Is the Supreme Court's "Industry" Ruling Pro-Industry?

The SC's ruling is structurally pro-employer, it drops the 1978 default for future cases, but not a blanket win. Pending disputes stay under the old broad test, the bench was internally split, and hospitals or NGOs aren't automatically exempted. It shifts the starting point, not the outcome. By Mahima Katal

New Delhi, Aug 21: A nine-judge Constitution Bench of the Supreme Court, led by Chief Justice of India Surya Kant, delivered a landmark verdict holding that the sweeping 1978 definition of "industry" will not automatically apply to India's new Industrial Relations Code, 2020. The ruling has been widely reported as a shift favouring employers, but does it actually tilt the scales toward industry, or is that framing too simple?

The Case That Started It All

In 1978, a seven-judge bench of the Supreme Court decided *Bangalore Water Supply and Sewerage Board v. R. Rajappa*, laying down an unusually broad definition of "industry" under the Industrial Disputes Act, 1947. That judgment extended labour protections — including the right to collective bargaining and recourse against unfair practices — to a vast range of employers: hospitals, universities, clubs, and government welfare departments among them. For nearly five decades, this expansive reading remained the benchmark for deciding who counted as an "industry" and who didn't.

The Union government, defending its newer Industrial Relations Code, 2020, argued that this old, worker-friendly definition should not dictate how the new law is read. It contended that welfare and charitable activities run by the state should not be swept into "industry" status. That question — whether the 1978 precedent should govern the new Code — went before a nine-judge bench for final resolution.

What the Court Actually Ruled

The bench decided, by majority, that the interpretation of "industry" under the new Code will rest on the Code's "own text and context," not on the 1978 judgment. In practical terms, courts are no longer required to treat the older, expansive definition as their starting point when interpreting disputes under the 2020 Code. Chief Justice Kant was explicit that the 1978 verdict "would not act as the sheet anchor" for future interpretation of the term under the new law.

Importantly, though, the Court did not discard the 1978 judgment altogether. It ruled that the "triple test" evolved in that verdict — used to determine whether an activity qualifies as an industry — remains valid and continues to apply to older, pending disputes filed under the 1947 Act. The change applies only prospectively, to matters arising under the new Code.

The Case for Calling It Pro-Industry

There's a reasonable argument that this ruling favours employers and institutions going forward. By removing the 1978 precedent as the default lens for the new Code, the judgment opens the door for a fresh, potentially narrower reading of who counts as an "industry." The 2020 Code's own definition, under Section 2(p), explicitly excludes institutions run for charitable, social, or philanthropic purposes, as well as certain sovereign government functions. Under the old expansive framework, such exemptions were difficult to invoke — many welfare bodies and charitable institutions still got pulled into "industry" status. With the 1978 judgment no longer binding on the new Code's interpretation, these carve-outs may now be read more literally, giving employers firmer ground to argue they fall outside labour code obligations.

This also aligns with what the government itself was pushing for. The Centre had specifically argued that welfare and charitable activities should not be treated as "industry," and the majority's ruling moves in that direction.

The Case Against a Simple "Pro-Industry" Label

At the same time, several aspects of the verdict resist a one-sided reading. The Court did not strike down the 1978 test, it explicitly held that its core principles have "stood the test of time" and remain fully applicable to pending cases under the older law. This is not a retroactive rollback of worker protections; it is a forward-looking recalibration that applies only to new disputes under the 2020 Code.

The bench itself was far from unanimous. While the majority backed the CJI's position, other judges expressed disagreement on various sub-issues. Notably, Justice Joymalya Bagchi agreed with the CJI and Justice Narasimha on the narrower procedural question of whether the case could be reconsidered at all, but aligned with dissenting judges, Justices Nagarathna, Datta, and Bhuyan, in holding that the 1978 judgment had, in fact, correctly determined the scope of "industry." That kind of internal split suggests genuine disagreement on the bench about how far worker protections should extend, rather than a clean ideological victory for either side.

Perhaps most importantly, the ruling does not itself declare that hospitals, universities, or NGOs are now exempt from "industry" status. It simply removes the automatic presumption that they are included. Whether these institutions actually end up inside or outside the definition under the new Code will depend on how tribunals and courts apply the IRC's text in individual cases going forward, a process that hasn't yet played out.

The Bottom Line

The ruling is best understood as structurally favourable to employers, in the sense that it removes a labour-friendly precedent as the automatic reference point for future disputes under the new Code. But it stops short of being a blanket "pro-industry" verdict. It preserves the older, more expansive protections for existing and pending cases, reflects real disagreement among the judges themselves, and leaves the actual boundaries of "industry" under the 2020 Code to be settled through future litigation rather than deciding the question outright.

In short: the ruling shifts the starting point of the conversation in industry's favour, but the conversation itself is far from over.