TODAY THE NINE-JUDGE BENCH, while deciding the reference concerning the interpretation of industry, under Section 2(j) of the Industrial Disputes Act, 1947, by 5:4 majority recognised that while the essential framework of the triple test laid down in Bangalore Water Supply and Sewerage Board v. R. Rajappa (1978) stood the test of time, certain aspects of the triple test and the accompanying guidelines were capable of further refinement.
However, Chief Justice of India (‘CJI’) Surya Kant, while pronouncing the judgment, clarified that the ruling would operate prospectively and would not affect pending disputes or proceedings.
“Judgments, settlements and determinations that are no longer subject to challenge shall remain undisturbed, notwithstanding the reformulation of the test set out in this judgment,” he said. It was further clarified that ruling shall not be treated as a source or aid for interpreting the Industrial Relations Code, 2020, if such a question arises in the future.
The dissenting opinions on merits were delivered by Justices B.V. Nagarathna, Dipankar Datta, Ujjal Bhuyan and Joymalya Bagchi, who held that the law laid down in Bangalore Water Supply remains correct and does not warrant reconsideration or reformulation. On the question of maintainability, Justices B.V. Nagarathna and Ujjal Bhuyan along with Justice Dipankar Datta were of the opinion that the reference was not maintainable. However, six judges including CJI ruled otherwise.
Background
In 1978, a seven-judge Bench established the landmark “Triple Test” in Bangalore Water Supply by which any systematic activity organised through employer-employee cooperation for the production or distribution of goods or services qualifies as an industry. It rendered the profit motive entirely irrelevant. The interpretation swept hospitals, educational institutions, and government departments under the jurisdiction of labour laws, leaving a narrow exception for sovereign functions.
Over subsequent decades, this broad interpretation led to highly inconsistent and conflicting rulings among smaller Benches of the Supreme Court. Recognising these difficulties, a five-judge bench in State of Uttar Pradesh v. Jai Bir Singh (2005) referred the correctness of Bangalore Water Supply to a larger bench, noting the lack of unanimity in the judgment and its problematic consequences for public welfare institutions and state functions. In 2017, a seven-judge bench further referred the matter to a nine-judge Constitution Bench for authoritative reconsideration.
The current bench formulated four broad questions:
Whether the triple test laid down in Bangalore Water Supply is the correct law.
Whether the Industrial Disputes (Amendment) Act, 1982 and the Industrial Relations Code, 2020 have any legal impact upon the definition of ‘industry’ as contained in the principal Act of 1947.
Whether the social welfare activities and schemes of government departments or instrumentalities can be construed to be industrial activities for the purposes of Section 2(j) of the 1947 Act.
What are the sovereign functions of the State that fall outside the purview of Section 2(j)
On March 19 2026, after hearing arguments for three days, the nine-judge bench comprising of CJI Surya Kant and Justices BV Nagarathna, PS Narasimha, Dipankar Datta, Ujjal Bhuyan, Satish Chandra Sharma, Joymalya Bagchi, Alok Aradhe and Vipul M Pancholi had reserved its judgment.
The ruling
The majority firstly, held that the reference to the nine-Judge Bench was validly made and maintainable which allowed the Court to examine whether the interpretation of industry in Bangalore Water Supply required reconsideration.
Secondly, law in Bangalore Water Supply was not completely rejected, however, certain elements of its triple test required refinement, so the majority reformulated the test. This reformulation, the Court clarified, would apply prospectively and pending cases under the 1947 Act continue to be decided under the original Bangalore Water Supply triple test.
Separate opinions
Justice BV Nagarathna authored a separate opinion and held that the reference made by the five-Judge Bench in Jai Bir Singh was unnecessary. She nevertheless examined the judgment in Bangalore Water Supply and concluded that its interpretation of industry under Section 2(j) of the Industrial Disputes Act, 1947 did not require any interference or modification. According to her, the triple test contained in paragraphs 140 to 144 of Justice Krishna Iyer’s opinion in Bangalore Water Supply remains the correct law.
“Privatisation inter alia implies that whatever activities were undertaken by the state as a state-owned or state-sponsored project or programme is now being conducted by private entities or under a public-private partnership. Therefore, workmen or employees who are working for public sector units were transformed as workmen of employees of the private sector. It is in this context that the protection of workmen as envisaged under the ID Act assumes relevance and significance,” she said.
Justice Nagarthana laid several reasons for retaining the Bangalore Water Supply interpretation, including the repeal of the 1947 Act, the long-standing operation of the seven-Judge Bench judgment, the need for certainty in industrial law, and the fact that the Industrial Disputes (Amendment) Act, 1982 had never been notified.
She further held that social welfare activities, schemes and other enterprises undertaken by government departments or their instrumentalities may constitute industrial activities depending upon the nature of the activity but the mere fact that an activity is performed by the government does not automatically exclude it from the definition of industry. The determination must, according to her, depend upon the nature of the activity.
Justice Dipankar Datta while writing for Justice Bhuayan and himself upheld the objection raised by Senior Advocate Indira Jaising against the maintainability of the reference. He observed that Maruti (1995) and Parmar (2001) were not conflicting decisions, as Parmar, on the basis of affidavit evidence, had distinguished Maruti. According to Justice Datta, the reference in Jai Bir Singh failed to satisfy the tests laid down in Kesoram Industries.
He too held that Bangalore Water Supply had correctly laid down the triple test for determining the meaning of industry under Section 2(j).
While Justice Joymalya Bagchi ruled that reference was maintainable, on the merits, he disagreed with the reformulation of the triple test as according to him the nature of the activity, rather than merely the identity of the entity performing it must be considered. While concurring with Justices Nagarathna, Bhuyan and Datta, Justice Bagchi observed that the concept of sovereignty in a constitutional democracy is confined to core and inalienable State functions and merely assigning a duty to the State through legislation or the Constitution does not automatically confer sovereign immunity from industrial law.
Why is the definition of industry so important?
The importance of how ‘industry’ is interpreted is rooted in the legal realities of who gets to be a workman and the protections that come with it. Under the Industrial Disputes Act, along with the definition of industry, comes the specialised protections of the Act for workmen, including provisions governing wages, working conditions, safeguards against unfair labor practices and access to legal and formal channels of employment grievances and dispute resolution. If the definition is narrowed, millions of workers would lose access to industrial tribunals. The scope of the definition also directly impacts the rules governing strikes, lockouts, retrenchment, layoffs, and the closure of undertakings.
The detailed written Judgment is yet to come out which will clarify what the majority means by its reformulation of the triple test. However, the challenge to the Industrial Relations Code has been left open, leaving the larger constitutional and legal questions surrounding the new labour regime unresolved.
“Even though the nine-judge bench noted during the hearing that it is not concerned with the new labour codes, the continuity between the ratio of the BWSSB case and the definition of ‘industry’ in Section 2 (p) of the Industrial Relations Code, 2020 means that the observations of the bench are likely to shape the interpretation of the new Code also,” wrote Saurabh Bhattacharjee for The Leaflet.
During the arguments in March, in context of challenge to the new IR Code, Senior Advocate Indira Jaising had humorously remarked, “That is the battle for another day… don’t worry, my Lord, we will be back here before you.” That prospect post this ruling now assumes greater significance as the world continues to evolve with new forms of employment beyond the definitions and categories contemplated by the law.