Supreme Court’s Refusal to Examine ‘Industry’ Definition Under the Industrial Relations Code, 2020: Revisiting the Legacy of Bangalore Water Supply

I. Introduction

A nine-judge Constitution Bench of the Supreme Court of India, led by Chief Justice of India Surya Kant, has clarified that it will not examine the definition of “industry” under the Industrial Relations Code, 2020 while reviewing the correctness of the landmark 1978 judgment in Bangalore Water Supply v A Rajappa.

Instead, the Court has confined its inquiry to determining whether the interpretation of “industry” under the earlier statutory regime—specifically the Industrial Disputes Act, 1947—was correctly decided in 1978.

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II. Background: The 1978 Bangalore Water Supply Judgment

The decision in Bangalore Water Supply v. A. Rajappa (1978) remains one of the most significant rulings in Indian labour law.

The Court interpreted Section 2(j) of the Industrial Disputes Act, 1947 expansively and introduced a “triple test” to determine what constitutes an “industry”:

1. Systematic activity

2. Cooperation between employer and employee

3. Production or distribution of goods and services to satisfy human wants

Applying this test, the Court brought within the scope of “industry” a wide range of institutions, including:

• hospitals

• educational institutions

• charitable organisations

This worker-oriented interpretation significantly expanded labour protections but also generated decades of legal ambiguity and litigation.

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III. Legislative Developments: 1982 Amendment and 2020 Code

Following the 1978 ruling, Parliament enacted an amendment in 1982 to refine the definition of “industry.” However, this amendment was never brought into force.

Subsequently, the legislature introduced the Industrial Relations Code, 2020, which came into effect on November 21, 2025, and repealed the Industrial Disputes Act, 1947 in February 2026.

The 2020 Code largely adopts the language of the earlier framework but introduces explicit exclusions, including:

• charitable, social, or philanthropic institutions

• sovereign functions of the State

• domestic services and other notified activities

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IV. Supreme Court’s Current Position

The Constitution Bench has made it clear that:

• It will not interpret the definition of “industry” under the 2020 Code

• The Code may be subject to independent constitutional challenges in the future

• Its present task is limited to reviewing whether the 1978 interpretation was legally correct

The Court observed that examining the 2020 Code at this stage may prejudice future litigation challenging the validity or interpretation of the new statute.

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V. Arguments by the Union Government

The Attorney General for India, R Venkataramani, argued that:

• Subsequent legislation, including the 2020 Code, can provide interpretive guidance

• Where earlier statutory provisions are ambiguous, later laws may help clarify legislative intent

This reflects a principle of statutory interpretation where later enactments may illuminate earlier ambiguities.

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VI. Counter-Arguments by Opposing Counsel

Senior advocates, including Indira Jaising, argued in support of the 1978 ruling and indicated that:

• Separate petitions are likely to be filed challenging the 2020 Code

• The Court should avoid conflating two distinct statutory regimes

The bench appeared inclined to maintain this separation to ensure procedural and doctrinal clarity.

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VII. Key Legal Issues Identified by the Court

The Constitution Bench has framed three core questions:

1. Whether the Bangalore Water Supply judgment correctly interpreted “industry”

2. Whether government welfare and social functions qualify as industrial activities

3. What constitutes “sovereign functions”, and whether such activities fall outside the scope of “industry”

These questions go to the heart of labour jurisprudence and state accountability.

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VIII. Judicial Concerns on Expansive Interpretation

Several judges raised concerns about the broad interpretation adopted in 1978.

Justice B V Nagarathna highlighted that:

• The economic landscape has changed significantly since the 1970s

• Liberalisation, privatisation, and globalisation have blurred the distinction between public and private functions

Justice P S Narasimha pointed out that:

• The statutory definition of “industry” is overly open-ended

• This has led to prolonged litigation and interpretive uncertainty

Justice Joymalya Bagchi cautioned against:

• Importing limitations from the 2020 Code into the interpretation of the 1947 Act

• Doing so could violate principles against retrospective application of law

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IX. Constitutional Dimensions

The case engages several constitutional principles:

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1. Directive Principles of State Policy

The Court referred to the role of the State under Part IV of the Constitution of India, which includes obligations to promote welfare and employment.

However, the Court observed that:

• Such obligations do not necessarily imply that all state activities qualify as “industry”

• Certain sovereign functions may fall outside the ambit of labour law regulation

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2. Separation of Powers

The Court’s refusal to interpret the 2020 Code reflects respect for:

• Legislative intent

• The possibility of future constitutional challenges

This aligns with the doctrine of judicial restraint.

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3. Article 141 – Binding Precedent

Under Article 141 of the Constitution of India, the Supreme Court’s interpretation of law is binding on all courts.

The present exercise may lead to a redefinition of a long-standing precedent, thereby reshaping labour law jurisprudence.

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X. Relevant Judicial Precedents

Apart from Bangalore Water Supply, courts have repeatedly grappled with defining “industry.”

The 1978 judgment itself has been both:

• followed in subsequent rulings

• criticised for being overly expansive

The present nine-judge bench is tasked with settling this doctrinal conflict conclusively.

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XI. Broader Implications

The outcome of this case will have far-reaching consequences:

• It may narrow or reaffirm the scope of labour protections

• It will impact whether non-commercial and welfare institutions are treated as industries

• It will clarify the extent to which state functions are subject to labour law obligations

Given that the Industrial Disputes Act has now been repealed, the ruling will also influence interpretation of the new labour codes.

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XII. Conclusion

The Supreme Court’s decision to exclude the Industrial Relations Code, 2020 from its present review marks a significant exercise in judicial discipline and restraint.

By focusing solely on the correctness of the 1978 Bangalore Water Supply judgment, the Court seeks to resolve a long-standing ambiguity in Indian labour law without pre-empting future constitutional challenges to the new statutory regime.

The eventual ruling of the Constitution Bench will not only determine the fate of a decades-old precedent but also reshape the contours of “industry” in India’s evolving economic and legal landscape.

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