In a landmark verdict delivered on August 20, 2026, a 9-judge Constitution Bench of the Supreme Court of India ruled that the expansive "Triple Test" established in the 1978 Bangalore Water Supply (BWSSB) case cannot be used to interpret the definition of "Industry" under Section 2(p) of the Industrial Relations Code, 2020. While pending litigation under the ID Act, 1947 will still follow the old rules, the new IR Code will be interpreted strictly on its own explicit statutory text and exclusions.
By a 6:3 majority, the Apex Court, headed by Chief Justice Surya Kant, resolved a four-decade-old reference regarding the scope of the term “Industry”.
While the Supreme Court affirmed that the fundamental “Triple Test” under BWSSB will continue to govern pending legacy litigation under the repealed Industrial Disputes Act, 1947, it held that the Industrial Relations Code, 2020 must be interpreted strictly on its own statutory text, legislative intent, and contextual exclusions.
1. The Legal Background: The 48-Year Shadow of BWSSB
Under Section 2(j) of the Industrial Disputes Act, 1947, the term “industry” was defined broadly as:
“any business, trade, undertaking, manufacture or calling of employers and includes any calling, service, employment, handicraft, or industrial occupation or avocation of workmen.”
In 1978, Justice V.R. Krishna Iyer laid down the celebrated “Triple Test” in BWSSB v. A. Rajappa, holding that an activity constitutes an industry if it involves:
- Systematic activity;
- Organised by cooperation between employer and employees;
- For the production and/or distribution of goods and services calculated to satisfy human wants and wishes (excluding spiritual or purely religious services).
The 1978 ruling swept almost every organized sector into the net of the ID Act—including hospitals, educational institutions, research organizations, charitable trusts, clubs, and municipal departments—regardless of profit motive or sovereign ownership.
Although Parliament passed the Industrial Disputes (Amendment) Act, 1982 to exclude institutions like hospitals, educational bodies, and domestic services, that amendment was never notified into force. As a result, courts and tribunals remained tethered to the broad BWSSB test, leading to a reference to a 9-judge bench in 2005 (State of U.P. v. Jai Bir Singh).
2. Key Takeaways from the 9-Judge Bench Verdict
A. Independent Interpretation for the Industrial Relations Code, 2020
The Supreme Court made it unequivocally clear that the 2020 Code represents a distinct statutory framework. Section 2(p) of the IR Code, 2020 is not a mere replication of the 1947 Act; it contains explicit statutory carving-outs that Parliament intentionally enacted. The judiciary cannot transplant pre-code jurisprudence over express legislative text.
B. Prospective Application and Protection of Legacy Disputes
- Pending Proceedings: All disputes currently pending before Labour Courts, Industrial Tribunals, or High Courts under the repealed Industrial Disputes Act, 1947 will continue to be adjudicated under the BWSSB Triple Test framework.
- Concluded Determinations: Concluded awards, settlements, and final judgments will not be reopened.
C. Bench Division (6:3 on Maintainability)
- Majority (6 Judges): Led by CJI Surya Kant, Justices Satish Chandra Sharma, Alok Aradhe, Vipul M. Pancholi, P.S. Narasimha, and Joymalya Bagchi upheld the validity of the reference and established the prospective decoupling for the new Code.
- Dissent (3 Judges): Justices B.V. Nagarathna, Dipankar Datta, and Ujjal Bhuyan held that the reference was unmaintainable and an academic exercise because the ID Act, 1947 stands repealed, affirming that the 1978 ruling had correctly balanced constitutional protections for labour.
3. Statutory Comparative: Section 2(j) (1947 Act) vs. Section 2(p) (IRC 2020)
The core reason the Supreme Court decoupled the two regimes lies in the deliberate structural changes enacted in the Industrial Relations Code, 2020:
| Parameter | ID Act, 1947 [Sec. 2(j) + BWSSB (1978)] | Industrial Relations Code, 2020 [Sec. 2(p)] |
|---|---|---|
| Statutory Text | Open-ended definition expanded entirely via judicial interpretation. | Codified definition with explicit statutory inclusions and exclusions. |
| Charitable & Philanthropic Institutions | Covered if systematic and employing staff, irrespective of non-profit status. | Explicitly Excluded if substantially engaged in charitable, social, or philanthropic services. |
| Sovereign Functions of the State | Strictly restricted to “inalienable” sovereign functions (e.g., core defence/policing). | Explicitly Excluded for activities of the appropriate Government relatable to sovereign functions (defence, space, atomic energy). |
| Domestic & Personal Services | Subject to judicial interpretation and tribunal scrutiny. | Explicitly Excluded by statutory provision. |
| Exemption Mechanism | Limited statutory exclusions; primarily governed by Section 36 notifications. | Central Government holds express powers to exempt specific categories via statutory notification. |
4. Practical Implications for Employers & HR Compliance
The ruling brings crucial structural clarity to corporate compliance, litigation management, and organizational structuring under the Four Labour Codes:
1. Relief for the Social & Educational Sectors
Under the 1947 Act, non-profit institutions, trusts, and philanthropic foundations operated under constant exposure to industrial dispute mechanisms. Under the IR Code, establishments that are substantially non-commercial/philanthropic now stand on solid statutory ground outside the definition of Section 2(p), insulated from legacy BWSSB doctrines.
2. Streamlining Dual-Track Dispute Management
Legal and compliance teams must maintain a strict demarcation in their litigation registers:
- Pre-Code Disputes: Litigated under the ID Act, 1947 using BWSSB principles.
- Post-Code Disputes: Litigated solely on the statutory parameters of Section 2(p), Section 2(zr) (Worker definition), and statutory threshold exemptions under the IR Code, 2020.
3. Clearer Thresholds for Standing Orders & Dispute Mechanisms
Because Section 2(p) exclusions are definitive, entities excluded from the “industry” definition are concurrently excluded from the obligations governing Chapter IV (Standing Orders), Chapter IX (Lay-off, Retrenchment, and Closure), and Chapter X (Special Provisions relating to Lay-off/Closure).
5. Strategic Conclusion
The 9-judge Constitution Bench has struck a pragmatic balance. By preserving the BWSSB doctrine for pending disputes under the 1947 Act, the Supreme Court prevented widespread legal disruption in active tribunal cases. By refusing to let BWSSB control the Industrial Relations Code, 2020, the Court has restored legislative supremacy, ensuring that India’s modernized labour framework is interpreted according to the text codified by Parliament.