SUPREME COURT REDEFINES ‘INDUSTRY’ UNDER THE INDUSTRIAL RELATIONS CODE, 2020

Why in the News?

A nine-judge Constitution Bench of the Supreme Court has held that the expansive interpretation of ‘industry’ laid down in the landmark Bangalore Water Supply and Sewerage Board v. R. Rajappa judgment of 1978 will not automatically govern the Industrial Relations Code (IRC), 2020. The ruling creates a fresh interpretative framework for future labour disputes under the new labour regime.

1978 BANGALORE WATER SUPPLY JUDGMENT

●     Broad Definition: The 1978 judgment significantly expanded the meaning of ‘industry’ under Section 2(j) of the Industrial Disputes Act, 1947, bringing numerous organised activities within labour-law protection.

●     Triple Test: The Court identified systematic activity involving employer-employee cooperation for producing or distributing goods or services to satisfy human wants as the principal basis for determining an industry.

●     Wide Coverage: Activities such as hospitals, educational institutions and municipalities could fall within the definition, even when they were not traditionally viewed as commercial industries.

●     Limited Exclusions: The judgment primarily excluded core sovereign functions, including defence, judiciary and law enforcement, from the scope of industrial activity.

●     Worker Protection: The expansive interpretation enabled workers across diverse sectors to access labour-law remedies, collective bargaining and protection against unfair employment practices.

IMPACT OF THE NEW SUPREME COURT RULING

●     Independent Interpretation: The majority held that ‘industry’ under the Industrial Relations Code, 2020 must be interpreted according to its own statutory language and contemporary legislative context.

●     Prospective Framework: The 1978 triple test will continue governing pending disputes under the repealed Industrial Disputes Act, while future IRC disputes will receive an independent interpretation.

●     Reformulated Test: Chief Justice Surya Kant indicated that the principles of the 1978 judgment remain valuable but proposed a reformulated triple test for contemporary industrial relations.

●     Judicial Balance: The judgment attempts to balance worker protection with changing economic structures, particularly amid privatisation, liberalisation, technological transformation and evolving employment relationships.

●     Future Uncertainty: The ruling leaves important questions for future litigation regarding which public, service-sector and non-profit activities will qualify as industries under the new labour framework.

 INDUSTRIAL RELATIONS CODE, 2020

●     Code Objective: The Industrial Relations Code, 2020 consolidates laws relating to trade unions, conditions of employment and settlement of industrial disputes, replacing three earlier central labour laws.

●     Major Laws: It subsumes the Industrial Disputes Act, 1947, Trade Unions Act, 1926 and Industrial Employment (Standing Orders) Act, 1946 into a unified industrial-relations framework.

●     Industrial Dispute: The framework regulates disputes between employers and workers, providing mechanisms for conciliation, adjudication and resolution of conflicts arising from employment relationships.

●     Trade Unions: The Code provides for registration and recognition of trade unions, while establishing provisions concerning negotiating unions and negotiating councils.

●     Labour Flexibility: The Code seeks to balance ease of doing business with worker protection, including provisions relating to retrenchment, standing orders, strikes and industrial dispute resolution.