Supreme Court Refines ‘Industry’ Test: How Could Workers’ Rights Be Affected?

The Supreme Court’s August 20 judgment in State of Uttar Pradesh v Jai Bir Singh has reshaped a crucial question in labour law: what qualifies as an “industry” and, consequently, which workers can access industrial-dispute protections.

In 1978, the Bangalore Water Supply case adopted a broad Triple Test. An activity could qualify where it involved systematic activity, cooperation between employer and employee, and production or distribution of goods or services satisfying human wants. Profit-making was not essential, allowing the definition to cover hospitals, educational institutions, charitable bodies and government activities.

A nine-judge Constitution Bench has now refined that approach by majority. The core framework survives, but the Court indicated that an activity should possess a “discernible commercial character” resembling trade or business. It also addressed the exclusion for sovereign functions, potentially allowing a wider range of governmental activities to fall outside “industry”.

However, the ruling does not retrospectively narrow workers’ rights under the repealed Industrial Disputes Act. Pending and concluded matters remain governed by the 1978 interpretation. Labour courts and tribunals therefore must apply the established Triple Test to pending ID Act disputes.

The majority also made a crucial distinction for the Industrial Relations Code, 2020. Its definition of “industry” must be interpreted independently from the 1978 judgment and from the new formulation. This creates uncertainty over how courts will determine coverage under the current regime and, consequently, which employees qualify for industrial protections.

Justice B V Nagarathna, joined by Justices Dipankar Datta and Ujjal Bhuyan, opposed reconsidering the 1978 precedent. She stressed judicial certainty and argued that the established test remained workable.

For workers, protection under old cases remains intact, but future disputes could involve arguments over commercial character and sovereign functions. Employers may gain scope to contest industry status. Government establishments could see broader exclusions, while labour courts face a two-track landscape.