TMI Blog1978 (9) TMI 184X X X X Extracts X X X X X X X X Extracts X X X X ..... ployed in the petitioner's factory. According to its case the relation between the petitioner management and its employees started deteriorating from the year 1974 and had become very much worse from 1976. From August, 1976 the workmen became very militant, aggressive, violent, indulged in unjustifiable or illegal strikes and the labour trouble in the factory became of an unprecedented nature. Various incidents have been mentioned in the Writ Petition in support of the above allegations. But since the facts are seriously challenged and disputed on behalf of the Labour Union, which was subsequently added as a party respondent in the Writ petition, we do not propose to refer to them in any detail and express our views in regard to them one way or the other. The various facts alleged in the petition may be correct-may not be correct. We do not think it necessary to adjudicate upon them for the purpose of deciding the constitutional question. Suffice it to say that it is legitimate to take notice of the fact that various kinds of situation, such as, labour trouble of an unprecedented nature, a factory running in a recurring loss, paucity of adequate number of competent and suitable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioners briefly drew our attention to the facts of this case which were of a nature adverted to above. The Wadala unit of the petitioner company is engaged in the business of manufacturing and selling Diesel Oil Engines, Mechanical Lubricators, Engine Valves and Push Rods etc. The petitioners were obliged to decide to close down the undertaking due to huge losses incurred by them on account of low productivity, serious labour unrest and indiscipline resulting in various incidents of assaults or the like. The Company, therefore, applied to the State Government of Maharashtra on May 2, 1977 under Section 25O(1) of the Act for approval of the intended closure. The State Government communicated their refusal in their letter dated the 29th July, 1977 enclosing therewith a copy of their order couched in identical terms as those in the case of Excel Wear. WRIT PETITIONS 959 AND 960 OF 1977 6. Mr. K.K. Singhvi, appearing for the petitioners in this case apart from supporting the argument of Mr. Nariman drew our attention to the facts of this case which were more or less of a similar nature as in the case of Acme Manufacturing Co. Ltd. Petitioner No. 2 is a citizen of India and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ite reasonable and justified to put a stop to the unfair labour practice and for the welfare of the workmen. It is a progressive legislation for the protection of a weaker section of the society. Mr. Deshmukh, however, did not accept that a right to close down a business is an integral part of the right to carry on any business. He submitted that a right to closure is appurtenant to the ownership of the property, namely, the undertaking. The total prohibition of closure only affects a part of the right to carry on the business and not a total annihilation of this. The restriction imposed was in public interest and there is a presumption of reasonableness in its favour. Mr. Nadkarni endeavoured to submit with reference to the high philosophies of Jurisprudence in relation to the social and welfare legislations, as expounded by renowned jurists and judges abroad, that the action of closing down a business is no right at all in any sense of the term. Mr. Ramamurthi while supporting the main arguments put forward on behalf of others led great stress in the point that the law is protected by Article 31-C of the Constitution, a point which was merely touched by them but was seriously tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anker (supra) was handed down the law was amended by an Ordinance followed by Amending Act 18 of 1957 with retrospective effect from November 28, 1956. Section 25FF was amended to make a provision for payment of compensation to workmen in case of transfer of undertakings and a provision was made in Section 25FFF for payment of compensation to workmen in case of closing down of an undertaking. It will be of use to read here Sub-section (1) of Section 25FFF for the purpose of deciding some of the contentious questions in this case. It reads as follows :- Where an undertaking is closed down for any reason whatsoever, every workman who has been in continuous service for not less than one year in that undertaking immediately before such closure shall, subject to the provisions of Sub-section (2), be entitled to notice and compensation in accordance with the provisions of Section 25F, as if the workman had been retrenched. Provided that where the undertaking is closed down on account of unavoidable circumstances beyond the control of the employer, the compensation to be paid to the workman under Clause (b) of Section 25F, shall not exceed his average pay for three months. Explan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not absolute. In the interest of the general public , says the learned Judge, the law may impose restrictions on the freedom of the citizens to start, carry on or close their undertakings. This clearly indicates, and the whole ratio of the case is based upon this footing, that the right to carry on any business includes a right to start, carry on or close down any undertaking. It has further been pointed out on the same page that by Section 25FFF(1), termination of employment on closure of the undertaking without payment of compensation and without either serving notice or paying wages in lieu of notice , is, not prohibited. Payment of compensation and payment of wages for the period of notice are not therefore conditions precedent to closure. This is one of the main reasons given in the judgment to repel the attack on the constitutional validity of the provision. We, however, must hasten to add that it does not necessarily follow therefrom that if such payments are made conditions precedent to closure the provision will necessarily be bad. While judging the question as to whether the restrictions imposed by Sections 25-O and 25-R are reasonable or not within the meaning of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viding for the giving by the employer of 60 days' prior notice to the appropriate Government of his intention to close down any undertaking. Failure to do so entailed a liability to be punished under Section 30A inserted in the Act by the same Amending Act. 15. Chapter VB was inserted in the Act by Amending Act 32 of 1976 with effect from the 5th March, 1976. Under Section 25K the provisions of this Chapter were made applicable to comparatively bigger industrial establishments in which not less than 300 workmen were employed. Only three kinds of industries were roped in for the purpose of the rigour of the law provided in Chapter VB by defining industrial establishment in Clause (a) Section 25L to mean :- (i) a factory as defined in Clause (m) of Section 2 of the Factories Act, 1948; (ii) a mine as defined in Clause (j) of Sub-section (1) of Section 2 of the Mines Act, 1952; or (iii) a plantation as defined in Clause (f) of Section 2 of the Plantations Labour Act, 1951. 16. Section 25M dealt with the imposition of further restrictions in the matter of lay-off. Section 25N provided for conditions precedent to retrenchment of workmen. In these cases the vires ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n made under Sub-section (3) and the appropriate Government does not communicate the permission or the refusal to grant the permission to the employer within a period of two months from the date on which the application is made, the permission applied for shall be deemed to have been granted on the expiration of the said period of two months. (5) Where no application for permission under Sub-section (1) is made, or where no application for permission under Sub-section (3) is made within the period specified therein or where the permission for closure has been refused, the closure of the undertaking shall be deemed to be illegal from the date of closure and the workman shall be entitled to all the benefits under any law for the time being in force as if no notice had been given to him. (6) Notwithstanding anything contained in Sub-section (1) and Sub-section (3), the appropriate Government may, if it is satisfied that owing to such exceptional circumstances as accident in the undertaking or death of the employer or the like it is necessary so to do, by order, direct that the provisions of Sub-section (1) or Sub-section (3) shall not apply in relation to such undertaking for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the intended closure. Our attention was drawn to the Bombay Industrial Rules and the form prescribed therein for the filing of an application for permission to close down an undertaking. A very comprehensive history of the undertaking and many facts and figures in relation thereto, apart from the reasons to be stated for the intended closure of the undertaking, are required to be given in the application form. Under Sub-section (2), if in the opinion of the appropriate Government, the reasons for the intended closure are not adequate and sufficient or if the closure is prejudicial to the public interest, permission to close down may be refused. The reasons given may be correct, yet permission can be refused if they are thought to be not adequate and sufficient by the State Government. No reason is to be given in the order granting the permission or refusing it. The appropriate Government is not enjoined to pass the order in terms of Sub-section (2) within 90 days of the period of notice. Sub-section (3) is a special provision in respect of an undertaking where an employer had given a notice under Section 25FFA(1) before the commencement of Act 32 of 1976. In that event he is re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin a period of 90 days and the undertaking is closed down on the expiry of the said period. 20. We propose first to briefly dispose of the two extreme contentions put forward on either side as to the nature of the alleged right to close down a business. If one does not start a business at all, then, perhaps, under no circumstances he can be compelled to start one. Such a negative aspect of a right to carry on a business may be equated with the negative aspects of the right embedded in the concept of the right to freedom of speech, to form an association or to acquire or hold property. Perhaps under no circumstances a person can be compelled to speak; to form an association or to acquire or hold a property. But by imposing reasonable restrictions he can be compelled not to speak; not to form an association or not to acquire or hold property. Similarly, as held by this Court in Cooverjee Bharucha v. The Excise Commissioner and the Chief Commissioner, Ajmer, and Ors. [1954]1SCR873 ; Narendra Kumar and Ors. v. The Union of India and Ors. [1960]2SCR375 total prohibition of business is possible by putting reasonable restrictions within the meaning of Article 19(6) on the right to car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no right is absolute in its scope, so is the nature of this right. It can certainly be restricted, regulated or controlled by law in the interest of the general public. 22. On behalf of the petitioners, the restrictions imposed by the impugned law are said to be unreasonable because- (i) Section 25-O does not require giving of reasons in the order. (ii) No time limit is to be fixed while refusing permission to close down. (iii) Even if the reasons are adequate and sufficient, approval can be denied in the purported public interest of security of labour. Labour is bound to suffer because of unemployment brought about in almost every case of closure. (iv) It has been left to the caprice and whims of the authority to decide one way or the other. No guidelines have been given. (v) Apart from the civil liability which is to be incurred under Sub-section (5), the closure, however, compulsive it may be, if brought about against the direction given under Sub-section (2) is visited with penal consequences as provided in Section 25-R. (vi) There is no deemed provision as to the according of approval in Sub-section (2) as in Sub-section (4). (vii) Refusal to ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st change and be necessarily different from the dogmatic and stereo-type tests laid down in the earlier decisions of this Court. Apart from invoking the bar of Article 31C in terms, it was also urged that the spirit behind the said Article for the progress of the law meant for social justice has got to be kept in view while judging the reasonableness of the restriction in the light of its endeavour to advance the directive principles enshrined in Part-IV of the Constitution. In order to overcome the various obvious lacunae in the section, we were asked, by a rule of construction, to read down the section and save its constitutionality. It was urged that successive applications can be made on the change of a situation. No amount of compensation can be a substitute for the preventive remedy of the evil of unemployment. 24. We now proceed to deal with the rival contentions. But before we do so, we may make some general observations. Concept of socialism or a socialist state has undergone changes from time to tune from country to country and from thinkers to thinkers. But some basic concept still holds the field. In the case of Akadasi Padhan v. State of Orissa MANU/SC/0089/1962MANU ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aving dealings with the undertaking. Does socialism go to the extent of not looking to the interests of all such persons? In a State owned undertaking the Government or the Government company is the owner. If they are compelled to close down, they, probably may protect the labour by several other methods at their command, even, sometimes at the cost of the public exchequer. It may not be always advisable to do so but that is a different question. But in a private sector obviously the two matters involved in running it are not on the same footing. One part is the management of the business done by the owners or their representatives and the other is running the business for return to the owner not only for the purpose of meeting his livelihood or expenses but also for the purpose of the growth of the national economy by formation of more and more capital. Does it stand to reason that by such rigorous provisions like those contained in the impugned sections all these interests should be completely or substantially ignored ? The questions posed are suggestive of the answers. 25. In contrast to the other provisions, Section 25-O(2) does not require the giving of reasons in the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onger. He must not be allowed to be whimsical or capricious in the matter ignoring the interest of the labour altogether. But that can probably be remedied by awarding different slabs of compensation in different situations. It is not quite correct to say that because compensation is not a substitute for the remedy of prevention of unemployment, the later remedy must be the only one. If it were so, then in no case closure can be or should be allowed. In the third case namely that of Apar Private Ltd. the Government has given two reasons, both of them being too vague to give any exact idea in support of the refusal of permission to close down. It says that the reasons are not adequate and sufficient (although they may be correct) and that the intended closure is prejudicial to the public interest. The latter reason will be universal in all cases of closure. The former demonstrates to what extent the order can be unreasonable. If the reason given by the petitioner in great detail are correct, as the impugned order suggests they are, it is preposterous to say that they are not adequate and sufficient for a closure. Such an unreasonable order was possible to be passed because of the un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when an undertaking is approved or permitted to be closed down and not before that. Secondly, it is not practicable to give three months notice in writing or wages for the said period in lieu of notice or to pay the retrenchment compensation in advance as required by Section 25N before the employer gets an approval from the Government. 29. It is not always easy to strike a balance between the parallel and conflicting interests. Yet it is not fair to unreasonably tilt the balance in favour of one interest by ignoring the other. Mr. Nadkarni relied upon the following passage of Frankfurter J., while expressing his view on Balance of Interest : I cannot agree in treating what is essentially a problem of striking balance between the competing interest as an exercise in absolutes. learned Counsel also referred to a note on 'Government and liberty' from 'Paradoxes of Legal Science' by Banjamin Cardozo which is to the following effect :- As the social conscience is awakened, the conception of injury is widened and insight into its cause is deepened the area of restraint is therefore increased. No body can have a quarrel with these basic principles however, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with reference not to the date on which it is made but to the date on which the right which is the subject-matter of the dispute arises, and that the machinery provided under the Act would be available for working out the rights which had accrued prior to the dissolution of the business. It would thus be seen that in the matter of giving appropriate and reseasonable relief to the labour even after the closure of the business the facts which were in existence prior to it can form the subject matter of an industrial dispute. Even assuming that strictly speaking all such matters cannot be covered in view of the decisions of this Court we could understand a provision of law for remedying these drawbacks. The law may provide to deter the reckless, unfair, unjust or mala fide closures. But it is not for us to suggest in this judgment what should be a just and reasonable method to do so. What we are concerned with at the present juncture is to see whether the law as enacted suffers from any vice of excessive and unreasonable restriction. In our opinion it does suffer. 31. The reasonableness has got to be tested both from the procedural and substantive aspects of the law. In the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . This proposition cannot be pressed into service in a case of the kind which we are dealing with. 34. Mr. Deshmukh's argument that a right to close down a business is a right appurtenant to the ownership of the property and not an integral part of the right to carry on the business is not correct. We have already said so. The properties are the undertaking and the business assets invested therein. The owner cannot be asked to part with them or destroy them by not permitting him to close down the undertaking. In a given case for his mismanagement of the undertaking resulting in bad relationship with the labour or incurring recurring losses the undertaking may be taken over by the State. That will be affecting the property right with which we are not concerned in this case. It will also be consistent with the object of making India a Socialist State. But not to permit the employer to close down is essentially an interference with his fundamental right to carry on the business. 35. On the basis of the decision of this Court in The State of Gujarat and Anr. v. Shri Ambica Mills Ltd., Ahmedabad, etc. [1974]3SCR760 it was urged that even if there is a violation by impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a partnership concern. The partners in the name of the firm can challenge the validity of the law. In each of the other two petitions, as already stated, a shareholder has joined with the company to challenge the law. The contention of Mr. Ramamurthi, therefore, must be rejected. 36. Now we proceed to consider whether the law is saved by Article 31C of the Constitution. This point, as indicated earlier, was just touched in passing by other counsel. But Mr. Ramamurthi endeavoured to advance a full-dressed argument on this aspect of the matter. His submission was that Article 31C inserted in the Constitution by the (Twenty-fifth Amendment) Act, 1971 as amended by the (Forty-second Amendment) Act, 1976 makes the law beyond the pale of challenge on the ground of violation of Article 19. 37. Mr. Ramamurthi's argument proceeds thus. A declaration of Emergency on the ground of external danger was made by the President in 1971. While the imposition of external Emergency was in force internal Emergency was also imposed on June 25, 1975. The Emergency-both external and internal, was lifted on March 21, 1977. Article 31C, as originally inserted read as follows : Notwithstanding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so. Yet we shall presently show that the amended Article 31C cannot put this law beyond the pale of challenge. 38. Chapter VB was introduced by Amending Act 32 of 1976 with effect from 5th of March, 1976. The amendment aforesaid made in Article 31C was with effect from 3rd January, 1977. Section 4 of the (Forty-second Amendment) Act, 1976 which brought about the amendment merely uses the expression the words and figures...shall be substituted. It did not say, and probably it could not have said so, that they will always be deemed to have been substituted. It is, therefore, clear that the amendment was prospective in operation and was not made retrospective. To overcome this difficulty Mr. Ramamurthi advanced an ingenious argument. He submitted that Chapter VB was inserted in the Act when the Emergency was in operation. Under Article 358, the State during the period of Emergency was competent to enact the impugned law even though it violated Article 19. By the time the Emergency was lifted amended Article 31C had come into operation. Thus by the continuous process the latter became immune from challenge on the ground of violation of Article 19. Counsel relied upon the follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the law which was incompetently made and bad for violation of Article 19 will not be taken to be so during the period of Emergency. But as soon as the Emergency is lifted the law becomes bad because it was bad when it was enacted, although it could not be taken to be so during the period of Emergency. The amended Article 31C says that if the law gave effect to the policy of the State towards securing any of the principles laid in Part-IV it shall not be deemed to be void on the ground of violation of Article 19. The law which was enacted in March, 1976 could, by no stretch of imagination, be said to be a law giving effect to the policy of the State towards securing any of the principles laid down in Part-IV within the meaning of the amended Article 31C which came into force in January, 1977. The Legislature could not have thought of enacting a law within the meaning of amended Article 31C at a point of time when the Article stood unamended. It is, therefore, difficult to accept the argument of the learned Counsel that the law was not bad during the operation of the Emergency because of Article 358 and the same position was continued by Article 31C by its amendment by the (Forty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention of the learned Counsel. In the Sundararamier's case (supra) Venkatarama Aiyar J., summed up the result of the various authorities at page 1474 thus : Where an enactment is unconstitutional in part but valid as to the rest, assuming of course that the two portions are severable, it cannot be held to have been wiped out of the statute book as it admittedly must remain there for the purpose of enforcement of the valid portion thereof, and being on the statute book, even that portion which is unenforceable on the ground that it is unconstitutional will operate proprio vigore when the constitutional bar is removed, and there is no need for a fresh legislation to give effect thereto. These observations were made in connection with the removal of the constitutional bar of imposition of sales tax under Article 286. The distinction so drawn in the above case is not of universal application. In the legislative field there is nothing like void or voidable . The application of the principle has been restricted later to only a limited field, namely, in connection with the question whether the legislation requires fresh enactment or not when the bar of incompetency is removed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3] Suppl. 1 S.C.R. 912 : the Supreme Court again reviewed the authorities, and held (i) that the doctrine of eclipse applied only to pre Constitution and not to post Constitution laws; (ii) that the words to the extent of the inconsistency or to the extent of the contravention were designed to save parts of a law which did not contravene, or were not inconsistent with, fundamental right; (iii) that the meaning of the word void in Article 13(1) and (2) was the same: (iv) however, pre Constitution laws violating fundamental rights were valid when enacted and could therefore be revived under the doctrine of eclipse, whereas post Constitution laws violating fundamental rights were still-born and non-est and could not be revived. In dealing with the argument, based on Supreme Court decisions, that a law violating Article 19 would be void qua citizens but valid qua...non-citizens, Wanchoo J. said : Theoretically the laws falling under the latter category (i.e. contravening Article 19) may be valid qua non-citizens; but that is a wholly unrealistic consideration and it seems to Us that such notionally partial valid existence of the said laws on the strength of hypothetical a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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