Judgments

EXCEL WEAR ETC VS UNION OF INDIA : CASE SUMMARY

The Supreme Court in Excel Wear Etc Vs Union of India (1979) 1 SCR 1009  held that the right to close business is an integral part of  Fundamental Right to carry on a business.

FACTS OF THE CASE

Four Writ Petitions were filed challenging the constitutional validity of Section 25O and 25R of the Industrial Disputes Act, 1947.

In Writ Petition 644 of 1977, Excel Wear was a partnership firm and used to manufacture garments for exports. Around 400 workmen were employed in Petitioner’s factory. Excel Wear was facing labour trouble and served notice on State Government for prior approval of closure under Section 25 -O (1), which was refused by State Government.

In Writ Petition 917 of 1977, Wadala Unit of Acme Manufacturing Co. Ltd. engaged in business of manufacturing and selling Diesel Oil Engines, Mechanical Lubricators, Engine Valves and Push Rods. The Petitioner decided to close down the undertaking due to huge loss, labour unrest, and industrial indiscipline. The Petitioner applied for prior leave under Section 25 (O) (1) of Industrial Disputes  Act for closure which was refused.

In Writ Petition 959 and 960 of 1977, Apar Private Ltd.  applied before the Government of Maharastra for prior approval for closure of factory under Section 25 (O) (1) which was refused.

FINDINGS OF THE SUPREME COURT

Section 25 O provided that an employer who intended to close down an undertaking of an industrial establishment to which this chapter applied had to serve for previous approval at ninety days before the date on which the intended closure is to become effective, a notice in prescribed manner, on the appropriate government stating clearly reasons for the intended closure of the undertaking.

Section 25 R provided for penal consequences for non-compliance of provisions of Section 25 O.

It was contended before the Supreme Court that a right to close down the business is an integral part of the right to carry on the business guaranteed under Article 19 (1) (g) of the Constitution of India. The impugned law imposed a restriction on the said Fundamental Right which is highly unreasonable, excessive and arbitrary. It is not a restriction but almost amounts to the destruction or negation of that right. The restrictions imposed is manifestly beyond permissible bounds of clauses (6) of Articles 19 of the Constitution.

The Supreme Court held that the right to close down a business cannot be equated with a right not to start or carry on a business at all. The extreme proposition urged on behalf of the employer by equating the two rights and placing them at par is not quite apposite and sound. If one does not start a business at all then perhaps under no circumstances, he can be compelled to start one. Such a negative aspect of a right to carry on a business may be equated with the negative aspect of the right embedded in the concept of right to freedom of speech, to form an association or to acquire or hold property. Perhaps under no circumstances, a person can be compelled to speak, to form an association or to acquire or hold a property. But by imposing reasonable restrictions, he too can be compelled not to speak, not to form an association or not to acquire or not to hold property. A total prohibition of business is possible by putting reasonable restrictions under Article 19 (6) on the right to carry on a business.

The Supreme Court further observed that the greater the restriction, the more the need for strict scrutiny by the Court. The contention put forward on behalf of the labour unions that the right to close down a business is not an integral part of the right to carry on a business or that it is not a Fundamental Right at all is also wrong. In one sense the right does appertain to property. But such a faith overlapping of the right to property engrafted in Article 19 (1) (f) or Article 31 must not be allowed to cast any shade or eclipse on the simple nature of the right. It can be certainly be restricted, regulated or controlled by law in the interest of general public.

The Supreme Court noted the difference between doctrinaire approach to problem of socialism and pragmatism. So long as the private ownership of an industry is recognized, it is not possible to say that principles of socialism and social justice can be pushed to such an extreme so as to ignore completely or to a very large extent the interests of another section of the public namely the private owners of the undertaking.

The Supreme Court observed that public interest and social justice do require the protection of labour. But it is not reasonable to give them protection against all unemployment after affecting the interests of so many persons interested including persons who have no connection with the management. The Supreme Court found restrictions put under Section 25 (O) and 25 (R) unreasonable and  declared Section 25 (O) invalid as a whole and Section 25 (R) so far it relates to the awarding of punishment for infringement of provisions of Section 25 (O).

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Mukesh Kumar Suman is an advocate and legal author based at Delhi. He regularly appears before various Judicial Forums including NCLT, NCLAT, High Courts and the Supreme Court. He can be approached at mukesh_suman@outlook.com or +91 9717864570.

Mukesh Kumar Suman

Mukesh Kumar Suman

Mukesh Kumar Suman is an advocate based at Delhi. He has rich experience in civil, criminal, commercial, arbitration and corporate insolvency matters. He regularly appears before District Courts, NCLT, NCLAT, High Court and the Supreme Court. He can be approached at mukesh_suman@outlook.com or +91 9717864570.

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