Supreme Court Rules 1978 ‘Industry’ Precedent Will Not Automatically Apply to Industrial Relations Code

August 21, 2026

A nine-member Constitution Bench of the Supreme Court of India has held that the nearly five-decade-old legal interpretation of what constitutes an ‘industry’ will not automatically apply to the Industrial Relations Code (IRC), 2020. The decision breaks the new labour framework away from the expansive standard set in 1978, leaving future disputes under the 2020 Code to be evaluated on their own statutory terms.

What Happened

The Constitution Bench, led by Chief Justice of India Surya Kant, examined whether the long-standing definition of ‘industry’ formulated in the 1978 landmark judgment Bangalore Water Supply and Sewerage Board v. R. Rajappa should govern Section 2(p) of the Industrial Relations Code, 2020. The 2020 Code came into force in November 2025, replacing the legacy Industrial Disputes Act, 1947.

The majority on the Bench held that the term ‘industry’ under the IRC must be interpreted according to the text and context of the new statute, rather than being bound to the 1978 ruling. Chief Justice Kant remarked that while core principles from the 1978 judgment had endured over time, the precedent would no longer serve as the ‘sheet anchor’ for defining an industry under the IRC. The Bench affirmed unanimously that the term under the 2020 Code will be interpreted independently to reflect contemporary industrial dynamics.

Key Highlights

Status of Pending Disputes: Pending disputes under the repealed Industrial Disputes Act, 1947, will continue to follow the 1978 Bangalore Water Supply precedent.
Independent Reading of the IRC: All future disputes arising under the Industrial Relations Code, 2020, will be interpreted afresh based on the new statutory language.
The 1978 ‘Triple Test’: Penned by Justice V.R. Krishna Iyer, the 1978 ruling defined systematic or organised activities based on employer-employee cooperation to supply goods or services as an industry, which included hospitals, educational institutions, and municipalities, exempting only core sovereign functions like defence, judiciary, and law enforcement.
Reformulation Proposal: Chief Justice Kant, joined by Justices Satish Chandra Sharma, Alok Aradhe, and Vipul M. Pancholi, suggested a reformulated triple test to operate prospectively. However, applying this recast test to Section 2(j) of the 1947 Act is no longer possible because the IRC, 2020, has already taken effect.
Minority and Concurring Views: Justices B.V. Nagarathna, Dipankar Datta, and Ujjal Bhuyan formed a minority opinion, maintaining that re-evaluating the 1978 ruling was unwarranted and warning that shifting the definition could create uncertainty and disrupt industrial peace. Justice Bagchi supported referring the matter to the nine-judge bench but opposed a reformulated triple test, noting that the absence of a profit motive does not exclude an activity from being an industry. Justice Datta, supported by Justice Bhuyan, emphasised that judicial credibility depends on finality rather than casting doubt on established law.

Why This Matters

For almost fifty years, the broad definition under the 1978 judgment allowed workers across a wide range of institutions, including educational bodies and hospitals, to seek legal remedies, enforce statutory labour protections, and take part in collective bargaining against unfair practices. By separating the new Industrial Relations Code, 2020, from this precedent, the Supreme Court has cleared the path for courts to determine worker protections and employer authority independently under the updated legislative text.

What to Watch Next

With the 1978 ruling decoupled from the new labour framework, future courts handling disputes under the Industrial Relations Code, 2020, will be tasked with determining the fresh legal boundaries of what constitutes an industry under Section 2(p) of the Code.

Frequently Asked Questions

What was the 1978 Bangalore Water Supply ruling?

In Bangalore Water Supply and Sewerage Board v. R. Rajappa, a seven-judge Bench of the Supreme Court introduced a ‘triple test’ that classified organised operations involving employer-employee cooperation to provide goods or services as an industry, covering entities like hospitals and educational institutions, while exempting only core sovereign state functions.

How does this ruling affect pending cases under the 1947 Act?

The Supreme Court clarified that ongoing cases under the legacy Industrial Disputes Act, 1947, will continue to be governed by the 1978 Bangalore Water Supply standard.

Will the 1978 definition apply to the Industrial Relations Code, 2020?

No. The nine-judge Bench determined that the term ‘industry’ under the Industrial Relations Code, 2020, must be interpreted independently based on the specific text and context of the new Code.

Source: Based on reporting from The Hindu.