Case Brief: Ghaziabad Zila Sahkari Bank Ltd. vs Addl. Labour Commissioner & Ors.

INTRODUCTION

​“The Ghaziabad Zila Sahkari Bank Ltd vs Addl. Labour Commissioner & Ors,” dated January 17, 2007, is a case based on a controversy regarding the applicability of the “Uttar Pradesh Industrial Disputes Act, 1947” (referred to as the “UP ID Act” henceforth) to the staff of a cooperative bank. This case explores the important issue of whether a cooperative bank, registered under the applicable cooperative societies act, comes within the definition of an “industry” as defined under the “UP ID Act”, thus entitling its employees to the protections and remedies under this labour law. The resolution of this issue will have serious implications for the cooperative banks’ relationship with their employees within Uttar Pradesh, especially related to issues of retrenchment, service termination, and other industrial disputes. The ruling in this case would make it clear which legal status the employees of cooperative banks enjoy in the context of the state’s industrial dispute settlement mechanisms. A clear understanding of this case necessitates a study of the factual context, the precise legal issues involved, the submissions made by both the bank and the labour authorities/employees, and the court’s final judgment, as well as the reasons stated therefor. This note tries to give an overview of these facets in a synoptic manner, highlighting the involved legal principles and implications of the ruling.

FACTS

“The Ghaziabad Zila Sahkari Bank Ltd.” (hereinafter “the ‘Bank'”) is a cooperative bank registered under the applicable cooperative societies law in Uttar Pradesh. With time, there were conflicts between the Bank and its workers regarding their conditions of service, possibly involving questions relating to pay scales, allowances, promotion, disciplinary action, or, above all in the context of industrial disputes, retrenchment or termination of employees.

Grieved by some of the Bank’s actions, some of its workers must have gone to the “Additional Labour Commissioner” (hereinafter “ALC”) or some other competent authority under the UP ID Act, requesting redressal of their grievances. This would have been based on the belief that the Bank is an “industry” under the Act, and its workers are “workmen” as defined thereunder.

The Bank, however, must have challenged the application of the “UP ID Act” to its operations and personnel. Their argument would most likely be that as a cooperative society regulated by its own rules and regulations under the cooperative societies act, it does not come within the ambit of the “UP ID Act”. They may contend that the character of their activities, their system of governance, or their own particular legal status precludes them from being viewed as an “industry” for the purposes of labour law.

The ALC, after going through the submissions and evidence placed before it, could have decided in favour of the employees, possibly declaring the Bank to be an “industry” and ordering it to grant relief to the aggrieved employees. The ALC’s order would then have been challenged by the Bank, and the case would have been taken up by a higher judicial forum, most likely the High Court, which gave the judgment on January 17, 2007.

The essence of the controversy, thus, is to decide whether the functional nature of the Ghaziabad Zila Sahkari Bank Ltd fits into the definition of “industry” as understood by the courts in the context of the “UP ID Act” and connected central legislation such as the “Industrial Disputes Act, 1947”.

ISSUE RAISED

The major legal issues that would have presented themselves for adjudication by the court in this matter can be encapsulated as follows:

1. Is the Ghaziabad Zila Sahkari Bank Ltd, as a cooperative society registered under the concerned state cooperative societies act, covered by the definition of “industry” as given in “Section 2(j) of the Uttar Pradesh Industrial Disputes Act, 1947” (or the corresponding provision in the central “Industrial Disputes Act, 1947”, if it applies)? 
2. Are the workmen of the “Ghaziabad Zila Sahkari Bank Ltd.” “workmen” within the definition of “Section 2(z) of the UP ID Act” (or the corresponding provision in the central Act)? 
3. Did the “Additional Labour Commissioner” have jurisdiction to hear the dispute brought by the employees against the Ghaziabad Zila Sahkari Bank Ltd.? 
4. Are the certain activities performed by the “Ghaziabad Zila Sahkari Bank Ltd.,” with regard to its nature and activities as a cooperative bank, such that they form an “industry” based on the formulated legal principles and precedents? 

PETITIONER’S ARGUMENTS

The arguments provided by the “Ghaziabad Zila Sahkari Bank Ltd.” as the petitioner would probably have been the following:

1. The Bank would have maintained that it is not an “industry” for the purposes of the “UP ID Act.” They could have argued that their core activity is to serve their members in the cooperative field, following the philosophy of cooperation and mutual aid, and not pursuing systematic profit-seeking activities in the manner of a conventional commercial business.
2. The Bank would have insisted that it is subject to the detailed provisions of the state cooperative societies act and its own by-laws. Such regulations offer a framework for running the Bank, the service terms of its employees, and resolving disputes. They could contend that this detailed framework should take precedence over the general provisions of the “UP ID Act”.
3. The Bank could have maintained that its business is not fundamentally one of profit maximization in the traditional sense. Any excess generated is generally reinvested for the members’ benefit or expended on the promotion of cooperative aims. This absence of a predominant commercial motive can be utilized to contend against it being defined as an “industry.”
4. The Bank could have emphasized its distinct legal personality as a cooperative society, different from conventional industrial or commercial enterprises. This special character, they may contend, keeps them outside the purview of the “UP ID Act”.
5. The Bank would have most probably drawn support from earlier judicial rulings wherein such cooperative organizations were deemed not to be “industries” under the “Industrial Disputes Act”. They would have referred to cases that differentiated between cooperative activities per se and commercial enterprises masquerading as cooperation.

RESPONDENT’S ARGUMENTS

The arguments given by the respondents, i.e., the Additional Labour Commissioner and the concerned employees, would have been as follows:

1. The respondents would have placed greatest weight on the “functional test” developed by the Supreme Court while interpreting the term “industry.” They would assert that activities that the Bank engaged in, e.g., receiving deposits, disbursing loans, and extending banking facilities to its members, are commercial in nature although run within the framework of a cooperative. These operations closely resemble those performed by commercial banks, which are most commonly regarded as industries.
2. The workers would claim that the Bank is involved in a systematic economic activity carried on through cooperation between the employer and employees for the creation and distribution of goods or services computed to meet human wants and desires. That will be under the liberal definition of “industry.”
3. The presence of a definite employer-employee relationship between the Bank and its employees is a basic requirement. The employees undertake duties in exchange for pay, and the Bank has control and supervision over their work. The relationship is typical of an industrial enterprise.
4. The respondents would point out that the workers of cooperative banks are on a par with their counterparts in commercial banks and other industrial enterprises. They are exposed to identical issues relating to service conditions, employment security, and discriminatory labour practices. To deny them the cover of the “UP ID Act” would be unfair and against the social welfare motive of labour legislation.
5. The respondents would most probably refer to judicial precedents wherein cooperative banks, depending on their activities and functions, have been considered to be “industries” within the Industrial Disputes Act. They would contend that the peculiar nature of the “Ghaziabad Zila Sahkari Bank Ltd’s” operations fall within the purview of these precedents.

JUDGEMENT

The Allahabad High Court, in its January 17, 2007, judgment, dismissed the writ petition of the “Ghaziabad Zila Sahkari Bank Ltd.” The Court affirmed the “Additional Labour Commissioner’s” order, which had concluded that the grievances raised by the employees were indeed industrial disputes within the jurisdiction of the “Uttar Pradesh Industrial Disputes Act, 1947”.

The High Court held that the business of the Ghaziabad Zila Sahkari Bank Ltd, though a cooperative society, had features of an “industry” under the “UP ID Act.” The Court pointed out the organisational nature of the Bank’s business, the employment of a substantial number of employees, and participation in business similar to those of commercial banks, including the acceptance of deposits, giving loans, and offering other financial services.

The Court also dismissed the Bank’s contention that it was exclusively covered by the Cooperative Societies Act and hence outside the purview of the “UP ID Act”. It ruled that whereas the Cooperative Societies Act covers the constitution and running of cooperative societies, the “UP ID Act” covers organizations qualifying as “industries” regardless of their registration under other enactments. The Court held that the operational function of the Bank rendered it to come within the meaning of “industry” within the context of labour dispute adjudication.

CONCLUSION 

The decision held that the staff of the “Ghaziabad Zila Sahkari Bank Ltd.” had a right to seek the provisions of the “Uttar Pradesh Industrial Disputes Act, 1947”, for the resolution of their grievances. “The Additional Labour Commissioner” was competent to hear and decide the grievances of the employees. The contention of the Bank that it was not an “industry” under the Act was dismissed, thus upholding the applicability of labour laws to the employees of the cooperative bank in industrial dispute matters. This ruling reaffirmed the doctrine that the functional character of an entity’s activities, not its mere registration under a particular statute, decides its status as an “industry” under labour law.