What Counts as 'Industry'? Supreme Court's Nine-Judge Bench to Deliver Landmark Verdict
The Supreme Court is set to pronounce on Thursday a crucial verdict on the exact scope of the term "industry" under Section 2(j) of the now-repealed Industrial Disputes Act, 1947. A nine-judge Bench headed by Chief Justice of India Surya Kant will deliver the judgment on a reference that could shape the legal framework governing labour disputes in India.
The reference centres on a 1978 judgment by a seven-judge Constitution Bench in the Bangalore Water Supply and Sewerage Board v. A. Rajappa case. That verdict, authored by Justice V.R. Krishna Iyer, gave an expansive definition to "industry" and provided workers across a wide range of sectors with legal recourse, including collective bargaining, against unfair labour practices. The 48-year-old judgment exempted only core sovereign activities—such as the judiciary, law and order, and defence—from the purview of Section 2(j) to protect the state's functional autonomy. It also introduced a triple test and brought hospitals, educational institutions, and municipalities within the definition of industry.
Several states, including Uttar Pradesh, Maharashtra, and Punjab, have urged the top court to revisit the 1978 judgment. They were represented by Additional Solicitor General K.M. Nataraj and senior advocates Shekhar Naphade and Shadan Farasat. Accordingly, the nine-judge Bench framed specific questions to consider. One question was whether "social welfare activities and schemes or other enterprises" undertaken by government departments or their instrumentalities could be construed as industrial activity under Section 2(j) of the Industrial Disputes Act. Another question examined whether "state/sovereign activities" would also fall within the definition of industry under the same provision.
Senior advocates such as Indira Jaising, C.U. Singh, and Gopal Sankaranarayanan argued in favour of keeping the reasoning of the 1978 judgment intact. Ms. Jaising submitted that bringing enterprises under the definition of industry provided workmen with a remedy to ventilate their grievances in relation to fair wages, health and safety, occupational safety, and security of employment, and to challenge unfair dismissals before a judicial authority.
"A democratic society governed by the rule of law is duty-bound to provide a grievance redressal forum of a judicial nature to all its citizens, where their substantive rights can be ventilated," she said in her submission before the Bench. The lawyers argued that although the Industrial Relations Code has already replaced the Trade Unions Act, 1926; the Industrial Employment (Standing Orders) Act, 1946; and the 1947 law, the top court should still authoritatively clarify when an activity can be classified as a sovereign function, or as an industry.
Attorney-General R. Venkataramani submitted that sovereign function cannot be bound to an exhaustive or closed definition. The nature of sovereign functions would change with the evolving role of the state, he said. The Bench's verdict is expected to provide clarity on this issue, which has significant implications for workers' rights and the extent of state immunity from labour laws.
The pronouncement comes at a time when India's labour landscape has undergone sweeping changes with the introduction of the Industrial Relations Code and other labour codes. Observers note that the verdict will likely be a landmark in defining the balance between workers' protections and the functional autonomy of the state in a modern democracy.
