M/S. ORISSA TEXTILE AND STEEL LTD. v. STATE OE ORISSA AND ORS.

The Judgment of the Court was delivered by , F S.N. VARIA VA, J. In these Appeals and Writ Petitions the question for consideration, by this Bench, is the constitutional validity of Section 25- 0 of the Industrial Disputes Act, 1947. Section 25-0, as it now stands, was incorporated by the Amendment Act 46 of 1982. (for sake of convenience the said Section will hereinafter be referred to as the amended Section 25-0. In some of these matters the constitutional validity of Section 6-W of the U.P. Industrial Disputes.Act is in question. Section 6-W is identical to amended Section 25-0. Even though in this Judgment reference is made only to Section 25-0, what is set out herein will equally apply to Section 6-W. For considering the constitutional validity of these Sections it is not necessary to note the facts in each case. Therefore, the facts are not being set out.

ORISSA TEXTILE AND STEEL LTD. v. STATEOFORISSA [S.N. VARIAVA,J.] J J5

(2) In the case of Excel Wear Etc. v. Union of India and Ors., [ 1979] A I SCR I 009 a Constitution Bench struck down Section 25-0 of the Industrial Disputes Act (as it then stood). Thereafter the constitutional validity of Section 25-N of the Industrial Disputes Act (as it then stood) was considered by a Constitution Bench in the case of Workmen v. Meenakshi Mills Ltd. [ 1992] 3 SCC 336. In Meenakshi Mills' case this Court, after referring to Excel B Wear's case, upheld the constitutional validity of Section 25-N. These Appeals and Writ Petitions have been referred to a Constitution Bench with the following observation:

"The common question that arises for consideration relates to the , constitutional validity of Section 25(0) of the Industrial Disputes Act C as introduced by Central Act No. 46 of 1982 and Section 25(0) as applicable in the State of MP by virtue of M.P. Act No. 32 of 1983 as well as Section 6(W) of the U.P. Industrial Disputes Act, 1947. The earlier provision contained in Section 25(0) was struck down by this Court in Excel Wear Etc. v. Union of India and Ors., [ 1979] I SCR I 009. The learned counsel for the employers in support of their D submissions assailing the validity of the said provisions have placed reliance on various observations in the judgment in Excel Wear 's Case. On behalf of the workmen reliance has been placed on the decision of the Constitution Bench in. Workmen of Meenakshi Mills ltd. and Ors. v. Meenakshi Mills Ltd. and Anr., [ 1992] 3 SCC 336. E Since the questions raised involve interpretation of the various observations in the judgment in Excel Wear 's case as well as in Meenakshi Mills· case, we consider it appropriate that these matters are heard by a Constitution Bench. It is, therefore, directed that all these matters be placed before Hon'ble the Chief Justice of India for suitable directions". F

(3) It must be mentioned that even amongst the High Courts there is a conflict of opinion. Some of the High Courts have held that the amended Section 25-0 of the Industrial Disputes Act and or Section 6-W of the U.P. Industrial Disputes Act still suffers from the substantial vice pointed out in G Excel Wear 's case and is, therefore, unconstitutional. Some other High Court have, relying on Meenakshi Mills' case upheld he validity of amended Section 25-0 and/or Section 6- W.

(4) At this stage a submission made by Ms. Jaising needs to be set out. Ms. Jaising submitted that in Meenakshi Mills 's case a Constitution Bench of H

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A this Court has extracted the reasons why in Excel Wears case Section 25-0 was struck down. It was submitted that that decision would be binding on this Court. It was submitted that this Court should not itself go into Excel Wear 's case to find out the reasons why Section 25-0 was struck down. We are unable to accept this submission. As has been held by this Court, in the case B of P.A. Shah v. State of Gujarat reported in [1985] Supp. 3 SCR 1025, it is the duty of the Constitution Court to form its own opinion about a given case and to consider the effect of a precedent by reading it over again, instead of relying upon the gloss placed on that precedent by some other decision. In our view the submissions of all the learned counsel will have to be considered in the light of what is laid down in Excel Wear 's case and Meenakshi Mills' C case.

(5) In Excel Wear's case this Court negatived a submission that a right to close down a business was not a fundamental right and that it was merely a right appurtenant to ownership of property. This Court held that the right

D to close down a business was an integral part of the fundamental right to carry on business as guaranteed under Article 19( I )(g) of the Constitution. It -- was held that there could be a reasonable restriction on this right under Article 19(6) of the Constitution. It was held that the law could provide to deter reckless, unfair, unjust and ma/a fide closure. A challenge under Article 14 of the Constitution was negatived. It was held that Chapter V-B dealt only with comparatively bigger undertakings and of a few types only and thus the classification was reasonable. It was held that reasonableness of the restrictions must be examined both from procedural and substantive aspects of the law. This Court then considered whether the restrictions imposed by Section 25- 0 (as it then stood) were reasonable and saved by Article 19(6) of the Constitution. It was held that the restrictions imposed by Section 25-0 were unreasonable for the following reasons:

(i) Section 25-0 did not require giving of reasons in the order. Even if the reasons were adequate and sufficient, permission to close could be denied in the purported public interest of labour as it had been left to the whims and caprice of the authority to decide one way or the other. Thus the order could be whimsical and capricious.

(ii) No time limit was fixed whilst refusing permission to close down.

(iii) That there was no deemed provision for according approval in the Section. It was held that the result would be that if the

ORISSA TEXTILE AND STEEL LTlt. v. STATEOFORISSA [S.N. VARIAVA, J.] J J7

Government order was not communicated to the employer within A 90 days, strictly speaking, the criminal liability under Section 25-F may not be attracted if on the expiry of that period the 1 undertaking is closed, but the civil liability under Section 25- 0(5) would come into play on the expiry of period of 90 days.

(iv) The order passed by the authority was not subject to any scrutiny by any higher authority or tribunal either in appeal or revision and the order could not be reviewed even after some time.

(v) The employer was compelled to resort to the provision of Section 25-N even after approval of closure.

(vi) The restriction imposed was more excessive than was necessary for the achievement of the object and thus highly unreasonable. It was suggested that there could be several other methods to regulate and restrict the right of closure e.g. by providing for extra compensation over and above the retrenchment compensation. D (6) In Meenakshi Mill's case, while considering the constitutional validity of Section 25-N (as it then stood), Excel Wear 's case was considered. This Court noted some of the vices pointed out in Excel Wear 's case. This Court than pointed out the differences between Sections 25-0 and 25-N (as they then stood) and held that considerations which weighed in Excel Wear 's E case could not be applied for judging the validity of Section 25-N. This Court proceeded on the assumption that the right to retrench workmen was an integral part of the fµndamental right of the employer to carry on business under Article 19 (l)(g). It was noted that Section 25-N formed part of Chapter V-8 which bore the heading "Special Provisions Relating to Lay off, Retrenchment and Closure in Certain Establishments". It was noted that the said Chapter consisted of Sections 25-K to 25-S and that the said Chapter was inserted by Amending Act No. 32 of 1976. This Court held that the objects and reasons underlining the enactment was to prevent avoidable hardship to the employees resulting from retrenchment by protecting existing employees and to check growth pf unemployment which would otherwise be the consequence of retrenchment in industrial establishments employing large number of workmen. It was noted that one of the objects and reasons was to maintain higher tempo of production and productivity by preserving industrial peace and harmony. It was noted that the mandate contained in the Directive Principles of the Constitution was sought to be given effect to. This Court held that, ordinarily, a restriction which had the effect of promoting or H

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A effectuating a directive principle can be presumed to be a reasonable restriction in public interest. This Court held that the restrictions imposed must, therefore be regarded as having been imposed in the interest of the general public. This Court held that the employer's right was not absolute and a restriction imposed on the employer's right to terminate the service of an employee wa.s not alien B to the constitutional scheme. This Court then negatived the following submissions:

(i) Adjudication by a judicial body available in the case of retrenchment under Section 25-F has been substituted by an administrative order passed by an executive authority in the case of retrenchment under Section 25-N and thereby a function which c was traditionally performed by Industrial Tribunals Labour Courts has been conferred on an executive authority.

(ii) No guidelines have been prescribed for the exercise of the power by the appropriate Government or authority under sub-section (2) of Section 25-N and it would be permissible for the authority to pass its order on policy considerations which may have nothing to do with an individual employer's legitimate need to reorganise its business. The requirement that reasons must be recorded by . ~

the appropriate Government or authority for its order under sub- section (2) of Section 25-N is not a sufficient safeguard against arbitrary action since no yardstick is laid down for judging the validity of those reasons.

(iii) There is no provisioa for appeal or revisions against the order passed by the appropriate Government or authority refusing to grant permission to retrench under sub-section (2) of Section 25- , F N. Judicial review under Article 226 of the Constitution is not an ~ adequate remedy.

(iv) The provisions are exfacie arbitrary and discriminatory inasmuch as while the workmen have a right to challenge, on facts, the correctness of an order passed under sub-section (2) granting G permission for retrenchment before the Industrial Tribunal by seeking a reference under Section I 0 of the Act, the management does not have a similar right to challenge the validity of an order passed under sub-section (2) refusing to grant permission for retrenchment."

H It was held that Section 25-N did not suffer from the vice of unconstitutionality.

ORISSA TEXTILE AND STEEL LTD. v. STATE OF ORISSA [S.N. VARIA VA, J.] 3 J9 It was held that Section 25-N was not violative of the fundamental rights guaranteed under Article 19(1 )(g). It was held that Section 25-N was saved by Article 19(6) of the Constitution.

(7) On behalf of employees, it is submitted that the amended Section 25-0 has removed all the vices pointed out in Excel Wear 's case. It is submitted that the amended Section 25-0 is now similar to Section 25-N (as it then stood). It is submitted that on the reasoning given in Meenakshi Mil/ 's case the amended Section 25-0 would have to be held to be constitutionally valid.

(8) On behalf of the employers it has been submitted that:

(a) in Meenakshi Mill's case Section 25-N was being considered. It c was submitted that in Meenakshi Mill's case it had been held that considerations which weighed in deciding the constitutional validity of Section 25-0 would not apply to Section 25-0. It was submitted that the principles on which Section 25-N was held to be constitutionally valid would not and should not be applied when considering the con.stitutionai validity of Section 25-0.

.. "'"' (b) that the in Excel Wear 's case Section 25-0 (as it then stood) was struck down not just on procedural grounds, but also on substantive grounds. It is submitted that the amended Section 25-0 only removes the procedural defects but still suffers from the su.bstantive vices pointed out in Excel Wear 's case as in substance it is the same as Section 25-0 (as it then stood). (c) that the phrase ''in the interest of the general public" was vague and of a very wide amplitude. It was submitted that anything and everything which is in the interest of general public would not have rational or proximate relations with the object of the present legislation. It was submitted that the restriction permitted by the use of this phrase goes way beyond what was necessary for the object to be achieved by the present legislation which was to prevent avoidable unemployment. G (d) that the reasonable restriction permissible under Article 19(6) has to be imposed by law. It was admitted that there could be a delegated legislation or subordinate legislation. It was, however submitted that the restrictions could not be left for determination by the executive or be imposed by an executive order. It was submitted that, in the amended Section 25-0, the restrictions H

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A were not laid down by law but had been left to the executive to decide on a case to case basis.

(e) that the restrictions imposed were excessive inasmuch as in the purported interest of general public closure could be prevented even if the employer had genuine and adequate reasons. It was B submitted, relying on Excel Wear's case, that a reasonable restriction would be one which provides for payment of different slabs ~f compensation in different situation.

(t) that the amended Section 25-0 left it to the discretion of the appropriate Government to review the order or to refer the matter c to the Tribunal.

(g) that the review provided in the amended Section was only a limited review. It was submitted that effectively the only review would be a judicial review under Article 226 or 32 of the Constitution in which factual elements, which went into the D determination, could not be investigated.

(9) In order to see whether the vices pointed out an Excel Wear 's case have been cured and to consider whether principles laid down in Meenakshi .... . .

Mills' case apply to amended Section 25-0 it would be convenient to set out herein Section 25-0 (as it then stood), the amended Section 25-0 and Section E 25-N (as considered in Meenakshi Mills' case). They read as follows:

25-0 (Unamended) 25-0 Amended 25-N

(I) An employer (I) An employer (I) No workman who intends to close who intends to close employed in any down an undertaking down an undertaking of industrial establishment of an Industrial an Industrial establish- to which this Chapter establishment to which ment to which this applies, who has been this Chapter applies Chapter applies shall, m in continuous service shall, serve, for the prescribed manner, for not less than one previous approval at apply for prior year under an employer least ninety days permission at least shall be retrenched by before the date on ninety days before the that employer until. " which the intended date on which the closure is to become intended closure is to (a) the workman has effective, a notice in become effective, to the been given three . H the prescribed appropriate Govern- months' notice in

ORI SSA TEXTILE AND STEEL LTD. v. STA TE OF ORI SSA [S:N. VARI AVA, J.] 32 J manner, on the ment, stating clearly the writing indicating A ) appropriate Govern- ment, stating clearly the reasons for the intended closure of the the reasons for retrenchment and reasons for the intended undertaking and a copy the period of notice closure of the of such application shall has expired, or the undertaking : also be served worknian has been simultaneously on the paid in lieu of such representatives of the notice, wages for workmen rn the the period of the prescribed manner: notice:

Provided that nothing Provided that nothing Provided that no such in this section shall apply in this sub-section shall notice shall be necessary to an undertaking set up apply to an undertaking if the retrenchment is for the construction of set up for the under an agreement, buildings, bridges, roads, construction of which specifies a date canals, dams or for other buildings, bridges roads, for termination of construction work. canals, dams or for other service: construction work. (2) On receipts of a (b) the workman has notice under sub-s. (I) (2) Where an been paid, at the the appropriate application for time of retrench- Government may, if it is permission has been ment, compensa- satisfied that the reasons made under sub-section tion which shall be for the intended closure (I), the appropriate equivalent to fifteen of the undertaking are not Government, after days' average pay ) adequate and sufficient or making such enquiry as for every completed such closure is it thinks fit and after year of continuous prejudicial to the public giving a reasonable service or any part interest, by order, direct opportunity of being thereof in excess of the employer not to close heard to the employer, six months: and down such undertaking. the workmen and (c) notice in the persons interested in prescribed manner (3) Where a notice such closure may, has been served on the is served on the having regard to the appropriate Govern- appropriate Govern-ment genuineness and ment by notification by an employer under adequacy of the reasons rn the Official sub-s. (I) of S. 25 FFA stated the employer, the Gazette, and the and the period of notice interest of the general permission of such has not expired at he public and all other Government or H

322 · SUPREME COURT REPORTS (2002] I S.C.R.

A commencement of the relevant factors, by authority is obtained Industrial Disputes order and for reasons to under sub-section (Amendment) Act, be recorded in writing, (2). 1976, such employer grant or refuse to grant shall not close down such permission and a (2) On receipt of a the undertaking but copy of such order shall notice under clause ( c) B shall within a period of be communicated to the of sub-section (I) the fifteen days from such employer and the appropriate Government commencement, apply workmen. or authority may, after to the appropriate making such enquiry as Government for (3) \Vhere an such Government or c permission to close application has been made under sub-section authority thinks fit, grant or refuse, for reasons to down the undertaking. (I) and the appropriate be recorded in writing (4) \Vhere an Government does not the permission for the application for communicate the order retrenchment to which permission has been granting or refusing to the notice relates.· D made under sub-s. (3) grant permission to the and the appropriate employer within a (3) \Vhere the Government does not period of sixty days Government or authority communicate the from the date on which does not communicate permission or the such application is the permission or the refusal to grant the made, the permission refusal to grant the E applied for shall be permission to the permission to the employer within a deemed to have been employer within three period of two months granted on the months of the date of from the date on the expiration of the said service of the notice application is made, period of sixty days. under clause ( c) of sub- F the permission applied section (I) the for shall be deemed to (4) An order of the Government or authority have been granted on appropriate Govern- shall be deemed to have the expiration of the ment granting or granted permission for said period of two refusing to grant such retrenchment on months. permission shall, the expiration of the said G subject to the provisions period of three months. (5) \Vhere no of sub-section (5), be • application for final and binding on all ( 4) \Vhere at the permission under sub- the parties and shall commencement of the s. (I) is made, or remain in force for one Industrial Disputes where no application year from the date of (Amendment) Act. 1976 H •

ORJSSA TEXTILE ANDS.TEEL LTD. v. STATEOFORISSA [S.N. VARIAVA, J.] 323

for permi~sion under such order. (32 of 1976), the period sub-s. (3) is made of notice given under within the period (5) The appropriate clause (a) of Section specified therein or Government may, 25-F for the where the permission either on its own retrenchment of any for closure had been motion or on the workman has not refused, the closure of application made by the expired, the employer the undertaking shall employer or any shall not retrench the be deemed to be illegal workman, review its workman but shall, from the date of order granting or within a period of . closure and the refusing to grant fifteen days from such • workman shall be permission under sub- commencement, apply entitled to all the section (2) or refer the to the appropriate benefits under any law matter to a Tribunal for Government or to the for the time in force as adjudication: authority specified in if no notice had been sub-section (2) for Provided that where given to him. permission for a reference has been retrenchment. D (6) Notwithstanding made to a Tribunal anything contained in under this sub-section, (5) Where an sub-s. (I) and sub-s. it shall pass an award application for (3) the appropriate within a period of thirty permission has been Government may, if it days from the date of made under sub-section is satisfied that owing such reference. (4) and the appropriate to such exceptional Government or the (6) Where no circumstances as authority, as the case application for accident in the may be, does not permission under sub- undertaking or death of communicate the section (I) is made the employer or the permission or the within the period like it is necessary so refusal to grant the specified therein or to do, by order, direct permission to the where the permission that the provisions of employer within a for closure has been sub-s. (I) or sub-s. (3) period of two months refused, the closure of shall not apply in the undertaking shall be from-the da~e on which relation to such the application is made, deemed to be illegal undertaking for such the permission applied from the date of closure period as may be for shall be deemed to and the workmen shall specified in the order. have been granted on be entitled to all the the expiration of the benefits under any Jaw (7) Whereas said period of two H

324 SUPREME COURT REPORTS [2002] I S.C.R.

A undertaking is for the time being in months. approved or permitted force as if the to be closed down undertaking had not (6) Where no under sub-section (I) been closed down. application for or sub-section (4), permission under clause every workman in the (7) Notwithstanding (c) of sub-section (I) is B said undertaking who anything contained in made, or where no has been in continuous the foregoing application for service for not less provisions of this permission under sub- than one year in that section, the appropriate section ( 4) is made undertaking immedia- Government may, if it within the period c tely before the date of is satisfied that owing to such exceptional specified therein or where the permission for application for permission under this circumstances as the retrenchment has section shall be entitled accident in the been refused, such to notice and undertaking or death of retrenchment shall be compensation as the employer or the like deemed to be illegal specified in S.25N as it is necessary so to do, from the date on which if the said workman by order, direct that the the notice of had been retrenched provisions of sub- retrenchment was given under section. section ( 1) shall not to the workman and the apply in relation to such workman shall the undertaking for such entitled to all the period as may be benefits under any law specified in the order. for the time being in force as if no notice had (8) \Vhere an been given to him. undertaking is permitted to be closed (7) \Vhere at the down under sub-section commencement of the (2) or where permission Industrial Disputes for closure is deemed to (Amendment) Act, 1976 be granted under sub- (32 of 1976). A dispute section (3 ), every relating, either solely or workman who is in addition to other employed in that matters, to the undertaking imme- retrenchment of any diately before the date workman or workmen of of application for an industrial permission under this establishment to which

ORISSA TEXTILE AND STEEL LTD. v. STATEOFORISSA [S.N. VARIAVA, J.] 325

section, shall be entit[ed this Chapter applies is A .:..i to receive compensation pending before a f which shall be Conciliation Officer or equivalent to fifteen the Central Government days' average pay for or the State every completed year of Government, as the continuous service or case may be and B any part thereof in excess of six months. (a) there is an allegation that such retren- • chment is by ways of c victimisation; or (b) the appropriate Government is of the opinion that such retren- D chment is not in .' the interest of the maintenance of industrial peace, the appropriate E Government, if satisfied that it is necessary so to do. May, by " order withdraw such dispute or, as the case may be, such dispute in so far as it relates to such retrenchment and transfer the same .....• to an authority (being an autho- rity specified by the appropriate H

326 SUPREME COURT REPORTS [2002] l S.C.R.

A Government by notification in the Official Gazette) for consideration whether such retrenchment is B justified and any order passed by such authority shall be final and binding on the c employer and the workman or workmen.

(I 0) The comparative table show that the amended Section 25-0 is in substance akin to Section 25-N (as it then stood). It contains many new provisions and substantially amends/alters the other provisions. Though Meenakshi Mills' case dealt with retrenchment, the same principles would apply as a closure also has the effect of termination of service, though of all '· the workmen. Also both Section 25-N and Section 25-0 are in Chapter V. The objects and reasons for enacting these provisions are the same and must be kept in mind whilst considering amended Section 25-0. As set out above (para 6) they have been extracted in Meenakshi Mill's case. Section 25-0 has been enacted to give effect to the Directive Principles of the Constitution. This aspect was not noted in Excel Wear 's case but has been emphasised in Meenakshi Mill's case. As set out in Meenakshi Mills' case such provisions p must be regarded as being in the interest of general public. We, therefore, do not accept the submission that the principles laid down in Meenakshi Mills case have no relevance in deciding the constitutional validity of (amended) Section 25-0.

(11) As has been set out herein above, in Excel Wear 's case, one of the G reasons why Section 25-0 (as it then stood) was struck down was that it did not require giving of reasons. Now the order granting or refusing permission has to be in writing and be a reasoned order. In Meenakshi Mills' case, in para 29, it has been held as follows :

"In sub-section (2) of Section 25-N. Parliament has used terminology H

ORISSA TEXTILE AND STEEL LTD. v. STATEOFORISSA [S.N. VARIAVA, J.] 327

which is different from that used in sub-section (2) of Section 25-0. A In sub-section (2) of Section 25-0, Parliament had used the expression ,. "the appropriate Government may, if it is satisfied that the reasons for intended closure of the undertaking are not adequate or sufficient or such closure is prejudicial to the public interest" which implied that the order refusing to grant permission to close down the undertaking was to be passed on a subjective satisfaction of the B appropriate Government about the adequacy or the sufficiency of the reasons for the intended closure or the closure being prejudicial to the public interest. In sub-section (2) of Section 25-N, the words used were "the appropriate Government or authority may after making • such enquiry as such Government or authority thinks fit, grant or c refuse, for reasons to be recorded in writing" which indicates that the appropriate Government or authority, before passing an order granting or refusing permission for retrenchment, is required to make an enquiry though the precise nature of the enquiry that is to be made is left in the discretion of the appropriate Government or authority and further that the order that is passed by the appropriate Government or authority D must be a speaking order containing reasons. The requirement to make an enquiry postulates an enquiry into the correctness of the "t' facts stated by the employer in the notice served under clause (c) of the sub-section (I) of Section 25-N for retrenchment of the workmen and other releval\,t facts and circumstances including the employer's E bonafides in making such retrenchment and such an enquiry involving ascertainment of relevant facts will necessarily require affording an opportunity to the parties viz. the employer and the workmen, who have an interest in the matter, to make their submissions ......

(30) It would thus appear that the employer is required to furnish detailed information in respect of the working of the industrial undertaking so as to enable to appropriate Government or authority to make up its mind whether to grant or refuse permission· for G retrenchment. Before passing such order, the appropriate Government

...,... or authority will have to ascertain whether the said information furnished by the employer is correct and the proposed action involving retrenchment of workmen is necessary and if so, to what extent and for that purpose it would be necessary for the appropriate Government or authority to make an enquiry after affording an opportunity to the H

328 SUPREME COURT REPORTS [2002] I S.C.R.

A employer as well as the workmen to represent their case and make a speaking order containing reasons. This necessarily envisages exercise of functions which are not purely administrative in character and are ·'- ! quasi-judicial in nature. The words "as such Government or authority thinks fit" do not mean that the Government or authority may dispense with the enquiry at its discretion. These words only mean that the B Government or authority has the discretion about the nature of enquiry which it may make. In our opinion, therefore, while exercising its powers under sub-section (2) of Section 25-N in the matter of granting or refusing permission for retrenchment, the appropriate Government or the authority does not exercise powers which are purely c administrative but exercises powers which are quasi-judicial in nature".

We are in agreement with the view that, under the unamended Section 25- 0, the order was to be passed on a subjective satisfaction of the appropriate Government. Now in amended Section 25-0 the words used are "the appropriate Government may, after making such enquiry as it thinks fit, and after giving a reasonable opportunity of being heard to the employer, the workmen and persons interested in such closure may, having regard to the genuineness and adequacy of the reasons stated by the employer, interest of the general public and all other relevant factors by order and for reasons to be recorded in writing, grant or refuse to grant such permission." Thus now the appropriate Government before passing an order is bound to make an enquiry. Now the order passed by the appropriate Government has to be in writing and contain reasons. As in the case of retrenchment, so also in closure, the employer has to give notice by filling up a form in which he has to give precise details and information. As held in Meenakshi Mills' case the requirement to make an enquiry postulates an enquiry into the correctness of the facts stated by the employer in the notice served by him and also all other relevant facts and circumstances including the bona fide of the employer. Now an opportunity to be heard would have to be afforded to the employer, workmen and all persons iQterested. The detailed information which the employer gives would enable the appropriate Government to make up its mind and collect necessary facts for the purposes of granting or refusing permission. The appropriate Government would have to ascertain whether the information furnished is correct and whether the propose action is necessary and, if so, to what extent. The making of an enquiry, the affording of an opportunity to thr. employer, the workmen and all interested persons and the necessity to pass a written order containing reasons envisages exercise of functions which are not purely administrative in character but quasi-judicial

ORISSA TEXTILE AND STEEL LTD. v. STATEOFORISSA [S.N. VARIAVA, J.] 329

in nature. As held in Meenakshi Mills' case the words "the appropriate A Government, after making such enquiry, as it thinks fit" does not mean that the Government may dispense with the enquiry at its discretion. These words only mean that the Government has discretion about the nature of the enquiry it is to make. We also agree with the following observations in Meenakshi Mills' case : B "42. It has been urged on behalf of the employers that sub-section (2) of Section 25-N does not prescribe any guidelines or principles to govern the exercise of the power that has been conferred on the appropriate Government or the authority in the matter of grant or . refusal of permission for retrenchment and in the absence of such guidelines or principles, it will be open to the appropriate Government or authority to take into account matters having no bearing or relevance to the legitimate need of the employer to reorganise his business and which may even be opposed to such need and it has been pointed that it would be permissible to pass the order by taking into consideration the state of unemployment in the industry or the state of unemployment in the State. It has also been submitted that the requirement that reasons should be recorded in the order that is passed by the appropriate Government or authority would not provide any protection against arbitrary action because in the absence of principles governing the exercise of the power, there is no touchstone to assess the validity of those reasons. We find no substance in this contention. We have already dealt with the nature of the power that is exercised by the appropriate Government or the authority while refusing or granting permission under sub-section (2) and have found that the said power is not purely administrative in character but partakes of exercise of a function which is judicial in nature. The exercise of the said power envisages passing of a speaking order on an objective consideration of relevant facts after affording an opportunity to the concerned parties. Principles or guidelines are insisted on with a view to control the exercise of discretion conferred by the statute. There is need for such principles or guidelines when the discretionary power is purely administrative in character to be exercised on the subjective opinion of the authority. The same is, however, not true when the power is required to be exercised on objective considerations by a speaking order after affording the parties an opportunity to put forward their respective points of view. H

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A (49) We are also unable to agree with the submission that the requirement of passing a speaking order containing reasons as laid down in sub-section (2) of Section 25-N does not provide sufficient safeguard against arbitrary action. In S.N. Mukherjee v. Union of India, (1990) 4 SCC 594, it has been held that irrespective of the fact whether the decision is subject to appeal, revision or judicial review, B the recording of reasons by an administrative authority by itself serves a salutary purpose, viz., "it excludes chances of arbitrariness and ensures a degree of fairness in the process of decision-making" (SCC p. 612 para 36)."

(12) Another reason why Section 25-N was struck down was that no c time limit had been fixed while refusing permission to close down. This is • ... now cured by sub-section (4) of the amended Section 25-0. This sub-section provides that the order of the appropriate Government shall remain in force for one year from the date of such order. Thus at the end of :he year it is always open to the employer to apply again for permission to close. We see no substance in the submission that the employer would not be able to apply again (at the end of the year) on the same grounds. In our view if the reasons were genuine and adequate, the very fact that they have persisted for a year more is sufficient to necessitate a fresh look. Also ifthe reasons have persisted for a year, it can hardly be said that they are the same. The difficulties faced "~

during the year, provided they are genuine and adequate, would by themselves be additional grounds. Also by the end of the year the interest of the general public or the other relevant factors, which necessitated refusal of permission on the earlier occasion may not prevail. The appropriate Government would necessarily have to make a fresh enquiry, give a reasonable opportunity of being heard to the employer, workmen and all concerned. In our view, providing for a period of one year makes the restriction reasonable. .., (13) Now sub-section (3) of the amended Section 25-0 provides that if the appropriate Government does not communicate the order within a period of 60 days from the date on which the application is made, the permission applied for shall be deemed to have been granted. Thus this defect has also been cured. G (14) Further sub-section (5) of the amended Section 25-0 provides that the appropriate Government may, either on its own motion or on an application made by the employer or any workman, review its order granting or refusing "'" permission or refer the matter to a Tribunal for adjudication. It has also been provided that if a reference is made to a Tribunal (under this sub-section)

ORISSA TEXTILE AND STEEL LTD. v. STATEOFORISSA [S.N. VARIAVA, J.] 33 J then the Tribunal should pass its award within a period of 30 days from the date of such reference. Counsel for the employers submitted that it is left to the discretion of the appropriate Government to either review or make a reference. They submitted that there is no right in the employer to compulsorily seek a review or a reference. The learned Attorney General, fairly submitted that the work "may", in sub-section (5) of the amended Section 25-0 should be read as "shall". He further submitted that the "review" would necessitate the making of an enquiry into all relevant facts, particularly the genuineness and adequacy of the reasons stated by the employer, and the giving of an opportunity of being heard. He submitted that the order passed on review would have to be an order in writing giving reasons. He submitted that even .. though sub-section (5) of amended Section 25-0, does not lays down any C · time limit within which the review was to be disposed off, a proper reading of the section would necessarily imply that a review would have to be disposed of within a period of 30 days from the date on which an application for review was made.

(15) The learned Attorney General relied on the case of Chief Controlling D Revenue Authority and Anr. v. Maharashtra Sugar Mills Ltd, reported in (1950] SCR 536, in which this Court observed, in context of the powers .• conferred on the Chief Revenue Authority by Section 57 of the Indian Stamp Act, as follows : E "In our opinion, the power contained in Section 57 is in the nature of an obligation or is coupled with an obligation and under the circumstances can be demanded to be used also by the parties affected by the assessment of the stamp duty."

' In the case of Western India Match Co. v. Workmen, reported in [1974] 3 F T sec 330, it has been held that on a proper construction the word "may", in Section 6-B of the Uttar Pradesh Industrial Disputes Act, should be read as "shall".

(16) In our view, the learned Attorney General is right. A proper reading of sub-section (5) of amended Section 25-0 shows that, in the context in G which it is used, the word "may" necessarily means "shall". Thus the appropriate Government "shall" review the Order if an application in that behalf is made by the employer or the workmen. Similarly, if so required by the employer or the workman, it shall refer the matter to a Tribunal for adjudication. As submitted by the learned Attorney General, in a review the H

332 SUPREME COURT REPORTS (2002) I S.C.R.

c A appropriate Government would have to make an enquiry into all necessary facts, particularly into the genuineness and adequacy of the reasons stated by the employer. An opportunity of being heard would have to be given to the employer, workmen and all interested persons. The order on review would have to be in writing giving reasons. Thus, in exercising powers of review, B the appropriate Government would be performing quasi judicial functions. Sub-section (5) of amended Section 25-0 provides that the Award should be passed within a period of 30 days from the date of reference. Even though it does not provide any time frame within which the review is to be disposed off, it is settled law that the same would have to be disposed of within a reasonable period of time. In our view, a period of 30 days would be a C reasonable period for disposing of a review also. This review and/or reference under amended Section 25-0 would be in addition to a judicial review under Article 226 or Article 32. In Meenakshi Mills' case it has been held that the exercise of power being quasi judicial the remedy of judicial review under Article 226 or Article 32 was an adequate protection against the arbitrary D action in the matter of exercising of power by the appropriate Government. We are in full agreement with those observations.

(17) Under Section 25-0 (7) (as it then stood), even when permission to close was granted, the employer had still to give notice and compensation "· .... as specified in Section 25-N. Noting this, it was observed in Excel Wear's E case as follows :

"Again, by interpretation we were asked to say that steps under section 25-N can be taken simultaneously when a notice under section 25- 0( 1) is given. Firstly, the language of sub-section (7) does not warrant ( this construction. The action of giving notice and compensation in accordance with section 25N is to be taken when an undertaking is approved or permitted to be closed down and not before that. Secondly, it is not practicable to give three months notice in writing or wages for the said period in lieu of notice or to pay the retrenchment compensation in advance as required by section 25-N before the employer gets an approval from the Government."

Now under the amended Section 25-0(8} this requirement of giving 3 months notices is dropped. All that is now required is to pay compensation which is equivalent to fifteen days average pay for every completed year of continuous service.

ORISSA TEXTILE AND STEEL LTD. v. STATEOFORISSA [S.N. VARIAVA,J.] 333

(18) We also see no substance in the contention that the amended A

) Section merely deals with the procedural defects pointed out in Excel Wear 's case and does not deal with the substantive grounds set out in Excel Wear 's case. In our view amended Section 25-0 is very different from Section 25- 0 (as it then stood). It is now mere akin to Section 25-N (as it then stood) the Constitutional validity of which was upheld in Meenakshi Mills' case. In B Excel Wear's case it has been accepted that reasonable restrictions could be placed under Article 19(6) of the Constitution. Excel Wear's case recognizes that in the interest of general public it is possible to restrict, for a limited period of time, the right to close down the business. Amended Section 25- 0 lays down guidelines which are to be followed by the appropriate .r .. Government in granting or refusing ;iermission to close down. It has to have C regard to the genuineness and adequacy of the reasons stated by the employer. However, merely because the reasons are genuine and adequate cannot mean that permission to close must necessarily be granted. There could be cases where the interest of general public may require that no closure takes place. Undoubtedly where the reasons are genuine and adequate the interest of the general public must be of a compelling or overriding nature. Thus, by way D

... . of examples, if an industry is engaged in manufacturing of items required for defence of the country, then even though the reasons may be genuine and adequate it may become necessary, in the interest of general public, not to allow closure for some time. Similarly, if the establishment is manufacturing ,

vaccines or drugs for a epidemic which is prevalent at that particular point E of time, interest of general public may require not to allow closure for a particular period of time. We must also take a note of sub-section (7) of amended Section 25-0 which provides that if there are exceptional circumstances or accident in the undertaking or death of the employer or the like, the appropriate Government could direct that provision of sub-section F (I) would not apply to such an undertaking. This, in our view, makes it clear that amended Section 25-0 recognizes that if there are exceptional circumstances then there could be no compulsion to continue to run the business. It must, however, be clarified that this Court is not laying down that some difficulty or financial hardship in running the establishment would be sufficient. The employer must show that it has become impossible to continue G to run the establishment. Looked at from this point of view, in our view, the ....,"'°' restrictions imposed are reasonable and in the interest of general public.

(19) In Excel Wear's case it has been held that under Section 25-0 (as it then stood), even if the reasons are adequate and sufficient, approval could H

334 SUPREME COURT REPORTS (2002) I S.C.R.

c A be denied in purported public interest or security of labour. It was submitted that even now permission to close could be refused even if the reasons were genuine and adequate. It was submitted that this was a substantive vice which still prevailed in the amended Section 25-0. We do not read Excel Wear 's case to mean that permission to close must always be granted if the reasons B are genuine and adequate. The observations relied on, in Excel Wear 's case, are in the context of an order under Section 25-0 (as it then stood), based on subjective satisfaction and capable of being arbitrary and whimsical. Now the amended Section 25-0 provides for an enquiry after affording an opportunity of being heard and provides that the order has to be a reasoned order in writing. The order cannot be passed arbitrarily and whimsically. c Now the appropriate Government is exercising quasi judicial functions. Thus the principles laid down in Meenakshi Mills' case would now apply.

(20) Reliance was also placed on the observations, in Excel Wear 's case, that there could be several methods to regulate and/or restrict the right of closure e.g. by providing for extra compensation over and above the retrenchment compensation. It was submitted that this was also a substantive ground on which Section 25-0 (as it then stood) was struck down. It was submitted that the amended Section 25-0 still suffers from the same vice inasmuch as permission to close could still be refused. It was submitted that ·- . this amounts to the restriction being excessive and unreasonable. We are unable to accept this submission. We do not read the observations in Excel Wear 's case, which are relied on, as laying down, that that could be the only method of lying down a reasonable restriction. We read these observations as being a suggestion as to one method of imposing a reasonable restriction. This is clear from the following observations in Excel Wear's case (page F 1036) :- y

"The law may provide to deter the reckless, unfair, unjust or ma/a fide closures. But it is not for us to suggest in this judgment what should be a just and reasonable method to do so."

G As set out hereinabove, the main consideration would be the genuineness and adequacy of the reasons stated by the employer. But that cannot be the only consideration. As stated hereinabove, there could be exceptional circumstances or overriding reasons where, in the interest of general public, there would have to be a restriction on closure for some time. The observations relied on, H cannot be read out of context. It is not possible to accept the submission that

ORISSA TEXTILE AND STEEL LTD. v. STATEOFORISSA [S.N. VARIAVA, J.] 335

) if reasons are genuine and adequate the appropriate Government must always grant permission to close, even though interest of general public and/or other factors require that the business be continued for some time. A

(21) We also see no substance in the submission that the phrase "in the interest of the general public" is of a very wide amplitude or that it is vague or uncertain. In the case of Mrs. Maneka Gandhi v. Union of India, reported B in (1978] 1 SCC 248, it has been held as follows :

"We are concerned only with the last ground denoted by the words "in the interest of the general public", for that is the ground which is attacked as vague and indefinite. We fail to see how this ground can, by any stretch of argument, be characterised as vague or undefined. C The words "in the interest of the general public" have a clearly well defined meaning and the Courts have often been called upon to decide whether a particular action is "in the interests of the general public" or in "public interest" and no difficulty has been experienced by the Courts in carrying out this exercise. These words are in fact borrowed ipsissimma verba from Article 19(5) and we think it would be nothing short of heresy to accuse the Constitution-makers of vague and loose . .~ thinking. The legislature performed a scissor and paste operation in lifting these words out of Article 19(5) and introducing them in Section 10(3)(c) and if these words are not vague and indefinite in Article 19(5), it is difficult to see how they can be condemned to be such when they occur in Section 10(3)(c). How can Section 10(3)(c) be said to incur any constitutional infirmity on account of these words when they are not wider than the constitutional provision in Article 19(5) and adhere loyally to the verbal formula adopted in the Constitution? We are clearly of the view that sufficient guidelines are provided by the words "in the interests of the general public" and the power conferred on the Passport Authority to impound a passport cannot be said to be unguided or unfettered. Moreover, it must be remembered that the exercise of this power is not made dependent on the subjective opinion of the Passport Authority as regards the necessity of exercising it on one or more of the grounds stated in the section, but the Passport Authority is required to record in writing a brief statement of reasons for impounding the passport and, save in certain exceptional circumstances, to apply a copy of such statement to the person affected, so that the person concerned can challenge the decision of the Passport Authority in appeal and the appellate authority can H

336 SUPREME COURT REPORTS [2002] I S.C.R.

A examine whether the reasons given by the Passport Authority are correct, and if so, whether they justify the making of the order impounding the passport."

(22) Again, in the case of Premium Granites v. State of Tamil Nadu, reported in [1994] 2 sec 691, it has been held that the phrase "public c B interest" finds place in the Constitution and in many enactments and has since been noted and considered by this Court in various decisions. It has been held that the said expression is of a definite concept and that there is nothing vague about it. Undoubtedly, in Maneka Gandhi's case it had been held that a fundamental right had not been breached. However, that would make no difference to the understanding of the term "in the interest of the general public". In our view, the phrase "in the interest of the general public" is the phrase of a definite connotation and a known concept. This phrase, as used in amended Section 25-0, has been bodily lifted from Article 19(6) of the Constitution of India. As stated in Maneka Gandhi's case if it is not vague in the Constitution, one fails to see how it becomes vague when it is incorporated in amended Section 25-0.

(23) It was submitted that the restriction in order to be valid must be ~,

. imposed by law made by the Government. It is admitted that such law could include delegate, legislation or subordinate legislation. It is submitted that mere executive order or mere executive determination was not permissible. E It was submitted that the law itself must define the content of the restriction. It was submitted that the Parliament cannot leave it to the executive to determine the content of the restriction. It was submitted that the object of the restriction must be differentiated from the restriction itself. It was submitted that Articles 19(2) to (6) of the Constitution lay down the grounds or objects ;r F of the restriction. It was submitted that the actual restriction had to be defined by "law". It was submitted that otherwise it would not be possible to say whether the restriction laid down by the specific law conforms to the standards specified in the Constitution and/or whether it was proximate thereto and reasonable. It was submitted that ifthe content of the restriction was not laid down by the law but was lef, to be decided by the executive on a case by case G basis then there would be an impermissible delegation of legislative functions. • .,., (24) We see no substance in these contentions. Amended Section 25-0 is the law which lays down the restriction. As has been set out above, there is nothing vague or ambiguous in its provision. It is Section 25-0 H which gives the power to grant or refuse permission. It would be impossible

ORISSA TEXTILE AND STEEL LTD. v. STATEOFOR!SSA [S.N. VAR!AVA, J.] 337

to enumerate or set out in Section 25-0 all different contingencies or situations A ) which may arise in actual practice. Each case would have to be decided on its own facts and on the basis of circumstances prevailing at the relevant time. All that can be set out, in the Section, are guidelines. These have been set out in amended Section 25-0.

(25) Mr. Cama also submitted that amended Section 25-0 was B discriminatory inasmuch as a firm of lawyers or chartered accountants or doctors or a hospital employing several hundred workmen could close down on giving 60 days notice and on payment of closure compensation but in cases of a factory, mine or plantation permission to close could be refused. Just such an argument has ben negatived in Excel Wear's case. In Excel C Wear's case it has been held that the classification is reasonable. We see no reason to take a different view.

(26) We, therefore, hold that the amended Section 25-0 is not ultra- vires the Constitution. We hold that it is saved by Article 19(6) of the Constitution. D (27) All these Appeals and Writ Petitions are now sent back to a Division -, Bench for decision in accordance with law.

K.K.T. Appeals and Writ Petitions sent back to a Division Bench for decision E in accordance with law.