Supreme Court Reconsiders Definition of ‘Industry’ in Labor Law

New Delhi – The Supreme Court of India commenced a crucial hearing on Tuesday, March 17, 2026, to re-examine the definition of “industry” under the Industrial Disputes Act, 1947. A nine-judge Constitution Bench is considering whether the broad interpretation established in the 1978 Bangalore Water Supply & Sewerage Board v. A. Rajappa case requires reconsideration, a decision with potentially wide-ranging ramifications for India’s labor landscape.

Government Argues for Narrower Definition

The Union government, represented by Attorney General R. Venkataramani, argued that an overly expansive definition of “industry” could deter private players and burden employers. The government cautioned against broadly applying the “triple test” established in the 1978 ruling, which currently defines an industry as involving systematic activity, organized cooperation between employer and employee, and the production and/or distribution of goods and services to satisfy human wants and wishes [ThePrint].

Venkataramani submitted that while the triple test is logically sound, its indiscriminate application has led to the inclusion of welfare schemes and governmental functions not originally intended to be classified as industrial activity [Economic Times]. He emphasized that the modern state operates as a welfare entity and that “incidental operational aspects” of government functions should not be isolated and treated as independent industrial activity [Bar & Bench].

Revisiting the 1978 Ruling

The case stems from a 2002 appeal and was initially referred to a larger bench in 2005 [The Hindu]. A seven-judge bench in 2017 then constituted the current nine-judge bench to specifically address the issue. The 1978 Bangalore Water Supply case established a sweeping interpretation of “industry,” encompassing any systematic activity organized for the production or distribution of goods and services, even without a profit motive.

Concerns About Legislative Intent and Subsequent Laws

The Attorney General also argued that the 1978 ruling adopted a restrictive understanding of “sovereign functions” that should be revisited in light of India’s constitutional framework. He suggested the Industrial Relations Code, 2020, could serve as an interpretative aid, though the bench expressed reservations about applying a prospective law retrospectively [Economic Times].

Justice Joymalya Bagchi cautioned that using the 2020 Code to interpret the 1978 judgment could effectively offer retrospective operation to a law intended to be prospective. Chief Justice Surya Kant clarified that the Court would confine itself to examining whether the 1978 judgment was correctly decided and would not rely on the unnotified 1982 amendment or the 2020 Code.

Sovereign Functions and Exemptions

Additional Solicitor General K.M. Nataraj, representing the State of Uttar Pradesh, argued that the concept of sovereign functions should be understood within the context of a constitutional democracy. He pointed out that the 2020 Code exempts not only sovereign functions but also activities related to them. He affirmed that a defense canteen, for example, would fall within “relatable sovereign functions” [Economic Times].

Bench Questions Validity of Reference

Justice Dipankar Datta questioned the validity of the original reference, asking where the pressing demands of competing sectors and the difficulties faced by the legislature in enforcing the amended definition were discussed in the initial judgment [Bar & Bench].

Composition of the Bench

The nine-judge Constitution Bench hearing the matter comprises Chief Justice of India Surya Kant, and Justices B.V. Nagarathna, P.S. Narasimha, Dipankar Datta, Ujjal Bhuyan, Satish Chandra Sharma, Joymalya Bagchi, Alok Aradhe and Vipul M Pancholi [Economic Times].

Arguments will continue in subsequent hearings.