Congress Warns SC Industry Definition Ruling Could Weaken Worker Safeguards

NEW DELHI, Aug 22: The Congress has raised concerns over the Supreme Court’s August 20 ruling on the legal definition of an “industry”, warning that any move away from the broad interpretation established in 1978 could weaken safeguards available to workers.

Congress general secretary in charge of communications Jairam Ramesh said the judgment in State of Uttar Pradesh versus Jai Bir Singh had raised important questions about the future interpretation of labour law, particularly after the introduction of the Industrial Relations Code, 2020.

Ramesh argued that the issue is significant because the definition of an industry determines which activities fall within labour legislation and, consequently, which workers can claim statutory protections.

Congress questions revised interpretation

The Congress leader said the Supreme Court’s 1978 judgment in Bangalore Water Supply and Sewerage Board versus A Rajappa had established a broad “triple test” for determining whether an activity qualified as an industry.

Under that framework, an industry generally involved systematic activity, cooperation between employers and employees, and the production or distribution of goods or services intended to meet human needs.

The earlier judgment also held that the presence or absence of a profit motive was not decisive. Charitable organisations and public bodies could therefore fall within the definition, subject to limited exceptions for core sovereign functions.

Ramesh said this approach had provided a relatively settled legal framework for almost five decades and extended labour protections to a wide range of workers.

He claimed the recent majority judgment had proposed a narrower approach by introducing the requirement of a “discernible commercial character” resembling trade or business.

According to Ramesh, the ruling also potentially expands the category of activities that could be treated as sovereign functions and therefore excluded from the definition of an industry.

SC limits impact of new formulation

The Supreme Court, however, clarified that its revised formulation would not affect cases already concluded or pending under the repealed Industrial Disputes Act, 1947.

Chief Justice Surya Kant, delivering the majority judgment, said the triple test developed in the 1978 ruling would continue to govern proceedings under the old legislation.

He also made clear that the court had not interpreted the Industrial Relations Code, 2020. Fresh disputes under the new legislation would therefore have to be considered in the context of its own statutory provisions.

The Chief Justice observed that the future interpretation of the term “industry” under the 2020 Code was not automatically governed by the interpretation of the corresponding provision under the 1947 Act.

The ruling further directed that pending matters under the earlier legislation should continue to be decided according to the 1978 judgment.

Dissent calls for settled law to remain

Justice B V Nagarathna disagreed with the majority and questioned the need to reconsider the 1978 precedent.

In her dissenting opinion, she maintained that the earlier ruling did not require reconsideration and emphasised the importance of judicial certainty.

Justice Nagarathna also examined the transformation of India’s economy following liberalisation, privatisation and globalisation, noting the shift from state-controlled enterprises towards greater private participation in the delivery of goods and services.

Justices Dipankar Datta and Ujjal Bhuyan agreed with her view that the 1978 judgment did not warrant reconsideration.

Congress warns of litigation and uncertainty

Ramesh said that although the Supreme Court had clarified that its latest formulation would not govern pending or concluded cases under the old law, leaving the new interpretation on record could lead to fresh disputes.

He argued that labour courts and industrial tribunals could face uncertainty over the scope of worker protections, particularly as the Industrial Relations Code gives the Centre powers to exclude additional categories of establishments from its ambit.

Ramesh also praised Justice Nagarathna’s dissent, describing it as a strong defence of judicial consistency and settled legal principles.

He said the judgment had come at a time when greater clarity was needed to maintain stable labour relations.

The Congress leader further argued that with private participation expanding across several service sectors, narrowing the concept of an industry could have consequences for workers who rely on statutory labour protections.

The debate is now likely to centre on how the Industrial Relations Code will define the scope of labour protections and whether principles developed under the earlier legislation will influence future judicial interpretation.