LABOUR LAW-I

Course Coordinator
Mr. Jagdish Khobragade
Assistant Professor of Law

MAHARASHTRA NATIONAL LAW UNIVERSITY, NAGPUR

 What is Retrenchment?
The term “Retrenchment” has been given a very wide meaning
under Section 2(oo) of the ID Act to include termination by
the employer for any reason whatsoever, other than a
punishment given in disciplinary proceeding.
The provision further states that Retrenchment does not
include:
1. Voluntary retirement;
2. Retirement on reaching age of superannuation;
3.Termination of service of workman as a result of non-
renewal of contract of employment;
4. Termination of workman due to continuous ill-health
A mere perusal of the aforesaid provision shows that the
employer has been given wide discretion for terminating an
employee as it states that employer can terminate for any
reason whatsoever…
 Section 25F of the ID Act is a very essential provision for law relating to
retrenchment.

If the conditions or requirements given in this provision are not followed by

the employer, then the retrenchment of employee will be illegal and invalid.

According to this provision, a workman employed in any industry who has

been in continuous service for not less than one year under an employer
cannot be retrenched unless-
The workman has been given one month’s 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;
The workman has been paid compensation at the time of retrenchment;
Notice in the prescribed manner is served on the appropriate Government
Hence, if aforesaid conditions have not fulfilled by the employee before
retrenching employee, then the employee can challenge the same
Section 25FF of the ID Act provides for Compensation to workmen in
case of transfer of undertakings.
According to this provision where the ownership of management of an
undertaking is transferred from the old employer to a new employer, a
workman is entitled to notice and compensation.
However, the workman shall have been in continuous service for minimum
one year in that undertaking immediately before such transfer.

In the case of Ambala Cantt. Electric Supply vs Commissioner of

Income-Tax, 1982 133 ITR 343 P H. the High Court of Punjab & Haryana
had explained the object of Sections 25F and 25FF of the ID Act.
The Court in the case observed that Section 25FF was introduced to
safeguard the rights of workmen, who because of the transfer of an
undertaking could not be employed by the transferee. The Court in the
case further observed that the language of Section 25FF of ID Act makes it
clear that if the right of the retrenchment compensation accrues to the
workman, then it must be a right to receive compensation from the
employer, who was its” (undertaking’s) owner up till the date and time of
transfer. The only thing to be guarded against is that the retrenchment
should not be by way of punishment, but in anticipation of a transfer.
The issue of Retrenchment compensation was also dealt with by the
Supreme Court in the case of Commissioner of Income-Tax vs Gemini
Cashew Sales Corporation, 1967 SCR (3) 727.
In this case, the Supreme Court held that the Liability to pay retrenchment
compensation arises under Section 25FF when there is a transfer of the
ownership or management of an undertaking: it arises on the transfer of
the undertaking and not before. The right, therefore, arises from
determination of employment, or from transfer of the undertaking: it has
no existence before these events take place.

Consent of Workmen for Transferring an Undertaking–

In the case of Sunil Kumar Ghosh v. K. Ram Chandran, the Supreme

Court held that without consent, workmen cannot be forced to work under
different management and in that event, those workmen are entitled to
retirement/retrenchment.
Sunil Kr. Ghosh & Ors. (s) versus K. Ram Chandran & Ors. (s) LNIND
2011 SC 1170.
Industrial Disputes Act (14 of 1947) Section 10(2) Reference of dispute
Transfer of ownership of company No consent of workers Refusal by
Government to refer dispute for adjudication Filing of writ petition by
workers Direction by single Judge to pay retirement/retrenchment benefits
to workmen Violation of Court Order Dismissal of Contempt Application
filed by workers by single Judge and Division Bench Appeal High Court
order to pay benefits not challenged by Management or Government Order
attained finality Workmen cannot be compelled to join transferee company
against their wish Failure of workers to avail VRS within stipulated time or
not retiring from service cannot be a reason to deny payment Held ,
workers entitled to compensation Company directed to comply with Court
order Appeals allowed.
Ratio Decidendi
Workmen cannot be compelled to work under different management and in
that event, those workmen are entitled to retirement/retrenchment
compensation in terms of the , 1947
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 materials or 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 muster rolls of his industrial establishment
and who has not been retrenched.
Explanation.
Every workman whose name is borne on the muster rolls of the industrial
establishment and who presents himself for work at the establishment at the time
appointed for the purpose during normal working hours on any day and is not
given employment by the employer within two hours of his so presenting himself
shall be deemed to have been laid-off for that day within the meaning of this
clause:
Provided that if the workman, instead of being given employment at the
commencement of any shift for any day is asked to present himself for the
purpose during the second half of the shift for the day and is given employment
then, he shall be deemed to have been laid-off only for one-half of that day:
Provided further that if he is not given any such employment even after so
presenting himself, he shall not be deemed to have been laid-off for the second
half of the shift for the day and shall be entitled to full basic wages and dearness
allowance for that part of the day;]
Chapter V-B was added in the Industrial Disputes Act, 1947,
Chapter V-B includes Section 25-K to Section 25-S of the Industrial
Disputes Act, 1947.

This chapter deals with the special provisions relating to lay-off,

retrenchment and closure in certain establishments.
 Papnasam Labour Union V. Madhura Coats Ltd. AIR1995 SC 2200,
1995 SCC (1) 501.
In this case 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.
WORKMEN OF MEENAKSHI MILLS LTD. ETC. V. MEENAKSHI MILLS LTD. AND ANOTHER - LNIND
1992 SC 411 (1992) 3 SCC 3361992 3 SCR 4091992 65 FLR 1AIR 1992 SCW 1378AIR 1994 SC
2696JT 1992 (3) SC 446[1992] 2 LLJ 294LNIND 1992 SC 411

Employment And Labour Law—Retrenchment—The Industrial Disputes Act, 1947

—Section 25N—Validity of section 25N of Act, 1947 prescribing condition
precedent for retrenchment of workmen in an Industrial Establishment was
challenged before various High Courts—There was a conflict of opinion amongst
High Court while one High Court upheld validity of section but two other High
Court held section to be violative as it imposed unreasonable restriction on said
right of employer—Whether, Section 25N of said Act was unconstitutional on
ground that it was violative of fundamental right guaranteed under Article 19(1)(g)
and was not saved by Article 19(6) of Constitution.
Held, it was unable to accept decision of two High Court where section 25N was
unconstitutional as there was no principal or guidelines had been laid down for
exercise of power under sub section(2) of section 25N and also there was no
provision for appeal or review against order passed under this section, were
rejected by this Court— section 25N did not suffer from vice of unconstitutionality
on ground that it was violative under Article 19(1)(g) and was not saved by Article
19(6) of Constitution—This matter may be placed before a Division Bench for
consideration in light of this Judgement.
M/S ORISSA TEXTILE AND STEEL LTD. V. STATE OF ORISSA AND
ANOTHER - LNIND 2002 SC 42 (2002) 2 SCC 5782002 (1) SCALE 2022002
SCC (L&S) 325AIR 2002 SC 708JT 2002 (1) SC 160[2002] 1 LLJ 858[2002]
1 SCR 309[2002] 2 MLJ 13[2002] MLJ 13LNIND 2002 SC 42
Article, 1950—Industrial Disputes Act, 1947, Section 25 -O—U.P. Industrial
Disputes Act, 1947, Section 6(W)—Constitutional validity of Section 25 -O of
Industrial Disputes Act as introduced by Central Act No.46 of 1982—
Amended Section 25-O was stuck down in Excel Wear Etc case—Meenakshi
Mill’s case upheld the constitutional validity of Section 25-N—Questions
raised involve interpretation of various observations in Excel Wear’s case as
well as in Meenakshi Mills? case—Held, Right to close down a business was
an integral part of fundamental right to carry on business as guaranteed under
Article 19(1) (g)—Reasonable restriction on this right under Article 19(6)—
Provisions contained in amended Section 25-O are guidelines—Each case
have to be decided on its own facts and basis of circumstances prevailing at
relevant time—Amended Section 25-O not ultra-vires Constitution—Saved by
Article 19(6)—Matter remanded

— Industrial Disputes Act (XIV of 1947)—Sec.25-O—Constitution of India

(1950), Sec.25-O and Sec.25-O—Right to close down an undertaking as per
amended Sec.25-O—Provision is not ultra vires Constitution of India—
Provision of Sec.25-O is a saving provision.
Section 2 (cc) "closure "means the permanent closing down of a place
of employment or part thereof; a saving provision.

Section 25 R and Section 30 A applies to Closure.

Unfair Labour Practice

Section 2(ra) of the Industrial Disputes (Amendment) Act, 1982 defines unfair
labour practice to mean, “any practices specified in the Fifth Schedule”. The
Fifth Schedule enumerates the unfair labour practices.

1.On the part of employers and trade union of employers

2.On the part of workmen and trade union of workmen.

Section 25 T and Section 25 U applies to Unfair Labour Practice.

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