Congress flags SC’s ‘industry’ ruling, warns of weaker worker safeguards

The Congress on Saturday, 22 August expressed concern over a Supreme Court ruling that said its 1978 worker-friendly interpretation of the term ‘industry’ will not apply to fresh cases under the Industrial Relations Code, 2020, warning that any move to narrow the definition could weaken worker safeguards.

Congress Rajya Sabha MP and general-secretary (communications) Jairam Ramesh said the Modi government’s Industrial Relations Code, 2020, “significantly weakens essential safeguards for our workers”.

Against this backdrop, a narrow majority of the Supreme Court, in State of Uttar Pradesh v. Jai Bir Singh, delivered on 20 August, has “hypothesised” a reformulation of the Triple Test laid down in its landmark February 1978 verdict in Bangalore Water Supply and Sewerage Board v. A. Rajappa, Ramesh posted on X.

The significance of how ‘industry’ is interpreted lies in the legal reality of who qualifies as a workman and, consequently, who receives the protection of labour laws, he said.

“In the 1978 Bangalore Water Supply case, the Supreme Court identified three elements that ordinarily characterise an industry: a systematic activity; cooperation between employer and employee; and production or distribution of goods or services calculated to satisfy human wants and wishes, excluding purely spiritual or religious services,” Ramesh said.

The court had also held that the absence of a profit motive was irrelevant, and that activities carried out by charitable institutions or public bodies could still fall within the definition, he pointed out. The only exemption was for core sovereign activities, such as the judiciary, law and order and defence, he said.

“For nearly five decades, this Triple Test provided a broad and settled framework for determining what constitutes an 'industry' under the erstwhile Industrial Disputes Act, 1947, as amended from time to time, bringing a wide range of workers within the protection of labour law,” Ramesh said.

The 2026 majority judgment narrows this approach in two important ways, he pointed out. First, it requires an activity to have a “discernible commercial character” resembling trade or business — an additional requirement not found in the earlier test. Second, it broadens the scope of the sovereign-function exemption, potentially placing a wider range of government activities outside the definition of ‘industry’.

The Supreme Court, however, clarified that the reformulation will not disturb concluded or pending proceedings under the erstwhile Industrial Disputes Act and will not govern the interpretation of the new Industrial Relations Code, he said.

The court had also made clear that its reformulation of the Triple Test could not be applied retrospectively to pending or decided cases under the now-repealed law. But leaving this “hypothesis” on the record creates an interpretive vacuum that could open a Pandora’s Box of litigation and uncertainty, particularly before labour courts and industrial tribunals, Ramesh said.

He argued that this could allow a narrower definition to take hold in practice, especially when the Industrial Relations Code already empowers the Centre to exclude further categories of establishments from its ambit.

In its significant verdict, the Supreme Court on Thursday held that its 48-year-old expansive interpretation of ‘industry’ would not apply to fresh cases under the Industrial Relations Code, 2020. Pronouncing the verdict, Chief Justice of India Surya Kant made clear that the Triple Test, evolved in the 1978 judgment by Justice V.R. Krishna Iyer to determine what constitutes an ‘industry’, would remain valid.

He said the Triple Test had been refined in the latest judgment, but that the refinement could not be used in pending or decided cases under the Industrial Disputes Act, 1947. The majority verdict also made clear that it had not examined the 2020 Code.

“The future of 'industry' in Section 2(p) of the 2020 Code is not burdened by the interpretation of 2(j) in the Industrial Disputes Act of 1947,” the CJI said. “Consequently, any pending proceedings before the courts, tribunals, labour authorities or any fora under the 1947 Act should be decided as per the interpretation of Section 2(j) in the Bangalore Water Supply and Sewerage Board (1978) judgment.”

Justice Narasimha agreed with the CJI and said an authoritative interpretation of Section 2(j) had lost its relevance with the new Code coming into force.

Disagreeing with the majority, Justice B.V. Nagarathna said the reference made to a nine-judge Bench against the 1978 verdict was unwarranted and not maintainable. In her dissent, she highlighted India’s changing industrial landscape, from state-owned enterprises to an era of privatisation, liberalisation and globalisation.

“Liberalisation and privatisation were meant for the welfare of the people of India. Liberalisation, privatisation, globalisation were embraced by the Indian economy with a view to privatise state-sponsored and managed industries by handing over these entities, goods and services to private hands,” Justice Nagarathna said.

Ramesh described her dissent as “courageous, clear and compelling”.

“Justice B.V. Nagarathna's dissent is, as always, courageous, clear and compelling. She has held that the Triple Test in the Bangalore Water Supply case required no reconsideration and, in the interest of judicial certainty, cautioned against unsettling settled law,” he said.

She also observed that established jurisprudence under the old law could inform interpretation of the new Code, rather than the new Code being used to reopen settled law under the old Act, Ramesh said.

Justice Dipankar Datta, who wrote the judgment for himself, and Justice Ujjal Bhuyan concurred with Justice Nagarathna that the 1978 verdict did not require reconsideration. Ramesh said the August majority judgment was concerning because it injected uncertainty into labour relations at a time when clarity was essential for industrial peace.

“In an open economy with increasing private delivery of services, any move to narrow or distance the law from the broad definition of 'industry' risks weakening worker safeguards precisely when they are needed most,” he said.

With PTI inputs