Supreme Court refines 'industry' definition under Industrial Disputes Act, protects pending disputes

Hindustan Times - India · 21 Aug 2026 · 2 min read
Prelims · Polity Mains · GS2 Polity and constitution High relevance

A 9-judge SC bench, in a 5:4 split verdict, refined the 1978 'triple test' for defining 'industry' under the repealed Industrial Disputes Act while safeguarding pending disputes and clarifying non-applicability to the Industrial Relations Code, 2020.

Key points

9-judge Constitution bench headed by CJI Surya Kant delivered a nuanced 5:4 verdict on the definition of 'industry' under Section 2(j) of the repealed Industrial Disputes Act, 1947.

Majority view (5 judges) held that the 1978 Bangalore Water Supply & Sewerage Board Vs A Rajappa judgment's 'triple test' required refinement but protected all pending disputes from retrospective application of the new formulation.

Minority view (4 judges) maintained that the 1978 judgment correctly laid down the law and the reference itself was unnecessary, emphasizing the 'dominant nature' of activity over entity identity.

The bench unanimously directed that pending disputes under the 1947 Act shall continue to be adjudicated under the 1978 'triple test', ensuring legal certainty for ongoing cases.

The judgment clarified that the Industrial Relations Code, 2020's definition of 'industry' (Section 2(p)) must be interpreted independently, without being burdened by previous interpretations of the repealed Act.

[GS2-Governance] The verdict highlights judicial restraint in labor law transition periods, balancing legal certainty for pending cases with the need for doctrinal clarity in new legislation.

[GS4-Ethics] Justice Nagarathna's dissent emphasized worker protections, arguing that sovereign functions shouldn't grant blanket immunity from labor laws, reflecting ethical considerations in judicial interpretation.

The split verdict reflects ongoing judicial debate on the appropriate scope of labor protections, particularly for charitable/social institutions and government entities performing commercial activities.

Way Forward: Parliament should provide clear statutory definitions in new labor codes, establish specialized labor benches for faster dispute resolution, and create transitional provisions when repealing major labor laws.

Key terms

Industrial Disputes Act, 1947

A landmark labor legislation governing industrial relations in India, repealed by the Industrial Relations Code, 2020. Its Section 2(j) defined 'industry' broadly, interpreted expansively in Bangalore Water Supply case to include hospitals, educational institutions and government departments engaged in commercial activities.

Bangalore Water Supply Case (1978)

A 7-judge SC verdict that established the 'triple test' for defining industry: (1) systematic activity, (2) cooperation between employer-employee, and (3) production/distribution of goods/services. This expansive interpretation brought many non-traditional sectors under labor law protections.

Industrial Relations Code, 2020

Part of India's labor law reforms consolidating three existing laws. Its Section 2(p) redefines 'industry' with modified exclusions, requiring fresh judicial interpretation independent of precedents under the repealed 1947 Act.

Constitution Bench

A Supreme Court bench of 5 or more judges constituted under Article 145(3) to decide substantial questions of constitutional law. This 9-judge bench reflects the institutional significance of clarifying labor law jurisprudence during statutory transitions.