'Unemployment Of Workers Can’t Be Ground To Compel Loss-Making Company To Run Business': Bombay High Court

Observing that the possibility of unemployment of the workers cannot be a ground to compel the company to run its business and refuse closure, the Bombay high Court recently upheld the order of an industrial tribunal permitting the closure of a manufacturing plant of General Motors (GM) Company in Talegaon, Maharashtra after the company claimed to have accumulated over Rs9,000 crore of loss. 

“It needs to be clearly stated that if a Company approaches the Court for closure of its establishment on the ground of accumulated losses in accordance with law, then in that event the possible unemployment of the workers cannot be a ground to compel the Company to run its business and refuse closure,” observed Justice Milind Jadhav on January 9. 

The court further noted that in GM’s case, the company has suffered significant loss over nearly three decades, which totalled over Rs9,000 crore. 

Company suffered significant losses over past 28 years: Court

“The accumulated losses in the present case are substantial. They pan out over almost a decade prior to the closure announced by the Company. What is significant to be noted in the present case is that the Company has suffered significant losses over the past 28 years and at the end of the financial year 2021-2022, the progressing accumulated losses are ₹9656.87 crores,” Justice Jadhav underlined. 

In a detailed 43-page judgment, the court said that the industrial tribunal had taken into account that from GM’s evidence that the company had drained all its resources to make itself financially strong and its business self-sustainable. Ultimately, the decision of closure was taken after none of these steps helped turn around the company. 

The HC was hearing a plea filed by the General Motors Employees Union challenging the April 28, 2023, order by the industrial tribunal permitting closure of GM’s Talegaon plant. 

On November 20, 2020, GM filed an application seeking permission for closure of its Talegaon plant on the ground of accumulated losses to the tune of Rs8,500 crore. On December 24, 2020, the company declared end of production at its Talegaon Plant.

Govt's rejection of GM's closure application

However, the Maharashtra government rejected the closure application on January 18, 2021, stating that the company could recover from the losses. 

On a review application by the company after three days, the state government made a reference before the industrial tribunal.

The employees union, on February 21, 2023, filed an application before the industrial court seeking a restraining order against GM from creating any third-party rights in favour of Hyundai Motors in the company’s Talegaon plant. The Tribunal rejected this on March 8, 2023.

The industrial tribunal, on June 30 last year, passed an order in government’s reference and permitted the closure of the company with effect from April 30, 2021.

The employees union challenged this before the HC.