Supreme Court reopens the 47-year-old ‘industry’ definition in labour law, but protects pending cases from being affected by the change.
The Supreme Court has stepped into one of the oldest and most contested questions in India's labour law: what exactly counts as an “industry”? On August 20, a nine-judge Constitution Bench led by Chief Justice Surya Kant ruled by a narrow 5:4 majority that the definition laid down nearly five decades ago needs to be revisited. Yet, in the same ruling, the bench unanimously protected every pending case from being disturbed by this reopening, choosing certainty for workers and employers today over an immediate rewrite of the rules.
At the centre of the case is Section 2(j) of the now-repealed Industrial Disputes Act, 1947, which defines “industry”. In 1978, a seven-judge bench in Bangalore Water Supply and Sewerage Board vs A. Rajappa gave the term a sweeping meaning. It laid down what came to be called the “triple test”. An activity could qualify as an industry if it involved systematic and organised work, cooperation between employer and employee, and the production or distribution of goods or services to meet human needs.
The interpretation had far-reaching consequences. It brought a wide range of activities and establishments within the possible reach of industrial law, extending the debate well beyond conventional factories and commercial enterprises. Government departments, hospitals, charitable institutions and research organisations became part of the larger legal controversy over where the boundary of “industry” should be drawn.
Employers and the government have argued for years that such a broad interpretation could blur the distinction between commercial activity, welfare functions and the state's sovereign responsibilities. The dispute eventually reached a seven-judge bench in 2017, which felt that the question deserved consideration by a larger bench.
That is what led to Thursday's ruling.
The majority, written by CJI Surya Kant for himself and Justices SC Sharma, Alok Aradhe and Vipul M. Pancholi, held that the 1978 test requires “refinement and reformulation”. Importantly, the CJI made clear that the court was not redefining “industry” under the new Industrial Relations Code, 2020.
The 1978 verdict, he said, could not be treated as a permanent and unquestionable anchor for interpreting the term under the new legal framework. Justice P.S. Narasimha agreed with this reasoning, taking the majority to five judges, and held that the reference to a larger bench had been validly made in the first place.
But the bench was far from united on the substance.
Justice B.V. Nagarathna held that the reference itself was unnecessary. In her view, the 1978 verdict could have been reconciled with subsequent judgments and its expansive understanding of “industry” remained both necessary and correct. She stressed that what matters is the nature of the activity itself, rather than simply who carries it out. A government body performing a particular function, she indicated, cannot automatically claim immunity merely by describing that function as sovereign.
Justice Dipankar Datta, writing for himself and Justice Ujjal Bhuyan, went further. They questioned the practical purpose of reopening the precedent and warned that unsettling a decades-old legal position could create confusion and disturb industrial peace.
Justice Joymalya Bagchi agreed that the reference was validly made but disagreed with the need to refine the 1978 definition. He particularly cautioned against allowing charitable and social institutions to escape obligations toward workers unless Parliament specifically exempts them through a properly notified law.
The disagreement shows that the case is not simply about whether the 1978 judgment was right or wrong. It is about how far the judiciary should go in revisiting a legal principle that has shaped labour relations for nearly half a century.
Yet, whatever the philosophical divide, the nine-judge bench spoke in one voice on a crucial practical point. Every dispute currently pending under the 1947 Act will continue to be decided using the same 1978 triple test.
In other words, nothing changes immediately for ongoing litigation.
That safeguard is significant for workers and employers involved in disputes that may have been pending for years. Changing the applicable legal standard in the middle of those proceedings could have produced uncertainty and potentially altered the legal basis on which existing cases were being fought.
The stakes behind the case are therefore much larger than a technical disagreement over the meaning of a single statutory word.
Attorney General R. Venkataramani, representing the government, argued that questioning the broad definition did not make the state anti-worker. At the same time, he warned that treating departments such as forestry and irrigation as “industries” could have serious administrative consequences.
On the other side, senior advocates including Indira Jaising, C.U. Singh, Vijay Hansaria and Gopal Sankaranarayanan defended the 1978 judgment as a precedent that has provided an important framework for protecting workers for more than four decades.
For now, however, the Supreme Court has changed nothing for cases already before the courts.
What it has done is open the door to a future reconsideration of what “industry” should mean in Indian labour law. The old definition continues to govern pending disputes, while the larger legal question has been left open for a future judicial determination.
The Supreme Court has stepped into one of the oldest and most contested questions in India's labour law: what exactly counts as an “industry”? On August 20, a nine-judge Constitution Bench led by Chief Justice Surya Kant ruled by a narrow 5:4 majority that the definition laid down nearly five decades ago needs to be revisited. Yet, in the same ruling, the bench unanimously protected every pending case from being disturbed by this reopening, choosing certainty for workers and employers today over an immediate rewrite of the rules.
At the centre of the case is Section 2(j) of the now-repealed Industrial Disputes Act, 1947, which defines “industry”. In 1978, a seven-judge bench in Bangalore Water Supply and Sewerage Board vs A. Rajappa gave the term a sweeping meaning. It laid down what came to be called the “triple test”. An activity could qualify as an industry if it involved systematic and organised work, cooperation between employer and employee, and the production or distribution of goods or services to meet human needs.
The interpretation had far-reaching consequences. It brought a wide range of activities and establishments within the possible reach of industrial law, extending the debate well beyond conventional factories and commercial enterprises. Government departments, hospitals, charitable institutions and research organisations became part of the larger legal controversy over where the boundary of “industry” should be drawn.
Employers and the government have argued for years that such a broad interpretation could blur the distinction between commercial activity, welfare functions and the state's sovereign responsibilities. The dispute eventually reached a seven-judge bench in 2017, which felt that the question deserved consideration by a larger bench.
That is what led to Thursday's ruling.
The majority, written by CJI Surya Kant for himself and Justices SC Sharma, Alok Aradhe and Vipul M. Pancholi, held that the 1978 test requires “refinement and reformulation”. Importantly, the CJI made clear that the court was not redefining “industry” under the new Industrial Relations Code, 2020.
The 1978 verdict, he said, could not be treated as a permanent and unquestionable anchor for interpreting the term under the new legal framework. Justice P.S. Narasimha agreed with this reasoning, taking the majority to five judges, and held that the reference to a larger bench had been validly made in the first place.
But the bench was far from united on the substance.
Justice B.V. Nagarathna held that the reference itself was unnecessary. In her view, the 1978 verdict could have been reconciled with subsequent judgments and its expansive understanding of “industry” remained both necessary and correct. She stressed that what matters is the nature of the activity itself, rather than simply who carries it out. A government body performing a particular function, she indicated, cannot automatically claim immunity merely by describing that function as sovereign.
Justice Dipankar Datta, writing for himself and Justice Ujjal Bhuyan, went further. They questioned the practical purpose of reopening the precedent and warned that unsettling a decades-old legal position could create confusion and disturb industrial peace.
Justice Joymalya Bagchi agreed that the reference was validly made but disagreed with the need to refine the 1978 definition. He particularly cautioned against allowing charitable and social institutions to escape obligations toward workers unless Parliament specifically exempts them through a properly notified law.
The disagreement shows that the case is not simply about whether the 1978 judgment was right or wrong. It is about how far the judiciary should go in revisiting a legal principle that has shaped labour relations for nearly half a century.
Yet, whatever the philosophical divide, the nine-judge bench spoke in one voice on a crucial practical point. Every dispute currently pending under the 1947 Act will continue to be decided using the same 1978 triple test.
In other words, nothing changes immediately for ongoing litigation.
That safeguard is significant for workers and employers involved in disputes that may have been pending for years. Changing the applicable legal standard in the middle of those proceedings could have produced uncertainty and potentially altered the legal basis on which existing cases were being fought.
The stakes behind the case are therefore much larger than a technical disagreement over the meaning of a single statutory word.
Attorney General R. Venkataramani, representing the government, argued that questioning the broad definition did not make the state anti-worker. At the same time, he warned that treating departments such as forestry and irrigation as “industries” could have serious administrative consequences.
On the other side, senior advocates including Indira Jaising, C.U. Singh, Vijay Hansaria and Gopal Sankaranarayanan defended the 1978 judgment as a precedent that has provided an important framework for protecting workers for more than four decades.
For now, however, the Supreme Court has changed nothing for cases already before the courts.
What it has done is open the door to a future reconsideration of what “industry” should mean in Indian labour law. The old definition continues to govern pending disputes, while the larger legal question has been left open for a future judicial determination.
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