The Centre told the Supreme Court that welfare schemes and sovereign functions cannot be treated as industrial activity under labour laws. The 9-judge bench is now set to redefine the scope of “industry” under the Industrial Disputes Act.
The Central Government has begun its arguments before a Constitution Bench of the Supreme Court on a long-pending and crucial question—what exactly qualifies as an “industry” under Indian labour law. The matter is being heard by a 9-judge bench led by Chief Justice of India Surya Kant, and the outcome is expected to have far-reaching consequences for both workers and government institutions.
Appearing for the Centre, Attorney General R. Venkataramani argued that not all government activities can be treated as industrial in nature. He emphasized that social welfare schemes and core governmental functions should not be classified as “industry”, even if they involve structured operations similar to commercial organisations. According to the Centre, applying the existing legal test too broadly has created confusion between commercial activities and essential governance duties.
The Attorney General referred to the landmark 1978 judgment in Bangalore Water Supply case, where the Supreme Court evolved the well-known “triple test” to determine what constitutes an industry. While the Centre accepted that this test is still legally valid, it cautioned that its excessive and mechanical application has blurred important distinctions.
The Centre also strongly argued that the power to decide what falls under “sovereign functions” should primarily lie with the executive (government), though such decisions can still be reviewed by courts. It urged the Supreme Court not to attempt an exhaustive definition of sovereign functions, but instead allow flexibility, with judicial oversight to ensure fairness.
This important hearing began on March 17, 2026, and is being conducted by a 9-judge bench comprising Chief Justice Surya Kant and Justices BV Nagarathna, PS Narasimha, Dipankar Datta, Ujjal Bhuyan, SC Sharma, Joymalya Bagchi, Alok Aradhe, and Vipul M. Pancholi.
The case revolves around the interpretation of Section 2(j) of the Industrial Disputes Act, 1947, which defines the term “industry”. Over the years, courts have interpreted this definition very widely, bringing many institutions within its scope and extending labour law protections to their employees.
The present reference asks the Court to reconsider the correctness of the Bangalore Water Supply judgment, which had adopted a broad and inclusive interpretation. The matter was originally referred to a larger bench in 2005 in the case of State of Uttar Pradesh vs. Jai Bir Singh, where the Court felt that a clear line must be drawn to exclude certain activities from the definition of industry.
The 9-judge bench will now examine several key issues. These include whether the “triple test” laid down in the Bangalore Water Supply case still represents correct law, and whether later legislative developments like the Industrial Disputes (Amendment) Act, 1982 and the Industrial Relations Code, 2020 have any effect on how “industry” should be understood today.
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Another major issue before the Court is whether social welfare schemes and government-run services should be treated as industrial activities. The bench will also decide what qualifies as a “sovereign function” and whether such functions should be kept outside the scope of labour laws under the Industrial Disputes Act.
The background of the case shows that this issue has remained unresolved for more than two decades. In the Jai Bir Singh case, the Supreme Court had already expressed concerns about the wide scope of Section 2(j). It had observed that although the provision uses very broad language, there is a need to interpret it in a balanced way.
The Court had earlier noted:
“In construing the definition clause and determining its ambit, one has not to lose sight of the fact that in activities like hospitals like hospitals and education, concepts like right of the workers to go on
strike' or the employer's right toclose down’ andlay off' are not contemplated because they are services in which the motto isservice to the community’. If the patients or students are to be left to the mercy of the employer and employees exercising their rights at will, the very purpose of the service activity would be frustrated.”
It had further highlighted the urgency of resolving the issue by stating:
“Pressing demands of the competing sectors of employers and employees and the helplessness of legislature and executive in bringing into force the Amendment Act compel us to make this reference, it had then said.”
The Supreme Court had also previously remarked on the need for balance, stating that although the definition of industry is wide, reasonable limitations must be applied to avoid including services that are fundamentally different in nature.
In 2017, a seven-judge bench led by then Chief Justice T.S. Thakur had confirmed that the issue required consideration by a 9-judge bench due to its constitutional importance.
Now, after years of delay, the Supreme Court has finally begun hearing the matter in detail. The decision of this Constitution Bench is expected to settle the law on what constitutes an “industry” once and for all, and clarify the extent to which government functions and welfare activities fall under labour law protections.
This ruling will be especially significant for sectors like healthcare, education, and public services, where the balance between workers’ rights and public interest remains a sensitive and complex issue.
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