Arguments
Sr. Adv. Sanjay Hegde opens submissions by taking the Bench through the 1978 Bangalore Water Supply ruling, focusing on how the opinions were structured and delivered.
Sr Adv Hegde highlights that on February 21, 1978, multiple judges recorded broad agreement with Justice V.R. Krishna Iyer’s opinion, while noting that reasons and areas of concurrence/divergence would follow later.
He points out that this initial order reflected a general consensus, though differences on specific points were left open.
Referring to subsequent developments, Hegde notes that on April 7, 1978, a separate opinion clarified positions, with some judges ultimately fully concurring with the majority view, while others expressed reservations.
He breaks down the numerical strength of the judgment, submitting that:
A clear majority supported Justice Krishna Iyer’s view,
While a minority dissented or expressed partial disagreement.
Hegde argues that despite later qualifications, the ruling effectively operated as a binding precedent with majority backing.
However, he contends that the reasoning inBangalore Water Supply was not entirely crystallised at the time, suggesting the judgment contained “creases” and some lack of doctrinal clarity.
He submits that the Bench at the time was working under time constraints (with the then CJI nearing retirement), which may have contributed to the staggered articulation of opinions.
Hegde contrasts this with what he describes as a “clearer line of reasoning” emerging from subsequent judgments, urging the present Bench to prefer a more coherent interpretative approach over what he termed a “slightly hazy” formulation in Bangalore Water Supply.
He emphasizes that bench strength and majority composition remain determinative, but invites the Court to revisit the doctrinal foundation of the definition of “industry”.
The Bench engages on the issue of how to read split and concurring opinions, noting that even where there are variations in reasoning, the binding force of the majority cannot be diluted.
Sr. Adv. Sanjay Hegde argues that the definition of “industry” must be read as a whole, not in two independent parts.
He submits that:
The definition reflects a collective enterprise,
“Industry” exists only where there is a functional employer–employee relationship,
The two limbs are “counterparts” and not standalone definitions.
Using an analogy, he says the two parts are like “two arms of the same body”, which must operate together, with the second limb merely describing workmen within an industry established by the first.
Sr Adv Hegde contrasts this with Bangalore Water Supply, where:
The Court treated the definition as two parts,
And allowed the second limb (workmen’s activities) to independently expand the scope,
Rendering the employer-side requirement largely redundant.
He submits that the Safdarjung Hospital approach requiring both limbs to coexist is truer to the statutory scheme.
On profit motive and commercial character, Hegde argues:
While profit motive is not essential,
The activity must still be analogous to business or trade in a commercial sense.
He emphasizes that not every non-commercial or welfare activity qualifies as “industry”.
Citing examples, he notes that:
Government hospitals providing medical services,
Research or charitable hospitals,
And institutions sustained largely by donations without profit distribution,
were held not to be “industry” under Safdarjung.
Hegde reiterates that this interpretation is more consistent with the statutory architecture, unlike the expanded reading in Bangalore Water Supply.
Justice Dipankar Dutta questions the petitioner’s interpretation, observing that if the inclusive part of the definition is read independently, the “means” part may become redundant.
He draws attention to the definition of “industrial dispute” under Section 2(j), noting that disputes can arise:
Between employers and employers,
Between employers and workmen,
Between workmen and workmen.
The Bench indicates that in disputes between employers alone, the employer-centric (“means”) part would still operate, suggesting it is not rendered otiose.
Justice Dutta emphasizes that the Court must interpret the statute holistically, stating:
One cannot interpret “industry” in isolation,
The definition must be read alongside the concept of an “industrial dispute” and the overall scheme of the Act.
He remarks that understanding the Act’s structure is essential, cautioning against a narrow or segmented reading of definitions.
In response, Sr. Adv. Sanjay Hegde maintains that the focus remains on the definition of “industry”, while acknowledging the need to read it in the broader statutory context.
CJI asks on the role of profit motive, sovereignty, and the scope of “industry” under the Act.
Sr Adv Hegde clarifies that:
Profit motive is not essential,
But the activity must still be analogous to trade or business in character.
He submits that even non-profit or charitable entities may qualify as “industry” if they are organised and function on business-like lines (e.g., structured operations, call centres, systematic activity).
The Bench notes that the distinction between Safdarjung Hospital and Bangalore Water Supply on this issue is not absolute, but one of degree.
Hegde refers to Justice Krishna Iyer’s classification of charitable institutions:
Those with systematic, organised activity producing value,
Those with commercial features but no profit motive,
And those that are purely charitable or spiritual.
He submits that the real question before the Court is:
“Where should the line be drawn and how broadly?”Sr Adv Hegde argues that over time, the definition of “industry” has been expanded excessively, especially after Bangalore Water Supply, covering a wide range of activities over nearly five decades.
He urges the Bench to return to the Safdarjung standard, where:
The key test was whether the activity is analogous to commerce and run on business lines,
And if so, industrial dispute mechanisms should apply.
In contrast, he notes, Bangalore Water Supply treated the definition as deliberately wide, refusing to read down “undertaking”, thereby greatly expanding the scope of “industry”.
Sr Adv Hegde concludes that statutory interpretation must have limits, submitting:
Words cannot be stretched infinitely,
The Industrial Disputes Act is meant to regulate employer–employee relations in organised economic enterprises, and resolve disputes arising therein.
Sr. Adv. Sanjay Hegde argues for a broader understanding of sovereign functions beyond the narrow “regal” view in Bangalore Water Supply.
He submits that sovereign functions include:
Core functions: legislation, justice, defence, law & order,
Welfare roles: health, education, rural development,
Regulatory and planning functions of the State.
Hegde emphasizes that the modern State performs far wider roles, which cannot be treated as “industry”.
He distinguishes between:
Execution activities (e.g., construction) may be industry,
Policy, planning, and regulation must remain outside “industry”.
- Sr. Adv. Shadan Farasat urges the Court to resolve the reference by restricting the definition of “industry” itself, making it unnecessary to answer the remaining questions.
- He submits that the Bangalore Water Supply (BWSSB) triple test is correct but incomplete, and proposes:
Triple test + two limiting principles to curb its overbreadth.
Proposed limits:
The entity must have a commercial objective or be analogous to trade/business (not necessarily profit-driven),
The activity must involve primarily physical/manual labour, not intellectual or professional services.
He relies on:
The word “manufacture” in the definition,
And ejusdem generis to argue that “services” should be labour-centric, not extend to professions.
Historical context:
Industrial law arose from the Industrial Revolution, targeting labour-intensive industries, not modern professional services.Effect of his framework:
Non-commercial entities (including charities) → excluded,
Professional services (lawyers, doctors, CAs, etc.) → excluded,
State activities → included only if carried out on commercial lines (e.g., PSUs, electricity distribution at market rates).
He clarifies that the test is commercial character, not profit motive.
Farasat argues this approach:
Eliminates the need for a separate “sovereign functions” test,
Avoids category-based exclusions, reducing future litigation.
Addressing concerns on exclusion:
Government employees are protected under service law frameworks (Article 309, tribunals, etc.), often stronger than ID Act remedies,
Professionals and establishments are regulated under state Shops & Establishments laws, covering wages, hours, leave, and dispute mechanisms.
He concludes that BWSSB created an overbroad solution to a non-existent problem, and the Court should confine “industry” to genuinely commercial, labour-centric activities.
Sr. Adv. Jaideep Gupta confines his arguments to the core issue: scope of Section 2(j), submitting that once this is settled, other issues may not require reference to a larger bench.
Appearing in matters concerning temple administration, he notes conflicting precedents where temples have been treated as “industry”, largely due to the broad reading in Bangalore Water Supply.
Gupta argues that the Bangalore Water Supply approach is flawed, as it starts with the premise that almost all organised employer–employee activity is “industry”, subject to narrow exceptions.
He urges a “paradigm shift”:
The definition must align with the scheme of the Industrial Disputes Act (strikes, lockouts, retrenchment),
Applying it to institutions like temples leads to incongruous results.
Bench interjects on whether temple activities (books, prasadam, services) could still be non-spiritual.
Gupta responds that such activities are incidental to spiritual purpose, not commercial ventures.
Relying on Justice Jaswant Singh’s dissent, he submits:
“Industry” should be confined to activities carried on commercial lines,
The key test is commercial character—not profit or surplus.
He emphasizes:
Surplus generation or its use is irrelevant,
The decisive factor is whether the activity is fundamentally commercial.
Bench observes that from a workman’s perspective, labour remains the same regardless of profit motive.
Gupta responds that the current law’s worker-centric focus has led to over-expansion, and the definition must instead consider the purpose and nature of the institution.
On Bangalore Water Supply’s charity classification, Gupta argues:
The categories are artificial and non-exhaustive,
They lead to misclassification (e.g., temples being forced into categories).
He stresses that:
The “nature” of activity must include its purpose,
Institutions with predominantly charitable or spiritual character cannot be treated as “industry”, even if some employees are engaged.
Bench engages on “dominant purpose”:
Gupta agrees that predominant commercial character should determine inclusion,
Minor or incidental activities (e.g., CSR, ancillary services) should not alter the classification.
He cites a recent Supreme Court order holding that a temple is not an “industry”, though briefly reasoned.
Addressing concerns on remedies:
Gupta submits that alternative mechanisms (civil courts, tribunals, statutory frameworks) exist,
The Industrial Disputes Act should not be stretched to cover all such activities.
He concludes that the Court must move away from an overbroad definition and confine “industry” to genuinely commercial, economic activities.
Sr. Adv. Abhimanyu Bhandari argues that sovereign functions must include welfare activities, relying on later judgments (1997–98) which expand the concept beyond narrow “regal” functions.
He submits that:
State welfare functions should fall within sovereign functions,
And therefore remain outside the scope of “industry”.
On profit motive vs commercial character, Bhandari contends:
It is not necessary that an activity be profit-driven,
It is sufficient if it is carried out in a commercial sense.
He notes that Bangalore Water Supply criticised this distinction (para 136), but argues:
There can be activities conducted on commercial lines as welfare measures,
Without profit being the primary objective.
Supporting the Safdarjung Hospital approach, he submits:
The law should recognise commercial character without insisting on profit motive,
And allow for state-led welfare activities with economic elements to remain outside “industry”.
He concludes that a broader understanding of sovereign functions + flexible commercial test better reflects the statutory scheme.
Adv. Saket Sikri argues that Bangalore Water Supply (para 113) deals only with research linked to industrial growth and wealth generation, not government research bodies.
He submits that institutions like ICMR-type organisations:
Operate in discharge of constitutional obligations and DPSPs,
Focus on public health, welfare, and public good, not commercial output.
Sikri contends that such bodies:
Do not engage in production or distribution of goods/services,
Therefore fail the “triple test”, particularly its third limb.
He emphasizes that:
Their activities are not aimed at industrial or economic gain,
And hence should not be classified as “industry”.
Adv. Verma, appearing for AIIMS, submits that it has been treated as an “industry” following Bangalore Water Supply, including in later rulings.
He supports the view that:
The triple test is correct but incomplete,
And must be supplemented with a “commercial sense” limitation, as argued in Safdarjung.
Referring to earlier precedents, he submits:
The term “undertaking” must be read as analogous to business/trade,
The correct test is whether the activity has an economic/commercial character, not merely organisation of labour.
On AIIMS specifically, he clarifies:
Its primary functions are research and education,
Patient care is incidental, not the core objective.
Citing case law (e.g., research institutions), he argues:
Where research contributes to efficiency, cost reduction, or economic output, it may fall within “industry”,
But purely public-oriented research may not.
He also highlights practical concerns:
In institutions like AIIMS, industrial dispute mechanisms (e.g., strikes) can harm patient care,
Hence, a permanent negotiation mechanism has been evolved instead of resorting to industrial action.
Verma submits that the Court must adopt a balanced interpretation, recognising:
The need for labour protections,
While ensuring critical public institutions are not disrupted.
Sr. Adv. Indira Jaising begins by challenging the very basis of the reference, submitting that it is founded on an incorrect assumption of conflict between precedents.
She argues:
There is no real conflict between Conservator of Forests and P. Ramanatha Aiyar-type rulings,
The latter is fact-specific and does not lay down a contrary principle.
Primary submission:
The reference need not be answered at all, for three reasons:No conflict exists,
Bangalore Water Supply is a 7-judge decision (despite dissents) and remains binding,
A new legislative regime (Industrial Relations Code, 2020) now governs the field.
On bench strength, she strongly contests arguments at the Bar:
Bangalore Water Supply is not a 5-judge ruling but a 7-judge judgment,
It cannot be diluted by treating it as anything lesser.
Bench engages on how the matter reached 7 judges; reference passages from the judgment are discussed.
Jaising points out that:
The Court itself in Bangalore Water Supply lamented legislative inaction,
Parliament has now responded through the 2020 Code (brought into force in 2025).
Reading the new definition of “industry”, she highlights:
It is largely a legislative adoption of Bangalore Water Supply,
Including features like:
No requirement of profit motive,
Inclusion of systematic activity with employer–employee cooperation.
However, she flags ambiguities in exclusions, particularly:
“Charitable” and “social” activities,
Lack of clear statutory definitions, which may create future disputes.
She submits that:
Deciding this reference may impact both workers and employers,
And risks overlapping with the new statutory regime.
Bench clarifies that:
The Court is interpreting the old law,
Any ruling would be confined to the pre-Code regime.
Jaising responds that:
Even so, the Court must be cautious,
As its interpretation may indirectly influence how new exclusions (e.g., charity) are understood.
She concludes by reiterating:
The reference is unnecessary,
And the Court should avoid rendering an opinion where legislative intervention has already occurred.
The matter will be taken after Lunch.
The Constitution Bench resumes after lunch and Sr Adv Indira Jaising gives her submissions.
Sr. Adv. Indira Jaising defends Bangalore Water Supply, submitting that it was decided using settled principles of statutory interpretation, particularly for beneficial legislation.
She argues that:
The Industrial Disputes Act is a beneficial statute,
It must be interpreted in light of Directive Principles (Part IV), the object of the Act, and its social purpose.
Relying on Justice Beg’s opinion, she submits it offers a clear and concise articulation of how “industry” should be interpreted within the statutory scheme.
Core submission:
The Act’s primary purpose is access to justice for workers, especially:Protection against unfair dismissal,
Relief of reinstatement (unlike civil courts),
Safeguards against “hire and fire” practices.
She highlights the significance of:
Section 11A and rulings like Firestone,
Which empower labour courts to reappreciate evidence and modify punishment.
Jaising emphasizes:
Labour law has two components:
Security of employment (core protection),
Welfare benefits (gratuity, PF, etc.).
She argues that excluding entities from “industry” removes access to these remedies, leaving workers without effective recourse.
Bench queries on overlap with other protections (e.g., Articles 309/311, tribunals).
Jaising responds that:
Those already covered need not rely on the ID Act,
But large sections of workers fall outside such protections.
On charitable institutions, she strongly opposes exclusion:
Workers’ rights cannot depend on whether the employer is charitable,
The triple test applies regardless of profit/surplus.
She notes:
Many institutions (hospitals, universities, trusts) are “charitable” in tax law, yet operate with structured employment systems,
Workers in such institutions still require protection.
Bench raises concerns about the scope of “industry” and access being tied to the definition.
Jaising responds that:
The definition is the gateway,
Denying inclusion denies access to justice.
On sovereign functions, she submits:
The concept must be narrowly confined to inalienable functions (e.g., defence, law-making),
Welfare and economic activities cannot be excluded merely by labelling them sovereign.
She cautions against:
Over-narrowing or over-expanding the definition,
Emphasizing that Bangalore Water Supply carefully balances both extremes.
She concludes that:
The judgment has stood for decades,
No case is made out for reconsideration,
And any dilution would undermine worker protections and access to justice.
He highlights practical risks:
Pending cases may be derailed or reset,
Reinterpretation post-2025 repeal creates uncertainty for pipeline matters.
Singh argues the reference itself is flawed:
No real conflict in precedent,
Issues framed by the 5-judge bench do not arise from the judgment.
On sovereign functions, he submits:
Bangalore Water Supply actually narrowed the doctrine,
General law applies to the State unless expressly exempted.
He stresses that the ID Act provides unique protections (e.g., reinstatement, adjudication) not available under other laws.