What Counts as an ‘Industry’ Under Indian Labour Law? The Supreme Court’s 2026 Nine-Judge Decision Explained

The answer now depends on which law applies to the dispute. 

For matters governed by the Industrial Relations Code, 2020, the definition in Section 2(p) applies. For pending disputes governed by the repealed Industrial Disputes Act, 1947, the Supreme Court has confirmed that the original Bangalore Water Supply test continues to apply.

That is the central takeaway from the nine-Judge decision in State of Uttar Pradesh v. Jai Bir Singh, 2026 INSC 897, decided on 20 August 2026. Importantly, the Supreme Court did not replace the old test with one new binding definition applicable to every workplace. Indian Kanoon

Read the 2026 Supreme Court judgment — State of U.P. v. Jai Bir Singh

Why does it matter whether an establishment is an “industry”?

Whether an establishment is an “industry” can determine whether the industrial-relations machinery of Indian labour law applies to disputes involving its workers.

This question can affect termination disputes, retrenchment, trade-union rights, industrial disputes and access to the statutory dispute-resolution framework. But two separate questions must always be kept apart: Is the establishment an “industry”? And is the particular employee a “worker” protected by the relevant provisions?

This distinction can become important in an actual employment dispute. An employer may assume that once the establishment falls within the labour-law framework, every employee working there receives the same statutory protection. That is not necessarily the case. .

For businesses reviewing employment documentation, workforce exits or labour disputes, Law Wallet's Employment & Business Protection practice covers the wider employment-law context in which these classification questions usually arise.

Why this classification matters in real disputes

The question of whether an establishment is an “industry” may sound technical, but it can have very practical consequences.

Whether the definition applies can affect termination disputes, retrenchment, trade-union rights, industrial disputes and access to the statutory dispute-resolution framework.

The issue can become particularly important for organisations that do not fit neatly into the traditional idea of a business. Hospitals, schools, charitable organisations, research institutions and government-run activities can all raise different questions under the definition.

There is also another point that is often missed. Whether an establishment is an “industry” and whether a particular employee is a “worker” are two different questions.

An organisation may qualify as an industry while a senior managerial or administrative employee working there may still fall outside the statutory definition of “worker”.

In a real dispute, that distinction can make a difference to the remedies available to the employee and to the way the employer needs to respond.

For businesses reviewing employment documentation, workforce exits or labour disputes, Law Wallet's Employment & Business Protection practice covers the wider employment-law context in which these classification questions usually arise.

What did the Supreme Court actually decide in 2026?

The case was State of Uttar Pradesh v. Jai Bir Singh, 2026 INSC 897. The reference arose from a long-running controversy over whether activities such as government social-forestry schemes could amount to an “industry” under Section 2(j) of the Industrial Disputes Act, 1947. Supreme Court Observer

The nine-Judge Bench delivered five separate opinions. For that reason, it would be too simplistic to describe the judgment as merely saying that “the Supreme Court changed the definition of industry”.

Three points are especially important.

First, the Court unanimously agreed that pending proceedings under the old Industrial Disputes Act should continue to be decided under the law laid down in Bangalore Water Supply and Sewerage Board v. A. Rajappa, (1978) 2 SCC 213. The lead opinion expressly stated that its proposed reformulation was not intended to displace the legal position governing pending proceedings. Indian Kanoon

Second, the Bench was divided on whether the 1978 reasoning itself should be reconsidered or refined. The reference was held maintainable by a 6:3 majority, but there was no nine-Judge consensus adopting a new replacement test. Supreme Court Observer

Third, Chief Justice Surya Kant's lead opinion—joined by Justices Satish Chandra Sharma, Alok Aradhe and Vipul M. Pancholi—suggested a hypothetical reformulation placing greater emphasis on whether the activity has a discernible commercial character analogous to trade or business. Only four Judges joined that opinion. The judgment itself described this exercise as hypothetical and did not make it the governing test for pending Industrial Disputes Act proceedings. Indian Kanoon

Calling the four-Judge formulation “the new Supreme Court test for industry” would therefore be misleading. 

Does the old Bangalore Water Supply test still apply?

Yes, but principally to legacy disputes governed by the repealed Industrial Disputes Act, 1947.

In Bangalore Water Supply and Sewerage Board v. A. Rajappa, the seven-Judge Bench developed what became known as the Triple Test.

An activity could ordinarily constitute an industry when there was systematic or organised activity, cooperation between employer and employees, and production or distribution of goods or services intended to satisfy human wants or wishes. Profit motive was not essential. Indian Kanoon

The decision also developed the dominant nature test for establishments conducting several integrated activities. The character of the undertaking was ordinarily assessed by looking at its predominant activity rather than mechanically separating every department. Indian Kanoon

The treatment of governmental functions was also comparatively narrow: an organisation did not automatically cease to be an industry merely because it was operated by the State. The nature of the activity remained important, although genuinely sovereign functions could stand on a different footing. Indian Kanoon

Read Bangalore Water Supply v. A. Rajappa, (1978) 2 SCC 213

The practical effect of the 2026 judgment is therefore straightforward: the four-Judge “commercial character” reformulation should not be used to change the result of an old pending case that is governed by the Industrial Disputes Act.  The Supreme Court specifically preserved the Bangalore Water Supply position for those proceedings. Supreme Court Observer

What law applies to new cases after 21 November 2025?

For the present statutory regime, businesses should begin with Section 2(p) of the Industrial Relations Code, 2020, not with Section 2(j) of the old Industrial Disputes Act.

The Central Government brought the Industrial Relations Code into force on 21 November 2025 through S.O. 5320(E). Labour India

Official Industrial Relations Code, 2020 — India Code

Official commencement notification dated 21 November 2025

The Industrial Relations Code (Amendment) Act, 2026 subsequently amended the repeal-and-transition provision and was expressly deemed to have come into force from 21 November 2025. Labour India

Industrial Relations Code (Amendment) Act, 2026 — Official Gazette

How does Section 2(p) define an “industry” today?

Section 2(p) of the Industrial Relations Code broadly covers a systematic activity carried on through cooperation between an employer and workers for producing, supplying or distributing goods or services to satisfy human wants or wishes, other than wants or wishes that are merely spiritual or religious.

The statute expressly says that it does not matter merely because no capital has been invested or because the activity is not carried on for profit. India Code

However, Section 2(p) expressly excludes certain activities or institutions:

Establishment or activity

Position under Section 2(p)

Ordinary manufacturing, trading or service activity satisfying the statutory test

Normally capable of being an “industry”

Activity without a profit motive

Not excluded merely because it is non-profit

Institution owned or managed by an organisation wholly or substantially engaged in charitable, social or philanthropic service

Expressly excluded

Government activity relatable to sovereign functions

Expressly excluded

Defence research, atomic energy and space activities of the specified Central Government departments

Included within the sovereign-function exclusion

Domestic service

Expressly excluded

Activity specifically excluded later by Central Government notification

Can be excluded

Hospitals, schools or research bodies

Not automatically excluded merely by those labels; the statutory facts and any applicable exclusion must be examined

This last point deserves attention. The current Code does not simply reproduce every exclusion Parliament had proposed in the never-operative 1982 amendment to the Industrial Disputes Act. Businesses should therefore avoid relying on old summaries which say, for example, that every hospital, educational institution or research institution is automatically outside labour-law concepts of “industry”.

What happened to the 1982 amendment to the definition of “industry”?

The Industrial Disputes (Amendment) Act, 1982 contained a significantly more detailed proposed definition, with numerous exclusions. But the relevant replacement definition was never brought into force while the Industrial Disputes Act operated.

The 2026 Supreme Court decision did not treat that uncommenced provision as the operative definition governing old disputes. The lead opinion expressly declined to give it operative legal effect in deciding the controversy. Supreme Court Observer

This is another reason why older articles that reproduce the 1982 wording as though it was the actual Section 2(j) applicable throughout the life of the Industrial Disputes Act can be misleading.

Did the Supreme Court introduce a new “commercial character” requirement?

Not as a binding current-law test applicable across India.

The Chief Justice's four-Judge opinion considered that the old Triple Test could have been framed more appropriately by requiring the goods or services to possess a discernible commercial character analogous to trade or business. Profit motive itself would still remain irrelevant. Indian Kanoon

But there are two significant qualifications.

The first is numerical: that formulation was contained in an opinion joined by four of the nine Judges, not by five Judges constituting a majority of the Bench.

The second is even more important: the lead opinion itself treated the formulation as hypothetical and expressly preserved the original Bangalore Water Supply test for pending Industrial Disputes Act proceedings. It also stated that questions under the Industrial Relations Code were being left open. Supreme Court Observer

So, the safer way to put it is this: the 2026 judgment is important to the development of the law on “industry”, but it did not make the four-Judge commercial-character formulation the controlling test under Section 2(p) of the Industrial Relations Code. 

Does Bangalore Water Supply control the meaning of “industry” under the new Code?

Not automatically.

One of the clearest points emerging from the nine-Judge decision is that the Court did not decide the meaning of Section 2(p) of the Industrial Relations Code. The judgment repeatedly left that question for determination in an appropriate case. Indian Kanoon

For a dispute under the new Code, the starting point is Section 2(p) 

Earlier decisions may still be relevant in understanding the development of the law and, depending on the issue, may provide useful interpretative guidance. But it would be premature to say that the 1978 Triple Test or the four-Judge 2026 reformulation has already been declared the definitive test for Section 2(p). 

That question remains capable of further judicial development.

Where lawyers may see the real disputes arising

The difficult cases are likely to arise at the edges rather than in straightforward manufacturing or trading businesses.

Hospitals, educational institutions, research organisations, charities, NGOs and government-linked bodies are likely to raise more complicated questions because their activities may combine service delivery, social objectives and, in some cases, commercial operations.

The same organisation may also carry out different types of activities under one structure. In such cases, looking only at the organisation's name or incorporation status may not tell the whole story. The actual activities, ownership and management structure may become important.

Another area to watch is the transition between the two statutory regimes. The date of the dispute and the law governing the proceedings may affect which definition has to be applied. That makes it particularly important for employers and employees to identify the applicable statute before relying on either the old or the new test.

Are charitable organisations automatically outside the definition?

No. The wording of the exclusion must be applied carefully.

Section 2(p) excludes institutions owned or managed by organisations wholly or substantially engaged in charitable, social or philanthropic service. India Code

That is more specific than simply asking whether an entity is incorporated as a trust, society or Section 8 company.

In other words, “non-profit” or “charitable” is not necessarily the end of the analysis.  Its objects, actual activities, organisational structure and the character of the organisation that owns or manages the institution may matter. A business should therefore not assume that the words “non-profit”, “NGO” or “charitable trust” automatically settle the labour-law classification.

Are hospitals and educational institutions industries?

There is no safe one-word answer for the current regime.

Under the old Bangalore Water Supply jurisprudence, the definition of industry was interpreted very widely and generated extensive litigation concerning hospitals, educational institutions, research organisations and similar bodies. Indian Kanoon

Under the current Industrial Relations Code, hospitals and educational institutions are not separately listed as blanket exclusions in Section 2(p). However, an institution may fall within another statutory exclusion—for example, the charitable, social or philanthropic exclusion—depending on its ownership, management and activities. India Code

Accordingly, stating that “all hospitals are industries” or “all schools are excluded” would go beyond what the current statutory text and the 2026 judgment establish.

Are government departments industries?

Government ownership by itself does not answer the question.

Under the present Code, Section 2(p) expressly excludes activities of the appropriate Government that are relatable to sovereign functions, and specifically refers to Central Government departmental activities concerning defence research, atomic energy and space. India Code

Other governmental commercial, service or welfare activities require closer analysis. The classification depends on the nature of the activity and the statutory framework rather than simply attaching the word “government” to the employer.

For older pending Industrial Disputes Act disputes, the Bangalore Water Supply jurisprudence concerning sovereign functions continues to matter because the Supreme Court preserved that law for legacy cases. Supreme Court Observer

If a company is an “industry”, is every employee automatically a “worker”?

No. This is one of the most common classification mistakes.

Section 2(zr) of the Industrial Relations Code separately defines “worker”. It covers persons employed to perform manual, unskilled, skilled, technical, operational, clerical or supervisory work, subject to statutory exclusions.

Among other exclusions, a person employed mainly in a managerial or administrative capacity is not a “worker”. A person employed in a supervisory capacity who draws wages above ₹18,000 per month, or such other amount as may subsequently be notified by the Central Government, is also excluded from the general definition. Labour India

Therefore:

• Industry status concerns the nature of the establishment or activity. 

• Worker status concerns the nature of the individual's employment. 

• The two questions may overlap in the same dispute, but they are legally distinct questions and should be analysed separately.

How should a business check whether it is an “industry”?

A practical review should start with the actual activity rather than the organisation's name.

Ask what goods or services are actually produced, supplied or distributed; whether the activity is systematic; whether it is carried on through employer-worker cooperation; whether the service satisfies material rather than merely spiritual or religious wants; whether any Section 2(p) exclusion applies; and whether the employees involved in the dispute separately satisfy the definition of “worker”.

For a mixed organisation, the relationship between different departments should also be documented rather than assuming that every unit necessarily has the same legal character.

The classification should be supported by real documents: constitutional documents, employment agreements, job descriptions, organisational charts, payroll records, service descriptions, outsourcing arrangements, policies and evidence showing what the establishment actually does.

This is particularly useful when an employer is planning a restructuring, outsourcing arrangement, closure or workforce reduction. It is better to identify a classification issue before taking the employment action than to discover it after a dispute has been filed. 

A broader employment and compliance review can also be incorporated into an annual legal health check for the business.

A practical point from advising businesses or handling labour disputes

In practice, one of the first things worth checking is whether the organisation's documents match what it actually does.

An organisation may describe itself as a non-profit, charitable institution or service provider, but the legal analysis cannot always stop at that description. The nature of its operations, the way employees are engaged and the structure through which services are delivered may all become relevant if a dispute arises.

For employers, this means that “industry” status is not something to think about only after receiving a legal notice. It can be relevant when drafting employment documentation, restructuring teams, outsourcing functions or planning workforce exits. Keeping the underlying records clear and consistent can make the classification question much easier to address later.

What should employers avoid after the 2026 judgment?

The biggest mistake is using a headline version of the judgment.

An employer should not argue that the Supreme Court has universally imposed a new “commercial character” requirement. Equally, a worker should not automatically assume that the 1978 definition governs every dispute arising under the Industrial Relations Code.

The first question should be which statutory regime applies.

If the matter is a legacy proceeding governed by the Industrial Disputes Act, Bangalore Water Supply remains central. If the matter arises under the Industrial Relations Code, Section 2(p) is the starting point and the Supreme Court has deliberately left its authoritative interpretation open.

That distinction can determine the entire approach to a labour dispute.

Frequently Asked Questions

1. Did the Supreme Court overrule Bangalore Water Supply in 2026?

No. The Court unanimously allowed the original Bangalore Water Supply position to continue governing pending disputes under the repealed Industrial Disputes Act. Supreme Court Observer

2. Is the “commercial character” test now compulsory?

No. The commercial-character formulation appears in the four-Judge lead opinion as a hypothetical refinement. It is not the controlling test for pending ID Act cases, and the Court did not adopt it as the definition of industry under the Industrial Relations Code. Indian Kanoon

3. Which law governs new industrial-relations disputes?

The Industrial Relations Code, 2020 has been in force since 21 November 2025, and Section 2(p) contains the present statutory definition of “industry”. Labour India

4. Does an organisation need to make a profit to be an industry?

No. Section 2(p) expressly makes profit motive and capital investment non-determinative, subject to the statutory exclusions contained in the definition. India Code

5. Is every charitable organisation excluded?

Not merely because it describes itself as charitable. The exclusion concerns institutions owned or managed by organisations wholly or substantially engaged in charitable, social or philanthropic service. The actual structure and activities therefore require examination. India Code

6. Are managers covered merely because their employer is an industry?

No. Industry status and worker status are separate. Persons employed mainly in managerial or administrative capacities are excluded from the Section 2(zr) definition of worker. India Code

7. Are hospitals and schools automatically excluded under the Industrial Relations Code?

No blanket exclusion for hospitals or educational institutions appears in Section 2(p). Their position must be determined from the statutory definition, applicable exclusions and the particular facts. India Code

8. What is the safest approach when classification is doubtful?

Examine the actual activity, ownership and management structure, employee functions and the date and nature of the dispute. The 2026 judgment makes the distinction between legacy Industrial Disputes Act cases and current Industrial Relations Code matters especially important.

For more practical business-law material, see Law Wallet's Legal Insights.

Conclusion

The Supreme Court's 2026 nine-Judge decision is significant, but its significance lies partly in what the Court did not do.

It did not create one new universal definition of “industry”. Instead, it preserved Bangalore Water Supply for pending cases governed by the repealed Industrial Disputes Act while leaving the meaning of Section 2(p) of the Industrial Relations Code, 2020 to be decided on the new statute's own terms. Supreme Court Observer

For businesses today, the practical starting point is therefore Section 2(p), its express exclusions and the actual nature of the establishment's activities. Where the dispute predates the new regime or remains governed by the old Act, the 1978 Triple Test continues to matter.