When you hear the word “industry,” you probably picture a massive factory with chimneys, assembly lines, and thousands of workers. But in the eyes of the law, the definition is much broader. Can a hospital be an industry? What about a charity, a university, or a social club? For decades, Indian labour law said “yes.”
Recently, a nine-judge bench of the Supreme Court sat down to decide if this broad definition needed to change. The outcome was one of the most unusual legal situations in recent history: a fractured 4-4-1 verdict. Because the judges could not agree on a single path forward, the old rules will continue to survive.
The Plot Twist: No Majority For The New Test
We recently discussed how the Chief Justice of India proposed a new test that scrapped the worker-friendly 1978 ‘industry’ precedent for a new labour code. However, the final publication of the full judgment reveals a massive plot twist. Only four out of the nine judges actually backed this new, stricter definition.
Four other judges strongly disagreed, stating the 1978 law was perfectly fine. The ninth judge agreed that the 1978 law should not be touched, but for a completely different reason. Since the new test formulated by the Chief Justice did not get the required majority of five judges, it does not become the new binding law for old cases.
The Background: The 1978 Bangalore Water Supply Case
To understand why this matters, we have to travel back to 1978. In a landmark case called Bangalore Water Supply & Sewerage Board v. A. Rajappa, a seven-judge Supreme Court bench created a very wide definition of the word “industry.”
Justice V.R. Krishna Iyer laid down what became famous as the “Triple Test.” According to this test, an activity is an industry if it has:
- Systematic and organised activity: The work is planned and structured.
- Cooperation: There is a clear relationship between an employer and employees.
- Production of goods or services: The goal is to satisfy human wants and wishes (excluding purely religious or spiritual activities).
Under this 1978 test, making a profit was not required. This meant that charitable organisations, educational institutions, research bodies, and even clubs were classified as “industries.” This was a huge victory for everyday workers, as it allowed employees in these sectors to claim rights and protections under the Industrial Disputes Act, 1947.
The CJI’s View: Four Judges Push For A Commercial Test
Chief Justice of India (CJI) Surya Kant, writing for himself and three other judges (Justice Satish Chandra Sharma, Justice Alok Aradhe, and Justice Vipul Pancholi), felt the 1978 test went too far. They argued that Parliament never intended for every single organised activity—like a charity or a social welfare group—to be treated as an industry.
The CJI’s camp proposed a new test. They said that for an enterprise to be an industry, it must have a “commercial character.” It must operate similarly to a trade or business. While they agreed that making a profit was not strictly necessary, they insisted that the activity must be economic and commercial in nature. State-run welfare activities, they argued, should not automatically fall under the labour law umbrella.
The Dissent: Four Judges Defend The 1978 Law
On the other side, four judges stood firmly behind the 1978 precedent. Justice B.V. Nagarathna, Justice Dipankar Datta, Justice Ujjal Bhuyan, and Justice Joymalya Bagchi wrote separate opinions but reached the same conclusion: the Bangalore Water Supply judgment does not need to be changed.
Justice Nagarathna pointed out that the 1978 ruling has been the settled law of the land for nearly 48 years. She noted that while the government tried to amend the definition of “industry” in 1982, that amendment was never officially brought into force. Because the government accepted the court’s broad definition for four decades, she argued there was no reason for the Supreme Court to suddenly rewrite it now.
Justice Datta strongly criticized the attempt to reopen a settled law after so much time. He argued that countless workers, employers, and legal institutions have relied on the 1978 rules for generations. Changing it now would only cause chaos.
The Tie-Breaker: One Judge’s Unique Stand
With the bench split 4-4, the final vote came down to Justice P.S. Narasimha. His decision broke the tie, but in a unique way.
Justice Narasimha agreed with the four dissenting judges that the 1978 Bangalore Water Supply judgment should not be disturbed. However, his reasoning was entirely practical. He pointed out that the old Industrial Disputes Act, 1947, has already been repealed by the government and replaced by the new Industrial Relations Code, 2020.
Because the old law is essentially dead, Justice Narasimha argued that it makes no sense for the Supreme Court to waste time redefining words in a repealed statute. He concluded that the 1978 rules should continue to govern all old, pending disputes, while new disputes will eventually be handled under the new 2020 Code.
What The Law Says
Section 2(j) of the Industrial Disputes Act, 1947: This is the old law that defines an “industry.” Thanks to the 4-4-1 split, the broad 1978 interpretation of this section remains valid for all disputes that arose under this Act. If you worked for an NGO, hospital, or trust and filed a labour dispute under this Act, you are still protected.
Section 2(p) of the Industrial Relations Code, 2020: This is the new labour law passed by Parliament. It introduces its own updated definition of an “industry.” Once fully enforced, all future employer-employee disputes will be judged based on the text of this new Code, not the 1947 Act.
Why This Matters For You
If you are an employee working in a non-profit organisation, an educational trust, a cooperative society, or a social club, this fractured verdict is highly relevant to your rights.
Because the Supreme Court failed to reach a majority to overturn the 1978 rules, your workplace can still be legally classified as an “industry” under the old laws. This means your rights to fair wages, protection against unfair dismissal, and access to labour courts remain intact for any pending cases.
However, this is also a signal of changing times. While the old rules survive for now, the legal landscape is shifting towards the new Industrial Relations Code, 2020. Both employers and employees must prepare for a future where labour rights will be defined by new statutory codes rather than decades-old court judgments.
The Final Word
The Supreme Court’s rare 4-4-1 split proves how difficult it is to balance the rights of workers with the realities of modern business. For now, the historic 1978 labour protections live to fight another day.
Story reported by Supreme Court – High Court – Legal Breaking News | Live Law India. This article is BareLaw’s independent explanation and analysis.
