1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court in this judgment are:
(a) Whether the letter dated 25th September 2019 issued by the Deputy Secretary of the Government of Maharashtra can be construed as a valid order under Section 25-O of the Industrial Disputes Act, 1947 (the Act), and whether the appellants are entitled to the relief of deemed closure under the deeming fiction provided in Section 25-O(3) of the Act as of 27th October 2019.
(b) The meaning and scope of the phrase 'appropriate Government' under Section 25-O of the Act, and whether, in the facts of the case, the Deputy Secretary or any other authority apart from the Minister for Labour was the appropriate Government competent to act in the matter of closure applications.
(c) Whether the closure application dated 28th August 2019 was complete and sufficient to trigger the operation of the deeming provision under Section 25-O(3), or whether the application was incomplete and required resubmission.
(d) The interplay between the fundamental right under Article 19(1)(g) of the Constitution of India to carry on business, including closure thereof, and the restrictions imposed by Section 25-O of the Act.
(e) The extent and nature of the application of mind and procedural requirements necessary for the 'appropriate Government' to pass an order granting or refusing permission to close an undertaking.
2. ISSUE-WISE DETAILED ANALYSIS
Issue (a): Whether the letter dated 25th September 2019 constitutes a valid order and the applicability of deemed closure under Section 25-O(3)
The relevant legal framework is Section 25-O of the Industrial Disputes Act, 1947, which mandates that an employer intending to close an industrial undertaking must apply for prior permission at least ninety days before closure, stating reasons and serving a copy to workmen representatives. The 'appropriate Government' must then make an enquiry, hear all parties, and pass a reasoned order granting or refusing permission within sixty days. If no order is communicated within sixty days, permission is deemed granted under Section 25-O(3).
The Court examined the letter dated 25th September 2019, in which the Deputy Secretary informed the appellants that their application was deficient for not disclosing efforts to prevent closure and lacking cogent reasons, and requested resubmission with more details. The appellants contended this letter was not an order and that the deeming provision should apply.
The Court noted that the letter was not communicated by the 'appropriate Government' (the Minister for Labour) but by the Deputy Secretary, whose authority was questionable (discussed under Issue (b)). Even assuming the letter had ministerial approval, the Court found the letter lacked the necessary application of mind and reasoned decision-making required by Section 25-O(2). The letter merely endorsed an internal noting without independent consideration or recorded reasons by the Minister.
The Court held that such a communication did not amount to a valid order rejecting the application. Since no valid order was passed within sixty days, the deeming fiction under Section 25-O(3) would apply, entitling the appellants to deemed permission for closure as of 27th October 2019.
Issue (b): Meaning of 'appropriate Government' and authority to act
The Act vests the power to grant or refuse permission for closure with the 'appropriate Government'. The State Government had delegated this power to the Minister for Labour by notification dated 25th June 2013 (not on record), but there was no evidence that the Deputy Secretary was authorized to act or communicate decisions on behalf of the appropriate Government.
The Court emphasized that delegation must be by notification under Section 39 of the Act. The Deputy Secretary's letter was therefore unauthorized and without legal sanction. The Court rejected reliance on internal file notings as evidence of valid delegation or ministerial approval, citing precedents that internal government notings have no legal sanctity.
The Court held that only the Minister for Labour, as the appropriate Government, was competent to act on the closure application, and no evidence showed that the Minister had applied independent mind or passed a reasoned order. Consequently, the letter of 25th September 2019 was not a valid order.
Issue (c): Completeness of the closure application and requirement of resubmission
The appellants initially filed their closure application on 28th August 2019. The State contended that the application was incomplete and required resubmission with additional reasons and details, as reflected in the letter dated 25th September 2019.
The appellants replied on 10th October 2019 furnishing additional reasons and efforts made to prevent closure. The High Court held that this admission of furnishing additional reasons implied the original application was incomplete, and therefore the deeming fiction under Section 25-O(3) would not apply.
The Supreme Court disagreed with this reasoning, holding that providing further information or clarification does not necessarily mean the original application was incomplete or defective. The Court observed that the application dated 28th August 2019 was complete and sufficient to trigger the sixty-day period for deemed closure. The Court further held that the authorities had no power to extend or delay the sixty-day period by requesting resubmission, as there was no provision for resubmission under the Act.
Issue (d): Interplay between Article 19(1)(g) and Section 25-O
The Court reiterated that Article 19(1)(g) guarantees the right to carry on any lawful trade or business, which includes the right to close down a business. This right is, however, subject to reasonable restrictions in the interest of the general public under Article 19(6). Section 25-O is a reasonable restriction that balances the employer's right to close with the protection of workers' interests and public welfare.
The Court referred to precedents including Excel Wear and Orissa Textile and Steel, which upheld the constitutionality of the amended Section 25-O, emphasizing that the right to close is subject to procedural safeguards and the consideration of genuine and adequate reasons, and the interests of the general public.
The Court noted that financial difficulty alone is insufficient to justify closure; the employer must demonstrate exceptional circumstances or impossibility of continuing operations. In the instant case, the appellants demonstrated that their manufacturing unit was entirely dependent on a single client whose termination of the job work agreement made continuation impossible.
Issue (e): Requirement of application of mind and procedural fairness in passing closure orders
The Court underscored the statutory requirement under Section 25-O(2) that the appropriate Government must pass an order "for reasons to be recorded in writing." This entails an application of mind and reasoned decision-making.
The Court held that mere endorsement of an internal noting or adoption of a subordinate officer's view without independent consideration by the Minister does not constitute application of mind. The letter dated 25th September 2019 lacked such application of mind and hence was not a valid order.
The Court further emphasized the importance of recording reasons to ensure transparency, accountability, and judicial review, citing relevant precedents.
3. SIGNIFICANT HOLDINGS
"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 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."
"Reasons, therefore, are important and ought to 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 authorityRs. We think not."
"The 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."
"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 application of mind. Subdelegation to the officer was not permitted by law, and, therefore, any communication made by him would be without any legal sanction."
"The appeals are allowed."
Core principles established include:
- The 'appropriate Government' under Section 25-O must be the authority empowered by notification and must apply independent mind in passing closure orders.
- Internal file notings and subordinate officers' endorsements do not constitute valid orders or application of mind.
- The statutory requirement of passing a reasoned order within sixty days is mandatory; failure to do so triggers the deeming provision granting permission to close.
- Providing additional information or clarifications after the initial application does not automatically render the original application incomplete or defective.
- The right to close a business under Article 19(1)(g) is subject to procedural safeguards and reasonable restrictions under Section 25-O to protect workers and public interest.
- Financial difficulty alone is insufficient to refuse closure; exceptional circumstances or impossibility of continuing must be shown.