Bangalore Water Supply test leaves 9 judge bench in awkward posture

The Supreme Court’s nine-judge Constitution Bench judgment on what constitutes an “industry” under the Industrial Disputes Act, 1947, raises an important question that the judgment itself does not answer with sufficient clarity: does the Chief Justice of India’s reformulation of the 1978 Bangalore Water Supply test command a majority of the nine-judge bench?

The operative portion, read out on August 20, was understood as a 5:4 verdict, with CJI Surya Kant and justices Satish Chandra Sharma, Alok Aradhe, Vipul M Pancholi and PS Narasimha forming the majority on the need to refine the law. But the judgment released subsequently reveals a more complicated picture.

The CJI’s opinion is expressly authored “on behalf of himself, and justices Sharma, Aradhe and Pancholi” – making four judges.

The detailed judgment released a day later however depicts that Justice Narasimha does not actually concur with the CJI’s reformulation. His opinion describes and engages with the CJI’s proposed approach, but ultimately says that the reference need not be answered on merits because the Industrial Disputes Act has been repealed and replaced by the Industrial Relations Code. He expressly favours allowing pending disputes to continue under Bangalore Water Supply rather than creating a new test for them.

That leaves the judgment with an unusual numerical problem: four judges favour the CJI’s reformulation; four reject it; and the tie-breaker judge does not answer the substantive question. The judgment does not expressly explain how this translates into a majority holding on the new test.

The CJI’s opinion represents a substantial departure from the expansive approach in Bangalore Water Supply & Sewerage Board Vs A Rajappa, the 1978 seven-judge judgment that evolved the “triple test”.

The new approach retains the basic ingredients of organised activity and employer-employee cooperation, but gives greater prominence to the nature and character of the activity and its commercial character. The CJI’s opinion says that the nature of the activity and employer-employee cooperation have to be examined together and that commercial character cannot simply be disregarded.

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The judgment also makes clear that the absence of a profit motive does not automatically take an activity outside the definition. What matters is whether the activity bears the indicia of an organised economic or commercial enterprise. Activities wholly divorced from commercial or economic character would ordinarily fall outside Section 2(j).

This is plainly a new formulation, intended to recalibrate the 1978 test.

But the opinion is explicitly a four-judge opinion. There is no indication in its opening that Justice Narasimha is joining it on this substantive question.

That distinction matters because the four other judges are unequivocal in rejecting the reformulation.

Justices BV Nagarathna and Dipankar Datta hold that Bangalore Water Supply correctly laid down the law.