1978 “Industry” test to be refined, old definition to determine pending cases

CJI Surya Kant: Essential framework of Bangalore Water Supply has stood the test of time

CJI Surya Kant, writing for Justices S.C. Sharma, Alok Aradhe and V.M. Pancholi, formulated four questions: whether the triple test in Bangalore Water Supply was correctly laid down; whether the Industrial Disputes (Amendment) Act, 1982 and IR Code affected the definition of “industry” under the Industrial Disputes Act, 1947; whether social welfare activities of government departments or instrumentalities could constitute industrial activities under Section 2(j); and which sovereign functions fell outside its scope.

On maintainability, he found “no infirmity” in the manner in which the reference came before the nine-judge Bench. Where a reference seeks to settle an issue of recurring importance and bring certainty to the law, he said, “Institutional prudence may sometimes favour a decision on the merits rather than a retreat into procedural considerations”. The Bench held that owing to the “extraordinary passage of time” and “considerable expenditure of judicial effort”, it was their “solemn duty” not to retract from their institutional responsibility.

On Bangalore Water Supply, the CJI held that the triple test and the accompanying guidelines needed further refinement, while its “essential framework” had “stood the test of time”. The triple test was reformulated considering constituent elements of Section 2(j) could have been articulated differently to better reflect the scope and contours of the provision. However, he observed the reformulated test would not prejudice pending proceedings. Matters pending under the 1947 Act would continue to be decided under the triple test, since disturbing it would “create artificial discrimination”. The judgement would operate prospectively, without reopening matters that had attained finality.

CJI Surya Kant noted that a reading of the 1982 amendment is unwarranted since it never came into force. He refrained from expressing any opinion on the IR Code, clarifying that the judgement was confined to disputes under the 1947 Act and “shall not be regarded as a source or aid for the interpretation of the Industrial Relations Code”.

Justice B.V. Nagarathna: Bangalore Water Supply requires no interference or modification

Justice B.V. Nagarathna held that reconsideration of Bangalore Water Supply was not warranted and that the reference made by the five-judge Bench in State of Uttar Pradesh v Jai Bir Singh was unnecessary. She said the five-judge Bench could have reconciled or adopted one of the opinions in the three-judge Bench decisions in Chief Conservator of Forests v Jagannath Maruti Kondhare (1995). She gave reasons as to why answering the reference is unnecessary, including that the ID Act had been repealed with effect from 21 November 2025 and the subsequent IR Code contains a new definition of “industry” in Section 2(p).

Justice Nagarathna examined the opinions in Bangalore Water Supply, including its triple test and its overruling of Management of Safdarjung Hospital v Kuldip Singh Sethi (1970), National Union of Commercial Employees v M.R. Meher (1962) and Secretary, Madras Gymkhana Club Employees Union v Management of the Gymkhana Club (1967). She said the judgement had to be viewed against the “precarious condition” in which India found itself at independence and the constitutional transformation of its socio-economic conditions. Privatisation had shifted activities previously undertaken by the State to private entities, transforming public-sector workmen into private-sector employees. This made the protection of workmen under the Industrial Disputes Act particularly significant. “The interpretation of the definition of ‘industry’ in Section 2(j) has to be broad-based,” she held.

She rejected the argument that the difficulties in applying Bangalore Water Supply is a reason to reconsider it. The 1982 amendment had remained “unnotified and thereby incomplete”, while Bangalore Water Supply had remained the law for 48 years with a broad consensus among the majority opinions. It should therefore be taken to have received “the acquiescence of even Parliament and the Executive”. In the interest of employers, workmen, industrial activity and the Indian economy, the existing interpretation should continue to govern pending cases.

Justice Nagarathna held that the test in paragraphs 140 to 144 of Justice Krishna Iyer’s opinion was the correct law. The 1982 Amendment and the IR Code had no legal impact on Section 2(j). She held that government welfare activities could constitute industrial activities depending on their nature. The fact that a function was performed by the State did not itself exclude it from “industry”. The “dominant nature of the activity” had to be considered.

On the new IR Code, Justice Nagarathna opined that the interpretation of Section 2(j) may have a bearing on Section 2(p), she said, “and not vice versa”.

Justice P.S. Narasimha: Bangalore Water Supply confined to pending cases under repealed Act

Justice P.S. Narasimha held that the procedure by which Bangalore Water Supply was referred to the nine-judge Bench was valid. The decisions following Bangalore Water Supply, culminating in Jai Bir Singh, were an endeavour to bring certainty to what “industry” entails and were justified. The reference could therefore be answered on merits. He said the difficulty in defining “industry” since 1947 arose “not because of the methodology of interpretation, but because of the way in which the definition itself is formulated”. 

An authoritative interpretation was compelling when the reference was made, he observed, but became unnecessary after repeal of the relevant provision and the commencement of the IR Code. He held that pending cases should be disposed of under the existing ratio “without attempting to create a third set of principles applicable only to the pending cases”.

Justice Narasimha agreed that the future interpretation of Section 2(p) should not be burdened by Section 2(j). “The Industrial Relations Code, 2020 must be interpreted on its own text and in its own context alone,” he said. If Bangalore Water Supply were modified or restricted, long-pending disputes could be excluded from the Industrial Disputes Act regime, leaving parties to remedies before civil courts. 

Justice Dipankar Datta: Reference serves no practical, jurisprudential or doctrinal purpose

Justice Dipankar Datta, writing for himself and Justice Ujjal Bhuyan, described “industry” as “perhaps the most litigated word in Indian labour jurisprudence”. Whether the law covered private business, welfare work, schools, hospitals or government services had remained contested. “Even today, this Court remains engaged with the same question it faced in 1952: What is an industry?” he said.

Justice Datta held that institutional credibility demands an authoritative determination that “bestows certainty” and “enables the law to move forward.” He concluded that the reference itself should never have been made. Upholding the objection raised by Senior Advocate Indira Jaising, he held that Jai Bir Singh had no occasion to refer the issue to a three-judge Bench, which was later referred to five-judges who sought a reconsideration.

Justice Datta relied on The Keshav Mills Co. v Commissioner Of Income-Tax, Bombay (1965), which had laid down tests for when a reference could be made, and held that the five-judge Bench in Jai Bir Singh failed those tests. 

He distinguished the “substance test” from the “form test”. On substance, he held that Bangalore Water Supply had correctly laid down the triple test. The reference was “not necessary” and served “no practical, jurisprudential or doctrinal purpose”. It disturbed a “quietus that has held the field for nearly half a century”.

“Institutional credibility lies in respecting finality, not in perpetuating doubt,” Justice Datta said.

Justice Joymalya Bagchi: Bangalore Water Supply triple test correctly determines scope of “industry”

Justice Joymalya Bagchi agreed with CJI Surya Kant and Justice P.S. Narasimha that the reference was validly made, holding that the manner in which Bangalore Water Supply was referred for reconsideration conformed with Central Board of Dawoodi Bohra Community v State of Maharashtra (2004)  and Aligarh Muslim University (2024). On merits, however, he  concurred with Justices Nagarathna and Datta that the test in paragraphs 140 to 144 of Bangalore Water Supply correctly determines the scope of “industry” under the 1947 Act.

Justice Bagchi described the triple test as exhibiting “a rare felicity in judicial interpretation”. It remained faithful to the statutory text while extending the beneficial object of the law to organised, systematic activities “akin to trade and commerce” for human needs. The test, he said, carved out “just and proper exceptions” for casual and non-systematic activities such as domestic service, individual professions and small, unorganised clubs or associations.

On welfare activities and charitable institutions, Justice Bagchi held that sovereignty in a constitutional democracy had undergone a “jurisprudential contraction” and was restricted to core, inalienable duties for which the State was not answerable in courts or to the people through democratic discourse. Welfare activities undertaken by government departments and instrumentalities were not excluded from Section 2(j) merely because they were public, charitable or welfare activities. “Mere vesting of a duty in the State by statute or by the Constitution” did not confer sovereign immunity from industrial law.

He held that charitable undertakings, temples and educational institutions had to be assessed through the employer-employee relationship rather than their spiritual, religious or benevolent objectives. Where activities were organised and systematic, they satisfied the triple test. “The absence of profit or the presence of a benevolent object does not take them outside the ambit of the beneficial legislation”, he observed.

Justice Bagchi held that the 1982 amendment could not be used to redraft Bangalore Water Supply, since it was never notified. The new definition under the IR Code was prospective. Section 6 of the General Clauses Act preserved rights and liabilities under the repealed law. Bangalore Water Supply would therefore continue to govern pending cases and proceedings under the repealed Act, while the new Code would be interpreted independently. The economic and technological changes since Bangalore Water Supply had “weakened rather than strengthened the case for revisiting it”. Overruling it now would “do more harm than good”.