Right Under Article 19(1)(g) To Carry On Business Under Also Includes Right To Shut Down Business : Supreme Court

The Supreme Court, in a judgment by the two-Judge Bench comprising Justice Sanjay Karol and Justice Prashant Kumar Mishra, clarified that the right under Article 19(1)(g) of the Constitution to carry on any trade or business includes the right to shut down that business. However, this right is not absolute and is subject to reasonable restrictions aimed at protecting workers and ensuring compliance with statutory procedures.

This ruling arose from appeals filed by Harinagar Sugar Mills Ltd. (Biscuit Division) challenging the Bombay High Court's orders relating to the closure of its business.

Background

Harinagar Sugar Mills Ltd. (HSML) had operated a biscuit manufacturing division exclusively for Britannia Industries Limited (BIL) for over three decades under Job Work Agreements (JWAs). In 2019, BIL terminated this agreement, triggering HSML to seek closure of its business under the Industrial Disputes Act, 1947. HSML filed its closure application on August 28, 2019, under Form XXIV-C as prescribed by the Maharashtra Rules. The Maharashtra Government's Deputy Secretary, however, rejected the application as incomplete, demanding resubmission. Despite HSML's efforts to provide additional information, the closure application was delayed. Workers' unions moved the Industrial Tribunal seeking to restrain closure, which was granted. HSML's petitions challenging this were dismissed by the High Court, leading to appeals before the Supreme Court.

HSML argued that their closure application was complete and valid from August 28, 2019, and that the 60-day period for deemed closure had expired in October 2019. They contended that only the Minister concerned was empowered to entertain the application and that the Deputy Secretary lacked authority to demand revisions or halt the closure. HSML emphasized that after decades of exclusive work for BIL, the termination of the JWA left them with no alternative business avenues, making closure inevitable. The Government, on the other hand, maintained that the application was incomplete and urged that closure be restrained to protect workers. Workers and unions opposed the closure, citing statutory safeguards.

Court's Findings

The Supreme Court acknowledged the balance between the constitutional right to conduct business and the need for reasonable restrictions to protect employees. It held that the application dated August 28, 2019, was complete and triggered the statutory 60-day deemed closure period. The Court found that the Deputy Secretary was not the “appropriate Government” under Section 25-O of the Industrial Disputes Act, and the Minister had failed to independently apply mind, unlawfully delegating authority. This rendered the communications from the Deputy Secretary invalid. The Court further noted that HSML had compelling reasons for closure, having no alternative business opportunities post-termination of the agreement with BIL.

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)...”

Court's Ruling

The Supreme Court allowed the appeals, setting aside the High Court orders. It declared the closure application valid from August 28, 2019, and recognized the expiry of the 60-day period in October 2019, authorizing deemed closure. The Court held that the Deputy Secretary had no authority to demand revisions or delay the closure, and that the Minister's failure to consider the application amounted to a legal defect. Additionally, the Court ordered that compensation paid to employees during litigation would not be recoverable. Appreciating HSML's efforts, the Court enhanced the compensation offered to workers by an additional ₹5 crores, directing disbursal within eight weeks.

Cause Title- Harinagar Sugar Mills Ltd. (Biscuit Division) & Anr. v. State of Maharashtra & Ors.

Citation: 2025 LiveLaw (SC) 673

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