S.25FFF Industrial Disputes Act | Shut Down Of Specific Unit Amounts To Closure, Workers Are Entitled To Compensation: AP High Court

Section 25FFF (Compensation to workmen in case of closing down of undertakings) states that every workman working for not less than 1 year in an undertaking, which is closing down, is entitled to notice and compensation upon closure.

Meanwhile Section 2 (cc) defines 'closure' which means the permanent closing down of a place of employment "or part thereof". 

 Justice Maheswara Rao Kuncheam thus said:

"The above provision crystal clears that if the establishment falls within the ambit of Section 25FFF of the Industrial Disputes Act, 1947, it is not necessary that the entire establishment of the employer be closed; rather, the closure of a unit or part of the undertaking that has functional integrity with other units amounts to closure within the meaning of Section 25FFF of the Industrial Disputes Act. In other words, if the entire establishment is not shut down but only a specific unit or an undertaking is closed, provided, such unit has no operational stability with other units or undertakings, the provisions of Section 25FFF of the "Act‟ come into operation. Thus, in view of peculiar facts and circumstances involved in the instant case, the petitioner is entitled only for compensation as enunciated under Section 25FFF of the Industrial Disputes Act, 1947"

The petitioner worked from 1999, till his retrenchment in 2007, at M/s Krishna Industrial Corporation Ltd, which was engaged in the business of purification of raw carbon-dioxide.

The retrenchment was caused primarily due to a rift between Corporation and its suppliers regarding stoppage of supply of raw CO2 gas, which forced the Corporation to stop its functioning and relieve the petitioner. While doing so, Corporation affixed two cheques towards full and final settlement, including gratuity.

Aggrieved the petitioner approached the Labour Court seeking to set aside the retrenchment orders and for a direction to reinstate him into service with continuity of service, back wages and attendant benefits. This was dismissed by the Labour Court, against which petitioner moved the high court. 

The petitioner argued that his termination was against the provisions of the Act, and in view of the fact that other units of Corporation in other districts were functional, the petitioner was entitled for reinstatement in those units.

The Corporation submitted that from the date of disconnection of CO2 gas till the closure, it continued paying all 19 workers and upon closure, and it had paid all dues and compensation as per Section 25(FFF)  which mandated one month notice pay and balance of wages, gratuity etc.

It argued that provisions of Sections 25(F) and 25(G) [prescribes procedure for retrenchment] are applicable only to running units/Corporations where there is surplus manpower, but not to closed ones, and thus, the petitioner possesses no right to claim employment in any other units of the Corporation, which are registered separately under the Factories Act and located in far of districts.

Thus, the Court was to determine whether the Corporation was entitled to take shelter under Section 25F and 25G and whether petitioner was entitled for absorption in other distant yet functional units of the Corporation.

The Court referred to Section 25F of the 1947 Act which enlists the mandatory requirements an employer must fulfil before effecting retrenchment, failing which such retrenchment would be deemed illegal and invalid; Section 25FFF which deals with compensation in case of closure of undertakings; and Section 2(CC) which defines “closure”.

Dismissing the plea the high court said that the Labour Court had after appreciating all the facts and circumstances by perceiving ground realities, had rightly held that the Corporation has not violated the statutory provisions enunciated under the Act.

Case Title: G. Ram Babu v. The State of Andhra Pradesh and others

WRIT PETITION NO: 5020 OF 2016

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