1 week ago
Supreme Court Narrows 1978 Industry Definition Under New Labour Code
India’s Supreme Court considered how to decide whether an organization counts as an “industry” under labour law.
A 1978 ruling gave the word a broad meaning and extended protections to workers in places such as hospitals, schools, clubs and some government bodies.
That ruling created a three-part test involving organized work, cooperation between employers and workers, and goods or services for people.
The court said this test will continue to be used for pending cases under the old 1947 law.
However, the 1978 ruling will not automatically decide cases under the newer Industrial Relations Code.
Judges said those new cases must be examined using the new law and their individual facts.
Justice B V Nagarathna and Justices Dipankar Datta and Ujjal Bhuyan disagreed that the reference asking the court to reconsider the old ruling was maintainable.
The reports differ on whether the overall vote was 6:3 or 5:4.
All nine judges agreed that the issue had become largely academic because the old law had been repealed.
The Supreme Court ruled that the 1978 expansive definition of “industry” will not automatically guide interpretation of the Industrial Relations Code, 2020.
The 1978 triple test remains applicable to pending disputes under the repealed Industrial Disputes Act, 1947.
Future cases under the 2020 Code must be decided independently according to the new law’s language, facts and context.
The 1978 ruling brought hospitals, educational institutions, clubs and some government welfare bodies within labour protections if they met the test.
Reports describe the ruling’s majority as 6:3, while one account reports a 5:4 split; three judges opposed the reference’s maintainability.
- Who
- A nine-judge Constitution Bench of the Supreme Court headed by Chief Justice Surya Kant decided the matter.
- What
- The court limited the use of the 1978 definition of “industry” under the Industrial Relations Code, 2020, while retaining the triple test for pending cases under the repealed 1947 law.
- Where
- The ruling was delivered by the Supreme Court in New Delhi.
- When
- The ruling was delivered on Thursday, August 20, 2026, according to the articles. The Industrial Relations Code is stated to have come into force on November 21, 2025.
- Why
- The bench considered whether the 1978 interpretation under the Industrial Disputes Act, 1947, should continue to influence the meaning of “industry” after that law was replaced by the Industrial Relations Code, 2020.
Majority View
Dissenting View
Validity of reconsideration reference
Majority View
The majority held that the reference asking a larger bench to reconsider the 1978 ruling was legally valid and maintainable.
Dissenting View
Justices B V Nagarathna, Dipankar Datta and Ujjal Bhuyan held that the reference was unwarranted or not maintainable.
Status of the 1978 ruling
Majority View
The majority limited the ruling’s use as a foundation for interpreting the 2020 Code, while preserving its application to pending cases under the 1947 Act.
Dissenting View
Justice Nagarathna said the 1978 judgment was correctly decided, and Justices Datta and Bhuyan said it did not require reconsideration.
Worker protection and future interpretation
Majority View
The majority said future cases under the 2020 Code must be decided independently and suggested that aspects of the earlier test could be refined prospectively.
Dissenting View
The dissent argued that retaining the inclusive definition was important to safeguard workers in a privatised and changing industrial economy and avoid uncertainty in labour protections.
Key facts
- 1978 precedent
- Bangalore Water Supply and Sewerage Board v. A. Rajappa broadly interpreted “industry” under the Industrial Disputes Act, 1947.
- Triple test
- An activity generally qualifies if it is systematic or organized, involves employer-employee cooperation, and produces or provides goods or services to meet human needs.
- Pending cases
- Disputes pending under the repealed 1947 Act will continue to be decided using the 1978 interpretation and triple test.
- New labour code
- The 1978 principles cannot be used as a sweeping framework for interpreting the Industrial Relations Code, 2020.
- Government activities
- A government body is not automatically outside the definition of industry; the nature of the activity must be examined.
- Dissent
- Justices B V Nagarathna, Dipankar Datta and Ujjal Bhuyan opposed the reference’s maintainability; Nagarathna also said the 1978 ruling was correct.
- Reported vote
- Three accounts report a 6:3 majority, while one account reports a 5:4 majority.
Quotes
Chief Justice Surya Kant
Chief Justice of India
“The majority has held that the reference is valid and we have made it abundantly clear that the majority will apply prospectively and the pending matters (under the ID Act of 1947) will be adjudicated as per the triple test definition under the Bangalore Water Supply (1978 judgement)”
livemint.com
“The future of ‘industry’ in Section 2(p) of IRC is not burdened by the interpretation of 2(j) in the Industrial Disputes Act.”
thehindubusinessline.com
Sources
Supreme Court 6:3 Verdict Narrows Use Of 1978 ‘Industry’ Definition Under Industrial Relations Code 2020
SC scraps worker-friendly 1978 ‘industry’ precedent for new labour code
SC keeps labour protection intact in pending cases, leaves ‘industry’ definition under new code open
Expansive definition of industry in 1978 verdict not to be used for 2020 Code: SC
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