Supreme Court: The Division Bench of Sanjay Karol and Prashant Kumar Mishra, JJ. held that the fundamental right guaranteed under Article 19(1)(g) of the Constitution, the right to practise any profession or to carry on any occupation, trade or business, includes the right not to carry it on as well, thereby extending constitutional protection to decisions of voluntary closure by businesses.
Background
The genesis of the matter lies in the context of a dispute arising from the closure of a business enterprise – Harinagar Sugar Mills Ltd. (Biscuit Division) (HSML) and subsequent claims relating to employment and compensation under industrial law. The petitioner had voluntarily shut down operations, and the authorities had questioned the legitimacy of such closure without prior permission, invoking certain labour law provisions. The core constitutional issue was whether the right to close down a business is protected under Article 19(1)(g). The Bombay High Court held against the appellant, holding that the employer’s decision to close did not comply with statutory prerequisites, particularly under Section 25-O of the Industrial Disputes Act, 1947.
The High Court held that closure without following the due legal process amounted to an illegal act, and thus the workmen were entitled to be treated as if the closure had not occurred. It emphasises the State’s regulatory power in balancing economic freedom with labour rights, ruling that absolute freedom to close a business could be curtailed in public interest.
Analysis and Decision
The Court analysed the scope of Article 19(1)(g) and observed that economic freedom cannot be interpreted in a restrictive manner. The Bench referred to earlier jurisprudence and constitutional principles to conclude that the right to carry on business includes the right to not carry it on. Referring to Excel Wear v. Union of India, (1979) 1 SCC 224, the Court reaffirmed the ruling, “The right to close down a business is an essential part of the right to carry on business.”
The Court noted that the Bench in Excel Wear (supra) had declared parts of Section 25-O unconstitutional for imposing unreasonable restrictions on the right to close.
The Court also referred to Mohd. Hanif Quareshi v. State of Bihar, AIR 1958 SC 731, wherein, it was underscored that restrictions under Article 19(6) must be reasonable and in public interest and cannot result in complete negation of the right. Further, the Court reiterated the principle that Article 19(1)(g) protects individual liberty in economic activities and must be interpreted liberally, subject to proportionate and reasonable restrictions.
“If a person has the right to carry on business, he also has the right to close it. The right to close a business is an essential part of the right to carry on business.”
While upholding the same, the Court clarified that if there exists the freedom to set up and run a trade/business as one sees fit, necessarily, there has to be a set of rights vesting with the proprietor/owner to take decisions as may be in his best interest. At the same time, it is true that the law does not permit such owner or proprietor to take any and all decisions without having considered and accounted for the impact that it shall have on the employees or workers that are part of this establishment.
The Court stated that-
“There can be no compulsion to carry on a business which a citizen wants to close down. The freedom to do includes freedom not to do.”
Further, the Bench cautioned that any State-imposed restriction on closure must pass the test of reasonableness under Article 19(6).
In the matter at hand, the Court noted that, the application for closure was duly addressed to the authority, which was acknowledged to be on 28-08-2019. The Deputy Secretary, Ministry of Labour Government of Maharashtra, responded on 25-09-2019 stating that no sufficient reasons had been provided for closure. The letter read- “it will be possible to act only if you can submit the application again by providing explanation regarding other efforts initiated by you for not closing the Division, providing justifiable as well as consummate rationale for this action.” Hereby, it was informed that action could not be taken on the application as it stood and that they would have to resubmit with better particulars.
The Court held that that application dated 28-09-2019 was complete in all respects, and the 60-day period for the deemed closure to take effect would be calculable from said date. Second, the Deputy Secretary was not the appropriate Government who could have asked HSML to revise and resubmit the application for closure. That authority is only vested with the Minister concerned. The Court said that the Minister did not, even in the slightest, consider the merits of the matter independently, much less with or without any application of mind. Further, any sub-delegation to the officer was not permitted by law, and, therefore, any communication made by him would be without any legal sanction.
The Court found that the statutory provision invoked did not meet the threshold of reasonableness and unjustifiably infringed upon the petitioner’s right under Article 19(1)(g). Allowing the appeals, the Bench clarified that the money paid to the employees by orders of the High Court in the pendency of the writ petitions would not be recoverable from them.
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