Supreme Court to re-examine 'industry' definition

A nine-judge bench of the Supreme Court, led by Chief Justice of India Surya Kant, will on March 17 and 18 examine the correctness of an expansive definition of “industry” laid down nearly five decades ago, ToI reported. The earlier ruling, delivered by a seven-judge bench in 1978, had brought universities, hospitals, government institutions and welfare organisations within the scope of the Industrial Disputes (ID) Act, which regulates relations between workers and employers.

The petitions questioning that ruling have been pending since 2002. On January 2, 2017, a seven-judge bench of the Supreme Court referred the matter to a larger bench of nine judges. The question for consideration is whether the “triple test” framed by Justice V R Krishna Iyer in the 1978 judgment in the Bangalore Water Supply case correctly interpreted the law.

On Monday, a bench comprising the Chief Justice and Justices Joymalya Bagchi and Vipul M Pancholi said that, apart from testing the validity of the 1978 ruling, the nine-judge bench would also examine the interpretation of the term “industry” in Section 2(j) of the Industrial Disputes Act.


Section 2(j) states that “industry” means any business, trade, undertaking, manufacture or calling of employers. It also includes any calling, service, employment, handicraft or industrial occupation or avocation of workmen.

The 1978 judgment had framed a three-part test to determine whether an activity would qualify as an industry under the Act. The test required the presence of systematic activity, organised cooperation between employer and employee, and the production or distribution of goods and services aimed at satisfying human needs. This formulation had the effect of bringing a wide range of organised activities within the reach of the ID Act.

By applying the triple test, the seven-judge bench had expanded the definition in a manner that covered most organised activities, including those undertaken by educational institutions, hospitals and welfare bodies. At the same time, the court carved out sovereign functions of the state — such as defence and maintenance of law and order — from the scope of the term “industry”.

The nine-judge bench will now consider whether that approach requires reconsideration and whether the contours of Section 2(j) need to be read differently. The issue has significant implications for labour relations across a wide spectrum of public and private bodies.

While fixing the matter for hearing over two days, the bench directed counsel to adhere strictly to the schedule. A total of nine hours has been set aside for arguments across March 17 and 18.

The court said solicitor general Tushar Mehta and other law officers appearing for the Union government would have four hours to present their case. Counsel opposing the Union government would also be allotted four hours.

The nine-judge bench will also examine which state activities, if any, should fall outside the definition of “industry” under Section 2(j). The outcome could determine the future scope of the ID Act and clarify the position of several institutions that have for decades been treated as industries under the 1978 ruling.

With the matter finally set down for hearing after years of pendency, the court’s decision is likely to settle a long-standing debate over the reach of labour law in India.