The Supreme Court of India has initiated formal proceedings to examine a significant legal challenge brought by the All India Trade Union Congress (AITUC) regarding the definition of “industry” under the Industrial Relations Code, 2020. During a recent hearing, a three-judge bench headed by Chief Justice of India Surya Kant, along with Justices Joymalya Bagchi and V Mohana, reviewed the petition filed by the Tamil Nadu unit of the labor union. The legal action specifically contests the constitutional validity of exclusionary clauses within Section 2(p) of the 2020 Code, which effectively remove institutions engaged in charitable, social, or philanthropic services, as well as those performing sovereign functions, from the legal definition of an “industry.”

For labor professionals and practitioners across the country, this development marks a critical juncture in how industrial protections are administered. By narrowing the scope of what constitutes an industry, the 2020 Code has sparked concerns regarding the potential disenfranchisement of large segments of the workforce who may no longer have access to statutory dispute resolution mechanisms. The petition urges the Court to intervene, arguing that these exclusions create an irrational divide in labor rights that could leave thousands of employees without a legal remedy when faced with unfair labor practices, illegal terminations, or disputes regarding working conditions.

Navigating the Threshold of Labor Protection

The core of the dispute lies in the departure from the long-standing functional interpretation of “industry” that has defined the industrial landscape in India for nearly five decades. The petitioner contends that the new statutory framework ignores the “triple test” established by the landmark judgment in Bangalore Water Supply and Sewerage Board v. A Rajappa . This established precedent maintained that an activity qualifies as an industry if it involves a systematic and organized activity, cooperation between employer and employee, and the production or distribution of goods and services to satisfy human needs.

Counsel for the petitioner argued that the 2020 Code’s definition of industry is unnecessarily broad, creating a loophole that allows for the systemic exclusion of workers in the welfare and service sectors. As the petitioner noted during the proceedings, “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.”

The legal challenge gains additional complexity due to the recent ruling by a nine-judge Constitution Bench in State of Uttar Pradesh v. Jai Bir Singh . In that judgment, the Court specifically left the interpretation and constitutional validity of Section 2(p) of the 2020 Code open, focusing instead on proceedings governed by the older Industrial Disputes Act, 1947. This silence from the Constitution Bench has paved the way for the current petition, as it ensures the matter remains legally active rather than moot.

The Conflict Over Sovereign and Charitable Exclusions

The industrial relations landscape is currently governed by the 2020 Code, which came into force on November 21, 2025. Among the most contested provisions is the authority granted to the Central government to notify “any other activity” for exclusion from the industry definition. Petitioners fear that without a clear, objective criterion for these exclusions, the government could arbitrarily widen the gap between protected and unprotected workers.

Beyond the technical legal arguments, the case underscores a practical reality for the labor force: the distinction between the character of an institution and the nature of the work performed. The AITUC argues that the identity of the employer—whether charitable, sovereign, or private—should not be the deciding factor in whether a worker receives the benefit of industrial law. Instead, they argue, the focus must remain on the “dominant nature” of the activity itself. By shifting the focus to the institutional description, the new Code threatens to dismantle the accessibility of Labor Courts and Industrial Tribunals for those working in the public and service sectors.

During the exchange with the Bench, Chief Justice Surya Kant signaled the Court's intention to engage deeply with the nuances of these exclusions. When the petitioner emphasized that the nine-judge bench had expressly left the definition of industry open for future review, the Court acknowledged the merit in examining the vires of the challenged sections. “I would like to go through it,” the Chief Justice observed, before the bench tentatively scheduled the matter for a further hearing next month.

Anticipating the Path Forward

The judicial scrutiny of Section 2(p) arrives at a time when the implementation of the new labor codes is being monitored closely by both employers and trade unions. The outcome of this case is expected to have far-reaching consequences for the uniformity of labor protections. If the Supreme Court finds that the exclusions in the 2020 Code are indeed too broad or constitutionally infirm, it may necessitate a significant amendment or a specific judicial reading-down of the definitions to ensure that workers in charitable and public service establishments are not left without statutory recourse.

For now, the legal community awaits the next hearing, which will determine whether the Court will proceed with a comprehensive review of the statutory language. The petitioner’s effort to ensure that the “wide amplitude” of industrial protections remains intact reflects a broader effort to prevent the erosion of labor rights that have been carefully guarded since the 1970s. As the case progresses, the focus will likely remain on whether the legislature’s intent to define industry under the new Code can be reconciled with the constitutional guarantees of equality and access to justice under Articles 14 and 21.

The matter is currently listed for further consideration, with the Court signaling that it requires time to digest the complexities of the constitutional challenge presented. This procedural interval allows all stakeholders to prepare for what could be a foundational redefinition of the relationship between the state, the charitable sector, and the workers who sustain these vital services. The final determination will likely hinge on the Court’s willingness to balance the state’s desire for regulatory flexibility under the new Code against the imperative of providing a uniform safety net for all industrial workers.