What is the ‘definition of industry’ case about?

In 1978, a seven-judge bench of the Supreme Court, in Bangalore Water Supply & Sewerage Board v R. Rajappa, adopted a wide interpretation of “industry”, as defined in Section 2(j) of the Industrial Disputes Act, 1947 (IDA). The implication of the expansive reading was far-reaching—it brought everything from hospitals to government departments under the scope of “industry”. 

As India’s economic landscape transformed in the wake of the liberalisation of 1991, the breadth of this interpretation increasingly came under scrutiny. In 2002, the Bangalore Water Supply verdict was challenged in a case called State of UP v Jai Bir Singh. In May 2005, a five-judge Constitution Bench referred the petition to a larger Bench, seeking reconsideration of the verdict for being too “worker-oriented.”

The reference was picked up in January 2017, where a seven-judge Bench directed the case be heard by nine judges.  

In February 2026, a Bench led by Chief Justice Surya Kant listed the matter for final arguments. Beginning 17 March, a nine-judge Bench comprising CJI Surya Kant and Justices B.V. Nagarathna, P.S. Narasimha, Dipankar Datta, Ujjal Bhuyan, S.C. Sharma, Joymalya Bagchi, Alok Aradhe and Vipul M. Pancholi will hear the matter over two days.

Why does the definition of “industry” matter so much—and whose interests will the Court’s answer ultimately serve?

Why does the definition matter

The IDA aims to protect employee rights without disrupting production and productivity. It governs issues related to wages, work hours, settlement of disputes, consequences for unionising or going on strike and protection against non-employment and harassment.

In short, the definition of “industry” determines the applicability of IDA protections, restrictions and guardrails to a given undertaking. Earlier decisions had taken divergent views—some excluding charitable or welfare activities from the Act, while others emphasised the presence of organised labour and employer control. 

To settle the issue, the Supreme Court in Bangalore Water Supply formulated the “triple test”: an undertaking would qualify as an “industry” if there was (i) systematic activity, (ii) cooperation between employer and employee, and (iii) the production or distribution of goods or services to satisfy human wants or wishes. Applying this test, the Court brought hospitals, educational institutions, clubs, philanthropic bodies and certain State welfare activities within the scope of the IDA.

The Court also applied a “dominant nature” test, holding that where an establishment carried on multiple activities, its primary function would determine whether it fell within the scope of the IDA.

The unresolved ambiguities

Yet, the verdict Bangalore Water Supply did not conclusively put the conflicting interpretations to bed. The present reference in Jai Bir Singh is a case in point: it arose from a “cleavage of opinion” over the welfare/industrial nature of the Social Forestry Department. 

In an analysis published in two parts on the Law and Other Things blog in 2016, Saurabh Bhattacharjee pointed out that Bangalore Water Supply contains an internal contradiction regarding profit motive as a determining factor for identification of an industry. Excluded from the triple test, profit motive was—in the opinion authored by Justice Krishna Iyer—nevertheless laid down as the primary criteria for determining IDA applicability to “research institutions”.

Bhattacharjee contends that a similar conflict emerges over the judges’ treatment of “sovereign functions” as an implied exclusion from the definition of industry. Justice Y.V Chandrachud questioned whether the IDA contained any statutory basis for such an exclusion. Chief Justice M.H. Beg, by contrast, stressed that strictly sovereign functions of the State should remain outside the Act. Justice Krishna Iyer adopted a middle position—recognising a narrow exception for core sovereign functions such as defence and “employment under statutory bodies,  while treating most other State-run activities as industries. The verdict thus accepted a narrow sovereign-functions exception but offered little guidance on where the line should be drawn.

Diverging perspectives 

“The law is reason, free from passion” is a quote attributed to Aristotle. Yet, the opinions at the centre of this debate—the verdict in Bangalore Water Supply and the reference in Jai Bir Singh—strongly worded as they are, appear to reflect broader value-based considerations alongside empirical evidence. Justice Krishna Iyer was firm in his opinion that the IDA is to be interpreted as a beneficial welfare legislation aimed at “the betterment of the workmen’s lot, the avoidance of outbreaks blocking production, and just and speedy settlement of disputes.”

In the 2005 Reference, the majority opinion penned by Justice D.M. Dharmadhikari asserted that the statute must be interpreted to prevent exploitation of employers as well. Drawing on Justice Sujata Manohar’s observation in a 1992 verdict that extending IDA coverage had “done more damage than good,” the Bench suggested that courts may have stretched the statute too far and referred the question to a larger Bench.

Legislative action 

A central strand of the 2005 reference in Jai Bir Singh was that the scope of “industry” may require legislative clarification. While discussing the breadth of Bangalore Water Supply, the Bench observed that the inclusion of “liberal professions”—professional services such as law, medicine and accountancy—raised difficult questions about whether such activities should fall within the IDA, suggesting that they might instead be regulated through “separate, suitable legislation”.

Parliament had, in fact, already attempted to narrow the definition through the Industrial Disputes (Amendment) Act, 1982, which introduced a revised definition of “industry” excluding several categories of activity. However, that definition was never brought into force, as the relevant provision was never notified by the executive. 

The broader legislative landscape has also shifted. Between 2019 and 2020, Parliament consolidated 29 labour laws into four codes: the Code on Wages, 2019; Industrial Relations Code, 2020; Occupational Safety, Health and Working Conditions Code, 2020; and Code on Social Security, 2020. Although these codes have been passed by Parliament, most of their provisions have yet to come into force, as the Centre and states are still finalising the rules required for implementation. 

The reforms have drawn strong resistance from trade unions: a nationwide strike involving an estimated 30 crore workers in opposition to the codes made headlines in February 2026. Against this backdrop, earlier that month, while dismissing a PIL seeking a legal framework for enforcement of minimum wages for domestic workers, Chief Justice Surya Kant had quipped that trade unions were “largely responsible” for stalled industrial growth.

What remains to be seen

This week’s hearings will reveal whether the Court is prepared to revisit the triple test—and potentially the 1978 decision in its entirety—or whether it will confine itself to resolving narrower issues.

In 2005, the five-judge Bench described the caseload resulting from the verdict in Bangalore Water Supply as a “docket explosion”. The eventual ruling is therefore expected to ease the burden on courts, unless the Bench concludes that any revision of the definition must come from Parliament.