Legislative actions and court rulings have greatly extended and changed the definition of ‘industry’ over the period of time. Since labour as a subject is included in the concurrent list, both the central and state governments have used it to their advantage in the political arena. Due to lack of clarity in the statutory definition as articulated in the 1947 statute and contradictory judicial decisions, there has been lot of inconsistencies and confusion on the scope.  At present, there are about 40 central laws governing different facets of labour. The 2nd National Commission on Labour found existing laws confusing, with outdated clauses and contradictory meanings.

To simplify the labour laws, current regime of NDA government has merged various central acts into four codes on September 29, 2020, which are – Industrial Relations Code, Code on Occupational Safety, Health & Working Conditions Code (OSH), Social Security Code, and Code on Wages. 

Evolution of Definition of Industry

1947 DEFINITION: Section 2 (j) of the Industrial Disputes Act of 1947 defines “industry” in two parts: the first section enumerates the legislative definition of “industry,” and the second part outlines what an industry means from the viewpoint of workers.

“Section 2 (j) “industry” means any business, trade, undertaking, manufacture or calling of employers and includes any calling, service, employment, handicraft, or industrial occupation or avocation of workmen”

This definition has been interpreted and evolved in various phases through court rulings and government actions as described below:

Phase I: Expansive interpretation: In the case of D. N. Banerji vs. P R Mukherjee, the concept of industry was first interpreted in 1953.The Workers Union filed a grievance, requesting reinstatement of sanitary inspector and head clerk who were dismissed by Municipality. The Municipality argued in the Supreme Court that it is performing a sovereign role under the Bengal Municipal Act and hence it is not an industry. It was decided that the Municipality is an industry because sanitation and recycling are equivalent to commerce and industry.

In 1960, Hospital Mazdoor Sabha Case, all kinds of hospitals whether government or private were taken under the purview of industry. The Court established the working premise that an enterprise which does any systematic activity for the manufacture or sale of goods or services with the assistance of workers comes under the definition of ‘industry’. Since hospitals also do systematic activities and provide material services with the assistance of their employees, they come under the purview of the definition of industry. The test applied was on the nature of activity rather then who is doing the activity. So, if the hospital operations conducted by the private players can be classified as an industry, then the hospital operations managed by government also comes under the ambit of definition.

Phase II: Selective exemption: An aberration was made in the University of Delhi Case in 1961. The Supreme Court ruled that education is delivered by teachers who are not workers. The legislature did not intend for educational institutions to be included within the meaning of industry to offer incentives to drivers and those who are not key service providers.

Phase III: Reversal: In 1967, Safdarjung case reversed the findings drawn from the Hospital Mazdoor Sabha Case. This case dealt with the same issue of weather hospitals can be considered under the ambit of industry. The Court provided a strong rationale for determining which hospital operation should come under the ambit of industry or not.

It was observed that ‘material services’ for the purpose of bringing an enterprise within the definition of ‘industry’ should be an activity which is carried by the co-operation of employers and employees for the community like electric power, water, transportation, mail delivery, telephones etc. It does not apply to professional such as doctors, lawyers, and teachers who work as private practice because they do not work in occupations where employers and workers collaborate.

Further, court ruled that the hospital run by Government or by Charitable institutions cannot come under the definition of ‘Industry’. It is only those hospital which being run as a business in a commercial way can only come under the purview of the definition.

Phase IV: Objective interpretation: The most comprehensive decision which laid down objective criteria to test what comes under the definition of ‘industry’ and what not came inBangalore Water Supply case in 1978. It provided for the triple test criteria which provide that:

Further, court laid down the following guidelines:

Phase V:Attempt to amend the Definition by legislature in 1982: In reaction to the judicial activism displayed by the court in Bangalore water supply case, the government attempted to amend the scope of the definition in 1982 by applying the triple test through Industrial disputes (Amendment) Act, 1982. This amended definition attempted to nullify the effect of many conflicting judgements on what is included in the definition of ‘industry’ and what is not. Also, this definition was much more elaborative and expansive as compared to the original definition under 1947 act. However, For 38 years until the definition of ‘industry’ was revisited under Industrial Relations Code, 2020 dissent views on the definition and scope continued in the corridors of the Supreme Court.[1]

In the 1990 Coir Board Case, the court disagreed with the decision in the Bangalore water supply case and held that not every organisation that provides a valuable service and hires people qualifies as industry.

In 2005, the Supreme Court again overruled the Bangalore water supply case in the Jai Bir Case. The Court determined that the state’s social forestry department is a sovereign function, not an industry.

Phase VI: The Industrial Relations Code, 2020: Under this code, the Government has attempted to rationalise and streamline central labour legislation in accordance with the recommendations of the 2nd National Commission on Labour. The new meaning of “industry” in Section 2(p) applies to any systemic activity involving employers and employees for the purpose of producing, supplying, or distributing products and services, regardless of whether the activity is undertaken for profit or capital expenditure. According to the new term, hospitals, educational establishments, and research institutions are all classified as industry. The new definition specifically excludes following activities from the definition of ‘industry’

  • An organisation involved in charitable, social, or philanthropic services.
  • An activity related to defense, atomic energy, and space research carried over by the federal government.
  • Any household activity.
  • Any other activity that central government restricts to come under the definition of ‘industry’ by its specific order.

An Analysis of new definition:

  • Inclusion of Hospitals, educational, and scientific institutions to the definition of ‘industry’ is pro workers.
  • Definition is expanded to include workers employed through contractors.
  • Vagueness of the term “social activity” could lead to all sorts of institutions claiming exemption from labour laws.
  • New definition empowers the central government to exclude any activity from the definition of ‘industry’ anytime through notification does not go well with Article 19 (1)(g) of the constitution of India. It gives arbitrary and uncontrolled power to the government. On one hand, the Constitution guarantees right to practice any profession, or to carry on any occupation, trade or business but on the other hand when an activity is specifically allowed to come within the definition of ‘industry’ once then it would not be fair to deprive the employees of that industry the protection of labour laws when central government chooses to exclude said activity from the definition of ‘industry’ at any given point of time. Any activity once allowed to come under the definition should continue to remain under its ambit and no action of the government except for the situations when it is necessary to exclude in the interests of the sovereignty and integrity of India or public order should eject it from the definition.

Political Aspects of Evolving Definition

Since the enactment of the Industry Dispute Act, 1947, governments have always been in a dilemma about how to interpret the definition of ‘industry’. On one hand, they have the workers who always wanted to see themselves governed by a well-structured legal and regulated framework in matters of employment, compensation, health, and security, while on the other hand, they have the lobby of industrialists who desire the laws to be more flexible and favour them in matters of labour laws to enjoy free flow.

Since1947, there have been no efforts made by any government to list down specifically what comes under the definition of industry and what does not. The governments were always fearful of including public sector workers in the definition for their election management and they never tried to relook at the definition of industry as provided in the act of 1947. They continued to rely on courts to interpret the meaning of industry through various judgments, which were also not consistent.

The federal structure of our constitution was also one of the limiting factors to contemplate a standard definition of industry across the country. Labour being the subject matter of concurrent list, it always remained a fertile playfield for political parties.

Following the Bangalore Case, the parliament revised the definition of industry as provided in Section 2 (c) of the 1982 Act, but it never got implemented due to political pressures and conflict of interest between center and states.

With the NDA government coming into power in 2014, they first put across a draft labour code bill in 2015, and now in Sep 2020, they have notified The Industrial Relations Code, 2020, which has increased the scope of definition of industry to a greater extent. The new labour laws go in conjunction with the disinvestment policy of the government, where the government feels that they should not be doing business but governing the country. From this standpoint, workers who are part of public undertakings will become part of the private workforce and could benefit from the new labour laws.

The new labour code rules were supposed to be implemented from April 1, 2021, but the Centre has deferred it for the time being. The delay has been attributed to the fact that several states have not yet finalised the rules of the Code of Wages, 2019. The new target date is Ist October 2021. This has been the dilemma since independence that center and states are not able to work as one cohesive unit on such an important subject touching the most venerable section of the society. They always are on tug of war with each other depriving benefits to the workers and their beneficiaries.

State governments continue to give relaxation on labour laws to attract investment, recently the Uttar Pradesh government has approved “Uttar Pradesh Temporary Exemption from Certain Labour Laws Ordinance, 2020” Ordinance exempting businesses from the purview of almost all the labour laws but four labour laws for the next three years, to give a fillip to investment in the state. On one hand it will create employment opportunities but on the other hand will deprive the workers from the benefit of labour laws


While the broad concept of ‘industry’ may put further operations into the Code’s coverage, the exception made in the case of entities owned by organisations wholly or substantially involved in any charitable, social, or philanthropic service may exclude a number of jobs from the Code’s coverage.

Furthermore, the central government’s unguided power to exempt any activity from the definition of “industry” by issuing a notification could result in the arbitrary exclusion of employees working in establishments engaged in such activities from the Code.

There is a greater need to set up a monitoring committee at central level to look after the readiness of states to implement the new codes.

[1] Surya Narayan Mishra, Labour and Industrial Law, pg. 45,46, Central Law Publications 2019.

Saurav Gupta, a 3rd year student at Hidayatullah National Law University, Raipur.

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