JAMIA MILLIA ISLAMIA, NEW DELHI

(Taught man what he knew not)

FACULTY OF LAW

INTERNATIONAL TRADE & FINANCE

“Termination of Job For Any Whatsoever.

A Critique in the Context of Retrenchment Under The Industrial
Dispute Act”

SUBMITTED BY: - SUBMITTED TO: -

Priyam (s/f) Dr. Nuzhat Parveen Khan

B.A. LL. B (Hons) Prof. (Lobour Law)

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 TABLE OF CONTENTS

TABLE OF AUTHORITIES...........................................................................................................2
INTRODUCTION...........................................................................................................................3
RESEARCH METHODOLOGY....................................................................................................4
THE CONCEPT OF RETRENCHMENT.......................................................................................5
STATUTORY HISTORY AND PROVISIONS.............................................................................5
Tracing the legislative history of “retrenchment” under the IDA...............................................5
Scope and extent of Section 2(oo): Defining Retrenchment.......................................................6
Conditions for retrenchment........................................................................................................7
JUDICIAL INTERPRETATION: FROM PIPRAICH TO PUNJAB LAND DEVELOPMENT...8
Narrow Interpretation: Pipraich and Hariprasad Shivshankar Shukla.........................................8
Changing judicial trends: Sundara Money Onwards.................................................................10
Current law: Punjab Land Development...................................................................................11
Private and Public Sector Workmen..........................................................................................13
CRITICISM AND LABOUR COMMISSION RECOMMENDATIONS....................................14
CONCLUSION..............................................................................................................................16
BIBLIOGRAPHY..........................................................................................................................17
Books.........................................................................................................................................17
Articles.......................................................................................................................................17
Reports.......................................................................................................................................17

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 TABLE OF AUTHORITIES

Constitution
 THE CONSTITUTION OF INDIA, 1950.
Statute
 The Industrial Disputes Act, 1947.
 Trade Disputes Act, 1929.
Cases
 Delhi Cloth and General Mills Ltd. V. Shambhu Nath Mukherjee, AIR 1978 SC 8.
 Duport Steels v. Sirs, (1980) I WLR 142, (House of Lords).
 Hariprasad Shivshankar Shukla v. A.D. Divalkar, AIR 1957 SC 121.
 Hindustan Steel Ltd. v. State of Orissa, AIR 1977 SC 31.
 K.V. Rajendran v. Deputy Commissioner of Labour, Madras, (1981) Lab IC 799.
 Parry and Co. Ltd. V. P.C. Pal, AIR 1970 SC 1334.
 Pipraich Sugar Mills Ltd. V. Pipraich Sugar Mills Mazdoor Union, AIR 1957 SC 95.
 Punjab Land Development and Reclamation Corporation Ltd. V. Presiding Officer,
Labour Court, (1990) 3 SCC 682.
 Santosh Gupta v. State Bank of Patiala, AIR 1980 SC 1219
 State Bank of India v. N. Sundara Money, AIR 1976 SC 1111.
 Uptron India Ltd. v. Shammi Bhan, AIR 1998 SC 1681.
Reports
 National Commission on Labour, THE REPORT OF THE NATIONAL COMMISSION OF

LABOUR (2002).

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 INTRODUCTION

Law forms an effective means of social reform and social control in a society. The Industrial
Disputes Act, 1947 [hereinafter, “the act”] is one such legislation that seeks to achieve social
reform by virtue of its provisions relating to the investigation and settlements of procedural
disputes.

Notably, the act provides for various rights to both the employer, as well as the employees. One
of the many rights afforded to an employer, is that of the right to retrench workmen employed in
the industry, provided that the mandatory requirements under the statute are fulfilled. However,
it must be noted that such rights of the employer are not absolute, being subjected to a lot of
statutory duties and conditions, incorporated for the purpose of balancing the rights of employers
against those of the employees.

While retrenchment as a concept did not originally exist in the act, there has been a huge debate
and controversy around the scope and ambit of such powers of the employer, ever since it was
made a part of the act in 1953.Further, the absence of a clear-cut, unambiguous definition only
adds to the problem, posing as a major source of dispute between employers and workmen
regarding which terminations amount to “retrenchments”, especially given the various
advantages that the Act confers on retrenched workmen as against others.

In furtherance of the same, this project work is an attempt to understand the concept of
“retrenchment” under the Industrial Disputes Act, primarily by focusing on the definitional
aspects as defined under Section 2(oo) of the act, with a view to critically scrutinizing the
provisions, judicial pronouncements and the settled law on the subject.

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 RESEARCH METHODOLOGY

Aims and objectives

This paper aims to examine and analyze the scope of the concept of “retrenchment” as provided
for under the Industrial Disputes Act of 1947. The primary focus of this paper is to study the
conceptual and definitional aspects of “retrenchment” as provided under the statute. In
furtherance to the same, the paper delves into authoritative judicial pronouncements and
legislative amendments, in great depths.
Scope and Limitations
The scope of this paper, as the title suggests, is limited primarily to the scope of the definition of
retrenchment as a concept under the Industrial Disputes Act. Thus, the focus of the research has
been restricted to Section 2(oo) of the act, and related provisions and judicial pronouncements,
which contain the term “for any reason whatsoever”. Accordingly, other aspects of
retrenchment, such as the conditions, procedure, compensation etc. have not been dealt with in as
much depth.
Research Questions:
(1) What is the meaning of “retrenchment”? How and when was “retrenchment” introduced
as a statutory concept?
(2) How is “retrenchment” defined under the Industrial Disputes Act, 1947?
(3) What is the scope of this definition?
(4) What has the judicial trend been, in dealing with what constitutes retrenchment? Why has
this interpretation been afforded by the courts?
(5) What is the criticism levelled against the judicial interpretation of the concept?
(6) What has the Labour Commission suggested in response to such criticism?
Style of writing
An analytical style of writing, supported by descriptive arguments has been employed. The
researcher has primarily relied on secondary sources of data, such as books, articles, and case
laws based on the statutory provisions.

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 THE CONCEPT OF RETRENCHMENT:
STATUTORY HISTORY AND PROVISIONS

Tracing the legislative history of “retrenchment” under the IDA

The year of 1953 saw a huge influx of modern machinery, especially the textile mills, rendering
a lot of workers around the country jobless. Consequently, the Government came to the rescue of
such workers, promulgating the Industrial Disputes (Amendment) Ordinance, which amended
the already existing Industrial Disputes Act, 1947, by inter alia, adding specific provisions
dealing with retrenchment and layoff.1

In fact, retrenchment had not been defined prior to this. Both the repealed Trade Disputes Act,
1929 and the original Industrial Disputes Act had no mention of the concept. Thus, it was only in
1953 that it was given a statutory definition, as subsection (oo) to Section 2. Moreover, the same
Amendment Act also inserted the Chapter V-A, providing for certain specific provisions dealing
with layoff and retrenchment of workmen.2

However, subsequently, it was felt that the existing law was still inadequate in protecting
workers from large scale lay-offs, retrenchments and closures, especially by big establishments,
which was demoralizing the workforce and adversely affecting their productivity. Thus, to alter
the existing law and to put some restrictions on employers, Chapter V-B was incorporated into
the Act through an amendment in the year 1976. It contains detailed, restrictive conditions
governing the layoff, closure and retrenchment process. The Chapter, which was originally made
applicable to industrial establishments employing 300 or more workmen, was subsequently
amended in 1982 to include establishments with 100 workmen.3

1
Arghya Chattaraj, The Definition of Retrenchment – Need for Specific Legislation, LABOUR AND INDUSTRIAL
CASES, Vol. 3(8), 253 (2006).
2
In particular, the conditions for retrenchment under Section 25-F, the procedure under Section 25-G and
reemployment of retrenched workmen under Section 25-H.
3
Subhajit Bannerjee, Retrenchment, Law-Off and Closure- In the Light of the Second National Commission and
Looking Ahead, LABOUR AND INDUSTRIAL CASES, Vol. 4(10), 179 (2010).

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As argued above, the provisions pertaining to retrenchment, especially those under Chapter V-B,
were introduced to assure “prior scrutiny of the reasons for retrenchment” with a view to avoid
and prevent hardships to the “employees of unemployment, which would otherwise be the
consequences of retrenchment in industrial establishments” that employ a large number of
workmen.4 Therefore, this chapter merely laid down the conditions precedent to retrenchment of
workmen employed in industrial establishments and gives effect to the “mandate contained in
the Directive Principles enshrined in the Constitution”.5

After the introduction of this part, the constitutional validity of Chapter V-B was challenged and
was held to be ultra vires the Constitution by the Madras High Court,6 for being arbitrary and
unreasonable and hence violative of Article 19(1)(g). However, these decisions were overruled
by a five-judge bench of the Supreme Court, which resulted in an amendment to these
provisions, which came into force in 1984.7

Scope and extent of Section 2(oo): Defining Retrenchment

The definition of the term “retrenchment”, as has been defined under Section 2(oo) of the
Industrial Disputes Act, 1947, can be broadly divided into two parts. First, the exhaustive of the
two, states that “retrenchment” means “termination of service of the workman by the employer,
for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary
action” (thus the main part excludes termination of service as a measure of punishment by way
of disciplinary action from the ambit of the definition of retrenchment). 8 The second part
excludes certain, specific situations from the provision’s ambit: (i) voluntary retirement, (ii)
retirement on reaching superannuation age, (iii) non-renewal of employment contract, and (iv)
termination on ground of continued ill-health.9

The expression “termination of service for any reason whatsoever”, as used un Section 2(oo)
covers every kind of termination of service except those not expressly excluded or expressly

4
Id.
5
Bannerjee, supra note 3, at 180.
6
K.V. Rajendran v. Deputy Commissioner of Labour, Madras, (1981) Lab IC 799.
7
Workmen of Meenakshi Mills Ltd. V. Meenakshi Mills Ltd., (1992) 3 SCC 336.
8
Section 2(oo), Industrial Disputes Act, 1947.
9
Section 2(oo), Industrial Disputes Act, 1947.

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provided for by other provisions of the Act such as Section 25-F and 25-FFF. Moreover, the
management can retrench its employees only for proper reasons, which means that it must not be
actuated by any motive of victimisation or any unfair labour practice. It is for management to
decide the strength of its labour force.

Conditions for retrenchment

The Industrial Disputes Act recognises the right on employer to retrench workmen employed in
his industry, provided certain statutory requirements are fulfilled. The conditions specified under
Section 25-F of the Act are:

(a) The workman should be given one month’s 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;
(b) The workman has been paid, at the time of retrenchment, “compensation which shall be
equivalent to fifteen days’ average pay for every completed year of continuous service”;
(c) Notice, as has been prescribed by the appropriate Government.10

It is well settled that where the prerequisites for valid retrenchment as laid down in this section
have not been complied with, the retrenchment bringing about termination of services shall be
void ab initio. However, before a workman raises a grievance regarding retrenchment not being
in compliance with the provisions of Section 25-F, it is the onus of the workman to prove that
s/he has been in continuous employment/service for not less than one year, under that employer
who terminated the service.11

10
Section 25-F, The Industrial Disputes Act, 1947.
11
V.G. Goswami, LABOUR AND INDUSTRIAL LAWS, 604 (8th edn., 2004).

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JUDICIAL INTERPRETATION: FROM PIPRAICH TO PUNJAB LAND DEVELOPMENT

The interpretation of the term “retrenchment” has been a matter of great controversy in the
Indian judiciary. Prima facie, it may appear from its definition that retrenchment may include
every kind of termination. However, the judicial interpretation has lent a different interpretation
to this word. Moreover, the presence of the term “for any reason whatsoever” seems to have
added fuel to the debate regarding its scope.

Narrow Interpretation: Pipraich and Hariprasad Shivshankar Shukla

In one of the first cases on this issue arising before the Supreme Court even before the
amendment, the Supreme Court was faced with the question of “whether a discharge of
workmen on closure of business amounted to retrenchment”.12 Answering the question in
negative, the Court explained that “retrenchment connoted in its ordinary acceptation that the
business itself was being continued but a portion of the labour force is discharged as
surplusage”.13 (emphasis supplied)

Notably, the first landmark decision came in the year 1957, in Hariprasad Shivshankar Shukla v.
A.D. Divalkar,14 where the scope of the definition of retrenchment was decided by a five-judge
bench of the Supreme Court. In this case, the Court dealt with two appeals, one relating to claim
for compensation made by an employee on the transfer of a Railway undertaking and the other
relating to claim for compensation made, under Section 25-F, on closure of mill. S.K. Das, J.,
held that:

“retrenchment, as defined under Section 2(oo) and used is Section 25(f) has no wider meaning
than the ordinary accepted connotation of the word: it means the discharge of surplus labour or
staff by the employer for any reason whatsoever otherwise than as a punishment inflicted by way

12
Pipraich Sugar Mills Ltd. V. Pipraich Sugar Mills Mzadoor Union [“Pipraich”], AIR 1957 SC 95.
13
Pipraich Sugar Mills Ltd. V. Pipraich Sugar Mills Mzadoor Union [“Pipraich”], AIR 1957 SC 95.
14
Hariprasad Shivshankar Shukla v. A.D. Divalkar, AIR 1957 SC 121.

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of disciplinary action, and it has no application where the services of all workmen have been
terminated by the employer.”15

Thus, insofar as closure of business was concerned, the dictum of Pipraich was upheld.
However, more importantly, it is observed that the Court gave a narrow, restrictive interpretation
to concept of retrenchment under the Industrial Disputes Act.16 In this regard, it was also held
that the words “for any reason whatsoever” actually meant for any reason which was connected
with the economy whatsoever.17 In fact, in a later case, the Supreme Court held that workmen
may become surplus “on the ground of rationalisation or economy reasonably or bona fide
adopted by the management or on the ground of other industrial or trade reasons”.18

The aforementioned narrow view of the law taken by the Supreme Court led to a lot of difficulty
for the workmen, who were rendered unemployed by reasons of a transfer of management or
closure of the concern, deprived of any kind of compensation. Consequently, the parliament
stepped in for the aid of workmen, Accordingly, section 25FF (compensation to workmen “in
case of transfer of undertakings”) and 25FFF (Compensation in case of closing down of
undertaking) were inserted, eventually proving for the payment of compensation to workers
under circumstances where the undertaking was closed or transferred, as though the workers had
been retrenched.

However, it is imperative to note that while the effect of such amendments was that the
termination of services owing to the transfer or closure, for the purposes of notice and
compensation, was treated by the parliament as “deemed retrenchment”, yet by virtue of the
Supreme Court’s decisions, such cases “did not fall within the definition of retrenchment under
Section 2(oo)”.19 But an alternative view suggests that the Supreme Court decision in Hariprasad
Shukla has in fact been impliedly overruled by the amendment.

15
Hariprasad Shivshankar Shukla v. A.D. Divalkar [“Hariprasad Shukla”], AIR 1957 SC 121.
16
The fact that in interpreting Section 2(oo) so narrowly, the Court seems to have overlooked the qualifying clause
“otherwise than as punishment inflicted by way of disciplinary action”, has been subject to criticism.
17
Chattaraj, supra note 1, at 254.
18
Parry and Co. Ltd. V. P.C. Pal, AIR 1970 SC 1334.
19
Fauza Shakil, Concept of Retrenchment Under the Industrial Disputes Act, From Pipraich case to Punjab Land
Development case: A Critique, LABOUR AND INDUSTRIAL CASES, Vol. 3, 130 (2005).

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Changing judicial trends: Sundara Money Onwards

The discussion on the scope of the definition of retrenchment under the Industrial Disputes Act
was reopened in the case of State Bank of India v. N. Sundara Money,20 a decision which marked
a drastic shift in the judicial trend with regard to interpretation of the definition of retrenchment.

In this case, the Court was faced with the question whether an order of appointment of a
temporary workman which carried a provision for automatic cessation of work. and whether the
employment having been terminated accordingly (by efflux of time), amounted to retrenchment
under the Act? Affirming the workman’s contention, the Court through Justice Krishna lyer
stated that “a breakdown of Section 2(oo) unmistakably expands the semantics of retrenchment
[...] whatever the reason, every termination spells retrenchment.”21 Accordingly, termination of a
worker as per Section 2(oo) of the act “was not confined to cases” where an employer, by his
active steps, terminated the services of a workman, but included an automatic cessation of
service as well. The Apex Court based its decision on the construction of the words “for any
reason whatsoever” as “very wide and almost admitting of no exceptions”.22 Interestingly, the
judgment did not go into the concept in detail greater than this, nor did it refer to any limitation
as imposed on these words by cases such as Pipraich23 and Hariprasad Shivshankar Shukla.24 As
per OP. Malhotra, the Court seemed to have been swayed by the unfair conduct of the
employer.25

Such a liberal and expansive definition of retrenchment as given in this case had large-scale
implications. Thus, in Delhi Cloth and General Mills Ltd v. Shambhu Nath Mukhejee,26 the
Supreme Court enlarged the definition of retrenchment under Section 2(oo) and held that striking
off the name of the workman from the rolls by the management is retrenchment within the
meaning of the section. Similarly, in Hindustan Steel Ltd. v. State of Orissa,27 an enlarged

20
State Bank of India v. N. Shankara Money, AIR 1976 SC 1111.
21
State Bank of India v. N Sundara Money, AIR 1976 SC 1111.
22
State Bank of India v. N Sundara Money, AIR 1976 SC 1111.
23
Pipraich, AIR 1957 SC 121.
24
Hariprasad Shukla, AIR 1957 SC 121.
25
E.M. Rao, O.P. MALHOTRA’S: THE LAW OF INDUSTRIAL DISPUTES, Vol. 1, 419 (6th edn., 2004).
26
Delhi Cloth and General Mills Ltd v. Shambhu Nath Mukhejee, AIR 1978 SC 8.
27
Hindustan Steel Ltd. v. State of Orissa, AIR 1977 SC 31.

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definition of retrenchment, as propounded by Sundara Money’s case,28 was upheld. The Supreme
Court observed that the decision in Hariprasad Shukla, was only that the words ‘for any reason
whatsoever’ used in the definition would not include a bona fide closure of ta whole business
because that would affect the entire scheme of the Act. More notably, in Santosh Gupta v. State
Bank of Patiala,29 the Supreme Court while discountenancing the contention that retrenchment
means a discharge of workmen on account of surplusage, once again upheld Sundrara Money’s
dictum. Countering that suggestion for a restricted definition of the term, the Court stated that
“we cannot assume that the Parliament was undertaking an exercise in futility, to give a long-
worded definition, merely to say that the expression means what it always meant”.30

Current law: Punjab Land Development

Since the interpretation of Section 2(oo) was still ambiguous in terms of an explicit, authoritative
judicial decision, a pronouncement to that effect was necessary. In 1990. a Constitution bench of
the Apex court got an opportunity to discuss the scope of Section 2(oo) in the case of Punjab
Land Development and Reclamation Corporation Ltd. v. Presiding Officer, Labour Court.31 The
judgment was delivered for a number of cases involving different fact situations, clubbed
together because they involved a common question of law i.e., “whether on a proper
construction of the definition of retrenchment in Section 2(oo) of the Industrial Disputes Act, it
meant termination of service by the employer for any reason whatsoever, or termination of
service of the workman only on account of surplusage”.32 In other words, the question to be
decided before the court was whether the word ‘retrenchment’ in the definition had to be
understood in it narrow, natural and contextual meaning (the Hariprasad Shukla ruling) or in its
wider, literal sense (the Sundra Money ruling).

However, interestingly, the Supreme Court drew a distinction between the scopes of the
decisions in these two judgments. Accordingly, it held that Hariprasad Shukla33 was no

28
State Bank of India v. N. Sundara Money, AIR 1976 SC 1111.
29
Santosh Gupta v. State Bank of Patiala, AIR 1980 SC 1219.
30
Santosh Gupta v. State Bank of Patiala, AIR 1980 SC 1219.
31
Punjab Land Development and Reclamation Corporation Ltd. v. Presiding Officer, Labour Court, (1990) 3 SCC .
32
Punjab Land Development and Reclamation Corporation Ltd. v. Presiding Officer, Labour Court, (1990) 3 SCC
682.
33
Hariprasad Shukla, AIR 1957 SC 121.

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“authority for the proposition that Section 2(oo) covered only cases of labour surplusage”, its
actual ratio being limited to the scope of retrenchment in cases of closure of an undertaking.
Thus, in effect. the court stated that it was in fact Sundara Money’s case34 which first considered
and laid down the true scope of the definition of retrenchment under Section 2(oo), and therefore
Hariprasad Shukla was no authority on the same.35

Therefore, based on the above reasoning and by applying the principle of judicial restraint as
enunciated by the House of Lords in Duport Steels v. Sirs,36 the Court held that retrenchment
meant the termination by the employer of the service of a workman for any reason whatsoever,
except those expressly excluded by the provision. It thus follows that if the case of termination of
the workman comes within any of the exceptions enumerated within the section, only then will
the said termination not be a case of retrenchment within the meaning of Section 2(oo) of the
Act.37 Therefore, while nullifying the effect of the Hariprasad Shukla dictum and upholding the
law as laid down in Sundara Money, the Supreme Court quoted with approval the following
statement from a previous decision:

“We are inclined to hold that the stage has come when the view indicated in the Sundara Money
case has been absorbed into consensus and there is no scope for putting the clock back or for an
anti-clockwise operation”.38

Private and Public Sector Workmen

In yet another aspect of the employer’s right to retrench his workmen, an imbalanced situation
seems to have been created in respect of public sector and private sector workmen. In Uptron
India Ltd. v. Shammi Bhan,39 the Supreme Court held that the services of a permanent employee
employed by the government, or a government company or instrumentality within the meaning

34
State Bank of India v. N. Sundara Money, AIR 1976 SC 1111.
35
Per Saikia J., “infact the question whether retrenchment did or did not include other termination was never
required to be decided in Shukla and could not, therefore, have been or taken to have been decided by this court ”.
Punjab Land Development and Reclamation Corporation Ltd. V. Presiding Officer, Labour Court, [“Punajb Land
Development”], (1990) 3 SCC 682.
36
Duport Steels v. Sirs, (1980) I WLR 142, (House of Lords).
37
Goswami, supra note 11, at 619.
38
Punjab Land Development and Reclamation Corporation Ltd. V. Presiding Officer, Labour Court, (1990) 3 SCC
682.
39
Uptron India Ltd. v. Shammi Bhan, AIR 1998 SC 1681.

PAGE | 13 [ LABOUR LAW- I]

of Article 12 of the Constitution could not be terminated abruptly either by giving him notice or
pay in lieu thereof, notwithstanding that “there may be a stipulation to that effect either in the
contract of service or in the certified standing orders”.40

It is submitted that this judgment marked a turning point for workmen employed in public sector
industries. Nevertheless, it appears to be discriminatory to accord Constitutional protection
against arbitrary termination to public sector workmen only, leaving the private sector workmen
at the mercy of the employer.41

40
Uptron India Ltd. v. Shammi Bhan, AIR 1998 SC 1681.
41
D.K. Bhatt, Industries and Retrenchment of Workmen: Trends and Prospects, JOURNAL OF THE INDIAN LAW
INSTITUTE, Vol. 42(1), 96 (2000).

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 CRITICISM AND LABOUR COMMISSION RECOMMENDATIONS

The wide meaning given by the Supreme Court to the term ‘retrenchment’ has been subject to a
lot of criticism, including by eminent industrial jurists like O.P. Malhotra. He contends in as
many words that the decisions in cases like Sundara Money, Delhi Cloth Mills, Santosh Gupta
and the like were wrongly decided, not being in conformity with the ratio of the live judge bench
in Hariprasad Shukla,42 where the Supreme Court stated, in essence, that unless there is
discharge of surplus labour or staff, there can be no retrenchment. However. none of the
subsequent cases as aforementioned related to discharges of surplus labour. In fact, they were all
held to be falling within the scope of “retrenchment” under the Industrial Disputes Act.43

It is thus submitted that the Court misunderstood the ratio of Hariprasad Shukla44 and mistakenly
concluded that the decision was only applicable to cases where there was a closure or transfer of
management. Moreover, the restriction of the decision of a Constitution Bench, to any particular
fact, situation, is an outrageous proposition. In the Punjab Land Development case,45 while
limiting the scope of Hariprasad Shukla, the Supreme Court seems to have overlooked the
explicit wording of the Constitution Bench, which, in paragraph 25 of the judgment categorically
and unequivocally stated:

“In no case is there any retrenchment, unless there is discharge of surplus labour or staff in a
confirming running industry we hold that retrenchment as defined in Section 2(oo) and as used
in Section 25-F has no wider meaning than the ordinary accepted connotation of the word”.46

Furthermore. while the Punjab Land Development judgment,47 may be argued to be in favour of
workmen, its criticism also stems from the possible potential for misuse of such a wide
interpretation of retrenchment provisions, which came to be used by them to get even valid

42
Hariprasad Shukla, AIR 1957 SC 121.
43
Rao, supra note 25, at 423.
44
Hariprasad Shukla, AIR 1957 SC 121.
45
Punjab Land Development and Reclamation Corporation Ltd. V. Presiding Officer, Labour Court, (1990) 3 SCC
682.
46
Per S.K. Das, J., Hariprasad Shukla, AIR 1957 SC 121.
47
Id.

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termination orders invalidated. Moreover, it was also felt that the intention of the legislature with
regard to an important social security measure had been rendered inoperative by such decisions.48

In this regard, the Report of the Second National Commission on Labour in 2002, recommended
inter alia, the negation of this expansive literal interpretation as given by the Apex Court. It was
stated that the term ‘retrenchment' should be defined precisely to cover only termination of
employment arising out of reduction of surplus workers in an establishment, such surplus having
arisen out of one or more of several reasons. 49 (This recommendation was incorporated into the
definition of retrenchment under the draft law on Labour Management Relations).50

Thus, the definition of retrenchment given by the Labour Commission clearly supports the
Constitution Bench decision in the Hariprasad Shivshankar Shukla case,51 effectively negating
the expansive definitions given in Sundara Money52 and Punjab Land Development53 cases. In
this context, the researcher submits that it is imperative that the legislature incorporates into the
statute such recommendations, to put an end to the controversy that has engulfed the
retrenchment provisions ever since their incorporation.

48
Punjab Land Development and Reclamation Corporation Ltd. V. Presiding Officer, Labour Court, (1990) 3 SCC
682.
49
National Commission on Labour, THE REPORT OF THE NATIONAL COMMISSION OF LABOUR, ¶ 6.43 (2002).
50
THE LABOUR MANAGEMENT RELATIONS ACT, 2002 (Not enacted as of date)
(AS PROPOSED BY THE SECOND NATIONAL COMMISSION ON LABOUR)
Section 2(v):
“Retrenchment means the termination by the employer of services of a worker on account of
surplusage of man power and does not include:
(i) Termination of service of a worker by way of punishment on account of misconduct;
(ii) Voluntary retirement or resignation;
(iii) Retirement of a worker on reaching the age of superannuation in terms of contract
of employment. rules or standing orders. applicable to the worker.
(iv) Termination of the services of a worker on grounds of ill-health;
(v) Termination of services of a worker as a result of the contract of employment or
the termination of contract under stipulation in that behalf contained therein.”
51
Hariprasad Shukla, AIR 1957 SC 121.
52
Sundara Money, AIR 1976 SC 1111.
53
Punjab Land Development, (1990) 3 SCC 682.

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 CONCLUSION

Despite an inherent dynamism annexed to its social dimension, law can be accredited to be good
law only when it is certain. Frequent judicial vacillations in interpreting any law renders it
precarious, which breeds both confusion and discontent in the minds of those effected. It is
submitted that the same has been the case with the law relating to retrenchment, ever since the
concept was incorporated into statute, in 1953.

An imprecise definition of the pivotal term ‘retrenchment’ under the Industrial Disputes Act has
resulted in much ambiguity and confusion as to its application and consequences in different
situations of termination of service of workmen. The great mass of contradictory judgments,
starting from Pipraich and Hariprasad Shukla to Punjab Land Development, has not helped in
clarifying the mist surrounding the enigmatically nebulous wordings of the statutory definition,
which, with the inclusion of the words ‘for any reason whatsoever" is greatly subjective. In fact,
the Constitution Bench decision of Hariprasad Shukla sincerely endeavoured to channelize the
law, which was effectively overlooked by subsequent decisions including Sundara Money, a
decision much criticised.

It is submitted that this confusion will continue to subsist unless concrete efforts are made by
amendments to the Act itself through law reforms. From an analysis of the provisions, it is amply
clear that it could not have been the intention of the legislature to make retrenchment
synonymous with a discharge simpliciter. If the observation made in Santosh Gupta’s case that
“every termination of the service of a workman by the act of the employer is retrenchment” is
correct, then the termination of the service of an individual workman will be virtually impossible
and absurd consequences, by applying the provisions of Ss. 25-G, 25- H, 25-N and 25-Q will
follow. Thus, it is submitted that the recommendations of the second Labour Commission need
to be seriously considered, and crystallised in the form of an amendment to positively affect
labour rights legislation and put an end to the confusion surrounding retrenchment.

PAGE | 17 [ LABOUR LAW- I]

 BIBLIOGRAPHY

Books
 E.M. Rao, O.P. MALHOTRA’S: THE LAW OF INDUSTRIAL DISPUTES , Vol. 1, (6th edn.,
2004).

 S.C. Srivastava, INDUSTRIAL RELATIONS AND LABOUR LAWS, (5th edn., 2007).

 V.G. Goswami, LABOUR AND INDUSTRIAL LAWS (8th edn., 2004).

Articles
 Arghya Chattaraj. The Definition of Retrenchment- Need for Specific Legislation,
LABOUR AND INDUSTRIAL CASES, Vol. 3(8), (2006).

 D.K. Bhatt, Industries and Retrenchment of Workmen: Trends and Prospects, JOURNAL
OF THE INDIAN LAW INSTITUTE, Vol. 42(1), 96 (2000).

 Fauza Shakil, Concept of Retrenchment Under the Industrial Disputes Act, From
Pipraich case to Punjab Land Development case: A Critique, LABOUR AND INDUSTRIAL

CASES, Vol. 3, (2005).

 Subhajit Banteee. Retrenchment, Lay-Off and Closure- In the Light of the Second
National Commission and Looking Ahead, LABOUR AND INDUSTRIAL CASES, Vol. 4(10),
(2010).

Reports

 National Commission on Labour, THE REPORT OF THE NATIONAL COMMISSION OF

LABOUR (2002).

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