Supreme Court says 1978 ‘industry’ definition won’t guide interpretation of 2020 labour code

The Supreme Court on Thursday, by a 6:3 majority, held that the expansive, labour-friendly definition of "industry" laid down in its landmark 1978 judgment will not govern the interpretation of the Industrial Relations Code, 2020.

A nine-judge Constitution bench headed by Chief Justice Surya Kant also, by majority, held that a reference seeking reconsideration of the 1978 judgment by a seven-judge bench was validly made.

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The 1978 ruling, delivered in the Bangalore Water Supply and Sewerage Board case, had significantly widened the scope of the term "industry" under the Industrial Disputes Act, 1947. It brought millions of employees working in sectors including hospitals, educational institutions, clubs and government welfare departments within the protection of the labour law.

Justice Surya Kant, who authored the majority judgment for himself and Justices Satish Chandra Sharma, Alok Aradhe and Vipul M Pancholi, made clear that the "triple test" evolved in the 1978 ruling to determine what constitutes an "industry" would continue to apply to pending cases under the now-repealed 1947 Act.

The test, formulated by Justice V R Krishna Iyer in the 1978 judgment, broadly provides that a systematic activity involving cooperation between employers and employees for the production or distribution of goods and services would qualify as an "industry", thereby extending statutory labour protections to workers across a wide range of sectors.

However, the court said the 1978 ruling could not be used as a broad basis for interpreting the 2020 labour code.

"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)," the CJI said.

He added that the principles laid down in the 1978 verdict "shall not be considered as a sweeping anchor for the interpretation of the 2020 Act and its interpretation will be considered independently".

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Judges differ on reference

Justices P S Narasimha and Joymalya Bagchi delivered separate judgments broadly agreeing with the CJI's view. Both held that the reference seeking reconsideration of the 1978 ruling on the definition of "industry" was valid.

Justices B V Nagarathna, Dipankar Datta and Ujjal Bhuyan dissented, particularly on whether the reference made to the nine-judge bench was maintainable.

Justice Nagarathna held that the 1978 judgment was correctly decided and there was no need to refer it for reconsideration.

The bench was unanimous, however, in noting that the 1947 law had since been repealed and replaced by a new legislation, rendering the exercise academic in that context.

The majority judgment also clarified that the ruling would not apply to the 2020 Code and that fresh cases under the new law would have to be decided on their own facts and in their specific context.

The detailed judgments are awaited.

What the 1978 ruling changed

The Supreme Court's February 21, 1978 judgment in the Bangalore Water Supply and Sewerage Board case had dramatically expanded the meaning of "industry" under Section 2(j) of the Industrial Disputes Act.

The ruling's "triple test" became a key benchmark for determining whether an undertaking or activity qualified as an industry, with its implications extending to workers in a broad range of institutions and services.

The latest ruling was closely watched by labour and industrial sectors because of its potential implications for workers' rights and the application of protections under the 1947 Act.

On February 16, the nine-judge bench had framed the key questions before it, including whether the test laid down in paragraphs 140 to 144 of Justice Krishna Iyer's 1978 opinion represented the correct law on what constitutes an "industry".

It also considered whether the Industrial Disputes (Amendment) Act, 1982, which apparently never came into force, and the Industrial Relations Code, 2020, effective from November 21, 2025, had any legal bearing on the interpretation of "industry" under the original Act.

Another question was whether social welfare activities, government schemes and enterprises run by government departments or their instrumentalities could be treated as "industrial activities" under Section 2(j) of the 1947 Act.