Right of workmen laid off for compensation Section 25 C (u/ IRC Chapter IX, Sections 67, 69)

- Not paid to a badli a casual worker. Badli is a substitute of a workman, but shall cease to be
so if he has completed 1 year of continuous service.
- Paid to workmen whose name is borne on muster rolls
- Paid to those who completed 1 year of continuous service
- Paid by employer
- Paid for the days during which he is laid off
- Lay-off Compensation @ 50% of basis wages + DA
- No compensation is payable after expiry of first 45 days of lay-off in the preceding 12
months
- Lay off compensation paid for those days may be set off against the retrenchment
compensation i.e. the employer can retrench the workmen who is laid for > 45 days in the
last 12 months and can set off lay off compensation from the retrenchment compensation
- Lay – off compensation for weekly holidays – PAID WAGES AS USUAL

Duty of an employer to maintain muster rolls of workmen Section 25 D

It is the duty of employer to maintain muster rolls with the details of workmen who present themselves
for work during the normal working hours

Workmen not entitled to compensation in certain cases - Section 25 E

No compensation –

- If workman refuses to accept any alternative employment in the same establishment or in

any other establishment of the same employer in the same town/village situated within 5
miles radius from his establishment. (under IRC, 8 kms)
- Such alternative employment should not call for any special skill or previous experience.
- Normal wages should be paid in the alternative employment
- He should present himself for work at the appointed time at least once a day during the
normal working hours
- If such lay –off is due to a strike or slowing down of production on the part of workmen in
another part of the establishment

Nutan Mills Ltd Vs ESIC

during lay – off the employee would be entitled to go and serve another employer but would be
disentitled to receive lay off compensation.

[Link] Mills Ltd Vs [Link] 1962 Bombay

Less than 50 workmen employed – management laid off workmen without paying them any
compensation – on failure of conciliation proceedings, dispute referred to IT for adjudication – IT
awarded compensation on the ground of equity and social justice.

Management appealed to High Court – HC confirmed the Tribunal’s view – further appeal to Division
Bench of HC – had conflicting opinions – matter referred to another justice for final disposal – held that
Tribunal had no jurisdiction to award lay-off compensation to them.
 - Sections 25 C, D & E - Do not apply to seasonal establishments or where work is performed
intermittently

U IRC, For violation of 67 (Layoff), 70 (Retrenchment), 73 (Transfer), 75 (Closure) falling under Ch IX –

50000 to 2 lacs. (For repeat offenders – 1 lac to 5 lacs or up to 6 months or both

Chapter V B – Lay-off

Prohibition of lay-off – section 25M (inserted in 1976, re-drafted in 1984) (u/ IRC 2020 sec 78 , Penalty
s86

1. a workman whose name is borne on the muster rolls shall not be laid off except with the prior
permission (“PP”) of the AG.
2. PP is obtained by making an application
3. PP is applied by the employer in the prescribed manner along with reasons
4. Copy of such application shall be served on the workmen simultaneously
5. PP is not necessary if lay-off is due to
- Shortage of power or

- In case of a mine - fire or flood or excess of inflammable gas or explosion, but the employer
shall within 30 days from commencement of lay-off, apply to AG for permission to continue
the lay-off in the mine.

But the employer will have to apply for permission subsequently to continue the layoff.
6. When such application is made, the AG conducts enquiry according to PNJ; grant or refuse such
permission; copy of such order is communicated to the employer and workmen.
7. When no communication from AG (either refusal or granting) is made within 60 days from such
application, the permission is deemed to be granted on the expiry of 60 days
8. This order of refusal or granting is final and binding on all parties and remains in force for 1 year
from such order
9. AG may review its order on its own motion or on application by the parties or refer it to a
Tribunal for adjudication. Tribunal shall pass an award within a period of 30 days of such
reference
10. Where no application was made or application was refused – such lay off shall be deemed to be
illegal - workmen shall be entitled to all benefits under any law as if he had not been laid off
11. On exceptional circumstances as accident in the establishment or death of the employer or the
like – the AG may exempt from PP condition
12. When lay-off is permitted, section 25 C applies
13. If workman is given alternative employment that needs same skills or previous experience, he is
not deemed to be laid off, if such alternative employment does not cause undue hardship to the
workman (no kms are mentioned under VB or u/ IRC section 78)

Penalty for lay-off and retrenchment without PP – section 25 Q

Employer who violates 25 M or 25 N – imprisonment up to 1 month or fine up to 1000/- or both

Penalty for violation of layoff under 78 IRC – fine 1 lac to 10 lacs ( same fine for violation of chapter X R
or Closure too); for repeat offenders – 5 lacs to 20 lacs or upto 6 months. (this too is same for R & C)

S.A.E. Mazdoor Union Vs Labour Commissioner, Indore, 2002 MP

The trade union challenged the order Labour Commissioner granting permission to the employer to lay-
off on ground of accumulation of stock u/s 25 M. Held – accumulation of stock would become inevitable
if workmen were not laid off, hence would fall within scope of reasons of 25M read with 2(kkk).
Therefore, permission granted is not assailable

Procedure for lay-off

- Act does not prescribe the procedure for lay –off.

- It is provided in Industrial Dispute (Central Rules) 1957, Rule 75A, and makes it obligatory on
the employer to given notice of lay-off period, on the affected workmen, within 7 days of
commencement or termination of lay-off.
- This notice should be served irrespective of the fact whether they are entitled to lay-off
compensation or not under section 25 C.

RETRENCHMENT –

U/ IDA: sections 2(oo); Ch VA – 25 F, G, H, I; Ch V B – 25 N, Q

U/ IRC, 2020: Ch IX, X ; Def 2(zh), Ch IX - 70, 71,72 & Ch X - 79 , penalty 86

Definition 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 does not 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 non-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”

When is a termination not a retrenchment? In how many situations as per this definition?

“ALL RETRENCHMENT IS TERMINATION OF SERVICE BUT ALL TERMINATION OF SERVICE IS NOT

RETRENCHMENT”
 - Termination on the ground of reduction in volume of business is R
- Termination on the ground of surplus labour is R

Board of Trustees of Port of Mumbai Vs Deepak S. Raut 2007 Bombay – NO

respondent is a temporary employee engaged as assistant welder – terminated from service – Tribunal
ordered reinstatement – HC held respondent as appointed for a particular project of repair works &
there is nothing to show that he was appointed on permanent basis or temporary basis for permanent
job – he did not work >240 days – therefore NOT Retrenchment.

Haryana State FCCW Stores Ltd Vs Ram Nivas 2002 SC – NO

workman appointed on contract basis on daily wage basis on clear terms that their appointment was on
contract basis, till the stock of grain stored in the open area at Mandi were disposed off or for a period
of 3 months. – Management terminated them after the stock was cleared – workmen raised industrial
dispute.

- Labour Court – not R

- HC – yes R, ordered reinstatement + back wages
- SC – held 2(oo) (bb) applies therefore NOT Retrenchment

Binay Kumar Chatterjee Vs Jugantar Ltd & Ors 1983 – NO

Retired employee at 60 years – re-employed for 12 months on contract basis – terminated after expiry
of contract – he raised industrial dispute and claimed R compensation. SC held – since it was contract
basis and non-renewal of contract led to termination – NOT Retrenchment

M/S Gammon India Ltd Vs Narayan Dass 1984 SC - YES

Termination of senior clerks due to reduction in the volume of business as a result of rescission in work –
held – yes R

Mithilesh Kumar Singh Vs State of Bihar & Ors 1995 Patna HC - YES

Termination on ground that initial appointment was not legal and valid – held – yes R

T of S for unauthorized absence from duty – yes R

Termination in accordance with Standing Orders for continued absence without leave – yes R

Uptron India Ltd Vs Shammi Bhan 1998 SC - YES

She was a permanent employee on maternity leave – overstayed her leave – Standing Orders provided
that an employee who overstays the leave without permission for more than 7 days , his services would
be liable to automatic T. – hence, her services were terminated by issuing a letter – YES

Prakash Pandurang Sawant Vs Punjab & Sind Bank & Ors 2007 - NO

Peons in a bank – engaged temporarily on fixed term basis – termination will not amount to R even if
they worked for >240 days since 2(oo) (bb) is applied

Anand Bihari Vs Rajasthan RTC

Termination of driver of RTC who have developed a defective vision – not R

Kamal Kishore Lakshman Vs Ms. Pan American World Airways Inc, (1985) SC

T. or S. due to loss of confidence – such T amounts to punishment by way of disciplinary action.

Disciplinary proceedings should precede such punishment, else, order of punishment would be vitiated
and cannot sustain.

Therefore, T on ground of loss of confidence – NO

M.D. Karnataka Handloom Devp Corporation Vs M. L. Rawal 2007 SC

Respondent was appointed for fixed period as expert weaver to train weavers – services discontinued
after expiry of contract period – industrial dispute – Labour Court directed his reinstatement –
confirmed by HC – appeal to SC – Held – appointment was purely contractual that stood automatically
terminated on completion of stipulated period – terms of employment did not show him as a worker but
employed on contract basis in a time barred scheme.

Therefore, the T was – NO

J.K. Cotton Spinning & Weaving Mills Co. Ltd Vs State of U P 1991

Employee voluntarily tendered resignation – accepted by management – T _ NO

Morinda Co-op Sugar Mills Ltd Vs Ramkishan & Ors 1996 SC

Workmen were employed in sugar mills during crushing season only and consequent to closure of
season, they ceased to work. Held that such cessation of work would not amount to R since it is only a
seasonal work.

Probation period – Termination of Service – YES OR NO?

Santosh Gupta Vs State Bank of Patiala 1980 SC – YES – but OVER RULED NOW

Bank employee with > 240 days of service in a year, failed to pass the prescribed test for confirmation
in service – discharged – Tribunal held T was not R – SC directed her reinstatement with full back
wages holding that such T of S would amount to R. The phrase “for any reason whatsoever” is wide
enough to include every kind of T by an act of employer excepting those excluded by 2(oo).

Over ruled by M. Venugopal Vs LIC India, A P & Anr 1994 SC - NO

SC held T of probationer cannot be said to be R within 2(oo) because his confirmation would depend
upon the fulfilment of minimum business guarantee and the employee failed to fulfill this norm
prescribed. He was asked to improve his performance before the expiry of extended period of
probation.

Therefore, LIC was justified in terminating his service without complying with the Act…. NO.

M. P. Electricity Board & Anr Vs Dinesh Kumar Aggarwal 2001 SC --NO

Appointment order provided for T. on failure to pass the prescribed test – Held it is not R – it would be a
case of non-renewal of contract of employment u/s 2(oo) (bb)

C.S. H. N Murthy Vs Govt. of AP & Ors 1999 AP HC - NO

T of probationer during probation period does not amount to R – a probationer cannot be equated to
another permanent employee.

PROCEDURE FOR RETRENCHMENT – Sections 25 F, G, H, N, Q- (VA -25F ; VB – 25N)

Conditions precedent to retrenchment of workmen Section 25F

A workman shall not be retrenched unless the employer fulfills the following conditions:

- Workman should have not less than 1 year of continuous service under an employer who
retrenches him
- Employer shall give in writing 1 months’ notice + reasons for retrenchment + notice period
should expire or workman is paid wages in lieu of such notice period
- At the time of retrenchment workman shall be paid compensation @ 15 days’ average pay
for every completed year of continuous service or any part thereof in excess of 6 months
- Notice shall be served on the appropriate government in the prescribed manner

In brief,

25F – atleast 1 yr of C.S. + 1 months’ written notice + reasons for R + notice period expiry/wages in
lieu of notice + pay compensation @ 15 days wages for every yr of C.S. or for any period of >6 months
+ Notice to AG

5y 8m – monthly wages is 20000;

monthly wages/26 = per day wages * 15 =15days wages * no of yrs of service

- Serving notice/wages in lieu of notice & paying compensation are conditions precedent for a
valid R.
- Else the retrenchment is bad and invalid
- Tribunals may direct the following:
I) Reinstatement with/without continuity of service
II) with/without back wages

if R is in violation of 25 F – employee remains to be the employee of the company since Termination of

service would be void ab initio

Sarabhai Chemicals Vs S.N. Pandya

25F is applicable to badlis continuing in service for 1 year

- adhoc or temporary employees working for >240 days in a year – will be entitled to R
compensation

Ramesh Kumar Vs State of Haryana

Daily wager was terminated without notice and R compensation. Held T of S was in contravention of
25F.

Procedure for Retrenchment - Section 25 G

- section applies to both Chapter VA & V B establishment

- “First come last go” or “Last come first go” principle to be applied while retrenching
workmen
- Only when there is no agreement between employer and workmen contrary to above
principle

Re-employment of retrenched workmen – Section 25H

If the employer proposes to employ any persons – he shall give an opportunity to retrenched workmen
– he shall give preference to them over other persons – if they offer themselves for re-employment

Retrenchment in Chapter V B

Conditions precedent to retrenchment of workmen – Section 25 N

- Inserted in 1984
- Workman should have atleast 1 yr of C. S
- Employer shall give 3 months’ notice in writing + reasons for retrenchment +only on expiry
of notice period or wages in lieu of notice period
- Employer shall apply for prior permission from AG in the prescribed manner + reasons for
retrenchment
- Copy of PP shall be served on workmen simultaneously
- AG holds enquiry following PNJ
- Grants or refuses PP and send order copy to employer and workmen
- Deemed to be granted if no communication made within 60 days
- Order of AG is final and binding – remain in force for 1 year from such date
- AG may review its own order or refer it to Tribunal
- Retrenchment is deemed to be illegal if –
I) No application for PP is made or
II) PP was refused
- AG grants exemption if R was due to accident in establishment or death of the employer or
the like
- Where permission granted or deemed to be granted – retrenched workmen shall be entitled
to compensation @ 15 days wages for every completed year of CS or any part thereof in
excess of 6 months.

PP Application + 1 yr CS + 3 months’ notice + grant/refusal + comp

Penalty for Retrenchment without PP- Section 25 Q

- Penalty on employer
- Imprisonment upto 1 month or fine upto 1000/ or both