Bombay High Court Approves General Motors Plant Closure Despite Job Losses

Bombay High Court Approves General Motors Plant Closure Despite Job Losses

The Bombay High Court, echoing an earlier decision by the Industrial Tribunal, has granted automotive giant General Motors the green light to shutter its Talegaon plant in Maharashtra. This comes after years of mounting losses, with the company accumulating a staggering ₹9656.87 crore by 2022.

In a blow to the General Motors Employees Union, Justice Milind Jadhav rejected their attempt to block the closure of the Talegaon MIDC plant. His ruling upholds the Industrial Court's orders, allowing General Motors India Private Limited to proceed with the shutdown under Section 25-O of the Industrial Disputes Act, 1947.

In its judgment, the Court emphasised that while worker welfare is crucial, it cannot force a struggling company to remain operational against its will, especially when facing heavy losses. The Court noted the specific case at hand, highlighting the company's sustained losses over 28 years, culminating in a staggering ₹9656.87 crore by 2022. Therefore, based on financial hardship and legal compliance, the Court upheld the company's right to closure.

Faced with mounting losses of ₹8,500 crore, General Motors opted to close its Halol Plant in 2017 and pivot towards a Talegaon-based export strategy. However, efforts to sell the entire operation, including Talegaon, to Great Wall Motors of China ultimately fell through.

Following its initial closure application on November 20, 2020, which was rejected by the government on January 18, 2021, General Motors submitted a revised application for the Talegaon Plant's closure. Due to concerns raised, the government then referred the matter to the Industrial Tribunal for further review on March 19, 2021.

Amidst the ongoing Covid-19 pandemic in 2021, General Motors issued lay-off notices due to economic challenges. The company launched a Voluntary Separation Scheme, offering generous severance packages ranging from ₹25 to 35 lakh to 484 workers who opted to leave. Those who did not participate were subsequently terminated.

Seeking to halt the plant closure process, the union filed an application on April 19, 2023, arguing that the Industrial Tribunal's reference to adjudicate the matter had become invalid. However, the Tribunal rejected their claim on April 28, 2023.

Despite having sold the Talegaon plant to Hyundai in 2023, General Motors filed a second closure application on June 27, 2023. This occurred while the initial closure case, referred to the Industrial Tribunal in March 2021, was still pending adjudication.

The closure of the Talegaon plant sparked a protracted legal battleground. The employee union and General Motors clashed at multiple levels - Industrial Court, Bombay High Court, Supreme Court - over issues like closure applications, employee layoffs, service conditions, and even the legality of the plant's acquisition by Hyundai.

The Industrial Tribunal issued its final award on June 30, 2023, retroactively permitting the closure of the Talegaon plant effective April 30, 2021.

Unwilling to accept the closure, the employee union contested both the Industrial Tribunal's June 30, 2023, order permitting closure and its earlier decision from April 28, 2023. Their central argument hinged on the claim that the reference to adjudicate the case had become irrelevant after a year following the first closure application's rejection.

The union argued that according to the law if a closure application is denied, the decision stands for one year. If the case goes to a tribunal for further review, the tribunal should reach a verdict within 30 days. In this case, while the reference was made within the one-year timeframe, the tribunal took over two years to decide, exceeding the allowed time limit. Hence, the union claimed that the reference lost its validity and the initial closure rejection should remain in effect.

The Court disagreed with the union's argument based on a previous case (Vazir Glass Works Ltd. v. Maharashtra General Kamgar Union). It explained that this case only applies when the review and reference happen more than a year after the closure application is rejected. In this case, since the reference was made within the year, it remained valid even though the decision took longer than a year. The Court further clarified that other court rulings consider the timelines of these sections as guidelines, not strict deadlines.

The Court acknowledged the company's mounting losses, attributed to a confluence of challenges, soaring vehicle costs, high finance rates, unpredictable policy shifts, stricter emission regulations, cutthroat market competition, and a constantly evolving customer landscape.

The Court firmly countered the union's argument of past profitability by drawing attention to the alarming trend of progressively mounting losses. It further highlighted documented efforts the company undertook to turn things around, ultimately emphasising that closure was only pursued as a last resort after all avenues for recovery were exhausted.

The Court upheld the tribunal's review, citing thorough scrutiny of the company's financial documents and a rigorous cross-examination of its witness that solidified the evidence of mounting losses. It further underlined that being a private entity, unlike publicly traded or crucial utility companies, the company could not be compelled to operate against its economic interests despite these losses.

Rejecting the union's procedural challenge regarding the application's format, the Court affirmed substantive compliance with prescribed norms. It further reasoned that the union's earlier active participation in proceedings without objection estopped them from raising this technical contention at this stage.

Addressing the union's concern regarding the retrospective determination of the closure date as April 30, 2021, the Court asserted that the continued payment of full wages to the workers up to their termination on July 12, 2021, mitigated any potential prejudice arising from the retrospective date.

The Court deemed the union's numerous objections and applications, filed intermittently throughout the case, as dilatory tactics that unnecessarily prolonged the legal process. Consequently, citing the union's inconsistent strategy, the Court dismissed both their writ petitions and upheld the challenged orders.