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JUDGMENT 2001 (2) SCR 462 The following Order of the Court was delivered :

RAJENDRA BABU, J. The facts arising in the case which led to the present dispute are in brief as follows :
The respondent company [respondent No.2 herein] was formed in the year 1982 with the object of rendering computer services to its customers relating to collection and maintenance of information and to develop company software application to suit the special requirements of the customers; that in March 1983, the second respondent set up a data processing division which undertook data processing services such as preparation of pay rolls, financial accounting and inventory control related statements; that subsequently there was a decline in the demand for the services of the data processing division of the second respondent on account of availability of indigenously manu-factured computer and in the year 1989, the division became non-viable and, therefore, the second respondent was forced to close down the same. As on 4.1.1989, 46 persons were employed in the data processing division and they were informed of the decision to close down the unit. On 30.1.1989, a notice under Section 25 FFA of the Industrial Disputes Act, 1947 (hereinafter referred to as 'the ID Act') was sent to the State Government intimating the Government that the data processing operations would be closed down with effect from 3.4.1989. The services of the workmen in the data processing division were terminated on account of closure of the unit and by October, 1989, the software division of the second respondent also was closed and the services of 71 workmen had been terminated after paying the closure com-pensation in terms of the provisions of the ID Act.
(iv) composing types for printing, printing by letter press, lithogra-phy, photogravure or other similar process or book binding; or
(v) constructing, reconstructing, repairing, refitting, finishing or breaking up ships or vessels; or
(vi) preserving or storing any article in cold storage.;"

In order to understand whether data processing or sofware preparation would involve a manufacturing process, it is necessary to know the legal nature of a software and which is elusive in computer law. Computer software is a term used to describe programmes that cause the computer to operate in a particular way. The other non-hardware parts of computer system such as manuals are, sometimes, regarded as software. Commercially an important distinction is drawn between standard package software and custom built software. The former is marketed as standard product to meet requirements of a large number of users, while the latter is written to meet particular requirement of the User. A hybrid form of software also exists : the standard package is altered so that it fits customers' needs more clearly, adopting a process of customisation. A distinction of technical nature is also drawn between system software, which organises the way in which the hardware operates and application software which performs the functions required by user of the computer system. Software comprises the instructions that cause the hardware to work in a particular manner, for example, to process the payroll of an office. From that angle, software is intangible and difficult to classify in legal terms. It appears to be pure information enjoying no physical form except that of magnetic notation on a tape or disk. Since it appears that information is not goods one might conclude neither is software. This approach is flawed with because it draws a distinction between software and the medium on which software is supplied.