Supreme Court of India reformulates industry definition in labor law

A nine-judge bench of the Supreme Court of India has reviewed the long-standing definition of ‘industry’ under labor law. The court examined the validity of the ‘Triple Test’ established in the 1978 Bangalore Water Supply and Sewerage Board v. A. Rajappa judgment, which defined an industry based on systematic activity, employer-employee cooperation, and the production or distribution of goods or services.

While the 1978 jurisprudence remains relevant for pending disputes under the Industrial Disputes Act, 1947, the Court has proposed a reformulated test that will apply prospectively. Chief Justice Surya Kant, writing for a majority, suggested adding a discernible commercial character similar to trade or business and expanding exemptions for sovereign functions. However, the bench clarified that this new interpretation does not govern the meaning of ‘industry’ under the Industrial Relations Code, 2020.

The decision saw internal disagreement among the judges. While the majority supported the reformulation, several justices opposed altering the 1978 test, citing its importance for worker protections in changing economic conditions.