How Supreme Court’s new ruling changes the definition of ‘industry’ | Explained

How Supreme Court's new ruling changes the definition of 'industry' Explained Justices B.V.

Key points

• Pending cases under the 1947 Act will continue to be governed by the 1978 Bangalore Water Supply precedent.
• It came into force in November 2025 and replaced the legacy Industrial Disputes Act, 1947.
• The Constitution Bench, led by Chief Justice of India Surya Kant, addressed the question whether the 1978 definition of 'industry' should govern Section 2(p) of the IRC.
• An opinion authored by Chief Justice Kant, and shared with Justices Satish Chandra Sharma, Alok Aradhe and Vipul M.
• Krishna Iyer, that seven-judge Bench significantly broadened the definition of Section 2(j) under the 1947 Act.

How Supreme Court's new ruling changes the definition of 'industry' Explained Justices B.V. Nagarathna, Dipankar Datta, and Ujjal Bhuyan formed the minority view on the Bench that a re-evaluation of the 1978 judgment was "unwarranted"; Justice Nagarathna cautioned that altering the definition could create uncertainty and disrupt industrial peace. Representative image. Photo Credit: Getty Images/iStockphotos.

Notably, a nine-member Constitution Bench of the Supreme Court of India held that the almost half-century-old interpretation of the term 'industry' will not automatically apply to the Industrial Relations Code (IRC), 2020. It came into force in November 2025 and replaced the legacy Industrial Disputes Act, 1947. This decision effectively severs the new labour regime from an expansive, worker-friendly precedent set in 1978, establishing a clean slate for future labour law disputes.

To understand the significance of this judgment, one must look back to the historic 1978 ruling in Bangalore Water Supply and Sewerage Board v. R. Rajappa.

Authored by Justice V.R. Krishna Iyer, that seven-judge Bench significantly broadened the definition of Section 2(j) under the 1947 Act. The 1978 judgment introduced the triple test. It classified systematic or organised operations based on employer-employee cooperation to provide goods or services for consumers as an industry.

This sweeping definition brought various activities, including hospitals, educational institutions, and municipalities, under the legal definition of an industry. The only exclusions were core sovereign functions of the state, such as defence, judiciary, and law enforcement. For almost half a century, this judgment had enabled workers throughout diverse sectors to access legal recourse, enforce labour rights, and engage in collective bargaining against unfair practices. The crux of the nine-judge Bench judgment.

In practice, the Constitution Bench, led by Chief Justice of India Surya Kant, addressed the question whether the 1978 definition of 'industry' should govern Section 2(p) of the IRC.

In practice, the majority held that 'industry' under the IRC must be interpreted based on its own specific text and statutory context, unburdened by the legacy of the 1978 precedent. According to Chief Justice Kant, while the core principles of the 1978 ruling had stood the test of time, the 1978 judgment would no longer act as the "sheet anchor" for interpreting 'industry' under the IRC.

Pending cases under the 1947 Act will continue to be governed by the 1978 Bangalore Water Supply precedent. All future disputes governed by the new Industrial Relations Code will be interpreted afresh. Differing points of view on the Bench.

In practice, the nine-judge Bench reflected nuanced positions on the balance between worker protections and modern economic realities.

Meanwhile, an opinion authored by Chief Justice Kant, and shared with Justices Satish Chandra Sharma, Alok Aradhe and Vipul M. Pancholi, held that the 'triple test' of 1978 Bangalore Water Supply and Sewerage Board case judgment will continue to be applied to pending industrial disputes.

Notably, the Chief Justice, nevertheless, identified that the 1978 verdict could have been articulated differently and set down a "reformulated" triple test. It would operate prospectively. Nevertheless, the possibility of using the recast triple test to determine if an operation was an industry or not under Section 2(j) of the repealed 1947 Act is non-existent as the new labour law, The Industrial Relations Code 2020, has already come into force. The Bench has unanimously created it clear that 'industry' under the 2020 Code will be "interpreted independently" to align with contemporary industrial dynamics, and not be burdened by the 1978 verdict.

Justices B.V. Nagarathna, Dipankar Datta, and Ujjal Bhuyan formed the minority view on the Bench that a re-evaluation of the 1978 judgment was "unwarranted". Justice Nagarathna cautioned that altering the definition could create uncertainty and disrupt industrial peace.

Justice Nagarathna argued that the 1978 judgment had offered a broad based definition of 'industry'. When public sector workers were transitioning into private employment due to a changing industrial landscape inspired by privatisation, liberalisation and globalisation of the Indian economy, she highlighted that the judgment was a child of its time.

Justice Bagchi backed the need for the reference to the nine-judge Bench, but expressed his inability to agree to a "reformulated" triple test. Justice Bagchi remarked an apprehension that the triple test conceived in the 1978 judgment converted any organised activity into an industry was misplaced.

In practice, the judge agreed with Justices Nagarathna that even the state could enter into seemingly non-sovereign functions. The concept of 'sovereignty' has itself undergone changes with the passage of time. Absence of a profit motive did not take an activity outside the realm of industry, he observed. He remarked it was unwise to "re-draft" Justice Iyer's triple test. Justice Datta echoed the need for judicial consistency. Sharing his opinion with Justice Bhuyan, Justice Datta remarked that institutional credibility relies on respecting finality rather than perpetuating doubt over established law. A step towards a new era.

By severing the IRC from the 1978 precedent, the Supreme Court has set the stage for a new chapter in Indian labour law, leaving it to future courts to decide where the lines between employer authority and worker protections will ultimately be drawn.

Taken together, the developments around how Supreme Court's new ruling changes the definition of 'industry' point to a situation that is still moving, and the coming days should bring more clarity.