04 June 2025 Industrial Law >> Business & Commercial Law   |   Civil Appeals >> Civil & Consumer Law  

In a significant ruling on June 4, 2025, the Supreme Court of India addressed complex issues surrounding industrial closures, particularly focusing on the interpretation of Section 25-O of the Industrial Disputes Act, 1947. The case, Harinagar Sugar Mills Ltd. (Biscuit Division) & Another v/s State Of Maharashtra & Others, centered on the closure of Harinagar Sugar Mills Limited's (HSML) biscuit manufacturing unit after the termination of its long-standing job work agreement with Britannia Industries Limited (BIL).

Background to the Dispute:

Harinagar Sugar Mills Ltd. (Biscuit Division) had been exclusively manufacturing biscuits for Britannia Industries Limited for over three decades under a Job Work Agreement (JWA). On May 24, 2019, BIL terminated this agreement, effective November 20, 2019, citing a 180-day notice period as per the JWA.

Following the termination, HSML applied to the competent authorities on August 26, 2019, for business closure under Section 25-O(1) of the Industrial Disputes Act, 1947, informing 178 permanent workmen of the impending closure on August 28, 2019. HSML stated that without the contract from BIL, they had no other manufacturing avenues.

The Government of Maharashtra, through a letter dated September 25, 2019, informed HSML that their application lacked cogent reasons and failed to disclose efforts to prevent closure, asking for a resubmission. In response on October 10, 2019, HSML provided details of their attempts to secure job work from other manufacturers like Mondelez India Limited, ITC Ltd., and Parle Biscuits, all of which proved unsuccessful. They contended that they had no alternative but to close the manufacturing operations.

The authorities, however, again found the response insufficient, raising concerns about the absorption of employees into other divisions and the possibility of HSML diversifying its production. On November 22, 2019, HSML argued that under Section 25-O(3) of the Act, permission for closure was deemed granted as the 60-day statutory period had expired on October 27, 2019, and the authorities had become functus officio. The workers' unions opposed the closure, citing "ulterior motives".

High Court's Impugned Judgment:

The High Court of Judicature at Bombay dismissed HSML's writ petitions. The High Court's findings included:

• An application for closure must be made at least 90 days prior, clearly stating reasons, and the "appropriate Government" must conduct an inquiry, provide a hearing, and pass a reasoned order.
• Section 25-O(3) stipulates that if an order is not communicated within 90 days, permission is deemed granted after 60 days.
• The High Court rejected HSML's contention of "deemed permission," ruling that since HSML furnished additional reasons on October 10, 2019, it implied the original application was incomplete. Therefore, the deeming fiction would not apply.

Key Legal Questions Before the Supreme Court:

The Supreme Court considered two primary questions:

• Whether the letter dated September 25, 2019, from the State could be construed as an order, and consequently, whether HSML was entitled to "deemed closure" by October 27, 2019, under Section 25-O(3).
• The meaning of "appropriate Government" and whether it was acting correctly in this case.

Submissions of the Parties:

Appellants (HSML) argued that:

• The High Court relied on the wrong form (Form XXIV instead of XXIV-C).
• The finding of incomplete applications was a misunderstanding of the forms.
• Internal file notings cannot constitute an order, and the September 25, 2019 letter merely asked for details, not a rejection.
• An application for closure must be disposed of by an order under Section 25-O(2), failing which Section 25-O(3) applies.
• The 60-day time limit is mandatory and its non-observance would violate Article 19(1)(g) of the Constitution.
• Providing further information does not mean the original application was defective, citing State of Haryana v. Hitkari Potteries.
• The 60-day period cannot be extended by requesting resubmission.
• The Labour Minister is the "appropriate Government," and no further sub-delegation of quasi-judicial function is permissible without notification.
• The September 25, 2019 letter was not an order and was not marked to workmen, a requirement under Section 25-O(2).

Respondents (Workers Union and State of Maharashtra) contended that:

• The impugned judgment was justified.
• Non-inclusion of the recognized union in closure discussions was detrimental to the approximately 300 workers.
• The intent of Section 25-O is to protect employees' fundamental right to livelihood, aligning with the State's stance on genuineness and adequacy of reasons.
• No question of law arises that warrants Supreme Court interference under Article 136.
• The "deeming provision" under Section 25-O(3) is contingent on an inquiry under Section 25-O(2), which never took place, so closure cannot be deemed granted.
• HSML's provision of additional reasons indicated the incompleteness of their initial application.
• The State's queries about accommodating workers in other HSML concerns were justified, and workers have not accepted monetary proposals, entitling them to full benefits under Section 25-O(6).

Court's Analysis and Decision:

The Supreme Court's judgment, delivered by Justice Sanjay Karol, will provide crucial clarity on the procedural and substantive requirements for industrial closures under the Industrial Disputes Act, particularly concerning the interaction between employer applications, government responses, and the "deeming fiction" of permission. The Court emphasized the fundamental right to trade and business under Article 19 of the Constitution, subject to reasonable restrictions, and the object of industrial law to improve service conditions. The decision will impact future cases involving factory closures and employee rights.