Court case(1978) 4 SCC 224

Excel Wear, a registered partnership running a garment factory in Bombay with about 400 workers, applied to the Maharashtra Government for permission to close its undertaking because of serious labour trouble and losses. Section 25-O of the Industrial Disputes Act 1947, inserted in 1976, required ninety days' notice and government permission for closure, which could be refused if the government thought closure prejudicial to the public interest; no reasons were required, no time limit was fixed for the decision, and there was no appeal or review. Permission was refused and the firm challenged section 25-O and the penal section 25-R under Article 32.

Untwalia J struck down sections 25-O and 25-R. The right to close a business is an integral part of the right to carry it on; one cannot be compelled to carry on a business against one's will. The right is not absolute and may be reasonably restricted in the interests of the general public, but the impugned scheme was unreasonable: the government could refuse permission without giving reasons, the order was not subject to any review or appeal, there was no time limit for the decision, no guidelines beyond 'public interest', and the employer could be compelled to run an undertaking at a loss indefinitely under penal sanction. The claim to protection under Article 31C failed because the provisions had no nexus with the Directive Principles in Article 39(b) and (c). (Parliament re-enacted section 25-O in 1982 with reasons, a time limit and a reference to the Tribunal.)