Why this judgment matters
The Supreme Court’s recent judgment by a nine-judge Constitution Bench on the meaning of “industry” is an important development in Indian labour law. Its roots go back to the landmark Bangalore Water Supply & Sewerage Board v. R. Rajappa judgment of 1978 — a judgment which has influenced industrial relations in India for almost five decades.
What makes the latest judgment particularly significant is that the Court has not simply upheld or overturned the 1978 judgment. It has refined the test for the old Industrial Disputes Act, protected pending and concluded matters, and at the same time made it clear that the new Industrial Relations Code, 2020 will have to be interpreted independently.
A little background — the 1978 judgment
In 1978, a seven-judge Bench of the Supreme Court gave a very wide meaning to “industry” under the Industrial Disputes Act, 1947. The Court’s well-known “Triple Test” looked at whether there was a systematic and organised activity; cooperation between employer and employees; and production of goods or rendering of services to satisfy human wants. Importantly, making a profit was not a necessary condition.
This meant that the concept of industry was not confined to factories and commercial enterprises. Depending on the nature of the activity, hospitals, educational institutions, public bodies, welfare organisations and others could come within its scope.
What happened after 1978?
The difficulty was that this broad interpretation created uncertainty. Was a hospital an industry? What about a university or educational institution? A charitable organisation? Could activities carried out by Government departments be treated as industrial activities? And, importantly, what exactly should be regarded as a sovereign function of the State?
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There were also subsequent Supreme Court decisions which questioned aspects of the 1978 judgment. The matter was eventually referred to a larger Bench and, in 2017, to a nine-judge Constitution Bench.
What was the nine-judge Bench asked to examine?
At its heart, the question was whether the broad interpretation of “industry” given in 1978 remained the correct interpretation of the Industrial Disputes Act. The Court also considered the treatment of Government and social-welfare activities, the scope of sovereign functions, and the relevance of subsequent legislative changes.
By the time the matter came before the nine-judge Bench, however, the legal landscape had changed. The Industrial Disputes Act had been replaced by the Industrial Relations Code, 2020. This became an important part of the Court’s final approach.
What has the Supreme Court now said?
The nine-judge Bench, by majority, has not discarded the Bangalore Water Supply judgment. The basic approach of the 1978 Triple Test has survived, although the Court has refined and reformulated aspects of it.
The Court has also been careful not to unsettle the large body of cases that arose under the old Industrial Disputes Act. Pending matters under the ID Act will continue to be decided using the Bangalore Water Supply Triple Test. Judgments, settlements and determinations that have attained finality are not to be reopened merely because of this judgment.
In simple terms: the Court has protected the past while refining the law for the future.
And what about the new Labour Codes?
This, in my view, is the most important part of the judgment. The Industrial Relations Code, 2020 has its own definition of “industry”. The Supreme Court has made it clear that the interpretation developed under the 1978 judgment cannot simply be carried across to the new Code.
The new definition will have to be examined on its own language, structure and legislative framework. The Bangalore Water Supply judgment is therefore not to become a “sweeping anchor” for interpreting the 2020 Code.
For organisations such as educational institutions, hospitals, charitable organisations and NGOs, this distinction will be particularly relevant. It would be premature to conclude from this judgment that their position under the new Labour Codes has been finally settled.
What does it mean for employers and HR?
For employers, there is no immediate need for wholesale changes merely because of this judgment. Existing disputes under the ID Act will continue under the established framework.
But going forward, HR professionals, employers and workers will need to look at the Industrial Relations Code separately. For nearly five decades, Bangalore Water Supply has been the reference point whenever the question of “industry” arose. We are now entering a new phase.
KEY TAKEAWAYS
- The 1978 judgment has not been thrown out. Its basic framework continues to govern legacy ID Act matters.
- There is no reopening of the past. Pending matters continue under the 1978 Triple Test and concluded matters remain undisturbed.
- The Court has refined the test rather than simply repeating the 1978 formulation.
- The Industrial Relations Code opens a new chapter. Its definition of “industry” will require an independent interpretation.
- For education, healthcare, charitable and similar institutions, the debate under the new Code has only begun.
The larger takeaway
For almost 50 years, we have debated “What is an industry?” under the Industrial Disputes Act. The Supreme Court has now preserved the position for the legacy of that law, while making space for a fresh interpretation under the new Labour Code.
The question for the next phase is therefore not only “Was Bangalore Water Supply right?” — but “What should constitute an industry under the Industrial Relations Code?”
Source note: Prepared with reference to the Supreme Court judgment and contemporary reports including Mint, Business Standard, LiveLaw and other legal reporting dated 20 August 2026.
