1978 ‘industry’ definition void under new code: SC, Pg1

Key Highlights:

• A nine-member Constitution Bench of the Supreme Court ruled that the nearly half-century-old expansive interpretation of ‘industry’ will not apply under the new Industrial Relations Code, 2020.
• The previous broad definition stemmed from the 1978 seven-judge Constitution Bench judgment in Bangalore Water Supply and Sewerage Board v. R. Rajappa.
• The new verdict, delivered by a 5:4 majority, means the term ‘industry’ under Section 2(p) of the Industrial Relations Code, 2020 will be interpreted on a clean slate.
• The Industrial Relations Code, 2020 came into force on November 21, 2025, consolidating three major labour laws.

Detailed Insights:

• The 1978 judgment had introduced a ‘triple test’ that brought a wide range of activities, including hospitals, educational institutions, and municipalities, within the ambit of ‘industry’.
• This expansive interpretation under Section 2(j) of the Industrial Disputes Act, 1947, had granted workers in these sectors stronger labour rights and protection.
• Chief Justice of India Surya Kant, authoring the majority opinion, stated that the 1978 judgment would not serve as the foundation for future interpretation of ‘industry’ under the Industrial Relations Code, 2020.
• The Supreme Court clarified that its ruling applies prospectively, ensuring that all pending disputes under the now-repealed Industrial Disputes Act, 1947, will continue to be adjudicated based on the 1978 ‘triple test’.
• The Industrial Relations Code, 2020 consolidates the Trade Unions Act, 1926, the Industrial Employment (Standing Orders) Act, 1946, and the Industrial Disputes Act, 1947, aiming to simplify compliance and promote ease of doing business.
• The new definition of ‘industry’ under the Industrial Relations Code, 2020, explicitly excludes institutions engaged in charitable, social, or philanthropic services, as well as sovereign functions of the government.

Key Concepts Involved:

• Industrial Relations Code, 2020: A comprehensive legislation that consolidates and amends laws relating to trade unions, conditions of employment, and industrial disputes.
• Industrial Disputes Act, 1947: A former central legislation that provided for the investigation and settlement of industrial disputes, now subsumed by the IRC.
• Bangalore Water Supply and Sewerage Board v. R. Rajappa: A landmark 1978 Supreme Court case that significantly broadened the definition of ‘industry’ under the 1947 Act.
• Triple Test: Criteria established in the 1978 judgment to determine if an activity constitutes an ‘industry’, based on systematic activity, employer-employee cooperation, and production of goods/services.