The Supreme Court’s nine-judge Constitution Bench has revisited the test used for nearly five decades to decide what qualifies as an “industry” under the Industrial Disputes Act, 1947.

In a 5:4 majority judgment, the Court modified the “triple test” laid down in the 1978 landmark judgment in Bangalore Water Supply & Sewerage Board v. R. Rajappa.

The Constitution Bench, headed by Chief Justice of India Surya Kant, held that some parts of the earlier test required reconsideration in light of the way labour law has evolved over the years.

The judgment is significant because the 1978 ruling had given the term “industry” a wide meaning, bringing several activities and organisations within the scope of industrial law.

What did the 1978 judgment say?

In Bangalore Water Supply, a seven-judge Bench had laid down a three-part test to determine whether an activity could be treated as an “industry”.

The test broadly looked at whether there was:

• Systematic and organised activity;
• Cooperation between employers and employees; and
• Production or distribution of goods or services to satisfy human wants and needs.

The Court had also made it clear that the presence of a profit motive was not essential for an activity to be considered an industry.

The ruling consequently became the leading authority on the interpretation of Section 2(j) of the Industrial Disputes Act.

New ruling will not affect pending cases

While modifying the earlier position, the nine-judge Bench has taken care not to disturb cases that are already pending.

The Court said that the modified test will apply prospectively. Therefore, disputes already pending before courts, tribunals, labour authorities or other forums under the Industrial Disputes Act, 1947 will continue to be decided on the basis of the test laid down in Bangalore Water Supply.

The Bench also clarified that it was not examining the meaning of “industry” under the Industrial Relations Code, 2020.

Four judges dissent

The judgment saw a strong dissent from four judges — Justices BV Nagarathna, Dipankar Datta, Ujjal Bhuyan and Joymalya Bagchi.

The dissenting judges were of the view that there was no sufficient reason to reopen a legal position that had been settled by the Supreme Court nearly 50 years ago.

Justice Nagarathna, in particular, emphasised the continuing relevance of the 1978 judgment and its interpretation of the term “industry”.

A reference pending for over two decades. The issue reached the nine-judge Bench after the Supreme Court referred the matter for reconsideration in 2005 in State of Uttar Pradesh v. Jai Bir Singh. The question remained pending for more than two decades before the Constitution Bench finally heard the matter.

The ruling now puts a new interpretation in place for future disputes while preserving the legal position applicable to cases that are already pending.

The judgment is therefore likely to have a significant bearing on future industrial disputes and the scope of labour protections under the 1947 law.