From Bangalore Water Supply To New Labour Code: Has India Redefined 'Industry'?
Image Courtesy : Financial Express
When talking about industry, I understood the word in its ordinary sense as “the people and activities involved in producing something, providing a service, etc.” But in law, “industry” gives a much broader perspective. It can encompass a wide range of organised activities through which goods or services are produced and provided. Governments and economies themselves rely upon productive activity; the level and organisation of production are closely connected with economic development and prosperity.
In labour law, however, the word “industry” does not simply mean factories or businesses that manufacture products. Its legal definition matters because whether an organisation is considered an “industry” determines whether its workers fall within particular labour-law protections and dispute-resolution mechanisms. The definition of industry is therefore crucial: it helps determine who receives the shield of labour-law protection.
That is why the Supreme Court's broad interpretation in 1978 was so significant. It moved the focus away from simply asking, “Is this a factory?” towards asking whether there is an organised activity involving employers and employees for the production or provision of goods or services. The question has become even more important today because India's economy has moved far beyond traditional factories towards services, technology, digital platforms and increasingly non-traditional forms of employment. In 1978, the Supreme Court, in Bangalore Water Supply and Sewerage Board v. A. Rajappa, gave a broad interpretation to the word “industry” under the Industrial Disputes Act, 1947. The Court developed what became known as the “triple test”. An activity would generally fall within the meaning of industry where the following elements were present:
1. Systematic activity - the activity is organised and carried out in a structured manner.
2. Employer-employee cooperation - there is cooperation between employers and employees.
3. Production or distribution of goods or services - the activity is directed towards the production or distribution of goods and services calculated to satisfy human wants and needs.
The importance of the judgment lay partly in its rejection of the idea that profit-making was an essential requirement. An organised activity could fall within the definition even if it was not carried on for profit. The focus was instead placed upon the nature of the activity and the relationship between those participating in it.
This became essential because the Court's approach brought a wide range of organised activities within the potential scope of labour law. Earlier cases had adopted narrower approaches. In Management of Safdarjung Hospital v. Kuldip Singh (1970), for instance, the Court had taken a restrictive approach to whether hospitals could be regarded as industries. Bangalore Water Supply subsequently displaced this approach. Similarly, National Union of Commercial Employees v. M.R. Meher (1962) and Secretary, Madras Gymkhana Club Employees' Union v. Management of Gymkhana Club (1967) represented earlier restrictive approaches that were subsequently overruled. The 1978 judgment therefore became one of the most important decisions in modern Indian labour jurisprudence.
The judgment also made an important distinction regarding government activities. Government ownership alone did not automatically place an activity outside the definition of industry. Instead, the nature of the activity had to be considered. The Court distinguished ordinary welfare and economic activities from genuinely sovereign functions. This distinction subsequently became an important issue in litigation involving government departments and public bodies. The debate, however, did not end with Bangalore Water Supply. By the twenty-first century, labour and the nature of industry had changed considerably, while the judicial framework developed in 1978 continued to govern disputes under the Industrial Disputes Act. In the State of U.P. v. Jai Bir Singh (2005), a Constitution Bench referred to the correctness of the 1978 interpretation for reconsideration by a larger Bench. The matter ultimately reached a nine-judge Bench of the Supreme Court.
On 20 August 2026, the nine-judge Bench delivered its judgment. The decision, however, cannot accurately be described as a simple majority of six judges replacing the 1978 test with a new definition. Four judges Chief Justice Surya Kant and Justices Satish Chandra Sharma, Alok Aradhe and Vipul M. Pancholi supported a reformulation of aspects of the triple test, including the introduction of a dominant commercial-motive consideration. The remaining five judges did not join that reformulation, although they reached their conclusions through different reasoning. Four judges affirmed the correctness of the Bangalore Water Supply approach, while Justice P. S. Narasimha considered that reopening the question was unnecessary because the Industrial Disputes Act had already been repealed.
The significance of the 2026 judgment therefore lies not simply in the creation of a new test. The Court preserved the Bangalore Water Supply framework for pending proceedings under the Industrial Disputes Act, 1947. The reformulation proposed by the four-judge opinion was expressly prospective and was not intended to disturb concluded matters or alter pending proceedings under the repealed Act. This makes the relationship between the 1978 judgment and the new Industrial Relations Code, 2020 particularly important. The Industrial Relations Code came into force on 21 November 2025 and contains its own statutory definition of “industry”. The Supreme Court clarified that the interpretation developed under Section 2(j) of the Industrial Disputes Act should not simply be carried over and used as the interpretive framework for the new Code. The new statutory definition must be understood from the text and context of the Industrial Relations Code itself.
This creates an unusual legal transition. For pending disputes governed by the repealed Industrial Disputes Act, Bangalore Water Supply continues to provide the applicable framework. But for disputes arising under the Industrial Relations Code, the meaning of “industry” must develop through the interpretation of the new statute. The 2026 judgment therefore does not simply replace one definition with another; it separates two statutory eras. From 1978 to the present, India has also witnessed a substantial transformation in its economy. The 1978 judgment brought a broad range of activities, including educational institutions, hospitals and municipalities, within the scope of its judicial framework, subject to the applicable tests. It fundamentally changed the interpretation of “industry” under Section 2(j) of the 1947 Act. Nearly five decades later, however, the economic landscape is markedly different. Services have expanded, technology has transformed workplaces, digital platforms have altered the relationship between employers and workers, and conventional employment structures have increasingly become more fluid.
Not everyone supported reconsidering the 1978 framework. Justice B. V. Nagarathna, in particular, maintained that the Bangalore Water Supply interpretation did not require interference. Her reasoning emphasised the continued importance of the judgment in protecting workers in a changing economy and noted that the new Industrial Relations Code had already replaced the statutory provision that had been interpreted in 1978. Other judges, including Justice Dipankar Datta and Justice Ujjal Bhuyan, also affirmed the correctness of the Bangalore Water Supply approach, while Justice Joymalya Bagchi agreed with that position on the merits after finding the reference maintainable. Justice P. S. Narasimha took a different route, concluding that the repeal of the Industrial Disputes Act made it unnecessary to reopen the old interpretation.
The disagreement reveals a larger tension in labour jurisprudence. On one side is the concern that a long-standing judicial framework should not be disturbed without sufficient justification, particularly when workers and employers have relied upon it for decades. On the other is the recognition that economic structures change and that legal concepts may have to respond to new forms of production, employment and organisation.
Critics of reconsideration therefore raise an important concern: judicial change may create uncertainty and disturb industrial peace. At the same time, the changing nature of the economy raises a different question: can legal concepts developed for one economic era continue indefinitely without adaptation? This tension reflects one of the defining characteristics of the common-law system, where legal principles develop through their interaction with changing social conditions. Law cannot exist independently of the society it regulates. The significance of the 2026 judgment therefore extends beyond the definition of a single legal term. It raises a much larger question about the relationship between law and economic change. The India of 2026 does not operate in the same economic environment as the India of 1978. Production has moved from factories towards services, from physical workplaces towards digital platforms, and from conventional employment towards increasingly diverse forms of work.
If labour law is meant to protect people within this changing economy, its concepts must remain capable of responding to social and economic change. Yet evolution cannot mean uncertainty. The challenge before Indian labour law is therefore to maintain a balance between adaptability and legal certainty: protecting workers while ensuring that the boundaries of labour regulation remain grounded in clear statutory principles. The 2026 judgment does not simply answer whether the definition of “industry” should be broad or narrow. Instead, it marks an important separation between the legal framework developed under the repealed Industrial Disputes Act and the statutory framework now contained in the Industrial Relations Code. Bangalore Water Supply continues to govern pending matters under the old Act, while the new Code begins a separate statutory chapter whose meaning will have to develop through its own text and context.
Perhaps, therefore, India has not simply redefined “industry”. It has separated the old judicial definition of industry from the new statutory definition, leaving behind a more fundamental question: can labour law evolve quickly enough to protect workers in an economy that is evolving even faster?