A hospital. A university. A charitable trust. A club. A government department. Are any of them an "industry" — and therefore subject to the machinery of industrial dispute resolution, with their staff entitled to raise disputes, resist dismissal and claim retrenchment compensation?
For nearly fifty years the answer came from a seven-judge Bench decision in 1978, which read the term about as widely as it could be read. As of 21 November 2025 the answer comes from a statutory definition that expressly excludes several of the bodies that judgment had brought in. If you advise an NGO, a hospital trust or an educational institution, this is the first thing to re-check.
| Case | Bangalore Water Supply & Sewerage Board v A. Rajappa |
| Citation | AIR 1978 SC 548 |
| Bench | 7 judges; leading opinion of Krishna Iyer J |
| Decided | 21 February 1978 |
| Provision construed | s.2(j), Industrial Disputes Act — repealed |
Position stated as at July 2026. Reported citations vary between AIR 1978 SC 548 and AIR 1978 SC 553; verify against the report you are relying on.
What happened
The Bangalore Water Supply and Sewerage Board imposed and recovered fines from employees for alleged misconduct. The employees brought a claim before the Labour Court. The Board raised a preliminary objection: as a statutory body providing basic civic amenities — in essence a governmental function — it was not an "industry" under s.2(j), its staff were therefore not workmen, and the Labour Court had no jurisdiction.
The question had produced what Krishna Iyer J described as a zigzag course of conflicting decisions on hospitals, clubs, universities and government departments. A seven-judge Bench was constituted to settle it.
The triple test
The majority held that an activity is an industry where there is:
- Systematic activity — organised, with an element of planning, method and continuity;
- Co-operation between employer and employee; and
- Production or distribution of goods or services calculated to satisfy human wants and wishes — material needs rather than spiritual or religious ones.
All three must be present. Crucially, the Court held that the absence of a profit motive or the presence of a philanthropic purpose is irrelevant. The inquiry shifted from the identity, form or motive of the employer to the objective nature of the activity.
The Bench also articulated a dominant nature test for undertakings performing multiple functions: the character of the whole is judged by the predominant activity. Where a department discharging sovereign functions contains units that are industries and are substantially severable, those units can fall within s.2(j).
Applying this, the Board was an industry. The majority overruled a line of earlier decisions — including those concerning Safdarjung Hospital, the Gymkhana Club, Delhi University, Dhanrajgiri Hospital and the Cricket Club of India — and approved others, including Hospital Mazdoor Sabha.
What changed on 21 November 2025
The Industrial Disputes Act, 1947 was repealed and s.2(p) of the Industrial Relations Code, 2020 now defines industry. The definition codifies much of the triple test — systematic activity carried on by co-operation between employer and worker for the production, supply or distribution of goods or services, whether or not capital has been invested or the activity is carried on with a profit motive. That last clause preserves the case's central insight.
But the Code adds something the judgment did not have: express exclusions.
| Expressly excluded under s.2(p) | Position under Bangalore Water Supply |
|---|---|
| Institutions owned or managed by organisations wholly or substantially engaged in charitable, social or philanthropic service | Would generally have been included — absence of profit motive was irrelevant |
| Sovereign functions of government, including activities in defence research, atomic energy and space | Broadly consistent, though the judgment allowed severable industrial units within sovereign departments |
| Domestic service | Excluded |
| Any other activity as notified by the Central Government | No equivalent |
What survives
- The triple test itself, substantially codified in s.2(p) and useful for interpreting it.
- The irrelevance of profit motive, expressly carried into the statutory text.
- The dominant nature test, still the sensible approach to a multi-function undertaking — and the same reasoning the Supreme Court applied in December 2025 to worker status in Srinibas Goradia v Arvind Kumar Sahu.
- The shift from form to function. The employer's legal character, ownership or stated purpose does not determine the answer. Its activity does.
It is also worth knowing that the breadth of this judgment was contested for decades — a later five-judge Bench in State of UP v Jai Bir Singh referred the question of its reconsideration to a larger Bench, and a 1982 amendment intended to narrow the definition was passed. The Code has now, in effect, done legislatively what those efforts sought.
Why it matters to an employer today
If your organisation is an industry, the whole apparatus applies: your staff can be workers, disputes go to the Tribunal, terminations attract the s.70 conditions, and the two-year limitation in s.4(11) runs on every exit. If it is not, you are governed by contract and your state's Shops and Establishments Act, and the exposure is quite different.
For most commercial employers the answer is obvious and always was. For hospitals, schools, universities, professional bodies, clubs and charitable institutions it is not, and it just changed. See also who counts as a "worker" and do old labour law judgments still apply?
Frequently asked questions
What is the triple test for 'industry'?
Laid down by a seven-judge Bench on 21 February 1978: systematic activity, organised with planning, method and continuity; co-operation between employer and employee; and production or distribution of goods or services calculated to satisfy human wants and wishes, meaning material rather than spiritual needs. All three must be present, and the absence of a profit motive is irrelevant.
What is the dominant nature test?
Where an undertaking performs multiple functions, its character is judged by its predominant activity. The Court also held that where a department discharging sovereign functions contains units that are industries and are substantially severable, those units can fall within the definition.
Does Bangalore Water Supply still apply after the Labour Codes?
Partly. Section 2(p) of the Industrial Relations Code, 2020 codifies much of the triple test, including that a profit motive is irrelevant. But it adds express exclusions for institutions wholly or substantially engaged in charitable, social or philanthropic service, for sovereign functions including defence research, atomic energy and space, and for domestic service. Older authority does not survive an express statutory exclusion pointing the other way.
Are charitable institutions an industry in India?
Under Bangalore Water Supply they generally were, since the absence of a profit motive was irrelevant. Under Section 2(p) of the Industrial Relations Code, 2020 institutions owned or managed by organisations wholly or substantially engaged in charitable, social or philanthropic service are expressly excluded. Anyone relying on pre-2025 advice on this point should re-take it.
Why does it matter whether an organisation is an industry?
If it is, the industrial relations machinery applies — staff can be workers, disputes go to the Tribunal, terminations attract the Section 70 conditions, and the two-year limitation under Section 4(11) runs on every exit. If it is not, the relationship is governed by contract and the applicable state Shops and Establishments Act, and the exposure is materially different.