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

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A nine-member Constitution Bench of the Supreme Court of India held that the nearly half-century-old interpretation of the term ‘industry’ will not automatically apply to the Industrial Relations Code (IRC), 2020, which 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, which 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 nearly half a century, this judgment had enabled workers across diverse sectors to access legal recourse, enforce labour rights, and engage in collective bargaining against unfair practices.

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.

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. Chief Justice Kant noted that 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.

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

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.

The Chief Justice, however, found that the 1978 verdict could have been articulated differently and set down a “reformulated” triple test, which would operate prospectively. However, 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.