The Fork In The Forest

By Sujit Bhar

Freedom is a two-way street. If one has the freedom to do a thing, he surely has the freedom to not do it. This is a fundamental right, and the Supreme Court recently applied Article 19(1)(g) of the Constitution in the case of the right to carry out or not a business in this country. This has to go against the mild socialist grain of India’s existing ethos, but the immense legality of the top court’s landmark judgment cannot be overstated.

The top court ruled that the fundamental right under Article 19(1)(g) of the Constitution—the right to practise any profession, or to carry on any occupation, trade, or business—also includes the right not to carry it on. The apex court bench, comprising Justices Sanjay Karol and Prashant Kumar Mishra, issued this clarification in a case involving Harinagar Sugar Mills Ltd (Biscuit Division), which had voluntarily closed down operations, triggering employment disputes.

This interpretation adds a powerful layer to economic freedom in India. By affirming that a business owner has a constitutional right to shut shop voluntarily, the apex court has ever so lightly, though definitively, altered the balance between economic liberalism and labour rights. Historically, in independent India, this equilibrium had been viewed through the lens of public welfare and social justice. The legality of it all had been somewhat obfuscated.

That was the lens through which the Bombay High Court had viewed it in its verdict that went against the company.

THE CONTEXT

At the heart of the dispute was whether the closure of the business division complied with Section 25-O of the Industrial Disputes Act, 1947, which lays down the process for closure of undertakings. The Bombay High Court had earlier ruled that the closure was illegal because it failed to meet statutory requirements, holding that economic liberty does not translate into absolute liberty, especially when such actions severely impact the lives and livelihoods of employees.

However, the Supreme Court overturned the verdict, declaring that the freedom to shut down a business is a natural extension of the freedom to run it. The Court cited the 1979 Excel Wear vs Union of India decision, which had partially struck down Section 25-O for placing unreasonable restrictions on closures. It also referenced Mohd. Hanif Quareshi vs State of Bihar (1958) to reinforce the idea that restrictions under Article 19(6) must be reasonable and not destroy the essence of the right altogether.

Yet, in the same breath, the Court issued a caveat—that closures must consider the impact on workers, and owners cannot act arbitrarily without accounting for social consequences. This nuance indicates a retained sensitivity to labour rights, though the broad message signals a tilt towards economic freedom.

THE AMERICAN ANALOGY

To understand the real-world implications of such a ruling, it is essential to look at the United States, a global champion of economic freedom and private enterprise. Over the decades, the US has witnessed numerous mass closures, outsourcing practices, and abrupt layoffs under the guise of strategic business decisions.

From the decline of the Rust Belt’s manufacturing jobs in the 1980s to recent tech layoffs at Google, Meta, Amazon and others, workers have often borne the brunt of corporate decisions, with minimal social cushioning. There is little legal requirement in the US for prior approval for closures, barring the Worker Adjustment and Retraining Notification (WARN) Act, which purports to protect employees by requiring certain employers to provide 60 days’ advance no­tice of plant closings and mass layoffs. Even then, violations are common and enforcement is weak.

More troubling is the historical precedent: US business owners have used the right to close down to break unions, relocate to states with fewer labour protections, or even to restructure in ways that prioritise shareholder interests over human consequences. The result has been a deepening wealth gap, insecure employment, and a gig economy that commodifies labour.

India is not at that stage yet, but debate must ensue as to whether this verdict has the potential to be misused if safeguards are not strengthened simultaneously.

CAN INDIA AFFORD THIS MODEL?

India’s socio-economic landscape is vastly different from the US. With over 90 percent of the workforce in the unorganised sector, labour protection often seemed the only safety net many workers had. The recent Supreme Court judgment, while constitutionally sound in theory, could be misused, leading to real-life upheavals, particularly in sectors like textiles, MSMEs, agriculture-ba­sed processing units, and IT services, where mass closures and layoffs are becoming increasingly common.

In an economy that has yet to build a robust social security framework, granting businesses a blanket right to shut down operations without significant procedural scrutiny could lead to:

1. Sudden loss of livelihood for thousands, with no immediate alternative.

2. Exploitation by profit-maximizing owners, especially in regions with weak administrative enforcement.

3. Exacerbation of unemployment, particularly among the youth and semi-skilled workforce.

4. Increased public unrest, with job losses seen as betrayals, not mere business decisions.

Moreover, post-pandemic India has already witnessed mass layoffs in the start-up ecosystem, with many citing unsustainable business models and funding droughts. Companies such as Byju’s, Unacademy and several edtech and fintech start-ups have cut jobs en masse. While these may appear as legitimate strategic decisions, unregulated closures under a blanket right may legitimize corporate impunity.

ONE SIZE DOES NOT FIT ALL

Of course, the judgment in itself shows ample caution, yet its probable misuse and attempted broad applicability warrants that the socio-economic context of each case should be a primary consideration. The following are some extrapolations:

• Large-scale employers with substantial social impact—like sugar mills, public-facing services, or tech companies employing hundreds—cannot be equated with small, family-owned kirana shops or local bakeries.
• Closures due to fraudulent transfers of capital, shell conversions, or dubious restructuring must not be protected under this constitutional right.
• Employees’ rights to severance, retrenchment compensation, rehabilitation, or notice pay must not be diluted by the blanket invocation of the right to close.

That leads to an approach which evaluates closures on a case-by-case basis, applies proportionality tests, examines public interest, and considers employment vulnerability in each context. That would uphold constitutional freedoms while balancing them with the Directive Principles of State Policy, which seek to promote social and economic justice.

THE ROAD AHEAD

India must now urgently update its closure laws and regulatory mechanisms. The Supreme Court verdict, while doctrinally significant, should act as a catalyst for reform, not deregulation. Some key possibilities include:

• Establishing closure tribunals or quasi-judicial bodies to assess business shutdowns that impact more than a threshold number of workers.
• Instituting mandatory social impact assessments before granting approval for large-scale closures.
• Enforcing time-bound severance payments, re-skilling schemes, and relocation assistance for affected workers.
• Introducing graduated regulatory scrutiny, where the scale and sector of business determine the degree of oversight required for closure.

This is especially critical in light of India’s own employment crisis. According to the Centre for Monitoring Indian Economy (CMIE), India’s unemployment rate remains volatile and has crossed 7 percent several times in recent quarters. As global markets slow and supply chains restructure, many Indian firms are laying off workers to manage balance sheets. This is a volatile atmosphere, and closures need a human face.

BETWEEN LIBERTY AND RESPONSIBILITY

The Supreme Court’s ruling in the Harinagar Sugar Mills case is a powerful affirmation of economic liberty, but it arrives at a complex time for India. The world is facing an economic slowdown, with inflation, geopolitical tensions, and technological disruption altering the fabric of employment. For India—a nation still building its welfare state—such freedom must be tempered with accountability, fairness, and foresight.

The Constitution may allow you to shut your doors, but in a democracy built on human dignity, you must also be held answerable for the consequences of that act.

The post The Fork In The Forest appeared first on India Legal.

Source