The Supreme Court on Thursday held that its nearly 50-year-old interpretation of the word “industry” in the landmark Bangalore Water Supply judgment would not automatically apply to disputes under the Industrial Relations Code (IRC), 2020.
The ruling creates a distinction between old and new labour disputes. In essence, while the 1978 judgment cast a wide net over what counted as “industry”, the ruling allows a fresh framework to decide that question rather than automatically applying the old test.
The cases arising under the Industrial Disputes Act, 1947, will continue to be decided using the broad test laid down in 1978.
But courts will have to interpret the definition of “industry” under the new IRC independently rather than treating the earlier judgment as the starting point.
The nine-judge Constitution Bench, headed by Chief Justice of India Justice Surya Kant, delivered a divided verdict on several aspects of the case.
The issue before the Bench was the meaning of “industry” under Section 2(j) of the 1947 Act. In Bangalore Water Supply and Sewerage Board v A Rajappa, a seven-judge Bench led by Justice V R Krishna Iyer had given the term a wide meaning.
It had held that an activity would qualify to be “industry” if it was organised and systematic, involved cooperation between employers and employees, and produced goods or services to satisfy human needs.
The “triple test” brought several establishments such as hospitals, educational institutions and municipalities within the scope of labour law.
Only core sovereign functions such as the judiciary, defence and law enforcement were excluded.
The IRC, which came into force in November last year, has its own definition of “industry” under Section 2(p).
The majority of the judges, led by Justice Surya Kant and supported by Justice Satish Chandra Sharma, Justice Alok Aradhe and Justice Vipul M Pancholi, held that the interpretation of Section 2(j) could not be treated as the foundation for interpreting Section 2(p).
Justice P S Narasimha and Justice Joymalya Bagchi agreed with the majority on this aspect.
“The future of ‘industry’ in Section 2(p) of the IRC is not burdened by the interpretation of 2(j) in the Industrial Disputes Act,” Justice Kant said.
However, the ruling does not disturb pending or concluded matters under the old law. Justice Kant said the proceedings before courts, tribunals and labour authorities under the 1947 Act must continue to be decided in accordance with the Bangalore Water Supply judgment.
Indranil D Deshmukh, partner (head of disputes), Cyril Amarchand Mangaldas, said: “Pending cases, past awards and concluded settlements continue to be governed by the 1978 test. The real consequence is for the future, because the court has said the 1978 decision is not to be treated as a sweeping anchor for the new Code. Employers therefore get a fresh slate under the Code, while workers keep the protection they already had.”
Deshmukh, however, said his comments were based on media reports and the full judgments and opinions were awaited.
“Industry” under Section 2(j), he said, was a defined statutory expression and not simply the word in its ordinary sense. The Supreme Court had given it a specific legal meaning, which was why dictionary definitions had never been determinative.
Impact on employers and workers
“The immediate effect of the judgment is limited but important. Pending proceedings under the Industrial Disputes Act, 1947, will continue to be governed by the broad test laid down in Bangalore Water Supply. Employers cannot use this judgment to reopen concluded matters or avoid liability in pending disputes under the old law,” said Rishabh Gandhi, founder, Rishabh Gandhi and Advocates.
He said this was particularly relevant for hospitals, educational institutions, charitable bodies and government instrumentalities, whose status as “industry” had often been contested.
Mathuvanthy Mathavan, partner, Poovayya & Co, said: “The more significant impact is prospective. The Supreme Court has made it clear that the interpretation of ‘industry’ under the Industrial Relations Code, 2020, must be undertaken independently. The wide interpretation developed under the 1947 Act cannot automatically be imported into the new Code.”
Dissent
Justice B V Nagarathna took a different view. Along with Justice Dipankar Datta and Justice Ujjal Bhuyan, she held that the reference against the 1978 judgment was unwarranted. She favoured retaining its broad interpretation to protect workers.
Nagarathna said liberalisation, privatisation and globalisation had transformed the workplace and made strong labour protections more important. She also rejected the argument that government involvement automatically made an activity a sovereign function.
 "SC retains 1978 industry test for old disputes, leaves new labour code open")
