Introduction
In a writ petition before the Kerala High Court (“Kerala HC”), the Court had to ascertain whether Indian Space Research Organisation (“ISRO”) would qualify as an industry under the Industrial Disputes Act, 1947 (“The Act”). This question emerged due to a dispute over the regularization of contract workers at ISRO.
The court did not delve into determining ISRO’s classification as an industry. This identification holds considerable importance for the following reasons. Firstly, the evolving judicial approach demonstrates the adaptability of the Act to diverse sectors such as hospitals, telecommunications, and education. This opens the door for interpretation of space exploration within the Act’s ambit. Secondly, the growing commercialization of space operations by introducing intricate economic and operational factors necessitates formal industry acknowledgment. Defining ISRO as an industry would help establish an equitable regulatory framework, promote just working conditions, protect worker rights, and enhance conflict settlement.
This piece first examines the present legal question through the principles established in the landmark judgment of Bangalore Water Supply & Sewerage Board v. A. Rajappa (“Bangalore Water Supply”). Thereafter, it lays down the legal justification for proving the judicial error in Physical Research Laboratory v. KG Sharma (“PRL Industry”).
Space Exploration as an Industry?
The statutory definition of ‘industry’ has been laid down in Section 2(j) of the Act. However, as seen from DN Banerjee to Safdarjung Hospital, courts have found a literal interpretation inadequate to capture the intricacies of labour dynamics and industrial disputes. The first set of cases interpreted ‘industry’ broadly, based on the Act being welfare legislation, while others preferred a narrower interpretation of the term.
Ultimately, in the case of Bangalore Water Supply, the Supreme Court (“SC”) settled the position by giving the term ‘industry’ a wider import by flexibly interpreting it and encompassing within its ambit a range of activities. The judges laid down the Triple Test to define an industry.
- Three-Prong Test
The triple test laid down in Bangalore Water Supply is as follows: firstly, that the industry is a continuous entity that performs systematic and organised activities; secondly, that there exists a cooperative endeavor between the employer and the employee within the organisation’s framework; and thirdly, that the activity of the industry is geared towards the production of certain goods or services from which the community derives utility.
Firstly, space exploration presents one of the prime examples of continuing, systematised, and organised activity. A perusal of the judgment suggests that the terms ‘systematised’ and ‘organised’ should be interpreted with a notional understanding of trade and business. Further, there must be a habitual undertaking of such activities.
Space missions are performed regularly and governed by well-defined organisational structures, standardized procedures, and strategic long-term planning. Various divisions manage distinct aspects of space exploration, encompassing satellite design and mission planning. Furthermore, space exploration necessitates the amalgamation of numerous technological innovations and standard operating procedures facilitate systematic operations.
Secondly, the cooperative nature between employer and employee is inherent to the work of ISRO and space exploration. This relationship between ISRO and scientists can be adjudged by applying several legal tests such as control and supervision, organisation, economic, and integration tests.
The control and supervision test entails that the master or employer not only assigns the work but also prescribes how it will be performed. The integration test entails whether the employee’s work is integral to the organization’s core functions. Permanency and regularity in employees’ tenure are critical factors in determining such a relationship. The dynamic relation between the two can be elaborated by referring to four indicia– the employer’s power of selection, method of remuneration, control in the manner of doing work and right to suspend or dismiss.
When applied to ISRO, the control and supervision test is evident in the organisation’s continuous surveillance, where scientists comply with designated projects and abide by the precise guidelines regarding the execution of different projects. Moreover, the experiments and work performed by scientists form the backbone of the organisation’s entire functionality. This shows their indispensable contribution to the work of ISRO, thereby fulfilling the integration test. The power of selecting scientists, deciding their remuneration, and initiating disciplinary proceedings, proves that the test of four indicia stands fulfilled.
Thirdly, the activity must be geared towards producing goods or services of some economic value or from which individuals can derive benefits. This means that the product should have the ability to be used in a commercial sense, and not be for any altruistic purpose. Similarly, the community must derive some utility from the product or service generated by the organization. For instance, the court held that companies engaged in agricultural operations would fall within the ambit of industry as there is production and distribution of goods related to agricultural operations. Similarly, the court determined that hospital activities, which involve consistently producing and distributing goods for essential services, satisfy the test’s third prong.
This rationale can be extended to space exploration, which involves satellite development and launch services. These activities directly contribute to the workings of telecommunications, defense, and navigation, thus generating utilities for the entire community. Space launch services and data collection can be sold commercially or be used by the government. For instance, ISRO generated over 4000 crores by launching around 430 satellites for other countries. Further, the Indian space sector contributed to around 60 billion dollars to the GDP in the last decade.
- Inapplicability Of Exception
In Bangalore Water Supply, the court held that while construing the definition of industry, sovereign functions would qualify as an exception and not entail the “welfare activities or economic adventures performed by the government.” In All India Radio v. Santosh Kumar, the court ruled that All India Radio qualifies as an industry due to its engagement in commercial activities, such as advertisements. Moreover, providing critical information and news did not, on its own, qualify as a sovereign function. Further, taking a cue from the Australian Jurisprudence, the term sovereign functions is often read synonymously with regal functions confined to legislative power, the administration of the laws, and exercise of the judicial power. Moreover, in P. W. D. Employees’ Union v. State of Gujarat, the construction of dams and allied activities being a welfare activity was not in stricto sensu described as an activity undertaken in the discharge of sovereign functions, thereby clearly establishing that there is a difference between the two terminologies. The overarching rationale is that sovereign functions are specifically delineated as essential governmental responsibilities, whereas broader activities, such as welfare and economic enterprises, are excluded.
Space exploration includes technological innovations, scientific inquiry, and commercial enterprises. They are more directly associated with welfare, economic, and developmental pursuits rather than with the fundamental responsibilities of governance that are inalienable. Similar to the court’s determination that disseminating information or building dams do not necessarily constitute sovereign responsibilities, space exploration can also be categorised as a welfare or economic adventure. Moreover, space exploration, akin to other non-regal endeavours, may entail commercial partnerships and interactions with the private sector. These traits emphasise its alignment with economic and industrial tasks rather than sovereign responsibilities, emphasising that space exploration should be regarded as an industry.
Physical Research Laboratory (“PRL”) v. K.G. Sharma: A Judicial Error
The discussion pertaining to PRL Industry is necessitated due to three reasons. Firstly, in PRL Industry there has been evident misapplication of the court’s reasoning given in Bangalore Water Supply. Secondly, the research domain of PRL industry relates to studying space evolution, which falls within the broader domain of the piece related to establishing space exploration as an industry. Lastly, the court, conflated sovereign functions with welfare functions, thereby giving sovereign functions an extensive interpretation.
The dispute in this case arose when a scientific glass blower employed at the Physical Research Laboratory, a government-financed research institute functioning under the Department of Space, was compulsorily retired at the age of fifty-eight rather than sixty. Challenging this decision, he approached the Labour Court, which held PRL to be an “industry” under the Act by applying the principles in Bangalore Water Supply, reasoning that PRL engaged in systematic and organised research with active employee cooperation and that its discoveries could be marketable. On appeal, the Supreme Court reversed the Labour Court’s finding while relying on reasoning that were riddled with infirmities as elucidated below. In this case , the court held that PRL undertakes research work which does not result in direct production of material goods and services. Here, the research so undertaken is used by the government and is not sold to any private player. The court reasoned that PRL was undertaking more governmental functions than an economic or commercial venture.
The flaw in the reasoning lies in the court’s reliance on the commercialization of goods and services as the basis for deciding whether PRL constitutes an industry. The test espoused in Bangalore Water Supply did not require production of material goods or direct services with commercial worth to be classified as an industry. Rather the court asserted that activities which indirectly serve societal requirements, such as educational or research institutions, can also be qualified as an industry.
The court erroneously limited its view of “satisfying human wants” to activities with immediate commercial value, neglecting the societal importance of space exploration. The emphasis on PRL’s absence of direct economic output misinterprets the broader societal context of fulfilling human needs, as demonstrated in Bangalore Water Supply. The court misapplied the test’s third prong by failing to acknowledge the larger, non-commercial societal significance of PRL’s research operations.
Conclusion
The classification of ISRO as an industry, is an intricate issue with profound consequences for the regulation of space activities in India. It appears to fulfil the triple test formulated in Bangalore Water Supply. Further, the analysis reveals that space activities are inherently associated with economic and welfare functions of the government rather than their sovereign functions.
The misapplication of law in Physical Research Laboratory v. K.G Sharma highlights the need for nuanced understanding of the term ‘industry.’ Rather than relying only on commercial viability of activities, the societal benefits should be examined while applying the triple test. With the increase in commercial events in space and its contribution to national development, it is vital to recognize ISRO and its other establishments as industries. This will help enact strong labour laws, create a fair work environment, and enhance workers’ rights. Such a reclassification not only solves short-term labour issues but also prepares India for the evolving global space landscape.
Tanishq Kabra and Prangana Singh are fourth year students at West Bengal National University of Juridical Sciences.
[Ed Note: This piece was edited by Aditi Bhojnagarwala and published by Vedang Chouhan from the Student Editorial Team.]
Disclaimer: The views and opinions expressed on this blog are those of the authors in their personal capacity.
