How to define ‘industry’ under labour law: Inside SC’s split verdict

In a landmark decision, India's Supreme Court has struggled to reach a consensus on the definition of "industry" under labour law. The nine-judge Constitution Bench reached a divided verdict, delivering five separate opinions with conflicting interpretations. However, they reached a consensus on the practical standing for pending proceedings: cases involving the definition of "industry" under the repealed Industrial Disputes Act of 1947 will be decided using the 1978 "triple test" established by the Supreme Court in Bangalore Water Supply and Sewerage Board vs A Rajappa.

The new Industrial Relations Code, 2020, will have to be interpreted separately according to its own provisions. The dispute originated from Section 2(j) of the Industrial Disputes Act, 1947, which offered a broad definition of "industry". This led to debates over whether workplaces like hospitals, universities, charitable institutions, and government departments were included within the Act's scope, and whether their employees were entitled to statutory protections.

In 1978, the Supreme Court, in the Bangalore Water Supply case, adopted a broad interpretation of "industry" through the "triple test": systematic activity, organized cooperation among employer and employee, and production or distribution of goods or services aimed at satisfying human needs. This interpretation was challenged by Parliament in 1982, which sought to add an additional requirement that the activity must be carried on along commercial lines.

However, the amended definition was never notified. Over the years, the Supreme Court developed a split on this issue, with some judges favoring a commercial requirement for an activity to qualify as an industry, while others defended the social-welfare purpose of labour legislation and argued against excluding non-profit entities.