*Laying Way for Neo Liberal Interpret & Crusade on Entitlements : Lordships Infringe Workers Rights*
*Article by N.Umesh*
One A.Rajappa and other workers who were employed by Bangalore Water Supply & Sewage Board (BWSSB) were imposed penalty on disciplinary issue in 1972. The Industrial Disputes Act 1947 (ID Act) Section 33(C)(2) entitled worker with a right to seek justice against the arbitrary action of imposition and deduction of penalty by the employer. So in the dispute raised by him the labour Court held BWSSB to be an industry and rejected the contention of BWSSB, that he is not a workman under the ID Act, as it is involved in service activity of providing water and is not an industrial activity. The High Court upheld the award of labour court and on appeal Supreme Court, seven Judges bench by 5:2 majority laid down the 1978 precedent popularly known by its author as Justice V.R.Krishna Iyer judgement. It held BWSSB as an industry and laid down triple test to determine any activity as an industry and dominant nature test to determine as to what activities constitute sovereign functions, for not to be considered as industry.
In 1980’s one casual daily wage worker Jai Veer Singh working for Social Forestry in the Uttar Pradesh Govt was terminated from services against which he approached the labour court, contending that his termination was in violation of the retrenchment rules under Section 25F of ID Act. The contention of the UP Govt that social forestry activity for the environment protection, is a sovereign function, and not an industrial activity. The Labour Court held it an industrial activity and High Court also upheld it. So on an appeal by the UP Govt the five Judges Bench of Supreme Court referred the 1978 BWSSB precedent to a larger Bench in 2005. The seven members bench constituted referred the matter to nine members bench in 2017 and thereby the present nine judges constitutional bench was constituted. The bench framed four issues on 16 February 2026, to examine the correctness of law of 1978 precedent, its application to IR code, social activities and sovereign functions.
*Unburden & Unanchor*
The constitutional bench of Supreme Court has laid down on 20.8.2026 by 5:4 majority a precedent that the definition of Industry as defined in Industrial Relations Code 2020 & earlier by Industrial Disputes (Amendment) Act 1982 can not be burdened and be sheet anchored by the Precedent laid down in 1978 by the seven judges Constitutional Bench on the definition of Industry.
*Insulate Industry under IR code*
There by the majority judgement has insulated the definition of Industry that is not only in the Industrial Relations Code and one that was in the never implemented Industrial Disputes (Amendment) Act 1982 also even though it stands repealed as on 16.2.2026 along with the Industrial Disputes Act 1947. It has dis entitled the workers engaged in several activities, and allowed for fresh interpretation as to whether they constitute industrial activity or not under the IR code and from the right to protection under law against arbitrary dismissal, retrenchment, lay off, and several other actions of the employers. And has held that the 1978 precedent shall be applicable only to the pending disputes but not to the future disputes under IR Code.
*Triple Tests*
The 1978 Judgement laid down triple tests to decide as to any institution is an industry under section 2(j) of the ID Act. The triple tests say if any institution firstly undertakes a systemic activity, secondly organised employer and employee relationship exists, and thirdly even though it is not for profit motive if there is production and distribution of goods and services to satisfy human wants or wishes it is to be construed as an industry. So except sovereign functions like that of defence, law and order, legislation, Judiciary every thing else came under the scope and ambit of the Industry. Where by it allowed for expansive coverage of several activities under the definition of Industry with protective cover of law entitling the workers, a right to seek Justice.
*Dominant Nature Test*
In the course of interpretation it laid down dominant nature test to determine as to what constitutes sovereign function. When there are complex of activities involved in the departments discharging sovereign functions it was laid down that if there are units undertaking activities, which are substantially severable, then they come under the ambit of the Industry as dominant nature of function is not sovereign function.
*Tests entitled workers*
The triple tests and the dominant nature test determined the scope and coverage of the definition of Industry and provided the entitlements of rights and protections under the Industrial disputes act enlarging it to even workers working in charitable trusts, religious and philanthropic institutions, govt departments, defence research and development institutions, domestic services and so on.
*IR Code disentitle workers*
The Industrial Relations Code 2020, Section 2(P) says ‘any institution where there is a systemic activity, organised employer and employee relationship, goods and services are produced, distributed for human wants or wishes’ shall be industry. Then one shall ask what is the problem as it is in line with 1978 judgement. But the problem is with the proviso, which excludes any activities carried out by institutions wholly or substantially engaged in charitable, social or philanthropic service, activities of Govt in relation to sovereign functions – defence research, atomic energy, space and etc, domestic services along with any other activity notified by central govt as excluded. This definition empowers the govt to notify additional activities also which are not to be covered under the definition of Industry under IR Code. It further broadened exclusions to dis entitle the workers.
Legislative attempts to insulate industry
Pursuant to 1978 precedent laid down in BWSSB Judgement, legislative attempt was made in 1979 to insulate the industry from the impact of the precedent through infamous Industrial Relations Bill placed by the then labour minister Ravindra Varma under Morarji Desai Govt, but was forced to be withdrawn due to joint trade union movement.
Smt. Indira Gandhi Govt in 1982 brought in an amendment to ID Act 1947 where in while the three components were included in the definition, the Govt was empowered to exclude the industries from the scope of the ID Act by taking out of the purview of industry, certain types of activities under the annexed schedule. Thereby millions of the workers were excluded from the ambit of the Industry. In 1988 in Ailtmesh Rein v. Union of India case, govt submitted to the Supreme Court that as there was no alternative machinery provided for the redressal of service disputes of those excluded from the definition of industry, the amended definition was not brought into force.
The Modi Govt enacted IR Code 2020, implemented it from 21 November 2025 and operationalized it on 8th May 2026 in tune with the neo liberal construct of the industry. It has also repealed the ID Act 1947 & ID (Amendment) Act 1982 through an IR (Amendment) Code 2026 from 16.2.2026. But unless the existing 1978 precedent was not over ruled any further interpretation of industry under IR code had to be done in light of it. So their lordships have laid way for the neo liberal interpret of industry and crusade on the entitlements of the workers, by majority declaring it that any prospective disputes shall be freshly interpreted.
*Furthering Exclusions*
IR code has empowered 90 percent of the industries to lay off, retrench and close their industries with out prior permission from the Govt and also to have self certified standing orders, with out statutory certification. In such a situation the supreme court Judgement shall further exclude all the institutions which are run by charitable/philanthropic institutions, defence research, atomic energy, and any of such activities which shall be notified by the Govt as sovereign function beyond the threshold of 300 employees and others below that also from the entitlements.
*Dissent commands attention*
Here the dissenting Judgement of Justice B V Nagarathna and reasoning given for it commands attention. It reasons out the process of privatisation and liberalisation as what warrants strong protection for workers, as laid down in the triple tests and dominant nature test of the 1978 precedent. Hence she concludes that the triple test laid down is correct law, and it impacts the definition of industry in IR code & ID Act 1982, social welfare activities & schemes of govt department or their instrumentalities are to be construed to be industrial activities, sovereign functions also fall under the purview of industry based on the dominant nature test.
*Infringing Workers right*
But their lordships by majority have unburdened and unanchored, the definition of industry under IR code insulating it from its own 1978 precedent which provided for inclusivity. There by their lordships have infringed the time tested workers rights and have enabled for further wandering in the rough sea of judicial interpretations to fix the exclusions provided for in the Code
If not this redefining of bourgeois legality of capital and labour relations, what else can be expected from the super structure – the judiciary of a bourgeois landlord state which is turning out to be a neo liberal state in its desperation to overcome the systemic crisis of capitalism. As Karl Marx said ‘labour laws are never a neutral domain under capitalism’. It is only working class struggle which constrains the state to draw an equilibrium between the capital and labour. Let us build a befitting united working class struggles for it.
*(The author is a trade union leader.)*
