How Supreme Court’s new ruling changes the definition of ‘industry’ | Explained
A nine-judge Constitution Bench of the Supreme Court, led by Chief Justice Surya Kant, revisited the 1978 seven-judge ruling in Bangalore Water Supply and Sewerage Board (BWSSB) v. A. Rajappa, which had given an expansive meaning to the word "industry" under Section 2(j) of the Industrial Disputes Act, 1947.
On the question of whether the reference for reconsideration was validly made, the Bench held by a 6:3 majority that it was maintainable.
On merits, by a 5:4 majority, the Bench held that the core "triple test" framework of the 1978 ruling has stood the test of time and continues to apply to disputes under the Industrial Disputes Act, 1947, including pending cases.
The Bench clarified that the 1978 judgment will no longer serve as the automatic "sheet anchor" for interpreting the term "industry" under the Industrial Relations Code (IRC), 2020 — the new code must be read on its own text and statutory context, independent of the 1978 precedent.
The ruling therefore creates a bifurcated position: the 1978 test continues to govern disputes under the older Industrial Disputes Act, while the interpretation of "industry" under the new IRC, 2020 is left open to be developed afresh.
The 1978 "Triple Test" — Bangalore Water Supply & Sewerage Board v. A. Rajappa
In 1978, a seven-judge Bench of the Supreme Court in BWSSB v. A. Rajappa laid down a wide "triple test" to determine whether an activity qualifies as an "industry" under Section 2(j) of the Industrial Disputes Act, 1947: (i) systematic activity, (ii) organised cooperation between employer and employee, and (iii) production or distribution of goods or services calculated to satisfy human wants and wishes. The Court held that profit motive and capital investment were largely irrelevant, giving the definition a very wide sweep that brought hospitals, educational institutions, and even sovereign/regal government functions within the ambit of "industry," entitling their employees to industrial-dispute protections.
Key Details
- Section 2(j), Industrial Disputes Act, 1947 defines "industry" — the provision the 1978 Bench interpreted.
- The 1978 test excluded only "sovereign functions" (legislative, judicial, and defence-related functions of the State) from the definition.
- The 1978 ruling was criticised for decades for its over-inclusiveness (e.g., bringing charitable and educational bodies within "industry") and was repeatedly flagged for reconsideration by later benches.
The 2026 nine-judge Bench was specifically constituted to reconsider whether the 1978 triple test needed correction; it chose to retain the test's essential framework for the 1947 Act rather than overturn it outright.
Industrial Relations Code, 2020 — Codification of Labour Law
The Industrial Relations Code, 2020 is one of four labour codes (along with the Code on Wages 2019, Code on Social Security 2020, and Occupational Safety, Health and Working Conditions Code 2020) that consolidate and replace 29 central labour laws, including the Industrial Disputes Act, 1947, the Trade Unions Act, 1926, and the Industrial Employment (Standing Orders) Act, 1946. The IRC defines "industry" in Section 2(p), using language that substantially mirrors but is not identical to Section 2(j) of the 1947 Act.
Key Details
- The IRC, 2020 received presidential assent on 28 September 2020 but has not yet been notified/enforced uniformly across states as of the ruling (states must also frame rules).
- The four labour codes aim to simplify compliance, widen the definition of "worker," and introduce fixed-term employment and a re-skilling fund for retrenched workers.
- Because the IRC's definition of "industry" is textually distinct from the 1947 Act's provision, the Supreme Court held it must be interpreted independently rather than through automatic reliance on 1978-era case law.
This is the crux of the ruling — the Bench refused to let the 1978 "sheet anchor" precedent pre-determine how courts will read "industry" once IRC provisions come into force, leaving room for future benches to calibrate the definition to the new statutory text.
Larger Bench Requirement to Revisit Precedent
The Supreme Court has held, notably in Central Board of Dawoodi Bohra Community v. State of Maharashtra (2005), that a Bench of a given strength is bound by, and cannot overrule or depart from, the view of law taken by a Bench of equal or larger strength; only a Bench of larger strength can reconsider or overrule such a ruling. This is a self-imposed rule of judicial discipline (not an express constitutional provision) that maintains consistency in the Supreme Court's own precedents.
Key Details
- The 1978 BWSSB ruling was delivered by a seven-judge Bench; reconsidering it required convening a Bench of at least eight judges — the 2026 Bench, composed of nine judges, met this requirement.
- Article 141 of the Constitution makes the law declared by the Supreme Court binding on all courts within the territory of India.
- A split verdict (5:4 on merits, 6:3 on maintainability) illustrates how a Constitution Bench can still produce a binding "majority holding" without unanimity among the judges.
The nine-judge strength of the 2026 Bench reflects this doctrinal requirement — a Bench larger than the seven-judge 1978 Bench had to be empanelled before its ruling could be revisited or narrowed in application.
- Case reconsidered: Bangalore Water Supply and Sewerage Board v. A. Rajappa (1978), decided by a seven-judge Bench.
- 2026 Bench strength: nine judges, led by Chief Justice of India Surya Kant.
- Maintainability of the reference: upheld 6:3.
- Modification of the triple test on merits: decided 5:4 — core framework retained for the Industrial Disputes Act, 1947.
- Statute interpreted: Section 2(j), Industrial Disputes Act, 1947; compared against the "industry" definition in the Industrial Relations Code, 2020.
- The IRC, 2020 is one of four consolidated labour codes replacing 29 central labour statutes.