PolityGS2+ GS3

Supreme Court rules 1978 'industry' definition does not bind new Labour Code

The Hindu·2026-08-21· Read original

"Supreme Court rules 1978 'industry' definition does not bind new Labour Code"

Prelims Facts

  • •The Industrial Relations Code, 2020 consolidates three laws: the Industrial Disputes Act 1947, the Trade Unions Act 1926, and the Industrial Employment (Standing Orders) Act 1946.
  • •The BWSSB v. R. Rajappa (1978) ruling was delivered by a seven-judge Constitution Bench; the 2026 ruling was delivered by a nine-judge Constitution Bench.
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Key Terms

Industrial Relations Code, 2020 (IRC)

one of four Labour Codes consolidating 29 central labour laws, replacing the Industrial Disputes Act 1947 among others

Triple test (BWSSB, 1978)

three conditions (systematic organisation, employer-employee cooperation, production of goods/services) used to determine if an activity qualifies as 'industry'

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Study Note

BackgroundCore Concept

Background

India's labour law framework has long rested on a patchwork of central legislation, the most significant being the Industrial Disputes Act, 1947 (IDA). Section 2(j) of the IDA defined 'industry', and the scope of that definition determined which workers could access collective bargaining, raise industrial disputes, and seek protection against unfair dismissal. For decades, the definition was narrow and contested.

In 1978, a seven-judge Constitution Bench of the Supreme Court delivered a landmark ruling in Bangalore Water Supply and Sewerage Board v. R. Rajappa. The judgment, authored by Justice V.R. Krishna Iyer, gave an expansive reading to 'industry' under Section 2(j). It introduced the 'triple test': any activity that is (i) systematic or organised, (ii) operates on the basis of employer-employee cooperation, and (iii) produces goods or services to satisfy human wants, qualifies as an 'industry'. The ruling brought hospitals, educational institutions, and municipalities within the fold of 'industry'. Only core sovereign functions — the judiciary, defence, law and order — were exempted. This interpretation significantly widened the net of worker protection for nearly five decades.

The four Labour Codes enacted between 2019 and 2020 — covering wages, industrial relations, social security, and occupational safety — were Parliament's attempt to consolidate and modernise 29 central labour laws. The Industrial Relations Code, 2020 (IRC) replaced the IDA, the Trade Unions Act, and the Industrial Employment (Standing Orders) Act. The IRC came into force in November 2025. Its Section 2(p) defines 'industry' afresh, raising the question of whether the 1978 BWSSB interpretation would carry over.

The Topic Explained

The nine-judge Constitution Bench was convened to resolve precisely this question: does the expansive 1978 definition of 'industry' under Section 2(j) of the IDA govern the interpretation of Section 2(p) of the IRC?

The majority opinion held that it does not. The IRC's definition of 'industry' starts on a 'clean slate' — it is not burdened by the 1978 judgment. The majority reasoned that the IRC is a new, self-contained code with its own legislative intent, and importing the 1978 interpretation would distort that intent. The 1978 BWSSB ruling is now confined strictly to legacy disputes — proceedings already pending before courts, tribunals, and labour authorities under the 1947 Act before the IRC came into force. Those pending cases will continue to be decided under the BWSSB framework.

The majority also offered a 'refinement' of the triple test as a considered opinion. …

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Related PYQs

2017GS1 Prelims

Which principle among the following was added to the Directive Principles of State Policy by the 42nd Amendment to the Constitution?

AEqual pay for equal work for both men and women
BParticipation of workers in the management of industries
CRight to work, education and public assistance
DSecuring living wage and human conditions of work to workers
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2017GS1 Prelims

The Trade Disputes Act of 1929 provided for

Athe participation of workers in the management of industries.
Barbitrary powers to the management to quell industrial disputes.
Can intervention by the British Court in the event of a trade dispute.
Da system of tribunals and a ban on strikes.
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2017GS1 Prelims

Consider the following statements:

1.The Factories Act, 1881 was passed with a view to fix the wages of industrial workers and to allow the workers to form trade unions.

2.N.M. Lokhande was a pioneer in organizing the labour movement in British India.

Which of the above statements is/are correct?

A1 only
B2 only
CBoth 1 and 2
DNeither 1 nor 2
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2019GS1 Prelims

With reference to the Constitution of India, prohibitions or limitations or provisions contained in ordinary laws cannot act as prohibitions or limitations on the constitutional powers under Article 142. It could mean which one of the following?

AThe decisions taken by the Election Commission of India while discharging its duties cannot be challenged in any court of law.
BThe Supreme Court of India is not constrained in the exercise of its powers by laws made by the Parliament.
CIn the event of a grave financial crisis in the country, the President of India can declare Financial Emergency without the counsel from the Cabinet.
DState Legislatures cannot make laws on certain matters without the concurrence of Union Legislature.
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Practice MCQs

Politymedium

With reference to the Bangalore Water Supply and Sewerage Board v. R. Rajappa (1978) judgment, consider the following statements:

1.It was delivered by a seven-judge Constitution Bench of the Supreme Court.

2.It introduced a 'triple test' to determine whether an activity qualifies as 'industry' under the Industrial Disputes Act, 1947.

3.It exempted all government activities from the definition of 'industry' on the ground that the state performs sovereign functions.

Which of the statements given above is/are correct?

A1 and 2 only
B2 and 3 only
C1 and 3 only
D1, 2 and 3
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Politymedium

The Industrial Relations Code, 2020 (IRC) consolidated which of the following Acts?

1.Industrial Disputes Act, 1947

2.Trade Unions Act, 1926

3.Contract Labour (Regulation and Abolition) Act, 1970

4.Industrial Employment (Standing Orders) Act, 1946

Select the correct answer using the code below:

A1, 2 and 4 only
B1, 3 and 4 only
C2, 3 and 4 only
D1, 2, 3 and 4
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Politymedium

Which of the following activities were brought within the definition of 'industry' under Section 2(j) of the Industrial Disputes Act, 1947 by the Bangalore Water Supply and Sewerage Board v. R. Rajappa (1978) judgment?

1.Hospitals

2.Educational institutions

3.Municipalities

4.The judiciary

Select the correct answer using the code below:

A1, 2 and 3 only
B1 and 2 only
C2, 3 and 4 only
D1, 2, 3 and 4
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