Supreme Court Clarifies the Law on “Industry”: What the Jai Bir Singh Judgment Means for Employers

In State of U.P. v. Jai Bir Singh, Civil Appeal No. 897 of 2002 and connected matters (Supreme Court, August 20, 2026), a 9 judge Constitution Bench comprising Chief Justice Surya Kant and Justices B.V. Nagarathna, P.S. Narasimha, Dipankar Datta, Ujjal Bhuyan, Satish Chandra Sharma, Joymalya Bagchi, Alok Aradhe and Vipul M. Pancholi, has considered whether the “triple test” laid down by a 7 judge Bench in Bangalore Water Supply and Sewerage Board v. A. Rajappa (1978) requires reformulation. The Bench divided 4-4-1, and no single formulation of the test attracted the support of a clear majority of five judges.

The reference traced its origin to a batch of appeals arising from disputes raised by daily wagers employed in a tree planting welfare scheme run by the Social Forestry Department of Uttar Pradesh. A 5 judge Bench doubted the correctness of the 1978 ruling in 2005 and referred the matter for reconsideration by a larger Bench, and in January 2017 a 7 judge Bench directed that the reference be placed before a Bench of 9 judges. The 9 judge Bench heard arguments over three days in March 2026 and reserved judgment.

The 1978 ruling had held that an establishment qualifies as an “industry” where there is systematic activity, cooperation between employer and employee, and production or distribution of goods or services intended to satisfy human wants, regardless of whether the activity is carried on for profit. Chief Justice Surya Kant, writing for himself and Justices Satish Chandra Sharma, Alok Aradhe and Vipul M. Pancholi, proposed that the third limb of the test be reformulated to require that the goods or services in question bear a “discernible commercial character”, so as to exclude activity with no resemblance to trade or business. Justices Nagarathna, Datta, Bhuyan and Bagchi, in separate opinions, declined to join this reformulation, holding variously that the 1978 test remained sound and that reopening a settled definition risked introducing confusion into pending litigation. Justice Narasimha authored a further separate opinion that did not align fully with either the plurality favouring reformulation or the four judges opposing it, and instead emphasised that the meaning of “industry” under Section 2(p) of the Industrial Relations Code, 2020 must be construed independently and without reference to either the 1978 ruling or the present judgment.

Despite this division, the Court was unanimous on three points that will govern the practical application of the judgment. First, every dispute presently pending before a court, tribunal or labour authority under the Industrial Disputes Act, 1947 will continue to be adjudicated under the 1978 triple test. Second, matters that have already attained finality, whether by judgment, settlement or otherwise, will not be reopened. Third, the meaning of “industry” under Section 2(p) of the Industrial Relations Code, 2020, which repealed the 1947 Act with effect from November 21, 2025, was not before the Court and remains to be authoritatively determined in a future case arising under the Code.

The decision is of considerable significance for employers with pending industrial disputes and for those assessing their exposure under the Industrial Relations Code, 2020 going forward. Employers with matters currently before a labour court, industrial tribunal or the National Industrial Tribunal that turn on whether the establishment is an “industry” should proceed on the basis that the 1978 test continues to apply and need not revisit strategy on account of the present ruling. At the same time, employers seeking to assess whether an establishment without a commercial character, such as a charitable, religious, educational or welfare body, falls within the definition of “industry” under Section 2(p) of the Industrial Relations Code, 2020 for disputes arising after November 21, 2025, should note that this question remains open. Given that no single formulation commanded majority support, neither the 1978 test nor the plurality’s proposed reformulation can be treated as binding on the interpretation of the Code, and employers in this category would be well advised to review the express statutory exclusions already written into Section 2(p), including those for institutions run by charitable organisations, domestic service and activities connected with the sovereign functions of government, rather than relying on either judgment as a complete answer.

Last Updated on 21 September, 2026