Labour Law

Bangalore Water Supply and Sewerage Board v. A. Rajappa & Ors.

(1978) 2 SCC 213; AIR 1978 SC 548

Citation: (1978) 2 SCC 213; AIR 1978 SC 548
Court: Supreme Court of India
Date: 21 February 1978
Bench: 7-Judge Bench - Y.V. Chandrachud, C.J.; V.R. Krishna Iyer, P.N. Bhagwati, N.L. Untwalia, D.A. Desai, O. Chinnappa Reddy and Jaswant Singh, JJ.

Facts

The Bangalore Water Supply and Sewerage Board was a statutory body responsible for supplying water and providing sewerage services.
Disputes arose between the Board and categories of its employees.
The Board argued that it was performing an essential governmental and public-welfare function and was therefore not an “industry” under Section 2(j) of the Industrial Disputes Act.
Several connected appeals concerning hospitals, educational bodies, clubs, research organisations and other institutions were considered together.
Earlier Supreme Court decisions had given inconsistent meanings to the term “industry.”
A seven-judge Bench was constituted to settle the governing test.

Issue

What activities fall within “industry” under Section 2(j)?
Whether profit motive, private ownership or commercial character is necessary.
Which governmental, charitable, professional and welfare activities are excluded.
How a mixed organisation containing industrial and non-industrial departments should be classified.

Rule

The Court formulated the triple test:
there must be a systematic activity;
organised through cooperation between employer and employees;
for the production or distribution of goods or services calculated to satisfy human wants and wishes.
Profit motive and capital investment are irrelevant.
The focus is functional: the nature of the activity and the employer–employee cooperation matter more than the legal form of the organisation.
Charitable, statutory and public-sector undertakings may be industries.
Strict sovereign functions—such as core legislative, judicial and inalienable governmental functions—remain outside the definition.
Under the dominant-nature test, an organisation is examined as a whole, while genuinely severable sovereign departments may be excluded.

Application

Water supply and sewerage services were systematically organised and provided through the coordinated labour of the Board’s employees.
These services satisfied important material needs of the community.
The fact that the Board was created by statute and acted for public welfare did not remove its activities from Section 2(j).
Similar services could be, and sometimes were, provided by private or municipal organisations.
The absence of a profit-making objective was therefore immaterial.
The Court rejected a narrow understanding that confined industry to factories or commercial businesses.
Industrial relations can arise wherever an employer organises employees to provide material goods or services.
Hospitals, educational institutions, clubs, charitable bodies and professional organisations could therefore be industries where they met the functional test.
The Court nevertheless recognised limited exclusions:
purely spiritual or religious functions;
small domestic or personal-service arrangements;
organisations substantially operated without employees; and
strictly sovereign governmental activities.
Where an organisation performed several functions, the court should identify its predominant activity.
If the dominant undertaking satisfied the triple test, supporting departments and employees would generally form part of the industry.
The Board’s function was not an inalienable act of sovereignty merely because water supply was essential.
Essentiality and public importance did not equal sovereign character.
The Board therefore fell squarely within the statutory definition.

Conclusion

The Supreme Court held that the Bangalore Water Supply and Sewerage Board was an industry.
It adopted the broad triple test and dominant-nature test as the governing interpretation of Section 2(j).
Current position: the correctness of this interpretation has been placed before a nine-judge Bench. As of the Supreme Court’s order dated 16 February 2026, reconsideration was pending and Bangalore Water Supply had not been overruled.
Use this case for: a systematic employer–employee activity supplying material goods or services is generally an industry, irrespective of profit motive or statutory character.