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18. I would also like to make a few observations about the so-called 'sovereign' functions which have been placed outside the field of industry. I do not feel happy about the use of the term 'sovereign' here. I think that the term 'sovereign' should be reversed technically and more correctly, for the sphere of ultimate decisions. Sovereignty operates on a sovereign plane of its own as 1 suggested in Karnataka Bharati's case , supported by a quotation from Ernest Barker's "Social and Political Theory". Again, the term "Regal" from which the term "sovereign" functions appears to be deprived, seems to be a misfit in a Republic where the citizen shares the political sovereignty in which he has even a legal share however small inasmuch as he exercises the right to vote. What is meant by the use of the term 'sovereign', in relation to the activities of the State, is more accurately brought out by using the term 'governmental' functions although there are difficulties here also inasmuch as the Government has entered largely now fields of industry. Therefore, only those services which are governed by separate rules and constitutional provisions, such as Articles 310 and 311 should, strictly speaking, be excluded from the sphere of industry by necessary implication.

5. Subsequently, the Apex Court has again considered the case of Bangalore Water Supply (supra) in connection with what is the sovereign function of the State. This aspect has been examined by the Apex Court in case of Chief Conservator of Forests v. J.M. Kondhare reported in AIR 1996 SC 2898. Relevant observations made in Para 7 are reproduced as under:

7. As per the Bangalore Water Supply case AIR 1978 SC 548, 'sovereign functions strictly understood' alone qualify for exemption and not the welfare activities or economic adventures under taken by the Government. This is not all. A rider has been added that even in the departments discharging sovereign functions, if there are units which are industries and they are substantially severable, then, they can be considered to be an industry. As to which activities of the Government could be called 'sovereign functions strictly understood' has not been spelt out in the aforesaid case.
In Paras 12 and 13 of the said decision, it has been observed by the Apex Court as under:
12. We may not go by the labels. Let us reach the hub. And the same is that the dichotomy of sovereign and non-sovereign functions does not really exist, it would all depend on the nature of power and manner of its exercise, as observed in Para 23 of Nagendra Rao's case 1994 AIR SCW 3753. As per the decision in this case, one of the tests to determine whether the executive function is sovereign in nature is to find out whether the State is answerable for such action in Courts of Law. It was stated by Sahai, J. that acts like defence of the country, raising armed forces and maintaining it, making peace or war, foreign affairs, power to acquire and retain territory, are functions which are indicative or external sovereignty and are political in nature. They are, therefore, not amenable to the jurisdiction of ordinary Civil Court inasmuch as the State is immune from being sued in such matters. But then, according to this decision, the immunity ends there. It was then observed that in a Welfare State, functions of the State are not only the defence of the country or administration of justice or maintaining law and Order, but extends to regulating and controlling the activities of people in almost every sphere, educational, commercial, social, economic, political and even marital. Because of this, the demarcating line between sovereign and non-sovereign powers has largely disappeared.
13. The aforesaid shows that if we were to extend the concept of sovereign function to include all welfare activities as contemplated on behalf of the appellants, the ratio in Bangalore Water Supply case , would get eroded, and substantially, we would demur to do so on the face what was stated in the aforesaid case according to which except the strictly understood sovereign function, welfare activities of the State would come within the purview of the definition of industry, and not only this, even within the wider circle of sovereign function, there may be an inner circle encompassing some units which could be considered as industry if substantially severable.