Summary and Analysis of Harinagar Sugar Mills Ltd. v. State of Maharashtra & Ors. (2025 INSC 801)

Case Citation:

2025 INSC 801 (Supreme Court of India)
Bench: Justice Sanjay Karol and Justice Prashant Kumar Mishra

1. Background of the Case

• Parties:
  Appellants: Harinagar Sugar Mills Ltd. (HSML) – Engaged in biscuit manufacturing for Britannia Industries Ltd. (BIL) under a Job Work Agreement (JWA).
  Respondents: State of Maharashtra & Workers’ Unions.

• Key Issue:
  HSML sought permission to close its biscuit division after BIL terminated the JWA, citing no alternative business avenues.
  The State rejected the closure application, leading to a legal dispute over deemed closure under Section 25-O of the Industrial Disputes Act, 1947.

2. Key Legal Questions

1. Whether the letter dated 25th September 2019 (asking HSML to resubmit its closure application) constituted a valid "order" under Section 25-O(2)?

2. Whether HSML was entitled to deemed closure under Section 25-O(3) due to the State’s failure to communicate a decision within 60 days?

3. Whether the Deputy Secretary (who issued the letter) had the authority to act on behalf of the "appropriate Government"?

3. Supreme Court’s Analysis

A. Validity of the Letter Dated 25th September 2019

• The Court held that the letter did not qualify as a valid order because:
  It was issued by the Deputy Secretary, who lacked authority under Section 25-O. The power was delegated exclusively to the Labour Minister via a 2013 notification.
  The letter merely asked HSML to resubmit the application without independent application of mind or recorded reasons, violating Section 25-O(2).
  Internal file notings cannot substitute a reasoned order (Bachhittar Singh v. State of Punjab).

B. Deemed Closure under Section 25-O(3)

• The Court ruled that since no valid order was communicated within 60 days of HSML’s application (28th August 2019), the deemed closure provision was triggered.

• The State’s subsequent letters (4th, 20th, and 22nd November 2019) were beyond the statutory period and could not override the deemed permission.

C. Genuineness of Closure Reasons

• HSML demonstrated compelling circumstances:
  Exclusive reliance on BIL for 32 years.
  No alternative job work available after BIL’s termination.
  Efforts to secure new contracts (e.g., with Mondelez, ITC) failed.

• The State’s rejection was arbitrary and ignored the impossibility of continuing operations.

4. Conclusion and Directions

• Judgment: Appeals allowed. HSML entitled to deemed closure effective 27th October 2019.

• Compensation for Workers:
  HSML to pay ₹15 crores (enhanced from ₹10 crores) + gratuity (₹4 crores) to workers within 8 weeks.

• Key Precedents Cited:
  Excel Wear v. Union of India (Right to close business under Article 19(1)(g)).
  Orissa Textile and Steel v. State of Orissa (Constitutionality of Section 25-O).
  Star Enterprises v. CIDCO (Necessity of reasoned orders).