Supreme Court severs new labour code from 1978 'industry' definition: what it means
The Supreme Court of India has delivered a landmark judgment on the definition of 'industry' under the Industrial Relations Code (IRC), 2020. A nine-judge Constitution Bench ruled that the broad and worker-friendly interpretation of the term established in 1978 will not automatically apply to the new labour regime. This decision marks a significant shift in how industrial disputes will be resolved in the country.
To understand the ruling, one must look back at the 1978 case of Bangalore Water Supply and Sewerage Board v. R. Rajappa. In that case, a seven-judge Bench led by Justice V.R. Krishna Iyer expanded the meaning of 'industry' under the Industrial Disputes Act, 1947. The judgment introduced the 'triple test', which classified systematic or organised operations based on employer-employee cooperation to provide goods or services as an industry. This brought hospitals, educational institutions, and municipalities within the legal definition, leaving only core sovereign functions like defence, judiciary, and law enforcement outside its scope.
For nearly half a century, this broad definition allowed workers in diverse sectors to access legal remedies, enforce labour rights, and engage in collective bargaining. The new ruling, however, changes this trajectory for disputes arising under the IRC 2020, which came into force in November 2025 and replaced the 1947 Act.
The Constitution Bench, led by Chief Justice Surya Kant, addressed whether the 1978 definition should govern Section 2(p) of the IRC. The majority held that 'industry' under the IRC must be interpreted based on its own text and statutory context, without being burdened by the 1978 precedent. Chief Justice Kant noted that while the core principles of the 1978 ruling had stood the test of time, it would no longer serve as the 'sheet anchor' for interpreting 'industry' under the IRC.
The Bench also clarified that pending cases under the 1947 Act will continue to be governed by the Bangalore Water Supply precedent. All future disputes under the new Industrial Relations Code will be interpreted afresh.
The nine-judge Bench was not unanimous. An opinion authored by Chief Justice Kant, shared with Justices Satish Chandra Sharma, Alok Aradhe, and Vipul M. Pancholi, held that the 'triple test' will continue to apply to pending disputes. However, the Chief Justice also set down a 'reformulated' triple test that would operate prospectively. Since the IRC 2020 is already in force, this recast test will not apply to cases under the repealed 1947 Act. The Bench unanimously agreed that 'industry' under the 2020 Code will be interpreted independently to align with contemporary industrial dynamics.
Justices B.V. Nagarathna, Dipankar Datta, and Ujjal Bhuyan formed the minority view, arguing that a re-evaluation of the 1978 judgment was 'unwarranted'. Justice Nagarathna cautioned that altering the definition could create uncertainty and disrupt industrial peace. She noted that the 1978 judgment was a product of its time, when public sector workers were transitioning to private employment amid liberalisation and globalisation.
This judgment effectively creates a clean slate for labour law interpretation under the new code. While it preserves the worker protections of the past for existing cases, it also opens the door for a more modern and possibly narrower understanding of what constitutes an 'industry' in India's evolving economy.
