The Supreme Court is set to examine a petition filed by the All India Trade Union Congress, Tamil Nadu challenging the definition of 'industry' under the Industrial Relations Code, 2020 which came into effect in November last year.

The petitioner alleges negation of the functional and dominant-nature tests laid down by a Constitution bench of the Court in 1978 Bangalore Water Supply case and assails extinguishment of workers' access to statutory industrial dispute resolution framework.

A bench of CJI Surya Kant, Justice Joymalya Bagchi and Justice V Mohana today tentatively listed the matter next month.

The petition challenges the constitutional validity of the exclusionary clauses in Section 2(p)(ii)(i), Section 2(p)(ii)(ii) and Section 2(p)(ii)(iv) of the 2020 Code, which exclude institutions engaged in charitable, social or philanthropic service, activities relatable to sovereign functions, and any other activity notified by the Union government from the definition of 'industry'.

The petitioner contends that the exclusions depart from the principles laid down by a Constitution bench in Bangalore Water Supply and Sewerage Board v. A Rajappa (1978) (which laid down the 'triple' test for determining whether an activity constitutes an 'industry'). A 7-judge bench held that an activity qualifies as an "industry" if it satisfies three conditions:

- Systematic and organized activity.

- Cooperation between employer and employee.

- Production or distribution of goods and services to satisfy human wants and needs (excluding purely spiritual or religious services).

Referring to Bangalore Water Supply, the petitioner says that the determinative factor is the nature of the activity performed and no the character of the institution or the presence/absence of profit motive, or the identity of the employer. Further, where an establishment undertakes multiple functions, it is the dominant character of the activity undertaken which determines whether it qualifies as an 'industry'.

It is contended that there is a need to reaffirm the "wide amplitude" accorded to the threshold definition of 'industry' in Bangalore Water Supply case. "the impugned exclusions under Section 2(p)(ii) of the Code are worded in statutory language that is considerably broader than the narrow sovereign exception recognized in Bangalore Water Supply, and may potentially exclude welfare schemes, research institutions and public service bodies that would otherwise satisfy the statutory test of industry."

Invoking Articles 14, 16, 19(1)(c) and 21 of the Constitution, the petitioner urges that the impugned exclusions deprive large classes of workers of statutory labor protections and create irrational distinctions between those similarly situated.

"Workers employed in establishments such as charitable hospitals, welfare institutions, and other public or service organizations would thereby be denied access to the statutory machinery for investigation and settlement of industrial disputes and rendered unable to challenge illegal termination, retrenchment or unfair labor practices before Labor Courts and Industrial Tribunals."

"Divergent or overbroad application of the exclusions would result in similarly situated workers receiving materially different protection merely by reason of the institutional description of their employer or the sector in which they serve, thereby placing large classes of workers beyond the reach of effective statutory remedies."

In context of the Supreme Court's recent 9-judge bench decision in State of Uttar Pradesh v. Jai Bir Singh, it is submitted that the interpretation and constitutional validity of Section 2(p) of the 2020 Code were expressly left open. The operative determination was confined to proceedings governed by the Industrial Disputes Act, 1947 (repealed with the coming into effect of IR Code).

Some of the grounds raised are as follows -

- The Constitution bench in Jai Bir Singh left the issue of Section 2(p) open and therefore, the writ petition is neither academic nor rendered infructuous. It raises questions that were expressly reserved in Jai Bir Singh. For nearly 5 decades, Bangalore Water Supply decision defined 'industry' in welfare-oriented manner. That approach must remain relevant to the construction of Section 2(p).

- The exclusions in Section 2(p) require constitutional scrutiny, as they result in unequal treatment, as the controlling consideration is the nature and inalienability of the activity and not the identity of the employer, and as clause (iv) authorizes the central government to exclude 'any other activity' without prescribing an express criterion. The impugned exclusions operate at the very threshold, determining whether workers can at all gain access to the beneficial and specialized machinery. The provisions are therefore not just classificatory, but capable of excluding entire classes of workers from the protection of industrial law.

- Section 2(p) must be harmoniously construed with Section 2(r), which requires an enquiry into the predominant character and severability of the activities carried on by an establishment.

- The Supreme Court has preserved the law declared in Bangalore Water Supply case for legacy proceedings, while leaving the issue of Section 2(p) to be determined. Therefore, a pronouncement is necessary to prevent unequal access to industrial justice.

The petition has been filed through AoR Aarthi Ranjan. Senior Advocate Gopal Sankaranarayanan appears for petitioner.