VS
1. Case Details
- Case Name: Harinagar Sugar Mills Ltd. (Biscuit Division) & Anr. vs. State of Maharashtra & Ors.
- Case Number: Civil Appeal No. _ of 2025 (Arising out of SLP(C) No. 4268/2023) with Civil Appeal No. _ of 2025 (Arising out of SLP(C) No. 4645/2023)
- Citation: 2025 INSC 801
- Court: Supreme Court of India
- Bench: Hon’ble Mr. Justice Sanjay Karol, Hon’ble Mr. Justice Prashant Kumar Mishra
- Date of Judgment: June 4, 2025
2. Subject Matter
The case revolves around the interpretation of Section 25-O of the Industrial Disputes Act, 1947, specifically the provision for “deemed permission” for the closure of an industrial undertaking if the government fails to communicate its decision within a stipulated time.
3. Brief Facts
- The appellant, Harinagar Sugar Mills Ltd. (HSML), was exclusively engaged in manufacturing biscuits for Britannia Industries Ltd. (BIL) for over three decades.
- On May 24, 2019, BIL terminated its contract with HSML, leaving the appellant with no business.
- Consequently, on August 28, 2019, HSML applied to the Government of Maharashtra for permission to close its undertaking under Section 25-O of the Industrial Disputes Act.
- The Deputy Secretary of Labour responded on September 25, 2019, stating the application lacked “cogent reasons” and asked HSML to resubmit it.
- HSML contended that since no valid order was passed by the ‘appropriate Government’ (the Labour Minister) within the statutory 60-day period (which expired on October 27, 2019), the permission for closure was “deemed” to have been granted.
4. Lower Court’s Decision (High Court of Bombay)
- The High Court dismissed HSML’s writ petition.
- It held that the government’s letter of September 25, 2019, constituted a valid communication that prevented the “deeming fiction” from taking effect.
- The High Court reasoned that by providing additional information on October 10, 2019, HSML had implicitly accepted that its initial application was incomplete.
5. Key Legal Principles Discussed by the Supreme Court
- Deemed Permission under Section 25-O(3): If the ‘appropriate Government’ does not communicate its order (granting or refusing permission for closure) within 60 days of the application, the permission is legally deemed to have been granted. This time limit is mandatory.
- ‘Appropriate Government’: The decision under Section 25-O must be made by the authority in whom the power is vested. In this case, it was the Minister for Labour, not the Deputy Secretary.
- Validity of an Order: An order must be passed by the competent authority with due application of mind. Internal file notings, even if approved by the Minister, do not constitute a legally valid and communicable order. A mere endorsement of a subordinate’s note is not a substitute for a reasoned decision by the competent authority.
- Right to Close a Business: The right to close a business is a fundamental right under Article 19(1)(g) of the Constitution, subject to reasonable restrictions like those in Section 25-O. An employer must show compelling circumstances or impossibility of running the business.
6. Supreme Court’s Reasoning
- The letter dated September 25, 2019, was issued by the Deputy Secretary, who was not the ‘appropriate Government’ and had no authority to decide on the application.
- The letter was not a final order rejecting or accepting the application; it was merely a communication asking for resubmission, which is not contemplated under Section 25-O.
- Even if the Minister had approved the action on an internal file, such a noting has no legal sanctity and cannot be considered a formal order passed with the application of mind as required by the statute.
- Therefore, no valid order was communicated by the competent authority within the 60-day statutory period.
- As a result, the deeming fiction under Section 25-O(3) was triggered, and permission for closure was deemed to have been granted as of October 27, 2019.
- The Court also found that the complete cessation of business from its sole client (BIL) constituted a “compelling circumstance” and spelled “impossibility” for HSML to continue its operations.
7. Final Order
- The appeals are allowed.
- The judgment of the High Court is set aside.
- The Court holds that the closure application dated August 28, 2019, was complete and the deemed closure took effect after 60 days from that date.
- Appreciating a gesture by the appellant, the Court enhanced the compensation to be paid to the workmen to Rs. 15 Crores (in addition to statutory gratuity), to be released within eight weeks.