TaxTMI 
TaxTMI 
2025 (6) TMI 529
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....ND DISCUSSION ............................................................ 24 CONCLUSION ........................................................................................ 42 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 2023 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) Abbreviated as 'HSML' is a company incorporated under the Companies Act, 1956 and was engaged in biscuit manufacturing for Britannia Industries Limited Abbreviated as 'BIL'. 3.2 Such manufacturing by HSML had been exclusively for BIL, and had been ongoing for more than three decades, unde....
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....a Industries Ltd." (Emphasis supplied) 3.4 Resultantly, applications for closure of business were made to the competent authorities on 26th August 2019, as per Form XXIV-C prescribed under Rule 82-B(1) of the Industrial Dispute (Maharashtra) Rules, 1957 read with Section 25-O(1) of the Industrial Disputes Act, 1947 Hereinafter, 'the Act'. The workers of HSML were informed vide closure notices dated 28th August 2019. The letter is extracted below: "HARINAGAR SUGAR MILLS LIMITED (BISCUIT DIVISION) Conductors of the Factory & Business of Shangrilla Food Products Limited Regd. Office : 207 Katbadevi Road, Mumbai-400002 Pl. Correspondence to: L.B.S. Marg. Bhandup (W), Mumbai-400078. Ref No. Dated : 28.08.2019 From-XXIV-C (To be submitted in triplicate) [See Rule 82-B(1)] From of application for permission of closure to be made by an employer under sub-Section (1) of Section 25-O of the Industrial Disputes Act, 1947 (14 of 1947) To, The Secretary to the Government of Maharashtra Industries, Energy and Labour Department, Mantralaya, Mumbai-32. Sir, Under Section 25-O of the Industrial disputes Act, 1947 (14 of 1947), I hereby inform you that I prop....
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....xtracted. It reads : "ANNEXURE P/5 Government of Maharashtra No. Closure-82019/C.No.3/L-2 Industry, Energy & Labour Dept. Madam Cama Road Hutama Rajguru Chowk Mantralaya, Mumbai-400032 Dated : 25TH September, 2019 To, Authorised Signatory, M/s. Hari Nagar Sugar Mills Limited, L.B.S. Marg, Bhandup (W) Mumbai-400 078. Subject:- Application for obtaining permission U/s. 25(O)(1) for closing down establishment of M/s Hari Nagar Sugar Mills Ltd. at L.B.S. Marg, Bhandup (W), Mumbai-78 Reference: Your application dated 28/8.2019. Sir, With reference to the above referred application, you as authorised signatory of M/s. Hari Nagar Sugar Mills Ltd. have submitted an application to the Government on 28/8/2019 u/s 25(O)(1) of the Industrial Disputes Act, 1947 for closing down the unit at L.B.S. Marg, Bhandup (W) Mumbai-78. 2. On reviewing the said application it is observed that the job contract agreement signed by M/s. Hari Nagar Sugar Mills Ltd. with M/s. Britania Industries Ltd. for production of biscuits will be cancelled with effect from 27.11.2019 and therefore the management of the Company has given the reason that the said Biscuit Div....
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.... result. The Company had then approached other biscuit manufacturers such as M/s. Mondelez India Limited and Us. ITC Ltd. On 15.07.2019, the top management of the Company had meeting with Mr. T. Arunkumar, CMO, Manager of M/s. Mondelez India Limited and then as per his requirement had forwarded e-mail on 24.07.2109. However, thereafter there was no response. Similarly the top management of the Company had discussed with Mr. Divi of M/s. ITC, Foods. However, on 17.07.2019 Mr. Div replied that there is no requirement of contract manufacturing unit to them at present. Once again on 24.07.2019 mail was forwarded to Mr. Divi of M/s. ITC Foods but there was no response to the said mail. We enclose copies of emails forwarded to M/s. Mondelez India Ltd. and Ms. ITC Foods The management of the Company had also talked and discussed with Mr. Ajay Chauhan of Parle Biscuits to provide job work to the Company. However, there was no positive response even from Parle Biscuits. The reason for closing down the manufacturing activities is there is no job work which can be done in the said factory. As stated in the closure application the company for last 32 years was doing only the job work for Br....
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....4.3 Arguments were heard and concluded on 7th February 2023. 4.4 The findings in the impugned judgment can be summarised thus : Firstly, the Court discussed the scheme of Section 25-O of the Act and found that an application for closure has to be made to a competent authority at least 90 days prior to the date from which the closure is sought to be made effective; the reasons for such closure must be clearly stated; on receipt of such application, the 'appropriate Government' is to make an enquiry; provide an opportunity for hearing all concerned - workmen, employer and persons interested in closure, and then pass a reasoned order, also keeping in view interests of the general public. Section 25-O(3) provides that if such an appropriate authority fails to communicate an order made thereby, granting or denying permission within 90 days of the application being preferred, it shall be deemed that the permission was granted at the expiry of 60 days. Other parts of Section 25 of the Act were also taken note of such as the power of review, the remaining in force of the order of the competent authority for a period of one year etc. Secondly, it was observed that the case of the petitio....
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....er 2019 (reproduced supra) was in response to the authorities asking them to resubmit. They supplied thereby, additional reasons for closure and the steps taken to prevent that eventuality. It was held that since the undisputed position is that vide letter dated 10th October 2019 HSML sought to furnish additional reasons, that ipso facto would amount to an acceptance that the application was not complete in all respects. That being the case, the deeming fiction would not come into play. Since the application was deficient, the State Government need not pass orders thereon. It was thereafter held as under: "30....The fact that authority was not convinced with the application of the petitioner and had communicated that cogent reasons are not spelt out in the application would be sufficient to conclude that the authority did not grant the application for closure. What was contemplated by letter dated 25 September 2019 was "re-submission" of the application. Petitioners however chose to add reasons to the pending applications on 10 October 2019. Petitioners failed to submit fresh applications by providing statement of reasons as directed by State Government vide letters dated 25 Sept....
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....25-O(3) will kick in. v. The previous iteration of Section 25-O was struck down by this Court vide its judgment in Excel Wear v. Union of India (1978) 4 SCC 224 on the ground that it did not prescribe a time limit for deciding the applications for closure. It was found that the restrictions were not in accordance with Article 19(6) of the Constitution of India. The amended iteration was upheld vide judgment in Orissa Textile and Steel v. State of Orissa (2002) 2 SCC 578, wherein it was held that the requirement to conduct an enquiry, give a hearing, pass a reasoned order, and also the time limit was the curing of defects present in the previous version of the section. It has been so submitted by the appellants to show that the 60-day requirement is mandatory. If not so observed, it would violate Article 19(1)(g). vi. It has not been shown by the respondents, how the applications made by the appellants are defective/incomplete. Providing of further information cannot mean that the original application was defective. The decision in State of Haryana v. Hitkari Potteries (2001) 10 SCC 74 was relied upon to show that even when the application was belatedly rejected on t....
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....velihood. The stand of the State is in consonance therewith, keeping in view important factors such as genuineness and adequacy of reasons. iv. No question of law arises in the present matter which requires or would justify, the interference of this Court under its jurisdiction under Article 136 of the Constitution of India. v. The deeming provision under Section 25-O(3) of the Act has to be read in continuation with Section 25-O(1) thereof. Since the employees were never informed of the enquiry as contemplated under Section 25-O(2) of the Act and the same never took place, closure cannot be deemed to have been granted thereunder. vi. The incompleteness of the applications was accepted by the appellants themselves since they produced additional reasons. Also, the argument of respondent No.1 that internal noting of the file being used to show that the file had not been delayed, has been adopted by the Respondent-Union. vii. Since the learned Industrial Tribunal had granted stay on 26th November 2019, and the writ petition subject matter of these appeals, was filed before the High Court on the same day, there has been no effective order of closure thus far. viii. The question....
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....thorises legislation which imposes reasonable restrictions on this right in the interests of the general public. It was not disputed that in order to determine the reasonableness of the restriction regard must be had to the nature of the business and the conditions prevailing in that trade. It is obvious that these factors must differ from trade to trade and no hard-andfast rules concerning all trades can be laid down. It can also not be denied that the State has the power to prohibit trades which are illegal or immoral or injurious to the health and welfare of the public. Laws prohibiting trades in noxious or dangerous goods or trafficking in women cannot be held to be illegal as enacting a prohibition and not a mere regulation. The nature of the business is, therefore, an important element in deciding the reasonableness of the restrictions. The right of every citizen to pursue any lawful trade or business is obviously subject to such reasonable conditions as may be deemed by the governing authority of the country essential to the safety, health, peace, order and morals of the community..." Second A Constitution Bench of this Court in Hindustan Antibiotics Ltd. v. Workmen 1966....
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....d forbade strikes in public utility service without a statutory notice in writing. The Act did not make provision for any machinery for settling of industrial disputes. The said Act was repealed and replaced by the Trade Disputes Act, 1929 which started the State intervention in the settlement of industrial disputes and armed the Government with the power which could be used whenever considered fit to intervene in industrial disputes. This Act was amended in the year 1938 authorising the Central and Provincial Governments to appoint Conciliation Officers for mediating in or promoting the settlement of industrial disputes. Shortly thereafter the Government of India promulgated the Defence of India Rules to meet the exigency created by the Second World War. Rule 81-A gave powers to the Government to intervene in industrial disputes and was intended to provide speedy remedies for industrial disputes by referring them compulsorily to conciliation or adjudication by making the awards legally binding on the parties and by prohibiting strikes or lockouts during the pendency of the conciliation or adjudication proceedings. The Industrial Employment (Standing Orders) Act, 1946 was enacted w....
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.... undertaking of an industrial establishment to which this Chapter applies shall, in the prescribed manner, apply, for prior permission at least ninety days before the date on which the intended closure is to become effective, to the appropriate Government, stating clearly the reasons for the intended closure of the undertaking and a copy of such application shall also be served simultaneously on the representatives of the workmen in the prescribed manner: Provided that nothing in this sub-section shall apply to an undertaking set up for the construction of buildings, bridges, roads, canals, dams or for other construction work. (2) Where an application for permission has been made under sub-section (1), the appropriate Government, after making such enquiry as it thinks fit and after giving a reasonable opportunity of being heard to the employer, the workmen and the persons interested in such closure may, having regard to the genuineness and adequacy of the reasons stated by the employer, the interests of the general public and all other relevant factors, by order and for reasons to be recorded in writing, grant or refused to grant such permission and a copy of such order shall be....
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....ht to shut down a business but is, of course, subject to reasonable restrictions. This interplay of Article 19(1)(g) and Section 25-O of the Act engaged in the attention of a Constitution Bench of this Court in Excel Wear (supra), when it was cast with considering the constitutionality of Section 25-O as it then stood. It has subsequently been amended, challenged before this Court and upheld in Orissa Textile and Steel (supra), which we will discuss further ahead. 11. In Excel Wear (supra), N.L Untwalia, J., writing for the Court made some pertinent observations which we see fit to reproduce with profit : "20... But then, as pointed out by this Court in Hatisingh case the right to close down a business is an integral part of the right to carry it on. It is not quite correct to say that a right to close down a business can be equated or placed at par as high as the right not to start and carry on a business at all. The extreme proposition urged on behalf of the employers by equating the two rights and placing them at par is not quite apposite and sound. Equally so, or rather, more emphatically we do reject the extreme contention put forward on behalf of the Labour Unions that rig....
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....d adequate it may become necessary, in the interest of the general public, not to allow closure for some time. Similarly, if the establishment is manufacturing vaccines or drugs for an epidemic which is prevalent at that particular point of time, interest of the general public may require not to allow closure for a particular period of time. We must also take a note of sub-section (7) of the amended Section 25-O which provides that if there are exceptional circumstances or accident in the undertaking or death of the employer or the like, the appropriate government could direct that provision of sub-section (1) would not apply to such an undertaking. This, in our view, makes it clear that the amended Section 25-O recognizes that if there are exceptional circumstances then there could be no compulsion to continue to run the business. It must however be clarified that this Court is not laying down that some difficulty or financial hardship in running the establishment would be sufficient. The employer must show that it has become impossible to continue to run the establishment. Looked at from this point of view, in our view, the restrictions imposed are reasonable and in the interest ....
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....icial Gazette, direct that any power exercisable by it under this Act or rules made thereunder shall, in relation to such matters and subject to such conditions, if any, as may be specified in the direction, be exercisable also,-- (a) where the appropriate Government is Central Government, by such officer or authority subordinate to the Central Government or by the State Government, or by such officer or authority subordinate to the State Government, as may be specified in the notification; and (b) where the appropriate Government is a State Government by such officer or authority subordinate to the State Government as may be specified in the notification." There is nothing on record to show that the Deputy Secretary has been duly authorised to conduct communication and/or accept or reject applications for closure made by industrial units. The concerned authority in that regard is only the Minister. If it is considered that the Minister for Labour himself represents the State Government or is merely an agent of the State Government, then for the Deputy Secretary to act, there ought to have been a notification in that respect. Otherwise, if the Minister for Labour is a dele....
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....application of mind'. To show the same, it is generally prudent that reasons are recorded. In decades past, there was a belief that the Government would be brought to a standstill if it had to provide reasons for each administrative action, keeping in view the fact that it functions through a myriad of agencies and authorities Mahabir Jute Mills Ltd. v. Shibban Lal Saxena, ( 1975 ) 2 SCC 818. Even here, it was stated that when such a decision affects the rights of parties, reasons should be accorded. It may be observed here that Section 25-O specifically provides "by order and for reasons to be recorded in writing," and so, reasons are a statutory necessity. With time, it is now settled that administrative authorities are also required to give reasons for a decision made. In Star Enterprises v. City and Industrial Development Corpn. of Maharashtra Ltd. ( 1990 ) 3 SCC 280, a three-Judge Bench in the context of tenders invited by a corporation which is 'State' within the meaning of Article 12 of the Constitution of India, held as follows in regard to giving reasons for its decisions: "10. In recent times, judicial review of administrative action has become expansive and is becoming....
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....tion. The same conclusion can be reached on a second count - the 'order' suffered from the vice of non-application of mind by the competent authority. 18. Section 25-O provides that the appropriate Government may, after making an enquiry and hearing all the concerned parties, pass an order in writing accepting or rejecting the application for closure. It also provides that if the appropriate Government does not communicate and order within 60 days of the date of application, there shall be deemed closure. We have held that the appropriate Government had not acted in respect of the application made by HSML since the Minister, who was the competent authority, had not applied his mind to the administrative 'order' nor, did the Deputy Secretary have the authority to do so. In other words, the appropriate Government failed to make and communicate any order on the application for closure. The deemed closure would, therefore, come into effect. 19. Separately, we may observe that the reasoning furnished by the Deputy Secretary to reject the application for closure made by HSML is insufficient, and it appears to have been given for the sole purpose of rejecting the application without due....