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IN THE HIGH COURT AT CALCUTTA
RAJASEKHAR MANTHA, J.
DIC India Limited and Another – Petitioners
Versus
The State of West Bengal and Others – Respondents
WPA No. 27249 of 2023
Decided On : 28-02-2024
(A) Industrial Disputes Act, 1947 - Section 25(o) - Closure of business - The refusal of the State Government to grant permission for closure of the Kolkata Unit of DIC India Ltd. was found to be arbitrary and not sustainable in law. The court clarified that an employer is not required to submit alternative plans for closure, and the impact on local economy is not a valid ground for refusal. (Paras 8, 10, 14, 15)
(B) Right to Closure - The right to close a business is integral to the freedom of trade under Article 19(1)(g) of the Constitution, and reasonable restrictions may be imposed, but the reasons for closure must be genuine and adequate. (Paras 6, 7)
Facts of the case:
The petitioner sought permission to close its Kolkata manufacturing unit, which was denied by the State Government citing public interest and the impact on local economy and employment. The court found these reasons insufficient and arbitrary.
Findings of Court:
The refusal to grant permission under Section 25(o) was quashed, allowing the petitioner to close its unit.
Issues: The main issue was whether the reasons provided by the State Government for denying closure were valid under the Industrial Disputes Act.
Ratio Decidendi: The court held that the reasons given by the State were not in the interest of the general public as defined by law, and the decision to close was a commercial one not subject to State interference.
Result: Permission granted for closure.
JUDGMENT :
RAJASEKHAR MANTHA, J.
1. This Court has carefully heard the submissions made on behalf of the Additional Secretary, Government of West Bengal, particularly, the Labour Department. The reasons indicated in the order dated February 21, 2024 do not stand to reason or law.
2. The reasons advanced by the Additional Secretary for refusing permission for closure of the petitioner’s business and manufacturing unit at Kolkata are set out as follows:
1. The management of DIC India Ltd. did not submit to the State Government any alternative plan to run the factory.
2. The management of DIC India Ltd. did not submit any re-structuring plan and cost controlling measures to rejuvenate the factory.
3. The management of DIC India Ltd. want to close the Kolkata Unit only but the it will run the Units in other States. The management refuses for closure of Unit of DIC India Ltd. located only in West Bengal to disturb the equilibrium prevailing in the industry in region.
4. The State Government could not be convinced as to whether the management closes the Kolkata Unit of DIC India Ltd. finally and irrevocably. The intention of the management of DIC India Ltd. is not clear. It appears that the management merely intends to close down of the Kolkata Unit of DIC India Ltd.
5. The issues including the livelihood of the 61 Contract Labours, being the person interested in such closure, were not considered.
6. The livelihood of the people around the factory will be affected because such closure.
7. The business and economic activities around the factory will be affected because of such closure.
8. The job and professions on which the livelihood of the large number of the people depend will be affected because of such closure.
9. If the factor is closed then industrialization in the State will be affected adversely.”
3. In addition thereto, it has been stated that there are 61 contractual labourers who are still working in the company and the employer has not indicated as to whether such contractual employees are appropriately secured.
4. Mr. Saha, learned Senior Counsel appearing for the petitioners submits that out of 61 contractual labourers, only 26 remain. The rest have been paid and discharged upon completion of the period of contract. The 26 remaining contractual labourers are required for the purpose of dismantling and securing the remaining facilities at the employer’s manufacturing unit.
5. The other grounds as set out hereinabove indicated by the State, appear to be under the expression “in the interest of the general public” under Section 25 (o) of the Industrial Disputes Act, 1947 read with the definition of closure under Section 2CC thereof.
6. The meaning and purport of the expression “in the interest of general public” has been succinctly explained by the Supreme Court in the case of Orissa Textiles & Steel Ltd. Vs. State of Orissa and others, (2002) 2 SCC 578, particularly at paragraph 80, which is set out hereunder:
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 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 court established that a closure permitted under the Industrial Disputes Act remains valid unless successfully challenged within a reasonable timeframe.
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 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 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 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....
The validity of closure negates grounds for reinstatement unless framed properly within statutory provisions under the Industrial Disputes Act.
The court upheld that the closure of the employer's business complied with statutory provisions, affirming the award of closure compensation to workers under the Industrial Disputes Act.
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