Expansive definition of ‘industry’ in 1978 verdict will continue to govern pending cases under ID Act: SC
A nine-judge Constitution Bench of the Supreme Court held that the 1978 expansive interpretation of the term "industry" under the now-repealed Industrial Disputes Act, 1947 will continue to govern thousands of pending cases involving hospitals, educational institutions, and government departments
The bench reaffirmed the "Triple Test" laid down in Bangalore Water Supply and Sewerage Board v. A. Rajappa (1978), clarifying that a profit motive or gainful objective is not essential for an undertaking to qualify as an "industry"
The Court clarified that the reaffirmed principles apply only to matters that arose and are pending under the erstwhile Industrial Disputes Act, and do not extend to new cases arising under the Industrial Relations Code, 2020
The decision was rendered with a 6-3 majority on the need to revisit the reference at all, with three judges dissenting on that preliminary question
Bangalore Water Supply and Sewerage Board v. A. Rajappa (1978) — The Triple Test
This seven-judge Constitution Bench decision, authored primarily by Justice V.R. Krishna Iyer, is the foundational precedent defining "industry" under Section 2(j) of the Industrial Disputes Act, 1947. It replaced earlier, narrower tests with a functional "Triple Test" applicable to any organised activity, regardless of the employer's identity or profit motive.
Key Details
- Decided by a seven-judge bench in 1978 (AIR 1978 SC 548)
- The Triple Test requires: (i) systematic activity, (ii) cooperation between employer and workforce, and (iii) production or distribution of goods/services to satisfy human wants — spiritual or religious wants excluded
- Held that profit motive is irrelevant; charitable hospitals, universities, and government departments performing analogous functions could qualify as "industry"
- This broad reading brought vast numbers of establishments — including sovereign functions in some readings — within the protective ambit of industrial law (right to raise disputes, seek reinstatement, claim retrenchment compensation, etc.)
The 2026 nine-judge bench was constituted specifically to reconsider whether this 1978 test remained sound; it upheld the Triple Test, meaning the expansive definition continues to apply to disputes that arose while the 1947 Act was in force.
Section 2(j), Industrial Disputes Act, 1947 — Definition of "Industry"
Section 2(j) of the Industrial Disputes Act, 1947 defined "industry" broadly as "any business, trade, undertaking, manufacture or calling of employers" and included "any calling, service, employment, handicraft, or industrial occupation or avocation of workmen." Its open-textured wording is what necessitated repeated judicial interpretation, culminating in the 1978 and 2026 rulings.
Key Details
- The Industrial Disputes Act, 1947 provided the principal machinery — Works Committees, Conciliation Officers, Labour Courts, Industrial Tribunals — for resolving disputes between employers and workmen in establishments classified as "industry"
- The Act has now been repealed and consolidated, along with the Trade Unions Act, 1926 and the Industrial Employment (Standing Orders) Act, 1946, into the Industrial Relations Code, 2020
- Because the 1947 Act's definition was litigated for over four decades without legislative amendment, courts relied on judicial tests (Triple Test) rather than statutory clarity
The nine-judge bench's ruling determines which of the thousands of disputes still pending under the repealed 1947 Act — many involving hospitals and educational institutions — will be adjudicated as "industrial" disputes, entitling workers to statutory protections such as retrenchment compensation and access to Labour Courts.
Industrial Relations Code, 2020 — The New Statutory Definition
The Industrial Relations Code, 2020, one of four labour codes consolidating 29 central labour laws, replaces the Industrial Disputes Act, 1947 and provides its own definition of "industry" under Section 2(p), without relying on the judicially evolved Triple Test.
Key Details
- Section 2(p) of the IR Code, 2020 defines "industry" as any systematic activity carried on through employer-worker cooperation for production or distribution of goods/services to satisfy human wants or wishes (excluding purely spiritual or religious wants)
- The IR Code specifically excludes certain institutions from the definition, unlike the wide judicial reading under the 1978 Triple Test
- The four labour codes (Wage Code, Industrial Relations Code, Social Security Code, Occupational Safety Health and Working Conditions Code) together replace 29 existing central labour statutes
The 2026 judgment expressly confined the reaffirmed Triple Test to pending cases under the old 1947 Act; disputes arising after the Industrial Relations Code, 2020 takes full effect will instead be governed by the Code's own statutory definition of "industry," not the judicially expansive 1978 formula.
Constitution Benches and Large-Bench References
Under Article 145(3) of the Constitution, any case involving a substantial question of law as to the interpretation of the Constitution must be heard by a bench of at least five judges. Larger benches (seven, nine, or more judges) are convened when an earlier Constitution Bench ruling itself needs reconsideration.
Key Details
- A smaller or coordinate bench cannot overrule a larger bench's precedent; only an equal or larger bench can revisit it — a principle reaffirmed in various rulings on judicial discipline
- The nine-judge bench in this case was necessitated because the 1978 ruling was itself delivered by a seven-judge bench, requiring an equal-or-larger bench for reconsideration
- The bench in the present matter was headed by the Chief Justice of India and rendered a 489-page judgment across five separate opinions, with a 6-3 split on whether the reference required reconsideration at all
The scale of the bench (nine judges) itself signals the constitutional weight of the "industry" definition question, given that the original Triple Test was laid down by a seven-judge bench in 1978.
- Nine-judge Constitution Bench decision delivered 21 August 2026, headed by the Chief Justice of India
- Original precedent: Bangalore Water Supply and Sewerage Board v. A. Rajappa (1978), AIR 1978 SC 548 — a seven-judge bench decision
- Judgment length: 489 pages across five separate opinions; majority split 6-3 on the threshold question of reconsideration
- Statute under interpretation: Section 2(j), Industrial Disputes Act, 1947 (now repealed)
- Successor law: Industrial Relations Code, 2020, which defines "industry" under Section 2(p) and does not rely on the 1978 Triple Test
- Entities affected by the ruling: hospitals, educational institutions, government departments, charities, and research institutes with disputes pending under the 1947 Act