Discover how the Supreme Court of India affirmed the constitutional right to business closure under Article 19(1)(g), highlighting the landmark case involving Harinagar Sugar Mills Ltd. and the interpretation of the Industrial Disputes Act.

Supreme Court Upholds Right to Shut Down Business Under Article 19(1)(g)

In a significant ruling, the Supreme Court of India reaffirmed that Article 19(1)(g) of the Indian Constitution grants individuals not only the right to operate a business but also the right to shut it down. This judgment was delivered by a two-judge bench comprising Justice Sanjay Karol and Justice Prashant Kumar Mishra.

However, this right remains subject to reasonable restrictions aimed at protecting employees and ensuring compliance with labor laws and statutory procedures.

Background of the Case: Harinagar Sugar Mills vs. Bombay High Court

Harinagar Sugar Mills Ltd. (HSML), which operated a biscuit division under exclusive Job Work Agreements (JWAs) with Britannia Industries Limited (BIL) for over 30 years, faced a critical change when BIL terminated the agreement in 2019.

As a result, HSML applied for closure under the Industrial Disputes Act, 1947 on August 28, 2019, by submitting Form XXIV-C as required under the Maharashtra Rules. However, the application was rejected by the Deputy Secretary of the Maharashtra Government as “incomplete,” leading to delays and further conflict.

Government and Union Resistance

Despite additional information provided by HSML, the Industrial Tribunal allowed the workers’ union to oppose the closure. HSML argued that the 60-day deemed approval period had lapsed in October 2019 and that the closure should be recognized as valid from the original submission date.

They also contended that the Deputy Secretary lacked the authority to reject or alter the application—stating only the Minister had jurisdiction in such cases. Meanwhile, the government cited the incomplete nature of the application and emphasized the need to protect workers’ rights.

Supreme Court’s Analysis and Ruling

The Supreme Court confirmed that while businesses have a constitutional right to close under Article 19(1)(g), this right is regulated by Section 25-O of the Industrial Disputes Act. The Court ruled:

• The closure application dated August 28, 2019, was complete and initiated the 60-day statutory window.
• The Deputy Secretary was not the “appropriate Government” as per Section 25-O.
• The Minister failed to independently evaluate the application, making the delegation of authority improper.
• All communications from the Deputy Secretary were legally invalid.

The court referenced previous landmark cases like Excel Wear and Orissa Textile and Steel, reaffirming the interplay between business rights and labor regulations.

Final Verdict and Compensation Award

The Supreme Court set aside the Bombay High Court‘s decision and upheld the deemed closure as valid. It found procedural lapses in how the Maharashtra Government handled the case and concluded that HSML had no viable business options after the JWA termination.

In a significant move, the Court directed that compensation awarded to employees during the dispute would not be recoverable. Additionally, it ordered HSML to pay an extra ₹5 crores in compensation to workers—payable within eight weeks.

Conclusion: Balancing Business Freedom and Worker Protection

This judgment reaffirms the delicate balance between the right to trade or business under Article 19(1)(g) and the legal safeguards designed to protect workers. While entrepreneurs have the liberty to close operations, such decisions must comply with applicable laws and respect due process.

The Harinagar Sugar Mills case serves as a precedent on how constitutional freedoms and industrial regulations intersect in a rapidly evolving business environment.