For Nearly Fifty Years, Almost Everything Was an 'Industry' — Hospitals, Clubs, Even Charities. The Supreme Court Just Split 6-3 and Narrowed It. Millions of Workers May Lose a Shield They Never Knew They Had.
By Squirrels·
A single word in labour law decides who gets the law's protection. The court has just made that word mean less.
On August 20, 2026, the Supreme Court, by a majority of 6 to 3, held that the sweeping, worker-friendly definition of the term "industry" laid down in its 1978 judgment will not apply to the interpretation of the Industrial Relations Code, 2020 (IRC). The ruling came in State of Uttar Pradesh v. Jai Bir Singh.
It sounds like a technicality. It is one of the most consequential labour rulings in decades.
Why One Word Carries So Much
In Indian labour law, whether an establishment counts as an "industry" determines whether its workers get the protections of the labour code at all — rules on dismissal, retrenchment, dispute resolution and more. If you are not in an "industry," much of that shield does not cover you.
For decades the governing answer came from 1978, in Bangalore Water Supply and Sewerage Board v. A. Rajappa. That judgment set an expansive triple test and pulled an enormous range of activity inside the definition — hospitals, educational and research bodies, clubs, even many charitable operations. The effect was to extend labour protection very widely.
"Industry" decides whether workers get the labour code's core protections
The 1978 Bangalore Water Supply ruling set a broad triple test covering hospitals, clubs, charities and more
The 2026 majority rejects that broad test for interpreting the IRC, 2020
The IRC itself excludes charitable institutions, domestic service and core sovereign government functions
What the Court Decided
The six-judge majority held that the 1978 definition cannot be the foundation for reading the new IRC. The Code itself carves out charitable institutions, domestic service, and core sovereign functions of government from its definition of industry. On top of that, the majority read in a further requirement: for an activity to qualify, it must have a discernible commercial character resembling trade or business — a condition the older triple test did not impose.
The court did preserve one lane. For legacy disputes still pending under the repealed Industrial Disputes Act, 1947, the 1978 triple test continues to apply. But it will not govern how the new Code is read going forward.
The Political Reaction
The Congress attacked the ruling, warning that it risks weakening worker safeguards by narrowing who the law protects. That reaction captures the core of the fight: the newer, narrower definition, combined with a commercial-character test, could push entire categories of establishments — and their staff — outside the code's coverage.
The counter-view, favoured by employers and by the drafting logic of the labour codes, is that the 1978 definition had ballooned beyond reason, sweeping in bodies that were never really commercial enterprises, and that a tighter test brings clarity.
Why It Matters
The IRC is one pillar of the government's consolidation of India's tangled labour laws into a handful of codes. How its central term is interpreted shapes the reach of the entire reform. A narrow reading eases compliance for employers and shrinks the protected workforce; a broad one does the opposite.
By choosing narrow — and adding a commercial-character requirement on top — the majority has tilted that balance toward employers, at least for future disputes under the Code.
What Happens Next
The immediate uncertainty is for establishments sitting near the new line — hospitals, educational bodies, non-commercial or quasi-charitable operations whose workers assumed they were covered. Future litigation will be about which side of the discernible commercial character test they fall on.
A 6-3 split is also a signal in itself: three judges disagreed strongly enough to dissent. That leaves the door open for the question to return, and for the boundaries of "industry" to be fought over again as the labour codes bed in.