A landmark definition revisited

Few statutory definitions have generated as much litigation as the word “industry” in the Industrial Disputes Act, 1947. Nearly five decades ago, the Supreme Court tried to bring order to it in Bangalore Water Supply and Sewerage Board v A. Rajappa (BWSSB). A seven-judge bench devised the familiar triple test: systematic activity, organised cooperation between employer and employee, and the production or distribution of goods or services calculated to satisfy human wants. Profit motive was not decisive; only “sovereign functions” stood outside the definition.

The formulation was never entirely comfortable. It brought hospitals, educational institutions, research bodies, charities and several public activities within the possible reach of industrial law, and Parliament sought to replace the definition in 1982, but that amendment was never brought into force. BWSSB therefore continued to govern the jurisdiction of labour courts and industrial tribunals until Parliament replaced the Industrial Disputes Act with the Industrial Relations Code, 2020.

The long road to a nine-judge bench

The latest ruling arose from a reference that began in 2005, when a five-judge bench in State of U.P. vs Jai Bir Singh questioned the correctness of BWSSB, observing that its “worker-oriented approach” was “unmindful of the interests of the employer or owner of the industry.” A seven-judge bench referred the matter to a nine-judge bench in January 2017, and by order dated February 16, 2026, the nine-judge bench framed four questions concerning the correctness of the triple test, the impact of the 1982 amendment, whether government welfare activities count as industrial activities, and the scope of “sovereign functions” under Section 2(j).

By the time the questions were framed, the Industrial Relations Code, 2020 had come into force on November 21, 2025, repealing the Industrial Disputes Act, 1947. This repeal rendered the reference effectively otiose, as several judges noted. Justice D. Datta and Justice U. Bhuyan held that “the reference requires no answer.” Justice B.V. Nagarathna found the exercise “unnecessary and only academic in nature.” Justice P.S. Narasimha held that while an authoritative interpretation was compelling at the time of the reference, such a determination had become unnecessary with the repeal.

What the majority decided

A four-judge opinion, written by Chief Justice Surya Kant for himself and Justices Satish Chandra Sharma, Alok Aradhe and Vipul Pancholi, retained much of the architecture of BWSSB but introduced an important qualification: the goods or services must possess a “discernible commercial character” analogous to trade or business. Profit motive remains unnecessary, but the economic character of the activity becomes relevant.

The opinion emphasised that concluded decisions and pending proceedings under the old Act should not be disturbed, and that the triple test would stand for disputes under the Industrial Disputes Act. It described its reformulation as “hypothetical,” expressly stating that it will not apply to any pending case.

The majority also addressed the future application of the 1978 precedent. It cautioned against treating BWSSB as the “sheet anchor” for construing the new Industrial Relations Code, insisting that the code is an independent legislative enactment and must be interpreted on its own terms. Justice P.S. Narasimha, in a separate opinion, stressed that the definition of “industry” under the IRC should be read according to its own text and statutory setting and “must be freed of the bondage of ratio” in BWSSB. He reflected on the extraordinary amount of litigation generated by Section 2(j) of the ID Act, and the majority opinion spoke of lifting a “burden” and permitting the law to “move forward unencumbered.”

Other judges weighed in on the question of precedent. Justices Datta and Bhuyan placed greater weight on stare decisis, questioning whether the decisions that generated the reference disclosed a conflict serious enough to warrant displacing a seven-judge precedent. Justice Bagchi considered the unequal bargaining relationship between labour and capital, quoting that “a workman seldom enters the field of negotiation as an equal,” and noted that automation, platform work and the growing mobility of capital have transformed employment without removing that inequality.

The dissent: a frayed safety net

Justice B.V. Nagarathna, in a 147-page dissent, warned that dismantling the expansive definition of “industry” may give free rein to the “skewed bargaining power” that private sector and corporates wield over workers. She questioned whether the majority’s decision to wipe the slate clean of the 1978 judgment may unsheathe a “supercharged” version of corporate bargaining power.

She argued that BWSSB was a child of its times, its pervasive definition serving as a “bulwark” against violation of labour rights for nearly half a century during the shift to privatisation after markets opened up to liberalisation and globalisation. She also emphasised the durability of BWSSB and the consequences of reopening a rule that has governed industrial relations for nearly 48 years.

Justice Nagarathna disagreed with the majority’s conclusion that the 1978 judgment would not act as a precedent for future interpretations of “industry” under the IRC. She pointed out that earlier case law on a corresponding provision may be “highly persuasive, even binding,” if the statutory language is found identical. She cautioned that any pronouncement on BWSSB would “cast its shadow” on Section 2(p) of the IRC, and noted that Section 2(p) contains a new definition, differently structured and accompanied by express exclusions.

She also urged the majority to drop the reference as “not maintainable,” but failed to convince them. Her opinion left room for continuity, recognising that earlier judicial interpretations may remain relevant where Parliament has retained similar language or concepts.

Reactions and implications

The Congress raised concerns over the judgment, warning that a narrower interpretation could leave more workers outside the protection of labour laws at a time when the Centre’s Industrial Relations Code, 2020 had already “weakened” the safeguards available to workers. Congress general secretary Jairam Ramesh said the verdict had “hypothesised” a reformulation of the triple test.

The definition of “industry” has a direct bearing on who qualifies as a worker and consequently becomes entitled to protections under labour law. The ID Act provided basic protections and a forum for adjudicating disputes, and to be excluded from the definition was to be excluded from that bare minimum protection. The triple test, however, was not merely a pro-labour device; it brought with it not just the ID Act’s protections but also its restrictions, such as a regulated route to retrenchment and closure for the employer, and a bar on workers striking at will. It allowed for industrial peace rather than worker welfare alone.

Some observers have noted that Section 2(p) of the IRC reproduces much of the essence of the triple test, suggesting that the majority’s refusal to treat BWSSB as a “sheet anchor” cuts away the interpretive framework that gave the definition its expansive reach. The majority’s assurance that its reformulation is “hypothetical” and will not disturb concluded cases may offer some stability in the transition, but the direction of future interpretation under the IRC remains a contested question.