Supreme Court upholds definition of ‘industry’ as per Industrial Relations Code, 2020
A nine-judge Constitution Bench of the Supreme Court ruled, by a 6:3 majority, on the continuing applicability of the 1978 "industry" test to labour disputes
The Bench held that the expansive triple-test definition of "industry" laid down in the 1978 judgment will continue to govern industrial disputes that are already pending under the Industrial Disputes Act, 1947
The majority clarified that this 1978 definition cannot automatically be read into the Industrial Relations Code, 2020, which carries its own statutory definition of "industry"
Future disputes arising after the Code takes effect will have to be adjudicated on the basis of the Code's own definition and facts, independent of the 1978 precedent
The "Triple Test" — Bangalore Water Supply and Sewerage Board v. A. Rajappa (1978)
This seven-judge Constitution Bench judgment, authored by Justice V.R. Krishna Iyer, gave an unusually wide interpretation to the word "industry" under Section 2(j) of the Industrial Disputes Act, 1947. It held that an activity qualifies as an "industry" if it satisfies a triple test: (a) systematic activity, (b) organised by cooperation between employer and employee (the direct and substantial element being the employer-employee relationship), and (c) for the production, supply, or distribution of goods or services calculated to satisfy human wants and wishes — irrespective of profit motive.
Key Details
- Delivered in 1978 by a seven-judge Bench of the Supreme Court, overruling earlier narrower interpretations
- Brought even charitable, educational, and government departmental activities within the sweep of "industry" unless specifically excluded
- Repeatedly criticised for making the definition so wide that Parliament was urged to legislate a clearer definition — a task attempted only decades later through the Industrial Relations Code, 2020
The Supreme Court held that this 1978 triple test remains the governing law for industrial disputes that arose and are pending under the old Industrial Disputes Act, 1947, preserving continuity for litigants who approached forums before the new Code took effect.
Definition of "Industry" under the Industrial Relations Code, 2020
The Industrial Relations Code, 2020 — one of the four labour codes consolidating 29 central labour laws — carries its own statutory definition of "industry" in place of the judicially expanded 1978 test. Under Section 2(p), "industry" means any systematic activity carried on by cooperation between an employer and worker for the production, supply, or distribution of goods or services to satisfy human wants or wishes (not spiritual or religious in nature), whether or not capital is invested or profit is intended.
Key Details
- The Code expressly excludes: institutions engaged in charitable, social, or philanthropic service; domestic service; and government activities relating to sovereign functions such as defence research, atomic energy, and space
- The Industrial Relations Code, 2020 replaces the Industrial Disputes Act, 1947, the Trade Unions Act, 1926, and the Industrial Employment (Standing Orders) Act, 1946
- It also introduces a statutory definition rather than leaving the term open to expansive judicial interpretation, reducing litigation uncertainty for employers
The Court held that disputes arising after the Code's commencement must be decided strictly on the Code's own definition and facts, not mechanically imported from the 1978 judgment — meaning the scope of "industry" going forward is narrower and more predictable than under the judicially expanded test.
Doctrine of Prospective Application in Constitutional Adjudication
When a Constitution Bench revisits a long-standing precedent that has shaped rights and obligations over decades, courts often calibrate the ruling's application in time to avoid disturbing settled matters — applying the older rule to pending cases while confining the new position to future disputes.
Key Details
- Nine-judge Constitution Benches are reserved for questions involving substantial interpretation of the Constitution or overruling of larger Bench precedents, as mandated by Article 145(3)
- This matter required reference to a nine-judge Bench because the original 1978 ruling itself came from a seven-judge Bench, and only an equal or larger Bench can revisit it
- The approach mirrors past instances where the Supreme Court has balanced legal certainty for pending litigation against the need to align future adjudication with a new statutory framework
This is why the Bench drew a temporal line — the 1978 test survives for pending Industrial Disputes Act cases, but the codified 2020 definition takes over for disputes under the new Code.
- Majority ruling: 6:3 by a nine-judge Constitution Bench of the Supreme Court
- 1978 judgment: Bangalore Water Supply and Sewerage Board v. A. Rajappa, authored by Justice V.R. Krishna Iyer, decided by a seven-judge Bench
- Triple test elements: systematic activity + employer-employee cooperation + production/supply/distribution of goods or services for human wants
- Industrial Relations Code, 2020 defines "industry" in Section 2(p), excluding charitable/philanthropic institutions, domestic service, and sovereign government functions (defence research, atomic energy, space)
- The Industrial Relations Code, 2020 consolidates the Industrial Disputes Act 1947, Trade Unions Act 1926, and Industrial Employment (Standing Orders) Act 1946