The Supreme Court’s nine-judge Bench has delivered a nuanced ruling on the meaning of “industry” under the Industrial Disputes Act, 1947, with the judges divided over whether the landmark Bangalore Water Supply interpretation should be reconsidered.
The decision in State of U.P. v. Jai Bir Singh does not amount to a straightforward overruling of the 1978 precedent. While Chief Justice of India Surya Kant and three other judges proposed a narrower formulation placing greater emphasis on the commercial character of an activity, four judges expressly supported the earlier Bangalore Water Supply approach. Justice P.S. Narasimha reached the outcome of not disturbing the precedent for a different reason: the Industrial Disputes Act has since been repealed.
What Was the Earlier ‘Triple Test’?
In Bangalore Water Supply & Sewerage Board v. A. Rajappa (1978), a seven-judge Bench gave Section 2(j) of the Industrial Disputes Act a broad interpretation.
The test generally examined whether an activity involved:
- A systematic and organised activity;
- Cooperation between employers and employees; and
- Production or distribution of goods or services to satisfy human wants and wishes.
The earlier ruling also held that the absence of a profit motive did not by itself take an organisation outside the definition of an “industry”.
This broad approach had the potential to cover a wide range of establishments and activities, including educational institutions, research organisations, cooperatives, clubs and certain charitable or welfare-oriented activities.
CJI-Led Opinion Proposes a Narrower Approach
CJI Surya Kant, writing for himself and three other judges, concluded that the 1978 formulation required reconsideration.
The proposed test retains the requirements of organised activity and employer-employee cooperation but adds an important consideration: the goods or services involved should possess a discernible commercial character analogous to trade or business.
The opinion therefore gives greater weight to the nature of the activity and its commercial character while maintaining that an organisation does not necessarily need to operate for profit to qualify.
The CJI-led view also rejected the idea that every activity carried out by a government entity should automatically qualify as an “industry”.
Four Judges Defend the 1978 Precedent
Justices B.V. Nagarathna, Dipankar Datta, Ujjal Bhuyan and Joymalya Bagchi expressly supported the continued correctness of the Bangalore Water Supply interpretation.
Justice Nagarathna emphasised the importance of precedent and pointed to the fact that the earlier interpretation had remained in operation for decades.
Justice Datta similarly questioned the value of reopening such an established precedent after the passage of nearly five decades, particularly when the underlying legislation had already been replaced.
Justice Bagchi agreed that the Bangalore Water Supply triple test correctly interpreted the old statutory provision, while also agreeing that the Industrial Relations Code, 2020 must be examined independently.
Justice Narasimha Takes a Different Route
Justice P.S. Narasimha did not consider it necessary to disturb the 1978 interpretation because the legal framework itself has changed.
The Industrial Disputes Act was repealed with effect from November 21, 2025, and replaced by the Industrial Relations Code, 2020.
Justice Narasimha therefore considered the reconsideration of a provision in the repealed legislation to have limited practical significance.
What Happens to Pending Cases?
An important practical consequence of the judgment is that the Bangalore Water Supply triple test continues to govern pending disputes arising under the repealed Industrial Disputes Act.
The new Industrial Relations Code has its own definition of “industry”, and that provision is to be interpreted independently rather than simply importing either the 1978 test or the CJI-led reformulation.
Thus, the ruling should not be understood simply as the Supreme Court replacing the Bangalore Water Supply test with a new commercial test for every existing dispute.
A 4-4-1 Division
The judgment has produced an unusual division among the nine judges.
- Four judges supported the CJI-led reformulation.
- Four judges expressly upheld the Bangalore Water Supply interpretation.
- Justice P.S. Narasimha reached the conclusion that the old precedent should not be disturbed because the legislation itself has been repealed.
The operative position, however, preserves the earlier test for pending proceedings under the repealed law, while leaving the interpretation of the Industrial Relations Code to be worked out independently.
Why the Verdict Matters
The ruling marks an important transition in Indian labour law.
For disputes governed by the old Industrial Disputes Act, the expansive Bangalore Water Supply framework remains relevant. Future disputes under the Industrial Relations Code, however, will have to be decided by examining the language and structure of the new legislation.
The judgment therefore represents less of a simple overruling and more of a transition between two statutory regimes, while leaving an important jurisprudential disagreement among the judges over how broadly the concept of “industry” should be understood.
Case Details
Case: State of U.P. v. Jai Bir Singh
Civil Appeal: No. 897/2002
Bench: Nine-Judge Bench
Decision: August 20, 2026
Key Issue: Meaning of “industry” under Section 2(j), Industrial Disputes Act, 1947
