New Delhi: A Supreme Court bench on Thursday held by a 5:4 majority that the definition of industry—via the triple tests laid down in Bangalore Water Supply judgement of 1978—requires further refinement, while the essential framework laid down therein has stood the test of time. The court has held that the triple-test of the definition of industry should be revisited.
The dissenting judges—Justices B.V. Nagarathna, Dipankar Datta and Ujjal Bhuyan—held that no redefinition of the 48-year-old judgement is required and that the current reference is not maintainable. Justice Joymalya Bagchi agreed that the reference is valid, but redefinition is not needed.
Importantly, the court clarified that the new formula will only apply prospectively and will not disturb concluded decisions or affect pending proceedings. The court also clarified that the interpretation is confined only to the Industrial Disputes Act 1947, and will not impact the new Industrial Relations (IR) Code 2020, which means the IR Code could be challenged.
Thursday’s judgment essentially means that the definition of ‘industry’ as set by the 1978 judgement will now be redefined and reformulated, determining who counts as labour and can get relief under related safety provisions. This redefines the labour law landscape in India. If an institution is held not to be an “industry”, its employees could lose access to Industrial Disputes Act-type remedies and parallel protections under the new labour code framework, depending on implementation.
The nine-judge bench of Chief Justice of India Surya Kant and Justices B.V. Nagarathna, P.S. Narasimha, Dipankar Datta, Ujjal Bhuyan, Satish Chandra Sharma, Joymalya Bagchi, Alok Aradhe and Vipul M. Pancholi heard a reference on the limited issue whether the Bangalore Water Supply judgment was rightly decided, and had reserved their verdict in March this year.
Five judges—the CJI, Justices Narasimha, Sharma, Aradhe and Pancholi—held that a revisitation of the definition is required. Justices Nagarathna, Datta and Bhuyan dissented to hold that the reference was not maintainable and that the definition was not maintainable. Justice Narasimha wrote a separate judgment concurring with the majority.
Justice Bagchi, while holding that the reference was maintainable, held that a redefinition was not required.
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Why was the reference made?
Many institutions that do not look like factories are today treated as ‘industry’ if they run in an organised way, employ staff and provide services. Now that the definition is to be reconsidered, entire sectors could move outside industrial labour law.
The 1978 judgment created the famous “triple test” for deciding what is an “industry” under the Industrial Disputes Act—a definition that decides which workers are entitled to labour law protections. If there is systematic activity, employer-employee cooperation, and production or distribution of goods or services for human wants, the organisation may qualify as an industry, even if there is no profit motive.
That sweeping definition brought a huge range of institutions, from hospitals and educational bodies to welfare organisations and some government entities, within the scope of labour protections.
The call for a relook at the definition was initiated in 2002, when the 1978 verdict by of a seven-judge Supreme Court bench was challenged in a petition by Uttar Pradesh in the case of State of UP v. Jai Bir Singh in the top court.
Later, in 2005, describing the Bangalore Water Supply case as a “docket explosion”, a five-judge bench termed the verdict too “worker-oriented” and referred this petition to a larger bench to reconsider. In 2017, a Supreme Court bench of seven judges decided that the issue needs to be relooked at.
What the dissenting judges said
The dissenting judges—Justices Nagarathna, Datta and Bhuyan—held that the reference was not maintainable and that the definition of industry laid down in the 1978 Bangalore water supply case was good.
Justice Nagarathna said the interpretation of ‘industry’ has to be broad-based and not narrowly viewed—like the majority ruling in the 1978 judgement. Justice Datta, agreed to by Justice Bhuyan, said it was perhaps the most litigated word in labour jurisprudence.
Benches have deferred [this issue] time and again, he said, asking if it is only business or schools and hospitals? What is required is an authoritative interpretation that allows the law to move forward, he said. “We have reached our conclusion that… the reference seeks to disturb a quietus that has held the field for half a century. Finality would be undermined. We must remember that credibility lies in finality and not perpetuating doubt,” Justice Datta said.
Agreeing with the CJI, Justice Narasimha said that it is prudent to dispose of the pending cases on the basis of the ratio in the BWSSB without attempting to create third principles. He agreed with the CJI’s perspective on reinterpret the new code provisions in the future. He noted that if the nine-judge bench restricts the definition and scope of an ‘industry’, it will seriously affect the exclusion of long-pending disputes from the regulatory regime of the Industrial Disputes Act of 1947.
(Edited by Nardeep Singh Dahiya)
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