Centre: Welfare, Charity Acts Not 'Industry'; SC Reviews Definition

The Union Government has asserted before the Supreme Court that welfare activities and charitable functions undertaken by the State cannot be classified as 'industry' under labour law. This argument was presented on March 17, 2026, before a nine-judge Constitution Bench that is currently re-examining the definition of 'industry' as established in the landmark Bangalore Water Supply and Sewerage Board v. A. Rajappa case of 1978. [3, 8, 12, 13] Attorney General for India, R. Venkataramani, submitted that while the 'triple test' laid down in the 1978 judgment—which includes systematic activity, employer-employee cooperation, and production or distribution of goods and services for human needs—is legally sound, its indiscriminate application has led to an unwarranted expansion of the 'industry' definition. [3, 5, 13] He cautioned that applying this test broadly could encompass governmental functions and charitable organizations in ways not originally intended. [3] The Supreme Court's nine-judge bench is delving into the correctness of the Bangalore Water Supply judgment, which had adopted a wide, 'worker-oriented' approach to defining 'industry' under the Industrial Disputes Act, 1947. [5, 8, 13, 17] This broad interpretation, articulated by Justice V.R. Krishna Iyer, included activities like hospitals and universities within the ambit of 'industry', even if they were not profit-making. [5, 13, 17] The current proceedings are crucial as they will influence the interpretation and implementation of the Industrial Relations Code, 2020, which consolidated several labor laws and came into effect on November 21, 2025. [4, 7, 17] The Centre's argument suggests a need to distinguish between traditional sovereign functions and the evolving role of the modern welfare state. The AG emphasized that modern governance involves wide-ranging socio-economic policies, and a restrictive, colonial understanding of 'sovereign functions' needs to be revisited in light of India's constitutional framework. [3] The nine-judge bench, led by Chief Justice of India Surya Kant, is considering several key issues, including whether social welfare activities and schemes undertaken by government departments or their instrumentalities can be construed as 'industrial activities' under Section 2(j) of the Industrial Disputes Act, 1947. [9, 12] The bench is also examining the impact of subsequent legislative developments, such as the Industrial Relations Code, 2020, on the definition of 'industry'. [5, 12] The Centre's stance aims to prevent a scenario where essential governmental functions and charitable services, which are integral to the welfare state's mandate, are subjected to the same regulations and industrial dispute mechanisms applicable to commercial enterprises. This is particularly relevant given the government's ongoing efforts to streamline labor laws through the Industrial Relations Code, 2020, which seeks to balance worker protection with business flexibility. [4, 7] The broad definition of 'industry' could potentially bring numerous government-run welfare programs and charitable institutions under the purview of labor disputes, creating unforeseen complications. [3, 5] The proceedings highlight the tension between the need for robust worker protections and the efficient functioning of government and social service institutions. The Supreme Court's final decision is expected to clarify the boundaries of what constitutes an 'industry' and its implications for the vast array of services provided by the state and non-profit organizations in India. [5, 12, 13]

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