RETRENCHMENTCASES

SUBMITTED BY:TANU SHREE

SECTION B

RETRENCHMENT BACKGROUND

With the cessation of World War 2 and re-establishment of normal transport facilities new and improved machinery began to flow in the country. These in turn resulted in rationalization of production process and retrenchment of surplus labor.

Till 1953,the situation was met by State interference in regulating the employer’s right to retrench their workmen directly through the ministry of labor and indirectly through the Industrial Tribunals.

In 1953,a grave situation arose in textile mills resulting in retrenchment of large number of workers employed therein, which led to announcement of the Industrial Disputes (Amendment) Act 42 of 1953.

Though this act provided for notice and retrenchment compensation it did not contain any provision for preventing retrenchment.

Consequently ,the Industrial Disputes (Amendment)Act ,1976 was enacted. By this amendment a new chapter V b has been added to the ID Act,1947

and this chapter applies to industrial establishments which are factories, mines and plantations ,employing 300 or more workmen.

However, the ID (Amendment )Act ,1982 extended the provisions of retrenchment to industrial establishments employing 100 workmen.

NATURE OF RETRENCHMENT 1) General Retrenchment generally means "discharge of surplus labor or staff "by the

employer on account of long period of lay-off or rationalization or production process or improved machinery or similar other reasons.

It is adopted as an economy measure.

2) Retrenchment And Lockout

3) Retrenchment And Lay-off

4) Retrenchment And Closure of business

STATUTORY DEFINITION OF RETRENCHMENT Section 2(oo) the id act,1947,defines Retrenchment as: 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-

Voluntary retirement of the workman Retirement of the workman on reaching the age of superannuation 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.

Termination of the service of workman on the ground of continued ill- health.

CASESTERMINATION AS A RESULT OF TRANSFER OF UNDERTAKING :RETRENCHMENT1) Barsi Light Railway Co. v. Joglekar

(K.N.) Under an agreement, the President of India gave notice to the Railway Co.

on 19th December,1952 that the undertaking of the Railway Company would be taken over with effect from 1 Januaury,1954.Consequently,the Railway Company served a notice to its workmen that in the view of aforesaid circumstances, the services of all the workmen of the Railway Company would be terminated with effect from 31st December,1953.

It was also stated therein that the Government of India intended to employ those staff of the Company who would be willing to serve the Railways on terms and conditions fixed by the Government. Majority of the staff of the Railway Company were re-employed on the same scales of pay.However,23 percent of the staff were re-employed on somewhat lower scales though the pay which they actually drew at the time of re-employment was not affected. Only about 24 of the former employees of the Railway Company were not taken back by the Government.

Soon after Railwaymen’s Union filed 61 applications under the Payment of the Wages Act,1936 to the Payment of Wages authority for payment of retrenchment compensation under Section 25 F.

On these facts questions arose : Whether the Authority under the Payment of Wages Act,1936 had

jurisdiction to adjudicate upon the claim of retrenchment compensation? Whether they had been “retrenched” by their former employee? The Authority held that it had no jurisdiction to deal with the application

but held that the workers were entitled to compensation as there had been retrenchment.

Aggrieved by this order the Railway men's union moved the Bombay High Court.

High Court held that workers had been “retrenched” and the Railway Company was liable to pay compensation to them.

TERMINATION AS A RESULT OF CLOSURE:RETRENCHMENT2) Hariprasad Shivshankar v. A.D.

Divalkar (Dinesh Mills) The management of Shri Dinesh Mills had decided to close down the

shifts.Thereafter,the management gave notice to the workmen intimating that the second shift would be closed with effect from 20 December ,1953 and the first shift with effect from 8 january,1954 and also mentioned in the notice that as a result of the closure, the services of all workmen shall stand terminated.

The Mill was closed and therefore, its workmen made an application to the Authority under the Payment of Wages Act, claiming retrenchment compensation under Section 25F (b) of the ID Act 1947.

It held that the discharge of workmen on closure, did not constitute retrenchment as defined in section 2(oo) of the ID Act 1947.

Thereupon, the workmen moved the Bombay High Court for issuance of appropriate writ.

Bombay High Court relying on the decision in Barsi Light Railway Co. held that the discharge of workmen on closure of business was “retrenchment”.

ANY KIND OF TERMINATION: RETRENCHMENT3) Santosh Gupta v. State Bank of Patiala The bank terminated the services of one of its workman(a woman) who had

put in more than 240 days of service,(deemed continuous service for a year under Section 25B(2)) on the ground of her failure to pass the prescribed test provided for confirmation in service.

She was neither served with a notice required under Section 25 F (a),nor paid retrenchment compensation under Section 25 F(b).

On these facts a question arose whether termination of the service of the workman by the bank due to the failure of the workman to pass the prescribed test for confirmation in the service amounted to a “retrenchment”?

The Court preferred to adopt a broad interpretation to the expression ‘retrenchment’ and stated:

“If due weightage is given to the words ‘for any reason whatsoever’ ,they simply mean that the retrenchment must include every termination of service of a workman by an act of the employer ..except those which are excluded.”

Therefore, the Court accordingly held that the discharge of the workman on the ground that she did not pass the test which would have enabled her to be confirmed was “retrenchment”.

TERMINATION UNDER A FRESH CONTRACT: NOT RETRENCHMENT4) Binoy Kumar Chatterjee v. Jugantar

Limited Here the petitioner was re-employed by the company on reaching the age

of superannuation. He was paid retiral benefits which he willingly received. Thereafter he was offered fresh employment on contract basis for a period of 12 months. His service was terminated on the expiry of the said period.

Thereupon, the petitioner challenged the validity of the order on the ground that he was neither served a notice nor was paid retrenchment compensation under Section 25 F and therefore, the termination of his service was illegal.

On these facts, a question arose whether the termination of his subsequent service under a fresh contract was “retrenchment”?

The Supreme Court held that the termination of service of the workmen under a fresh contract was not a “retrenchment”.

STRIKING OFF THE NAME OF ABSENTEES:RETRENCHMENT5) Arun Mathur v. Labour Court Striking off the name of the workman from the attendance register , for

being absent without any intimation was held to be “retrenchment” under section 2(oo).

VOLUNTARY RETIREMENT: NOT RETRENCHMENT6)JK Cotton Spinning and Weaving Mills

Co. Ltd. Kanpur v. State of UP. In this case an employee had voluntarily resigned. The resignation was

accepted by the employer. Subsequently a dispute was raised by the workman which went up to the Allahabad High Court. The High Court held it to be a case of “retrenchment” and ordered payment of retrenchment compensation.

On appeal, the Supreme Court held that when a contract or service is terminated on the employee exercising his right to quit, such termination cannot be said to be the instance of the ‘retrenchment’ by the employer.

The court accordingly held that voluntary resignation amounted to voluntary retirement and not ‘retrenchment’.

TERMINATION OF SERVICE OF DAILY WAGERS – NOT COVERED7)Executive Engineer CPWD, Indore v.

Madhukar Purushottam The respondent was engaged in Central Public Works Department(CPWD)

on daily wages on a purely temporary basis. In the order of appointment ,it was mentioned that his services could be terminated at any time without giving notice to him.

The CPWD terminated his services. A question arose whether the termination of his services was

“retrenchment” The Supreme Court answered the question in negative and held that in the

absence of any fixed term mentioned in the letter of appointment he would not be covered under Section 2(oo).

PROJECT EMPLOYMENT-NOT COVERED

8)Anil Bapurao Kanase v. Krishna Sahkari Sakkar Karkhana Ltd.

In this case, the management terminated the services of an employee working in the Chemistry section of the sugar factory after the crushing season was over.

It was contented that the termination amounted to “retrenchment” and was made in the violation of Section 25F .

The Supreme Court negatived the contention and held that since the work was of seasonal nature, the principle of the ID Act 1947 was not applicable.

RETRENCHMENT OF WORKMEN DUE TO CLOSURE OF A UNIT:NOT RETRENCHMENT9)M.P. State Textiles Corporation Ltd. V.

Mahendra & ors. Here the Corporation recruited certain workmen and posted them to its

different units.However,on closure of its 1 unit,namely,Indore Textile Mills, the workmen employed therein were retrenched ,even though it was stipulated in the letter of appointment that they could be appointed anywhere or transferred to various textile mills.

On these facts the Labour Court held the retrenchment to be illegal and directed reinstatement. The award was upheld by the High Court.

On appeal, the Supreme Court held that the respondent workmen were the employees of the Corporation and their retrenchment by Indore Textile Mills was without authority of law since they were not the employees or workmen of Indore Textile Mills.

THE RULE OF LAST COME,FIRST GO10)Workmen of Sudder Workshop of

Jourhat Tea Co. Ltd. v. Management In this case, the management retrenched 23 workmen. Out of this, the services of 7 workmen were terminated without following

the rule of “last come and first go” under Section 25 G. The Tribunal,therefore,set aside the management’s order of termination of

the 7 workmen and directed their reinstatement with same wages. The Supreme Court on appeal, confirmed the findings of tribunal and

ruled: “The rule is that the employer shall retrench the workman who came

last ,but, of course, this rule is not inflexible and extraordinary situations may justify variations. i.e. there must be a valid reason for any kind of deviation to this rule.”

SOURCEIndustrial Relations and Laws By S C Srivastava

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