What Happened
- A nine-judge Constitution Bench of the Supreme Court, led by Chief Justice Surya Kant, is examining whether to revisit the 1978 Bangalore Water Supply & Sewerage Board v. R. Rajappa & Others judgment, which gave a broad definition of "industry" under the Industrial Disputes Act, 1947.
- Justice Nagarathna observed that the 1978 ruling was "a product of the socialist era of the 1970s" and that "We have had many years of LPG (Liberalisation, Privatisation and Globalisation)" — a pointed reference to the post-1991 economic transformation.
- The Union government told the Court that an overly broad interpretation of "industry" could deter private sector investment by imposing disproportionate employer obligations under labour law.
- The case has implications for whether private hospitals, schools, charitable institutions, and government departments qualify as "industries" — and whether their employees can raise industrial disputes.
- A nine-judge bench is required because the earlier 1978 judgment was delivered by a seven-judge bench — constitutional protocol requires a larger bench to overrule or modify a bench's ruling.
Static Topic Bridges
Industrial Disputes Act 1947: Definition of "Industry" and the Bangalore Water Supply Case
The Industrial Disputes Act 1947 is the principal legislation governing industrial relations in India — covering strikes, lockouts, layoffs, retrenchment, and dispute resolution through conciliation, arbitration, and adjudication. The Act's applicability hinges on whether an entity qualifies as an "industry." Section 2(j) of the Act defines "industry" broadly as "any business, trade, undertaking, manufacture or calling of employers including any calling, service, employment, handicraft, or industrial occupation or avocation of workmen." The 1978 Supreme Court judgment in the Bangalore Water Supply case interpreted this expansively, holding that even hospitals, educational institutions, and municipal corporations could be "industries" — triggering the Act's full worker-protection provisions.
- Section 2(j) IDA 1947: The foundational definition that the Court is re-examining.
- The 1978 ruling established a "triple test" for industry: (i) systematic activity, (ii) cooperation between employer and employee, (iii) production/distribution of goods or services — regardless of profit motive.
- The ruling had the effect of bringing government departments (except sovereign functions) within the IDA's purview.
- Sovereign functions (defence, police, judiciary) have consistently been held outside "industry" — they involve the State's primary constitutional duty, not a trade or commercial service.
- The IDA has been partially superseded by the Industrial Relations Code 2020 (one of four Labour Codes), which subsumes the IDA but has not yet been brought fully into force.
Connection to this news: The nine-judge bench is directly questioning whether the 1978 expanded definition is still appropriate when much of what was then a state-run, socialist economy has been privatised or liberalised — the "LPG factor" Justice Nagarathna explicitly named.
Liberalisation, Privatisation, Globalisation (LPG) Reforms of 1991
India's New Economic Policy of 1991, announced under Finance Minister Manmohan Singh and Prime Minister P.V. Narasimha Rao, represented the most consequential structural transformation of the Indian economy since independence. Triggered by a balance-of-payments crisis (forex reserves fell to cover only 2 weeks of imports), the 1991 reforms dismantled the License-Permit Raj, reduced import tariffs, devalued the rupee, opened foreign investment, and set India on a high-growth path.
- Liberalisation: Abolition of industrial licensing (except for a small negative list), delicensing of most sectors, deregulation of interest rates and capital markets.
- Privatisation: Disinvestment of public sector undertakings (PSUs), reduced state monopoly in sectors like telecom, aviation, banking (partial); creation of SEBI for capital markets oversight.
- Globalisation: Reduction of import tariffs from an average of 87% (1990) to below 25% by 2000, WTO membership (1995), current account convertibility.
- The reforms led India's GDP growth to average ~6–7% annually through the 1990s–2000s, the "Hindu rate of growth" of 3.5% was left behind.
- Services sector emerged as the dominant engine: IT/ITES, banking, telecom — all involving large private sector employers that the 1978 "industry" definition would classify differently from manufacturing.
Connection to this news: Justice Nagarathna's observation that the 1978 ruling predates LPG reforms is the analytical crux — if the definition of "industry" was shaped by a state-dominated, socialist economy, it may need reinterpretation for a liberalised market economy where private hospitals, private schools, and tech companies are major employers.
Four Labour Codes and India's Labour Law Consolidation
The government enacted four Labour Codes in 2019–2020 to consolidate 29 central labour laws into a simpler, more consistent framework. The Industrial Relations Code 2020 subsumes the Industrial Disputes Act 1947, the Trade Unions Act 1926, and the Industrial Employment (Standing Orders) Act 1946. However, the four codes require state-level complementary rules before they can be notified into force — a process that is still incomplete in most states, leaving the old IDA regime in effect.
- Code on Wages 2019: Consolidates Minimum Wages Act, Payment of Wages Act, Equal Remuneration Act, and Payment of Bonus Act.
- Industrial Relations Code 2020: Subsumes IDA 1947; raises the threshold for mandatory permission for layoffs/retrenchment from 100 workers to 300 workers — a significant dilution of worker protection.
- Code on Social Security 2020: Subsumes EPF, ESIC, gratuity, and maternity benefit laws; extends applicability to gig and platform workers for the first time.
- Occupational Safety, Health and Working Conditions Code 2020: Subsumes 13 laws including Factories Act 1948, Contract Labour Act, Mines Act.
- Only a handful of states (Uttar Pradesh, Madhya Pradesh, Gujarat) have notified rules; the codes remain largely unimplemented nationally.
Connection to this news: The Supreme Court's reconsideration of the "industry" definition has direct relevance to the Industrial Relations Code 2020's revised definition — and could either reinforce or contradict the legislative intent of India's labour law consolidation exercise.
Constitution Bench Structure and Judicial Precedent
Under Article 145(3) of the Indian Constitution, a minimum of five judges must sit to decide questions involving substantial interpretation of the Constitution. A previous judgment by a larger bench can only be overruled or distinguished by a bench of equal or greater strength — hence a nine-judge bench to revisit the seven-judge 1978 ruling. Constitution Benches take up questions of substantial constitutional importance and their judgments bind all courts in India under Article 141 (law declared by the Supreme Court is binding on all courts).
- Article 141: Supreme Court's law is binding on all courts throughout India — making Constitution Bench judgments particularly significant.
- Article 145(3): Minimum five-judge bench for constitutional questions.
- The bench strength hierarchy: Division Bench (2) → Full Bench (3) → Constitution Bench (5+) → Larger Constitution Bench (7, 9, 11 judges) for overruling.
- Notable nine-judge bench judgments: Kesavananda Bharati (1973, Basic Structure doctrine), ADM Jabalpur overruled in Puttaswamy (2017, Privacy as fundamental right).
- A Constitution Bench can "refer" rather than "decide" — if it finds an even broader constitutional question, it may constitute a still-larger bench.
Connection to this news: The procedural fact that nine judges are required to revisit the 1978 seven-judge ruling underscores the constitutional weight of the "industry" definition question — and any new ruling will have binding effect on labour law interpretation nationwide.
Key Facts & Data
- Case: Revisiting Bangalore Water Supply & Sewerage Board v. R. Rajappa (1978) — 7-judge bench
- Current bench: 9-judge Constitution Bench, led by CJI Surya Kant
- Section 2(j), Industrial Disputes Act 1947: defines "industry" broadly — core provision under review
- Justice Nagarathna's observation: 1978 ruling is "a product of the socialist era"; post-1991 LPG reforms change the context
- 1991 New Economic Policy: Liberalisation, Privatisation, Globalisation under FM Manmohan Singh, PM P.V. Narasimha Rao
- Industrial Relations Code 2020: Subsumes IDA 1947; raises layoff/retrenchment threshold from 100 → 300 workers
- Article 141: SC judgments bind all courts; Article 145(3): minimum 5 judges for constitutional questions
- Government position: Broad "industry" definition deters private investment by imposing disproportionate labour obligations