Summary
The Supreme Court held that a Deputy Secretary's letter asking an employer to resubmit its closure application under Section 25-O of the Industrial Disputes Act, 1947 was not an 'order' granting or refusing permission: the Deputy Secretary was not the appropriate Government (the power having been delegated to the Labour Minister, with no further delegation under Section 39), and the Minister's bare endorsement of an unidentified officer's file noting showed no application of mind. Since no order was communicated within 60 days, closure was deemed permitted under Section 25-O(3); the termination of the sole job-work contract also constituted compelling circumstances for closure.
Issues
- Whether the Deputy Secretary's letter dated 25 September 2019 asking the employer to resubmit its closure application with better reasons can be construed as an order under Section 25-O(2) of the Industrial Disputes Act, 1947, and if not, whether permission for closure was deemed granted under Section 25-O(3) on expiry of 60 days.
- What is meant by 'appropriate Government' under Section 25-O, whether the Deputy Secretary could act in that capacity without a notification under Section 39, and what is the effect of a communication by an officer not so authorised.
- Whether a Minister's endorsement of a subordinate's internal file noting amounts to an application of mind and a reasoned order as required by Section 25-O(2).
- Whether furnishing additional particulars in response to the authority's query amounts to an admission that the original closure application was incomplete.
- Whether termination of the employer's sole job-work agreement constituted genuine, adequate and compelling reasons for closure.
Provisions considered
- Article 19(1)(g) and 19(6), Constitution of IndiaThe right to carry on a business includes the right to close it down (Excel Wear), subject to reasonable restrictions in the interest of the general public; the amended Section 25-O, with its enquiry, hearing, reasoned order and time-limit, has been upheld as such a restriction (Orissa Textile and Steel). The deeming provision ensures the owner is not saddled indefinitely with running the business if the Government does not act expeditiously. (¶¶ 7, 10, 11, 12, 13)
- Section 25-O(1), (2) and (3), Industrial Disputes Act, 1947Sub-section (1) requires application to the appropriate Government at least 90 days before closure stating reasons, with a copy to workmen's representatives; sub-section (2) requires the appropriate Government, after enquiry and hearing, to grant or refuse permission by order with reasons recorded in writing, communicated to employer and workmen; sub-section (3) deems permission granted if no such order is communicated within 60 days. The resubmission letter was neither an order under (2) nor by the competent authority, so the deeming under (3) operated from 60 days after 28 August 2019. (¶¶ 8, 9, 14, 16, 17, 18, 22)
- Section 39, Industrial Disputes Act, 1947Delegation of the appropriate Government's powers must be by notification in the Official Gazette. The State Government had delegated the Section 25-O power to the Labour Minister; nothing on record showed any notification authorising the Deputy Secretary to communicate on, accept or reject closure applications, so his letter was without authority and sub-delegation to him was impermissible. (¶¶ 15, 16, 17, 22)
- Rule 82-B(1), Form XXIV-C, Industrial Disputes (Maharashtra) Rules, 1957The closure application was made in Form XXIV-C prescribed under Rule 82-B(1); the High Court erred in relying on a different form, leading to an erroneous appreciation of the statutory provisions. (¶¶ 3.4, 21)
Held
- Under Section 25-O as upheld in Orissa Textile and Steel: the right to close a business is subject to the interest of the general public; the application must disclose genuine and adequate reasons; even genuine and adequate reasons do not automatically entitle the employer to permission, but a refusal in such a case requires a compelling and overriding public interest; and mere financial difficulty is not enough, the employer must show exceptional circumstances or impossibility of running the business. (¶¶ 12, 13)
- The power under Section 25-O rested with the Labour Minister as delegate of the State Government. There was no notification under Section 39 authorising the Deputy Secretary, and sub-delegation to him was not permitted by law; his communication asking for resubmission was therefore without legal sanction. Internal file notings carry no legal sanctity and cannot be relied on to establish that the Minister acted. (¶¶ 15, 16, 17, 22)
- Even assuming the letter was issued with the Minister's approval, the 'order' was lacking. Section 25-O(2) makes reasons a statutory necessity, and administrative authorities must in any event give reasons. A Minister's endorsement of a conclusion reached by an unidentified subordinate officer is not an application of mind by the sole competent authority; the decision had to be top-down. Had the Minister himself concluded that the reasons were insufficient and directed its communication, the result might have differed. (¶¶ 16, 17)
- Because the appropriate Government neither made nor communicated any order on the application within 60 days, the deemed permission under Section 25-O(3) came into effect. The application of 28 August 2019 was complete in all respects, and the 60-day period ran from that date; supplying further particulars at the authority's request did not render the original application incomplete. (¶¶ 18, 22)
- The reasoning for seeking resubmission was insufficient and appeared designed solely to reject the application. Where the undertaking had for 32 years manufactured exclusively for one principal, which supplied the raw material, plant and machinery, and that principal terminated the job-work agreement, with efforts to retain it and to find work from other manufacturers failing, this spelt impossibility of continuing; the State did not contend otherwise. Sufficient compelling circumstances for closure existed. (¶¶ 19, 20)
- Amounts paid to the employees under the High Court's interim orders during the writ proceedings are not recoverable. The employer's offer of Rs 10 crores over and above gratuity (about Rs 4 crores) as compensation was taken on record and enhanced by the Court to Rs 15 crores, to be released to eligible employees within eight weeks. (¶¶ 23, 24)
Result
Appeals allowed; the Bombay High Court's judgment dated 17 February 2023 dismissing the writ petitions set aside. Closure of the appellants' undertakings deemed permitted under Section 25-O(3). Money paid to employees under the High Court's interim orders not recoverable. Compensation of Rs 15 crores (enhanced from the appellants' offer of Rs 10 crores), in addition to gratuity, to be released to the employees as per entitlement within eight weeks. Pending applications disposed of.