(Section 2(p))

Introduction

The Industrial Relations Code, 2020 (IRC, 2020) consolidates and replaces the following three labour laws:

1. Industrial Disputes Act, 1947
2. Trade Unions Act, 1926
3. Industrial Employment (Standing Orders) Act, 1946

The definition of “Industry” is provided under Section 2(p) of the Industrial Relations Code, 2020. It is largely based on the earlier definition under the Industrial Disputes Act, 1947, with certain clarifications and exclusions.

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Definition of Industry (Section 2(p))

Section 2(p) defines Industry as:

“Any systematic activity carried on by co-operation between an employer and worker (whether employed directly or through any agency, including a contractor) for the production, supply or distribution of goods or services to satisfy human wants or wishes (other than purely spiritual or religious wants), whether or not—

(i) any capital has been invested; or

(ii) the activity is carried on with a motive to make any gain or profit.”

Thus, the existence of capital investment or a profit motive is not essential for an activity to be regarded as an industry.

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Essential Ingredients of Industry

For an establishment to qualify as an industry, the following conditions must exist:

1. Systematic Activity

The activity must be organised, continuous and systematic.

2. Cooperation between Employer and Worker

There must be cooperation between employer and worker, including workers employed through contractors.

3. Production, Supply or Distribution

The activity should involve production, supply or distribution of goods or services.

4. Human Wants or Wishes

The goods or services should satisfy human wants or wishes, except purely spiritual or religious wants.

5. Profit Motive Not Necessary

Even charitable or non-profit organisations may constitute an industry if the essential ingredients are satisfied, unless specifically excluded.

6. Capital Investment Not Necessary

Even without investment of capital, an activity may be regarded as an industry.

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Activities Excluded from the Definition

The following are not industries under Section 2(p):

1. Institutions owned or managed by organisations wholly or substantially engaged in charitable, social or philanthropic service.
2. Sovereign functions of the Government, including:
   • Defence
   • Defence Research
   • Atomic Energy
   • Space Departments
3. Domestic services.
4. Any other activity notified by the Central Government.

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Triple Test (Bangalore Water Supply Case)

Although the Industrial Relations Code, 2020 provides the statutory definition, courts continue to rely on the principles laid down in the landmark judgment of Bangalore Water Supply and Sewerage Board v. A. Rajappa.

The Triple Test states that an establishment is an industry if:

1. There is a systematic activity.
2. There is cooperation between employer and workers.
3. Goods or services are produced or supplied to satisfy human wants.

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Examples of Industries

• Manufacturing companies
• Banks
• Insurance companies
• Transport organisations
• Hotels
• Restaurants
• Information Technology companies
• Public utility services
• Electricity Boards

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Importance of the Definition

The definition of industry is important because it:

• Determines the applicability of the Industrial Relations Code.
• Protects workers’ rights.
• Regulates employer-worker relations.
• Facilitates settlement of industrial disputes.
• Promotes industrial peace and harmony.

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Conclusion

The Industrial Relations Code, 2020 adopts a broad definition of “Industry”. Any systematic activity carried on through employer-worker cooperation for producing or supplying goods or services to satisfy human wants is generally an industry, irrespective of profit motive or capital investment. However, sovereign functions, domestic services and specified charitable institutions are excluded. The Triple Test laid down in the Bangalore Water Supply case continues to guide the interpretation of the term.