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Judgment
The petitioner Maulins of India Limited has two factories, one at Mohali in Punjab and the other at No. 12, Biren Roy Road (West), Behala, Calcutta-34. The petitioner-Company manufactures machines for manufacturing cigarettes, for packing pharmaceuticals, general purpose packaging machines and table-top off-set printing machines etc. at the said Mohali factory in Punjab. At its factory at Behala the petitioner-company manufactures spare-parts for cigarette industry and other precision engineering items. The Company employed about 247 workmen at the said factory at Behala including 10 canteen boys.
On 19th September, 1987, the Company submitted an application for permission to close down the factory at Behala. The grounds were that there has been a serious decline in the demand for the products of the Company. Owing to the reduced off-take of the Company''s products, the goods manufactured remained in stack and unsold, which in turn resulted in six-fold burden of interest over the last four years. Due to depression in market, increased labour costs, decrease in sales of the Company''s products at Behala, there have been mounting losses over the last three years i.e. 1985, 1986 and first half of 1987.
According to the Company it has become almost impossible to fund the losses arising out of the depressed market condition for the products of the Company from the Behala Unit. The financial results of the company (which relate to both its establishments) snowed losses to the extent of Rs. 87/- lakhs approximately during the years 1985 and 1986 and further Rs. .82 lakhs during the first six months of the subsequent year that is, upto June, 1987. According to the company the Behala Unit is mainly responsible for such losses.
Thereafter on 20th October, 1987 a formal hearing was given to the petitioner-company, by the Deputy Secretary, Department of Labour, being concerned Authority. The said Deputy Secretary, Labour Department, Govt. of West Bengal, has been made the Respondent No. 2. The Respondent Nos. 4 and 5 are the unions of the employees which made representation and submissions to the Deputy Secretary, Department of Labour, Government of West Bengal being the Respondent No. 2. It does not appear that any opportunity was given to the Company to controvert the representations of the Labour Unions. Furthermore, the case of the petitioner is that the representations of the Labour Unions were heard in the petitioner''s absence. Thereafter by an order dated 12th November, 1987 the said application of the petitioner-company was rejected. A copy of the said order is annexed to the petition.
The said order refers to the financial position of the Company. Upto 1984 the Company earned profits, but there was loss of Rs. 44.74 lakhs in 1985 and Rs. 42.58 lakhs in 1986. But the final accounts of the Company being amalgamated for the two units, viz., one at Behala, Calcutta and the other at Mohali in the Punjab do not reflect separately the working results of the Behala Unit. It is stated in the order that it is difficult to assess the financial results of the Unit at Behala. The submissions on behalf of the Workers'' Union are also recorded in the said order. According to the said unions the grounds stated by the Company in the notice for closure were not real and the application was calculated to exert more pressure on the workers in order to make them agree to give higher production. According to the workers, the Company had opened Unit at Mohali in the Punjab from the funds generated by the Behala Unit. According to the workers, substantial reserves of the Company have been drained off for the Research and Development Wing of the Mohali factory. The said Deputy Secretary has accepted the accounting results of the Company for the years 1985 and 1986. He observes further as follows:
However, the reports for 1985 and 1986 indicated that the reasons for set back in the financial results of the Company were mainly the continued depression in demand of machinery for cigarette Industry.
It is to be noted that it is the Behala Unit which produces spares for the machinery for Cigarette Industry. The said Deputy Secretary'' has discussed in his order the outstanding order book position, idle hours, production figures. He has expressed the opinion that most of the difficulties, which according to him are temporary in nature, can be averted by diversification of products, which the Company appears to have attempted seriously. The Deputy Secretary, Labour Department, Government of West Bengal finally held that the contentions of the unions seemed to be acceptable in the circumstances of the case and that the reasons shown by the Company for allowing closure of the Unit at Behala did not appear to be adequate and sufficient and the Unit should continue to function in the public interest. It does not appear that any enquiry was made to find out the exact losses incurred by the Behala Unit. The case of the Company was that it was the Behala Unit which was mainly responsible for the losses. Finally the said Deputy Secretary refused to grant permission to close down the undertaking and he ordered that the Company should not close down the said undertaking.
The petitioner seeks to challenge the said order dated 12th November, 1987 and prays that the same is liable to be quashed on the ground that there are errors of law apparent on the face of the record and that rules of natural justice were not followed in hearing the matter.
The balance-sheet of the Company for the year ending 31st December, 1984 shows that the Company had a share capital of Rs. 140.00 lakhs and reserve and surplus to the extent of Rs. 190.34 lakhs. During that year the Company made a profit of Rs. 45.78 lakhs which after provisions for taxation came to Rs. 23.78 lakhs. For the next financial year ending 31st December, 1985 the Company incurred a loss of Rs. 44.74 lakhs which resulted in the erosion of the reserve and reflected loss. In the next year" viz., the year ending on December 31, 1986, a further sum of Rs. 42.58 lakhs was shown as loss, So far as the accounting results for the year ending 31st December, 1984, 85 and 86 are concerned, the audited balance-sheets have been produced and so far as the first six months of 1987 (January-June) are concerned, the same are statements based on the books accounts of the petitioner-company, for the period concerned.
Affidavits have been filed on the behalf of the Respondent No. 4 and also on behalf of the Union of India. According to the Workers'' Union, the management is resorting to unfair labour practice and mala fide illegal acts. From the said affidavit it also appeares that the Company asked the workers not to report for work and to remain on special leave with full wages with effect from 2nd September, 1987 for a period of three months, with the option to increase the period. It has been further alleged that the management of the petitioner had purported to issue the impugned notice dated 31st August, 1987 to implement their unfair labour practice involved in taking away the legal rights of the workmen and the employees to continue in employment under the petitioners. It has been further alleged that the said notice was prelude to victimization and/or unfair labour practice which the management of the petitioner conspired to resort to against the workmen.
The petitioner had also contended that Section 25-O, as a whole and Section 25R of the Industrial Disputes Act, 1947, in so far as it relates to the awarding of punishment for infraction of the provisions of Section 25-O, are constitutionally bad and invalid being violative of Article 19(1)(g) of the Constitution of India read with Article 19(6) thereof. The Union of India has however submitted that the Industrial Disputes (Amendment) Act, 1982 which incorporated the revised provisions, satisfies the tests laid down by the Supreme Court of India, in the case of Excel Wear and Others Vs. Union of India (UOI) and Others, . By the said judgment in Excel Wear''s case (supra) the supreme Court had struck down the old Section 25-O, of the Industrial Disputes Act, as it then existed, on the grounds mentioned in the said judgment, and, inter alia, held that the said old Section 25-O was violative of Article 19(1)(g) of the Constitution of India and was not saved by Article 19(6) thereof.
The questions that arise for consideration in this case are as to whether the said amended Section 25-O has taken care of the infirmities of the old Section 25-O which was declared by the Supreme Court as ultra vires the Constitution of India. The second question that arises is as to whether the decision of the Deputy Secretary was without observing the rules of natural justice and has errors apparent on the fact of the record and the same is liable to be quashed.
That the Co. has suffered substantially losses during the years 1985 and 1986 has not been disputed even by the Workers'' Union in their affidavit Furthermore, the audited balance-sheets of the Company are there which reflect the said losses. The losses of the said two years, that is, 1985 and 1986 comes to Rs. 87 lakhs, The loss in the first six months of the year 1987 has been stated by the Company, to be Rs. 82 lakhs. The total expected loss for the whole year 1987 as stated by the company was Rs. 1 crore 45 lakhs. Thus in three years the Company has lost and/or was likely to lose Rs. 232 lakhs, in all. Of course, the figures for 1987 are not as per the audited accounts. But the person verifying the petition and the affidavit in - reply can be expected to have due knowledge of the accounts of the Company. The share capital of the Company was Rs. 140 lakhs and as against this the total losses in three years come to Rs. 232 lakhs, that is, far exceeding even the share capital. The Company''s reserves, and surpluses were Rs. 190 lakhs in 1984. Furthermore, according to the Company the Behala Unit is mainly responsible for the said losses and the said unit has become economically non-viable. The representative of the Union who affirmed the affidavit could not be expected to have sufficient knowledge with regard to the accounts of the Company relating to the two different units and/or the working results thereof. Furthermore, it is actually the management of the company, who could be expected to have knowledge as to which of the two factories of company is mainly responsible for the said losses. It does not appear that any attempt was made by the Deputy Secretary to look into the Account Books of the Company in respect of the years 1985 to 1987 for the purpose of finding out the working results of the two factories. The Deputy Secretary has accepted the contentions of the Union. How can a man, who issues notice to close down the factory, put pressure on the workers to give higher production and how can it be said that the objective of the employer is to achieve more production? A person who is interested in more production will not issue a notice of the nature as was issued on 31st August 1987. The employer writes that he will pay full wages even without working. That sort of notice can only be issued by an employer who does not need production at all and secondly when he finds that by running the factory he will lose more than what he losses in form of full pay to idle labour.
In order to appreciate the respective contentions made on behalf of the parties on the question of the vires of Section 25-O it is necessary to look into the old and the new Section together. The said Section 25-O as contained in the old Act and also in the new amendment is as hereunder:-
Section-0 (Old) Section-25 (New) NINETY DAYS NOTICE TO BE GIVEN OF PROCEDURE FOR CLOSING DOWN AN INTENTION TO CLOSE DOWN ANY UNDERTAKING: UNDERTAKING:
An employer who intends to close down (1). An employer who intends to close down an undertaking of an industrial establishment an undertaking of an industrial establishment to which this. Chapter applies shall serve, for to which this Chapter applies shall, in the previous approval at least ninety days before prescribed manner, apply for prior permission the date on which the intended closure is to at least ninety days before the date on which become effective, a notice in the prescribed the intended closure is to become effective, manner, on the appropriate Government to the appropriate Govt. stating clearly the stating clearly the reasons for the intended reasons for the intended closure of the closure of the undertaking. undertaking and a copy of such application shall also be served simultaneously on the representatives of the workmen in the prescribed manner.
Provided that nothing in this Section shall Provided that nothing in this sub-section shall apply to an undertaking set up for the apply to an undertaking set up for the construction of buildings, bridges, roads, construction of buildings, bridges, roads, cannals, dams or for other construction work. canals, dams or for other construction work.
On receipt of a notice under sub-section (2). Where an application for permission has (1) the appropriate Government may, if it is been made under Sub-section (1) the appropriate satisfied that the reasons for the intended Government after making such enquiry as it closure of the undertaking are not adequate thinks fit and after giving a reasonable and sufficient or such closure is prejudicial opportunity of being heard to the employer, to the public interest, by order, direct the the workmen and the persons interested in employer not to close down such undertaking. such closure may, having regard to the genuineness and adequacy of the reasons stated by the employer, the interests of the general pubic and all other relevant factors, by order and for reasons recorded in writing grant or refuse to grant such permission and a copy of such order shall be communicated to the employer and the workmen.
Where a notice has been served on the (3).Where an application has been made under appropriate Government by an employer Sub-section (1) and the appropriate Government under Sub-section (1) of Section 25FFA and the does not communicate the order granting or period of notice has not expired at the refusing to grant permission to the employer commencement of the Industrial Disputes within a period of sixty days from the date (Amendment) Act, 1976, such employer shall on which such application is made, the not close down the undertaking but shall permission applied for shall be deemed to within a period of fifteen days from such have been granted on the expiration of the said commencement, apply to the appropriate period of sixty days. Govt. for permission to close down the undertaking.
where an application for permission has (4). An order of the appropriate Government been made under sub-section (3) and the granting or refusing to grant permission, appropriate government does not shall, subject to the provisions of Sub-section (5), communicate the permission or the refusal be final and binding on all the parties and to grant the permission to the employer within shall remain in force for one year from the a period of two months from the date on date of such order. which the application is made, the permission applied for shall be deemed to have been granted on the expiration of the said period of two months.
Where no application for permission under (5). The appropriate Government may, either Sub-section (1) is made, or where no application on its own motion or on the application made for permission under Sub-section (3) is made by the employer, or any workman, review its within the period specified therein or where order granting or refusing to grant permission the permission for closure has been refused, under Sub-section (2) or refer the matter to a the closure of the undertaking shall be deemed Tribunal for adjudication. Provided that to be illegal from the date of closure and the where a reference has been made to a Tribunal workmen shall be entitled to all the benefits under this sub-sec, it shall pass an award under any law for the time being in force as within a period of thirty days from the date if no notice had been given to him of such reference.
Notwithstanding anything contained in Sub- 6. Where no application for permission under section (1) and Sub-section (3) the appropriate Sub-section (1) is made within the period Government may, if it is satisfied that owing specified therein or where the permission for to such exceptional circumstances as accident closure has been refused, the closure of the in the undertaking or death of the employer undertaking shall be deemed to be illegal from or the like it is necessary so to do, by order, the date of closure and the workmen shall be direct that the provisions of Sub-section (1) entitled to all the benefits under any law for or Sub-section (3) shall not apply in relation the time being in forces as if the undertaking to such undertaking for such period as may be has not been closed down. specified in the order.
Where an undertaking is approved or 7. Notwithstanding anything contained in the permitted to be closed down under Sub-section foregoing provisions of the Section, the (1) or Sub-section (4) every workman in the appropriate Government may, if it is satisfied undertaking who has been in continuous that owing to such exceptional circumstances service for not less than one year in that as accident in the undertaking or death of the undertaking immediately before the date of employer or the like it is necessary so to do, application for permission under this Section by order, direct that the provisions of sub-sec. shall be entitled to notice and compensation (1) shall not apply in relation to such as specified in Sec. 25 N as if the said undertaking for such period as may be workman had been retrenched under that specified in the order. Section.
Where an undertaking is permitted to be closed down under Sub-section (2) or where permission for closure is deemed to be granted under Sub-section (3) every workman who is employed in that undertaking immediately before the date of application for permission under this Section shall be entitled to receive compensation which shall be equivalent to fifteen days'' average pay for every completed year of continuous service or any part thereof in excess of six months.
The changes that have been brought by the amended new Section can be enumerated as hereunder:-
1) In the new Sub-section (2) an enquiry is required to be held and an opportunity of hearing to interested parties is provided. The old Sec. provided that if the reasons are not adequate or sufficient or such closure is prejudicial to public interest, an order could be made directing the employer not to close down the undertaking. This language has been changed in new Sub-section (2), which provides that the appropriate Government may having regard to the genuineness and adequacy of the reasons, the interest of the general public and all other relevant factors by order grant or refuse to grant such permission.
2) The Government is required to record reasons for grant or refusal to grant permission.
3) The order passed either granting or refusing permission could be enforced only for one year. Therefore, a fresh application after the said date is permissible and the order passed is again subject to review by the State Government.
4) There is also provision for review of the matter and for referring the matter to the Tribunal, with the requirements that the Tribunal should dispose of the reference within one month from the date of Reference. The Government may either on its own motion or on the application made by the employer or any workman, review its order or refer the same to a Tribunal for adjudication.
In Excel Wear''s case (Supra), the Supreme Court had the occasion to consider the vires of the old Section 25-O and, inter alia, had observed as follows (536-541):
But then, as pointed out by this Court in Hatisingh''s case (supra), the right to close down a business is an integral part of right to carry it on. It is not quiet 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. The extreme proposition urged on behalf of employers by equating the two rights and placing them at par is not quite apposite and sound.
Equally so, or rather, more emphatically we do reject the extreme contention put forward on behalf of the Labour Unions that right to close down a business is not an integral part of the right to carry on any business, but it is a right appurtenant to the ownership of the property or that it is not a fundamental right at all. It is wrong to say that an employer has no right to close down a business once he starts it. If he has such a right, as obviously he has, it cannot but be a fundamental right embedded in the right to carry on any business guaranteed under Article 19(1)(g) of the Constitution.
In contrast to the other provisions Section 25-O(2) does not require the giving of reasons in the order. In .two of the impugned orders communicated to the petitioners, Excel Wear and Acme Manufacturing Co. Ltd. it is merely stated that the reasons for the intended closure are prejudical to public interest suggesting thereby that reasons given by the employers are correct, adequate and sufficient, yet they are prejudicial to the public interest. In cases of bonafide closures, it would be generally so. Yet the interest of labour for the time being is bound to suffer because it makes a worker unemployed. Such a situation as far as reasonably possible, should be prevented. Public interest and social justice do require the protection of the labour. But is it reasonable to give them protection against all unemployment after affecting the interest of so many persons interested and connected with the management apart from the employer''s? Is it possible to compel the employer to manage the undertaking even when they do not find it safe and practicable to manage the affairs?
Can they be asked to go on feeing tremendous difficulties of management even at the risk of their person and property? Can they be compelled to go on incurring losses year after year? As we have indicated earlier, in Section 25FFF retrenchment compensation was allowed in cases of closure and if closure was occasioned on account of unavoidable circumstances beyond the control of the employer a ceiling was put on the amount of compensation under the proviso. The explanation postulates the financial difficulties including financial losses or accumulation of undisposed stocks, etc,, as the closing of an undertaking on account of unavoidable circumstances beyond the control of the employer but by a deeming provision only the ceiling in the matter of compensation is not made applicable to the closure of an undertaking for such reasons. In 1972 by insertion of Section 25FFA in Chapter V-A of the Act, an employer was enjoined to give notice to the Government of an intended closure. But gradually the net was cast too wide and the freedom of the employer tightend to such an extent by introduction of the impugned provisions that it has come to a breaking point from the point of view of the employers. As in the instant cases, so in many others a situation may arise both from the point of view of law and order and the financial aspect that the employer finds it impossible to carry on the business any longer. He must not be allowed to be whimsical or capricious in the matter ignoring the interest of the labour altogether. But that can probably be remedied by awarding different slabs of compensations in different situations. It is not quite correct to say that because compensation is not a substitute for the remedy of prevention of unemployment, the latter remedy must be the only one. If it were so, then in no case closure can be or should be allowed. In the third case, namely that of Apex Private Ltd. the Government has given two reasons, both of them being too vague to give any exact idea in support of the refusal of permission to the close down. It says that the reasons are not adequate and sufficient (although they may be correct) and that the intended closure is prejudicial to the public interest. The latter reason will be universal in all cases of closure. The former demonstrates to what extent the order can be unreasonable. If the reasons given by the petitioner in great detail are correct, as the impugned order suggests they are, it is preposterous to say that they are not adequate and sufficient for a closure. Such an unreasonable order was possible to be passed because of the unreasonableness of the law. Whimsically and capriciously the authority can refuse permission to close down, Cases may be there, and those in hand seem to be of that nature, where if the employer acts according to the direction given in the order he will have no other alternative but to face '' ruination in the matter of personal safety and on the economic front. If he violates it, apart from the civil liability which will be of a recurring nature, he incurs the penal liability not only u/s 25R of the Act but under many other statues.
26...Intrinsically no provision in Chapter V-B of the Act suggests that the object of carrying on the production can be achieved by refusal to grant permission although in the objects and reasons of the Amending Act such an object seems to be there although remotely and secondly it is highly unresonable to achieve the object by compelling the employer not to close down in public interest for maintaining the production.
It is not always easy to strike a balance between the parallel and conflicting interests. Yet it is not fair to unreasonably tilt the balance in favour of one interest by ignoring the other. Mr. Nadkarni relied upon the following passage of Frankfurter. J. while expressing his view on ''Balance of Interest'':-
''I cannot agree in treating what is essentially a problem of striking balance between the competing interests as an exercise in absolute.''
Learned Counsel also referred to a note on ''Government and liberty from Paradoxes of Legal Science'' by Benjamine Cardozo which is to the following effect:-
''As the social conscience is awakened the conception of injury is widened and insight into its cause is deepened, the area or restraint is therefore increased.''
Nobody can have a quarrel with these basic principles however high sounding or unreasonable they may appear to be on their face. But yet no jurisprudence of any country recognizes the concept of injury is widened and the area of restraint is broadened to an extent that it may result in the annihilation of the person affected by the restraint.
In case of fixation of minimum wages the plea of the employer that he has not got the capacity to pay even minimum wages and, therefore, such a restriction on his right to carry on the business is unreasonable has been repeatedly rejected by this Court to U. Unichoyi and Others Vs. The State of Kerala, But this principle, rather in contrast, illustrates the unreasonableness of the present impugned law. Nobody has got a right to carry on the business if he cannot pay even the minimum wages to the labour. He must then retire from business. But to tell him to pay and not to retire even if he cannot pay is pushing the matter to an extreme.
It is not doubt true that Chapter V-B deals with certain comparatively bigger undertakings and of a few types only. But with all this difference it has not made the law reasonable. It may be a reasonable classification for saving the law from violation of Article 14 but certainly it does not make the restriction reasonable within the meaning of Article 19(6). Similarly the interest of ancillary industry cannot be protected by compelling an employer to carry on the industry although he is incapacitated to do so. All the comprehensive and detailed information given in the application forms are of no avail to the employer if the law permits the authority to pass a cryptic, capricious, whimsical and one-sided order.
In the said case the Supreme Court had struck down the said Section 25-O being violative of the fundamental right to carry on business guaranteed by Article 19(1)(g) of the Constitution of India and also held that the same was not saved by Article 19(6) of the Constitution of India, and did not amount to reasonable restrictions on the said right.
The petitioner also relied on the judgment Stumpp Schuele and Somappa Ltd. and M. Shivkumar Vs. State of Karnataka, Union of India and Workmen of Electronic Divisions of Stumpp Schuele and Somappa Ltd., . In that case M. Rama Jois J. had the occasion to consider said new section which was declared to be ultra vires the Constitution of India. The learned Judge after considering the said judgment of the Supreme Court in Excel Wear''s case and the changes brought about by the new Section held that the principal grounds on which the old Section was struck-down by the Supreme Court, were still not removed by the new Section 25-O.
Under the old Section 25-O the Government could refuse permission to close if there was no adequate and sufficient reasons for the intended closure or the closure was prejudicial to the public interest. In the amended Section though an enquiry and hearing have been provided for, the Government, having regard to the genuineness and adequacy of the reasons stated by the employer as also the interest of the general public and all other relevant factors, can grant or refuse permission. Even if there are genuine and good reasons for such closure still the permission could be rejected if the same were held to be inadequate or if the interest of the general public required so. It will actually depend on the whims of the particular officer to give such weight to different grounds as he may decide. There are no guidelines in this amended Section as to what weight is to be given to different grounds. As per the Supreme Court observations in the aforementioned case is it possible to compel the employer to manage the undertaking even when they do not find it safe and practicable to manage the affairs? Can they be asked to go on facing tremendous difficulties of management even at the risk of their person and property or if they go on incurring losses year after year? The amended Section hardly satisfies the queries raised in the aforesaid judgment of the Supreme Court.
The fact that the closure results in unemployment of the workmen or decrease in production would not be a valid ground to deny the permission to close in case where it is not possible to carry on the business or it is not safe or practicable to manage the affairs or in the case of incapacity or impossibility to carry on the same or in case of continued financial losses. Hence the provision which gives a scope to the passing of such an order cannot be regarded as reasonable.
Furthermore, the discretionary power conferred on the Government to review the order or to make a reference to the Tribunal or that the order would be in force for one year does not in any way confer the right upon the aggrieved party to go in appeal or in revision, so that the order may be scrutinized by a higher authority. As per the Supreme Court judgment in Excel Wear''s case (supra) the law can impose such conditions or restrictions on the exercise of right to close the business which goes to defer an unfair, whimsical unjust or mala fide, closure but cannot prevent the exercise of the right.
In the said case of Stumpp Schuele and Ors. v. State of Karnataka and Ors. (supra) the Karnataka High Court had the occasion to consider the effect of the changes, brought about by the amended new section and the question as to whether the said changes save the new section from the vice of unconstitutionality. The said High Court ultimately held that the said new Section 25-O was ultra vires the Constitution of India.
As will appear from the comparision of the old Section 25-O declared unconstitutional by the Supreme Court in Excel Wear''s case (supra), and the new Section 25-O, some improvements have been sought to be made which include requirement of holding an enquiry, giving of reasonable opportunity of being heard to the interested parties including the employer, to consider all other relevant facts before making an order, to record reasons in writing, to grant permission if not decided to refuse, the provisions for review of the order by the Government, a provision for reference of question to tribunal with a requirement that such reference should be decided within a month, a provision that the order for refusing permission remains in force only for one year which means after the expiry of one year a fresh application could be made.
However, in my opinion, the real and substantial ground for striking down the old Section 25-O by the Supreme Court was that under the said old Section the permission to close down could be refused, even if the reasons for closing down the industry were good and genuine. The amended new Section 25-O still suffers from the said vice. Under the new Section, the appropriate Government may, having regard to the genuineness and adequacy of the reasons stated by the employer, the interest of general public and all other relevant factors, grant or refuse to grant such permission. It does not provide as to what are genuine and adequate reasons and if genuine and good reasons are there, the permission has to be granted. It also does not provide the circumstances under which a permission can be refused. The permission can be refused having, regard to interest of general public which is always in favour of continued production and employment. It also does not provide as to what are the other relevant factors. It also does not provide as to what are the grounds which will not be adequate. The provision of the amended section is such that a permission can be refused even in the interest of the general public and if the appropriate Government is of the opinion that the grounds are inadequate. Even a genuine and good ground may be held to be inadequate in the opinion of appropriate Government. This is clearly unreasonable restriction on the fundamental right of the employer. In other words an unreasonable order could be made well within the scope of the power conferred under the section because the section itself was unreasonable. Under old Section the exercise of right to close was made dependent on the permission of the Government, which can be refused even if the reasons for closure were good and genuine. The recording of reasons can only be of significance if the citizen aggrieved by the order could resort to a further remedy, in shape of appeal or revision. The new Section does not give any right as such to the aggrieved party. The provision for review and/or for reference to Tribunal is at the option of the Government and the same does not amount to giving of any right to the aggrieved party. The Government may or may not allow such review or reference. Furthermore, if the law itself permitted refusal of permission, inspite of the reasons for closure being good and genuine, a remedy by way of review or reference may not be of any assistance to the aggrieved person and is likely to be mere illusory.
The Karnataka High Court in the aforesaid judgment went on to hold as follows (P. 559):
Therefore, if in the impugned provision the specific grounds which, if made out, entitled the employer to secure the permission were set out and the Section made it obligatory for the Government to accord permission, if one or more grounds so specified were made out, with a further provision that reasons must be recorded in the event of refusing permission., such a permission might perhaps be regarded as a reasonable restriction on the exercise of the right, for, the agreed employer could even in the absence of any appeal to a specified authority enforce his right and secure the relief through a petition under Article 32 or 226, if he is able to prove that he had made, good, one or more of the grounds, which entitled him to secure the permission, but had been refused by recording reasons which were perverse.
But without specifying the grounds, which if made out entitles the owner of an industry to secure permission to close it down, a mere provision for recording reasons does not save it from the vice of unconstitutionality, for, even if such on order is struck down on the ground that the permission had been rejected, arbitrarily, it is of no use to the owner as it does not have the effect of according permission and the position of the owner remains the same, i.e. he cannot close down the business without permission. Even if there were to be a direction to the Government to reconsider the matter, again the permission can be rejected.
In paragraph 25 of the judgment in the case of Excel Wear (supra), the Supreme Court, interalia, posed the following questions:
(i) Is it possible to compel the employer to manage the undertaking even when they do not find it safe and practicable to manage the affairs?
(ii) Can they be asked to go on facing tremendous difficulties of management even at the risk of their person and property?
(iii) Can they be compelled to go on incuring losses year after year?
In the aforesaid judgment the Supreme Court further held that if the reasons given by the petitioner were correct, it is preposterous to say that they are not adequate or sufficient for a closure. Such an unreasonable order was possible to be passed because of the unreasonableness of the law. The Supreme Court further observed that it is highly unreasonable to achieve the object by compelling the employer not to close down in public interest for maintaining production.
The Karnataka High Court further held in the aforesaid case as follows (PP. 559-560):
In my view the new Section 25-O is not at all in the nature of a restriction imposed on the exercise of the right to close down the business. The nature of restrictions on the exercise of the right in public interest which could be imposed in view of Clause (6) of Article 19 must be such as would enable a person who desires to exercise his right guaranteed under Article 19(1)(g) to do so, if the conditions specified by Law exist and/or the conditions imposed by law were to be complied with by him. Further the conditions, the existence of which are made necessary for the exercise of the right, must be reasonable and the conditions required to be complied with must-be such, the compliance with which is reasonably possible. In Section 25-O the conditions which must exist for the exercise of the right are not specified. Similarly Section 25-O does not specify the conditions, which, if fulfilled permissions would be granted. On the other hand securing of permission of the Government, which is not within the hands of the owner, itself is a condition to be complied with for exercising the right of closure. To put it in a nut shell, the Section is not in the nature of fetter on the exercise of the right, but a provision which employers the Government to put a shutter on the exercise of the right irrespective of the fact that the reasons to close down .the industry are valid and may be even beyond the control of the employer.
The facts of this case clearly established how the Section operates as a shutter on the exercise of the right. The reason given by the petitioners for its decision to close down the business is that it had suffered heavy loss during the last three consecutive years and the total loss for the three years was more than Rs. 100''lakhs. This statement was supported by the audited certified balance sheets. The factual statement has not been found to be untrue. The petitioner also stated that the attempt of the petitioner to continue the industry by drastically reducing labour in consultation with Respondent No. 3-Union had also failed and that in view of the mounting losses, there was no alternative than to close down the industry. The Government, however, refused the permission on the ground that the industry could be run more economically and efficiently if not profitably, and proceeded to state that adequate case was not built up for closing the industry at least at this stage. As observed by the Supreme Court in Excel Wear''s (supra), how can an industry be compelled to continue its business in the face of continued losses over the years? Inspite of the said ground having been made out by producing the certified balance sheets, the Government refused to accord permission.
The Supreme Court while dealing with the question as to whether an employer could be allowed to close an industry in a whimsical and capricious manner and bring misery to the employees held as follows Excel Wear and Others Vs. Union of India (UOI) and Others, :
25�He must not be allowed to bewhimsical or capricious in the matter ignoring the interest of the labour altogether, But that can probably be remedied by awarding different slabs of compensation in different situations. It is not quite correct to say that because compensation is not a substitute for the remedy of prevention of unemployment, the latter remedy must be the only one. If it were so, then in no case closure can be or should allowed.
30...It would thus be seen that in the matter of giving appropriate and reasonable relief to the labour even after the closure of the business the facts which were in existence prior to it can form the subject-matter of an industrial dispute. Even assuming that strictly speaking all such matters cannot be covered in view of the decision of this Court we would understand a provision of law for remedying these drawbacks. The law may provide to deter the reckless, unfair, unjust or mala fide closure.
The object of Chapter 5 in general and of Section 25-O in particular, are to maintain tempo of industrial production and productivity and to prevent unemployment which would be the inevitable result of a closure of an industry. Both these objects are in public interest and ''therefore. Section 25-O which imposes restriction on the exercise of right to close an industry, by way of making the condition of prior permission from the Government, next fall within the scope of Clause (6) of Article 19 in order to be nonviolative of Article 19(1)(g). The Supreme Court in the case of Excel Wear (supra), has considered both the aspects and has rejected them. The fact that closure results in unemployment, cannot be a valid ground to prevent closure of an industry by its owner in the excercise of his rights, guaranteed under Article 19(1)(g), and if it were to be regarded as valid, in no case an owner can be permitted to close his industry. It is highly unreasonable to compel an owner of an industry not to close down the same for maintaining production, though it is open to the State to provide for its take over by the State. The area of restraint in public interest cannot be broadened to the extent of bringing about annihilation of the persons affected by the restraint. How can a person be forced to continue an industry when one considers it impracticable or impossible to carry on the industry on account of continued financial Joss or is not in capacity to properly manage the industry or is unwilling to continue the industry for reason of his ill health or want of proper successor or on account of his desire to lead a retired life and continue his life for social service or for any other genuine reasons. A law which compels an employer to run the industry cannot be regarded as reasonable and in some cases it might become tyrannical. If an employer is required to run the industry for maintaining production or for preventing unemployment, inspite of the fact that he does not have the financial or physical capacity or willingness to do so, on the grounds as hereinbefore stated, will, in my opinion, amount to an unreasonable restriction on the said fundamental right to close down the business. This may cause total annihilation of the employer, financially or physically and/or may even result in his collapse, assuming that he is unable to manage and/or is intending to retire and has proper personnel at his disposal on whom he can entrust the future control and management. This will introduce another form of slavery and would amount to an unreasonable restriction on the fundamental right as guaranteed by Article 19(1)(g) of the Constitution of India. To do social justice and to act in the interest of the general public may be a good cause for the State for extending its activities, but an employer and/or general shareholders of a big company cannot be asked to sacrifice themselves at the altar of the interest of the general public. An industry is run for the purpose of financial benefit and/or for the purposes getting income therefrom or until the industrialist hopes to earn even in a reasonably near future. Furthermore it can be carried only when the employer finds it practicable to do so. I cannot think of a situation when there are good and genuine reasons for the closure of an industry how the employer can be asked in the form of restrictions to continue the same even at the risk of collapsing financially and/or physically and be forced to face extinction. 29. It is to be noted that no appeal or revision is provided for as of right. Even if there would have been a provision for appeal, then also, in my opinion the powers given u/s 25-O are so vague and uncertain that a closure can be refused even on the ground that the interests of the general public require the undertaking to continue. The other provisions in the said Sub-section (2) do no make it obligatory on the authority concerned that it will have to grant permission if the reasons are genuine and/or good.
Relying on the said judgment of the Supreme Court in Excel Wear''s case (supra) and in view also of the said decision of the Karnataka High Court in the case of Stumpp Schedule and Ors. v. State of Karnataka and Ors. (supra), and also in view of what has been discussed above, I am of the opinion that the new Section 25-O of the Industrial Disputes Act, as introduced by the amendment of 1982 in ultra vires, the fundamental rights guaranteed under Article 19(1)(g) of the Constitution of India and amounts to an unreasonable restriction. It is because of the defect in the law itself that permission to close can be rejected even if the grounds are genuine and good. The language used is vague and uncertain and permission to close may be refused on the ground of public interest alone or other relevant facts which are also not defined. Whether the grounds are adequate or not, is likely to vary from person to person and opens up the gate for arbitrariness.
This is particularly so in the absence of any guidelines in Section.
Furthermore, so far as the impugned order is concerned it appears to me that the factum of continued losses by the Behala Unit was duly substantiated and was not and could not be disputed. The Deputy Secretary, Labour Department, Government of West Bengal, who was the deciding authority, accepted the said position with regard to the factum of losses for the year 1985-1986, as represented by the audited Balance Sheets for the said years. So far as the year 1987 is concerned, it does not appear that any attempt was made by the said Deputy Secretary to look into the relevant Books of Account of the Company for finding out the correct position. It further appears that no attempt even was made by the authority concerned to find out the quantum of losses that could be contributable to the Behala Unit. It does not appear as to what was the material evidence on the basis whereof the company''s statements with regard to the losses by Behala Unit were not accepted. The Deputy Secretary has not considered the question as to why the factum of continued losses which are quite disproportionate with the amount invested as capital in the company, should not be held to be an adequate or sufficient ground for the closure of the business. That a factory should continue to function in the public interest cannot, of course, he disputed. But whether the grounds made out by the petitioner were not adequate or were not sufficient have not been discussed in the proper perspective aad it appears that the Deputy Secretary has misconducted himself in law, in dealing with the matter. It may be that it has been so because of the infirmity of the law itself. Could a man be required to carry on or continue the business, if it has been incurring huge losses year after year and whether it is reasonable to expect him to do so, has not been discussed at all in the impugned order. Furthermore, it appears that the Labour Unions were heard separately. The petitioner had no opportunity to know about or to deal with the submission and/or contention of the Labour Unions. The petitioner should have been given an opportunity to know and to deal with contentions of the Labour Unions. This was contrary to the principles of natural justice and also denial of an opportunity to be heard.
In the premises, the said impugned order passed by the Deputy Secretary. Labour Department, Government of West Bengal dated 12th November, 1987 is, in any event, liable to be quashed. I, therefore, direct that the said order dated 12th November, 1987 be quashed and the respondents are prohibited from enforcing the said order or from taking any steps to enforce the same.
In view of the what has been discussed above it is declared that Section 25-O of the Industrial Disputes Act, as a whole, as introduced by Section 14 of the Amending Act 46 of 1982, with effect from 21st August, 1984, and Section 25R in so far as it relates to the awarding of punishment for infraction of the provisions of Section 25-O, are constitutionally bad and invalid, for violation of Article 19(1)(g) of the Constitution. Consequently also the impugned order passed under Sub-section (2) of Section 25-O, is held to be void and the respondents are restrained from enforcing the same.
There will be no order as to costs.