'Not A Company Concerned With Public Utility, Cannot Be Compelled To Run After Suffering Losses': Bombay HC On General Motors Plant Closure

The Bombay High Court has upheld an order allowing General Motors to close its plant under Section 25-O of the Industrial Disputes Act, 1947. 

In that context, the Bench of Justice Milind N Jadhav observed that, "The learned Tribunal has taken great pains to consider the evidence placed before it, to ultimately conclude that the Company has virtually drained all its resources to make it financially strong and its business self-sustainable and only when all efforts failed, the decision of closure was taken. The efforts taken by the Company to come out of the losses have been clearly documented on the basis of the evidence placed on record".

In light of the same, it was held that, "the Company is not a public limited company or a company concerned with public utility so as to force the Company to continue its operations despite accumulated losses."

Senior Advocate Sanjay Singhvi appeared for the petitioner, while Senior Advocate JP Cama appeared for the respondent.

In 2017, General Motors decided to close its Halol Plant due to substantial losses and shifted focus to exporting from the Talegaon Plant. Efforts to transfer operations to Great Wall Motors failed. The government rejected General Motors' closure application for the Talegaon Plant on January 18, 2021. The matter was referred to the Industrial Tribunal on March 19, 2021.

Due to the Covid-19 pandemic in 2021, lay-off notices were issued, and 484 workers availed separation benefits under the Voluntary Separation Scheme. The Talegaon plant was sold to Hyundai in 2023.

During the pendency of the Industrial Tribunal's reference, the company filed a second closure application on June 27, 2023. Multiple legal battles occurred between the employee union and the company before various Courts and the government, involving challenges to references, closure applications, acquisition deals, layoffs, and service conditions.

On June 30, 2023, the Industrial Tribunal passed an award allowing the closure of the Talegaon plant from April 30, 2021. The employee union challenged this order and another dated April 28, 2023. The union argued that the reference became infructuous one year after the rejection of the initial closure application, and that according to Section 25-O(6) of the ID Act, the order denying closure should remain effective for one year. It was argued that although the reference was made within one year, the tribunal's decision occurred over two years from the date of the reference and the rejection of the first closure application. The union contended that as the reference remained undecided, it became infructuous after one year from the rejection of the closure application.

Relying on the case of Excel Wear Vs. Union of India, the High Court stressed that the right to close down a business is a fundamental right and a Company cannot be compelled to continue to run even if it suffers continuous losses. 

The Court also held that once the Union has fully participated in the proceedings in all forums, it does not lie in its mouth to make this argument about tampering / alteration of the date of Closure. In that context, it was said that, "As per the details supplied by the Company, since the last intended day of cessation of employment was 30.04.2021, the learned Tribunal on its own volition altered the said issue accordingly and signed on the original order of framing issues. No capital can be made out this by the Union that there is tampering of the issue framed or the date suggested for Closure is at the behest of the Company."

It was also further held that, if the order of Reference is made within the aforesaid period of one year, the Reference would be valid even if it is actually heard and disposed, after the expiry of the period of one year. In that context, it was observed that, "if the order of Reference is made within the aforesaid period of one year, the Reference would be valid even if it is actually heard and disposed, after the expiry of period of one year. It is therefore clearly seen and understood that it now stands established that the period of one year mentioned in Section 25-O(6) of the said Act and the period of 30 days mentioned in Section 25-O(4) thereto, is only ‘directory and ‘not mandatory’."

In light of the same, the application was dismissed.

Cause Title: General Motors Employees Union vs General Motors India Private Limited

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