From hospitals to govt offices: What counts as ‘industry’? & why a 9-judge Supreme Court bench is revisiting a 1978 ruling

Mar 18, 2026

Synopsis
Supreme Court Industry Definition Reference: India's Supreme Court is re-examining the definition of 'industry'. This crucial decision will impact labor laws covering wages, disputes, and worker protections. The court considers the nation's economic shift towards privatization and liberalization. The ruling will clarify which organizations fall under labor regulations. This affects millions of workers across various sectors.

A nine-judge Constitution Bench of the Supreme Court is examining a deceptively simple but far-reaching question: what exactly qualifies as an “industry” under Indian law, as hearings entered their second day on Wednesday. The answer will determine which organisations fall under labour laws governing wages, disputes, strikes and worker protections — and which do not.

At the heart of the debate is a broader shift in India’s economic structure.

As Justice B. V. Nagarathna observed during the hearing, the context has dramatically changed since the original ruling: “We have the reforms of 1991, which focused on liberalisation, privatisation and globalisation. Now, if there is going to be more focus on privatisation and liberalisation, many of the functions which the state was doing would be performed by the private sector. Then what should be the scope of the definition of industry?”

She added: “Should it still be very expansive, or should it be restricted, or a balance has to be struck? I think that is one of the angles of this case, since that judgment was delivered almost half a century ago. Now, we are in 2026 and we have had many years of liberalisation … I say … liberalisation, privatisation, globalisation …”

What the court will decide

The bench, led by Chief Justice of India Surya Kant and comprising Justices B. V. Nagarathna, P S Narasimha, Dipankar Datta, Ujjal Bhuyan, Satish Chandra Sharma, Joymalya Bagchi, Alok Aradhe and Vipul M Pancholi, is examining multiple unresolved questions.

These include whether the legal test laid down in the landmark 1978 ruling in Bangalore Water Supply and Sewerage Board vs A. Rajappa still holds good, and whether later laws—such as the Industrial Disputes (Amendment) Act, 1982 and the Industrial Relations Code, 2020—change how “industry” should be interpreted.

The court is also delving into deeper questions:

Should government welfare activities be treated as “industry”?

What counts as a “sovereign function” of the state, and should such functions be kept outside labour laws?

How we got here: the timeline

What is the 1978 Industry development Act: The issue dates back to 1978, when a seven-judge bench of the Supreme Court, in the Bangalore Water Supply case, adopted a very broad definition of “industry” under the Industrial Disputes Act, 1947.

It introduced the “triple test”—systematic activity, employer-employee cooperation, and production of goods or services—and brought a wide range of entities, from hospitals to government departments, under labour law.

Over time, this expansive view came under pressure, especially after India’s 1991 economic liberalisation.

The matter was referred to a five-judge Constitution bench in 2005 in the case of State of UP vs Jai Bir Singh. The five-judge bench referred the matter to a larger bench. In 2017, a seven-judge bench subsequently directed that the case be placed before a nine-judge bench for resolution.

The case moved through the system:

2017: A seven-judge bench said the issue required a nine-judge bench due to its wide implications

2026: The current nine-judge bench began final hearings

What the courts have said so far

The 1978 judgment, authored by Justice V R Krishna Iyer, treated the law as a welfare measure aimed at protecting workers and preventing industrial unrest. It widened the scope of “industry” to include even non-profit and state-run activities.

But later benches began to question this approach.

In 2005, the Supreme Court flagged concerns that the definition had been stretched too far, potentially burdening employers and even leading to a “docket explosion” of cases. It suggested that courts must also consider the interests of employers and the changing economic context.

There have also been conflicting rulings over the years. For instance, one judgment held that a government social forestry department qualified as an “industry,” while another took the opposite view—highlighting the lack of clarity.

Why this matters now

At its core, the case is about balancing worker protection with economic realities. A wide definition means more organisations must comply with labour laws; a narrower one could exclude many sectors, especially in a privatised economy.

With the state stepping back from several sectors and private players stepping in, the court’s ruling could redefine the boundary between public duty and commercial activity—and, in turn, reshape the reach of labour laws in India.

The question before the court is no longer just legal. As the bench itself hinted, it is about how to interpret a decades-old law in an economy that has fundamentally changed.

What the case means for workers and everyday jobs

The case asks a significant question: which workplaces count as an “industry”. The current definition is broad, extending beyond factories and companies to include hospitals, schools and colleges, NGOs, clubs, and even certain government departments and welfare schemes.

The Supreme Court’s decision will determine which jobs and workplaces are covered by labour laws in today’s economy, impacting millions of workers across the public and private sectors.

(With inputs from PTI, LiveLaw and Indian Express)

[The Economic Times]