Harinagar Sugar Mills Ltd. (Biscuit Division) v. State of Maharashtra (2025): Right to Closure, Article 19(1)(g) and Section 25-O of the Industrial Disputes Act

The Supreme Court of India, in Harinagar Sugar Mills Ltd. (Biscuit Division) & Anr. v. State of Maharashtra & Ors. (2025), delivered an important judgment concerning the right of an employer to close an industrial undertaking and the statutory protections available to workers under the Industrial Disputes Act, 1947.

The judgment, delivered on 4 June 2025 by a two-judge Bench comprising Justice Sanjay Karol and Justice Prashant Kumar Mishra, examined the relationship between the constitutional right to carry on a business under Article 19(1)(g) of the Constitution of India and the statutory procedure for closure under Section 25-O of the Industrial Disputes Act, 1947.

The dispute arose when Harinagar Sugar Mills Limited (HSML), which had been manufacturing biscuits exclusively for Britannia Industries Limited for more than three decades, lost its long-standing business arrangement after Britannia terminated the job work agreement.

The company subsequently applied for permission to close its Biscuit Division. However, the authorities rejected its application on procedural grounds, leading to prolonged litigation.

The Supreme Court examined whether the closure application was complete, whether the Deputy Secretary had the authority to reject it, and whether the company was entitled to close its industrial undertaking after the statutory period had expired.

This judgment is significant for understanding the right to close a business under Article 19(1)(g), Section 25-O of the Industrial Disputes Act, and the protection of workers' interests during industrial closure.

Facts of Harinagar Sugar Mills Ltd. v. State of Maharashtra (2025)

The important facts of the case are as follows:

1. Long-Standing Business Arrangement with Britannia

Harinagar Sugar Mills Limited operated its Biscuit Division exclusively for Britannia Industries Limited under job work agreements for more than 30 years.

Under this arrangement, HSML manufactured biscuits for Britannia, making the company heavily dependent on this business relationship for the functioning of its Biscuit Division.

2. Termination of the Job Work Agreement

On 24 May 2019, Britannia Industries Limited issued a notice terminating its job work agreement with HSML, with effect from 27 November 2019.

The termination significantly affected the operations of HSML's Biscuit Division.

Since the division had been dependent on Britannia for its business for several decades, the company faced serious difficulties in continuing its operations.

3. Application for Closure Under Section 25-O

On 28 August 2019, HSML submitted an application under Section 25-O of the Industrial Disputes Act, 1947, seeking permission to close its Biscuit Division.

The proposed closure affected 178 permanent workers employed in the division.

The company explained the circumstances that had made continued operations commercially unviable and sought statutory permission for closure.

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4. Rejection of the Closure Application

On 25 September 2019, the Deputy Secretary rejected the closure application, stating that it was incomplete.

The authorities sought additional information regarding the steps taken by HSML to prevent the proposed closure and explore alternative business opportunities.

5. Efforts to Find Alternative Business

On 10 October 2019, HSML submitted a detailed response explaining its attempts to secure alternative business arrangements.

The company stated that it had approached several major companies, including Mondelez, ITC, and Parle Biscuits, to explore the possibility of continuing its manufacturing operations.

However, these efforts were unsuccessful, and the company could not secure an alternative business arrangement capable of sustaining the Biscuit Division.

6. Objections by Workers' Unions

The workers' unions opposed the proposed closure and challenged the company's decision.

The Industrial Tribunal granted an interim order restraining HSML from proceeding with the closure.

HSML challenged the actions of the authorities before the Bombay High Court. However, the High Court dismissed its challenges.

Aggrieved by the decision, HSML approached the Supreme Court of India.

Issues Involved in the Case

The Supreme Court considered several important legal questions:

1. Whether HSML's closure application dated 28 August 2019 was complete and valid under Section 25-O of the Industrial Disputes Act, 1947.
2. Whether the Deputy Secretary had the authority to reject the closure application.
3. Whether the failure to communicate a valid decision within the statutory period resulted in deemed permission for closure.
4. Whether the employer's right to close an industrial undertaking was protected under Article 19(1)(g) of the Constitution.
5. How the constitutional right of an employer to close a business could be balanced against the statutory rights and interests of workers.

Relevant Legal Provisions

1. Article 19(1)(g) of the Constitution of India – Right to Carry on Business

Article 19(1)(g) guarantees every citizen the fundamental right to practise any profession, or to carry on any occupation, trade, or business.

The provision states:

"All citizens shall have the right to practise any profession, or to carry on any occupation, trade or business."

This constitutional right is not limited to starting or continuing a business. It also includes the right to discontinue or close a business, subject to reasonable restrictions imposed by law.

In the present case, HSML argued that continuing the Biscuit Division had become commercially unviable after the termination of its exclusive business arrangement with Britannia.

The Supreme Court recognised that the right to carry on a business includes the right to shut it down when compelling circumstances justify such a decision.

However, this right is subject to reasonable restrictions under Article 19(6) and applicable labour welfare legislation.

2. Article 19(6) – Reasonable Restrictions

Article 19(6) empowers the State to impose reasonable restrictions on the exercise of the rights guaranteed under Article 19(1)(g).

Such restrictions may be imposed in the interests of the general public and through appropriate legislation.

In the context of industrial closure, labour welfare laws protect employees against arbitrary termination of employment and ensure that employers follow the prescribed statutory procedure.

Therefore, an employer's right to close an undertaking must be balanced against the interests of workers.

3. Section 25-O of the Industrial Disputes Act, 1947 – Procedure for Closing Down an Undertaking

Section 25-O of the Industrial Disputes Act, 1947, provides the procedure that an employer must follow before closing an industrial undertaking covered by the provision.

Its important requirements include:

• An employer must apply to the appropriate Government for prior permission at least 90 days before the intended closure.
• The application must state the reasons for the intended closure.
• The appropriate Government must conduct an enquiry and provide an opportunity of being heard to the employer, workers, and other interested parties.
• The Government must communicate its order granting or refusing permission within 60 days of the application.
• If no order is communicated within the prescribed 60-day period, permission is deemed to have been granted.

The provision seeks to balance the employer's business interests with the protection of workers.

Important: Section 25-O also provides for review of the Government's order and reference of the matter to a Tribunal, subject to the statutory conditions.

4. Section 25-O(6) – Compensation to Workers

Section 25-O(6) provides that where an undertaking is permitted to close down or permission is deemed to have been granted, workers are entitled to compensation in accordance with Section 25-N, as if they had been retrenched.

This provision ensures that workers receive statutory financial protection when an industrial undertaking is lawfully closed.

Supreme Court's Observations and Reasoning

The Supreme Court examined the statutory requirements under Section 25-O and the constitutional protection available to an employer under Article 19(1)(g).

1. Right to Close a Business Is Part of Article 19(1)(g)

The Court recognised that the fundamental right to carry on a business also includes the right to discontinue it.

An individual or company cannot be compelled to continue operating a business indefinitely, particularly when circumstances make its continuation commercially unviable.

However, this right is not absolute. It remains subject to reasonable restrictions and statutory obligations designed to protect workers.

The Court therefore adopted a balanced approach by recognising HSML's business interests while ensuring appropriate compensation for affected employees.

2. Closure Application Was Complete and Valid

The Supreme Court examined whether the closure application submitted by HSML satisfied the requirements of Section 25-O.

The company had explained the circumstances leading to the proposed closure, including the termination of its long-standing arrangement with Britannia.

It had also provided information about its efforts to secure alternative business opportunities.

The Court held that the closure application was complete and valid. The authorities could not treat it as incomplete merely because they were dissatisfied with the commercial reasons or supporting explanations provided by the employer.

3. Deputy Secretary Had No Authority to Reject the Application

One of the most important findings concerned the authority competent to decide a closure application under Section 25-O.

The Supreme Court held that the power under the provision vested in the appropriate Government, acting through the competent authority.

In the circumstances of the case, the Labour Minister was the authority entrusted with exercising this power.

The Deputy Secretary had no express authority to accept or reject the closure application.

The Court also observed that internal government file notings could not substitute for a legally valid decision by the competent authority.

Consequently, the communications issued by the Deputy Secretary could not be treated as valid orders rejecting the closure application.

4. Deemed Permission Under the 60-Day Rule

Section 25-O(3) provides that if the appropriate Government does not communicate an order within 60 days from the date of the closure application, permission is deemed to have been granted.

The Supreme Court examined the statutory timeline and held that no valid order had been communicated by the competent authority within the prescribed period.

Therefore, the statutory consequence of deemed permission followed.

The Court recognised the validity of HSML's closure and allowed it to proceed with the closure of its Biscuit Division.

5. Balance Between Employer's Rights and Workers' Welfare

The Court did not treat the employer's constitutional right as an unrestricted power to close an industrial undertaking without considering workers' interests.

It recognised that the closure affected 178 permanent employees who depended on the undertaking for their livelihood.

Accordingly, while allowing the closure, the Court also considered the need to provide adequate financial compensation to the affected workers.

6. Enhanced Compensation of ₹15 Crore

The Supreme Court directed HSML to pay a total compensation of ₹15 crore to the affected workers, enhancing the amount by an additional ₹5 crore over the earlier proposed compensation of ₹10 crore.

The amount was directed to be disbursed within eight weeks.

The Court also clarified that payments made to workers during the period of litigation would not be recovered from them.

This direction reflected the Court's effort to balance the employer's right to close its business with the financial security and welfare of employees.

Final Judgment of the Supreme Court

The Supreme Court allowed the appeals filed by Harinagar Sugar Mills Limited and held that its closure application dated 28 August 2019 was complete in all respects.

The Court concluded that:

• The 60-day statutory period under Section 25-O(3) had expired on 27 October 2019 without a valid order being communicated by the appropriate Government.
• The Deputy Secretary had no independent statutory authority to reject or require resubmission of the closure application.
• The Minister concerned was the competent authority, but there was no proper independent application of mind by the Minister.
• The communications issued by the Deputy Secretary could not be treated as legally valid orders.
• The circumstances demonstrated that continuing the Biscuit Division had become impossible after the termination of the exclusive job work arrangement.

Accordingly, the Court recognised the deemed closure with effect from 27 October 2019 and allowed the appeals.

For the welfare of the affected employees, the Court enhanced the compensation offered by HSML by ₹5 crore, making the total enhanced compensation ₹15 crore instead of ₹10 crore. The amount was directed to be released within eight weeks. The Court also clarified that payments already made to workers during the pending litigation would not be recovered from them.

Legal Significance of Harinagar Sugar Mills Ltd. v. State of Maharashtra (2025)

This judgment is important for constitutional law and labour law because it clarifies the scope of an employer's right to close an industrial undertaking.

Its major legal implications include:

1. Right to Close a Business: The right guaranteed under Article 19(1)(g) includes the right to shut down a business, subject to reasonable restrictions.

2. Mandatory 60-Day Period: Section 25-O(3) provides a statutory timeline for the appropriate Government to communicate its decision. Failure to do so results in deemed permission.

3. Authority of the Competent Government: Powers under Section 25-O must be exercised by the legally authorised authority. An unauthorised officer cannot independently exercise those powers.

4. Importance of Reasoned Administrative Decisions: Administrative authorities must record reasons while accepting or rejecting closure applications.

5. Protection of Workers: Recognition of an employer's right to close a business does not eliminate the statutory protections available to affected employees.

6. Limits on Government Intervention: An employer cannot be compelled to continue operating an industrial undertaking indefinitely when compelling circumstances establish that continuation has become impossible.

For judiciary and APO aspirants, this judgment is particularly important for questions concerning Article 19(1)(g), Article 19(6), industrial disputes, statutory interpretation, and administrative law.

Frequently Asked Questions (FAQs)

Q1. What was the main issue in Harinagar Sugar Mills Ltd. v. State of Maharashtra (2025)?

The main issue was whether Harinagar Sugar Mills Limited was entitled to close its Biscuit Division under Section 25-O of the Industrial Disputes Act, 1947, when the appropriate Government failed to communicate a valid decision within the prescribed 60-day period.

Q2. Which constitutional provision was discussed in this judgment?

The Supreme Court primarily discussed Article 19(1)(g) of the Constitution of India, which guarantees the right to practise any profession or carry on any occupation, trade, or business.

Q3. Does Article 19(1)(g) include the right to close a business?

Yes. The Supreme Court recognised that the right to carry on a business includes the right to shut it down, subject to reasonable restrictions under Article 19(6) and applicable laws.

Q4. What is Section 25-O of the Industrial Disputes Act, 1947?

Section 25-O prescribes the procedure for closing down an industrial undertaking. It requires an employer to obtain prior permission from the appropriate Government at least 90 days before the intended closure.

Q5. What happens if the Government does not communicate its decision within 60 days?

Under Section 25-O(3), if the appropriate Government does not communicate its order within 60 days from the date of the application, permission for closure is deemed to have been granted.

Q6. Why was the Deputy Secretary's communication declared invalid?

The Deputy Secretary had no express statutory authority to decide the closure application. The Court also found that the competent authority had not independently applied its mind to the matter.

Q7. How much compensation was directed to be paid to the workers?

The Supreme Court enhanced the compensation by ₹5 crore, making the total amount ₹15 crore instead of the earlier proposed ₹10 crore. The amount was directed to be released within eight weeks.

Conclusion

Harinagar Sugar Mills Ltd. (Biscuit Division) & Anr. v. State of Maharashtra & Ors. (2025) is an important Supreme Court judgment explaining the relationship between the fundamental right to carry on business under Article 19(1)(g) and the statutory requirements governing industrial closure under Section 25-O of the Industrial Disputes Act, 1947.

The judgment reinforces that the right to close a business is constitutionally protected, but its exercise must comply with applicable labour laws and reasonable restrictions. It also emphasises that statutory powers must be exercised by competent authorities through proper procedures and reasoned decisions.

By recognising deemed permission after the expiry of the statutory 60-day period and directing enhanced compensation for affected workers, the Supreme Court balanced the interests of employers with the welfare of employees.