Triple test, adrift

Why in the News

On 20 August 2026, a nine judge Bench of the Supreme Court of India delivered a judgment on the correctness of the ruling in Bangalore Water Supply and Sewerage Board vs A. Rajappa (1978). That 1978 judgment laid down the “Triple Test” for what counts as an “industry” under Section 2(j) of the Industrial Disputes Act, 1947. The present Bench left the Triple Test standing for all pending disputes under the older Act. A majority of the same Bench also ruled that the 1978 judgment will not be a “sheet anchor” for interpreting Section 2(p) of the Industrial Relations Code, 2020. The tension is that Section 2(p) itself reproduces much of the Triple Test’s essence, so an interpretive framework has been severed from a provision that continues to embody it.

What is the “Triple Test” on what counts as an “industry”?

1. The three conditions: An activity qualifies as an industry where three conditions are met together: a systematic activity, employer-employee cooperation, and production or distribution of goods and services to satisfy human wants other than those that are purely religious or spiritual.
2. Profit is irrelevant: Profit motive plays no part in the determination. What matters is the nature of the activity itself, so a loss making or non-commercial body can still be an industry.
3. The single exclusion: Only “sovereign functions” stand outside the definition, which is a narrow carve out rather than a general exemption for the State.

How did the reference reach a nine judge Bench?

1. The origin: The Triple Test was laid down in the 1978 judgment, which read Section 2(j) of the Industrial Disputes Act, 1947 expansively.
2. The doubt: A five judge Bench in State of U.P. vs Jai Bir Singh (2005) raised a doubt about that definition.
3. The escalation: A seven judge Bench then sent the question to the current nine judge Bench.
4. The statute changed while the reference was pending: The Industrial Disputes Act, 1947 was repealed on 21 November 2025, when the Industrial Relations Code, 2020 came into force.
5. The Bench therefore faced two statutes: It had to decide the status of the Triple Test both for disputes still pending under the repealed Act and for interpretation of the successor provision, which is why the ruling splits along those two lines.

What did the majority and the dissent hold?

1. Pending disputes are unaffected: The Bench, led by the Chief Justice of India, left the Triple Test standing for all pending disputes under the older Industrial Disputes Act, 1947.
2. The anchor was removed for the new Code: A majority of the nine judge Bench ruled that the 1978 judgment will not be a “sheet anchor” for interpreting Section 2(p) of the Industrial Relations Code, 2020.
3. The dissent went further than disagreement: The dissenting opinion held that the reference itself was unnecessary and that the Triple Test requires no interference at all.
4. The dissent was not isolated: That view was shared by three other judges on the Bench, so the split on the reference question was narrow rather than lopsided.

Why does an expansive definition of “industry” matter more now than in 1978?

1. The workforce has moved: Since 1978, and particularly after the liberalisation and privatisation reforms of 1991, a far higher number of workers have moved to the private sector, out of the security of public employment.
2. Security no longer comes from the employer: For a worker outside public employment, statutory coverage rather than employment status is what provides protection.
3. Definition decides access: Whether an establishment is an “industry” determines whether its workers can raise an industrial dispute at all, so the definition is the gateway to every protection that follows.
4. Most of the workforce is outside formal protection: About 90 per cent of India’s workforce is informal, and nearly 58 per cent of salaried workers still lack a written contract.
5. The expansive reading is therefore a bulwark: An expansive definition of industry is more necessary now than it was in 1978, precisely because the cushion of public employment has shrunk.

Was the Triple Test a pro-labour device or a framework for industrial peace?

1. It was not merely pro-labour: The Triple Test was not only a device for extending worker protection, though it is usually described that way.
2. It brought restrictions with it: An expansive definition of industry brought with it not just the protections of the Industrial Disputes Act, 1947 but also its restrictions.
3. The employer gained a defined route: It gave employers a regulated route to retrenchment and closure, rather than leaving those decisions to be contested without a framework.
4. Workers accepted a limit in return: It carried a bar on workers striking at will, so the coverage came with a procedural discipline on industrial action.
5. The net effect was industrial peace: In essence the Triple Test allowed for industrial peace rather than worker welfare alone, which is what makes its removal a loss to both sides rather than to one.

Why is setting the 1978 judgment aside difficult to justify?

1. The successor provision did not change the test: Section 2(p) of the Industrial Relations Code, 2020 does not move away from the Triple Test formula and reproduces much of its essence.
2. The reasoning does not follow: It is therefore difficult to understand why the 1978 judgment has to be set aside when Section 2(p) itself comes up for interpretation.
3. A framework, not just a precedent, was cut away: Severing that principle from the Code cuts away the interpretive framework that allowed such disputes to be resolved at all.
4. Two footings now coexist: Pending disputes under the repealed Act will be decided on the Triple Test, and disputes under the Code will be decided without it as an anchor, on a definition that says much the same thing.
5. The burden shifts to the lower courts: It is now incumbent upon courts and tribunals to ensure that a change of statute is not read as a change of intent, and they must do so with the anchor removed.

Challenges to the definition of “industry” under the Industrial Relations Code, 2020

1. Litigation will restart from zero: With the 1978 judgment displaced as the anchor, every category of establishment settled over four decades becomes arguable again. Eg. Hospitals, educational institutions and charitable bodies were brought within the definition on the strength of that judgment. Fix. Insert a statutory explanation to Section 2(p) listing the categories expressly included and excluded, so the question is settled by text rather than by fresh litigation.
2. The “sovereign functions” exclusion has no statutory boundary: The carve out is judicially defined, so its width expands or contracts with each ruling rather than by legislative choice. Eg. Municipal and public utility bodies performing statutory duties have repeatedly contested their status as industries. Fix. Define sovereign functions in the Code by reference to a listed set of constitutional functions.
3. Threshold changes shrink the protected group: Raising the retrenchment and closure approval threshold reduces how many workers the framework covers regardless of how “industry” is defined. Eg. The Industrial Relations Code, 2020 raises the closure and retrenchment threshold from 100 to 300 workers. Fix. Pair the higher threshold with a statutory retrenchment compensation escalator and a funded reskilling entitlement.
4. Platform and contract work sits outside the frame: The employer-employee cooperation limb assumes an identifiable employer, which app-mediated and multi-layered contract work does not supply. Eg. Aggregator platforms classify workers as partners rather than employees, which places them outside the industrial dispute route. Fix. Deem an aggregator to be the principal employer for the purpose of dispute resolution where it controls pricing and task allocation.
5. Two parallel regimes will run for years: Pending disputes under the repealed Act and new disputes under the Code will be decided on different interpretive footings for as long as the backlog lasts. Eg. Industrial disputes routinely take a decade or more to reach final decision. Fix. Issue a transitional provision directing that Section 2(p) be construed consistently with the settled position under Section 2(j) for a stated period.
6. Tribunal capacity has not been strengthened: A framework that shifts interpretive burden to tribunals fails where those tribunals are understaffed and slow. Eg. Industrial tribunals and labour courts carry long standing vacancies alongside a large pending case load. Fix. Fill sanctioned tribunal posts on a fixed calendar and publish disposal timelines for industrial dispute references.

Conclusion

The nine judge Bench preserved the Triple Test where it no longer decides much and removed it where it would have decided most. The relationship between the successor provision and the test, set out above, is what makes that split hard to defend. The dissenting view, that the reference was unnecessary and the test required no interference, is the more coherent reading of a workforce that has moved into private employment since 1978 and needs an expansive definition more, not less. It now falls to courts and tribunals to ensure that a change of statute is not read as a change of intent, without the anchor that would have made that straightforward.

Matching Previous Year Question

“[2024, GS3, 15 marks] Discuss the merits and demerits of the four ‘Labour Codes’ in the context of labour market reforms in India. What has been the progress so far in this regard?”