Excel Wear v. UOI – AIR 1979 SC 25

Introduction 

The case “Excel Wear Etc vs Union Of India & Ors” concerns the constitutional validity of certain sections of the Industrial Disputes Act, 1947, specifically Sections 25(O) and 25(R). The case was adjudicated in the Supreme Court of India on September 29, 1978, with the bench led by Justice N.L. Untwalia.

Background:

– Excel Wear, a partnership firm engaged in the manufacture of garments for export, employed approximately 400 workmen.

– By 1976, the relations between the management and the employees deteriorated significantly, leading to militant behavior from the workmen, including illegal strikes and aggressive actions.

Legal Proceedings:

– Unable to operate effectively due to the labor unrest, Excel Wear filed a notice with the State Government of Maharashtra on May 2, 1977, seeking approval to close down its operations as mandated by Section 25-O(1) of the Industrial Disputes Act.

– The State Government denied this request, asserting that the reasons provided by Excel Wear were prejudicial to public interest. This denial led Excel Wear to challenge the constitutionality of the relevant laws, claiming that the right to close down business is an integral part of the right to carry on business guaranteed under Article 19(1)(g) of the Constitution of India.

Constitutional Question:

The key issue presented was whether the restrictions imposed by the Industrial Disputes Act on closing down a business constitute a violation of fundamental rights under the Constitution, thereby raising significant questions about the balance between labor rights and business liberties.

Facts of the case 

In the case of “Excel Wear Etc vs Union Of India & Ors,” the petitioner, Excel Wear, is a partnership firm that specializes in manufacturing garments for export and employs approximately 400 workmen. By 1976, the relationship between the management and employees had significantly deteriorated, marked by a series of militant and aggressive actions from the workmen, including illegal strikes that disrupted operations. Facing nearly insurmountable difficulties in running the business due to this labor unrest, Excel Wear served a notice to the State Government of Maharashtra on May 2, 1977, seeking prior approval for the intended closure of its factory in accordance with Section 25(O)(1) of the Industrial Disputes Act, 1947. However, the state government denied this request, citing that the reasons for the closure were prejudicial to public interest. Subsequently, Excel Wear challenged the constitutional validity of Sections 25(O) and 25(R) of the Industrial Disputes Act, arguing that the right to close down a business is an integral part of the right to carry on a business as guaranteed under Article 19(1)(g) of the Indian Constitution. This led to a significant legal confrontation regarding the limitations of business rights versus labor protections within the framework of Indian law.

Arguments by the parties 

In the case of “Excel Wear Etc vs Union Of India & Ors,” the petitioner, Excel Wear, presented several arguments challenging the constitutionality of the restrictions imposed by Sections 25(O) and 25(R) of the Industrial Disputes Act. They contended that the right to close down a business is an essential component of the right to carry on business, as protected under Article 19(1)(g) of the Indian Constitution. Excel Wear argued that the law imposed unreasonable, excessive, and arbitrary restrictions that effectively negated their fundamental right. Specifically, they claimed that Section 25(O) failed to require the government to provide reasons for denying closure, did not impose a time limit for decisions, and allowed authorities to exercise discretion without clear guidelines, leading to potential abuse. On the other hand, the respondents, including the Union of India and intervening labor unions, defended the restrictions by asserting that they were reasonable and necessary in the public interest. They argued that protecting labor rights was paramount and that the law aimed to prevent significant unemployment and maintain economic stability. The respondents emphasized that the broader interests of the workforce and the economy justified the limitations on business closures, framing the debate as a conflict between labor protections and business freedoms.

Judgment of the case 

The Supreme Court, in its judgment for “Excel Wear Etc vs Union Of India & Ors,” declared Sections 25(O) and 25(R) of the Industrial Disputes Act unconstitutional, holding that they imposed excessive and unreasonable restrictions on the fundamental right to carry on business as guaranteed under Article 19(1)(g) of the Indian Constitution. The Court ruled that the right to close a business is an integral part of the right to operate one, and the restrictions imposed by the legislation were found to be arbitrary, lacking adequate procedural safeguards, and not reasonably justifiable in the public interest. The provisions did not require adequate reasoning for closure denial, lacked a defined time frame for decisions, and allowed for decisions by lower authorities without sufficient oversight. Consequently, the Court invalidated all orders issued under Section 25(O) related to the case, confirming that such government interference in business operations was unconstitutional. The judgment emphasized the need for a balanced approach that protects both the interests of labor and the rights of businesses, concluding that while labor welfare is important, it should not infringe upon constitutional freedoms without justifiable cause.