In which one of the following judgments did the Supreme Court lay down the ‘Triple test’ in respect of the definition of ‘industry’ under the Industrial Disputes Act, 1947 ?

Correct — B, (b) Bangalore Water Supply and Sewerage Board v. R. Rajappa, AIR 1978 SC 548. This is the judgment in which a seven-judge Bench of the Supreme Court laid down the triple test for deciding whether an activity is an 'industry' within section 2(j) of the Industrial Disputes Act, 1947.

Section 2(j) defines industry as 'any business, trade, undertaking, manufacture or calling of employers and includes any calling, service, employment, handicraft, or industrial occupation or avocation of workmen'. The definition is circular enough that its outer limits had to be settled judicially, and Bangalore Water Supply settled them by asking what the activity looks like rather than who runs it or why.

The TRIPLE TEST, as the Court put it, is satisfied where there is:

1. systematic activity; 2. organised by co-operation between employer and employee — the Court's phrase was that it is the co-operation between the two that produces the goods or services, so that the relation of employer and employee is essential; 3. for the production and/or distribution of goods and services calculated to satisfy human wants and wishes.

The Court added the consequences that make the test bite. Absence of a profit motive or a gainful objective is irrelevant, whether the venture is in the public, joint, private or other sector. The true focus is functional and the decisive test is the nature of the activity, with special emphasis on the employer-employee relationship. If the organisation is a trade or business it does not cease to be one because of philanthropy animating the undertaking. On that reasoning hospitals, educational institutions, clubs, research institutes, charitable bodies and statutory corporations were all brought within 'industry', subject to the exceptions the Court itself carved out — sovereign functions strictly understood, certain professions, and clubs and co-operatives of a purely domestic or self-service character.

That is why this citation, and not the others, is the one the item is looking for.

Why the others are wrong

• (a)State of Bombay v. the Hospital Mazdoor Sabha, AIR 1960 SC 610 — This is the right Court and the wrong decade. State of Bombay v. the Hospital Mazdoor Sabha, AIR 1960 SC 610, held that a group of hospitals run by the State was an industry, and it laid down a working test — an activity systematically or habitually undertaken for the production or distribution of goods or for the provision of material services to the community with the help of employees, organised in a manner in which trade or business is generally organised. It is the important precursor, and Bangalore Water Supply approved much of its reasoning. But the formulation known as the TRIPLE TEST, with its three explicit limbs and its express rejection of the profit motive as a criterion, comes from the 1978 seven-judge Bench, not from this two-judge-era decision. A candidate who knows only that a hospital case settled the meaning of industry picks this one.
• (c)State of U.P. v. Jai Bir Singh, (2005)5 SCC 1 — State of U.P. v. Jai Bir Singh, (2005)5 SCC 1 is the case that questioned the triple test rather than the one that laid it down. A five-judge Bench, dealing with whether the social-forestry department of a State was an industry, expressed serious doubts about the width of the Bangalore Water Supply definition and referred the correctness of that decision to a larger Bench of nine or more judges for reconsideration. That reference has not been decided, so Bangalore Water Supply remains the governing authority. The relationship between the two cases is worth carrying: 1978 is the law, 2005 is the pending challenge to it — and a question that asks which judgment LAID DOWN the test cannot be answered by the judgment that doubted it.
• (d)M/s Bharti Airtel Limited v. A.S. Raghavendra [Civil Appeal No. 5187 of 2023] — M/s Bharti Airtel Limited v. A.S. Raghavendra [Civil Appeal No. 5187 of 2023] is a recent Supreme Court decision on a quite different question — whether a particular employee was a 'workman' within section 2(s) of the Industrial Disputes Act, 1947, where the Court held on the facts that a manager performing supervisory and managerial duties was not, and set aside the awards below. It concerns the definition of workman, not the definition of industry, and it lays down no triple test. It is included here as the modern-sounding citation, and its very format gives it away: it carries a case number rather than a law-report reference, which is how a decision too recent to be settled authority is usually cited.

Section 2(j) of the Industrial Disputes Act, 1947 defines 'industry' in words wide enough to cover almost any organised human activity, and the Act's entire machinery — conciliation, adjudication, the definitions of industrial dispute and workman, the protections in Chapters V-A and V-B — hangs on that one word. Bangalore Water Supply and Sewerage Board v. R. Rajappa, decided by a seven-judge Bench in 1978, is the judgment that gave the definition a workable shape. Its triple test asks whether there is systematic activity, organised by co-operation between employer and employee, for the production or distribution of goods and services calculated to satisfy human wants and wishes. Three propositions follow. First, the presence or absence of a profit motive is irrelevant, so charitable and public bodies are not excluded. Second, the test is functional and looks to the nature of the activity, so an undertaking is judged by what it does and not by who owns it. Third, a dominant-nature test applies to a composite body: where an undertaking carries on several activities, the predominant one determines the character of the whole, and a department discharging sovereign functions may be severed. The exceptions the Court preserved are narrow — sovereign functions strictly understood, some liberal and professional callings where the employer-employee co-operation is not the productive element, and clubs or co-operatives that serve only their own members. Jai Bir Singh in 2005 referred the correctness of the decision to a larger Bench, but until that reference is answered the triple test is the law.

Key facts

• Bangalore Water Supply and Sewerage Board v. R. Rajappa, AIR 1978 SC 548, decided by a seven-judge Bench, laid down the triple test for 'industry' under section 2(j) of the Industrial Disputes Act, 1947.
• The three limbs: systematic activity; organised by co-operation between employer and employee; for the production and/or distribution of goods and services calculated to satisfy human wants and wishes.
• Absence of a profit motive or gainful objective is irrelevant, whether in the public, joint, private or other sector.
• The decisive test is functional — the nature of the activity, with special emphasis on the employer-employee relationship.
• On that reasoning hospitals, educational institutions, clubs, research institutes and statutory corporations can be industries.
• Sovereign functions strictly understood, certain professional callings, and purely self-service clubs and co-operatives were left outside.
• For a composite undertaking the dominant nature of the activity determines its character.
• State of Bombay v. Hospital Mazdoor Sabha, AIR 1960 SC 610, was the earlier decision holding State-run hospitals to be an industry.
• State of U.P. v. Jai Bir Singh, (2005) 5 SCC 1, referred the correctness of Bangalore Water Supply to a larger Bench; the reference remains undecided.

Common traps

• Choosing Hospital Mazdoor Sabha because it is the famous hospital case. It laid down the earlier working test, not the triple test.
• Choosing Jai Bir Singh because it is associated with the phrase. It doubted the test and referred it to a larger Bench.
• Treating the profit motive as part of the test. Bangalore Water Supply expressly holds it irrelevant.
• Assuming the reference in Jai Bir Singh has unsettled the law. Until it is decided, the 1978 test governs.

• practice — not a real PYQ

  Which one of the following is NOT a limb of the triple test laid down for 'industry' under the Industrial Disputes Act, 1947 ?

  • (a)Systematic activity
  • (b)Organised by co-operation between employer and employee
  • (c)Carried on with a view to profit or gain
  • (d)For the production or distribution of goods and services calculated to satisfy human wants and wishes

  Answer(c) Carried on with a view to profit or gain

• practice — not a real PYQ

  In which judgment did the Supreme Court refer the correctness of the definition of 'industry' laid down in Bangalore Water Supply and Sewerage Board v. R. Rajappa to a larger Bench ?

  • (a)State of Bombay v. Hospital Mazdoor Sabha
  • (b)State of U.P. v. Jai Bir Singh
  • (c)Bombay Union of Journalists v. State of Bombay
  • (d)D. N. Banerji v. P. R. Mukherjee

  Answer(b) State of U.P. v. Jai Bir Singh