In Supreme Court, government seeks free hand in defining what is ‘industry’

NEw new delhi : The authorities has argued that it be presumption a release deal in deciding what is a “sovereign function”, and, by implication, what is an “industry”, in a case before the Constitution Bench of the Supreme Court that has the potential to define the purview of labour laws.On Tuesday, the Centre told a nine-judge Constitution bench that while the expansive “triple test” for defining industry, evolved in the 1978 Bangalore Water Supply case remains sound in law, its indiscriminate application has blurred the line between commercial activity and constitutionally mandated governance, and that the final determination of what constitutes a “sovereign function” should rest with the executive.ALSO READ | SC orders maternity leave for all adoptive mothers - irrespective of age of childOpening arguments in the long-pending reference on the definition of “industry” under labour law, Attorney General R Venkataramani argued that social welfare schemes and governmental functions cannot be treated as “industrial activity”, even if they involve organisational or operational elements resembling commercial undertakings.At the same time, the Centre made a significant pitch for institutional deference, urging the court to refrain from exhaustively defining sovereign functions and instead leave it to the government— subject to judicial review— to determine what activities fall within that category.The bench, led by CJI Surya Kant and comprising justices BV Nagarathna, PS Narasimha, Dipankar Datta, Ujjal Bhuyan, Satish Chandra Sharma, Joymalya Bagchi, Alok Aradhe and Vipul M Pancholi, commenced hearings in the reference arising from State of Uttar Pradesh Vs Jai Bir Singh.The bench is examining whether the expansive interpretation in Bangalore Water Supply case requires reconsideration, a question first referred to a larger bench in 2017. The outcome could significantly reshape the scope of labour protections under industrial law. A narrower definition of “industry” would exclude a wide range of institutions and government-linked bodies from industrial dispute mechanisms, while reaffirming the earlier ruling would retain the broad sweep of labour adjudication into non-commercial sectors.In written submissions, the Centre endorsed the legal soundness of the “triple test” laid down in the 1978 ruling -- systematic activity, employer-employee cooperation, and production or distribution of goods or services for human needs—as a principled framework for identifying “industry” under Section 2(j) of the Industrial Disputes Act, 1947.ALSO READ | Invisible imbalance in parenting roles: SC pushes Centre for paternity leave frameworkHowever, it cautioned that the problem lies not in the test itself but in its “over-broad” and “indiscriminate application”, particularly to government departments, welfare schemes and charitable institutions. “The indiscriminate application of the triple test… has led to an overbroad import of ‘industry’, thereby blurring the distinction between commercial activity and constitutionally mandated public welfare/governmental/sovereign functions,” the AG’s submissions said. This expansive interpretation, flowing from the Bangalore Water Supply ruling, has brought within the fold of “industry” even universities, charitable organisations and autonomous bodies, triggering sustained criticism over the decades.The government drew a distinction between economic undertakings and welfare functions of the State, arguing that social welfare programmes are undertaken in discharge of constitutional obligations and cannot be equated with trade, business or manufacture.“Social welfare activities and schemes… differ fundamentally from economic undertakings engaged in trade, business or commercial production,” said the submissions, adding that both the Industrial Disputes (Amendment) Act, 1982 and the Industrial Relations Code, 2020 reflect Parliament’s intent to exclude such functions from the scope of ‘industry’.The government also warned against a mechanical application of the test that isolates operational components, such as logistics or service delivery, from the broader governmental purpose, calling such an approach “doctrinally unsound and practically unworkable.” In a key submission with significant constitutional implications, the Centre argued that courts should avoid constructing an exhaustive definition of “sovereign functions”, given the evolving nature of governance. Instead, it said, the executive is “institutionally better positioned” to determine, in the first instance, whether a particular activity qualifies as a sovereign or public-purpose function.“The executive possesses the practical expertise, and policy responsibility necessary to evaluate the administrative, economic, and institutional implications of such classifications,” the submissions stated.While acknowledging that judicial review must remain available to test arbitrariness or constitutional violations, the Centre urged the court to exercise restraint in laying down rigid judicial categories. The Centre’s submissions also emphasised that Indian jurisprudence has consistently resisted an exhaustive definition of sovereign functions, instead identifying only core inalienable State powers such as defence, maintenance of public order, administration of justice, law-making, and citizenship.At the same time, it flagged that the modern welfare state performs a wide array of socio-economic functions, many of which may superficially resemble industrial activity but are integral to governance and public purpose. Attempting to rigidly classify or sever such functions, the government argued, would risk “artificial fragmentation” of State activity and impose constraints on policy implementation.