Supreme Court Clarifies the Meaning of
“Industry” Under Labour Law
The Supreme Court has delivered an important ruling on
the interpretation of the term “industry” established in the landmark Bangalore
Water Supply and Sewerage Board v. A. Rajappa judgment of 1978.The Court
clarified that the broad interpretation given in the 1978 judgment will
continue to apply to pending disputes under the Industrial Disputes Act, 1947.
However, the same interpretation will not automatically apply to the Industrial
Relations Code (IRC), 2020.
Key Highlights of the Judgement
¨
The nine-judge
Constitution Bench held that the 1978 interpretation of “industry” under
Section 2(j) of the Industrial Disputes Act will not act as the “sheet anchor”
for interpreting “industry” under Section 2(p) of the IRC.
¨
The 1978 Triple Test will
continue to govern pending proceedings under the Industrial Disputes Act, 1947,
and the Court did not retrospectively replace it with a new test.
¨
The future meaning of
“industry” under the IRC will be interpreted independently, based on its own
statutory text and scheme.
¨
CJI Surya Kant observed
that the elements of the 1978 Triple Test could have been articulated
differently and suggested a possible refinement, including a discernible
commercial character analogous to trade or business.
¨
The suggested refinement
is only a considered opinion and cannot be used to alter the governing legal
position in pending proceedings under the 1947 Act.
¨
Justice B.V. Nagarathna,
supported by Justices Dipankar Datta and Ujjal Bhuyan, held that
reconsideration of the 1978 judgment was unwarranted and that its broad
interpretation remained important for safeguarding workers.
¨
Justice Joymalya Bagchi
agreed that the 1978 judgment correctly determined the scope of “industry” but
disagreed with reformulating the Triple Test; however, he agreed with the
majority that the IRC should not be encumbered by the 1978 verdict in future
disputes.
Industrial Relations Code, 2020
¨
The Industrial Relations
Code, 2020 replaced the Industrial Disputes Act framework and contains its own
definition of “industry” under Section 2(p).
¨
It covers systematic
activity involving cooperation between employers and workers for the
production, supply or distribution of goods or services, irrespective of capital
investment or profit motive.
¨
The Code excludes
charitable and philanthropic institutions, domestic service and sovereign
government functions, among specified exclusions.
¨
The Supreme Court held
that the meaning of “industry” under the IRC must therefore be interpreted
independently, rather than by automatically importing the 1978 interpretation
of Section 2(j).
Significance / Implications
¨
Future IRC disputes: The
meaning of “industry” under the IRC will develop through interpretation of the
new Code itself.
¨
Worker protection: The
decision may affect the future scope of labour-law protection because the 1978
interpretation had brought a wide range of workers and establishments within
its ambit.
¨
Sovereign functions:
Government involvement alone does not automatically make an activity sovereign;
the nature of the activity remains relevant.
¨
Legal certainty: By
retaining the 1978 position for pending cases, the Court avoided disturbing the
legal basis of existing proceedings.
¨
New phase of labour
jurisprudence: The judgment separates the jurisprudence governing legacy
disputes under the Industrial Disputes Act, 1947 from the future interpretation
of the Industrial Relations Code, 2020.
