TODAY, in a batch of cases concerning the interpretation of ‘industry’ under Section 2(j) of the Industrial Disputes Act, 1947 (‘IDA’), appellants, including the Union of India represented by Attorney General (‘AG’) R. Venkataramani (who argued yesterday), along with various state governments, public institutions, and private parties, concluded their submissions before a nine-judge Constitution Bench of the Supreme Court, led by Chief Justice (‘CJI’) Surya Kant. The AG broadly argued that while the ‘triple test’ laid down in Bangalore Water Supply v. R. Rajappa (1978) remains doctrinally sound, its overly expansive application has led to unintended consequences.
The matter is being heard by the Bench comprising CJI Kant, along with Justices B.V. Nagarathna, P.S. Narasimha, Dipankar Datta, Ujjal Bhuyan, Satish Chandra Sharma, Joymalya Bagchi, Alok Aradhe, and Vipul M. Pancholi, before whom the Respondents have now commenced their arguments.
Attorney General R. Venkataramani, appearing for the Union of India, did not seek to displace the ‘triple test’ evolved in Bangalore Water Supply but to discipline its application.
Background of the case
At the heart of the dispute is the Court's reconsideration of ‘industry,’ a term of significant consequence under the ID Act, which governs wages, working conditions, dispute resolution, and protections against unfair labour practices. Its classification determines both the applicability of these protections and who constitutes a ‘workman’.
The case stems from uncertainty following Bangalore Water Supply, where a seven-judge bench led by Justice V.R. Krishna Iyer expanded the term to cover any systematic activity organised through employer-employee cooperation for the production or distribution of goods or services satisfying human needs. The bench's ‘triple test’ which included systematic activity, employer-employee cooperation, and production of goods or services, rendered profit motive irrelevant. It brought hospitals, educational institutions, and government departments within labour law's ambit, subject only to a narrow ‘sovereign functions’ exclusion.
Over time, this wide interpretation led to conflicting judicial outcomes. For instance, in Chief Conservator of Forests v. Jagannath Maruti Kondhare (1995), a three-judge bench held that the social forestry department was an industry, whereas in State of Gujarat v. Pratamsingh Narsinh Parmar (2001), a two-judge bench held otherwise. This inconsistency, coupled with the fact that the Industrial Disputes (Amendment) Act, 1982 intended to narrow the definition, was never brought into force, deepened the ambiguity.
Senior Advocate Sanjay Hegde relied on Safdarjung Hospital to argue that the definition of ‘industry’ must be read as a whole, where both employer and employee components operate together, rather than treating the second limb as independently enlarging the scope of the definition.
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 present issues framed before the court are:
(i) Whether the test laid down in paragraphs 140–144 of Justice V.R. Krishna Iyer's opinion in Bangalore Water Supply and Sewerage Board correctly states the law for determining whether an undertaking or enterprise falls within the definition of ‘industry’; and whether the Industrial Disputes (Amendment) Act, 1982 (which did not come into force) and the Industrial Relations Code, 2020 (effective 21.11.2025) have any legal bearing on the interpretation of ‘industry’ under the principal Act.
(ii) Whether social welfare activities and schemes undertaken by Government departments or their instrumentalities can constitute ‘industrial activities’ under Section 2(j) of the IDA.
(iii) What State activities fall within the expression ‘sovereign functions,’ and whether such activities are excluded from the purview of Section 2(j) of the IDA.
(iv) Any other issues that may arise in the course of the proceedings.
Appellants’ arguments
Yesterday, AG R. Venkataramani, appearing for the Union of India, did not seek to displace the ‘triple test’ evolved in Bangalore Water Supply but to discipline its application. Characterising the test as sound in principle, he argued that its indiscriminate extension has drawn in activities never intended to fall within the statutory conception of ‘industry.’ His central submission was the distinction between welfare governance and industrial activity. The modern State, he contended, operates through welfare schemes, developmental programmes and constitutionally mandated obligations that may incidentally assume organisational forms resembling industrial enterprises. However, such features cannot be disaggregated from their underlying public purpose and treated as determinative. To do so, he warned, would be to misrecognise the nature of the welfare state itself.
He also critiqued the narrow, colonial understanding of ‘sovereign functions’ embedded in Bangalore Water Supply and urged the Court to revisit this framework in light of the post-Constitution transformation of the State.
Further, Additional Solicitor General K. M. Nataraj, appearing for the state of Uttar Pradesh, argued that the category of sovereign functions must include not only core functions but also activities “relatable” to them. This relational approach, he suggested, reflects the legislative policy underlying the Industrial Relations Code, 2020. While careful to characterise the Code as merely clarificatory, Nataraj invoked it as an interpretative aid to demonstrate that Parliament itself has recognised the need to limit the scope of ‘industry.’ His submissions further emphasised that employees engaged in such excluded functions are not left without remedies; they retain access to civil courts, writ jurisdiction under Article 226, and specialised tribunals.
The triple test as a conceptual overreach
The critique of Bangalore Water Supply was sharpened by Senior Advocate Shekhar Naphade, appearing for Maharashtra and the University of Mumbai. Naphade mounted a more fundamental attack on the doctrinal coherence of the ‘triple test’ itself, arguing that it was derived from Australian jurisprudence without firm statutory or conceptual foundation and reflects a “value-loaded” judicial expansion. By shifting focus away from commerciality and profit motive, the judgment untethered the definition of ‘industry’ from its economic moorings, he argued. Institutions such as universities performing essential public functions within the constitutional framework, were thus wrongly assimilated into the category of industry. This, he suggested, was not merely an interpretive error but a category mistake.
Proceedings were then adjourned. When the matter recommenced today, the Bench turned to the State of Karnataka, represented by Senior Advocate Sanjay Hegde.
A case for returning to Safdarjung
Hegde took the Bench through the internal inconsistencies within the judgment in Bangalore Water Supply. He drew the Court’s attention to Justice Y.V. Chandrachud’s opinion, and pointed out that at an earlier stage, through an order passed on February 21, 1978, there appeared to be broad agreement with Justice V.R. Krishna Iyer’s reasoning, with the judges indicating that any divergence would be clarified later. However, as the final opinions emerged in April 1978, differences among the judges became evident, resulting in what Hegde characterised as a somewhat unclear precedent. He contrasted this with the earlier six-judge ruling in Safdarjung Hospital v. Kuldip Singh (1970), arguing that its reasoning was more coherent and faithful to the statutory text, and should therefore be preferred over the “slightly hazy” line that developed in Bangalore Water Supply.
Building on this, Hegde advanced a substantive critique of the Bangalore Water Supply framework, particularly its rejection of the doctrine of noscitur a sociis and its expansive reading of ‘undertaking.’ He relied on Safdarjung Hospital to argue that the definition of ‘industry’ must be read as a whole, where both employer and employee components operate together, rather than treating the second limb as independently enlarging the scope of the definition. He emphasised that while profit motive is not essential, the activity must still be analogous to trade or business in a commercial sense, involving the production of material goods or services. The Bench reminded him that numerical divisions within earlier judgments do not diminish their precedential value, and that the task before the present nine-judge Bench is to clarify what it described as the “muddy waters” left by prior rulings.
Senior Advocate Shadan Farasat, appearing for the state of Punjab, argued that the ‘triple test’, while not fundamentally incorrect, lacks clear limiting principles, producing an over-expansive and unworkable definition of ‘industry.’ He proposed retaining the test but supplementing it with two requirements: that an entity must have a commercial objective or be analogous to trade or business, and that ‘industry’ be confined to activities primarily involving physical or manual labour. This would exclude non-commercial government functions, charitable institutions, and intellectual professions such as law and medicine.
Senior Advocate Shadan Farasat, appearing for the state of Punjab, argued that the ‘triple test’, while not fundamentally incorrect, lacks clear limiting principles, producing an over-expansive and unworkable definition of ‘industry.’
Farasat further argued that such narrowing would not leave workers unprotected, as these sectors are already covered by parallel frameworks. Government employees through Article 309 and service rules, and professionals through sector-specific legislation and Shops and Establishments Acts. The Bangalore Water Supply court, he contended, failed to account for these regimes, unnecessarily extending industrial law into already-regulated domains.
Limits of the employer-employee test in religious institutions
Advocate Jaideep Gupta, appearing for Arulmigu Subramaniyaswamy Thirukoil, critiqued the paradigm introduced by Justice V.R. Krishna Iyer, arguing that it effectively reduces ‘industry’ to any structured activity involving an employer-employee relationship that satisfies human wants. The limited exceptions carved out, such as for lawyers, are artificial and internally inconsistent, producing an overly broad definition that is selectively “cut down” in marginal cases rather than properly structured at the outset. He further argued that this interpretation ignores the structure of the ID Act itself. Provisions governing layoffs, retrenchment, and closure presuppose a commercial context, and cannot logically apply to institutions such as temples.
Relying on the dissent of Justices Jaswant Singh and Tulzapurkar in Bangalore Water Supply, particularly paragraph 185, which criticised the majority definition as vague and excessively wide, he argued that the correct approach must move away from a purely structural test and instead examine whether the activity is undertaken for a commercial purpose. The mere generation of surplus does not amount to profit; where surplus is applied to charitable or religious ends, commerciality is absent. Applied mechanically, Gupta warned, the Bangalore Water Supply logic would bring virtually every organised human activity within ‘industry,’ rendering the framework an overreach, a “solution looking for a problem.”
Overreach of industrial classification in non-commercial institutions
Parallel arguments were advanced in relation to research institutions and institutions like AIIMS and Central Council for Research in Ayurvedic Sciences where counsels emphasised that the application of the ‘triple test’ to research organisations rests on an outdated understanding that equates research with industrial production and wealth generation. In the contemporary context, where research often serves public, scientific, or non-commercial ends, such an approach is both reductive and misplaced.
On a whole, the appellants propose a more restrained, functionally differentiated approach towards the term ‘industry’, one that recognises the plurality of institutional forms within a modern constitutional state and resists their homogenisation under the rubric of industry.
Whether this recalibration will be accepted by the Court remains to be seen. What the appellants’ arguments have undeniably reopened foundational questions about the relationship between labour law, state function, and the evolving architecture of the Indian welfare state. In the past, the Supreme Court had interpreted ‘industry’ very broadly, bringing even hospitals, educational institutions, and charitable bodies within its scope.
Now, the Court is reconsidering whether that approach went too far. The outcome will directly affect how labour protections apply across sectors.
The respondents have already initiated their submissions through Senior Advocate Indira Jaising. The Leaflet will be providing a full, detailed report on the proceedings and arguments.