RECENT HEARINGS by a nine-judge Constitution Bench of the Supreme Court on the definition of 'industry' under the Industrial Disputes Act, 1947 (‘ID Act’) mark a critical moment for India’s labour jurisprudence, which already is at a point of inflection with the notification of the four Labour Codes in November 2021.
The bench, which reserved judgment on March 19, 2026, is set to decide whether to uphold or overturn the 'Triple Test' established in the landmark Bangalore Water Supply and Sewerage Board v. R. Rajappa (‘BWSSB’) case of 1978. In BWSSB, the Supreme Court had held that every establishment which carries out a systematic and organised activity with the cooperation of employees for production or distribution of goods or services will be ‘industry’ even if there is no profit motive. The only exception that the Court recognised was the sovereign function exception.
The hearing by the nine-judge bench is the culmination of a battle spanning two decades. In 2005, a five-judge bench of the Supreme Court in State of Uttar Pradesh v. Jaibir Singh had held that Justice Krishna Iyer's majority opinion in BWSSB could not be treated as authoritative precedent and called for reconsideration by a larger bench.
Stakes are very high since the scope of the term, ‘industry’ is pivotal for application of industrial relations law, particularly the provisions on strikes, retrenchment and closure and access to labour adjudication. Furthermore, 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 (‘IRC’) means that the observations of the bench are likely to shape the interpretation of the new Code also.
How BWSSB reflects the breadth of the statutory definition
Critics argue that Justice Krishna Iyer's Triple Test is too sweeping or that its application has gone overboard. These claims, however, fail to account for both the broad inclusive text of Section 2(j) and the longer pedigree of the ‘Triple Test’ itself.
Section 2(j) of the ID Act deliberately uses expansive terms like "undertaking," "manufacture," "calling," "service," "employment," and "avocation." Further, the use of the word "includes" in the second part of the definition signals an inclusive rather than exhaustive definition. It is also notable that Justice Iyer did not conjure the ‘Triple Test’ out of thin air. In D.N. Banerjee v. P.R. Mukherjee (1953), the Supreme Court recognized that the limited, traditional concept of industry must yield to an "enormously wider concept." Subsequently, in State of Bombay v. Hospital Mazdoor Sabha (1960), the Court explicitly adopted the functional approach, and notably, the ‘Triple Test’ itself, stating that "too much reliance cannot be placed on what are described as the essential attributes or features of trade or business as conventionally understood." Hospital Mazdoor Sabha also deemed the absence of a profit motive irrelevant. BWSSB simply reiterated this functional approach and clarified its scope.
Why ‘Triple Test’ furthers the objective of industrial peace and harmonious relations
The five-judge bench in Jaibir Singh, while seeking a reconsideration of the BWSSB decision, had ruled that the ID Act could not be viewed solely as a worker-oriented statute. Rather, its main aim, evident from its preamble and scheme, was to regulate and harmonise relationships between employers and employees for maintaining industrial peace and social harmony. While that may indeed be correct, it does not require revisiting the Triple Test.
As noted in D.N. Banerjee, a wider conception of industry ensures that disputes "might be settled quickly without much dislocation... and in a manner more adapted to conciliation and settlement." By covering all establishments engaged in systematic, cooperative endeavours for production or distribution of goods or services, the ‘Triple Test’ directly serves this statutory goal. Reading down the definition would exclude workers from the Act's dispute resolution mechanisms, thereby creating, rather than preventing, workplace strife.
Because excluded workers would lack alternate means to redress grievances, narrowing the definition would be highly retrograde. Even the Industrial Disputes (Amendment) Act, 1982, which was never brought into force, excluded certain categories and envisaged a separate law for those institutions. No such alternate machinery exists even today.
Is there a difference between ‘sovereign power’ and ‘sovereign function exception’?
Another point of departure between BWSSB and the Jaibir Singh Bench was the scope of ‘sovereign function’ exception. In Jaibir Singh, the Court had held that all public welfare activities of the State should be considered sovereign functions in a modern constitutional democracy where the State is mandated by the Constitution to carry out welfare activities. However, this assertion ignored established precedents limiting sovereign functions to primary, inalienable State duties.
In the Corporation of the City of Nagpur v. Employees (1960), the Supreme Court had held that regal functions are limited to primary and inalienable functions of State. More pertinently, in Agricultural Produce Market Committee vs Shri Ashok Harikuni (2000), the Court had observed that “various functions of the State, may be ramifications of 'sovereignty' but they all cannot be construed as primary inalienable functions.”
No need for reopening a question settled by the Industrial Relations Code
The Jaibir Singh decision heavily relied on the fact that all the judges in the seven-judge bench in BWSSB were of the view that legislative intervention was necessary to clarify the legal position on the definition of 'industry.' The Court in Jaibir Singh had held that “the Legislature should be allowed greater freedom to come forward with a more comprehensive legislation”.
The legislature heeded that clarion call and has amended the definition of Industry in the IRC 2020. A perusal of Section 2 (p) of the IRC reveals that the core of the ‘Triple Test’ as enunciated by the BWSSB case has been retained by legislature with the exception of sovereign function and charitable and philanthropic activities incorporated in the definition. Further, the number of exceptions in the definition in the IRC are far less than those in the definition in the unenforced Industrial Disputes Amendment Act, 1982. This clearly reveals the parliamentary intent to continue with the framework of the ‘Triple Test’ with a few modifications. In such a context, there is no need for revisiting the correctness of the BWSSB decision, particularly since the case has stood the test of time.
As the nine-judge bench deliberates on its decision, it should be kept in mind that overhauling the definition of ‘industry’ should be left to the legislative branch. The BWSSB case has provided a coherent, accessible framework for defining industry for nearly five decades. The nine-judge bench should, therefore, refrain from interfering with the interpretative approach of the BWSSB case and allow the law on definition of industry to be governed by the provisions of the IRC.
