The Supreme Court of India initiated a formal examination on October 28, 2026, concerning a petition filed by the All India Trade Union Congress, Tamil Nadu, which challenges the constitutional validity of the definition of “industry” provided under the Industrial Relations Code, 2020. The challenge marks a significant escalation in the ongoing debate over how the modern statutory framework impacts the rights of workers in sectors previously protected under older labor legislation.

A bench presided over by Chief Justice of India Surya Kant, accompanied by Justice Joymalya Bagchi and Justice V Mohana, heard the preliminary arguments presented by the petitioner. During the session, the Court opted for a cautious approach, with the Chief Justice signaling an intent to conduct an independent review of the specific exclusionary clauses before determining the next procedural steps. The petition specifically targets provisions within Section 2(p) of the 2020 Code, which explicitly exclude institutions engaged in charitable, social, or philanthropic services, as well as government activities defined as “sovereign functions,” from the legal classification of an “industry.”

Narrowing the Scope of Worker Protection

The primary contention brought forward by the petitioner is that the 2020 Code effectively strips millions of workers of their access to the statutory industrial dispute resolution framework. By narrowing the definition of what constitutes an industry, the government has created an environment where employees in newly excluded organizations are left without the mechanisms previously available under the Industrial Disputes Act, 1947.

Senior Advocate Gopal Sankaranarayanan, appearing for the union alongside advocate Aarthi Rajan, argued that the exclusions are not merely technical adjustments but are fundamentally at odds with established principles of labor equity. He emphasized that the government’s power to notify further activities for exclusion grants an unchecked authority that could lead to the further erosion of worker rights. The union’s primary grievance is that the Code moves away from the inclusive approach that had defined Indian labor law for nearly five decades, potentially rendering vulnerable sectors—such as hospitals, educational institutions, and clubs—wholly susceptible to arbitrary management decisions without legal recourse for the staff involved.

Challenging the Post-1978 Legal Landscape

The legal backdrop of this challenge is rooted in the long-standing influence of the 1978 Constitution Bench ruling in the case of Bangalore Water Supply and Sewerage Board v. A. Rajappa . For nearly 50 years, the “triple test” articulated by that judgment served as the foundation for determining the status of an “industry.” This test mandated that any systematic activity, organized via cooperation between employer and employee, for the production or distribution of goods or services to satisfy human wants, must be categorized as an industry.

However, the legal landscape shifted significantly in August 2026, when a nine-judge Constitution Bench, also led by Chief Justice Surya Kant, clarified the position regarding the new Code. The majority ruling established that the 2020 Code, which came into effect in November 2025, is not “burdened” by the interpretations of the 1947 Act. The judgment held that disputes arising under the current Code must be analyzed independently, distinct from the historical context of the “triple test.” Despite this, the current petition argues that the 2020 Code’s departures from the spirit of that test are overly broad, effectively creating a lacuna in the law that ignores the realities of modern employment.

The Union’s Core Legal Objections

During the hearing, the Court questioned the necessity of the challenge, asking the petitioner to clarify the specific problems they perceived with the statutory definition. Senior Advocate Gopal Sankaranarayanan responded that the inclusion of broad categories such as “sovereign functions” and “charitable services” creates an artificial separation that disadvantages the labor force. He submitted that these terms are vague and susceptible to over-interpretation by the state, which may use them to evade the obligations inherent in the collective bargaining and grievance redressal systems.

The Chief Justice’s observation during the proceedings—that he would like to “go through it” before deciding on further notices—underscores the judicial caution being exercised in a matter that intersects with major legislative reforms. The Court is clearly aware that any intervention here could necessitate a re-evaluation of the executive’s power to define the limits of labor law enforcement.

While the dissenting opinions in the August 2026 ruling, led by Justice B.V. Nagarathna and joined by Justices Dipankar Datta and Ujjal Bhuyan, cautioned against abandoning the inclusive scope of the 1978 test, the majority view has left the door open for this specific challenge under the new Code. The petitioner’s effort to force a judicial confrontation with these specific sections suggests that the transition to the new labor regime will continue to be a source of significant litigation.

As the matter now stands, the Supreme Court is slated to examine the nuances of the petition internally. The outcome of this preliminary review will determine whether the Court issues a formal notice to the Union of India, which would initiate a more robust debate on the constitutionality of the government’s regulatory reach in labor disputes. Until such time, the legal uncertainty regarding the status of workers in charitable and government-adjacent institutions persists, leaving labor unions and administrative bodies awaiting further judicial guidance. The next date of hearing remains pending as the Court continues its review of the specific sections challenged by the All India Trade Union Congress.