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SUPREME COURT OF INDIA
SANJAY KAROL, PRASHANT KUMAR MISHRA, JJ.
Harinagar Sugar Mills Ltd. (Biscuit Division) & Anr. – Appellants
Versus
State of Maharashtra & Ors. – Respondents
Civil Appeal No. 7372 of 2025 (Arising out of SLP(C)No.4645/2023), Civil Appeal No. of 2025 (Arising out of SLP(C)No.4268/2023)
Decided on : 04-06-2025
Industrial Disputes Act, 1947 – Section 25-O(3) – Constitution of India – Article 19(1)(g) – Closure of an undertaking – If there exists freedom to set up and run a trade/business as one sees fit, necessarily, there has to be a set of rights vesting with proprietor/owner to take decisions as may be in his best interest – At the same time, law does not permit such owner or proprietor to take any and all decisions without having considered and accounted for impact that it shall have on employees or workers that are part of this establishment – Article 19(1)(g) includes right to shut down a business but subject to reasonable restriction – An employer seeking to close his business must show compelling and overriding circumstances – There is nothing on record to show that Deputy Secretary has been duly authorised to conduct communication and/or accept or reject applications for closure made by industrial units – Concerned authority in that regard is only Minister – There is no express authority resting with Deputy Secretary – Order accepting or rejecting application for closure is an administrative order – Administrative authorities are also required to give reasons for a decision made – Appropriate Government failed to make and communicate any order on application for closure – Deemed closure would come into effect – There did indeed exist sufficient compelling circumstances for closure. (Paras 10, 13, 15, 16, 18 and 20)
Facts of the case:
Points for consideration are: –
A. Whether the appellants would be entitled to the relief of deemed closure, as on 27th October 2019 by virtue of the deeming fiction present in Section 25-O(3) of Industrial Disputes Act, 1947?
B. What would be meaning of phrase ‘appropriate Government’ and whether in facts of this case, it was appropriate Government acting in the matter of closure - if not what is effect in law, thereof?
Findings of Court:
Money paid to employees by orders of High Court in the pendency of the writ petitions would not be recoverable from them.
Result : Appeals allowed.
Based on
JUDGMENT :
SANJAY KAROL J.
This judgment, for clarity and ease of reference, is divided as follows:
| TABLE OF CONTENTS | |
| THE APPEALS | |
| BACKGROUND TO THE WRIT PETITIONS | |
| THE IMPUGNED JUDGMENT | |
| SUBMISSIONS OF THE PARTIES | |
| A. Appellants | |
| B. Respondents | |
| QUESTIONS TO BE CONSIDERED | |
| ANALYSIS AND DISCUSSION | |
| CONCLUSION | |
Leave Granted.
THE APPEALS
2. These appeals by special leave, question the correctness of a judgment and order passed by the High Court of Judicature at Bombay, dated 17th February 20231[Hereinafter ‘impugned judgment’], in Writ Petition No.3447 of 2019 and Writ Petition No.3397 of 2019, preferred by the appellants herein in Civil Appeal arising out of SLP(C)No.4268 of 2019 and by the appellant in Civil Appeal arising out of SLP(C)No.4565 of 2023, respectively.
BACKGROUND TO THE WRIT PETITIONS
3. The factual backdrop in which the writ petitions came to be filed is indisputably identical. As such we refer to the facts of the first appeal, which are as below :
3.1 Harinagar Sugar Mills Limited (Biscuit Division) 2[Abbreviated as ‘HSML’] is a company incorporated under the Companies Act, 1956 and was engaged in biscuit manufacturing for Britannia Industries Limited3[Abbreviated as ‘BIL’].
3.2 Such manufacturing by HSML had been exclusively for BIL, and had been ongoing for more than three decades, under Job Work Agreements4[Abbreviated as ‘JWA’], granted by the latter to the former and extended from time to time.
3.3 JWA was terminated by BIL with effect from 20th November 2019, vide letter dated 24th May 2019, stating that the 180-day notice period, as mandated by clause 20.3.1 of the JWA signed on 22nd May 2007, would begin from 1st June 2019. The letter is extracted as under :-
| “ANNEXURE P/1 BRITANNIA INDUSTRIES LIMITED Prestige Shantiniketan, White Field Main Road Mahadevpura Post, Bengaluru-560048 Without prejudice By Speed Post/Courier/Email Date: 24th May 2019 To, M/s Harinagar Sugar Mills Limited 207, Kalbaddevi Road, Mumbai-400002, Maharashtra, India CC: World Trade Centre, Centre-1, 10th Floor, Caffe Parade, Mumbai-400 005 Kind Attention : Mr. Ashok Kumar Jasrpuria Sub : Termination of the job work Agreement Ref: a. Job work Agreement dated 22nd May, 2007. b. Job Work Agreement Renewal dated 23rd Oct, 2013 (effective from 18th Feb 2013 till 17th Feb 2023) Dear Sir, We refer to job work agreement dated 22nd May, 2007 entered for period of 10 years effective from 21st February, 2003 and renewed on same terms and conditions for another period of 10 years effective from 18th February, 2013 whereby based on your representations, we have appointed you as our Contract Manufacturer on the terms and conditions contained therein. Pursuant to clause 20.3.1 of the Job Work Agreement, we hereby serve you One Hundred Eight (180) days written notice commencing from 1st June 2019 (“Effective date”). The business relationship between the parties under the Agreement shall stand terminated on the close of business hours of 27th November, 2019. You are requested to discontinue the operations under the agreement accordingly upon termination and cease to the know-how-return, all copies of the Know- how without retaining any part thereof, and deliver entre quantity of goods manufactured, ingredients, packing material and Raw Material etc. which are in your possession or custody as per the terms of the agreement. Further, you are requested to return all the documents containing information relating to products and Intellectual Property Rights of the Company and refrain from sharing, exchanging or selling or making any copies, summaries or transcripts of confidential information of the Company. Sd/- Britannia Industries Ltd.” (Emphasis supplied) |
3.4 Resultantly, applications for closure of business were made to the competent author
Closure of an undertaking – An employer seeking to close his business must show compelling and overriding circumstances – Order accepting or rejecting application for closure is an administrative ord....
The deeming fiction under Sec. 25-O(3) of the ID Act is not triggered if the closure applications are incomplete and deficiencies are communicated by the State Government within 60 days. The petition....
The court upheld the legality of the closure of the industrial establishment, affirming that the majority acceptance of a severance package by workers binds all, including dissenting individuals.
The provisions of Section 25-O of the Industrial Disputes Act are directory, allowing for closure applications to be valid even if adjudicated after one year from the refusal of closure permission.
The court established that a closure permitted under the Industrial Disputes Act remains valid unless successfully challenged within a reasonable timeframe.
The refusal to permit closure of a business under Section 25(o) of the Industrial Disputes Act, 1947 was arbitrary and not sustainable, as the employer is not required to submit restructuring plans.
Closure of business does not constitute retrenchment under the Industrial Disputes Act, 1947, reaffirming that termination due to closure is outside statutory definitions of retrenchment.
The validity of closure negates grounds for reinstatement unless framed properly within statutory provisions under the Industrial Disputes Act.
The main legal point established in the judgment is that the consequences of an illegal closure are statutorily prescribed, and the workmen are entitled to all the benefits under any law for the time....
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