Date of Judgment: 4 June 2025

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

Citation: 2025 INSC 801

Coram: Hon’ble Mr. Justice Sanjay Karol and Hon’ble Mr. Justice Prashant Kumar Mishra

Introduction

In a landmark ruling, the Supreme Court of India clarified the contours of the statutory “deemed closure” provision under Section 25-O(3) of the Industrial Disputes Act, 1947, by holding that Harinagar Sugar Mills Ltd. (HSML) was legally entitled to shut its biscuit manufacturing division after the expiration of the statutory 60-day period—due to inaction by the State Government. The judgment reinforces the delicate balance between the rights of employers to close business establishments and the State’s regulatory obligations under labour welfare statutes.

Background

HSML had entered into a long-standing Job Work Agreement (JWA) with Britannia Industries Ltd. (BIL), producing biscuits exclusively for them for over three decades. In May 2019, BIL issued a notice terminating the JWA with effect from 27 November 2019. With no alternate manufacturing opportunity and business viability lost, HSML applied on 28 August 2019 for permission to close its Biscuit Division under Section 25-O(1) of the Industrial Disputes Act, 1947.

Despite the statutory timeline, the Maharashtra Government failed to issue any formal order accepting or rejecting the closure application within the mandatory 60-day period. HSML treated the closure as deemed to have been approved, relying on Section 25-O(3) of the Act.

High Court Verdict

The Bombay High Court dismissed HSML’s writ petitions, observing that the original application was incomplete and that the communication dated 25 September 2019 from the Deputy Secretary seeking further details constituted a valid refusal of permission. The High Court also held that HSML’s subsequent clarificatory letter dated 10 October 2019 implied that the initial application lacked cogent reasons.

Supreme Court’s Analysis

Setting aside the High Court’s judgment, the Supreme Court made the following key observations:

1. 

Right to Close is Fundamental but Regulated

The Court reaffirmed that the right to close a business is embedded within Article 19(1)(g) of the Constitution, subject to reasonable restrictions under Article 19(6). Citing Excel Wear v. Union of India and Orissa Textile and Steel Ltd. v. State of Orissa, the Bench emphasized that the procedure for closure must respect both the employer’s freedom and the employees’ right to livelihood.

2. 

Statutory Deeming Fiction

The Court held that since no valid order was communicated within the 60-day period prescribed under Section 25-O(3), permission for closure stood “deemed to be granted.” The State’s failure to act within the statutory period rendered the deeming provision operational.

3. 

Deputy Secretary Not ‘Appropriate Government’

The Court rejected the State’s argument that the 25 September 2019 letter constituted a valid governmental order. The power to grant or deny permission rests exclusively with the Minister for Labour, as per statutory delegation under Section 39 of the Act. There was no valid notification authorising the Deputy Secretary to act on the matter.

4. 

Internal File Notings Do Not Constitute an Order

Citing precedents including Bachhittar Singh v. State of Punjab, the Court held that internal notings or endorsements on file cannot be treated as an administrative order unless formally communicated.

5. 

Compelling Circumstances for Closure Established

The Court accepted that HSML had clearly demonstrated business impossibility, having failed to secure alternate contracts despite earnest attempts. The absence of other manufacturing work and the termination of the only existing JWA justified closure.

Relief and Compensation

While allowing the appeals, the Court appreciated the voluntary offer made by HSML to compensate workers over and above their statutory dues. Accordingly, HSML was directed to pay ₹15 Crores (inclusive of ₹10 Crores initially offered and ₹5 Crores enhanced by the Court) in addition to ₹4 Crores as gratuity to the affected workers.

Implications

This decision is significant for several reasons:

• Clarifies legal position on “deemed closure” under Section 25-O(3) and governmental obligations to act within time.
• Strengthens employer rights in bona fide closure cases where continued operation is commercially impossible.
• Demands procedural compliance from State authorities and restricts arbitrary administrative interventions.
• Ensures worker compensation through judicially monitored equitable relief.

Conclusion

The Supreme Court has sent a strong message reinforcing the balance between business autonomy and employee protection. For industrial undertakings seeking closure due to genuine constraints, this ruling affirms that legal safeguards will prevail when statutory procedures are duly followed but met with governmental apathy or overreach.