Won’t examine ‘industry’ definition in Industrial Relations Code 2020: SC

ANine-judge composition Bench of the sublime margaret court on tues clarified that it testament not consider the definition of ‘industry’ as laid down under the Industrial Relations Code, 2020, while reviewing a landmark 1978 judgment.The bench led by Chief Justice of India (CJI) Surya Kant is examining the correctness of the seven-judge ruling in the Bangalore Water Supply vs. A. Rajappa case. The 1978 verdict adopted a “worker-oriented” approach, giving the term ‘industry’ a broad meaning by including hospitals, universities, and charitable institutions within its ambit.The bench said the contours of industry under the 2020 Code, which came into force from November 21, 2025, could be the subject matter of a fresh challenge. “We intend to consciously skip consideration of the 2020 Code or the earlier 1982 amendment since there could be a challenge to the 2020 Code,” the top court said, even as Attorney General R Venkataramani asked the court to scrutinise the 1978 ruling in light of subsequent laws.“If an earlier law has ambiguities and it is open to multiple interpretations, then a law on the same subject or cognate subject can throw considerable light on the reading of the law,” Venkataramani, who appeared for the Centre, said.The 1978 ruling expanded the definition of “industry” under Section 2(j) of the Industrial Disputes Act, 1947 and proposed a triple test – systematic activity, employer-employee cooperation, and production or distribution of goods or services for human needs.In 1982, an amendment to this provision was made along the lines of the judgment, but it was not brought into force. The 2020 Code adopted a similar language. After it was enforced in November last year, the 1947 Act was repealed in February 2026.The 2020 Code carved out three exceptions to the definition of industry - institutions engaged in charitable, social or philanthropic service; any activity of the government relatable to its sovereign functions; and domestic service or any such activity to be notified by the Centre.The opposite side led by advocates CU Singh, Indira Jaising and Gopal Sankaranarayanan, which is supporting the 1978 judgment, told the bench that petitions are in the pipeline to challenge the 2020 law.The bench, also comprising justices BV Nagarathna, PS Narasimha, Dipankar Datta, Ujjal Bhuyan, SC Sharma, Joymalya Bagchi, Alok Aradhe and Vipul M Pancholi, said, “We will only examine if the interpretation given by the 1978 ruling was correct or wrong. If we find that the provision was completely misconstrued by giving such a wide meaning, we will correct ourselves by saying it is not to be expansive.”With such an exercise being done 48 years after the ruling was pronounced, justice Nagarathna said, “The judgment came in the 1970s. Since then, we have had liberalisation, privatisation and globalisation in the 1990s. Many of the functions of the state are now performed by the private sector. Should the interpretation then be restrictive, expansive or there should be a balance is the question.”Justice Bagchi said, “Once we interpret our 1978 judgment in the shadow of the 2020 Code, notified in 2025, and we carve out sovereign functions by giving a wider interpretation, are we not importing restrictions of the 2020 law, although the legislature did not intend it to be retrospective.”CJI Surya Kant said, “The original definition of industry (under the 1947 Act) never contemplated and cannot be stretched to sovereign activity. Such activity is part of the Directive Principles of State Policy, which the State is otherwise also obligated to perform under the Constitution. It may be part of the constitutional obligation to promote industry and employment. But it is not your obligation to run these activities. Perhaps, the individual activities, on a case-by-case basis, can be excluded from this definition.”Justice Narasimha noted that the wording of the term “industry” in the now-repealed Act is itself problematic and has resulted in confusion, taking years for the court to interpret what constitutes “industry.”The 1947 Act defines industry as any business, trade, undertaking, manufacture or calling of employers and includes any calling, service, employment, handicraft, or industrial occupation or avocation of workmen.“You use such open-ended (language), which is so textual that it has led to unabated litigation,” justice Narasimha remarked.Justice Datta questioned the validity of the reference made by a five-judge bench in January 2017, which failed to record the “difficulties” faced by the legislature and the executive in enforcing the amended 1982 provision.Besides the Centre, arguments were also made by additional solicitor general (ASG) KM Nataraj for the UP government, senior advocates Shekhar Naphade and Sanjay Hegde for Maharashtra universities and Karnataka zilla panchayat. The court directed senior advocates JP Cama and PS Sengupta to assist as amicus curiae and posted the matter for hearing on Wednesday.This is one of the two nine-judge bench matters pending before the top court; the other is the review petition challenging the entry of women in Kerala’s Sabarimala temple. In February, the CJI-led bench listed the present matter for hearing in March and the Sabarimala review in April.The February 16 order of the court identified three major questions of law for consideration. These include: whether the Bangalore Water Supply case lays down the correct law on the definition of industry, whether social welfare activities and schemes or other enterprises undertaken by the government departments or their instrumentalities can be construed to be “industrial activities”, and what state activities will be covered by the expression “sovereign function”, and whether such activities will fall outside the purview of industry.