DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY.

SABBAVARAM.

Subject :- Labour Law – I

Topic:- Closure under I.D. Act

Submitted By-

Harsha .S. Ammineni

2015039

Vth Semester
Acknowledgement

I would sincerely like to put forward my heartfelt appreciation to our respected

Labour Law – I professor R. Bharath Kumar Sir for giving me a golden
opportunity to take up this project regarding ― Closure under Industrial
Disputes Act. I have tried my best to collect information about the project in
various possible ways to depict clear picture about the given project topic.
TABLE OF CONTENTS:-

S.No. TOPIC
01 Introduction.
02 Procedure.
03 Compensations.
04 Penalities.
05 Applicability.
06 Case study.
INTRODUCTION:-

The Industrial Disputes Act was initially passed in the year of 1947 for the
purpose of dealing with the disputes relating to the industries, factories, etc. The
term "closure" is defined under Section 2(cc) of the I.D.Act. It means the
permanent closing down of a place of employment or part thereof. This comes
under Chapter V-B of the 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.

PROCEDURE:-

Section 25-O of the Act deals with the concept of closure and the appropriate
provisions that deal with the procedure of closure of the industries.

(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(l),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 regards 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 (l) 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 to such
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 sub-section (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.
COMPENSATIONS:-

There are rules or provisions for that deals with the Compensation that is to be
provided for the Workmen by the Employee when there is a Closure.

SECTION 25FFF IN THE INDUSTRIAL DISPUTES ACT, 1947

Section 25FFF deals with the compensation to the workmen in case of closing
down of the undertakings.

(1) Where an undertaking is closed down for any reason whatsoever, every
workman who has been in continuous service for not less than one year in that
undertaking immediately before such closure shall, subject to the provisions of
sub section ( 2 ), be entitled to notice and compensation in accordance with the
provisions of section 25F, as if the workman had been retrenched:
Provided that where the undertaking is closed down on account of unavoidable
circumstances beyond the control of the employer, the compensation to be paid
to the workman under clause (b) of section 25F shall not exceed his average pay
for three months.

Explanation:- An undertaking which is closed down by reason merely of--

(i) financial difficulties (including financial losses); or

(ii) accumulation of undisposed of stocks; or

(iii) the expiry of the period of the lease or licence granted to it; or

(iv) in a case where the undertaking is engaged in mining operations, exhaustion

of the minerals in the area in which such operations are carried on; shall not be
deemed to be closed down on account of unavoidable circumstances beyond the
control of the employer within the meaning of the proviso to this sub- section.]

(1A) Notwithstanding anything contained in sub- section (1), where an

undertaking engaged in mining operations is closed down by reason merely of
exhaustion of the minerals in the area in which such operations are carried on,
no workman referred to in that sub- section shall be entitled to any notice or
compensation in accordance with the provisions of section 25F, if--
(a) The employer provides the workman with alternative employment with
effect from the date of closure at the same remuneration as he was entitled to
receive, and on the same terms and conditions of service as were applicable to
him, immediately before the closure;

(b) The service of the workman has not been interrupted by such alternative
employment; and

(c) The employer is, under the terms of such alternative employment or
otherwise, legally liable to pay to the workman, in the event of his
retrenchment, compensation on the basis that his service has been continuous
and has not been interrupted by such alternative employment.

SECTION 25FFA IN THE INDUSTRIAL DISPUTES ACT, 1947

Section 25FFA- ‘Sixty days’ notice to be given of intention to close down any
undertaking.-
(1) An employer who intends to close down an undertaking shall serve, at least
sixty days before the date on which the intended closure is to become effective,
a notice, in the prescribed manner, on the appropriate Government stating
clearly the reasons for the intended closure of the undertaking: Provided that
nothing in this section shall apply to--
(a) an undertaking in which--
(i) less than fifty workmen are employed, or
(ii) less than fifty workmen were employed on an average per working
. day in the preceding twelve months,
(b) an undertaking set up for the construction of buildings, bridges, roads, .
. canals, dams or for other construction work or project.
(2) Notwithstanding anything contained in sub- section (1), the appropriate
Government may, if it is satisfied that owing to such 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 provisions of sub- section (1) shall not apply in
relation to such undertaking for such period as may be specified in the order.]
PENALTIES:-

PENALTY WHEN PROCEDURE TO CLOSURE IS NOT FOLLOWED:-

Section 25-R deals with the provisions relating to the penalties that would be
imposed on an employer when there has been a closure of an industry or an
undertaking without complying with the procedure of 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.

PENALTY WHEN PROPER COMPENSATION IS NOT PROVIDED TO

THE WORKMEN:-

Any employer who closes down any undertaking without complying with the
provisions of section 25FFA 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.
APPLICABILITY:-

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.

CASE STUDY:-

1) Sher Singh Varma vs Rup Chandra And Anr. on 11 August, 1965

(1967) IILLJ 682 P H

Facts:-

Tapeshwarl Daas (respondent) made the aforesaid application claiming that he

had been In employ of Sher Singh & Sons, of which Sher Singh (hereafter
referred to as the petitioner), is alleged to be the sole proprietor. The respondent
farther claimed In his application that ha had been In the employment since
April 1933 and his wages were Es. 250 per mensem. Ha alleged that the
management closed the establishment in the month of August without any
notice to the applicant and the petitioner had failed to pay the dues as required
under Section 25FFF of the Industrial Disputes Act, 1947. The respondent)
therefore, claimed Re. 3,375 as under:

(1) Retrenchment compensation at the rate of 15 days' wages per mensem for 26
years' serviceRs. 3,125.

(2) Notice-pay for one monthRs. 250.

On these facts the respondent prayed in MB application under Section 330(2)

that the Court may compute the amount due to him. The petitioner was called
upon to file a reply In which he, inter alia, stated as under:
The relationship of employer and workman never existed between the parties
and the labour court had no jurisdiction to proceed on merits without declding
this issue. The surrendering of the possession of the shop to the landlord due to
forced unemployment cannot be termed as "closing down of the undertaking"
within the meaning of Section 25FFF of the Industrial Disputes Act, 1947.

Tapeshwari Dass was not entitled to any benefits from Sher Singh which could
be computed in terms of money by the labour Court. The petitioner was a
goldsmith by profession and was working as die-cutter under the name and style
of Sher Singh Varma in a rented premises at Nai Sarak, Delhi. He carried on his
work without the help of any employee. Tapeshwari Dass who was a man of
equal status and skill merely helped Sher Singh as a co-worker and used to
perform the job work entrusted to him by the petitioner on contract basis as an
Independent contractor. Whenever there was some surplus work with Sher
Singh he used to pans it on to Tapeshwarl Dass as well as other goldsmiths for
completion and such goldsmith Including Tapashwari Dass ware paid for the
job done. According to the petitioner, the relationship of employer and
workman never existed between the parties. The petitioner also stated that he
was left without any work with effect from 10 January 1663, due to the gold
control policy of the Government of India and he, therefore, surrendered the
possession of the premises after obtaining a certificate of being a bona fide
displaced goldsmith from the Deputy Commissioner, Delhi.

Tapeshwari Dasa had also stolen Rs. 2,500 and a gold tagari on 9 September
1963, belonging to Sher Singh and ho had already lodged a report with the
police.

Issues:-

(1) Was applicant a "workman" as defined in the Industrial Disputes Act? Did
the relationship of master and servant exist between parties? If so, what was his
salary?

(2) Was the business closed on account of unavoidable circumstances beyond

the control of employer? If so, it’s effect?

(3) To what benefits, if any, is applicant entitled?

Reasoning:-

As per the provisions of closure, If the appellant's construction is accepted, it

would necessarily mean that It would be at the option of the employer to allow
the workman to avail himself of the remedy provided by Sub-section (2),
because he has merely to raise an objection on the ground that the right claimed
by the workman Is not admitted to oust the jurisdiction of the labour court to
entertain the workman's application.

Held:-

It was finally held that-

(a) Tapeshwari Dass was entitled to make an application under Section 33G(2)
of the Industrial Disputes Act;

(b) closure of business by the petitioner was due to the causes beyond his
control and Tapeshwari Dass was, therefore, entitled only to three months'
wages as retirement compensation; and

(c) Tapeshwari Dass was drawing a salary of Rs. 250 and, therefore, he was
entitled to Rs. 750.

Further, an appeal was made and the order given by the labour court was
successfully quashed.

2) Hindalco Industries Ltd. Vs. Union of India & Ors

[2003] SC 595

Facts:-

The appellant is a Public Limited Company having its registered office at

Bombay, engaged in the business of producing aluminium metal and its alloys
and its factory is located at Renukoot in Uttar Pradesh. Bauxite being a raw
material required for the manufacture of aluminium, the appellant obtained
various mining leases in Bihar under the provisions of the Mines & Minerals
Regulations and Development Act, 1957. Appellant was thus having a bauxite
mining lease which was known as Maidanpat Bauxite Mine. The mining
operations at the Maidanpat Bauxite Mine were being done in forest land as
well as non-forest land. On 24th July, 1993, the Divisional Forest Officer,
Ranchi West Forest Division, issued a letter to the appellant to stop the mining
activities in the forest land of the Maidanpat Bauxite Mines. The appellant sent
a reply stating that their lease was valid upto January, 1997 and that they may
be permitted to continue mining operations. According to the appellant, the
Divisional Forest Officer did not accede to its request and the mining operations
were abruptly stopped and as there was no work for the workmen, a lay off was
declared from 31st July, 1993. Thereafter, a notice of closure under Section 25-
FFF of the Industrial Disputes Act, 1947 was sent to the concerned authorities.
The appellant further contended that though Section 25-O of the I.D. Act had no
application, in abundant caution the appellant made an application to the Union
of India for permission to effect closure.

Issues:-

The application filed by the appellant was not entertained, as it was not filed
within ninety days before the date of intended closure. The appellant thereafter
explained the position of closing of the mine on 19th August, 1993 for which
the permission could not be obtained in advance. So, is this a valid Closure or
not?

Reasoning:-

Though the party has made enough contentions, the court stated that when the
process of closure of a body is not correctly followed as per the provisions
given, then it would not constitute or abide to be a valid Closure. So, the
permission was granted subject to the following conditions:-

(i) The closure would be as per provisions of Section 25-O of the Industrial
Disputes Act, 1947;
(ii) Compensation and notice salary would have to be paid to the workmen as
per provisions contained under Section 25-O(8) of the Industrial Disputes Act,
1947;

(iii) Whenever a fresh permission is granted to the Management for mining in

the State of Bihar, the retrenched workmen would be employed as per the
provisions contained in Section 25-H of the Industrial Disputes Act.

Held:-

The appeal is without any merits and is dismissed. If the workers are not so far
paid their due compensation, the appellant shall pay the same within a period of
two months.

3) Excel Wear v. Union of India

1979 AIR 25, 1979 SCR (1)1009

Facts:-

Excel Wear is a partnership firm manufacturing garments for export. About

400 workmen were employed in the petitioners' factory. The case of the
petitioners is that the relations between the management and the employees
started deteriorating and became very strained from 1976. The workmen
became very militant, aggressive, violent and indulged in unjustifiable or illegal
strikes. Various incidents have been mentioned in the Writ Petition in support
of the said allegations which were not mentioned by the court due to serious
challenges made challenges made the workmen.

Issues:-

Are the restrictions imposed manifestly beyond the permissible bounds of Art.
19(6) of the Constitution. And are the restrictions are unreasonable because-

(i) Section 25(o) does not require giving of reasons in the order.
 (ii) No time limit is to be fixed while refusing permission to close down.
. (iii)Even if the reasons are adequate and sufficient, approval can .
. be denied in the purported public interest of security of labour. Labour
. is bound to suffer because of unemployment brought about in almost .
. every case of closure.

Reasoning:-

Section 25-O (2) does not require the giving of reasons in the order. In two of
the orders in the present cases, it is merely stated that the reasons for the
intended closure are prejudicial to public interest suggesting thereby that the
reasons given by the employers are correct, adequate and sufficient, yet they are
prejudicial to the public interest.

Held:-

All the petitions are allowed. Orders passed under sub-section (2) of Section 25-
O in all the cases are held to be void and the respondents are restrained from
enforcing them. We must, however, make it clear that since the orders fall on
the ground of the constitutional invalidity of the law under which they have
been made, we have not thought it fit to express any view in regard to their
merits otherwise.

4) Poonvasi And Ors. vs Crown Silk Weaving Industries and Ors

1994 (1) MhLj 847

Facts:-

The writ petition has been filed by the twelve workmen whose services came to
an end as a result of closure of the establishment of the respondent No. 1,
Crown Silk Weaving Industries. The petitioners and some other workmen had
filed an application before the Labour Court challenging the closure of their
services and claiming reinstatement in service with full back wages and
continuity of service. The Labour Court held the discontinuance of service of
the petitioners as illegal and directed the employer to pay each of the twelve
workmen token back wages at the rate of Rs. 200/- per month from 15 January,
1980 till the date of order of the Labour Court i.e., 17 April, 1985. It also
directed the employer to give the said workmen continuity in service from 15
January 1980 till the date of the above order for the purpose of computing all
benefits arising under the service rules like gratuity, retrenchment
compensation, leave wages etc. The employer was also directed to pay each of
the workman one month's notice wages at the rate of wages drawn by them
before 15th January, 1980 and all other claims like retrenchment compensation,
gratuity, leave wages etc., by treating them to have continued in service till the
date of its order. The employers appealed to the Industrial Court, Maharashtra,
Bombay, which by its order dated 7 March, 1989 held that the closure of the
establishment on 15 January, 1980 was genuine.

This was challenged and an appeal was made.

Issues:-

Whether the judgement given is Valid or not?

Rule of Law-

The provision of Section 25-O were not applicable as the number of workmen
employed by the employer was less than 100. Moreover, no notice as
contemplated by Section 25-FFF(1) was given to the workmen.

Held:-

There were no merits found and thus the case was dismissed.
5) The Management Of Town Bidi Company vs Presiding Officer, Labour
Court

(1990) IILLJ 55 Ori

Facts:-

Dispute arose in between the management of M/s Town Bidi Company, Cuttack
and its workmen. The State Government under Sub-section (5) of Section 12
read with Clause (d) of Sub-section (1) of Section 10 of the Industrial Disputes
Act, 1947 (hereinafter referred to as 'the Act') referred the matter to the
Presiding Officer, Labour Court (hereinafter referred to as 'the Labour Court')
for adjudication. The learned Labour Court giving due notice to both the sides
entered into reference.

Issues:-

Whether the refusal of employment to 19 workmen by the Management of M/s.

Town Bidi Co., Cuttack with effect from 21st October, 1977 is legal and/or
justified? If not, to what relief they are entitled.

Reasoning:-

Section 25FFA of the Industrial Disputes Act also comes into operation only
when there are 50 or more workmen working in the industrial establishment. In
this case the specific stand of the management is the Bidi Rolling Unit under
which the workmen were working was a separate establishment from Town
Bidi Factory and the said Town Bidi Rolling Unit was closed and in the Town
Bidi Rolling Unit only 39 workers were working.

Held:-

In the result, the writ application has no merit and is dismissed, but in the
circumstances of the case, there shall be no order as to cost.
6) Pottery Mazdoor Panchayat V. Perfect Pottery Co. Ltd. And Another

1979 AIR 1356, 1979 SCC (3) 762

Facts:-

The respondent, Perfect Pottery Co. Ltd., was engaged in the manufacture of
stoneware pipes and other refractory material at its factory known as Perfect
Pottery Works, where it employed about 900 workmen. For the purposes of its
factory, respondent had taken a lease of Poly Pather Clay Mines, wherein about
81 workmen were employed. On April 24, 1967 respondent issued a notice of
closure of the factory and the Mines stating that the management had decided to
close down the business on account of financial difficulties and other reasons. 

Consequent upon the notice of closure, the appellant herein, the Pottery
Mazdoor Panchayat, applied for initiation of conciliation proceedings to the
Deputy Labour Commissioner, Madhya Pradesh and to the Regional Labour
Commissioner (C), Jabalpur. The reason for initiatioh of two different
conciliation proceedings was that Perfect Pottery Works was an industry to
which the Madhya Pradesh industrial Relations Act, 1960, applied, whereas
Poly Pather clay Mines was an industry governed by the industrial Disputes
Act, 1947.

Conciliation proceedings have failed, the Madhya Pradesh State Government,

on June 26, 1960, referred an industrial dispute to the arbitration of the
industrial court.

Issues:-

Whether the proposed closure by the management of the Perfect Pottery Co.
Ltd., Jablapur, of their pottery factory, with effect from july 1, 1967, is proper
and justified?

To what retrenchment compensation are the employees entitled, if it is decided

that the proposed closure is proper and justified?
Reasoning:-

The company had notified its decision to close down the mine with effect from
July 1, 1967, that some of the workers were served eith notices of retrenchment
individually but that retrenchment compensation was not paid by the
management which is illegal and violative of the provisions of the Industrial
Disputes Act.

Held:-

The appeal is accordingly dismissed but there will be no order as such.

7) Welcomegroup Searock vs. Kashinath Iyer and Ors.

Writ Petition No. 3217 of 2002

Facts:-

The Petitioner was running a five star hotel at its establishment described in the
cause title. The Petitioner had employed about 800 workmen. One of them was
Respondent No. 1. It is the Petitioner's case that in 1989-1990 there were
industrial relations problems in its establishment, with the Union of its workmen
resorting to diverse pressure tactics including violent demonstrations at the hotel
premises. On 27 January 1989, there was a physical confrontation between
member employees of the Union and officials of the Hotel, in which the Health
Club Manager of the Hotel was assaulted. On 13 March 1989, another
murderous assault was made on the Personnel Manager of the Hotel. As a
result, in or about July/August 1990, the Petitioner was constrained to file a
complaint of unfair labour practice against the Union and its member
employees. The Industrial Court by its order restrained the Union and member
employees from resorting to the unfair labour practices alleged. On 22
December 1990, despite the orders, there was a gate meeting outside the Hotel
where provocative speeches were made. This was followed by a strike and
series of violent incidents on the next date which included assaults on the
officials of the Hotel. There were incidents of pelting of stones, bricks, etc.
during which porch and entrance doors of the Hotel were damaged and even
some guests of the Hotel were injured. It is the Petitioner's case that Respondent
No. 1 actively participated in these illegal activities. It is the Petitioner's case
that on 6 January 1991, at around 1200 Hours, Respondent No. 1 along with one
liftman, bell desk employee and engineer stopped an auto rickshaw carrying a
guest of the Hotel in the approach to the Hotel entrance; that the passenger in
the vehicle was forced to get out and walk to the Hotel. On the same date, at
around 1220 Hours and 1342 Hours, two other vehicles were stopped by
Respondent No. 1 along with some other employees and the guests were forced
to alight and walk to the Hotel.

Issues:-

During the pendency of the petition, the Petitioner has declared closure of its
Hotel with effect from 15 December 2006 after following due process of law.
The Union and its member employees have accepted that closure by duly
receiving closure compensation payable to them. Whether such closure is legal
and whether the compensation for closure should be given to the Respondent
No. 1 also? And whether the order given by the labour court to dismiss his
serviced is a valid one?

Reasoning:-

The only relief now possible is of monetary compensation since there is a

closure of the undertaking in the meanwhile. Such compensation must reflect
back wages payable upto the date of closure and closure compensation payable
to the employee at the date of closure and interest, if any, payable thereafter
upto the date of actual payment.

Held:-

Closure was held to be legal and the respondent 1 is ought to get the
compensation for closure.
8) Mackinon Mackenzie and Company Ltd. vs. Mackinnon Employees
Union

Civil Appeal No. 5319 of 2008

Facts:-

The Appellant-Company was engaged in shipping business from its premises at

Mackinnon Building, Ballard Estate, Mumbai. The activities were divided into
ship agency, shipping management, ship owning and operating, travel and
tourism, clearing and forwarding, overseas recruitment and property owning
and development. It had approximately 150 employees who were all workmen
and members of the Respondent-Union. The Respondent-Union is registered
under the provisions of the Trade Union Act, 1926. A letter dated 27.07.1992,
purportedly a notice of retrenchment together with the statement of reasons
enclosed therewith was served upon approximately 98 workmen by the
Appellant-Company stating that the same will be effective from closing of
business on 04.08.1992. In the statement of reasons, it was stated that the
Appellant-Company was accumulating losses and the proprietors had taken a
decision to rationalise its activities apart from the property owning and
development department, a portion of the clearing and development business
relating to contracts with the Government of India, Institutions such as, Central
Railway and Lubrizol India Ltd.

The Respondent-Union who are the concerned workmen filed the complaint
before the Industrial Court. Since there was a deviation from the seniority list of
some workers in the clearing and forwarding departments and some of the
remaining workers from the alleged closed departments of the Appellant-
Company were to be transferred to the aforesaid retained departments of the
Appellant-Company, a seniority list of all the workmen in the establishment was
also allegedly put up on the notice board. However, the finding of fact recorded
by the Industrial Court while answering the relevant contentious issues is that
this plea taken by the Appellant-Company was not proved. Aggrieved by the
said action of the Appellant-Company, the concerned workmen of the
Respondent-Union filed a complaint before the Industrial Court at Mumbai
alleging the unfair labour practices on the part of the Appellant-Company in not
complying with certain statutory provisions

Issues:-
The main issues were:-

That no list of seniority of workmen in different categories from which

retrenchment was contemplated had been put up on the notice board as
mandatorily required Under Rule 81 of the Industrial Disputes (Bombay) Rules,
1957

That the Appellant-Company was bound to give notice at least 60 days before
the intended closure to the State Government, this has not been done. Therefore,
Section 25FFA of the I.D. Act has not been complied with by the Appellant-
Company.

Whether the facts of the case require notices Under Section 9-A of the I.D. Act,
1947?

Reasoning:-

With respect to the violation of the principle of 'last come first go' Under
Section 25G of the I.D. Act read with Rule 81 of the Bombay Rules as
contended by the Respondent-Union on behalf of the concerned workmen that
no seniority list of the category wise workmen was put up on the notice board of
the Appellant-Company in accordance with Section 25G of the I.D. Act read
with Rule 81 of the Bombay Rules i.e. 'last come first go' and that the same was
not done within 7 days of the proposed retrenchment notice

Held:-

For the foregoing reasons, the appeal is dismissed. The court held up judgment
and order of the Division Bench of the High Court. The order dated 14.08.2006
extending protection to the Appellant-Company shall stand vacated. Since, the
concerned workmen have been litigating the matter for the last 23 years, it
would be appropriate for us to give direction to the Appellant-Company to
comply with the terms and conditions of the award passed by the Industrial
Court by computing back-wages on the basis of revision of pay scales of the
concerned workmen and other consequential monetary benefits including
terminal benefits and pay the same to the workmen within six weeks from the
date of receipt of the copy of this Judgment, failing which, the back-wages shall
be paid with an interest at the rate of 9% per annum.

9) Angrejo Devi vs. The Presiding Officer, Industrial Tribunal-cum-

Labour Court and Ors.

C.W.P. No. 14256 of 2012

Facts:-

The respondent-Delhi Public School, Panipat Refinery Township, Panipat is run

from a building provided by the Panipat Refinery which is owned and managed
by the Indian Oil Corporation Ltd (IOC). The school is established mostly to
impart education to the children of employees of the Panipat Thermal Plant.

No person was engaged directly by the school to carry out its housekeeping
activities. The petitioner who was employed by the school since April 01, 1998
became a victim of the new system introduced. She used to be paid a monthly
salary of ` 2500/- while in service. She was disengaged from service on April
01, 2005 after seven years of continuous work.

This gave rise to a dispute which was referred to the Presiding Officer, Labour
Court, Panipat for adjudication. What is urged by the respondent in defence of
the award is that closure compensation under Section 25FFF was offered to the
petitioner vide cheque Ex. M1 but the same was refused by the workman.
However, before the Labour Court, no direct evidence of closure was adduced
on record by the management.

It is argued that closure of a part of the activities of the school amounts to

closure with all consequences arising therefrom under the Industrial Disputes
Act, 1947

Issues:-

Whether the closure compensation should be allowed to the worker?

Reasoning:-

Section 25FFF provides for compensation to workmen in case of closing down

of undertakings. Where an undertaking is closed down for any reason
whatsoever, every workman who has been in continuous service for not less
than one year in that undertaking immediately before such closure shall, subject
to the provisions of sub-section (2) of section 25FFF, be entitled to notice and
compensation in accordance with the provisions of Section 25F, as if the
workman had been retrenched. The proviso to Section 25FFF provides that
where the undertaking is closed down on account of unavoidable circumstances
beyond the control of the employer, the compensation to be paid to the
workman under Clause (b) of Section 25-F shall not exceed his average pay for
three months.

Held:-

Resultantly, this petition is allowed with costs of ` 50,000/- for putting a low
paid marginal worker to a long battle fighting for her daily survival and at much
expense which she could ill-afford for which she deserves to be adequately
compensated and therefore the costs are imposed.

10) Vishwanath Namdeo Patil and Ors. vs. The Official Liquidator of
Swadeshi Mills, Forbes and Company Limited and Ors.

Company Application No. 487 of 2012 in Company Petition No. 385 of 2002

Facts:-

M/s. Swadeshi Mills Co. Ltd. was one of the leading Mills in Mumbai. The
Company, when it was in operation, had approximately 2970 employees. The
Company had substantial immovable assets. The main asset being 48 acre land
at Sion Chunabhatti in Mumbai. In the year 1997, one M/s. Rally Brothers &
Convey filed Company Petition No. 1068 of 1997 for winding up of the
Swadeshi Mills Co. Ltd. The Company made a reference to the Board of
Industrial and Financial Reconstruction (BIFR). On 24 April 1998, the BIFR
declared the Company as a sick undertaking, under the provisions of Sick
Industrial Companies (Special Provisions) Act. The BIFR on 5 February 2001,
recorded a prima facie opinion that the Company was not likely to make it's net
worth match its cumulative losses within a reasonable time and that the
Company was not likely to be viable. The BIFR recommended that it was just
and equitable and in public interest to wind up the Company.

Rashtriya Mill Mazdoor Sangh (RMMS) being the workers Union filed an
appeal before the Appellate Authority of Industrial and Financial
Reconstruction (AAIFR) challenging the order of BIFR. The Appeal was
dismissed by the AAIFR. Prior to the order dated 13 February 2002, the
Government of Maharashtra, by its communication dated 20 September 2001,
had constituted a High Power Committee for the payment of workmen and other
dues of the Company.

The High Power Committee consisted of the Chief Secretary (Labour), Deputy
Secretary (Labour), Representative of the Company and workers Union. The
Company thereafter filed a Company Application and prayed that the High
Power Committee appointed by the government of Maharashtra be authorized to
sell the assets of the Company and deposit sale proceeds in this Court.

Issues:-

Whether the closure was legal and should the compensation for closure be paid
to the workmen or not?

Reasoning:-

We need not go into the legality or otherwise of de-facto closure, since we have
admitted retrenchment compensation for the full tenure of service from the date
of joining to the date of appointment of provisional liquidation.

Badli workers will only be entitled to outstanding salary prior to de facto

closure, if proved. They will not be entitled to retrenchment, notice pay,
gratuity, etc.
Held:-

In the circumstances, although the court had upheld the order of the Industrial
Court for payment of compensation to the regular employees of the appellant at
the rate fixed by it, we are unable to subscribe to the view that the compensation
which would have been payable to the three categories of employees, should be
paid to the Badli workmen. In other words, we hold that Badli workmen have
no right to claim compensation on account of closure.

11) Massod Ahmed Khan and Ors. vs. Hamdard Dawakhana (Wakf) and
Ors.

WP(C) No. 3223/1989

Facts:-

It was the case of the petitioners before the Industrial Adjudicator, that they had
been employed with the respondent no.3 HRC Nursing Home for the periods
ranging from 10-17 years; that the HRC Nursing Home was a part and parcel of
the Foundation and was started as stepping stone for a hospital i.e. the Institute;
that the Hospital was also a part and parcel of the Institute; that their services
were terminated vide notice dated 16th June, 1982; that individual notices
terminating their services w.e.f. 18th June, 1982 were also served on them; that
they had served a charter of demands dated 26th March, 1982 on the
management demanding revision of pay scales etc. the Management put up
notice of closure of HRC Nursing Home; that the closure notice was contrary to
law; that HRC Nursing Home alone could not be shut; that the nursing home
activities, being carried on by HRC Nursing Home were continued at the
Hospital and the equipment was also shifted there and some of the employees
who were the puppets of the Management had also been absorbed therein; that
there was thus no closure in law and the veil thereof was used to victimize the
agitating workmen; mandatory provision of Section 25 FFA had not been
complied with. Thus, six of them together lodged this case.
Issues:-

1. Whether there is closure of Hamdard Research Training and Nursing Home?

If so, its effect?

2. Whether respondent no.1 is part and parcel of respondent nos. 2 to 4? If so,

its effect?

3. Whether the services of S/Shri Masood Ahmad, Shakeel Ahmad, Bashir

Ahmad, Salar Bux, Mohd. Sakir Qureshi and Bhagat Singh have been
terminated illegally and / or unjustifiably and if so what relief are they entitled?

Reasoning:-

Court stated that the petitioners admitted that according to the petitioners also
the HRC Nursing Home functioned till January, 1983 and did not function
thereafter; they could not however explain as to how the work was going on till
January, 1983 though they admitted that no patient was admitted in the nursing
home after 18 June, 1982; and that the entire grant for running the HRC Nursing
Home were paid by the Foundation and for this reason the equipment and
building of the HRC Nursing Home on closure, were surrendered to the
Foundation

Held:-

the respondent no.3 M/s Hamdard Research Clinic and Nursing Home (HRC
Nursing Home) having effected "closure" and further holding HRC Nursing
Home to be not part and parcel of respondent no.2 M/s Hamdard National
Foundation (India) (Foundation) or respondent no.5 M/s Majidia Hospital
(Hospital) or respondent no. 4 M/s Institute of History of Medicine and Medical
Research (Institute) and finding the petitioners to be entitled only to
compensation as provided under Section 25F of the Industrial Disputes Act,
1947 minus the amount already received.
12) Surat Singh vs. Presiding Officer and Another

C.W.P. No. 18845 of 2010 (O&M)

Facts:-

The workman was appointed as Helper by the management on 18.6.1981. Due

to imposition of prohibition in the State of Haryana, several workmen in the
factory were retrenched on 4.9.1996. On a request by the management to close
the factory, the government granted permission with the condition that on
reopening, the workmen, who have been retrenched, will be given preference in
re-employment. On 1.4.1998, prohibition was lifted by the State. Though the
management engaged a number of new workers but the old workers including
the workman were not given preference despite number of letters written by the
union to the management as well as to the government authorities. Writ
petitions were filed in this court seeking reinstatement. The same were disposed
of with the observation that the petitioners therein may raise industrial dispute.
Thereafter, demand notice was served on 15.3.2002. As the matter could not be
settled during conciliation proceedings, the dispute was referred to the Tribunal.
As the initial reference was only pertaining to the issue as to whether
termination of services of the workman was legal and justified or not, the
workman moved an application seeking amendment to the dispute referred. The
prayer was accepted. An additional dispute referred was as to whether after
reopening/re-start of the factory by the management, the workman was entitled
to be re-appointed in terms of Section 25H of the Act. After completion of
pleadings before the Tribunal, evidence was led by the parties, however, finally
the reference was answered against the workman. It is the aforesaid award,
which is impugned before this court.

Issues:-

whether in case a workman is retrenched on account of closure of a unit, at the

time of re-employment, the provisions of Section 25H of the Act are applicable
or not and if applicable, whether there is violation of the aforesaid provision in
the case in hand.
Reasoning:-

As far as compliance of compliance of condition No. (i) is concerned, there is

no dispute that all the workmen, whose services were dispensed with at the time
of closure of the unit, were awarded compensation. The dispute is sought to be
raised with reference to condition No. (ii). The submission of learned counsel
for the workman is that as the management failed to comply with Rule 77 of the
Rules by not sending individual notices to all the workmen by registered post,
there was violation of the provisions of Section 25H of the Act. It has been
consistently opined by Hon'ble the Supreme Court that in the case of closure of
a unit when the workmen are retrenched, they do not have preferential right to
seek re-employment in case the unit is re-opened. The procedure as prescribed
under Section 25H of the Act will not be strictly applicable and in violation
thereof, it cannot be said that the management is at fault

Held:-

The case was dismissed as there were no merits found.

13) Nasib Chand Etc. vs. Presiding Officer Labour court, Patiala

CWP No. 1268 of 2001, CWP No. 13003, 8715 and 7692 of 1999

Facts:-

The above cases address the common question relating to the validity of the
awards passed by the Labour Court rejecting the reference obtained at the
instance of the workmen who complained that they had been illegally
terminated from service. All the petitioners were admittedly workmen under the
2nd respondent-Management in a biscuit factory. To a contention by the
workmen that they had been illegally terminated from service on 25.10.1989,
without complying with the statutory mandate of Section 25N or 25F of the
Industrial Disputes Act, the defence was that the factory had become sick and it
had been closed on 25.10.1989, and since it was a case of closure, the
petitioners could not complain that there had been any illegal termination of
service. It was also the contention that the demand notices themselves had been
issued only in October, 1994 and a reference sought after a long delay was
barred by laches and limitation. It was also their contention that the petitioners
through their union representatives had been parties to a settlement that had
been brought about by the Management and the petitioners had also received the
first installment of Rs. 500/- and it was brought at a time when proceedings had
been taken before the BIFR. The BIFR had declared the company as "sick" and
provided for a settlement and the persons who were being parties could not
resile from the same and complain of illegal termination of service.

Issues:-

Dismissal of the reference on the ground of limitation, whether justified

Reasoning:-

The admitted fact is that the trouble arose when the management had sold the
factory and the concrete assets were liquidated. The factory premises are
reported to have given place to development of a housing colony. It will be
futile under such circumstances to give a direction of reinstatement of the
workmen. A right of reinstatement could be the obvious corollary in a case
where there is a violation of Section 25O or Section 25N or Section 25F.

Held:-

All the writ petitions are disposed of in the above terms.

Conclusion:-

According to Section 2(cc)"r of the Industrial Disputes Act, Closure of an

industry means the permanent closing down of a place of employment or part
thereof. 

The term closure was used in the Act even prior to the insertion of this
definition clause but was not defined as such, This led to divergence in judicial
view as to when the closing down of a part of an establishment constituted
closure and when it was an act of retrenchment. This controversy is resolved by
the express terms of the definition clause itself. It is now made clear that closure
arises even if a part of the place of employment is permanently closed down.

No Industrialist will like to close down an earning industry, unless there are
compelling circumstances to do so. Various kinds of situations, such as labour
trouble of unprecedented nature, recurring loss, paucity of adequate number of
suitable persons for the purpose of management, ’ non-availability of raw
materials, insurmountable difficulty in the replacement of damaged or worn-out
machinery may arise in any industry, ultimately forcing its closure.

Prior to the amendment in 1982, section 25(0) of the Act provided an elaborate
procedure for closing down of an industry. The Supreme Court in Excel Wear v.
Union of India” has struck down of section 25(0) as unconstitutional. The Court
held that the right to close down a business is an integral part of the right to
carry on the business guaranteed under the Article 19(1)(g) of constitution.
Bibliography:-

Labour and Industrial Laws by S.N. Mishra

Lawmann’s Industrial Disputes Act.

Practical guide to Industrial Disputes – H.L. Kumar

https://indiankanoon.org/

https://www.legalcrystal.com/

https://www.kaanoon.com