Justice Nagarathna’s dissent warns of tearing the safety net of labour law

Polity and Governance · 23 August 2026 · Based on The Hindu (original report)

2-minute summary

In a significant 147-page dissenting opinion, Supreme Court Justice B.V. Nagarathna warned against the majority decision of a nine-judge Bench to disregard the landmark 1978 Bangalore Water Supply precedent while interpreting the term 'industry' under the new Industrial Relations Code (IRC), 2020. The 1978 judgment had provided an expansive definition of 'industry', bringing various organizations under the ambit of the Industrial Disputes Act, 1947, thereby safeguarding workers' rights against corporate exploitation. Justice Nagarathna argued that this protective definition served as a vital bulwark for labour welfare, especially during India's post-1991 transition to privatisation and globalisation. She emphasized that when a new statute (like the IRC 2020) replaces an old one (the 1947 Act) with identical language, established judicial precedents remain highly persuasive and binding. Her dissent highlights the risk of 'supercharging' corporate bargaining power at the expense of vulnerable workers, urging that the state must not abdicate its welfare obligations.

Why it's in the news

Justice B.V. Nagarathna, in a dissenting opinion on a nine-judge Supreme Court Bench, cautioned against dismantling the expansive definition of 'industry' established in the landmark 1978 Bangalore Water Supply case. She warned that doing so under the new Industrial Relations Code (IRC) 2020 could compromise labour welfare and exacerbate the skewed bargaining power of corporates.

Background and context

The definition of 'industry' has been a contentious legal issue in Indian labour jurisprudence. Under Section 2(j) of the Industrial Disputes Act, 1947, the definition was initially vague, leading to conflicting judicial interpretations. In 1978, a landmark seven-judge Bench of the Supreme Court in Bangalore Water Supply and Sewerage Board v. R. Rajappa formulated a wide, triple-system test. It ruled that any systematic activity carried on by cooperation between an employer and employees for the production, supply, or distribution of goods or services satisfies the definition of an 'industry', regardless of profit motive. This brought educational institutions, research institutes, charitable projects, and municipal bodies under the protective umbrella of labour laws. In 2020, the government enacted the Industrial Relations Code (IRC) to consolidate and simplify labour laws. The recent nine-judge Bench's majority decision to set aside the 1978 precedent for future interpretations under the IRC 2020 has triggered concerns regarding the dilution of labour protections, prompting Justice Nagarathna's strong dissent.

Constitutional provisions

• Article 39(a) & (e) — Directs the State to secure that citizens have the right to an adequate means of livelihood and that the health and strength of workers are not abused.
• Article 42 — Directs the State to make provision for securing just and humane conditions of work and for maternity relief.
• Article 43 — Mandates the State to secure a living wage, decent standard of life, and social and cultural opportunities for all workers.
• Article 43A — Directs the State to take steps to secure the participation of workers in the management of undertakings, establishments, or other organizations engaged in any industry.

Committees and reports

• Second National Commission on Labour — Recommended the consolidation of existing central labour laws into broader codes, which eventually led to the drafting of the four Labour Codes, including the Industrial Relations Code, 2020.

Government schemes

• Shram Suvidha Portal — A single-window portal to facilitate reporting, transparency, and ease of compliance with various labour laws.

International organisations

• International Labour Organization (ILO) — A tripartite UN agency that sets international labour standards, promotes decent work, and protects social justice for workers globally.

Mains practice: Critically analyze the impact of redefining the term 'industry' under the new Industrial Relations Code, 2020, on labour welfare and corporate bargaining power in India.

The definition of 'industry' is the cornerstone of Indian labour law, determining which workers receive statutory protection. The recent Supreme Court deliberations on whether the landmark 1978 Bangalore Water Supply precedent applies to the Industrial Relations Code (IRC), 2020, have brought the delicate balance between labour welfare and ease of doing business to the forefront.

• **The Protective Legacy of the 1978 Precedent**: The Bangalore Water Supply case established an expansive 'triple test' (systematic activity, employer-employee cooperation, and production/distribution of goods/services) that brought diverse sectors under labour law protection, preventing arbitrary dismissals and ensuring fair dispute resolution.

• **Implications of Diluting the Precedent**: By 'wiping the slate clean,' the majority decision risks narrowing the definition of 'industry' under the IRC 2020. This could exclude millions of informal, service, and gig-economy workers from the safety net of labour laws.

• **Skewed Bargaining Power**: As highlighted by Justice Nagarathna, dismantling this protective shield 'supercharges' corporate bargaining power. In an economy with high underemployment, individual workers lack the leverage to negotiate fair terms without statutory backing.

• **Economic Efficiency vs. Welfare**: Proponents of the new code argue that a clearer, narrower definition reduces compliance burdens, curtails litigation, and attracts foreign investment. However, this must not come at the cost of the state's constitutional obligation to ensure dignified working conditions.

To achieve sustainable economic growth, India must balance industrial flexibility with robust social security. While regulatory clarity is welcome, the spirit of the Bangalore Water Supply ruling—ensuring that workers are not left at the mercy of asymmetric market forces—must be preserved through proactive legislative safeguards and progressive judicial interpretations.

Prelims practice questions

Q1. With reference to Indian labour jurisprudence, the landmark 'triple test' to determine whether an establishment qualifies as an 'industry' was laid down in which of the following cases?

1. Olga Tellis v. Bombay Municipal Corporation (1985)
2. Bangalore Water Supply and Sewerage Board v. R. Rajappa (1978)
3. Randhir Singh v. Union of India (1982)
4. Minerva Mills v. Union of India (1980)

Answer: B. The 1978 Bangalore Water Supply case established the 'triple test' (systematic activity, employer-employee cooperation, and production/distribution of goods/services) to comprehensively define 'industry' under the Industrial Disputes Act, 1947.

Q2. Consider the following statements regarding the Industrial Relations Code (IRC), 2020: 1. It consolidates and replaces the Industrial Disputes Act, 1947, the Trade Unions Act, 1926, and the Industrial Employment (Standing Orders) Act, 1946. 2. It completely excludes the service sector from the definition of 'industry'. Which of the statements given above is/are correct?

1. 1 only
2. 2 only
3. Both 1 and 2
4. Neither 1 nor 2

Answer: A. Statement 1 is correct as the IRC 2020 amalgamates these three central labour laws. Statement 2 is incorrect; it does not completely exclude the service sector, but the judicial interpretation of what constitutes an 'industry' under the new code remains a subject of legal debate.

Q3. Which of the following Directive Principles of State Policy (DPSP) in the Constitution of India is directly associated with securing the participation of workers in the management of undertakings or industries?

1. Article 41
2. Article 43A
3. Article 39A
4. Article 48

Answer: B. Article 43A of the Constitution of India, inserted by the 42nd Amendment Act of 1976, directs the State to take steps to secure the participation of workers in the management of undertakings, establishments, or other organizations engaged in any industry.

Revision flashcards

• What is the significance of the 1978 Bangalore Water Supply case? It established an expansive 'triple test' definition of 'industry' under the Industrial Disputes Act, 1947, bringing educational, charitable, and municipal bodies under labour welfare protections.
• Which three laws were consolidated to form the Industrial Relations Code (IRC), 2020? The Industrial Disputes Act (1947), the Trade Unions Act (1926), and the Industrial Employment (Standing Orders) Act (1946).
• What was the core concern raised in Justice B.V. Nagarathna's dissent regarding the IRC 2020? She warned that disregarding the 1978 Bangalore Water Supply precedent would dilute labour protections and exacerbate the 'skewed bargaining power' of corporates over workers.
• What is the rule of statutory interpretation cited in Greaves v. Tofield (1880) mentioned in the dissent? When a new statute replaces an old one with identical language on the same subject, well-known judicial interpretations of the repealed statute remain highly persuasive or binding.
• Which constitutional article directs the State to secure just and humane conditions of work? Article 42 of the Constitution of India (Directive Principles of State Policy).