UNLAWFUL CLOSURE OF FACTORY & EMPLOYEE COMPENSATION

SUPREME COURT OF PAKISTAN

2026 SCMR 152

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Case Reference

2026 SCMR 152 Messrs Trio Industries (Pvt.) Ltd. v. Babu Sher & others C.P.L.A. No. 451-K of 2023 Decided on: 2 June 2025 Court: Supreme Court of Pakistan Bench: Muhammad Ali Mazhar, Syed Hasan Azhar Rizvi & Aqeel Ahmed Abbasi, JJ Appeal from: Judgment dated 31.01.2023, High Court of Sindh, Karachi Statutes Involved:

• Sindh Terms of Employment (Standing Orders) Act, 2015
• Sindh Industrial Relations Act, 2013
• Constitution of Pakistan, Article 91

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1. Lawful Closure of an Establishment Requires Strict Compliance with Standing Order 15

The Supreme Court held that an employer seeking to close down an establishment under Standing Order 15 of the Sindh Terms of Employment (Standing Orders) Act, 2015 must strictly follow the mandatory legal procedure. Closure without obtaining approval through the proper governmental channel is unlawful and void.

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2. Filing Closure Application Before a Wrong Forum Has No Legal Effect

The petitioner company applied for closure before an incompetent forum and wrongly presumed that non-response within fifteen days amounted to deemed approval. The Court declared this understanding legally incorrect and contrary to the scheme of the 2015 Act.

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3. Proper Channel for Closure Approval: Role of Chief Secretary and Cabinet

The Court clarified that a lawful closure application must be routed through the Chief Secretary for placement before the Provincial Cabinet. Only upon such consideration could the Chief Minister or Cabinet lawfully approve closure. Failure to adopt this route invalidates the closure process.

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4. Deemed Approval After Fifteen Days Applies Only If Application Is Properly Filed

The legal fiction of “deemed approval” after fifteen days becomes operative only where the employer submits the application to the competent authority through the prescribed channel. An application filed before a wrong forum cannot trigger deemed approval.

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5. Compensation in Lieu of Reinstatement Where Closure Is Unlawful

Since the employer had already unlawfully shut down the establishment, reinstatement of employees was practically impossible. The Labour Appellate Tribunal and High Court correctly awarded reasonable compensation in lieu of reinstatement, considering the length of service and accrued dues of employees.

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6. Employer Cannot Benefit from Its Own Wrong

Applying the maxims nullus commodum capere potest de injuria sua propria and ignorantia juris non excusat, the Court held that the employer could not take advantage of its own illegal act of closure nor plead ignorance of the law to escape liability.

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7. Supremacy of Cabinet in Executive Decision-Making

Relying on Mustafa Impex v. Government of Pakistan (PLD 2016 SC 808), the Court reaffirmed that executive decisions requiring governmental approval must be taken by the Cabinet. Treating the Cabinet as a rubber stamp violates Article 91 of the Constitution.

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8. Need for Legislative and Regulatory Reforms

The Court observed serious procedural gaps in Standing Order 15 and emphasized the need for rules, SOPs, and structured mechanisms to ensure bona fide closures, protection of workers’ dues, hearing of stakeholders, and issuance of speaking orders appealable before Labour Courts.

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9. No Perversity in Concurrent Findings—Leave Refused

Finding no illegality or perversity in the concurrent judgments of the Labour Appellate Tribunal and the High Court, the Supreme Court refused leave to appeal and dismissed the petition.

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Key Legal Principles (Ratio Decidendi)

• Closure of an establishment without approval through the proper governmental channel is unlawful.
• Deemed approval after fifteen days applies only to validly filed applications before the competent authority.
• Where reinstatement is impracticable due to unlawful closure, compensation in lieu of reinstatement is justified.
• Employers cannot benefit from their own illegal acts or plead ignorance of law.
• Executive decisions of such nature require Cabinet approval under Article 91 of the Constitution.

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Summary of the Judgment

The Supreme Court of Pakistan held that the closure of an establishment under Standing Order 15 of the Sindh Terms of Employment (Standing Orders) Act, 2015 must strictly comply with the prescribed legal procedure and be routed through the proper governmental channel for Cabinet consideration. An application filed before an incompetent forum cannot result in deemed approval after fifteen days. Since the employer had unlawfully closed down the establishment, reinstatement of workers was impracticable; therefore, compensation in lieu of reinstatement was the most equitable remedy. The Court reaffirmed that no party can benefit from its own wrongdoing or plead ignorance of law and emphasized the constitutional supremacy of the Cabinet in executive decision-making. Finding no illegality in the concurrent findings of the Labour Appellate Tribunal and High Court, leave to appeal was refused.

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