Author Name:   krupa_gajjar

Chapter V-B was added in the Industrial Disputes Act, 1947 through amendment under Article 32 of the Constitution. This chapter deals with the special provisions relating to lay-off, retrenchment and closure in certain establishments.

Special Provisions relating to lay-off, retrenchment and closure under Industrial Disputes Act.

Chapter V-B was added in the Industrial Disputes Act, 1947 through amendment under Article 32 of the Constitution. This chapter deals with the special provisions relating to lay-off, retrenchment and closure in certain establishments. Chapter V-B includes Section 25-K to Section 25-S of the Industrial Disputes Act, 1947. Definitions of lay-off, retrenchment and closure under Industrial Dispute Act, 1947 are as under:

Definition of Lay off (Section 2(kkk))-

“Lay-off” (with its grammatical variations and cognate expressions) means the failure, refusal or inability of an employer on account of shortage of coal, power or raw materialsor the accumulation of stocks or the breakdown of machinery [or natural calamity or for any other connected reason] to give employment to a workman whose name is borne on the musterrolls of his industrial establishment and who has not been retrenched.
Definition of Retrenchment (Section 2(oo))-

“Retrenchment” means the termination by the employer of the service of a workman for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action, but doesn't include-
(a) Voluntary retirement of the workman; or
(b) Retirement of the workman on reaching the age of superannuation if the contract of employment between the employer and the workman concerned contains a stipulation in that behalf; or [(bb) termination of the service of the workman as a result of the on-renewal of the contract of employment between the employer and the workman concerned on its expiry or of such contract being terminated under a stipulation in that behalf contained therein; or]
(c) Termination of the service of a workman on the ground of continued ill-health;]
Definition of Closure (Section 2(cc))-

“Closure” means the permanent closing down of a place of employment or part thereof;
Application of Chapter V-B of Industrial Disputes Act, 1947-

Under Section 25-K of Industrial Disputes Act, 1947 the application of Chapter V-B dealing with special provisions relating to lay-off, retrenchment and closure is mentioned. The provision mentions the area where the Chapter V-B of the Industrial Disputes Act, 1947 applies.

Section 25-K- (1) The provisions of this Chapter shall apply to an industrial establishment (not being an establishment of a seasonal character or in which work is performed only intermittently) in which not lessthan 2[one hundred] workmen were employed on an average per working day forthe preceding twelve months.(2) If a question arises whether an industrial establishment is of a seasonal character or whether work is performed therein only intermittently, the decision of the appropriate Government thereon shall be final.

Special Provision relating to Lay-Off

Section 25-M Prohibition of lay-off-
(1) No workman (other than a badli workman or a casual workman) whose name is borne on the muster rolls of an industrial establishment to which this Chapter applies shall be laid-off by his employer except [with theprior permission of the appropriate Government or such authority as maybe specified by that Government by notification in the Official Gazette (hereafter in this section referred to as the specified authority), obtained on an application made in this behalf, unless such lay-off is due to shortage of power or to natural calamity, and in the case of a mine, such lay-off is due also to fire, flood, excess of inflammable gas or explosion],
(2) An application for permission under sub-section (1) shall be made by theemployer in the prescribed manner stating clearly the reasons for the intended lay-off and a copy of such application shall also be served simultaneously on the workmen concerned in the prescribed manner.

(3) Where the workmen (other than badli workmen or casual workmen) of an industrial establishment, being a mine, have been laid-off under subsection(1) for reasons of fire, flood or excess of inflammable gas or explosion, the employer, in relation to such establishment, shall, within a period of thirty days from the date of commencement of such lay-off,apply, in the prescribed manner, to the appropriate Government or the specified authority for permission to continue the lay-off.

(4) Where an application for permission under sub-section (1) or sub-section(3) has been made, the appropriate Government or the specified authority, after making such enquiry as it thinks fit and after giving a reasonable opportunity of being heard to the employer, the workmen concerned and the persons interested in such lay-off, may, having regard to the genuineness and adequacy of the reasons for such lay-off, the interests of the workmen and all other relevant factors, by order and for reasons to be recorded in writing, grant or refuse to grant such permission and a copy of such order shall be communicated to the employer and the workmen.
(5) Where an application for permission under sub-section (1) or sub-section(3) has been made and the appropriate Government or the specified authority does not communicate the order granting or refusing to grant permission to the employer within a period of sixty days from the date on which such application is made, the permission applied for shall be deemed to have been granted on the expiration of the said period of sixty days.
(6) An order of the appropriate Government or the specified authority granting or refusing to grant permission shall, subject to the provisions of sub-section (7), be final and binding on all the parties concerned and shall remain in force for one year from the date of such order.

(7) The appropriate Government or the specified authority may, either on its own motion or on the application made by the employer or any workman, review its order granting or refusing to grant permission under sub-section(4) or refer the matter or, as the case may be, cause it to be referred, to tribunal for adjudication: Provided that where a reference has been made to a Tribunal under this sub-section, it shall pass an award within a period of thirty days from the date of such reference.

(8) Where no application for permission under sub-section (1) is made, or where no application for permission under sub-section (3) is made within the period specified therein, or where the permission for any lay-off has been refused, such lay-off shall be deemed to be illegal from the date on which the workmen had been laid-off and the workmen shall be entitled to all the benefits under any law for the time being in force as if they had not been laid-off.

(9) Notwithstanding anything contained in the foregoing provisions of this section, the appropriate Government may, if it is satisfied that owing to such exceptional circumstances as accident in the establishment or deathof the employer or the like, it is necessary so to do, by order, direct that the provisions of sub-section (1), or, as the case may be, sub-section (3)shall not apply in relation to such establishment for such period as may be specified in the order.

(10) The provisions of section 25C (other than the second proviso thereto) shall apply to cases of lay-off referred to in this section.
Explanation.—For the purposes of this section, a workman shall not be deemed to be laid-off by an employer if such employer offers any alternative employment (which in the opinion of the employer does not call for any special skill or previous experience and can be done by the workman) in the same establishment from which he has been laid-off or in any other establishment belonging to the same employer, situate in the same town or village, or situate within such distance from the establishment to which he belongs that the transfer will not involve undue hardship to the workman having regard to the facts and circumstances of his case, provided that the wages which would normally have been paid to the workman are offered for the alternative appointment also.

Reasonable restrictions-
In order to prevent hardship to the employees and to maintain higher tempo of production and productivity, section 25M of the Industrial Disputes Act, 1947 puts some reasonable restrictions on the employer’s right to lay-off, retrenchment and closure. Section 25-M makes it clear that no workmen whose name is borne on the muster rolls of his employer shall be laid off without previous permission of such authority as may be specified by the appropriate government unless such lay off is due to shortage of power or natural calamity and in case of a mine it is due to fire, flood, etc.

Constitutional Validity of Section 25-M

In Papnasam Labour Union V. Madhura Coats Ltd. And another the constitutionality of Section 25-M of Industrial Disputes Act, 1947 was challenged on the ground that the section as amended by the Amendment Act of 1976 imposed unreasonable restrictions in so far as it required prior permission to be obtained to effect lay-off and as such it was ultra vires and void. It was held that the object of Section 25-M is to prevent avoidable hardship to the employees resulting from lay-off and maintain higher production and productivity by preserving industrial peace and harmony. It was further pointed out that the legislature has taken care in exempting the need for prior permission to lay-off in Section 25-M if such lay-off is necessitated on account of power of failure or natural calamities because such reasons being grave, sudden and explicit, no further scrutiny is called for. Therefore, in the greater public interest for maintaining industrial peace and harmony and to prevent unemployment without just cause, the restriction imposed under sub-section (2) of Section 25-M cannot be held arbitrary, unreasonable or far in excess of the need for which such restriction has been sought to be imposed. Criminal cases need not be pursued, not only within the ambit of Section 482 of Criminal Procedure Code but in special facts of the case will also secure the ends of justice.

Special Provision Relating To Retrenchment

Section 25-N Condition precedent to retrenchment of workmen-

(1) No workman employed in any industrial establishment to which this Chapter applies, who has been in continuous service for not less than one year under an employer shall be retrenched by that employer until,— (a) the workman has been given three months’ notice in writing indicating the reasons for retrenchment and the period of notice has expired, or the workman has been paid in lieu of such notice, wages for the period of the notice; and (b) the prior permission of the appropriate Government or such authority as may be specified by that Government by notification in the Official Gazette (hereafter in this section referred to as the specified authority) has been obtained on an application made in this behalf.

(2) An application for permission under sub-section (1) shall be made by the employer in the prescribed manner stating clearly the reasons for the intended retrenchment and a copy of such application shall also be served simultaneously on the workmen concerned in the prescribed manner.

(3) Where an application for permission under sub-section (1) has been made, the appropriate Government or the specified authority, after making such enquiry as it thinks fit and after giving a reasonable opportunity of being heard to the employer, the workmen concerned and the person interested in such retrenchment, may, having regard to the genuineness and adequacy of the reasons stated by the employer, the interests of the workmen and all other relevant factors, by order and for reasons to be recorded in writing, grant or refuse to grant such permission and a copy of such order shall be communicated to the employer and the workmen,

(4) Where an application for permission has been made under sub-section (1) and the appropriate Government or the specified authority does not communicate the order granting or refusing to grant permission to the employer within a period of sixty days from the date on which such application is made, the permission applied for shall be deemed to have been granted on the expiration of the said period of sixty days.

(5) An order of the appropriate Government or the specified authority granting or refusing to grant permission shall, subject to the provisions of sub-section (6) be final and binding on all the parties concerned and shall remain in force for one year from the date of such order.

(6) The appropriate Government or the specified authority may, either on its own motion or on the application made by the employer or any workman, review its order granting or refusing to grant permission under sub-section (3) or refer the matter or, as the case may be, cause it to be referred, to a Tribunal for adjudication: Provided that where a reference has been made to a Tribunal under thissub-section, it shall pass an award within a period of thirty days from the date of such reference.

(7) Where no application for permission under sub-section (1) is made, or where the permission for any retrenchment has been refused, such retrenchment shall be deemed to be illegal from the date on which the notice of retrenchment was given to the workman and the workman shall be entitled to all the benefits under any law for the time being in force as if no notice had been given to him. Such exceptional circumstances as accident in the establishment or death of the employer or the like, it is necessary so to do, by order, direct that the provisions of sub-section (1) shall not apply in relation to such establishment for such period as may be specified in the order.

(9) Where permission for retrenchment has been granted under sub-section (3) or where permission for retrenchment is deemed to be granted under sub-section (4), every workman who is employed in that establishment immediately before the date of application for permission under this section shall be entitled to receive, at the time of retrenchment, compensation which shall be equivalent to fifteen days’ average pay for every completed year of continuous service or any part thereof in excess of six months.]

The infirmity in retrenchment by reference to section 25N cannot be ventured to be found out without laying factual foundation attracting applicability of the provision.

It is incumbent on the management to prove that the copies of the application as required by section 25N read with rule 76A of the Industrial Disputes Rules, 1957, were served on the concerned workman.

Constitutional Validity of Section 25-N

In Workmen of Meenakshi Mills Ltd., etc. V. Meenakshi Mills Ltd. And another, the Supreme Court held that Section 25-N of the Act as constitutionally valid on the ground that the restrictions imposed on the right of employer to retrench workmen is in interest of the general public. It does not infringe Article 19(1) (g) of the Constitution and duty to pass a speaking order and affording opportunity to the parties concerned with judicial power while functioning under sub-section (2) of Section 25-N and hence no appeal lies to Supreme Court against an order passes under sub-section (2) of Section 25-N.

In Uttaranchal Forest Development Corporation and Another v. Jabar Singh and Others, the services of the respondent workman were retrenched by notices in compliance with Section 6-N of the U.P. Industrial Disputes Act, 1947. Labour Court gave an award holding the retrenchment as valid. The award was challenged in the High Court and the Court directed reinstatement with back-wages. The question for consideration was whether the corporation was an industrial establishment within Section 25-L of the Industrial Disputes Act, 1947 and if so whether the retrenchment was not valid for non-compliance of Section 25-N of the Industrial Disputes Act, 1947.

The Supreme Court observed that the process of cutting tress by axe and changing the shape by saw and conversion of tress into logs for purpose of sale and disposal fell within the scope of manufacturing process under Section 2-K of the Factories Act, 1948.

The establishment of appellant was therefore, held, to be an industrial establishment under Section 25-L of the Industrial Disputes Act, 1947 and Section 25-N was applicable.

The appellant did not comply with the two requirements of Section 25-N of the Industrial Disputes Act, 1947 namely giving three month notice or wages in lieu of notice and taking permission from the appropriate government. The retrenchment notices were therefore illegal and workmen were held entitled to be reinstatement with full back wages and continuity of service.

Special Provision Relating To Closure Section 25-O Procedure for closing down an undertaking-

(1) An employer who intends to close down an undertaking of an industrial establishment to which this Chapter applies shall, in the prescribed manner, apply, for prior permission at least ninety days before the date on which the intended closure is to become effective, to the appropriate Government, stating clearly the reasons for the intended closure of the undertaking and a copy of such application shall also be served simultaneously on the representatives of the workmen in the prescribed manner: Provided that nothing in this sub-section shall apply to an undertaking set up for the construction of buildings, bridges, roads, canals, dams or for other construction work,

(2) Where an application for permission has been made under sub-section (1), the appropriate Government, after making such enquiry as it thinks fit and after giving a reasonable opportunity of being heard to the employer, the workmen! and the persons interested in such closure may, having regard to the genuineness and adequacy of the reasons stated by the employer, the interests of the general public and all other relevant factors, by order and for reasons to be recorded in writing, grant or refuse to grant such permission and a copy of such order shall be communicated to the employer and the workmen.

(3) Where an application has been made under sub-section (1) and the appropriate Government does not communicate the order granting or refusing to grant permission to the employer within a period of sixty days from the date on which such application is made, the permission applied for shall be deemed to have been granted on the expiration of the said period of sixty days.

(4) An order of the appropriate Government granting or refusing to grant permission shall, subject to the provisions of sub-section (5), be final and binding on all the parties and shall remain in force for one year from the date of such order.

(5) The appropriate Government may, either on its own motion or on the application made by the employer or any workman, review its order granting or refusing to grant permission under sub-section (2) or refer the matter to a Tribunal for adjudication: Provided that where a reference has been made to a Tribunal under this sub-section, it shall pass an award within a period of thirty days from the date of such reference.

(6) Where no application for permission under sub-section (1) is made within the period specified therein, or where the permission for closure has been refused, the closure of the undertaking shall be deemed to be illegal from the date of closure and the workmen shall be entitled to all the benefits under any law for the time being in force as if the undertaking had not been closed down.

(7) Notwithstanding anything contained in the foregoing provisions of this section, the appropriate Government may, if it is satisfied that owing tosuch exceptional circumstances as accident in the undertaking or death of the employer or the like, it is necessary so to do, by order, direct that the provisions of sub-section (1) shall not apply in relation to such undertaking for such period as may be specified in the order.

(8) Where an undertaking is permitted to be closed down under subsection (2) or where permission for closure is deemed to be granted under sub-section (3), every workman who is employed in that undertaking immediately before the date of application for permission under this section, shall be entitled to receive compensation which shall be equivalent to fifteen days’ average pay for every completed year of continuous service or any part thereof in excess of six months.]

In S. G. Chemicals and Dyes Trading Employees Union v. S. G. Chemicals and Dyes Trading Limited and Others, the respondent company was engaged in business of pharmaceuticals etc. and was operating in Bombay through three Divisions situated at different places. The pharmaceuticals, the Dyes, and the Marketing and Sale Divisions situated at Worly, Trombay and Churchgate respectively. The registered officer of the Company was situated at Churchgate. The Company gave notice to the Government under Section 25-FFA (1) of its intention to close down its Marketing and Sales Division employing 90 workmen at Churchgate. Copies of the said notice were sent to the Commissioner of Labour, Maharashtra and the Union. Pursuant to this notice the Division of Churchgate was closed down and the Company agreed to pay compensation under Section 25-FFF of the Industrial Disputes Act, 1947. The Union protested against the termination of the services of the workmen and complained that the closure was contrary to the provisions of Section 25-O of the Industrial Disputes Act, 1947 and the Company had committed unfair labour practice under the Maharashtra Recognition of Trade Unions and Prevention of the Unfair Labour Practice Act, 1971. The union contended that for the purpose of Section 25-O all the workmen working in all three divisions of the Company should be taken into consideration as there was functional integrity amongst all the three Divisions. It was held that the Section 25-O applies to the closure of undertaking of an industrial establishment and not to the closure of an industrial establishment. It also does not require that an undertaking of an industrial establishment should also be an ‘industrial establishment’.

‘Undertaking’ means part of an ‘industrial establishment’. Undertaking and industrial establishment’. Undertaking and industrial establishment taken together constitute one establishment. Section 25-O would apply to the closure of an undertaking provided the condition laid down in Section 25-K is fulfilled. Further undertaking of an industrial establishment need not to be a factory. Consequently it was held that the closure of the Churchgate division was illegal as it was in contravention of the provisions of Section 25-O and the workmen whose services were terminated on account of such illegal closure are entitled to receive their full salary.

Applicability of Section 25-O

This section deals with the permission for closure of undertaking.

In Hindalco Industries Ltd v Union of India and Others, it was held that even though the closure of an undertaking was not a planned and voluntary closure by the company Section 25-O of the Industrial Disputes Act, 1947 would be applicable. It was also pointed out that even if an undertaking is closed for reasons beyond its control Section 25-o would be applicable and the conditions imposed in the order of the government granting permission for the closure were valid and binding on the appellant company.

Absorption in Service-

In Managing Director, Karnataka Forest Development Corporation Ltd. v. Workmen of Karnataka Pulpawood Ltd. And others, the private respondents were the workmen of a joint sector company. The State Government granted necessary permission to close down the company. The matter regarding closure of the company was not in dispute. Only the impugned order of the High Court directing the absorption of respondent’s workmen into service of the appellant corporation is challenged in this appeal.

Allowing the appeal it was held that in the event of undertaking being closed down, the only right which assures in favour of the workmen is to obtain compensation as provided. Both merger of two undertakings and the closure of one undertaking do not stand together. As such if the workmen think that any other right has accrued to them, they have to approach appropriate forum and civil writ petition is not maintainable.

Constitutionality of old Section 25-O

In Excel Wear v. Union of India, it was held that Section 25-O of the Industrial Disputes Act, 1947 as a whole and Section 25-R in so far as it relates to the awarding of punishment for infraction of the provisions of Section 25-O are constitutionally bad and invalid for violation of Article 19(1) (g) of the Constitution. It was further held that it is true that Chapter V-B deals with certain comparatively bigger undertaking and of few types only. But with all this difference it has not made the law reasonable. It may be a reasonable classification for saving the law from violation of Article 14, but certainly it does not make the restriction reasonable within the meaning of Article 19 (6). Similarly, the interest of ancillary industry cannot be protected by compelling an employer to carry on the business if he cannot pay even the minimum wages to the labourer.

Within the meaning of Article 19(1) (g) includes right to close down the business and the fact that the citizen cannot exercise this right as much as the permission of the State Government is required under Section 25-O before closing down the business, infringes the right given under Article 19(1) (g). The Supreme Court judgement in Workmen of Meenakshi Mills Ltd. v. Meenakshi Mills Ltd would equally apply to the provisions of Section 25-O as amended by the Act 46 of 1986. The right to close a business is an integral part of the fundamental right to carry on business and is guaranteed by Article 19(1) (g) of the Constitution.

Constitutionality of amended Section 25-O

In Orissa Textile and Steel Ltd. v. State of Orissa and Others, the constitutional validity of Section 25 as amended in 1982 was considered. This Section was struck down being unconstitutional in Excel Wear v Union of India.

In Workmen of Meenakshi Mills Ltd. v. Meenakshi Mills Ltd, the constitutional validity of Section 25-N was upheld by the Supreme Court. Therefore, there had been difference of opinion among the High Courts on the validity of Section 25-O. it was held by the Supreme Court in the present case that the amended Section 25-O was not ultra vires the Constitution and it was saved by Article 19(6) of the Constitution on the following grounds-
(i.) Section 25-o had been enacted to give effect to the directive principles of the Constitution and was in the interest of general public.
(ii.) Under the amended Section the order granting or refusing permission for closure has to be in writing and reasons are to be recorded.
(iii.) Even after permission to close being given, the employer had still to give notice and compensation as specified in Section 25-N.
(iv.) The other defect that no time limit has been fixed while refusing permission to close was now cured by sub-sections (3), (4) and (5) of amended Section 25-O.
(v.) The restrictions imposed under the amended section were reasonable and in the interest of general public.
(vi.) As far refusal in case of reasons being genuine is concerned the interest of general public or other factors might still justify refusal of permission, requiring that business be continued for some time.
(vii.) The phrase “in the interest of general public” was not vague but was of a definite concept.
(viii.) There was no excessive delegation of power to the executive as the guidelines had been set out in Section 25-O.
(ix.) There is no substantive vice as the reason for refusal now shall be given in writing after inquiry and giving opportunity of hearing. Thus, power of government was quasi-judicial.
(x.) Section 25(o) was not discriminatory between, say, a firm of lawyers and a factory or mine.
(xi.) The argument that the reasons gives in Excel Wear case, for striking down Section 25-O had been considered in Meenakshi Mills, case and as such it was not open to the present bench to reconsider those reasons was not acceptable to the Supreme Court. It observed that it was the duty of the Constitution Court to form its own opinion about a given case instead of relying upon the gloss placed on that case by some other decision.

Section 25-P Special provision as to restarting of undertaking closed down before commencement of Industrial Disputes (Amendment) Act, 1976-

If the appropriate Government is of opinion in respect of any undertaking or an industrial establishment to which this Chapter applies and which closed down before the commencement of the Industrial Disputes (Amendment) Act, 1976 (32 of 1976)-

(a) That such undertaking was closed down otherwise than on account of unavoidable circumstances beyond the control of the employer;

(b) That there are possibilities of restarting the undertaking;

(c) That it is necessary for the rehabilitation of the workmen employed in such undertaking before its closure or for the maintenance of supplies and services essential to the life of the community to restart the undertaking or both; and

(d) That the restarting of the undertaking will not result in hardship to the employer in relation to the undertaking, it may, after giving an opportunity to such employer and workmen, direct, by order published in the Official Gazette, that the undertaking shall be restarted within such time (not being less than one month from the date of the order) as may be specified in the order.

Penalty

Section 25-Q Penalty for lay-off and retrenchment without previous permission-
Any employer, who contravenes the provisions of section 25-M or section 25-N shall be punishable with imprisonment for a term which may extend to one month, or with fine which may extend to one thousand rupees, or with both.

Section 25-R Penalty for closure-

(1) Any employer, who closes down an undertaking without complying with the provisions of sub-section (1) of section 25-O shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to five thousand rupees, or with both.

(2) Any employer, who contravenes [an order refusing to grant permission to close down an undertaking under sub-section (2) of section 25-O or a direction given under section 25P], shall be punishable with imprisonment for a term which may extend to one year, or with fine which may extend to five thousand rupees, or with both, and where the contravention is a continuing one, with a further fine which may extend to two thousand rupees for every day during which the contravention continues after the conviction.

It was held in Excel Wear v. Union of India, that Section 25-R in so far as it relates to the awarding of punishment for violation of provisions of Section 25-O are constitutionally bad and invalid for violation of Article 19(1) (g) of the Constitution.

Section 25-SCertain provisions of Chapter VA to apply to industrial establishment to which this Chapter applies-
The provisions of sections 25B, 25D, 25FF, 25G, 25H and 25J in Chapter VA shall, so far as may be, apply also in relation to an industrial establishment to which the provisions of this Chapter apply.

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