Supreme Court Resets Interpretation of ‘Industry’ under
Industrial Relations Code
Prelims:
Indian Polity
& Governance
Mains:
GS Paper II:
Judiciary, GS Paper III: Employment and labour-related issues
Current relevance:
A nine-judge Bench of the Supreme Court held that the expansive interpretation of “industry” laid down in the 1978 Bangalore Water Supply and Sewerage Board v. R. Rajappa judgment will not govern the interpretation of “industry” under Section 2(p) of the Industrial Relations Code (IRC), 2020. The term under the new Code must instead be interpreted on its “own text and context.”
Highlights:
Supreme court decision:
1.
The
majority held that the meaning of “industry” under Section 2(p) of the IRC,
2020 would not be burdened by the interpretation of Section 2(j) of the Industrial
Disputes Act, 1947.
2.
The
1978 Bangalore Water Supply judgment will therefore not serve as the
foundation for future interpretation of “industry” under the IRC.
3.
The
term under the new Code will effectively be interpreted on a clean slate,
based on its own statutory text and context.
4.
The
Industrial Relations Code came into force in November 2025, reducing the
immediacy of reconsidering the old statutory definition.
Bangalore Water Supply Judgment, 1978:
1.
The
seven-judge Constitution Bench judgment, authored by Justice V.R. Krishna
Iyer, had adopted a broad interpretation of “industry” under Section
2(j) of the Industrial Disputes Act, 1947.
2.
It
introduced the “Triple Test”, bringing an activity within the meaning of
industry when it involved:
i.
Systematic/organised
activity
ii.
Employer–employee
cooperation
iii.
Production
of goods/services to satisfy human wants
3.
This broad approach brought institutions such as hospitals,
educational institutions and municipalities within the ambit of “industry”.
4.
It excluded essentially core sovereign activities, such as the
judiciary, law and order and defence.
5.
The interpretation enabled workers across a wide range of activities to
access labour-law protections, including collective bargaining and remedies
against unfair labour practices.
Existing & Pending Cases:
1.
The Supreme Court clarified that its ruling will not disturb or
reopen cases that have already been decided.
2.
Pending proceedings under the Industrial Disputes Act, 1947 will continue to follow
the interpretation of “industry” under Section 2(j) established in the
1978 Bangalore Water Supply judgment.
3.
For the Industrial Relations Code, 2020, the meaning of “industry”
under Section 2(p) will be interpreted independently on the basis of the
new Code’s own text and context.
Justice Nagarathna’s Differing View:
Justice B.V. Nagarathna considered the reference questioning the 1978 judgment “unwarranted”
and not maintainable.
1.
She
argued that an inclusive definition of industry remains important for
protecting workers' rights, particularly in an increasingly privatised
economy.
2.
Changes
from public to private ownership have transformed many public-sector employees
into private-sector workers, increasing the relevance of labour-law
protection.
3.
Altering
a definition that had operated for nearly five decades could create legal
uncertainty and disturb industrial peace.
4.
She
also emphasised that merely because the State performs an activity does not
automatically make it a sovereign function.
5.
Justice
Nagarathna also supported the “Dominant Nature Test” evolved in the 1978
judgment. It applies particularly to organisations undertaking multiple or
integrated activities.
6.
The
dominant character of the organisation's activities is examined to
determine whether the establishment qualifies as an “industry”.
Source: THE HINDU - https://www.pressreader.com/india/the-hindu-international-9bn2/20260821/282600269720497