Deemed closure upheld: SC reaffirms employer’s statutory right under Section 25-O of the Industrial Disputes Act, 1947

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  • Post published:June 22, 2025
  • Post last modified:June 22, 2025
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The Hon’ble Supreme Court while interpreting the scope of deemed permission to close and undertaking under Section 25-O(3) of the Industrial Disputes Act, 1947 has held that procedural lapses by the State Government cannot frustrate the statutory right of an employer to close a business when no timely decision is communicated by the appropriate authority. In the present case, HSML (the Appellant) was engaged in Job Work Agreement with Britannia Industries Ltd. For over three decades. Upon termination of the agreement, HSML applied for closure of its biscuit division under section 25-O of the Industrial Disputes Act, 1947. The Maharashtra Government did not issue a formal order within the statutory 60-day period. The Company claimed deemed permission for closure but the same was denied, and the same was upheld by the Bombay High Court calling the application incomplete. The Hon’ble Apex Court reversed this finding and upheld the deemed closure for the appropriate government, in the present case, was the Minister of Labour but no order for completion of the application was passed by him.

FACTS OF THE CASE

HSML’s only client for the past three decades, Britannia, terminated its contract effective from 27.11.2019 because of which, HSML applied for closure on 28.08.2019 and the State (the desk officer) responded via letter dated 25.09.2019, seeking more information, but did not pass a formal order. HSML replied with additional details on 10.10.2019. The State issued another letter on 04.11.2019 but again failed to pass a formal order. HSML claimed deemed closure effective from 27.10.2019 and the High Court rejected this claim.

STATUTES INVOLVED

  1. Section 25-O of the Industrial Disputes Act, 1947: procedure and deemed permission for closure.
  2. Section 39 of the Industrial Disputes Act, 1947: delegation of powers by the appropriate government.

ISSUES INVOLVED

  1. Whether the letter dated 25.09.2019 can be construed an order?
  2. Whether the Appellants would be entitled to the relief of deemed closure as on 27.10.2019 by virtue of the deeming fiction present in Section 25-O(3) of the Act?
  3. What would be the meaning of the phrase ‘Appropriate Government’ and whether in the facts of this case, it was the appropriate government acting in the matter of the closure- if not what is the effect in law, thereof?

JUDGMENTS REFFERED

  1. Coverjee B. Bharucha v. Excise Commissioner1: the nature of business is an important element in deciding the reasonableness of the restrictions. The right of every citizen to pursue any lawful trade or business is obviously subject to such reasonable conditions as may be deemed by the governing authority of the country essential to safety, health, peace, order and morals of the community.
  2. Hindustan Antibiotics Limited v Workmen2: the object of industrial law is two-fold, namely: (i) to improve the service conditions of industrial labour so as to provide for them the ordinary amenities of life (ii) by that process, to bring about industrial peace which would in its turn accelerate productive activity of the country resulting in its prosperity. The prosperity of the country, in its turn, helps to improve the conditions of labour.
  3. Ajaib Singh v. Sirhind Coop. Marketing-cum-Processing Service Society Ltd.3: the Act provides to ensure fair terms to workmen and to prevent disputes between the employer and the employees so that the large interests of the public may not suffer.
  4. Excel Wear v Union of India4: the right to close down a business is an integral part of the right to carry it on. It is not quite correct to say that a right to close down a business can be equated or placed at par as high as the right not to start and carry on a business at all.
  5. Orrisa Textile and Steel v State of Orissa5: the requirement to conduct an enquiry, give a hearing, pass a reasoned order, and also the time limit was the curing of defects present in the previous version of the section (which was held to be unconstitutional in Excel Wear).
  6. Pimpri Chinchwad New Township Development Authority v Vishnudev Coop. Housing Society6: a mere noting in the official files of the Government while dealing with any matter pertaining to any person is essentially an internal matter of the Government and carries with it no legal sanctity.
  7. Star Enterprises v City and Industrial Development Corpn of Maharashtra Ltd7: three-judge bench in the context of tenders invited by a corporation held is “State”  within the meaning of Article 12.

RATIO DECIDENDI

  1. An incomplete or unauthorized response does not qualify as an “order” under Section 25-O of the Act.
  2. The deemed permission under Section 25-O(3) becomes operational when no valid decision is communicated within 60 days.
  3. Internal file notings do not constitute a legally enforceable order unless communicated in writing by the competent authority.

    OBITER DICTUM

  1. The employer’s right to close a business is integral to Article 19(1)(g) of the Constitution, but subject to certain restrictions.
  2. Administrative convenience cannot override statutory time limits.
  3. “Application of mind” by the competent authority must be evident and cannot be presumed from internal notes.

DECISION

  1. Appeals were allowed and the closure was deemed as of 17.10.2019.
  2. Rs 15 crores was directed to be disbursed to employees within 8 weeks.
  3. No recovery of salaries to be done as the same was paid after High Court orders.

Harinagar Sugar Mills Ltd. (Biscuit Division) and Anr v State of Maharashtra and Ors.

SLP (C) NO. 4268 OF 2023

DATED: 04.06.2025

Click here to read/ download the judgment

  1. (1954) 1 SCC 18. ↩︎
  2. 1966 SCC OnLine SC 106. ↩︎
  3. (1999) 6 SCC 82. ↩︎
  4. (1978) 4 SCC 224. ↩︎
  5. (2002) 2 SCC 578. ↩︎
  6. (2018) 8 SCC 215. ↩︎
  7. (1990) 3 SCC 280. ↩︎

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