Most of the Industrial Establishments are not required to take permission from Government to retrench or closing down of the establishment as per the provisions of the Industrial Disputes Act. Yet many of us express our inability in this regard referring the ID Act. Similarly the other block in our minds is about a workman working two hundred forty days. Does the two hundred forty days working give permanent employment status to a workman in an industrial establishment? Certainly not. In this paper, an attempt has been made to place the subject in context alongside supporting judicial pronouncements and to bring out some of the salient features of the Industrial Disputes Act in this regard.
Chapter V-A and V-B of Industrial Disputes Act deals with the procedure to be followed with regard to the workmen who are in continuous service for one year in the industrial establishment for lay-off, retrenchment and closure. If a workman worked for two hundred forty days in the preceding twelve months, it is deemed that he or she is in continuous service for one year. Thus the concept of two hundred forty days working is to determine continuous service of a workman and providing necessary safe guards to the workmen working in certain industrial establishments.
Let us look at the issue of termination of employment of an industrial workman covered under ID Act and applicability of ‘Chapter V-A & V-B’ of the Act.
Chapter V-A and V-B of ID Act deals with the procedure and compensation payable for lay- off, retrenchment and closure. Interestingly these chapters are applicable only to a certain category of industrial establishments and other categories of industrial establishments are not covered under these chapters. It is applicable only to Factories, Mines and Plantations. That is to say irrespective of the number of employees employed in other industrial establishments, such as hospitals, hotels, retail sector, IT and ITES, shops and establishments etc., they are not covered under the provisions of these chapters even though they are covered under ID Act.
Even within the factories, the industrial establishments which are of a seasonal character or in which work is performed intermittently are not covered under these chapters. In India, most of the agro based industries such as cotton, tobacco, jute, silk and woolen textiles, sugarcane and vegetable oil industries are seasonal industries, as they are based on agricultural raw material. This industry is very significant in our country as it contributes 14% to the total industrial production and provides employment to 35 million people. The Supreme Court in the matter between Haryana Seeds Development Corporation Vs Presiding Officer (1997 LLR 806) held that termination of the workers in a seasonal establishment will not amount to retrenchment.
Thus, the application of Chapter V-A & V-B is restricted to non seasonal factories, mines and plantations employing 100 or more workman on an average in the preceding twelve months. Some State Governments such as Utter Pradesh, Rajasthan, and Andhra Pradesh amended the ID Act such that Chapter V-B is applicable only to industrial establishments that employ 300 or more workmen.
There has been a debate on the computation of number of workmen in an industrial establishment. It has been held by the Hon’ble Bombay High Court in the matter of Dyes and Chemicals Workers Union Vs Bombay Oil Industries Limited 2001 LLR 602 that only persons fulfilling the criteria as per the definition of ‘workman’ will be included for computing the number of employees under section 25K of the Industrial Disputes Act. That is to say, the persons discharging supervisory and management functions are excluded for the purpose of computation of number of workmen employed. The other question that arose was as to whether workmen engaged through contractors or workmen engaged as badili or casual should be included for the purpose of computation of number of workmen of the industrial establishment or not. The Bombay High Court in the matter of Maharashtra General Kamgar Union Vs Indian Gum Industries 2000 (86) FLR 533 held that neither contract labour nor the mathodhi workers will be taken into account to determine the strength of the workmen for seeking closure of an establishment. Thus for determination of strength of workmen of an industrial establishment, only the workmen who are on the rolls of the establishment should be taken into account.
From the above discussion, it is obvious that the application of the provisions of Chapter V-A & V-B and ‘retrenchment’ are applicable only to a small section of major industrial establishments and are not applicable to most of the medium and small factories and other industrial establishments. Therefore, it is for us to plan and organize our work and manpower deployment rather than lamenting for changes in the Act and looking to the Government.
The Industrial Disputes Act has excluded the below mentioned categories of ‘terminations’ from the definition of retrenchment.
- Termination of the service of the workman as a result of the non-renewal of contract of employment.
- Termination of the service of a workman on the ground of continued ill health.
While endorsing that the terminations in the above category do not fall under ‘retrenchment’ under the ID Act, the courts have further extended it to include other categories as well, some of which are as under. The Supreme Court in the matter between Punjab State Electricity Board Vs Darbara Singh (2006 LLR 68 SC) confirmed that non-renewal of contract of service will not fall under the provisions of retrenchment. Where engagement of a workman was for a specific period, as such his termination will be excluded from the provisions of section 2(oo)(bb) of ID Act and no retrenchment compensation will be payable on his termination even when he was worked for 240 days.
It has also been held that the termination of a trainee does not fall under the definition of retrenchment. The Delhi High Court in the matter of R. Kartik Ramachandran Vs Presiding Officer, Labour Court (2006 LLR 358) held that compliance of section 25 F of the I D Act will not be necessary on termination of a trainee.
When it comes to casual workmen, the Supreme Court in the matter between Batala Coop Sugar Mills Ltd Vs Sowaran Singh (2005 LLR 1211 SC) held that a casual workman on daily wages for a specific period and for specific work, will not fall under the ambit of retrenchment.
Project based employment termination at the end of the project also does not fall under the category of retrenchment. The Punjab & Haryana High Court (2010 LLR 482) held that even when the workman working on a project was not given contractual appointment, his termination would not be retrenchment when the contract comes to an end.
From the above reading it is amply clear that it is the requirement of management to perform the function of forecasting, assessing manpower requirements and inducting manpower in different categories to meet specific requirements of the industrial establishment from time to time. The Industrial Disputes Act has given ample scope to the industrial organizations to do this. Hence, HR professionals have a major role to play in categorizing the manpower requirements and planning to take them as per those requirements.
The other exclusion mentioned above is that of termination of service of a workman on the ground of continued ill health. The Delhi High Court (2007 LLR 303) in the matter of J B Kumar Vs Brijesh Sethi held that termination for continued ill-health of an employee is excluded from retrenchment. However, it is held that discharge for continuous ill health must be supported with sufficient evidence. (Somasundaram Vs Labour Court, Coimbatore, 2010 LLR 919 Mad HC)
It is commonly stated by most of the Managements as well as HR Professionals that termination of an employee is not possible once he has completed two hundred forty days of work in an organization in view of the provisions of the Industrial Disputes Act. On the other hand, trade union representatives time and again demand and insist that the workman should be taken on the permanent rolls of the company as he or she has worked for more than two hundred forty days. There are also a number of occasions where managements have voluntarily decided to take these employees on its rolls.
It is not true to state that when a workman works for two hundred forty days he automatically gains the status of a permanent workman. The Industrial Disputes Act laid down certain procedures that are to be followed for termination of a workman who has worked in an industrial establishment for two hundred forty days or more. However, these procedures have no universal application to all the industrial establishments covered under the Act.
The act never conferred the status of permanency simply because a workman worked for 240 days or more in the preceding twelve months. The Supreme Court in the case between Hindustan Aeronautics Ltd Vs Dan Bahadur Singh (AIR 2006 SC 2733) held that the completion of 240 days’ work does not confer right for regularization and again the same was reiterated in the matter of Gangadhar Pillai Vs Siemens Ltd (2007 1 SCC 533).
Thus it is very clear that all terminations do not fall under the category of retrenchment and all industrial establishments are not covered under Chapters V-A & V-B. Similarly, working in an establishment for two hundred forty days does not confer permanent status to a workman. Hence it is our duty to understand the applicability of various provisions of the Act and take decisions accordingly.
This article is contributed by Partners of SBS and Company LLP - Chartered Accountant Company. You can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it.
