Supreme Court's 4–4–1 Split on ‘Industry’: What the 9-Judge Bench Ruled in State of UP v Jai Bir Singh

The nine-judge Constitution Bench delivered a deeply divided verdict on the meaning of “industry” under the Industrial Disputes Act, 1947. Four judges backed CJI Surya Kant's narrower, commerce-oriented test, four expressly defended the landmark Bangalore Water Supply ruling, while Justice P.S. Narasimha declined to disturb the precedent after the old labour law was repealed.

The Supreme Court's much-awaited nine-judge Bench judgment on the definition of “industry” under Section 2(j) of the Industrial Disputes Act, 1947 has produced an unusual outcome: there is no clear majority endorsing the new test proposed by Chief Justice of India Surya Kant.

The judgment is significant because it revisits one of the most influential decisions in Indian labour law — Bangalore Water Supply & Sewerage Board v. A. Rajappa (1978) — nearly five decades after a seven-judge Bench gave the term “industry” an expansive interpretation.

The nine judges, however, did not speak with one voice.

Chief Justice Surya Kant's formulation received the support of Justices Satish Chandra Sharma, Alok Aradhe and Vipul Pancholi, making a group of four judges.

On the other side, Justices B.V. Nagarathna, Dipankar Datta, Ujjal Bhuyan and Joymalya Bagchi expressly affirmed the correctness of the interpretation laid down in Bangalore Water Supply.

The ninth judge, Justice P.S. Narasimha, concluded that there was no reason to disturb Bangalore Water Supply, but for a substantially different reason: the Industrial Disputes Act itself has now been repealed and replaced by the Industrial Relations Code, 2020.

The result is a notable 4–4–1 judicial split over a question that has shaped the scope of labour protections in India for decades.

Why was the meaning of ‘industry’ so important?

The controversy revolves around Section 2(j) of the Industrial Disputes Act, 1947, which defined “industry”.

The meaning assigned to that expression determines which organisations and activities fall within the industrial-disputes framework and, consequently, when the protections and dispute-resolution mechanisms under the legislation become applicable.

The Supreme Court gave the expression a particularly broad interpretation in its landmark 1978 decision in Bangalore Water Supply & Sewerage Board v. A. Rajappa.

Justice V.R. Krishna Iyer's judgment formulated what came to be known as the “triple test” for determining whether an activity constitutes an industry.

Under that test, an activity would generally qualify where there is:

1. systematic and organised activity;

2. cooperation between employer and employees; and

3. production or distribution of goods and services calculated to satisfy human wants and wishes, excluding activities that are purely spiritual or religious in nature.

Crucially, the Court held that the absence of a profit motive or gainful objective did not by itself take an organisation outside the definition.

The emphasis was therefore placed primarily on the functional nature of the activity, rather than on whether the undertaking was established to make money.

Why did Bangalore Water Supply have such a wide impact?

The broad functional approach meant that the definition was capable of covering organisations far beyond conventional factories and commercial enterprises.

Professions, clubs, educational institutions, cooperatives, research organisations, charitable undertakings and similar bodies could potentially come within its scope if their activities satisfied the test.

Similarly, an undertaking would not automatically fall outside the definition simply because it was operated by the government or a statutory body.

Pure sovereign functions were treated differently, but welfare and economic activities undertaken by the State could still fall within the industrial-disputes regime depending upon their nature.

It was this expansive interpretation that the nine-judge Bench was called upon to reconsider.

CJI Surya Kant proposes a new test for ‘industry’

Chief Justice Surya Kant, writing for himself and Justices Satish Chandra Sharma, Alok Aradhe and Vipul Pancholi, concluded that the Bangalore Water Supply formulation required reconsideration.

According to this group of four judges, the earlier interpretation stretched the statutory expression beyond its natural boundaries.

The concern was that the Bangalore Water Supply test could bring an extremely wide range of organised activities — including social, charitable and welfare undertakings — within the concept of industry merely because employer-employee cooperation existed.

The CJI-led opinion reasoned that such an expansive approach could advance labour-welfare objectives but did not necessarily reflect the legislative intention behind the Industrial Disputes Act.

The opinion observed that it would be difficult to attribute to Parliament an intention to bring virtually every organised venture or institution involving employer-employee cooperation within a single statutory definition.

What is CJI Surya Kant's new ‘industry’ test?

The CJI-led opinion proposed a modified three-part test.

Under the new formulation, an “industry” would involve:

1. a systematic and organised activity;

2. cooperation between employer and employee; and

3. production, distribution or provision of goods or services possessing a discernible commercial character analogous to trade or business and calculated to satisfy material human wants and wishes.

The most important addition is therefore the requirement of a “discernible commercial character” analogous to trade or business.

That represents a significant departure from the broad understanding associated with Bangalore Water Supply.

Does an organisation need to make a profit to qualify as an industry?

No.

Even under the CJI-led formulation, profit motive is not the decisive test.

The opinion retained the principle that absence of profit or a gainful objective is not, by itself, determinative.

Instead, the focus is on the nature and character of the activity.

This distinction is important.

A non-profit organisation could still potentially carry on an activity possessing commercial characteristics, while an organisation employing a substantial workforce would not necessarily become an “industry” merely because its operations were systematic and organised.

What did the judgment say about government bodies?

The CJI-led opinion also addressed governmental and statutory entities.

It accepted that sovereign functions governed by a distinct constitutional or statutory framework — including functions connected with Articles 310 and 311 of the Constitution — stand on a different footing and fall outside the Industrial Disputes Act.

At the same time, the opinion rejected the proposition that every governmental activity not traditionally classified as sovereign must automatically be treated as an industry.

This matters because governments perform a vast range of functions that do not resemble ordinary commercial enterprises.

Activities may be undertaken to fulfil constitutional obligations, deliver public welfare or achieve social objectives without possessing the commercial or economic characteristics contemplated by the reformulated test.

Accordingly, the CJI-led approach calls for examining the actual nature of the governmental activity, rather than assuming inclusion merely because employees are involved.

Four judges expressly defend Bangalore Water Supply

The CJI's approach, however, did not command the support of a majority of the nine-judge Bench.

Four judges — Justices B.V. Nagarathna, Dipankar Datta, Ujjal Bhuyan and Joymalya Bagchi — expressly affirmed the correctness of Bangalore Water Supply.

Their opinions are particularly important because they directly reject the need to replace the interpretation that has governed Indian labour law for nearly five decades.

Justice B.V. Nagarathna: No reason to modify the 1978 ruling

Justice B.V. Nagarathna rejected the need to reconsider Bangalore Water Supply and questioned the necessity of the reference to the nine-judge Bench itself.

In her view, there was no genuine conflict among the earlier decisions sufficient to justify reopening the issue.

She concluded that the 1978 judgment required neither interference nor modification and that its triple test and dominant-nature test continued to correctly interpret Section 2(j).

Justice Nagarathna also relied significantly on the doctrine of stare decisis — the principle that courts should ordinarily respect settled precedent — and the legislative history surrounding the definition of industry.

Parliament amended the definition in 1982, but the amended provision was never brought into force.

Justice Nagarathna reasoned that the executive's failure to notify the amendment could not be treated as Parliament rejecting the Supreme Court's interpretation.

As a result, Bangalore Water Supply continued to govern the field for decades.

Justice Dipankar Datta: ‘No tinkering’ with settled law

Justice Dipankar Datta, writing for himself and Justice Ujjal Bhuyan, similarly opposed reconsideration of the 1978 precedent.

His reasoning placed considerable weight on the fact that Bangalore Water Supply had become deeply embedded in Indian labour jurisprudence through decades of judicial and institutional reliance.

Even assuming difficulties had emerged in applying the decision, reopening the precedent after the underlying legislation had ceased to operate would have limited practical value.

Justice Datta therefore concluded that the elaborate interpretation adopted in Bangalore Water Supply required no tinkering or reconsideration.

Justice Joymalya Bagchi agrees with Bangalore Water Supply

Justice Joymalya Bagchi also expressly agreed that the triple test laid down in Bangalore Water Supply correctly determined the scope of “industry” under the Industrial Disputes Act.

His position differed from Justices Nagarathna, Datta and Bhuyan on one procedural point: Justice Bagchi considered the reference to the larger Bench to have been validly made.

On the substantive interpretation of “industry”, however, he sided with them in defending the 1978 judgment.

Justice Bagchi also agreed with the broader proposition that disputes governed by the repealed Industrial Disputes Act should continue to be decided under the old statutory regime, while the new Industrial Relations Code must be interpreted on its own terms.

Justice P.S. Narasimha: Why reopen a law that has already been repealed?

Justice P.S. Narasimha adopted a distinct route.

He considered the reference justified when it was originally made but concluded that subsequent legislative developments had fundamentally altered the situation.

The Industrial Disputes Act, 1947 was repealed with effect from November 21, 2025, following the coming into force of the new labour-code framework.

The Industrial Relations Code, 2020 now contains its own definition of “industry” under Section 2(p).

Justice Narasimha therefore saw little justification for unsettling an interpretation that had governed the old legislation for nearly 48 years when the statutory provision concerned had itself ceased to operate.

In effect, he declined to disturb Bangalore Water Supply without necessarily endorsing all of its reasoning.

So, has Bangalore Water Supply been overruled?

The nine-judge decision does not produce a straightforward majority for the CJI's reformulated test.

That is the central feature of the judgment.

The positions can be understood as follows:

Judges	Position
CJI Surya Kant + Justices Satish Chandra Sharma, Alok Aradhe and Vipul Pancholi	Favoured a narrower test requiring discernible commercial character
Justices B.V. Nagarathna, Dipankar Datta, Ujjal Bhuyan and Joymalya Bagchi	Expressly upheld Bangalore Water Supply
Justice P.S. Narasimha	Declined to disturb Bangalore Water Supply because the underlying statute has been repealed

Thus, four judges support the CJI's reformulated approach, four expressly support the old Bangalore Water Supply interpretation, and Justice Narasimha reaches the conclusion that the old precedent should not be disturbed on account of the changed statutory landscape.

The precise precedential effect of the separate opinions therefore requires careful reading of the propositions on which a majority of judges actually converge, rather than treating the CJI's four-judge opinion alone as the judgment of the entire nine-judge Bench.

What happens to cases under the old Industrial Disputes Act?

The CJI-led opinion stated that its reformulated test would operate prospectively and would not disturb pending cases.

The wider judgment must also be understood against the repeal of the Industrial Disputes Act and the transition to the Industrial Relations Code, 2020.

This means the decision has an unusual character: the Supreme Court has undertaken a major reconsideration of one of India's most important labour-law precedents at a time when the statutory regime that generated the controversy has itself been replaced.

Industrial Relations Code, 2020 now becomes crucial

For future labour disputes, attention will increasingly shift from Section 2(j) of the Industrial Disputes Act to the definition contained in Section 2(p) of the Industrial Relations Code, 2020.

The separate opinions also underline an important interpretative point: the new Code must be examined according to its own language, structure and legislative context rather than mechanically importing every proposition developed under the repealed 1947 Act.

The nine-judge decision therefore matters not merely for what it says about Bangalore Water Supply, but also for where it draws the line between nearly five decades of labour-law precedent and India's new labour-code regime.

Why does this Supreme Court judgment matter?

The definition of “industry” has historically determined the reach of India's industrial-disputes framework.

A broad definition potentially brings universities, hospitals, charitable organisations, research institutions, clubs, public bodies and other organised activities within labour-law protections.

A narrower, commercially oriented definition can reduce that reach.

The disagreement among the nine judges therefore reflects a deeper legal question:

Should labour legislation primarily focus on the existence of an organised employer-employee relationship, or should the activity itself also resemble trade or business?

Bangalore Water Supply strongly favoured the former approach.

The CJI-led opinion attempts to restore greater significance to the latter.

But with only four judges endorsing that reformulation and four judges expressly defending the earlier precedent, the nine-judge ruling is considerably more complex than a simple overruling of Bangalore Water Supply.

The bottom line

The Supreme Court's decision in State of U.P. v. Jai Bir Singh has produced an unusual 4–4–1 division over the meaning of “industry” under the now-repealed Industrial Disputes Act, 1947.

CJI Surya Kant and three other judges favoured a new test requiring an activity to possess a discernible commercial character analogous to trade or business.

Four judges expressly reaffirmed the landmark Bangalore Water Supply judgment and its broader functional approach.

Justice P.S. Narasimha, meanwhile, saw no justification for disturbing a precedent that had operated for almost five decades when the legislation itself had already been replaced.

The judgment therefore does not lend itself to the simple headline that Bangalore Water Supply has been overruled.

More importantly, the controversy now moves into a new era: future disputes will increasingly turn on the language of the Industrial Relations Code, 2020, rather than the Industrial Disputes Act that generated this decades-long debate.

Case at a Glance

Case: State of U.P. v. Jai Bir Singh

Case No.: Civil Appeal No. 897 of 2002

Bench: Nine-Judge Bench of the Supreme Court of India

Key Issue: Meaning of “industry” under Section 2(j) of the Industrial Disputes Act, 1947

Key Precedent: Bangalore Water Supply & Sewerage Board v. A. Rajappa (1978)

UPSC Relevance

GS Paper II: Judiciary, constitutional governance and statutory interpretation

GS Paper III: Labour reforms and employment

Prelims: Industrial Disputes Act, Industrial Relations Code, Articles 310 and 311

Mains: Labour-law reforms, workers' rights, judicial precedent and changing regulatory frameworks