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The Supreme Court has held that the meaning of “industry” under Section 2(p) of the Industrial Relations Code (IRC), 2020 must be interpreted independently from the landmark Bangalore Water Supply and Sewerage Board v. R. Rajappa (1978) judgment. The Court described the new Code as requiring interpretation on a “clean slate”.

1978 Bangalore Water Supply Judgment

In Bangalore Water Supply and Sewerage Board v. R. Rajappa (1978), a seven-judge Bench gave a broad interpretation to “industry” under Section 2(j) of the Industrial Disputes Act, 1947.

It evolved the Triple Test, under which an activity could qualify as an industry if it involved:

1. Systematic and organised activity;
2. Cooperation between employer and employees; and
3. Production or distribution of goods or services intended to satisfy human wants and wishes.

This broad interpretation brought institutions such as hospitals, educational institutions and municipalities within labour-law coverage, while core sovereign functions such as defence, judiciary and law enforcement were generally excluded.

What has the Supreme Court ruled?

• The Court held that the definition under the IRC, 2020 has to be determined from the language, structure and context of the new Code itself. Therefore, the 1978 judgment continues to govern disputes arising under the Industrial Disputes Act, 1947, but cannot automatically serve as the binding basis for interpreting “industry” under the new Code.
• This distinction is significant because India’s labour market has changed considerably since 1978, with liberalisation, privatisation, expansion of the service sector, new employment arrangements and the emergence of gig/platform work.

Industrial Relations Code, 2020

• Under Section 2(p), “industry” covers systematic activity carried out through cooperation between employer and worker, irrespective of whether capital is invested or profit is intended. This can potentially bring non-profit and low-capital activities within the labour-law framework.
• The broader coverage can facilitate access to conciliation and industrial tribunals, collective bargaining, grievance mechanisms, notice requirements for changes in service conditions and retrenchment-related protections for workers in covered establishments.