Section 25-F of the Industrial Disputes Act, 1947: Jurisprudential Evolution and Contemporary Application

Section 25-F of the Industrial Disputes Act, 1947: Jurisprudential Evolution and Contemporary Application

1. Introduction

Section 25-F of the Industrial Disputes Act, 1947 (hereinafter “IDA”) occupies a pivotal position in Indian labour jurisprudence as the principal statutory safeguard against arbitrary retrenchment. The provision mandates three cumulative pre-conditions—notice (or wages in lieu thereof), retrenchment compensation, and intimation to the appropriate government—before a workman who has completed one year of continuous service may be retrenched. This article critically examines the legislative text, doctrinal purpose, and judicial exposition of §25-F, weaving together landmark authorities such as State Bank of India v. N. Sundara Money[1], Santosh Gupta v. State Bank of Patiala[2], and the recent interpretative refinement in Pramod Jha v. State of Bihar[3]. Particular consideration is accorded to the Supreme Court’s purposive approach in Workmen of American Express v. American Express[4], which broadened the understanding of “continuous service”.

2. Legislative Context and Textual Framework

Enacted via the Industrial Disputes (Amendment) Act, 1953, §25-F reads, in material part:

“No workman employed in any industry who has been in continuous service for not less than one year under an employer shall be retrenched by that employer until— (a) one month’s notice in writing … or wages in lieu thereof; (b) payment, at the time of retrenchment, of compensation equivalent to fifteen days’ average pay for every completed year of service …; and (c) notice in the prescribed manner is served on the appropriate Government … .”

Chapter V-A thus superimposes a statutory bargain: an employer may shed surplus labour, but only upon simultaneously cushioning the economic displacement of affected workmen. The provision must also be read with (i) §2(oo) defining “retrenchment”, and (ii) §25-B which explicates “continuous service”.

3. Retrenchment: From Narrow to Expansive Construction

3.1 Early Narrow View

Initially, the Supreme Court in Hariprasad Shivshankar Shukla v. A.D. Divikar[5] confined retrenchment to discharge of surplus labour in a continuing undertaking. Termination on bona fide closure or change of ownership therefore escaped §25-F.

3.2 Breakthrough in Sundara Money

Sundara Money decisively rejected the narrow surplus-labour test, holding that “termination for any reason whatsoever” (save the enumerated exceptions) attracts §2(oo) and, by corollary, §25-F. Termination by effluxion of a fixed-term contract was deemed retrenchment, compelling payment of compensation and notice.[1]

3.3 Consolidation in Santosh Gupta and Subsequent Cases

In Santosh Gupta the Court reiterated that even failure to pass a confirmation test constituted retrenchment, emphasising the welfare orientation of the Act.[2] The ratio has since undergirded High Court decisions resisting employer attempts to invoke contractual or project-based cessation as an escape device.[6]

4. Continuous Service and the American Express Principle

The one-year threshold in §25-F hinges on “continuous service” under §25-B. In Workmen of American Express the Supreme Court adopted a purposive lens, holding that paid weekly offs and other paid holidays must be counted toward the 240-day requirement.[4] This interpretation promotes substantive equality between permanent and temporary staff whose work patterns structurally include such non-working remunerated days.

5. Preconditions under §25-F: Substance over Form

5.1 Notice or Wages in Lieu—Timing is Everything

The timing of payment is critical. In Daya Nand v. PO, Labour Court[7] and Pramod Jha[3] the Court affirmed that wages in lieu and compensation must be tendered contemporaneously with termination. However, Pramod Jha accepted banker’s cheques made available at a common location as substantial compliance, rejecting a hyper-technical insistence on physical disbursement.

5.2 Compensation Quantum

The statutory formula of “fifteen days’ average pay per completed year” has been labelled a minimum. Tribunals retain discretion to award additional amounts as equitable relief, yet cannot dilute the statutory floor.[8]

5.3 Government Intimation

Service of notice on the appropriate Government, though rarely litigated, remains a sine qua non—its absence vitiates retrenchment.[9]

6. Exceptions, Exemptions and Interplay with Chapter V-B

Section 25-A exempts certain small, intermittent, or seasonal establishments, while Chapter V-B (industrial establishments employing 100 or more workers) introduces additional safeguards such as prior permission. High Court dicta in Gopi Lal Teli[10] and J.J. Shrimali[11] stress that exclusionary clauses must be strictly construed against the employer given the Act’s benevolent purpose.

7. Remedies for Non-Compliance: From Automatic Reinstatement to Compensatory Trend

Traditionally, void retrenchment attracted automatic reinstatement with back-wages (Statesman Ltd.[12]). Yet recent Supreme Court jurisprudence reflects a calibrated shift. In Ram Manohar Lohia Hospital v. Munna Prasad Saini[13] the Court held that where reinstatement is impracticable (e.g., daily-wage, long passage of time, absence of unfair labour practice), lump-sum compensation may suffice. This pragmatic approach has filtered to High Courts, as seen in Birbal[14] and Om Prakash Raigar[15].

8. Interface with Employer Prerogative: Lock-out, Closure and Retrenchment

In Sur Iron & Steel[16] the Supreme Court upheld a bona fide closure following an illegal strike, clarifying that genuine closure is distinct from retrenchment. Nonetheless, where the termination concerns individual workmen in a continuing undertaking, §25-F remains imperative notwithstanding managerial motives.

9. Critical Appraisal

  • Purposive Interpretation: The judiciary has consistently treated §25-F as social-welfare legislation, eschewing literalist readings that would dilute worker protection.
  • Procedural Rigour v. Practical Flexibility: Pramod Jha injects pragmatism into compliance assessment, yet the core requirement of simultaneity remains non-negotiable.
  • Remedial Evolution: The shift towards compensation recognises economic realities but must not become a licence for employer non-compliance. Courts should articulate objective criteria—duration of service, nature of appointment, existence of unfair practice—to ensure principled discretion.
  • Legislative Silence on Alternative Compensation Modes: Parliament may consider codifying acceptable tender mechanisms (e.g., electronic transfer) to reduce litigation over procedural minutiae.

10. Conclusion

Section 25-F, seventy-one years after its insertion, remains the fulcrum of retrenchment regulation in India. Jurisprudence has travelled from a restrictive, employer-centric interpretation to a broad, employee-protective paradigm that animates the constitutional mandate of social justice (Articles 38, 43). While courts have recently moderated the remedy of reinstatement, the substantive obligations of notice, compensation, and government intimation endure as inviolable. Employers, counsel and adjudicators alike must therefore appreciate not only the letter but the humane spirit of §25-F.

Footnotes

  1. State Bank of India v. Shri N. Sundara Money, (1976) 1 SCC 822.
  2. Santosh Gupta v. State Bank of Patiala, (1980) 3 SCC 340.
  3. Pramod Jha & Ors. v. State of Bihar & Ors., (2003) 4 SCC 619.
  4. Workmen of American Express International Banking Corp. v. Management, (1985) 4 SCC 71.
  5. Hariprasad Shivshankar Shukla v. A.D. Divikar, AIR 1957 SC 121.
  6. P.K. Sharma v. MCD, 2007 (Delhi) (relying on §2(oo)(bb)).
  7. Daya Nand v. PO, Labour Court, 2024 (P&H); see also State Bank of India v. CGIT, 1990 (Madras HC).
  8. Chilika Development Authority v. Girija Prasad Sahoo, 2016 (Orissa HC).
  9. ID Act, 1947, Rule 76 of the Central Rules (prescribed manner of notice).
  10. Gopi Lal Teli v. State of Rajasthan, 1995 (Rajasthan HC).
  11. J.J. Shrimali v. District Development Officer, 1988 (Gujarat HC).
  12. Statesman Ltd. v. 8th Industrial Tribunal, 2004 (Calcutta HC).
  13. Ram Manohar Lohia Joint Hospital v. Munna Prasad Saini, (2021) SCC OnLine SC 746.
  14. Birbal v. PO, IT-Cum-LC, Hisar, 2012 (P&H HC).
  15. Om Prakash Raigar v. State of Rajasthan, 1996 WLC 429.
  16. Workmen of Sur Iron & Steel Co. (P) Ltd. v. Sur Iron & Steel Co. (P) Ltd., (1971) 3 SCC 618.