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1985 Supreme(Kar) 364
Karnataka High Court
Judges : M.Rama Jois
STUMPP SCHUELE AND SOMAPPA LTD.AND M.SHIVKUMAR - Appellant
Versus
STATE OF KARNATAKA, UNION OF INDIA AND WORKMEN OF ELECTRONIC DIVISIONS OF - Respondent
Writ Petition 10494 Of 1985
Decided On : 09/24/1985
The right to close down a business is a fundamental right guaranteed under Article 19(1)(g) of the Constitution of India. Any restriction on this right must be reasonable and necessary in the public interest.
Headnote:
The court held that Section 25-O of the Industrial Disputes Act, 1947, which requires the permission of the appropriate Government for closing down an industry to which Part V-B of the Act applies, is void on the ground that it is violative of the fundamental right guaranteed under Art. 19 (1) (g) of the Constitution of India.
Fact of the Case:
The petitioners, a public limited company and one of its shareholders, challenged the constitutional validity of Section 25-O of the Industrial Disputes Act, 1947, which requires the permission of the appropriate Government for closing down an industry to which Part V-B of the Act applies. The petitioners argued that the provision violated their fundamental right to do business under Article 19(1)(g) of the Constitution. The Union of India, in its statement of objections, submitted that the restrictions imposed by Section 25-O were reasonable and necessary to protect the interests of workers and maintain industrial peace.
Finding of the Court:
The court found that Section 25-O of the Industrial Disputes Act, 1947, was violative of the fundamental right to do business under Article 19(1)(g) of the Constitution. The court held that the provision was unreasonable and arbitrary, as it gave the Government unfettered discretion to refuse permission to close down an industry, even if the reasons for closure were genuine and valid. The court also held that the provision did not provide for any meaningful review of the Government's decision, and that the requirement of recording reasons for refusing permission was not sufficient to save the provision from being unconstitutional.
Issues: Whether Section 25-O of the Industrial Disputes Act, 1947, which requires the permission of the appropriate Government for closing down an industry to which Part V-B of the Act applies, is violative of the fundamental right guaranteed under Art. 19 (1) (g) of the Constitution of India?
Ratio Decidendi: The court held that Section 25-O of the Industrial Disputes Act, 1947, was violative of the fundamental right to do business under Article 19(1)(g) of the Constitution. The court reasoned that the provision was unreasonable and arbitrary, as it gave the Government unfettered discretion to refuse permission to close down an industry, even if the reasons for closure were genuine and valid. The court also held that the provision did not provide for any meaningful review of the Government's decision, and that the requirement of recording reasons for refusing permission was not sufficient to save the provision from being unconstitutional.
Final Decision: The court allowed the writ petitions and declared Section 25-O of the Industrial Disputes Act, 1947, to be invalid as offending Art. 19 (1) (g) of the Constitution. The court also issued a writ of mandamus to the respondents not to enforce the provisions of Section 25-O of the Act against the petitioners.
( 2 ) THE facts and circumstances which have given rise to the above question, briefly, are as follows :
(i) (a) Prior to the amendment of the Act by the Industrial Disputes Amendment Act, 1976, there was no condition imposed by any of the provisions of the Act requiring an owner of an industry to secure the permission of the appropriate Government to close down the industry. Similarly there was no such condition for effecting lay-off or retrenchment. With the object of imposing restraints on the decisions of the owners of industries in the matter of laying off or retrenching their workmen and also in the matter of closures, with the object of protecting the workmen against rendering them unemployed, and also to maintain the tempo of production and productivity, part V-B was inserted into the Act containing Ss. 25-K and 25-S. This chapter was made applicable to industries which are not seasonal and which are factories or plantations or mines employing not less than 300 employees vide Ss. 25-K and 25-L. In particular S. 25-O which was made applicable to all industries to which Part V-B was applicable except industries engaged in construction of buildings, roads, etc. , provided that an owner could close down his industry only with the previous approval of the appropriate Government. Section 25-R made the act of closure of an industry without prior permission as also an act of closure contrary to the direction of the Government issued under S. 25 (O) or 25 (P), punishable with imprisonment and/or fine to the extent specified in sub-Ss. (1), (2) and (3) of S. 25 (R ).
(b) The Supreme Court was called upon to consider the constitutional validity of S. 25 (O) in the case of Excel Wear v. Union of India [1978-II LLJ 527]. The Supreme Court declared the section void as offending Art. 19 (1) (g) of the Constitution. (c) Thereafter a new S. 25-O was inserted into the Act with certain modifications, by the industrial Disputes (Amendment) Act 1982 (Act 46 of 1982 ). By this amendment Chapter V-B which was earlier made applicable to industries employing not less than 300 workmen was made applicable to industries employing not less than 100 workmen. (ii) The first petitioner is a public limited company registered under the Companies Act. It was incorporated as a Company on 19th December, 1969. It has established a spring manufacturing unit at Bangalore. The second petitioner is a share-holder of the first petitioner-company. In the spring factory, the company has employed about 1000 workmen. There was another company at bangalore by name 'nippon Electronics (India) Limited'. The financial position of the said company became precarious and was on the verge of closure in the year 1981. According to the petitioners, the nationalised banks and some of the public financial institutions who had advanced money to Nippon Electronics (India) Limited, brought pressure on the petitioner-company to take over Nippon Electronic (India) Limited. Though the petitioner was unwilling to take over that sick unit, it had to yield to the pressure of the financial institutions as they were also financiers to the petitioner-company. Therefore, it was taken over with effect from 31st December, 1981. The amalgamation was approved and given effect to with effect from 31st December, 1981 by the order of the High Court dated 6th June, 1984. After the change of management, the petitioner-company tried to revive the sick unit. A capital investment of
