ONE A Rajappa and other workers who were employed by Bangalore Water Supply & Sewage Board (BWSSB) were imposed penalty on a disciplinary issue in 1972. The Industrial Disputes Act 1947 (ID Act) Section 33(C)(2) entitled workers to seek justice against the arbitrary action of imposition and deduction of penalty by the employer. So, in the dispute raised by him, the labour Court held BWSSB to be an industry and rejected the contention of BWSSB that he is not a workman under the ID Act, as it is involved in service activity of providing water and is not an industrial activity. The High Court upheld the award of the labour court and on appeal to the Supreme Court, a seven-judges bench by a 5:2 majority laid down the 1978 precedent popularly known by the name of its author as the Justice V R Krishna Iyer judgement. It held BWSSB as an industry and laid down a triple test to determine any activity as an industry and the dominant nature test to determine as to what activities constitute sovereign functions not to be considered as industry. 

In the 1980s, one casual daily wage worker Jai Veer Singh working for Social Forestry in the Uttar Pradesh government was terminated from services, against which he approached the labour court, contending that his termination was in violation of the retrenchment rules under Section 25F of the ID Act. The contention of the UP government was that social forestry activity for environment protection is a sovereign function and not an industrial activity. The Labour Court held it to be an industrial activity and the High Court also upheld this. On an appeal by the UP government, a five-judges bench of the Supreme Court referred the 1978 BWSSB precedent to a larger Bench in 2005. The seven-member bench constituted referred the matter to a nine-member bench in 2017 and thereby the present nine-judge constitutional bench was constituted. The bench framed four issues on February 16, 2026, to examine the correctness of the 1978 precedent, its application to the IR code, social activities and sovereign functions. 

UNBURDEN & UNANCHOR

The constitutional bench of Supreme Court has laid down on August 20, 2026 by 5:4 majority a precedent that the definition of “industry” as defined in Industrial Relations Code 2020 and earlier by Industrial Disputes (Amendment) Act 1982 can not be burdened and be sheet anchored by the precedent laid down in 1978 by the seven-judges Constitutional bench on the definition of Industry.

INSULATE INDUSTRY UNDER IR CODE

Thereby, the majority judgement has insulated the definition of industry that is not only in the Industrial Relations Code and one that was in the never implemented Industrial Disputes (Amendment) Act 1982 also, even though it stands repealed as on February 16, 2026 along with the Industrial Disputes Act 1947. It has disentitled workers engaged in several activities, and allowed for fresh interpretation as to whether they constitute industrial activity or not under the IR code and from the right to protection under law against arbitrary dismissal, retrenchment, lay off, and several other actions of the employers. It has held that the 1978 precedent shall be applicable only to the pending disputes but not to future disputes under the IR Code. 

TRIPLE TESTS

The 1978 Judgement laid down triple tests to decide whether any institution is an industry under section 2(j) of the ID Act. The triple tests say if any institution firstly undertakes a systemic activity, secondly an organised employer-employee relationship exists, and thirdly even though it is not for profit motive if there is production and distribution of  goods and services to satisfy human wants or wishes, it is to be construed as an industry. So, except sovereign functions like that of defence, law and order, legislation, judiciary everything else came under the scope and ambit of “Industry”. Whereby it allowed for expansive coverage of several activities under the definition of Industry with protective cover of law entitling the workers, a right to seek Justice.

DOMINANT NATURE TEST

In the course of interpretation, it laid down the dominant nature test to determine as to what constitutes sovereign function. When there are complex of activities involved in the departments discharging sovereign functions, it was laid down that if there are units undertaking activities which are substantially severable then they come under the ambit of the Industry as dominant nature of the function is not a sovereign function.

TESTS ENTITLED WORKERS

The triple tests and the dominant nature test determined the scope and coverage of the definition of Industry and provided the entitlements of rights and protections under the ID Act enlarging it to even workers working in charitable trusts, religious and philanthropic institutions, government departments, defence research and development institutions, domestic services and so on. 

IR CODE DISENTITLES WORKERS

The Industrial Relations Code 2020, Section 2(P) says ‘any institution where there is a systemic activity, organised employer and employee relationship, goods and services are produced, distributed for human wants or wishes’ shall be industry. Then one shall ask what is the problem as it is in line with 1978 judgement. But the problem is with the proviso, which excludes any activities carried out by institutions wholly or substantially engaged in charitable, social or philanthropic service, activities of government in relation to sovereign functions - defence research, atomic energy, space etc, domestic services along with any other activity notified by central government as excluded. This definition empowers the government to notify additional activities also which are not to be covered under the definition of Industry under IR Code. It further broadened exclusions to disentitle the workers. 

LEGISLATIVE ATTEMPTS TO INSULATE INDUSTRY 

Pursuant to the 1978 precedent laid down in BWSSB Judgement, a legislative attempt was made in 1979 to insulate the industry from the impact of the precedent through the infamous Industrial Relations Bill placed by the then labour minister Ravindra Varma in the Morarji Desai government, but it was forced to be withdrawn due to a joint trade union movement. 

The Indira Gandhi government in 1982 brought in an amendment to the ID Act 1947 wherein while the three components were included in the definition, the government was empowered to exclude industries from the scope of the ID Act by taking out of the purview of “industry”, certain types of activities under the annexed schedule. Thereby, millions of the workers were excluded from  the ambit of Industry. In 1988, in the Ailtmesh Rein v. Union of India case, the government submitted to the Supreme Court that as there was no alternative machinery provided for the redressal of service disputes of those excluded from the definition of industry, the amended definition was not brought into force. 

The Modi Govt enacted IR Code 2020, implemented it from November 21, 2025 and operationalised it on May 8, 2026 in tune with the neoliberal construct of the industry. It has also repealed the ID Act 1947 & ID (Amendment) Act 1982 through the IR (Amendment) Code 2026 from February 16, 2026.  But as long as the existing 1978 precedent was not overruled, any further interpretation of industry under the IR code had to be done in light of it. So, their lordships have laid the way for the neoliberal interpretation of “industry” and undermined the entitlements of the workers, by the majority declaring that any prospective disputes shall be freshly interpreted.

FURTHERING EXCLUSIONS

The IR code has empowered 90 percent of the industries to lay off, retrench and close their industries without prior permission from the government and also to have self-certified standing orders, without statutory certification. In such a situation, the Supreme Court judgement shall further exclude all the institutions which are run by charitable/philanthropic institutions, defence research, atomic energy,  and any activities which shall be notified by the government as sovereign functions beyond the threshold of 300 employees and others below that also from the entitlements.

DISSENT COMMANDS ATTENTION

Here the dissenting Judgement of Justice B V Nagarathna and reasoning given for it commands attention. It reasons out the process of privatisation and liberalisation as what warrants strong protection for workers, as laid down in the triple tests and dominant nature test of the 1978 precedent. Hence, she concludes that the triple test laid down is correct law, and it impacts the definition of industry in IR code & ID Act 1982; social welfare activities and schemes of government departments or their instrumentalities are to be construed to be industrial activities, sovereign functions also fall under the purview of industry based on the dominant nature test.     

INFRINGING WORKERS RIGHTS

But their lordships by majority have unburdened and unanchored the definition of industry under the IR code insulating it from its own 1978 precedent, which provided for inclusivity. Thereby, their lordships have infringed the time-tested workers’ rights and have enabled for further wandering in the rough sea of judicial interpretations to fix the exclusions provided for in the Code.

If not this redefining of bourgeois legality of capital and labour relations, what else can be expected from the super structure - the judiciary of a bourgeois landlord state which is turning out to be a neoliberal state in its desperation to overcome the systemic crisis of capitalism. As Karl Marx said ‘labour laws are never a neutral domain under capitalism’. It is only working class struggle which constrains the state to draw an equilibrium between capital and labour. Let us build a befitting united working class struggles for it.