The story so far:

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.

What constitutes an ‘industry’?

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 crux of the nine-judge Bench judgment

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.

Differing points of view on the Bench

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. The Bench has unanimously made 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’. She highlighted that the judgment was a child of its time, 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.

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

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 said 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.

Published – August 21, 2026 09:36 am IST

In a verdict in which judges varyingly differed on issues, the nine-judge Bench of the Supreme Court on Thursday (August 20, 2026) held that a nearly half-century-old expansive interpretation of ‘industry’, which previously granted workers stronger labour rights and protection, will not apply under the new Industrial Relations Code, 2020.

The reference before the Constitution Bench headed by Chief Justice of India Surya Kant was centred around a broad definition given to ‘industry’ in a 1978 seven-judge Constitution Bench judgment, authored by Justice V.R. Krishna Iyer, in the Bangalore Water Supply and Sewerage Board v. R. Rajappa case.

The verdict had enabled workers employed in a wide range of jobs to have a legal recourse, including collective bargaining, against unfair labour practices by employers. The 48-year-old verdict had exempted only core sovereign activities such as the judiciary, law and order, defence, etc. from the purview of ‘industry’, as defined under Section 2(j) of the Industrial Disputes Act, 1947, in order to protect the state’s functional autonomy.

The 1978 judgment had further introduced a ‘triple test’ which laid down conditions that any activity which was systematic or organised, operated on the basis of employer-employee cooperation and dealt in the production of goods and services to satisfy human wants came within the ambit of ‘industry’. The judgment had brought even hospitals, educational institutions and municipalities within the fold of ‘industry’.

The majority on the Bench held that ‘industry’ under Section 2(p) of the Industrial Relations Code (IRC), which came into force in November 2025, would not be “burdened” by the interpretation in the 1978 judgment of Section 2(j) of the 1947 Act. This means the interpretation of the term ‘industry’ under IRC would be done on a clean slate.

The majority opinion on this particular point was authored by Chief Justice Surya Kant and supported by Justices Satish Chandra Sharma, Alok Aradhe, and Vipul M. Pancholi, with Justices P.S. Narasimha and Joymalya Bagchi expressing agreement in their separate opinions.

Chief Justice Kant said the 1978 judgment and its conclusion would not act as the “sheet anchor” or the foundation for any future interpretation of Section 2(p) of the IRC. This has effectively confined the 1978 verdict strictly to legacy industrial disputes pending before courts, tribunals, labour authorities and other fora prior to the IRC.

“The future of ‘industry’ in Section 2(p) of IRC is not burdened by the interpretation of 2(j) in the Industrial Disputes Act,” Chief Justice Kant summed up at the end of an hour-long judgment pronouncement session on Thursday.

In fact, the CJI’s opinion even suggested a “refinement” of the 1978 triple test. While acknowledging that the core principles of the test had stood the test of time in deciding industrial disputes, the CJI said its elements could have been “articulated differently so that the scope and contours of 2(j) could have been better reflected”. However, the CJI clarified that this was only a “considered opinion”, and should not be used to displace the governing legal position on pending proceedings or dig up decided cases.

“Consequently, any pending proceedings before courts, Tribunals, labour authorities or any fora under the 1947 Act should be decided as per the interpretation of Section 2(j) in the Bangalore Water Supply and Sewerage Board (BWSSB) judgment,” the CJI said.

Justice Narasimha agreed, saying an authoritative interpretation of 2(j) had lost its immediacy with the coming into force of the IRC.

Justice Nagarathna differs, backs broad industry definition

In her separate opinion, Justice B.V. Nagarathna, seconded by Justices Dipankar Datta, who wrote an independent opinion shared with Justice Ujjal Bhuyan, found the reference against the 1978 verdict “unwarranted” and not maintainable. She said it was important, now more than ever, to retain the inclusive definition of industry to safeguard workers’ rights.

In a scathing dissent, Justice Nagarathna highlighted India’s shifting industrial landscape from state-owned enterprises to an era of privatisation, liberalisation and globalisation.

“Liberalisation and privatisation were meant for the welfare of the people of India. Heavy capital investment in the public sector and its failure to yield good results in the subsequent decades and the move towards disinvestment and privatisation were experiments in achieving the constitutional goals… It is in this backdrop the judgments of this court must be viewed… Liberalisation, privatisation, globalisation were embraced by the Indian economy with a view to privatise state-sponsored and managed industries by handing over these entities, goods and services to private hands,” Justice Nagarathna observed.

The change of ownership to private entities saw the transformation of workmen/employees of public sector units to workmen/employees of the private sector. It is in this context that the protection under the Industrial Disputes Act protection was provided. The judge said a pervasive definition of Section 2(j) was necessary to effectively protect workers’ right in a privatised world.

Justice Nagarathna cautioned that any tinkering with the definition of industry under 2(j), which had stood firm for nearly 50 years, would definitely cast a shadow on the interpretation of the term under the IRC. Interference would only create uncertainty and disturb “industrial peace”.

Justice Nagarathna said merely because the state was involved in an activity did not automatically qualify the venture as a sovereign function. Even social welfare activities done by the government or their instrumentalities could be construed as industry depending on the nature of the activities.

“The state engages in many activities which are not stricto sensu sovereign. Mainly because a function is performed by the state does not mean it would be exempted from the definition of industry. Justice Iyer’s interpretation was the correct law,” Justice Nagarathna said.

She upheld the ‘Dominant Nature Test’ introduced in the 1978 judgment concerning organisations which perform multiple or integrated activities. In such cases, the nature of the dominant activity of the organisation would be considered to determine if the entity was an industry or not.

Justices Datta and Bhuyan corroborated Justice Nagarathna’s view that the 1978 verdict did not require any re-consideration. The two judges concluded that the triple test has prevailed through time. “Institutional credibility lies in respecting finality and not in perpetuating doubt,” Justice Datta said.

Justice Bagchi, though agreeing with the CJI and Justice Narasimha on the validity of the reference, took the views of Justices Nagarathna, Datta and Bhuyan that the 1978 judgment correctly determined the scope and ambit of ‘industry’.

The judge, however, crucially weighed in with the majority on the Bench to hold that IRC should not be encumbered by the 1978 verdict in future disputes.

Published – August 20, 2026 12:15 pm IST

Supreme Court, in a majority opinion clarified that the 1978 judgment’s interpretation would not affect or influence ‘industry’ in Section 2(p) of Industrial Relations Code 2020.
| Photo Credit: Shiv Kumar Pushpakar