SC’s Nine-Judge Bench Revisits the Scope of ‘Industry’

The Supreme Court’s nine-judge Constitution Bench in State of U.P. v. Jai Bir Singh (2026 INSC 897; Civil Appeal No.897/2002) declined, by a narrow 5:4 majority, to disturb the expansive interpretation of “industry” laid down in the 1978 Bangalore Water Supply & Sewerage Board v. A. Rajappa [(1978) 2 SCC 213] judgment. In substance the decision changes little: the 1978 “triple test” is retained, and the Court did not lay down a new, authoritative definition of “industry.” The meaning of that term under the Industrial Relations Code, 2020 (IRC) is left to be settled through future litigation.

Importantly, the Court has not completely overruled the Bangalore Water Supply judgment; rather, it clarified that the interpretation given by it will apply to pending disputes under the erstwhile Industrial Disputes Act, 1947 (ID Act).

Definition of “Industry”:

Section 2(j) of the ID Act defined “industry” to include business, trade, undertakings, manufacture, calling, service, employment and industrial occupations of employers and workmen.

The definition of industry under Section 2(p) of The Industrial Relations Code, 2020 is more detailed and expressly covers systematic activity carried on through employer-worker cooperation for the production, supply or distribution of goods or services, while also setting out specific exclusions, including certain charitable, social and philanthropic institutions.

The Broad Interpretation in Bangalore Water Supply

In Bangalore Water Supply, the seven-judge Bench adopted a broad interpretation of “industry” through the “triple test”.

An activity could qualify as an industry where it involved:

• systematic and organised activity;
• cooperation between employer and employee; and
• production or distribution of goods or provision of services to satisfy human wants.

The Court also held that the absence of a profit motive was not decisive. The broad interpretation meant that activities such as those carried out by educational institutions, hospitals, charitable undertakings and certain governmental or welfare bodies could fall within the definition of “industry”, provided they satisfied the applicable tests.

Further, the Court also laid down the dominant nature test for organisations carrying out different activities. Where an undertaking carries on several activities, the predominant nature of its services and the integrated character of its departments are relevant in determining whether it constitutes an “industry”. The present judgment retains this part of the framework.

Why the 1978 Interpretation Came Up for Reconsideration?

The present appeals arose from a dispute over whether the Social Forestry Department, established as a welfare-oriented initiative for environmental improvement, could be considered an “industry” under Section 2(j) of the ID Act.

The question had remained before the Supreme Court for a long time. The reference followed earlier decisions concerning government welfare activities. In Chief Conservator of Forests v. Jagannath Maruti Kondhare [(1996) 2 SCC 293], the Supreme Court held that the Social Forestry Department could fall within the definition of “industry”. Subsequently, in State of Gujarat v. Pratamsingh Narsinh Parmar [(2001) 9 SCC 713], a two-judge Bench held that “Social Forestry” was a welfare scheme undertaken by the State for environmental improvement, rather than an “industry”. This apparent conflict led to the reference to the nine-judge Bench.

The present Bench, however, clarified that the two decisions did not actually conflict. Pratamsingh Parmar did not reject the principle applied in Jagannath Maruti Kondhare, but turned on the absence of sufficient factual material in that case.

Parliament had also attempted to narrow the definition of “industry” through the Industrial Disputes (Amendment) Act, 1982, but the amendment was never brought into force. The continuing uncertainty eventually led to a reference to a larger Bench in 2005, with the Court considering whether the broad interpretation in Bangalore Water Supply required reconsideration.

The issue acquired further significance following the repeal of the ID Act and its replacement by the IRC, which came into force on 21 November 2025. Since the present appeals arose before these legislative changes, they continued to be governed by the erstwhile ID Act.

What did the nine-judge Bench hold?

The judgment did not completely overrule the Bangalore Water Supply judgment.

The CJI-led opinion, supported by Justices Satish Chandra Sharma, Alok Aradhe and Vipul M. Pancholi, proposed refining the Bangalore Water Supply test. It said that the goods or services involved should have a “discernible commercial character that is analogous to trade or business”. However, an activity need not be profit-making to qualify as an industry; the nature of the activity remains the key consideration.

In contrast, Justices B.V. Nagarathna, Dipankar Datta, Ujjal Bhuyan and Joymalya Bagchi affirmed the correctness of Bangalore Water Supply. Justice P.S. Narasimha also declined to disturb the 1978 interpretation, noting that the ID Act had already been repealed.

Most importantly, the Court clarified that the interpretation of “industry” under Section 2(p) of the IRC must be considered independently, rather than simply carrying forward the interpretation of the repealed Section 2(j) of the ID Act.

Key Takeaways

• The 1978 interpretation is not the sheet anchor: The Court made clear that Bangalore Water Supply cannot be treated as the sole basis for determining the meaning of “industry” in the new statutory framework. Its interpretation continues to apply to disputes under the ID Act, while Section 2(p) of the IRC must be considered independently.
• Commercial character: The CJI-led opinion proposed that the production, distribution or provision of goods or services should have a “discernible commercial character that is analogous to trade or business.” The opinion also clarified that absence of a profit motive, by itself, does not take an activity outside the definition.
• Dominant nature test: The judgment retains the dominant nature test from Bangalore Water Supply for composite undertakings, where an establishment carries out different activities.
• Sovereign functions: The Court discusses the exclusion of core sovereign functions, including the distinction between sovereign functions and activities having an economic or commercial character. The fact that an activity is performed by the State is not, by itself, the test.
• Charitable and welfare activities: The Court examined the treatment of charitable and welfare activities under the existing law and emphasised that their character as charitable or welfare-oriented does not, by itself, determine whether an activity is an “industry”. The nature and character of the activity remain relevant to the inquiry.

The judgment consequently opens a new phase in the interpretation of “industry”, with the scope of Section 2(p) of the IRC likely to be shaped by future litigation and judicial clarification.