Compliance with S. 25F(c) ID Act Not Always Mandatory When Wages Paid In Lieu of Notice: MP High Court - 2024-11-08

MP High Court Clarifies Retrenchment Conditions Under ID Act, Upholds Employer 's Action

Gwalior , MP: The Madhya Pradesh High Court has set aside a Labour Court award directing the reinstatement of a daily-rated employee, clarifying the conditions precedent for retrenchment under Section 25F of the Industrial Disputes Act, 1947 (ID Act). The court held that compliance with Section 25F(c) – serving notice on the appropriate government – may not be mandatory when an employer chooses to pay wages in lieu of notice under Section 25F(a).

The ruling came in a petition filed by the Krishi Upaj Mandi Samiti, challenging the Labour Court's award from May 2, 2018, which had ordered the reinstatement of the respondent employee (a daily-rated Nakedar) with 50% back wages.

Case Background

The employee was initially appointed on a daily-rate basis in October 1992 and was orally removed in November 1994. The employee initiated conciliation proceedings only in 2009, some 15 years later, which failed. This led to a dispute before the Labour Court. In its award dated July 26, 2010, the Labour Court ordered reinstatement but granted the employer liberty to retrench the employee after complying with Section 25F of the ID Act. Back wages were denied in this initial award because the employee was found to be working in a private school.

The employer initially did not comply with the 2010 award, leading the employee to seek remedies. A Division Bench of the High Court, in June 2011, directed the employer to first reinstate the employee and then pass any suitable order. Following this, the employer reinstated the employee in September 2011 but subsequently retrenched him on August 16, 2012, paying a total of Rs. 27,652/-, which included retrenchment compensation and one month's salary in lieu of notice, claiming compliance with Section 25F. A copy of this retrenchment order was also sent to the Labour Commissioner.

The employee challenged this retrenchment, leading to the second round of litigation and the Labour Court award in 2018, which is the subject of the current petition before the High Court.

Arguments Presented

The petitioner-employer contended that they had complied with Section 25F by paying compensation and wages in lieu of notice. They argued that Section 25F(c) (notice to government) is directory, citing the Supreme Court judgment in Pramod Jha and others v. State of Bihar . Further, they argued that Section 25G (last come, first go principle) was not applicable as the junior employee cited by the Labour Court was a permanent, regular employee, not a daily-rated worker like the respondent. They also claimed Section 25N (requiring prior permission for retrenchment in larger establishments) was not applicable as the Mandi Samiti is not an 'industrial establishment' under the relevant definitions, citing a prior High Court judgment in Dilip v. Commissioner, M.P. Housing Board . The employer also highlighted the employee's 15-year delay in raising the initial dispute and his gainful employment elsewhere.

The respondent-employee, supporting the Labour Court award, argued that the retrenchment was illegal and that the post was still required. Crucially, they argued that compliance with Section 25F(c) is mandatory, relying on the Supreme Court's decision in Raj Kumar v. Director of Education and others .

High Court's Analysis and Findings

The High Court carefully reviewed the timeline of events and the prior court orders. The court acknowledged the apparent conflict between the Pramod Jha and Raj Kumar judgments regarding the mandatory nature of Section 25F(c).

However, the court distinguished the Raj Kumar case based on the facts. In Raj Kumar , the employer had given the workman one month's notice in writing under Section 25F(a). Rule 76 of the Industrial Disputes (Central) Rules, 1957, mandates that when notice is given to the workman, notice to the appropriate authority under 25F(c) must be sent within three days from that date.

In contrast, the High Court noted that in the present case, the employer chose the alternative provided by Section 25F(a) – paying wages for the period of notice in lieu of giving notice . The court interpreted the word "OR" in Section 25F(a) to be crucial. It reasoned that if the employer dispenses with giving written notice by paying wages, the requirement for notice under Section 25F(c) is not attracted in the same manner as when written notice is given. According to the court, a contrary interpretation would render the word "OR" in Section 25F(a) redundant.

The court also observed that the employer had, in fact, sent a copy of the retrenchment order (which included details of the payment) to the Labour Commissioner, indicating some form of communication with the appropriate government.

Regarding Section 25G (last come, first go), the court agreed with the employer that the cited junior employee was not similarly situated, being a regular, permanent employee while the respondent was daily-rated. The court also noted that the prior Labour Court award itself had given liberty to the employer to proceed with retrenchment under Section 25F, providing a valid reason for the retrenchment action outside the strict 'last come, first go' hierarchy of daily-rated workers.

The court further reaffirmed that Section 25N is not applicable to entities like the Krishi Upaj Mandi Samiti, citing the Dilip judgment. Finally, the court reiterated the initial delay of 15 years in raising the dispute and the employee's employment elsewhere as significant factors that the Labour Court had not properly considered in its 2018 award, particularly concerning the grant of 50% back wages.

Decision

Based on its analysis, the Madhya Pradesh High Court concluded that the employer had substantially complied with the requirements of Section 25F of the ID Act when retrenching the employee in 2012. The court found the Labour Court's award from 2018 to be perverse and contrary to the record and previous court orders.

Consequently, the High Court set aside the Labour Court award dated May 2, 2018, and upheld the employer's retrenchment order dated August 16, 2012. The court also clarified that any payments made to the employee under Section 17B during the pendency of the proceedings, if he was not gainfully employed, would be governed by that section and would not be recoverable.

The petition was allowed and disposed of in these terms.