Bombay High Court Modifies Closure Award; Grants ₹2-Lakh Compensation to Each of 472 Glass Workers Instead of Reinstatement and Consequential Benefits After 20-Year Factory Closure Dispute
Bombay High Court Modifies Industrial Tribunal Award in Mahalakshmi Glass Closure; Replaces Continued Employment Benefits With ₹9.44-Crore Lump-Sum Compensation
Facts
The petitioner, Mahalakshmi Glass Works Pvt. Ltd., operated a glass-container manufacturing factory at Mahalaxmi, Mumbai. It employed around 512 persons, including 471 workmen and 41 staff members. In 2006, the company applied under Section 25-O of the Industrial Disputes Act, 1947 for permission to close the undertaking.
The Labour Commissioner granted closure permission on 29 July 2006. The company claimed that it thereafter paid statutory dues, including retrenchment compensation, gratuity, leave wages and notice pay, and shut the factory.
The recognised union initially sought review under Section 25-O(5), while certain individual workmen claiming to represent 228 workers also sought reference of the matter to the Industrial Tribunal. Although the recognised union later withdrew its challenge, the individual workers continued with the proceedings.
The Industrial Tribunal eventually passed an Award dated 31 October 2017, set aside the closure permission, rejected the employer’s closure application and directed that the affected workers be treated as continuing in employment with all consequential benefits.
Mahalakshmi Glass Works challenged that Award before the Bombay High Court.
Issues
The principal questions before the Court were whether individual workmen could prosecute proceedings challenging closure despite the existence of a recognised union; whether the Industrial Tribunal had jurisdiction to scrutinise the genuineness and adequacy of the employer’s reasons for closure; whether the Tribunal’s findings against the employer were perverse; whether failure to decide the Section 25-O reference within 30 days rendered the Award void; and what relief remained practical after the factory had remained closed for approximately 20 years.
Petitioner’s Arguments
The company argued that once a recognised union existed, the individual workmen had no locus to independently prosecute a collective industrial dispute. It relied on the Maharashtra proviso to Section 36(1) of the Industrial Disputes Act, which ordinarily channels representation through the recognised union.
It further contended that the Tribunal had improperly substituted its own commercial judgment for the employer’s managerial decision. According to the company, rising fuel costs, inadequate natural-gas availability, accumulated losses and the impracticability of continuing glass manufacturing at the Mahalaxmi site justified closure.
The employer also argued that the statutory requirement that a Section 25-O reference be decided within 30 days had been grossly violated—the reference made in 2006 was decided only in 2017—and therefore the Award was without jurisdiction.
Finally, it relied on subsequent developments to argue that restoration of manufacturing was now impossible because the factory had remained closed for two decades and glass manufacturing had environmental and locational constraints at the Mahalaxmi site.
Respondents’ Arguments
The workmen argued that the Tribunal had correctly rejected the employer’s asserted reasons for closure.
They relied upon admissions in the employer’s evidence concerning continued licences, continued employment of certain staff, profitability during part of the relevant period, the proposed shift to Taloja and failure to modernise the plant.
They also contended that Section 25-O expressly permits an individual workman affected by closure to seek review or challenge closure permission and that the remedy is not confined to the recognised union.
On merits, they argued that the employer had failed to establish that closure was genuinely unavoidable and alleged that the real object was commercial development of valuable land at Mahalaxmi.
Analysis of the Law
Individual Workmen Can Challenge Closure
The Court distinguished ordinary collective industrial disputes from the special statutory scheme governing closure under Section 25-O.
Section 25-O permits review upon an application by the employer or “any workman”. The provision therefore confers an individual statutory right that is not extinguished merely because a recognised union exists.
The Maharashtra version of Section 25-O similarly permits an affected workman to challenge a closure decision before the Industrial Tribunal. The Court therefore held that the remedy could not be restricted exclusively to the recognised union.
The employer had also previously challenged the reference order in Writ Petition No. 1228 of 2007 and failed. It thereafter participated in the Tribunal proceedings. The Court held that its renewed locus objection deserved rejection.
Tribunal Can Examine Genuineness of Closure Reasons
The Court reaffirmed that Section 25-O requires scrutiny of the genuineness and adequacy of an employer’s stated reasons for closure, along with public interest and other relevant circumstances.
The Industrial Tribunal was therefore entitled to examine whether the claimed fuel costs, financial losses and other business constraints genuinely justified closure.
Precedent Analysis
The employer relied upon Asian Paints India Ltd., Godrej & Boyce Manufacturing Co., and Hind Kamgar Sanghatana to argue that individual workers could not prosecute proceedings where a recognised union existed.
The Court distinguished those cases because they concerned conventional industrial disputes and demands, whereas the present case arose under the special statutory machinery of Section 25-O, which expressly recognises rights of “any workman” affected by closure.
The workmen relied on Britannia Industries Ltd. for the proposition that the Tribunal can scrutinise the genuineness of closure reasons, Orissa Textile & Steel Ltd. for the relevance of reasonableness and public interest, and Voltas Employees Union v. Voltas Ltd. for the proposition that an employer must demonstrate measures taken to avoid closure. The High Court accepted these principles as relevant to the statutory inquiry.
On the 30-day time limit, the employer invoked decisions including Vazir Glass Works. The High Court, however, found no authority holding that the Tribunal automatically becomes functus officio once the 30-day period expires. It therefore refused to invalidate the Award merely because of delay.
Court’s Reasoning
The High Court broadly agreed with the Tribunal that the company had not established that continued operations had become completely impossible.
Although the balance sheets disclosed losses in some years and rising costs, the company had also earned a profit of approximately ₹1.05 crore in the year ending 31 March 2005, only about a year before closure. The Court therefore held that the financial record did not justify an inevitable conclusion that the business had become wholly unviable.
At the same time, the Court recognised significant subsequent and mitigating circumstances. The factory had remained closed for roughly 20 years, there was no evidence that Mahalakshmi Glass Works had continued similar manufacturing either at Mahalaxmi or elsewhere, and even the proposed Taloja facility had never commenced production.
The Mahalaxmi factory was also situated in a densely developed part of Mumbai, while glass manufacturing had environmental implications and was stated to fall within the Maharashtra Pollution Control Board’s red category.
The Court therefore concluded that, although the employer may have hurriedly opted for closure and could potentially have continued for another two or three years, directing reinstatement or treating workers as continuously employed two decades later would be unrealistic and inequitable.
Instead, the Court considered monetary compensation the appropriate mechanism to balance both sides.
Conclusion
The Bombay High Court partly allowed the writ petition and modified the Industrial Tribunal’s Award.
It directed Mahalakshmi Glass Works to pay ₹2,00,000 each to 472 workers or their legal heirs, over and above amounts already paid, within four months. The aggregate liability was approximately ₹9.44 crore.
The workers or their legal heirs were directed to provide their bank-account details so that payment could be transmitted expeditiously.
Importantly, the Court expressly held that beyond this lump-sum compensation, the workers would not be entitled to any further service-related benefits or payments from the company.
Thus, the Industrial Tribunal’s direction effectively treating the workers as continuing in service with consequential benefits was replaced by monetary compensation.
Case Details
Case: Mahalakshmi Glass Works Pvt. Ltd. v. Sunil V. Magar & Ors.
Court: Bombay High Court, Civil Appellate Jurisdiction
Citation: 2026:BHC-AS:37424
Case Number: Writ Petition No. 10306 of 2018 with Interim Application No. 3399 of 2026
Judge: Justice Sandeep V. Marne
Reserved: 20 August 2026
Pronounced: 10 September 2026
Result: Writ petition partly allowed; Industrial Tribunal Award modified; ₹2 lakh each directed to be paid to 472 workers/legal heirs within four months; no further service-related benefits payable.
