Supreme Court 9-judge Bench Modifies Definition Of Industry Laid Down in 1978 Bangalore Water Supply Case

A nine-judge bench of the Supreme Court today by a 5:4 majority has modified the definition of 'industry' as interpreted in 1978 by a seven-judge bench judgment in Bangalore Water Supply & Sewerage Board v. R Rajappa & Others.

The bench comprising Chief Justice of India Surya Kant along with Justices BV Nagarathna, PS Narasimha, Dipankar Datta, Ujjal Bhuyan, Satish Chandra Sharma, Joymalya Bagchi, Alok Aradhe and Vipul M Pancholi has ruled that certain aspects of the triple test and the accompanying guidelines formulated in Bangalore Water Supply require further refinement, while the essential framework laid down therein has stood the test of time.

Notably, four judges Justices BV Nagarathna, Dipankar Datta, Ujjal Bhuyan and Joymalya Bagchi have dissented.

"We have felt that some of these constituent elements could have been articulated differently so as to better reflect the scope and contours of Section 2(j). Therefore, we propose to reformulate the triple test," CJI Kant said, while pronouncing the verdict.

Today's ruling will remain applicable only prospectively and will not apply to pending disputes/ cases. It also refrained from examining the new definition of 'industry' under the Industrial Relations Code, 2020. The Court also said that the pending cases may be decided in accordance with earlier definition.

"It is not intended to prejudice the legal position in respect of pending proceedings. Consequently, all matters presently pending before courts, tribunals, labour authorities or other fora under the Industrial Disputes Act, 1947 may be adjudicated in accordance with the triple test as laid down in Bangalore Water Supply," CJI Kant clarified.

A nine-judge bench of the Supreme Court led by CJI Surya Kant had reserved its judgment in the case to determine whether the 1978 judgment was right in expanding the definition of 'Industry' to include workers in government departments, universities, and hospitals.

Attorney General R Venkataramani had told court during his submissions, “We are moving into a globalized world and we have to manage our domestic economy. Caution may be kept in mind by the court as defining forest department, irrigation department, research bodies as industry gives rise to a serious concern.”

Earlier, as the Central government opened arguments in the reference made to a 9-judge bench on the definition of “industry”. Attorney General R Venkataramani had told the bench that social welfare schemes and governmental functions cannot be treated as “industrial activity”, even if they involve organisational or operational elements resembling commercial undertakings. Centre argued that while the expansive “triple test” for defining industry, evolved in the 1978 Bangalore Water Supply case remains sound in law, its indiscriminate application has blurred the line between commercial activity and constitutionally mandated governance.

It was the Centre's stand that the final determination of what constitutes a “sovereign function” should rest with the executive. It has also urged court to refrain from exhaustively defining sovereign function while making the government's decision subject to judicial review— to determine what activities fall within that category. The Supreme Court recently constituted a 9-judge bench which will is hearing the case on scope of definition of the term “industry” as defined under Section 2(j) of the Industrial Disputes Act, 1947.

Appeals were referred to a Nine-Judge Bench to consider the correctness of the judgment rendered by a Seven-Judge Bench in Bangalore Water Supply and Sewerage Board vs. A. Rajappa, and concomitantly to also re-consider the interpretation of the expression “industry” as defined in Section 2(j) of the Industrial Disputes Act, 1947.

The nine-judge bench considered the correctness of Bangalore Water-Supply & Sewerage Board v R. Rajappa (1978), in which a seven-judge bench had endorsed a wide definition. The definition allowed a large number of institutions and its employees to receive protection under the Industrial Disputes Act. The question was referred to a larger bench in May 2005 by a Constitution Bench of five-judges in State of Uttar Pradesh vs. Jai Bir Singh.

In the said case supreme court had noted that though section 2(j) used words of very wide denotation, a line would have to be drawn in a fair and just manner so as to exclude some services or undertakings. It has thus called for the court to reconsider where the line should be drawn and what limitations can and should be reasonably implied in interpreting the wide words used in section 2(j).

"In construing the definition clause and determining its ambit, one has not to lose sight of the fact that in activities like hospitals like hospitals and education, concepts like right of the workers to go on `strike' or the employer's right to `close down' and `lay off' are not contemplated because they are services in which the motto is `service to the community'. If the patients or students are to be left to the mercy of the employer and employees exercising their rights at will, the very purpose of the service activity would be frustrated.", the Supreme Court had further said in Jai Bir Singh.

Pressing demands of the competing sectors of employers and employees and the helplessness of legislature and executive in bringing into force the Amendment Act compel us to make this reference, it had then said. In January 2017, a seven-judge bench, led by then CJI T.S. Thakur stated that a Bench of nine-judges will hear the case. The Supreme Court's decision in this matter will clarify a question that has been pending before it for over 20 years.

Case Title: STATE OF U.P. Vs JAI BIR SINGH

Bench: Chief Justice of India Surya Kant, Justices BV Nagarathna, PS Narasimha, Dipankar Datta, Ujjal Bhuyan, SC Sharma, Joymalya Bagchi, Alok Aradhe and Vipul M Pancholi

Judgment Date: August 20, 2026