A nine-judge Constitution Bench has answered, with great authority, a question about a repealed statute. On August 20, 2026, in State of U.P. v. Jai Bir Singh[1], the Supreme Court declined to reconsider the Triple Test for “industry” under Section 2(j) of the Industrial Disputes Act, 1947 (“ID Act“), laid down nearly five decades earlier in Bangalore Water Supply & Sewerage Board v. A. Rajappa[2] (hereinafter referred to as “Bangalore Water Supply“). By then, the ID Act had already been repealed and replaced by the Industrial Relations Code, 2020 (“IR Code“), which came into force on November 21, 2025.
From 1978 to 2025: A Short Legislative and Judicial History
The law on “industry” begins with Bangalore Water Supply, decided by a seven-judge bench. It deliberately adopted a broad conception of the term. An enterprise would ordinarily constitute an industry where it displayed three features: (i) systematic and organized activity; (ii) cooperation between employer and employee; and (iii) production, distribution or provision of goods or services calculated to satisfy human wants and wishes. This became known as the Triple Test. The Bangalore Water Supply judgment also rejected the proposition that an activity must be undertaken for profit to qualify as an industry. The inquiry was activity-centric rather than profit-centric: the nature of the organized activity and the employer-employee relationship was more significant than the purpose for which the enterprise operated.
The Parliament responded to the above interpretation, but not conclusively. The Industrial Disputes (Amendment) Act, 1982 sought to narrow Section 2(j) by expressly excluding hospitals, charitable institutions and clubs, alongside specified sovereign and other activities. However, the amendment was never notified and therefore, did not become the operative definition.
The significance of the amendment was nevertheless considered by the Court in the present case. The opinions of Justices Datta and Bhuyan explain that the Parliament’s intervention did not amount to a wholesale rejection of Bangalore Water Supply; it retained the basic Triple Test while seeking to calibrate the width of the definition through express exclusions. Since the amendment was never brought into force, however, Section 2(j) continued to operate in the form in which Bangalore Water Supply had interpreted it.
Over the years, multiple case laws have questioned aspects of Bangalore Water Supply, particularly in relation to governmental welfare activities, sovereign functions and the treatment of charitable and other institutions. The current controversy concerned the Social Forestry Department of the State of Uttar Pradesh. In Chief Conservator of Forests v. Jagannath Maruti Kondhare[3], a three-judge bench had treated the Social Forestry Department as falling within Section 2(j). A subsequent two-judge decision in State of Gujarat v. Pratamsingh Narsinh Parmar[4] took a different approach. That apparent divergence ultimately became the vehicle through which the wider question concerning Bangalore Water Supply reached the Constitution Bench. By then, however, the legislative landscape had changed. The question before the Court was consequently both retrospective and prospective; what remained to be decided under the old Act, and whether the Court should reconsider the law that would govern those surviving disputes.
What the Court Decided
The preliminary objection to the maintainability of the reference was rejected by a 6:3 majority. The CJI-led opinion held that the reference had been validly made and could be answered on the merits. Other opinions disagreed with the maintainability of the reference, but the Court ultimately proceeded to consider the substantive questions.
The judgment therefore does not change the definition of “industry” – it confirms it. The operative test remains as stated above. The absence of a profit motive remains non-determinative. The focus is on the nature of the activity and the existence of an organized employer-employee relationship. The dominant nature test also survives for Undertaking/Enterprise carrying on several activities. Where different functions form part of an integrated Undertaking, the test does not necessarily proceed by examining each activity in isolation. The predominant nature of the Undertaking and the integrated character of its departments remain relevant in determining whether the Undertaking as a whole falls within Section 2(j).
The CJI’s Hypothesis
An interesting part of the judgment to note is the formulation which the CJI-led opinion considers, but does not adopt as the governing test for pending matters. The opinion considers that certain aspects of Bangalore Water Supply could have been articulated differently. “Hypothetically speaking”, it proposes a formulation under which the third limb of the Triple Test would require the 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 opinion does not equate commercial character with profitability. It expressly maintains that the presence or absence of a profit motive should not be determinative. Undertaking may have commercial character without being profit-driven. The proposed qualification would instead look to whether the activity bears the characteristics of an organized economic or commercial enterprise. Activities wholly divorced from commercial or economic enterprise would, on this approach, ordinarily fall outside Section 2(j). The Court declines to disturb the application of the existing Triple Test to pending proceedings. As retrospectively altering the applicable test could create new distinctions between parties whose disputes had arisen under the same statutory framework, producing what the opinion describes as new classes of “haves” and “have-nots”. The further consideration was that Section 2(j) itself was no longer in operation, having been succeeded by the IR Code.
The result is an interesting piece of judicial reasoning. The Court records how the Triple Test might have been refined, had it been addressing the provision prospectively, while simultaneously holding that the refinement should not govern the pending disputes for which the reference was heard.
Government Welfare Activity: The Social Forestry Question
The dispute that gave the case its name, concerned the Social Forestry Department of Uttar Pradesh, a welfare-oriented governmental initiative directed towards environmental improvement. The Court did not hold that Social Forestry Departments are, as a class, industries. Nor did it hold that governmental welfare schemes are, by their nature, excluded from Section 2(j). It specifically observed that Bangalore Water Supply had made no comprehensive declaration that the Social Forestry Department of every State or Union would automatically constitute an “industry”. The earlier divergence between Jagannath Kondhare and Pratamsingh Parmar therefore could not simply be resolved by treating either case as laying down a categorical rule. The question requires application of the governing principles to the nature of the particular activity and the factual circumstances in which it is undertaken. The individual dispute, that occasioned a nine-judge reference, returns to the appropriate bench to be decided on those facts.
Sovereign Functions
The fourth issue framed by the Court is what constitutes the “sovereign functions” of the State outside Section 2(j). Having retained Bangalore Water Supply, the Court treated the question as redundant. The existing principles under the Bangalore Water Supply continue to govern the old Act, subject to the facts of the particular activity.
Charitable and Non-Profit Institutions
The judgment also preserves the position under Bangalore Water Supply concerning charitable undertakings. A charitable or non-profit institution is not automatically outside the definition of “industry”, just as charitable status does not automatically bring it within Section 2(j). The analysis turns principally on the nature of the activity and the employer-employee relationship.
The Bangalore Water Supply classification distinguishes between charitable enterprises which nevertheless employ persons on ordinary economic terms to produce or supply goods and services, and institutions in which persons participate primarily out of commitment to a cause without a conventional economic employer-employee relationship. The former may constitute industries; the latter may fall outside the definition because the requisite employer-employee relationship is absent, rather than because the institution happens to be charitable.
The Court also rejected the proposition that tax treatment should determine the industrial character of an institution. Exemptions under the Income Tax Act address questions of charitable purpose and application of income; Section 2(j) addresses industrial relations and the statutory framework governing disputes between employers and workmen. The two inquiries serve different purposes.
Whom the Judgment Governs
The judgment’s practical reach is principally confined to disputes governed by the repealed ID Act. Disputes arising before November 21, 2025, together with pending references under the ID Act, continue to be determined under Section 2(j) as interpreted in Bangalore Water Supply.
The New Code
On the IR Code, the CJI-led opinion expressly declines to examine the definition of “industry” as it presently exists. The IR Code is a new statutory enactment, and the principles developed under Bangalore Water Supply cannot simply be transposed onto it without examining the language and structure of the new provision. Section 2(p) itself contains express exclusions for specified categories, including certain charitable, social and philanthropic activities and specified sovereign functions. Those exclusions cannot be read backwards into Section 2(j). Accordingly, for disputes governed by the IR Code, the meaning and scope of “industry” remains to be worked out under Section 2(p) on the IR Code’s own text and statutory context. The Court has not attempted to forecast that jurisprudence. The IR Code has now introduced express exclusions of its own which did not enter into force via the Parliament’s attempt, i.e. the amendment in 1982. The legislative destination was eventually reached, but on a considerably different timetable.
Meanwhile, the CJI-led opinion’s own narrowing of the test, the “discernible commercial character” formulation, is offered strictly hypothetically. It offers a possible refinement of the old test and remains important as part of the Court’s reasoning, but its operative significance is necessarily limited by the repeal of the provision to which it relates.
[1] 2026 INSC 897.
[2] 1978 AIR 548.
[3] AIR 1996 SC 2898.
[4] 2001 (9) SCC 713.
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