SC begins hearing on definition of industry

A nine-judge Constitution bench of the Supreme Court on Wednesday said its verdict on the correctness of a 1978 judgment which gives an expansive interpretation of the term “industry” to govern labour relations will apply to existing cases under the now-repealed Industrial Disputes Act, 1947.

On February 21, 1978, a seven-judge bench delivered a verdict on the definition of the term “industry” while deciding the plea of Bangalore Water Supply and Sewerage Board and expanded the definition, which brought millions of employees in hospitals, educational institutions, clubs and Government welfare departments under the protection of the Industrial Disputes (ID) Act, 1947.

The nine-judge bench comprising Chief Justice Surya Kant and Justices B V Nagarathna, P S Narasimha, Dipankar Datta, Ujjal Bhuyan, Satish Chandra Sharma, Joymalya Bagchi, Alok Aradhe and Vipul M Pancholi is hearing submissions on the contentious issue of defining the word “industry” under the 1947 Act.

“Whatever is going to be said now will apply to the existing cases under the old law. That is the long and short of it,” Justice Nagarathna said during the hearing. The observation assumes significance as some of the advocates have questioned the reference made to the nine-judge bench on the ground that the 1947 Act has since been repealed and instead, the Industrial Relations Code, 2020, which became operative in 2025, is now in force. “The reference is made. Now, show us an authority which says in these circumstances, the nine-judge bench may not answer (the reference),” Justice Datta asked senior advocate C U Singh, who was arguing in the matter.

Singh said he was not questioning the reference but the 1947 Act has now been repealed.

During the day-long arguments, senior advocate Indira Jaising assailed the vehement opposition of the 1978 verdict by several states, irrespective of the fact as to which party is ruling there.

She said these oppositions seem to be a “surrogate litigation” on behalf of private players.  Referring to the 1947 Act, she said it provided security of tenure to the workmen. “Every democratic society is duty-bound to give access to justice and all that the Industrial Disputes Act, 1947, gave is access to justice to the workmen in relation to victimisation, malafide termination, etc.,” Jaising said.

The CJI concurred with the submissions and said, “The Industrial Disputes Act, 1947, is a beneficial legislation and workmen are entitled to some kind of statutory protection.” Justice Datta observed that the court would have to first see what an industrial dispute is. “Unfortunately, yesterday, no senior counsel referred to the provisions of the Industrial Disputes Act, 1947. We have to first understand what an industrial dispute is,” Justice Datta said.

Jaising argued that the reference was based on “incorrect information” on whether or not there was a conflict between two judgments of the apex court.

Justice Bagchi observed, “Our interpretation is in reference to the repealed law and not in reference to the 2020 Code.” The arguments in the matter would continue on Thursday. While hearing the matter on Tuesday, the bench said it would not deal with the term as defined in the Industrial Relations Code, 2020.

“That does not mean we are helpless. There is a reference before us. We are directly examining the question whether the interpretation of the original provision itself in the Bangalore (case) was correct or not,” the CJI had said. “If that interpretation was wrong, if that provision has been completely misconstructed by giving such a wide meaning, then we will correct our mistake,” the bench had said.

The bench, earlier, formulated the broad issues for its adjudication and the first issue reads: “Whether the test laid down in paragraphs 140 to 144 in the opinion rendered by Justice V R Krishna Iyer in Bangalore Water Supply and Sewerage Board’s case (of 1978) to determine if an undertaking or enterprise falls within the definition of ‘industry’ lays down correct law?”

“And whether the Industrial Disputes (Amendment) Act, 1982 (which seemingly did not come into force), and the Industrial Relations Code, 2020 (with effect from November 21, 2025), have any legal impact on the interpretation of the expression ‘industry’ as contained in the principal Act?” it had said.

It had been said that one of the issues to be adjudicated would be whether social welfare activities and schemes or other enterprises undertaken by Government departments or their instrumentalities can be construed to be “industrial activities” for the purpose of Section 2(j) of the 1947 Act. At the heart of the dispute is the 1978 ruling delivered by Justice V R Krishna Iyer, as it expanded the definition of the term ‘industry’ and established the “Triple Test” to define it.

According to the 1947 Act, the term ‘industry’ means any business, trade, undertaking, manufacture or calling of employers and includes any calling, service, employment, handicraft or industrial occupation, or avocation of workmen.

The 1978 verdict expanded the definition and provided a triple test and said that if there was “systematic activity” undertaken by an organisation and there was cooperation between employer and employees in carrying out that activity and production of goods and services, then the entity can be termed as ‘industry’ and workmen will be entitled to protection under the ID Act.

This wide interpretation brought hospitals, educational institutions and even charitable organisations under the ambit of labour laws.