New Code, Clean Slate: The Supreme Court Draws a Line Between Old Precedent and New Law

Authored by Arundhathi Gopakumar

There are few words in Indian labour law that have carried as much weight, and as much confusion, as the word “industry.” For nearly five decades, its definition under Section 2(j) of the Industrial Disputes Act, 1947, sat at the centre of one of Indian labour law’s longest running interpretive disputes. On 20 August 2026, a nine-Judge Bench of the Hon’ble Supreme Court in State of Uttar Pradesh v. Jai Bir Singh (2026 INSC 897) finally sat down to answer that question afresh, and in the process laid down something equally important. In doing so, it offered a clear lesson in how courts should treat inherited precedent once the statute that gave rise to it has been replaced by a new one.

The Bangalore Water Supply Legacy

The dispute traces back to Bangalore Water Supply and Sewerage Board v. A. Rajappa, (1978) 2 SCC 213, a seven Judge Bench decision that interpreted definition of “industry” under the Industrial Disputes Act, 1947 (“ID Act”), through what is now famously called the Triple Test. The test asked whether an activity involved systematic cooperation between employer and employee, and whether it resulted in the production or distribution of goods or services, largely without asking whether profit was involved. It was a generous reading, and it swept a remarkable range of institutions into the fold of industrial adjudication, from hospitals and research bodies to charitable trusts and cooperative societies.

That generosity came at a cost. Two later Benches disagreed over whether a State Social Forestry Department, a body devoted to environmental welfare, could itself be called an industry. The disagreement eventually grew into a formal reference, moving from a five-Judge Bench to a seven-Judge Bench, before finally reaching the nine Judge Bench that decided this case.

By the time the case was argued, though, the underlying statute had already vanished. The ID Act stood repealed from 21 November 2025, replaced by the Industrial Relations Code, 2020(“IR Code”), under which Section 2(p) offers its own definition of “industry” differently worded from the one various courts had spent decades interpreting.

Where the New Code Draws Its Own Line

The most crucial part of the judgment is what the Court chose not to do. It refused to let its own reading of the ID Act, built up over decades, automatically decide how “industry” should be understood under the new Code. The Court in Uttar Pradesh v. Jai Bir Singh held that the new IR Code is an independent piece of legislation, and any question about what it means must be answered by looking at its own words and purpose, not simply by transplanting the old understanding onto it. That question, the Court said, has been left open for a future case to decide.

This does not mean the old law is irrelevant. The Court recognised that when a new law reuses ideas from an older one dealing with the same subject, there is often a natural temptation to assume the old meaning carries over automatically. But it cautioned against giving in to that temptation here, since the new Code is worded differently from the old law in real and meaningful ways, particularly in how it treats charitable, educational and government run establishments. Letting the old interpretation quietly guide the reading of the new Code, the Court warned, would risk repeating the very confusion the new law was meant to resolve.

The judgment also touches briefly on who counts as a “worker” under the new Code, since that question is closely tied to whether an establishment counts as an industry in the first place. The Court noted that the new Code retains a broadly similar idea of cooperation between an employer and the workers, but it did not carry out anything close to the detailed exercise it undertook for “industry.” That question, too, has been left for a future case to settle.

An Old Attempt, Finally Completed

Long before the new Code came along, an earlier attempt had already been made to narrow the definition of “industry,” through the Industrial Disputes (Amendment) Act, 1982, carving out specific exclusions for hospitals, educational institutions, charitable bodies and government functions. That attempt was never brought into force and remained a dead letter for decades. A large part of that same list of exclusions now reappears, in a more streamlined form, within the new Code. It does not count as an industry, if it is run by an organisation that is substantially charitable, social or philanthropic in nature, if it involves a core sovereign function of the government such as defence, atomic energy or space, if it amounts to purely domestic service, or if the Central Government separately notifies it as excluded. Activity that is purely spiritual or religious in character is also left out.

Seen this way, the new Code looks less like a sudden departure and more like the completion of something the legislature had tried, and failed, to do many years earlier. This is part of why the Court treated the new Code as a genuinely fresh statement of the law, rather than as the old law wearing a different name.

Conclusion: What This Means for an Establishment Owner

For an establishment already involved in a dispute that began under the Industrial Disputes Act, nothing changes. That dispute, whether decided long ago or still pending, will continue to be judged under the familiar, long-standing Triple Test the courts have applied for decades.

For an establishment trying to work out, going forward, whether it counts as an industry, the underlying question of interpretation remains open, though the new Code does at least tell us, in its own words, where the lines are meant to be drawn.

Put simply, the new Code treats an activity as an industry where:

• The employer and its workers cooperate in an organised manner
• Workers are engaged directly or through a contractor or agency
• The activity produces or supplies goods or services
• The goods or services are intended to satisfy ordinary human needs or wants
• The investment of capital is immaterial
• The existence of a profit motive is immaterial

In practical terms, this means an establishment owner would be well advised to measure their own activity against these categories directly, rather than relying on how it may have been classified under the old law. Until the courts settle the finer points, the safest course is to read the new Code’s own definition carefully and treat genuinely borderline cases as unresolved, rather than assuming the old position, whatever it was, will simply continue.