What is an ‘industry’? Supreme Court to decide scope of key labour law

The Supreme Court has ruled that the definition of "industry" under the Industrial Disputes Act, 1947 and the Industrial Relations Code, 2020 needs to be modified. The current definition, laid down in the landmark 1978 ruling of Bangalore Water Supply and Sewerage Board v. A Rajappa, has been criticized for its broad scope, leading to a large number of cases being brought before labor courts.

The court's majority opinion stated that while pending disputes will continue to be adjudicated under the existing framework, prospective cases will be governed by the revised definition. However, this new definition will not apply to cases already pending. The triple test for identifying an industry - systematic activity, organized cooperation between employer and employee, and production or distribution of goods or services to satisfy human needs - was considered for modification.

The court also addressed the question of whether welfare schemes and social service activities run by government departments should be considered industrial activities, with Justice Nagarathna arguing that the nature of the activity, rather than who carries it out, should be the determining factor. The government's position was that the 1978 ruling had unintentionally broadened the definition to include welfare functions, while labor unions maintained that the existing framework has provided stability for five decades and that excluding workers without comparable protections would leave them with limited recourse.