Redefining ‘Industry’ Under Indian Labour Law: A Comparative and Critical Assessment

Author: Sarthak Bhardwaj, Law College Dehradun, Uttaranchal University.

This article analyzes in detail and compares the meaning of the term “industry” in Indian labour law, mainly focusing on the change from the Industrial Disputes Act, 1947 to the Industrial Relations Code, 2020. Considering the development from the broader Bangalore case to the formal setting in the Code, the examination evaluates the effect of these regulations on labor’s security. To evaluate the redefinition, the paper looks at its effects on society, government, and administrative structures from a UK, Australian, Canadian, and South African viewpoint. It finds that the 2020 Code enhances clarity and improves the way things are regulated, but it might not include all groups of vulnerable workers, mainly in charity-based and unorganized workplaces. The article ends by suggesting a definitional model that blends exact laws with the requirement to support social justice. 

Industry, Labour Law, Industrial Disputes Act, Industrial Relations Code, Bangalore Water Supply, Labour Reforms, Comparative Law, Worker Protections 

Indian labour law gives great importance to industry because its definition opens the door to various rights, safeguards, and obligations that workers and employers have to abide by. Its worth can be seen in how it affects whether a worker is eligible for legal help, if employers should adhere to the process laid out, and if disputes can be settled under these laws. For years, Indian labour law has been thinking about how to define this term by alternating between court decisions and new laws. The biggest example is when the Industrial Disputes Act, 1947 (IDA) was changed into the Industrial Relations Code, 2020 (IRC). 

At the beginning, the IDA used a broad definition of industry, which gave a lot of chances for different interpretations. Because of this openness, judges were more creative and, for example, in the case of Bangalore Water Supply and Sewerage Board v. A. Rajappa (1978), the Supreme Court decided to include businesses that did not aim only for profit. For this reason, hospitals, universities, charitable trusts, and some tasks done by the state were covered by industrial law. Even though the court ruling was praised by many workers, it caused confusion for non-business groups now considered to be “industries.” 

During the years that followed Bangalore Water Supply, there was tension between the legislature, judiciary, and stakeholders as they had opposing opinions on how to set labour rules. Because the courts focused on social justice, they sometimes went beyond what the legislature wanted, which resulted in different and questionable rules being created. It became very clear during India’s liberation era that the differences between laws and ordinary practices were unworkable as India’s economy became much more complex. 

By this time, it was obvious that the broadening of industry by the courts could affect both government agencies and the law in many ways. Educational, health, and non-profit organizations had to cope with partly unclear regulations and complex requirements since they suddenly became recognized as industrial companies. There were so many lawsuits that it was common for these forums to be faced with the task of deciding whether the company was a part of “industry” as explained by law. Things became worse when different states dealt with the issue differently and the High Courts issued mixed decisions. Consequently, the two vital elements of clarity and predictability in any regulatory system started fading away. 

All these factors led the Government of India to introduce vast changes in labour law, and the result was the Industrial Relations Code, 2020. To streamline things, the IRC combined different labour laws, including the IDA. Especially, under Section 2(p) of the IRC, “industry” was statistically defined. While this new version kept essential parts of the preceding law, it removed charitable, social, and government functions. The move to tighten the definition was meant to avoid reaching beyond the actual terms of the law and better match its concepts with the way present-day companies are run. 

Yet, changing the law in this way has caused people to talk again about how we can balance clarity with acceptance. It is argued by critics that, since the 2020 Code adds discipline to the terms used, it also fails to safeguard workers in marginal areas like NGOs, small educational institutions, and informal businesses. In wanting to make the bureaucracy more efficient, these groups say, the Indian law could have given up on the constitutional goals of social justice, equality, and inclusive development, which are principles important in India’s post-independence labour policies. 

How can a country work as a well-oiled machine and give its people the benefits of a free and fair society is the key question dealt with in this article. Essentially, the question in the constitution is whether the definition of industry should only include what is precise and easy for administrators to handle, or leave enough space to fit a variety of new and atypical jobs in India’s working environment. The new meaning of the term should be seen not just from what laws say, but also in the context of access to justice, negotiating at work, and the way industrial disputes are resolved. 

What’s more, the issue is discussed outside India as well. The United Kingdom, Australia, Canada, and South Africa employ different ways to think about industry and industrial relations. In the United Kingdom, contracts and different industries play the main role, since there is no clear statutory definition; yet, Australia looks to laws and frameworks like the Fair Work Act and uses resolving disputes through formal processes. Canada’s laws are divided between the federal and provincial governments, but they are mainly understood based on how things work for the economy. South Africa, directed by its Constitution and advanced laws for employees, favours an inclusive way by giving broad and real protection to all workers. Such experiences show that different laws try to combine handling government administration with respecting the rights of workers. 

India’s decision to reduce the definitions in its legislation is related to the worldwide trend of less regulation and clearer laws. What is more, the story also acts as a warning. It is not enough to sort out the definitions, also, we must make sure that sectors we exclude are not denied any legal way to defend their rights. It matters a lot as the labour market becomes more informal, uses the internet, and depends more on contract-based jobs. 

For this reason, this article will follow the development of the term “industry” under Indian law, paying special attention to what courts have decided and how these decisions shape the law. It next studies the effects of passing the Industrial Relations Code, 2020 and how the new laws affect labor relations. Based on the analysis of other countries’ laws, it highlights both the good and bad aspects of the current and past systems. Overall, the author proposes a combination approach to industry definition, because it ensures law is clear, faithful to the Constitution, fast for regulation, and fair for all groups. 

According to the Industrial Disputes Act, 1947 (IDA)’s Section 2(j), the phrase “industry” refers to various types of businesses and occupations involving both employers and workers. But, because the wording was unclear, courts were allowed to interpret it in many different ways. Since there were many interpretations, the courts became important in defining industrial law, causing the decisions in such cases to fluctuate and sometimes be unpredictable. 

In Bangalore Water Supply and Sewerage Board v. A. Rajappa (1978), a seven-judge panel from the Supreme Court brought an end to years of disagreements about the proper use of laws from the 1700s. The Court used the “Triple Test” to find out if an activity is an industry by checking if it involves: (1) a methodical way of working, (2) employees and their employer together, and (3) making or supplying goods and services to satisfy people’s needs. The Court decided that being motivated by profit does not matter, so charitable, educational, and government institutions were all included by the term. 

This judgment had an important effect on people across Britain. All of a sudden, hospitals, educational institutions, research centers, and NGOs could use the IDA’s ways to solve their industrial disputes. It was stated by the Court that dignity, means for earning a living, and social justice have constitutional values, and so industrial law needs to also apply to businesses that rely on employee-guided work. 

Yet, all this reading came with some negative results. Before, there were certain areas unaffected by the industrial system that had to start following new detailed procedures on matters like retrenchment, strikes, and closing down. For several non-profit as well as quasi-governmental entities, the effects were overwhelming because they added new work and raised legal questions. 

People questioned the wide-ranging results of the judgment in Bangalore Water Supply. After those decades, several branches of the Indian judiciary tried to either set it apart or narrow its use. Still, courts had to base their decisions on the triple test when evaluating more and more different organizations. Many efforts to clarify or alter the definition of labour law by changing the legislation were left unanswered for a long time mainly because the subject involved labour rights and the well-being of workers. 

The goals of the judgment were progressive, yet it caused major difficulties in both theory and practice. On the one hand, it made it possible for many people working in these industries to solve their work-related disputes under the Industrial Disputes Act. At the same time, many of these organizations faced lawsuits, since processes put in place for businesses were applied to them as well. 

For instance, Management of Safdarjung Hospital versus The case of Kuldip Singh (1970) and the University of Delhi focused on this point. Ram Nath established (1963) that, earlier, the courts often made decisions to exclude non-commercial and state bodies from being subject to the IDA’s regulations. Rajappa’s verdict successfully set aside this trend. However, a short period later, people again encouraged the idea of reviewing the decision. The Supreme Court in the State of U.P. v. Jai Bir Singh (2005) advised the legislature to make clear the barriers between industry and non-industry through new laws. 

As a result of this uncertain period,both institutional autonomy and the process of making policies were strongly affected for the worse. For instance, educational institutions did not want to hire more staff or promised long-term contracts, due to the fear of problems with industrial law. In order to resolve these problems and ensure labour reform, Parliament finally introduced the new law—the Industrial Relations Code, 2020. That is the subject of the next section: how the concept was redefined and what happened because of it. 

By introducing the Industrial Relations Code, 2020, the way India handles industrial relations and the concept of “industry” changed via a new law. By putting together more than 29 central labour lawsThe IRC was created to decrease complexity in the labour sector and make running a business easier. At the same time, this process showed that the lawmakers wanted to control how labour rights were defined. 

The term “industry” as found in Section 2(p) of the IRC is similar to the way it was stated in the IDA with certain important differences. According to the section, it happens frequently. 

An industry means any process in which an employer works with a worker to make, deliver, or distribute products or services to satisfy people’s needs and wants (except those that are religious or spiritual). 

The Code makes sure to exclude certain categories from its scope, including three groups of institutions.: 

1. Institutions run or owned by organizations that focus mainly on charitable, social or philanthropic efforts. 

2. All interactive work of the concerned Government matching sovereign functions, for example, with its departments for defence research, atomic energy, and space; 

3. Domestic services. 

Making these exclusions shows that lawmakers are trying to reverse the broad ruling given in Bangalore Water Supply. The choice to include carve-outs for some organizations is meant to make the rules of industrial regulation more narrow, so that only a select category of firms—such as non-profits and sovereign groups—have to deal with these regulations. 

Even though Section 2(p) of the IRC makes things clearer, it has become controversial because it appears to weaken the purpose and social aims of labour law. Charitable, sovereign, and domestic services being excluded from the term “industry” has brought up questions about workers in these areas because many of them have unsafe jobs and very little help from institutions. It is argued that the reform, although valid and efficient in its operation, does not help workers from vulnerable employment situations. 

Such a move worries the constitution as it comes under the Articles 14 and 21. Because of judicial decisions, the right to equality and the right to employable income now protect people in their jobs and give them fair procedure. Reducing the definition of “industry” may take away complaints, retrenchment services11, and collective bargaining from workers in those sectors, which is against the social and economic plans stated in the Directive Principles of State Policy. 

Furthermore, the way the laws summed up in Bangalore Water Supply are now treated shows a wider shift to favouring systems over people and away from the original focus on workers from the early years of Indian independence. As a result of these changes, some important questions appear: Should making government work simply take priority over including more people? If there is no protection from IDA or IRC, can workers who are vulnerable still depend on different laws and support? 

The Code makes sure that cases are handled in the same way, but also makes the law less flexible. It could prevent courts from giving more protections to people in gig, non-profit, and domestic work, where rules for employees may not apply but where the work is still mainly done by people. 

In short, the IRC’s update of the term “industry” gives us a straight-forward, less-inclusive, and probable more efficient approach to rules. At the same time, being clear means that industrial jurisprudence cannot speak to as many people. This change poses two problems: it makes people decide if certainty in law and strong governance are more significant than fairness under the constitution and key labour rights. 

Furthermore, the way the laws summed up in Bangalore Water Supply are now treated shows a wider shift to favouring systems over people and away from the original focus on workers from the early years of Indian independence. As a result of these changes, some important questions appear: Should making government work simply take priority over including more people? If there is no protection from IDA or IRC, can workers who are vulnerable still depend on different laws and support? 

The Code makes sure that cases are handled in the same way, but also makes the law less flexible. It could prevent courts from giving more protections to people in gig, non-profit, and domestic work, where rules for employees may not apply but where the work is still mainly done by people. 

In short, the IRC’s update of the term “industry” gives us a straight-forward, less-inclusive, and probable more efficient approach to rules. At the same time, being clear means that industrial jurisprudence cannot speak to as many people. This change poses two problems: it makes people decide if certainty in law and strong governance are more significant than fairness under the constitution and key labour rights. 

Australia has rules laid out in the Fair Work Act from 2009. “Enterprise” and “national system employer” are similar to “industry” in some of their meanings. Unless told otherwise by law, Australian labour law covers disputes involving non-profit organizations and community services in its resolution processes. Under the industrial relations system, main focus goes to collective bargaining and arbitration, though small and charitable organizations may have some discouragements from strict rules when appropriate. This means that Australia succeeds in having straightforward administration and including all citizens in health care. 

The federal system in Canada is different from others. Since labour law is shared by federal and provincial officials, each province has its own interpretation of the law. Still, in many cases, employers perform a functional test, paying attention to the nature of the job and the connection between the worker and employer. Charities and non-profit groups do not always get exemption, and workers who do important work, even in noneconomic fields, usually qualify for those rights. 

South Africa shows an especially valuable example in this regard. Since South Africa’s constitution after apartheid freely gives people their rights and calls for social justice, the Labour Relations Act, 1995, applies a broad, open definition of employment and industrial activities. Few employment relationships are not covered by the Act, except where the law says so. Also, the Constitutional Court’s decisions apply labour law in accordance with the overall spirit of the constitution, which ensures that informal or non-traditional types of employment are protected as well. 

In different jurisdictions, a number of similarities can be observed. For example, none of the systems automatically leave out organizations that serve society, such as charities, because of their nature. Consequently, the main focus is on what the job involves, how much workers depend on it, and what tasks are carried out. Next, most systems use laws that give judges or government officials freedom to help workers in new occupations. Also, labour law is commonly seen as a way to promote social justice, not only as a way to oversee the economy. 

Compared to countries around the world, India’s decision to exclude both organizations that help people and government bodies from “industries” seems a rather fixed approach. Even though the 2020 Code is clear, it might result in Indian labour law being slow to change and not matching the worldwide approaches that focus on helping workers. India puts more focus on an employer’s legal structure, while most international models give more attention to the nature of a worker’s work and their financial situation. 

All in all, comparative jurisprudence shows that flexible definitions, proper judicial understanding, and all-inclusive rules should be preferred over narrow exclusions to achieve the goals of labour law in a fast-changing world. 

In effect, the change of definition for “industry” by the Industrial Relations Code, 2020, shows a clear turning away from the guidelines set by Indian courts in landmark cases, similar to Bangalore Water Supply. Although the purpose of the bill is to make the rules for businesses clearer and stop labour law from being used in private areas, it might overlook many workers in charity, informal, or home jobs. 

Much attention is being given to the Section 2(p) exclusions that can be applied arbitrarily. In Indian law, a person’s job is not relevant to their inclusion in the labour law; instead, it is the nature of the institution (such as charity or sovereign) that decides if one can be covered under the law. As a result of this formalism, workers may not be able to invoke Articles 14, 19, and 21 of the Constitution because their disagreements are ignored and other rights are denied if their employer is part of the mining sector. Also, this discriminates indirectly because most employees in those excluded careers are usually women, migrants17, or from the informal work sector. 

In addition, how the Code is written could limit India’s ability to face future work challenges. As technology advances, traditional laws might no longer be able to support the growing and changing world of work. By only focusing on static forms of work, the Code may not adjust to new types of work that are not part of the usual commercial model. 

It becomes clear that the original understanding of “industry” must be reviewed from a policy point of view. There is also a possibility to use a hybrid strategy, saving the detailed approach for key or defense-related groups and making sure that courts and similar bodies can still include organizations based on their operations and the people working in them. Consequently, there would be room for understanding the constitution’s values as they change and treating each case with justice, without interfering with bureaucratic efficiency. 

Meanwhile, legal changes should go together with measures to protect institutions. Every employee in an excluded sector should receive benefits from minimum wage laws, social security programs, and state welfare boards, besides other protections20. If worker collectives can be recognized easily and disputes with businesses can be mediated, this would stop invisibility in law from causing tough economic problems for workers. 

All in all, while the code manages to clear up a debate over employee wages, it does bring up a new ethical issue. Should the law put more importance on being accurate but not necessarily just, at the expense of justice? Can justice be met when some types of workers are not subject to it just due to their position in the workforce? If labour law is to stay relevant for improving society as well as being useful, it should adapt to the changes in the economy and respect everyone’s dignity, equality, and inclusion. What is needed are detailed changes that address structure as well as people’s feelings. 

Changing the definition of “industry” in the Industrial Relations Code, 2020 is an important change in Indian labour law. After so many years of expanding and supporting workers in the Bangalore Water Supply case, legislative reforms indicate a move to better structure and clarity in the field. Nevertheless, by trying to make its rules clearer and limit cases going to court, the Code appears to have excluded just about every institution that operates in these areas. 

Leaving agricultural workers outside labor law could make farmers at risk even more. As a result, it not only disappoints the social justice commitments in the constitution but also follows trends around the world that recommend clearer, open, and flexible approaches for workers from diverse groups. 

It is shown in the comparison that pushing for a balanced system concentrates on the job and the employment terms instead of relying only on what a person does in society. They prove that having clear regulations does not mean workers in different positions cannot enjoy important rights. 

The country ought to make labour laws simpler, while at the same time keeping them inclusive, clear, and modern. Moving ahead, we require an approach that abides by the rules and allows adjustments in circumstances where employment may be informal and shadowed by the social service area. 

The meaning of “industry” really consists of much more than just the statutory explanations. It reflects how the country values fairness, equality, and the fairness of law in controlling who is in charge at workplaces. So, any law has to meet the principles set by administrative officials as well as the tougher principles of constitutional morality. 

1.B.N. Saparia, “Labour Law Reforms: A Critical Appraisal,” Indian Bar Review, Vol. 47, No. 4, 2020. 

2.Bangalore Water Supply and Sewerage Board v. A. Rajappa, (1978) 2 SCC 213. 

3. See P.L. Malik, Industrial Law, 21st Ed., Eastern Book Company, 2022, p. 142.

 4.Labour Relations Act, No. 66 of 1995 (South Africa); Constitution of South Africa, 1996, Section 23.

5. Bangalore Water Supply, supra note 1, at ¶130. 

6. The Industrial Relations Code, 2020, received Presidential assent on 28th September 2020.

7. Ministry of Labour & Employment, “Overview: Labour Reforms,” Government of India, 2020, available at: https://labour.gov.in. 

8. Section 2(p), Industrial Relations Code, 2020. 

9. Ibid., Explanation to Section 2(p). 

10 Article 14 and 21, Constitution of India, 1950; see also Maneka Gandhi v. Union of India, (1978) 1 SCC 248.

11. Dr. S.C. Srivastava, Industrial Relations and Labour Laws, Vikas Publishing, 2021, p. 334.

12.Fair Work Act, 2009 (Cth), Australia, Sections 12 and 13.

13.Fair Work Ombudsman, “Introduction to Australia’s National Workplace System,” https://fairwork.gov.au. 

14.  Labour Relations Act, No. 66 of 1995 (South Africa), Section 1. 

15. Anil Kumar, “Redefining Industry: A Step Backward?” Indian Journal of Labour Economics, Vol. 65, No. 2 (2021).

16. See Kesavananda Bharati v. State of Kerala, (1973) 4 SCC 225; Puttaswamy v. Union of India, (2017) 10 SCC  

17. Kamala Sankaran, Informal Labour, Formal Laws, Oxford University Press, 2017, p. 89.

18. ILO Report, “The Future of Work,” International Labour Organization, Geneva, 2019. 

19.See, Ministry of Labour & Employment, Government of India, “Code on Social Security, 2020 – Overview.  20.Code on Social Security, 2020; See also “Unorganised Workers’ Social Security Act, 2008

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