Shilpi Nama
On 4th June, 2025, the Supreme Court of India affirmed that under Article 19(1)(g) of the Constitution, businesses have the fundamental right to shut down operations. However, this right is subject to reasonable restrictions under labour laws, specifically Section 25-O of the Industrial Disputes Act, 1947.
The Bench comprised of Justice Sanjay Karol and Justice Prashant Kumar Mishra. The Court clarified that closures must be justified by exceptional or genuine reasons and that mere financial difficulty is not sufficient grounds for shutdown.
The ruling came in a case involving Harinagar Sugar Mills Ltd. (HSML) – Biscuit Division, which operated a factory in Mumbai exclusively for Britannia Industries. After Britannia ended their contract in May 2019, HSML decided to close its factory, citing no alternate clients, equipment, or means to continue production. On August 28, 2019, HSML applied for closure under Section 25-O. Although the law mandates a 60-day period for government response, the Maharashtra Labour Department repeatedly deemed the application incomplete without issuing a formal decision.
The company approached the Bombay High Court after administrative delays, but the High Court sided with the Labour Department. HSML then appealed to the Supreme Court, arguing that under Section 25-O(3), failure to respond within 60 days constitutes deemed approval. The company also contended that the Deputy Secretary lacked legal authority to issue correspondence regarding the application, as no delegation of power had been made under Section 39 of the Act.
The Supreme Court agreed with HSML, holding that internal file notings cannot replace a properly reasoned and legally valid order. It emphasized that administrative decisions affecting workers must be transparent and well-founded. The Court found HSML’s application to be clear and genuine, noting that the statutory 60-day window had expired without a valid response, effectively granting permission for closure by default.
Furthermore, the Court criticized the Bombay High Court for procedural errors, including referencing the wrong legal form under state rules—using Form XXIV meant for retrenchment instead of Form XXIV-C for closures. Setting aside the High Court’s ruling, the Supreme Court allowed HSML’s appeal.
Taking a balanced stance, the Court recorded HSML’s offer to compensate workers. Having already deposited ₹4 crore, HSML was directed to increase this to ₹15 crore, with disbursal to all eligible workers required within eight weeks.
Case Name: Harinagar Sugar Mills Ltd. (Biscuit Division) & Anr. vs. State of Maharashtra & Ors
Case Number: SLP(C)No.4268/2023
Bench: Justice Sanjay Karol and Justice Prashant Kumar Mishra.
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