Punjab-Haryana High Court
Gba Workers Union vs Chandigarh Administration And ... on 15 March, 2022
CWP-5966-2021(O&M) [1]
IN THE HIGH COURT OF PUNJAB AND HARYANA
AT CHANDIGARH
CM-17196-CWP-2021 in/and
CWP-5966-2021 (O&M)
Date of decision : March 15, 2022
GBA Workers Union ... Petitioner
Versus
Chandigarh Administration and another ... Respondents
CORAM: HON'BLE MR. JUSTICE HARINDER SINGH SIDHU
Present: Mr. K.L. Arora, Advocate for petitioner.
Mr.Aditya Jain, for respondent No.1 - UT Chandigarh.
Mr. Chetan Mittal, Senior Advocate with
Mr. Vivek Sethi, Advocate for respondent No.2- Company.
-.- -.-
HARINDER SINGH SIDHU, J.
This petition has been filed for directions to quash the order dated
1.3.2021 (Annexure P-6) wherein it is stated that on the application dated
01.12.2020 under Section 25 N(1)(b) of the Industrial Disputes Act, 1947 (in short
'the Act') filed by respondent No.2-Company seeking permission to retrench its 37
workmen, the permission is deemed to have been granted on expiry of sixty days
from the date of its filing.
The petitioner is a registered and recognized Union of respondent
No.2. Respondent No.2 is a private limited Company engaged in manufacture of
hosiery and knitting needles. Respondent No. 1 is Chandigarh Administration
through the Secretary Labour.
As per the averments in the petition on 01.12.2020 Respondent No.2-
Company submitted an application under Section 25N(1) (b) of the Act before the
Assistant Labour Commissioner-cum-Conciliation Officer (for short 'the Labour
For Subsequent orders see LPA-335-2021, LPA-270-2022, -- and 1 more.
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Commissioner') for permission to retrench 37 workmen.. The ground for
retrenchment was that due to Novel Corona Virus (Covid-19), the demand of the
products of the company had reduced in the local and global market. There was
large accumulation of the product at the warehouses of the Company, therefore, the
Company had decided to reduce its production with proportionate reduction in its
work force, i.e. 37 workers on the principle of 'last come first go'. On receipt of
the application the Labour Commissioner sent a notice to the petitioner-Union for
appearing before him for Conciliation. Some workers of the petitioner-Union
appeared before the Labour Commissioner. Five meetings were held before the
Labour Commissioner. However, the matter could not be finalized and a failure
report was sent to the Secretary Labour. The Secretary Labour addressed a
communication dated 22.01.2021 to the petitioner-Union informing about receipt of
notice regarding retrenchment from respondent No.2-Company. He fixed
25.01.2021 as the date of hearing/enquiry in the matter. Though notice was
received by only one worker, namely Ankit Puri and the petitioner Union, 25
workers appeared before the Secretary, Labour on that date i.e. 25.01.2021. On
01.03.2021, the impugned order was passed.
In the petition, the order dated 01.03.2021 (Annexure P-6) has been
assailed on the following grounds:
i) There is violation of provisions of Section 25-N(1)(a)(b). The Retrenchment
Notice dated 01.12.2020 was sent by the Management along with the
application for permission to retrench dated 01.12.2020. The requirement of
three months' notice or wages in lieu thereof has not been complied with.
ii) The order is violative of Section 25-N(2). The application for permission
filed by respondent No.2 on 01.12.2020 was served only on the Union. It was
not simultaneously served on each individual worker, proposed to be
retrenched.
For Subsequent orders see LPA-335-2021, LPA-270-2022, -- and 1 more.
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iii) The order is a non-speaking order. It does not take into consideration the
interest of workmen. No reasons for grant of permission have been
mentioned.
iv) The order is in breach of provisions of Section 25-N(3). Respondent No.2 -
employer had submitted application for permission to retrench on
01.12.2020. Thereafter, the Government entered into an enquiry. The
enquiry was made on 25.01.2021. Instead of finalizing the enquiry the
impugned order was passed on 01.03.2021. i.e. after 90 days of the
application for permission. This is illegal as once the enquiry is initiated the
period for the purposes of Section 25 N(4) `stops running' and `is arrested'.
The deeming permission provision does not come into play.
v) The action is violative of Section 25-N(6). After receipt of the application
the appropriate Government had entered into an enquiry. On 25.01.2021, the
Secretary, Labour conducted an enquiry. As the 60 days period had expired,
respondent No.1 was required to refer the matter to Industrial Tribunal for
adjudication, which was not done.
vi) The documents/particulars required to be submitted along with the
application seeking permission to retrench had not been submitted by
respondent No.2. Hence it was an incomplete application.
vii) There is no justification to retrench the workmen as the Company is running
in profit. The petitioners who have put in 10 -20 years of service have been
retrenched leaving them high and dry in the advanced years of their life
causing them and their families acute hardship.
Detailed reply on behalf of respondent No.2 has been filed,
controverting the averments in the petition.
For Subsequent orders see LPA-335-2021, LPA-270-2022, -- and 1 more.
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Giving the background of the decision to retrench the workers, it is
stated that respondent No.2 is engaged in the business of manufacturing high-class
industrial knitting and sewing machine needles. It is an Indian subsidiary of Groz-
Beckert Group, Germany (GBG) which is a leading provider of industrial needles,
precision components and fine tools as well as systems and services for the
production and joining of textiles. Respondent No.2 was established in India in
1960. It is one of the largest employer in Chandigarh. It has two manufacturing
facilities in India i.e. at 133-135 and 177A Industrial Area, Phase-I, Chandigarh.
On account of the adverse impact of US-China Trade War and the
Pandemic and subsequent lock-downs, the demand for the products of the
Company had decreased. The stocks of the manufactured goods had significantly
increased, leaving no option with respondent No.2, but decided to retrench 37
workmen along with 15 employees from the Staff Category on account of excess
man power. Accordingly, respondent No.2 filed application before Labour
Commissioner, UT, Chandigarh seeking permission to retrench 37 workers.
Simultaneously, each of the 37 workers were issued three months notice in writing
as per Section 25-N(1)(a).
After filing of the retrenchment application, several rounds of
discussions were held between representatives of respondent No.2 and the
petitioner Union before the concerned Labour Authorities including Labour
Commissioner, UT Chandigarh, and Secretary, Labour, UT Chandigarh. During
the pendency of those proceedings, the petitioners filed CWP No. 22297 of 2020
praying for directions to the Labour Commissioner, UT Chandigarh to not act on
the retrenchment application. That petition was dismissed as withdrawn with
liberty to avail of an alternative remedy. However, instead of pursuing the
alternative remedy, the petitioners filed CWP No.3886 of 2021 seeking directions
to the Labour Commissioner and Secretary Labour to decide the application.
For Subsequent orders see LPA-335-2021, LPA-270-2022, -- and 1 more.
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CWP-5966-2021(O&M) [5]
Respondent No.2 was intentionally not impleaded as a party in the said petition.
CWP No.3886 of 2021 was disposed of vide order dated 24.02.2021 on an
undertaking of the Labour Commissioner that an order on the retrenchment
application would be passed on or before 28.02.2021. The order is reproduced
below:-
"This matter is being taken up for hearing through video
conferencing due to outbreak of the pandemic, COVID-19.
Prayer in this writ petition is for direction to respondent No. 2
to consider application dated 01.12.2020 filed by respondent No. 3
under Section 25- N of the Industrial Disputes Act, 1947 (for short -
'the Act') and pass appropriate order in accordance with Section 25-
N(3) of the Act. Respondent No.3 has sought permission to retrench
37 workers from respondent No.2, vide said application dated
01.12.2020 (Annexure P-4B). Apprehension raised in this writ petition
is that despite having heard the workmen and the respondent -
company, respondent No.2 may not pass the appropriate order and
section 25-N(4) of the Act may come to operation.
Learned counsel for respondents No.1 and 2, on instructions
from Sh. Varun Beniwal, Assistant Labour Commissioner, UT,
Chandigarh submits that application under Section 25-N of the Act,
moved by respondent No.3 is under consideration of the authority and
appropriate order shall be passed before 28.02.2021.
In view of the specific stand of respondents No.1 and 2, no
further order need be passed in this writ petition, which is
accordingly, disposed of.
Thereafter, on 01.03.2021 the impugned order was passed which is reproduced :
'CHANDIGARH ADMINISTRATION
No. MISC. HII (2)-2021/2381 Dated : 1.3.2021
ORDER
An application under Section 25 N (1) (b) of the
Industrial Disputes Act, 1947 was filed on 1.12.2020 by M/s
For Subsequent orders see LPA-335-2021, LPA-270-2022, -- and 1 more.
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Groz Beckert Asia Private Limited, Chandigarh. As per
Section 25 N (4) of the Industrial Disputes Act, 1947 the
permission is deemed to have been granted on expiry of sixty
days from the date of its filing.'
It is stated that the undertaking of the Labour Commissioner to pass an
order on the retrenchment application was made in ignorance of the statutory
provisions, because on the date the undertaking was given i.e. 24.02.2021, the 60
days period prescribed under Section 25-N(4) had already expired and the
permission stood deemed granted on 30.01.2021. It is stated on the strength of the
deemed approval in terms of Section 25-N(4) of the Act, respondent No.2
retrenched the 37 workers w.e.f. 26.02.2021 and also paid the full and final dues
(except gratuity) to the said workers. The aforesaid full and final dues were duly
accepted by them without any protest.
Subsequently, in compliance with the order dated 24.02.2021
respondent No.1 passed the impugned order dated 01.03.2021 holding that as per
Section 25-N(4) of the Act 'deemed approval' stood granted on 30.01.2021.
28.02.2021 happened to be Sunday. The order was passed the very next day i.e.
01.03.2021.
Refuting the averment of the petitioners that the retrenchment notices
were not issued to the workmen, it is stated that respondent No.2 had handed over
physical copies of the retrenchment application to all the 37 workers as also to the
petitioner-Union. The workers refused to accept the notice of the retrenchment
from officials of respondent No.2. Thereafter, respondent No.2 displayed the
retrenchment application along with all annexures on the notice board of the
Company.
It has been asserted that it is admitted in the writ petition that the
retrenched workers participated in the discussions with the Authorities regarding
For Subsequent orders see LPA-335-2021, LPA-270-2022, -- and 1 more.
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the retrenchment application. The petitioner Union also represented the 37
retrenched workers in all the Forums. Hence, the petitioner is estopped from
raising the plea that the retrenchment notices had not been served on the 37
affected workers.
In the reply by respondent No.1 - Secretary, Labour Department,
Chandigarh it is stated that in fact on 24.02.2021, the day the order was passed in
CWP No. 3886 of 2021, the authorities had already become functus officio qua the
application filed by the Management under Section 25N (1) as the time prescribed
under Section 25N(4) of the Act had already expired. It is asserted that in view of
the deeming provision in Section 25 N(4) any order passed by the authority would
have been in the teeth of the relevant provisions and be patently illegal.
Replication has been filed by the petitioner, wherein, primarily, the
averments have been made that the grounds of retrenchment stated in the
application filed by respondent No. 2 are non-existent and there was no
justification for the retrenchment. It is stated that the factory remained closed only
for 39 days. The production was reduced only for a short period of 2½ months
when the Company ran two instead of usual three shifts. All three shifts started
operating from 16.03.2021. The Company was granted permission by the Director,
Industries vide order dated 24.04.2021 to continue with its manufacturing
operations. Thus, the manufacturing process of the Company remained suspended
only for a short period of 2½ months. It is stated that the financial position of the
Company does not warrant retrenchment. It is further stated that it is apparent
from the Balance Sheet and Profit & Loss Account that profit of the Company has
been increasing every year during the years 2016-17 to 2019-20. The sales have
also increased during these years. The sales remained low from April, 2020 to July,
2020. However, the sale figures reached normal levels of the pre-covid period
during 9/2020 and 10/2020. The stock position as on 10/2020 was also almost the
For Subsequent orders see LPA-335-2021, LPA-270-2022, -- and 1 more.
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same as the pre-covid period. It has also been stated that the principle of 'last come
first go' has been breached while retrenching 37 workmen. The respondents have
also recruited 4-5 fresh workers through Contractor after retrenching 37 workers.
Based on the aforesaid pleadings, the primary contention of Sh. Arora
Ld. counsel for the petitioner is that the retrenchment of the 37 workers is wholly
unjustified. He argued that in deciding an application for retrenchment filed by the
employer the competent authority is required to hear the employer, the workmen
concerned and the persons interested in such retrenchment, and after duly
considering the genuineness and adequacy of the reasons stated by the employer,
the interests of the workmen and all other relevant factors, pass an order in writing
giving reasons for granting or refusing permission. The same having not been done
the retrenchment of the workmen is illegal. As regards the stand of the respondents
that the no order having been passed on the application of respondent No.2 within
60 days, permission is to be deemed to have been granted as per Section 25-N(4)
of the Act, the contention of Shri Arora is that the said provision would be attracted
only in a case where after the filing of the application seeking permission for
retrenchment no enquiry is initiated by the Government. However, where an
enquiry is initiated by the Government within the period of 60 days, there can be no
question of 'deemed permission'. In such a case, the Government is mandated to
pass an order. He contended that on the initiation of the enquiry, the 60 days
period prescribed under Section 25-N(4) ceases to run.
Reliance has been placed on a decision of a Division Bench of
Karnataka High Court in Jayhind Engineering, Unit-I v. State of Karnataka,
2004 AIR Kant R 771. In that case, the Court was considering an analogous
provision under Section 25-O of the Act which specifies the procedure for closing
down an undertaking. Sub-section (3) of Section 25-O is analogous to Section 25-
N(4). As per Section 25-O(3), where an application seeking prior permission for
For Subsequent orders see LPA-335-2021, LPA-270-2022, -- and 1 more.
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closure has been made by an employer under sub-section (1) of Section 25-O and
the appropriate Government does not communicate the order of granting or
refusing to grant permission to the employer within 60 days from the date on which
the application is made, the permission applied for shall be deemed to have been
granted on the expiration of the period of 60 days. Construing the aforesaid
provision, a Ld. Single Judge of the Karnataka High Court had held that while the
Authority was in seisin of the application under Section 25-O and enquiry was
proceeded with as required by Section 25-O(2), the deeming fiction under Section
25-O(3) could not be relied on to nullify the enquiry itself. The Division Bench
affirmed the decision of the Ld. Single Judge by observing as under:-
"10. We do not find any infirmity in the said conclusion reached by
the learned Single Judge. No doubt, as contended by Sri
Vijayashankar that when an application is made seeking closure of the
industrial unit, the State Government is required to make an order
expeditiously. The observation of the Supreme Court in the case
of Indian Hume Pipe Company, Ltd. relied upon by Sri
"Vijayashankar also supports our view that the application is
required to be disposed of expeditiously. But, that does not mean that
the application should be disposed of in a mechanical manner and
without application of mind. Sub-section (2) of S. 25-O of the Act
makes it obligatory on the part of the State Government, on receipt of
the application, to conduct such an enquiry as it thinks fit and after
giving a reasonable opportunity of being heard to the employer and
the persons interested in such closure, to make an order either
refusing to grant permission or granting permission. While making
such an order, the State Government is required to keep in mind the
genuineness and adequacy of the reasons stated by the employer and
the interest of general public and other relevant factors. Therefore,
the nature of the enquiry contemplated under Sub-sec. (2) of S. 25-O
of the Act envisages that some reasonable time, necessarily has to be
taken, by the State Government in the course of the enquiry.
Therefore, for any valid reasons, if the enquiry goes beyond sixty days
For Subsequent orders see LPA-335-2021, LPA-270-2022, -- and 1 more.
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from the date of the application filed seeking for closing down of an
undertaking of an industrial establishment and in that situation if it is
to be held that since no order was made refusing to grant permission,
the deemed permission in terms of Sub-sec.(3) of S. 25-O of the Act is
granted to the employer, it would lead to adverse results seriously
affecting the rights of the workmen and the general public. Acceptance
of such a contention would totally frustrate the very object of an
enquiry contemplated under Sub-sec.(2) of S. 25-O of the Act before
an order is made either granting or refusing to grant permission
While interpreting the provisions of law, the Court cannot be oblivious
to the consequences of such an absurd result. Therefore, we are of the
view, as rightly found by the learned Single Judge, once an enquiry
notice is issued on receipt of the application by the State Government,
the running of the period of sixty days under Sub-sec. (3) of S. 25-O of
the Act is arrested. Therefore, the second submission of Sri
Vijayashankar is also liable to be rejected as one devoid of any
merit."
He stated that SLP Civil No.11255-11256 of 2004 filed against the aforesaid
decision, was dismissed. Mr.Arora asserted that the ratio of the aforesaid judgment
would be applicable in the present case as well.
The contentions of Mr.Arora have been controverted by Mr.Chetan
Mittal, Ld. Senior Counsel for respondent No.2. He argued that the provisions of
Section 25-N(4) are clear and unambiguous. If no order on the application is
communicated to the employer within 60 days the permission is deemed to have
been granted. He states that one of the major grounds for sustaining the
constitutional validity of Section 25-N by the Supreme Court was that a specific
time limit has been prescribed for passing an order on the application seeking
permission to retrench the workers. He further argued that in the present case no
order under Section 25-N(3) has been passed, hence this Court is not required to go
into the merits or the justification for retrenchment. The petitioner, if aggrieved of
the order of 'deemed permission' has a remedy to raise an industrial dispute.
For Subsequent orders see LPA-335-2021, LPA-270-2022, -- and 1 more.
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Mr.Mittal has relied on various decisions of Hon'ble Supreme Court
Workmen v. Meenakshi Mills Ltd., (1992) 3 SCC 336, Papnasam Labour Union
v. Madura Coats Ltd., (1995) 1 SCC 501 , State of Haryana v. Hitkari Potteries
Ltd., (2001) 10 SCC 74, Empire Industries Ltd. v. State of Maharashtra, (2010)
4 SCC 272 and a decision of the Orissa High Court OCL India, Ltd. v. State of
Orissa, 2002 SCC OnLine Ori 63
Section 25-N specifies the conditions precedent to retrenchment and is
reproduced below:
Section 25-N. Conditions precedent to retrenchment of workmen
"25-N. Conditions 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
For Subsequent orders see LPA-335-2021, LPA-270-2022, -- and 1 more.
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and the persons 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
this sub-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.
(8) 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
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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."
As decisions of Hon'ble Supreme Court construing the analogous provision in
Section 25-O have been cited, the relevant provisions of Section 25-O are
reproduced below:
"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 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
For Subsequent orders see LPA-335-2021, LPA-270-2022, -- and 1 more.
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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.
xxx xxx xxx"
The provisions of of Section 25-N were considered in detail by a Constitution
Bench of Hon'ble Supreme Court in Workmen v. Meenakshi Mills Ltd., (1992) 3
SCC 336 while examining the Constitutional validity of Section 25-N.
The Court observed that the underlying objective of Section 25-N, in
introducing prior scrutiny of the reasons for retrenchment, was to prevent avoidable
hardship to the employees resulting from retrenchment by protecting existing
employment and check the growth of unemployment which would otherwise be the
consequence of retrenchment in industrial establishments employing large number
of workmen. It is also intended to maintain higher tempo of production and
productivity by preserving industrial peace and harmony. It held that Section 25-N
thus seeks to give effect to the Directive Principles of the Constitution. The
restrictions imposed by Section 25-N on the right of the employer to retrench the
workmen were therefore to be regarded as having been imposed in the interests of
general public.
The Court then proceeded to consider whether the said restrictions
For Subsequent orders see LPA-335-2021, LPA-270-2022, -- and 1 more.
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incorporated in Section 25-N could be considered to be reasonable restrictions.
While doing so the Court also explained the import and rationale of the various
restrictions as under:
"28. Sub-section (1) of Section 25-N contains provisions
similar to those contained in Section 25-F with one modification that
the period of notice which is required to be given for retrenchment of
a workman in an industrial establishment covered by Section 25-K
and falling within Chapter V-B is three months instead of one months'
notice required under Section 25-F. The need for a period of notice is
indicated by sub-section (3) of Section 25-N because within a period
of three months from the date of service of the said notice, the
appropriate Government or authority is required to communicate the
permission or refusal to grant the permission for retrenchment to the
employer after making such enquiry as it thinks fit under sub-section
(2). The consequence of failure to keep this time schedule is indicated
in sub-section (3) wherein it is provided that in case the Government
or authority does not communicate the permission or the refusal to
grant the permission to the employer within three months of the date
of service of the notice, the Government or the authority shall be
deemed to have granted the permission for such retrenchment on the
expiration of the said period of three months. The change which has
been brought about by sub-section (2) of Section 25-N is that instead
of an adjudication by a judicial tribunal into the validity and
justification of retrenchment after the order of the retrenchment has
been passed under Section 25-F, an enquiry is to be made after the
service of notice of retrenchment and before the retrenchment comes
into effect and said enquiry is to be made by the appropriate
Government or authority specified by it, maintaining status quo in the
meanwhile."
xxx xxx xxx
57. In order to validly retrench the workmen under Section
25-N, apart from obtaining permission for such retrenchment under
sub-section (2), an employer has also to fulfil other requirements,
namely, to give three months' notice or pay wages in lieu of notice to
the workmen proposed to be retrenched under clause (a) of sub-
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section (1), pay retrenchment compensation to them under clause (b)
of sub-section (1) and to comply with the requirement of Section 25-G,
which is applicable to retrenchment under Section 25-N in view of
Section 25-G. An industrial dispute may arise on account of failure on
the part of the employer to comply with these conditions and the same
can be referred for adjudication under Section 10. In addition, an
industrial dispute could also be raised by the workmen in a case
where retrenchment has been effected on the basis of permission
deemed to have been granted under sub-section (3) of Section 25-N
on account of failure on the part of the appropriate Government or
authority to communicate the order granting or refusing the
permission for retrenchment within a period of three months from
the date of the service of notice under clause (c) of sub-section (1)
because in such a case, there has been no consideration, on merits,
of the reasons for proposed retrenchment by the appropriate
Government or authority and reference of the dispute for
adjudication would not be precluded. What remains to be considered
is whether an industrial dispute can be raised and it can be referred
for adjudication in a case where the appropriate Government has
either granted permission for retrenchment or has refused such
permission under sub-section (2) of Section 25-N. Since there is no
provision similar to that contained in sub-section (7) of Section 25-N
attaching finality to an order passed under sub-section (2) it would be
permissible for the workmen aggrieved by retrenchment effected in
pursuance of an order granting permission for such retrenchment to
raise an industrial dispute claiming that the retrenchment was not
justified and it would be permissible for the appropriate Government
to refer such dispute for adjudication though the likelihood of such a
dispute being referred for adjudication would be extremely remote
since the order granting permission for retrenchment would have been
passed either by the appropriate Government or authority specified by
the appropriate Government and reference under Section 10 of the Act
is also to be made by the appropriate Government. Since the
expression 'industrial dispute' as defined in Section 2(k) of the Act
covers a dispute connected with non-employment of any person and
Section 10 of the Act empowers the appropriate Government to make a
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reference in a case where an industrial dispute is apprehended, an
employer proposing retrenchment of workmen, who feels aggrieved by
an order refusing permission for retrenchment under sub-section (2)
of Section 25-N can also move for reference of such a dispute relating
to proposed retrenchment for adjudication under Section 10 of the Act
though the possibility of such a reference would be equally remote.
The employer who feels aggrieved by an order refusing permission for
retrenchment thus stands on the same footing as the workmen feeling
aggrieved by an order granting permission for retrenchment under
sub-section (2) of Section 25-N inasmuch as it is permissible for both
to raise an industrial dispute which may be referred for adjudication
by the appropriate Government and it cannot be said that, as
compared to the workmen, the employer suffers from a disadvantage
in the matter of raising an industrial dispute and having it referred for
adjudication. The grievance about discrimination in this regard raised
by the learned counsel for the employers is thus unfounded. The fourth
contention is, therefore, rejected."
While referring to Section 25-N(4) the Court clearly held that the
consequence of failure to keep the time schedule is indicated in sub-section (3)
wherein it is provided that in case the Government or authority does not
communicate the permission or the refusal to grant the permission to the employer
within three months of the date of service of the notice, the Government or the
authority shall be deemed to have granted the permission for such retrenchment on
the expiration of the said period of three months.
In Orissa Textile & Steel Ltd. v. State of Orissa, (2002) 2 SCC 578
the question for consideration before the Supreme Court was the constitutional
validity of Section 25-O of the Industrial Disputes Act, 1947 as amended by
Amendment Act 46 of 1982.
The Court adverted to the decision in Excel Wear V. Union of India
(1978) 4 SCC 224 where it was held that the right to close down a business was an
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integral part of the fundamental right to carry on business as guaranteed under
Article 19(1)(g) of the Constitution. It was held that there could be a reasonable
restriction on this right under Article 19(6) of the Constitution. It was held that the
law could provide to deter reckless, unfair, unjust and mala fide closure. In Excel
Wear the restrictions imposed by Section 25-O were held to be unreasonable for
various reasons, one of which was that there was no deemed provision for
according approval in the section.
After the decision in Excel Wear Section 25-O was amended in 1982.
The Court then made a comparison between the un-amended Section
25-O, the amended Section 25-O and Section 25-N. It held that in substance the
amended Section 25-O was akin to Section 25-N (which was considered in
Meenakshi Mills case). It contained many new provisions and substantially
amended the other provisions. It was opined that though Meenakshi Mills case
dealt with retrenchment, the same principles would apply as a closure also has the
effect of termination of service, though of all the workmen. Also both Section 25-N
and Section 25-O are in Chapter V. It negatived the contention that the principles
laid down in Meenakshi Mills case have no relevance in deciding the constitutional
validity of (amended) Section 25-O.
The Court then discussed the various grounds on which un- amended
Section 25-O had been struck down in Excel Wear and how those grounds ceased
to exist after the amendment of 1982.
Specific reference was made to the absence of deeming provision in
Section 25-O which was one of the grounds for declaring it unconstitutional in
Excel Wear case. It observed that with the incorporation of a deeming provision the
defect had been cured.
"13. Now sub-section (3) of the amended Section 25-O provides
that if the appropriate government does not communicate the order
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within a period of 60 days from the date on which the application is
made, the permission applied for shall be deemed to have been
granted. Thus this defect has also been cured."
In Empire Industries Ltd. v. State of Maharashtra, (2010) 4 SCC 272
Hon'ble Supreme Court again considered the scheme of Section 25-N and observed
that Sub-section (4) has the provision of deemed permission. The Court also
observed that the subject of retrenchment is fully covered by the provisions of
Section 25-N. The relevant observations are as under:
"40. As may be seen from Section 25-N, it has a complete
scheme for retrenchment of workmen in industrial establishments
where the number of workers is in excess of hundred. Clauses (a) and
(b) lay down the conditions precedent to retrenchment and provide for
three months' notice or three months' wages in lieu of the notice to the
workmen concerned and the prior permission of the appropriate
Government/prescribed authority. Sub-sections (2) and (3) plainly
envisage the appropriate Government/prescribed authority to take a
quasi-judicial decision and to pass a reasoned order on the
employer's application for permission for retrenchment after making
a proper enquiry and affording an opportunity of hearing not only to
the employer and the workmen concerned but also to the person
interested in such retrenchment. Sub-section (4) has the provision of
deemed permission. Sub-section (5) makes the decision of the
Government binding on all parties. Sub-section (6) gives the
Government the power of review and the power to refer the
employer's application for permission to a tribunal for adjudication.
Any retrenchment without obtaining prior permission of the
Government is made expressly illegal by sub-section (7) with the
further stipulation that the termination of service in consequence
thereof would be void ab initio. Sub-section (8) empowers the
Government to exempt the application of sub-section (1) under certain
exceptional circumstances and sub-section (9) provides for payment of
retrenchment compensation to the workmen concerned.
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41. The procedural details for seeking prior permission of the
appropriate Government for carrying out retrenchment under Section
25-N are laid down in Rule 76-A of the Industrial Disputes (Central)
Rules, 1957. The application for permission for retrenchment is to be
made in Form PA and that requires the employer to furnish all the
relevant materials in considerable detail.
42. It is, thus, seen that the subject of retrenchment is fully
covered by the statute. It is not left open for the employer to make a
demand in that connection and to get the ensuing industrial dispute
referred for adjudication in terms of Section 10(1) of the Act."
In Papnasam Labour Union v. Madura Coats Ltd., (1995) 1 SCC 501
Supreme Court was considering the constitutional validity of Section 25-M of the
Industrial Disputes Act, 1947 as it stood after the Industrial Disputes (Amendment)
Act, 1976 insofar as it required prior permission to effect lay-off.
The relevant provisions of Section 25-M of the Industrial Disputes Act
are as under:
"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 the previous
permission of such authority as may be specified by that appropriate
Government by notification in the Official Gazette, unless such lay-off
is due to shortage of power or to natural calamity.
(2) Where the workman (other than badli workman or casual
workman) of an industrial establishment referred to in sub-section (1)
have been laid off before the commencement of the Industrial Disputes
(Amendment) Act, 1976 and such lay-off continues at such
commencement, the employer in relation to such establishment shall,
within a period of fifteen days from such commencement, apply to the
authority specified under sub-section (1) for permission to continue
the lay-off.
(3) In the case of every application for permission under sub-
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section (1) or sub-section (2), the authority to whom the application
has been made may, after making such inquiry as he thinks fit, grant
or refuse, for reasons to be recorded in writing, the permission
applied for.
(4) Where an application for permission has been made under sub-
section (1) or sub-section (2) and the authority to whom the
application is made does not communicate the permission or the
refusal to grant the permission to the employer within a period of two
months from the date on which the application is made, the permission
applied for shall be deemed to have been granted on the expiration of
the said period of two months."
xxx xxx xxx"
Holding the provision to be Constitutionally valid the Court observed as under:
"18. In our view, the aforesaid observations in upholding the validity
of Section 25-N squarely apply in upholding the validity of Section 25-
M. It is evident that the Legislature has taken care in exempting the
need for prior permission for lay-off in Section 25-M if such lay-off is
necessitated on account of power failure or natural calamities
because such reasons being grave, sudden and explicit, no further
scrutiny is called for. There may be various other contingencies
justifying an immediate action of lay-off but then the Legislature in its
wisdom has thought it desirable in the greater public interest that
decision to lay-off should not be taken by the employer on its own
assessment with immediate effect but the employer must seek approval
from the authority concerned which is reasonably expected to be alive
to the problems associated with the industry concerned and other
relevant factors, so that on scrutiny of the reasons pleaded for
permitting lay-off, such authority may arrive at a just and proper
decision in the matter of according or refusing permission to lay-off.
Such authority is under an obligation to dispose of the application to
accord permission for a lay-off expeditiously and, in any event, within
a period not exceeding two months from the date of seeking
permission. It may not be unlikely that in some cases an employer may
suffer unmerited hardship up to a period of two months within which
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his application for lay-off is required to be disposed of by the
authority concerned but having undertaken a productive venture by
establishing an industrial unit employing a large labour force, such
employer has to face such consequence on some occasions and may
have to suffer some hardship for sometime but not exceeding two
months within which his case for a lay-off is required to be considered
by the authority concerned otherwise it will be deemed that permission
has been accorded. 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 to be arbitrary, unreasonable or far in excess of the
need for which such restriction has been sought to be imposed.
19. It may be pointed out that sub-section (3) requires recording of
reasons for the decision taken, and a copy of the order is required to
be communicated to all concerned. Further, by force of sub-section
(4), permission sought for shall be deemed to have been granted, if
the decision is not communicated within the mentioned period.
Procedural reasonableness has been taken care of by these
provisions. As regards substantive reasonableness, we feel satisfied,
as the power in question would be exercised by a specified authority
and as it can well be presumed that the one to be specified would be a
high authority who would be conscious of his duties and obligation. If
such an authority would be informed that lay-off is required because
of, any sudden breakdown of machinery, which illustration was given
by Dr Ghosh to persuade us to regard the restriction as unreasonable,
we have no doubt that the authority would act promptly and see that
the establishment in question is not put to loss for no fault on its part.
As every power has to be exercised reasonably, and as such an
exercise takes within its fold, exercise of power within reasonable
time, we can take for granted that the statutory provision requires that
in apparent causes (like sudden breakdown) justifying lay-off, the
authority would act with speed."
Referring to Section 25-M(5) it was held that by force of sub-section
(4), permission sought for shall be deemed to have been granted, if the decision is
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not communicated within the mentioned period.
In State of Haryana v. Hitkari Potteries Ltd., (2001) 10 SCC 74
Hon'ble Supreme Court upheld the order of the High Court wherein it was held
that permission to close down the company under Section 25-O was deemed to
have been granted on account of the failure of the Government to communicate the
order granting or refusing to grant permission to the employer within a period of 60
days from the date on which such application was made.
The short order of the Hon'ble Supreme Court is reproduced below:
"1. An application was made by Respondent 1 (hereinafter referred
to as "the respondent") under Section 25-O of the Industrial Disputes
Act (for short "the Act") for permission to close down the Company
on 15-1-1998. On 2-4-1998 a letter was sent on behalf of the
Government to the respondent to the effect that the application filed by
it is defective in certain aspects and is hence rejected.
2. Under Section 25-O(3) of the Act if the Government does not
communicate the order granting or refusing to grant permission to the
employer within a period of 60 days from the date on which such
application is made, permission applied shall be deemed to have been
granted on the expiration of the said period of 60 days.
3. In the present case the application was not disposed of within a
period of 60 days from 15-1-1998 and a communication was sent only
long after expiry of that period on 2-4-1998. In that view of the matter
the view taken by the High Court that necessary permission as
contemplated under the provisions of Section 25-O of the Act is
deemed to have been granted appears to us to be correct and certain
provisions have been made by the High Court in its order regarding
protection of rights of the workmen as claimed by them before the
Court. In that view of the matter no useful purpose would be served in
going into various questions raised herein, the orders were made by
the High Court on 15-1-1999 and no steps were taken to obtain any
interim order either from that Court or from this Court till 23-7-1999.
We think the order made by the High Court should be sustained and
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no interference is called for. The appeal is disposed of accordingly."
In all the above cases the Hon'ble Supreme Court while considering
Section 25-N(4), Section 25-O (3) and 25-M (3), which are the relevant deeming
provisions, has held that the permission sought for shall be deemed to have been
granted, if the decision is not communicated within the mentioned period. Further
it is clear from these decisions that existence of the "deeming provision" was an
essential element in adjudging that the restrictions imposed for retrenchment,
closure and lay off were reasonable and hence the provisions were constitutionally
valid.
The deeming provisions are unqualified. There is no exception
provided that the time will cease to run or "be arrested" on an enquiry being
initiated or for any other reason. No such exception has been recognized by
Hon'ble Supreme Court in any of the above cases.
In view thereof it is not possible to agree with the view of the
Karnataka High Court in Jayhind Engineering case relied on by Mr. Arora.
In OCL India, Ltd. v. State of Orissa, 2002 SCC OnLine Ori 63 an
application was submitted by the petitioner Company on 27.02.2001 to the Labour
Commissioner under Section 25-N(1) seeking permission to retrench 270 workmen
out of 860 workmen, which was received by him on 01.11.2001. The Labour
Commissioner issued notices on 21.11.2001 to the concerned parties to appear
before him on the dates mentioned in the notice. The Trade Union filed a writ
petition assailing the said notices. While issuing notice on 11.12.2001 the High
Court directed that any decision taken by the Labour Commissioner would be
subject to the result of the writ petition. The Labour Commissioner heard the
matter on various dates. On 29.12.2001, the Labour Commissioner reserved the
orders to await the final order in the writ petition. The writ petition was disposed
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of as not pressed on 24.01.2002. Thereafter, the Labour Commissioner
communicated the orders on 30.01.2002 refusing permission to the Company to
retrench 270 workmen. The Company filed a writ petition assailing the order
dated 30.01.2002 on the ground that the Labour Commissioner having failed to
communicate the order on the application seeking permission for retrenchment
within 60 days of its receipt, the permission for retrenchment shall be deemed to
have been granted under Section 25-N(4) of the Act and the impugned order
refusing permission having been communicated after the expiry of 60 days was un-
sustainable in law. It was contended on behalf of the Labour Commissioner that
the order on the application was reserved on 29.12.2001 in view of the orders of the
High Court, making the proceedings before the Labour Commissioner subject to
the decision of the writ petition. The Court perused the records and found that as a
matter of fact the Labour Commissioner had passed an order on 29.12.2001, but the
same had not been communicated in view of the pendency of the writ petition. It
was only after the dismissal of the writ petition that the final order was
communicated on 30.01.2002. The Court held that the order having been
communicated after 60 days was of no effect as the permission would be deemed to
have been granted. It was observed as under:-
"6. There is no dispute that the application of the management, dated
27 October, 2001, seeking permission to retrench 270 workmen was
received by the Labour Commissioner on 1 November, 2001. In view
of Sub-sec. (4) of S. 25 N, the Labour Commissioner was required to
communicate his order within a period of 60 days, i.e., by 30
December, 2001. Although he passed an order in the file on 29
December, 2001, he did not communicate the same to any one. He
ultimately communicated the order on 30 January, 2002 which is
beyond the period of 60 days.
7. It is relevant to extract Sub-sec.(4) of S. 25-N which is as under:
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"(4) Where an application for permission has been made
under Sub-sec.(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."
A bare perusal of the above provision would clearly show that if the
specified authority (in this case the Labour Commissioner) does not
communicate the order granting or refusing to grant permission to the
employer within the period of 60 days from the date of said
application permission applied for shall be deemed to have been
granted on the expiry of the said period of 60 days. It embodies a legal
fiction. In other words, it has created a fiction of "grant of
permission" on the failure of the specified authority to communicate
its order within a period of 60 days from the date of making the
application by the employer."
In the present case also, as the decision was not communicated within
60 days of the application for retrenchment, the permission is deemed to have been
granted. Thus there is no infirmity in the impugned order dated 01.03.2021.
This petition is dismissed.
It is clarified that this Court has not gone into the validity of the
grounds for retrenchment. This decision is only limited to examining the legality of
the order dated 01.03.2021
Hon'ble Supreme court in Meenakshi Mills has held that an industrial
dispute can be raised by the workmen in a case where retrenchment has been
effected on the basis of permission deemed to have been granted under sub-section
(3) of Section 25-N on account of failure on the part of the appropriate Government
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or authority to communicate the order granting or refusing the permission within
the stipulated time because in such a case, there has been no consideration, on
merits, of the reasons for proposed retrenchment by the appropriate Government or
authority and reference of the dispute for adjudication would not be precluded.
It would be open to the petitioner to take such recourse.
March 15, 2022 (HARINDER SINGH SIDHU)
gian JUDGE
Whether Speaking / Reasoned Yes
Whether Reportable Yes / No
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