TaxTMI 
TaxTMI 
2025 (6) TMI 529
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................................... 23 ANALYSIS AND 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....
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....l 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 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 Dispu....
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....t by the Deputy Secretary, Government of Maharashtra, informed HSML that they failed to disclose their efforts to prevent closure, nor had they given cogent reasons for closure. They were, therefore, asked to resubmit their application. This letter forms an important aspect of the respondents' case before the High Court and, therefore, it would be appropriate for it to be extracted. 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....
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....eceived your letter dated 25.09.2019 with regard to the aforesaid subject. It is a fact that for last 32 years, the Company used to do job work of manufacturing biscuits only for Britannia Industries Ltd. For manufacturing biscuits for Britannia Industries Ltd., the raw material as well as necessary plant and machinery used to be provided and installed by Britannia Industries Ltd. After receiving termination of Job work agreement from BIL, the Company Immediately persuaded the management of BIL to continue agreement and the job work with the Company. However, said persuasion did not work or yield any 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 24.07.2....
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....9 were the subject matter of challenge before the High Court. THE IMPUGNED JUDGMENT 4. The proceedings before the High Court, the culmination of which was the judgment impugned in these appeals, were as follows: - 4.1 Order dated 28th November 2019 records the statement of Mr. Ravi Kadam, Senior Counsel appearing for HSML that the salaries for the month of November shall be paid without insisting that the employees attend work. It is also recorded therein that the employees shall maintain peace and harmony. 4.2 On the next date, i.e., 12th December 2019 it was directed that the salaries for December be paid on or before 6th January 2020. 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 he....
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....inally came to be approved by Hon'ble Minister with a remark accepting hand written endorsement with further direction that the establishment should be intimated to file application with cogent reasons. In accordance with the above decision of the Hon'ble Minister, the letters dated 25 September 2019 were addressed to petitioners. We therefore repel the objection of the petitioners that the decision in communication was not taken by the Hon'ble Minister." Thirdly, the contention of HSML that the application dated 28th August 2019 was complete in all respects and it ought to have been treated as such was considered. It was submitted that the letter dated 10th October 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 deficie....
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....rnal office file cannot be used to construe what constitutes an order. Reference is made to Bachhittar Singh v. State of Punjab AIR 1963 SC 395; Sethi Auto Services Station v. DDA 2009 (1) SCC 180; and Shanti Sports Club v. Union of India (2009) 15 SCC 705 to submit that the internal file noting does not constitute an order. Furthermore, even such a contention that the letter dated 25th September 2019 is based on such noting is belied, for it does not say so. Instead, it only asks for details of the efforts made to avoid closure. iv. An application for closure can only be disposed of by an order in accordance with Section 25-O(2). If it is not so done, what has been provided for in Section 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 ....
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....tra Rajya Rashtriya Kamgar Sangh (INTUC) has filed written submissions. Their stand is that the impugned judgment is justified and takes the correct interpretation of facts and law. It has been argued therein, inter alia, that : i. The first response of the State to the closure application, i.e., letter dated 25th September 2019 is not within the sphere of challenge. ii. The communication which took place regarding the alleged closure of HSML and Shangrila Appellants in the connected SLP total approximately 300 workers, and non-inclusion of their recognised union in such discussions is absolutely detrimental to the interests of these workers. iii. The intent of Section 25-O is to protect the fundamental rights of the employees, i.e., livelihood. 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 wi....
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....t may be made by the legislature. When it comes to industry which is covered under Article 19, the field of the statute is occupied by the Industrial Disputes Act, 1947. As such, its scope must be set out. First In Cooverjee B. Bharucha v. Excise Commr. ( 1954 ) 1 SCC 18, a Bench of five learned Judges, while dismissing an application under article 32 of the Constitution of India arising from the grant of license to sell country liquor to a person, allegedly in contravention of the Rules set out for such purpose, i.e., in a manner, which according to the petitioner, violated his right under Article 19(1)(g), held : "7. Article 19(1)(g) of the Constitution guarantees that all citizens have the right to practise any profession or to carry on any occupation or trade or business, and subsection (6) of the Article authorises 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 n....
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....t of Objects and Reasons. While interpreting different provisions of the Act, attempt should be made to avoid industrial unrest, secure industrial peace and to provide machinery to secure the end. Conciliation is the most important and desirable way to secure that end. In dealing with industrial disputes, the courts have always emphasized the doctrine of social justice, which is founded on the basic ideal of socio-economic equality as enshrined in the Preamble of our Constitution. While construing the provisions of the Act, the courts have to give them a construction which should help in achieving the object of the Act. 6. The history of the legislation with respect to the industrial disputes would show that for the first time in the year 1920 the Trade Disputes Act was enacted which provided for courts of enquiry and Conciliation Boards and 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 Governm....
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....not supposed to deny the relief on account of the procedural wrangles. The Act contemplates realistic and effective negotiations, conciliation and adjudication as per the need of society keeping in view the fast-changing social norms of a developing country like India. It appears to us that the High Court has adopted a casual approach in deciding the matter apparently ignoring the purpose, aim and object of the Act." 8. Since both the questions that arise for our consideration are intertwined, they shall be taken up together. The instant dispute pertains to the closure of HSML and Shangrila, industrial units engaged in manufacturing for BIL. Section 25-O of the Act deals with this situation. The extract as it relates to the dispute herein, reads : "[25-O. Procedure for closing down an undertaking.- (1) An employer who intends to close down an 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 undertak....
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.... 10. If there exists the freedom to set up and run a trade/business as one sees fit, necessarily, there has to be a set of rights vesting with the proprietor/owner to take decisions as may be in his best interest. At the same time, it is true that the law does not permit such owner or proprietor to take any and all decisions without having considered and accounted for the impact that it shall have on the employees or workers that are part of this establishment. This is evidenced by the provision extracted above providing for a detailed procedure to be followed when a person wishes to 'shut shop', but concomitant providing that if the concerned Government does not take action with reasonable expediency, the business owner should not be saddled with the costs and responsibilities of running the business indefinitely, till such time the authority arrives at a proper and just decision. The sum and substance are that Article 19(1)(g) includes the right 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 wa....
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....se [(1978) 4 SCC 224 : 1978 SCC (L&S) 509 : (1979) 1 SCR 1009] recognizes that in the interest of general public it is possible to restrict, for a limited period of time, the right to close down the business. The amended Section 25-O lays down guidelines which are to be followed by the appropriate government in granting or refusing permission to close down. It has to have regard to the genuineness and adequacy of the reasons stated by the employer. However, merely because the reasons are genuine and adequate cannot mean that permission to close must necessarily be granted. There could be cases where the interest of general public may require that no closure takes place. Undoubtedly where the reasons are genuine and adequate the interest of the general public must be of a compelling or overriding nature. Thus, by way of examples, if an industry is engaged in manufacturing of items required for defence of the country, then even though the reasons may be genuine and 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 par....
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....y providing explanation regarding other efforts initiated by you for not closing down the Division, providing justifiable as well as consummate rationale for this action." Hereby, it was informed that action could not be taken on the application as it stood and that they would have to resubmit with better particulars. 15. It is contended by HSML that the Deputy Secretary made such an order without the requisite authority since he was not the "appropriate Government" to deal with applications under section 25-O. As such, the order to revise and resubmit would be non-est in law. It is an undisputed position, as also noted by the High Court, that the powers under section 25-O rest with the Minister. There is no difficulty in that respect. The State Government, being the appropriate Government, has delegated its power specifically to the Minister for Labour. Section 39 of the Act provides for such a situation. It reads : "39. Delegation of powers.- The appropriate Government may, by notification in the Official 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, a....
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....assuming that the letter dated 25 September 2019 was sent to HSML with the approval of the Minister, as allegedly shown by the internal noting in the office file, and was thereby issued by the competent authority, even in that case, we find the 'order' to be lacking. The order accepting or rejecting an application for closure is undoubtedly an administrative order. It is noted that the file originated from the desk officer and travelled up through the desks of various authorities and made its way to the Minister. One of these authorities, it is unclear which one made the noting that the closure application did not disclose cogent reasons. The Minister endorsed this finding and noted in the file that they should be asked to submit the application afresh. This is tried to be shown as a decision of the Minister. For the competent authority to take a decision, as the law understands it, there has to be 'application of mind'. The question that needs to be addressed is whether endorsement of a noting made by a subordinate officer can be '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....
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....o be recorded. It could be said that the conclusion reached by the office of the Minister that HSML had not supplied sufficient reasons for closure would itself be sufficient to qualify as 'reasons'. However, can an endorsement of the view taken by an undisclosed officer of the Ministry be said to be an 'application of mind' by the competent authority when the Minister is the sole authority? We think not. The decision had to be Top Down and not otherwise. Had it been that this conclusion of insufficiency of reasons was the Minister's conclusion, and then they would have directed the Deputy Secretary to communicate the decision to HSML, then our conclusion may have been different. 17. Given the above discussion, the necessary conclusion is that the letter dated 25 September 2019 addressed by the Deputy Secretary to HSML cannot be constituted to be an order since such order to resubmit the application was without any authority since it was not the appropriate Government acting in that regard and not an order rejecting or accepting the application. The same conclusion can be reached on a second count - the 'order' suffered from the vice of non-application of mind by the competent a....
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...., the raw material and necessary plant and machinery were provided by the latter itself. Upon receipt of the notice of closure, in an attempt to save the division, they tried to persuade BIL to reconsider its decision but were not met with success. They subsequently approached other companies seeking manufacturing work, but to no avail. In the attending facts and circumstances, we hold that there did indeed exist sufficient compelling circumstances for closure. 21. The High Court, in our considered view, erred in placing reliance on Form XXIV-B, instead of XXIV-C which, resulted into an erroneous appreciation of statutory provisions. CONCLUSION 22. In that view of the matter, we hold that application dated 28th August 2019 was complete in all respects, and the 60-day period for the deemed closure to take effect would be calculable from said date. Second, the Deputy Secretary was not the appropriate Government who could have asked HSML to revise and resubmit the application for closure. That authority is only vested with the Minister concerned. The Minister did not, even in the slightest, consider the merits of the matter independently, much less with or without any applica....