SC Redefines Industry Under Labour Code

Supreme Court Redefines Industry Under New Labour Code

Why in the News ?

A nine-judge Constitution Bench of the Supreme Court has held that the expansive 1978 interpretation of “industry” under the Industrial Disputes Act will not automatically apply to the Industrial Relations Code, 2020. Future interpretation will depend on the Code’s own text and context.

SC Redefines Industry Under Labour Code

1978 Bangalore Water Supply Judgment

  •     The Bangalore Water Supply and Sewerage Board v. R. Rajappa (1978) case gave an expansive interpretation to the term “industry” under Section 2(j) of the Industrial Disputes Act, 1947.
  •     The judgment was authored by Justice V.R. Krishna Iyer and significantly strengthened workers’ ability to seek legal remedies against unfair labour practices.
  •     It introduced the famous “triple test” for determining whether an activity constitutes an industry.
  •     An activity generally qualified when it:

○      Was systematic and organised;

○      Involved employer-employee cooperation; and

○      Produced goods or services to satisfy human wants.

  •     The interpretation brought several establishments, including hospitals, educational institutions and municipalities, within the scope of “industry”.
  •     Core sovereign functions, such as judiciary, defence and law enforcement, were excluded.
  •     The judgment consequently expanded workers’ access to collective bargaining and industrial dispute remedies.

Supreme Court’s Ruling Under Industrial Relations Code

  •     The majority held that “industry” under Section 2(p) of the Industrial Relations Code (IRC), 2020 must be interpreted independently.
  •     The 1978 interpretation of Section 2(j) cannot serve as the foundation or “sheet anchor” for interpreting the new provision.
  •     The IRC, which came into force in November 2025, will therefore be interpreted according to its own text and context.
  •     The Chief Justice noted that the principles of the 1978 triple test had remained useful, although its formulation could potentially have been refined.
  •     However, the Court clarified that this observation does not disturb cases already decided under the old law.
  •     Pending proceedings under the Industrial Disputes Act, 1947 will continue to be decided according to the 1978 Bangalore Water Supply interpretation.
  •     Justice B.V. Nagarathna took a different view, considering the reference against the 1978 judgment unwarranted and stressing the importance of protecting workers through an inclusive definition.

 About Industrial Relations Code:

  •     The Industrial Relations Code, 2020 consolidates three major labour laws:

○      Industrial Disputes Act, 1947

○      Trade Unions Act, 1926

○      Industrial Employment (Standing Orders) Act, 1946

  •     It seeks to create a consolidated framework for trade unions, industrial disputes and employment conditions.
  •     The Code deals with retrenchment, layoffs, strikes, lockouts, trade unions and dispute resolution.
  •     The concept of “industry” determines which establishments and workers fall within the industrial-relations framework.
  •     The case highlights the constitutional balance between workers’ rights, employer interests and economic efficiency.