Irrigation Department Of State Not An 'Industrial Establishment' Under Section 25L Of ID Act : Supreme Court

Observing that the Irrigation Department of the State of Madhya Pradesh is not an "Industrial Establishment" under Section 25L of the Industrial Disputes Act, the Supreme Court has held that to decide as to whether a Department is an Industrial Establishment or not, the test would be to consider the predominant functions and activities of the said Department.

"Even assuming that some of the employees may be doing the work of pumping of water, that is not sufficient to hold that Irrigation Department of the first appellant is carrying on manufacturing process. Overall activities and functions of the Irrigation Department will have to be considered while deciding the question whether it is carrying on manufacturing activities. Few employees of the Irrigation Department out of several may be incidentally operating pumps. But the test is what are the predominant functions and activities of the said Department. Even if the activity of operation of pumps is carried on by few employees, the Irrigation department does not carry on manufacturing process. As it is not carrying on manufacturing process, it is not a factory within the meaning of clause (m) of section 2 of the Factories Act. Therefore, the Irrigation Department of the first appellant will not be an Industrial Establishment within the meaning of Section 25L. Accordingly, Chapter VB will have no application in the present case," bench of Justices Ajay Rastogi and Abhay S Oka observed in State of Madhya Pradesh and Ors v Somdutt Sharma.

Factual Background

Somdutt Sharma ("Respondent" in the present case) was appointed as a daily wage employee on the post of Helper in the Irrigation Department ("Department") of the State of Madhya Pradesh. On December 1, 1995 his employment was terminated. On Chief Minister's directions, Sharma was again taken back in service on August 11, 2004 but his employment was terminated again on July 2, 2005.

Sharma raised a dispute which was referred by the appropriate Government to the decision of the Labor Court. Observing that since Chapter VB of the Industrial Disputes Act, 1947 ("Act") was applicable, the Tribunal ordered for Sharma's reinstatement in the Rajghat Canal Project since the State did not comply with section 25N of the Act. The Tribunal however declined to grant back wages. Aggrieved by the Tribunal's award, the State approached the Single Judge of the High Court. The Single Judge of the High Court affirmed the award. The Division Bench of the High Court on December 11, 2019 affirmed the decision by the Single Judge of upholding the Tribunal's award.

Aggrieved, the State approached the Top Court.

Counsel's Submissions

Appearing for the State, Deputy Advocate General Mukul Singh submitted that the State's Irrigation Department was not an Industrial Establishment within section 25L of the Act. It was also his contention that since the Department was not an Industrial Establishment, Chapter VB was not applicable. He further contended that although the Department might be having more than 100 workers, it was not a factory within the meaning of section 2(m) since it was not carrying any manufacturing process. Dy Advocate General further contended that since section 25N of the ID Act was a part of Chapter VB it was not applicable and that the State had complied with section 25F of the Act.

Appearing for Sharma, Advocate Prashant Shukla submitted that the State had not complied with Section 25F of the Act in which it was required to obtain permission from appropriate Government. It was also his contention that since the Department was involved in the activity of pumping of water and sewage, it was carrying a manufacturing process u/s 2(k) of the Act.

Reliance was placed by the counsel on the Top Court's judgement in State of Maharashtra and Anr. v. Sarva Shramik Sangh, Sangli and Ors. (2013)16 SCC 16 to submit that three Courts had concurrently held that there was failure on the State's part to comply with section 25N.

Supreme Court's Observations

The Court observed that the Irrigation Department, apart from looking after creation and management of irrigation potential through construction of water resources projects,  also dealt with disaster management, calamity management, maintenance of flood control works, reservoir operations etc. However,  none of these functions would attract the definition of Industrial Establishment.

On the aspect of compliance with Section 25(F) of the Act, bench took into consideration copy of the notice dated January 28, 2021 issued by the Executive Engineer of Sindh Project Pucca Dam Division which was a notice under section 25F of the ID Act addressed to Sharma which stated that in compliance with with section 25F, a sum of Rs. 36,361/- were being transferred to his bank account mentioned in the notice.

"The Labour Court as well the learned Single Judge and the learned Division Bench of the High Court have not adverted to the question whether the Irrigation Department of the first appellant is an Industrial Establishment within the meaning of Section 25L. There is no finding recorded that the Irrigation Department of the first appellant is doing manufacturing activity as provided in sub-clause (k) of Section 2 of the Factories Act", the judgment authored by Justice Oka said.

With the above observations, the Supreme Court allowed the appeal and set aside the judgements and orders and held that Sharma's termination of employment was legal and valid.

Case Title: State of Madhya Pradesh v Somdutt Sharma

Coram: Justice Ajay Rastogi and Justice Abhay Oka

Citation : LL 2021 SC 519

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