The Supreme Court on Wednesday made it clear that it will proceed to examine, on merits, the long-pending reference concerning the correctness of the 1978 ruling in Bangalore Water Supply & Sewerage Board v. R Rajappa.

 The court said “industry” has to be given a wide interpretation under the Industrial Disputes Act, 1947.

 A nine-judge Bench led by Chief Justice of India Surya Kant, and comprising Justices BV Nagarathna, PS Narasimha, Dipankar Datta, Ujjal Bhuyan, Satish Chandra Sharma, Joymalya Bagchi, Alok Aradhe, and Vipul M Pancholi, declined to entertain objections to the very maintainability of the reference. 

The issue had been raised in light of the repeal of the 1947 law and its replacement by the Industrial Relations Code, 2020. The Bench indicated that leaving the reference unanswered could have continuing consequences, particularly for pending matters where the earlier precedent may still govern interpretation. 

The Chief Justice underscored that the Court would not sidestep the substantive questions merely because the statutory framework has since evolved. Even if only a limited set of legacy disputes remain, the precedent would continue to influence adjudication unless conclusively addressed, he observed.

Senior Advocate Indira Jaising, defending the 1978 ruling, argued that the reference itself was flawed and unnecessary. She maintained that there was no real conflict between earlier judgments that warranted reconsideration and cautioned that any ruling by the present Bench would have wide ramifications, affecting both labour and management.

According to her, the earlier decision required no revisiting and the Court should decline to reopen settled law. At the same time, she indicated that she would advance submissions on merits if the Bench chose to proceed.

Rejecting the invitation to scrutinise the validity of the reference, the Bench said it would directly engage with the substantive issues surrounding the correctness of the earlier judgment. It clarified that the exercise would be confined to interpreting the definition of “industry” as it existed under the 1947 Act, without examining the contours or validity of the 2020 Code.

Justice Joymalya Bagchi noted that the 1978 ruling had, in a sense, anticipated legislative intervention to address gaps in the statutory framework. While Parliament has since acted, he emphasised that the present inquiry is limited to assessing whether the earlier interpretation was sound in the context of the law then in force. He added that the Court could expressly clarify that its conclusions would not bear upon the interpretation or constitutionality of the new legislation.

During the hearing, Justice Dipankar Datta flagged the need to interpret the definition of “industry” in conjunction with the concept of an “industrial dispute”, observing that the statutory scheme cannot be understood in isolation.

Appearing for the State of Karnataka, Senior Advocate Sanjay Hegde argued for a more restrained approach, contending that the wide interpretation adopted in 1978 stretched the statutory language beyond reasonable limits. He urged a return to an earlier line of reasoning that linked “industry” more closely to commercial or business-like activities, stressing that statutory terms cannot be extended indefinitely.

The Bench also engaged with the scope of “sovereign functions”, with questions raised about how core governmental functions, statutory duties, and welfare activities should be treated within the framework of “industry”. Hegde submitted that the traditional understanding of sovereign functions is too narrow and must account for the expanded role of the modern State in regulation and planning.

Senior Advocate Shadan Farasat, for Punjab, similarly pressed for narrowing the definition, suggesting that it should be anchored in activities involving production or manual labour. He argued that extending the concept to professional or intellectual services risks detaching it from its historical roots in industrial relations.

Other counsel echoed concerns about overbreadth.

Senior Advocate Jaideep Gupta pointed to the incongruity of applying industrial law frameworks to religious institutions, while Senior Advocate Abhimanyu Bhandari called for a broader reading of sovereign functions to include welfare activities.

On the other side, Jaising warned that scaling back the definition could exclude large sections of workers from statutory protection, leaving them without effective remedies unless covered by alternative legal regimes.

The hearing, which began earlier this week, will continue on Thursday.