Supreme Court Nine-Judge Bench Splits; 4-4 on Reconsidering Bangalore Water Supply Industry Test

New Delhi, August 20, 2026 – The Supreme Court of India ’s nine-judge bench has delivered a deeply divided verdict on the meaning of "industry" under the now-repealed Industrial Disputes Act, 1947 , failing to reach a clear majority on whether to overhaul the landmark 1978 triple test from Bangalore Water Supply & Sewerage Board v. A. Rajappa .

The bench, comprising nine judges, split 4-4 on the central question, with the ninth judge, Justice P.S. Narasimha, reaching the conclusion that the 1978 judgment should not be disturbed, but on the distinct ground that the Industrial Disputes Act has already been repealed and replaced by the Industrial Relations Code, 2020 . The result is a fractured opinion that leaves the Bangalore Water Supply ratio intact for pending legacy cases while preserving the new Code for independent interpretation.

The Genesis of the Triple Test and Its Challenge

For nearly five decades, the definition of "industry" in Section 2(j) of the Industrial Disputes Act was governed by the triple test articulated by Justice V.R. Krishna Iyer: (i) a systematic and organised activity , (ii) involving cooperation between employer and employee , and (iii) for the production or distribution of goods and services calculated to satisfy human wants and wishes . This formulation excluded only a narrow band of sovereign functions and purely spiritual activities, bringing within its ambit professions, clubs, educational institutions, charitable projects, and government welfare schemes.

The expansive reach of the test had been questioned repeatedly. In 2005 , a five-judge bench in State of U.P. v. Jai Bir Singh referred the correctness of Bangalore Water Supply to a larger bench, citing concerns that the definition had become over-inclusive and was causing practical difficulties. That reference, after traversing through a seven-judge bench, finally landed before the nine-judge bench now assembled to settle the law.

A House Divided: Arguments for and Against Reconsideration

The Union of India , various state governments, and employer bodies argued that the triple test needed recalibration. Led by Attorney General R. Venkataramani , they contended that the test had brought within its sweep welfare-oriented and charitable activities never intended by Parliament to be industries. They urged that a "commercial character" should be introduced as a dominant factor, arguing that many government and non-profit activities are not analogous to trade or business and should be excluded. The 1982 amendment (never notified) and the new IR Code definition were cited as evidence of legislative intent to narrow the scope.

Opposing them, worker unions represented by senior counsels Indira Jaising and C.U. Singh argued that the Bangalore Water Supply judgment was correct law and should not be reopened. They pointed out that it had held the field for nearly 50 years, and that legislatures and executives had ample opportunity to amend the definition but had not done so. The triple test , they said, ensures that millions of workers in hospitals, schools, and government departments remain protected under industrial law. To restrict the definition now, especially when the Act is already repealed, would cause immense public hardship and unsettle settled rights.

The Split Verdict: Four Judges Affirm, Four Propose a Change

Chief Justice Surya Kant, writing for himself and Justice Satish Chandra Sharma, Justice Alok Aradhe, and Justice Vipul M. Pancholi, held that the triple test needed refinement. The Chief Justice's opinion proposed a new formulation that adds a requirement of " discernible commercial character " to the third prong: the activity must be analogous to trade or business . The test, hypothetically reformulated, reads:

"Where there exists (i) a systematic activity; (ii) organised through cooperation between employer and employee ; and (iii) the production, distribution, or provision of goods or services possessing a discernible commercial character that is analogous to trade or business and calculated to satisfy material human wants and wishes…"

The Chief Justice emphasised that the nature and character of the activity must be the decisive inquiry, not merely the existence of an employer-employee relationship. He clarified that the judgment operates only prospectively and does not apply to pending cases.

In contrast, Justice B.V. Nagarathna, Justice Dipankar Datta (for himself and Justice Ujjwal Bhuyan), and Justice Joymalya Bagchi each wrote separate opinions firmly upholding the Bangalore Water Supply triple test as correct law.

Justice Nagarathna held that "the reference itself was unnecessary" and that the 1978 judgment "does not call for any interference or modification." She cited the doctrine of stare decisis and noted that the 1982 amendment was never brought into force, indicating legislative acquiescence .

Justice Dipankar Datta rejected the need for reconsideration, stating that Bangalore Water Supply had become settled law through decades of reliance. He observed, "The uninterrupted application of the law in Bangalore Water Supply having converted an arrangement, transient in origin, into the institutional… the chapter must be treated as closed."

Justice Bagchi, while agreeing on the validity of the reference, concurred with Justices Nagarathna and Datta on the merits, holding that the triple test correctly determines the scope of "industry."

Justice P.S. Narasimha took a middle path. He held that the procedure for the reference was valid and that an authoritative answer was compelling at the time, but has since become unnecessary because the Industrial Disputes Act was repealed on November 21, 2025 . He directed that the Bangalore Water Supply ratio should continue to govern pending cases, and that the Industrial Relations Code must be interpreted independently, free of the shadow of the old law.

Key Observations from the Bench

Chief Justice Surya Kant observed:

"In our considered view, it is difficult to attribute to the Legislature an intention that every organised venture, enterprise, institution, or activity involving some degree of employer-employee cooperation should lock, stock and barrel stand encompassed within a single statutory definition."

Justice Dipankar Datta remarked:

"The reference before us discloses no such justification… Bangalore Water Supply does not require reconsideration."

Justice B.V. Nagarathna emphasised:

"The judgment of the seven-judge bench in Bangalore Water Supply does not call for any reconsideration. The reference itself was not necessary."

The Final Word: Clarity from Fracture

Despite the absence of a uniform ratio , the practical outcome of the judgment is clear: the triple test from Bangalore Water Supply remains the governing law for all proceedings pending under the Industrial Disputes Act. The new definition under Section 2(p) of the Industrial Relations Code, 2020 , will be interpreted on its own text and context, uninfluenced by the old jurisprudence.

Justice Narasimha’s observation resonates as the final chord: "It is important to ensure that the future interpretation of the definition of ‘Industry’ under Section 2(p) of the Industrial Relations Code, 2020 , is not burdened by the existing interpretations based on the repealed Section 2(j) of the Industrial Disputes Act, 1947 ."

The judgment, though fragmented, brings an end to the uncertainty that has surrounded the term "industry" for over seven decades. For the thousands of workmen in public and private enterprises awaiting resolution of their disputes, the law remains as it was—but the path forward is now constitutionally distinct.