Introduction
In a seminal judgment delivered just the last week, the apex court has come up with a reasserting proposition, validating a distinct dimension to Article 19 of the constitution of India. The court, considering the case filed by Harinagar Sugar Mills Ltd. against the State of Maharashtra and Ors., elucidated that the right to carry on business envisaged under Article 19(1)(g) is coexistent with the right to shut down the business as well, though it must be exercised while keeping the welfare of the workers in mind. This decision, by focusing on the often-ignored perspective of businesses, marks a significant step in safeguarding the autonomy and economic liberty of individuals engaged various trades and businesses across the country.
Background
The petition of the concerned case is an exclusive biscuit manufacturing division of Britannia Industries Limited (BIL), operating under Job Work Agreements (JWAs) for BIL for over three decades. These agreements were concluded by BIL in 2019, Prompting the appellant to file application for closure of its business as per the provisions of the Industrial Disputes Act, 1947. However, this application was rejected by Maharashtra Government’s Deputy Secretary, on the grounds that it is incomplete, thereby demanding a resubmission of the same.
Though efforts were made by the appellant, Hindustan Sugar Mills Ltd., to provide additional information supporting the application made, it was not accepted. Amidst the hassle behind the closure application, the Worker’s unions moved the Industrial Tribunal seeking restrain closure which was granted immediately. This was challenged by the appellant before the High Court of Bombay in writ petition No. 3447 of 2019, however in vain. The aggrieved appellant thus approached the Supreme Court, contending that the rejection of closure application by the Deputy Secretary is unsound, since only the concerned minister is authorized to consider such applications. Additionally, it was contended that the closure application filed by the appellant was complete as on the date of filing and the statutory period prescribed for deemed closure (60 days) has also expired in October 2019.
After considering the submissions made by both parties, the court observed that, “The sum and substance are that Article 19(1)(g) includes the right to shut down a business but is, of course, subject to reasonable restrictions. This interplay of Article 19(1)(g) and Section 25-O of the Act engaged in the attention of a Constitution Bench of this Court in Excel Wear (supra), when it was cast with considering the constitutionality of Section 25-O as it then stood. It has subsequently been amended, challenged before this Court and upheld in Orissa Textile and Steel (supra)…”
Subsequently the court allowed the appeal and set aside the High Court order which had rejected the validity of the closure application filed by the appellant. The two-judge bench comprising of Justice Sanjay Karol and Justice Prashant Kumar Mishra, held that the Deputy Secretary of the state is in no way authorized to demand revisions or delay such closures. Furthermore, the court ordered that compensation that is paid to employees of the concerned manufacturer during the course of the litigation, cannot be recoverable.
The Fundamental right to shutdown businesses has been a well-recognized legal principle in the Indian Judiciary. In the Landmark judgments of Excel wear v Union of India, The Supreme court drew a balance between the rights of business owners and welfare of the workers, reaffirming that business owners essentially possessed the right to close unviable businesses, but underscoring that this right must not put the workers in significant disadvantage.
Key Points
- Rejection of closure application by the Deputy Secretary of State: The appellant was unable to sustain the business due to the termination of job work agreements with Britannia Industries Limited, under which the appellant had conducted business for 32 years. The closure application subsequently filed, was rejected by the Deputy Secretary. The Apex court observed that order rejecting this closure application cannot be constituted in the first place, since it was issued without the requisite authority.
- The Balance between right and welfare: The judgment delivered by the court displays an intricate balance between the liberty of the business owner to conduct or close their business and the welfare of laborers working in such business, thereby reaffirming the position laid down by this court in Excel wear v Union of India (1978). The court pointed out that the appellant had compelling reasons for closure and no alternate business opportunities. Despite allowing the closure application, the court pressed that compensation paid to aggrieved employees of the business during the litigation, would not be recoverable.
- Predominant constitutional right of the business owner: The Bench explained that the freedom to set up and run business is necessarily accompanied by the right of the proprietor or owner to take decisions as may be in his best interest. Though limited by reasonable restrictions, the right to shut down a business is a fundamental right recognized under Article 19 of the Constitution, hence a business entrepreneur cannot be compelled to continue running the business when the same is not viable.
Recent Developments
Explicit reaffirmation of right to close down business as a fundamental right that enjoys constitutional protection. Any ambiguity that may have remained despite the previous judgments on the concerned right has thus been settled.
The court confirmed that if the closure application has not been considered within the statutory period of 60 days, the business is automatically deemed to be closed.
An application for closure can only be considered by the entity which is specifically authorized to do the same. Interference by any other entity, however so competent, is invalid and not binding.
The right to shut down business is not absolute. This right must be exercised while upholding the rights of the workers. Labor justice cannot be compromised while shutting down a business.
Conclusion
To conclude, this recent judgment of the Supreme Court has brought more clarity into the discussions on the importance of economic liberty and the need to protect the interests of workers who may be put to a disadvantage at the wake of a business closing down. This judgment is an indisputable feat in Industrial jurisprudence, ensuring that the economic autonomy of business is protected without sacrificing the welfare of its workers. At the face of the rapid economic development, the clarity offered by this decision of the Hon’ble Supreme Court is of paramount importance.
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WRITTEN BY AYANA THERESA XAVIER
