Procedural Requirements Of Retrenchment Notice And Payment In Lieu Of Notice Must Be Fulfilled Under Both S. 25F of ID Act And State Rules: Gujarat High Court

The Gujarat High Court division bench of Justice Biren Vaishnav and Justice Pranav Trivedi summarily dismissed an appeal filed against Trivedi Crafts, an Ahmedabad-based marble dealer. The bench perused Section 25F of the Industrial Disputes Act and Rule 80B of the Industrial Disputes (Gujarat) Rules, 1996 and held that the procedural requirements of retrenchment were duly followed by providing notice in the prescribed form and offering one month's wages to the affected workers in lieu of notice.

Section 25F of the ID Act provides conditions precedent to the retrenchment of workmen. These conditions include providing the workman with one month's written notice or wages in lieu of notice, paying compensation equivalent to fifteen days' average pay for each completed year of service, and serving notice to the appropriate government authority.

Rule 80-B of the Industrial Disputes (Gujarat) Rules prescribes Form XXIV for releasing the notice of retrenchment. Further, it indicates that if such a notice is not given within 7 days of retrenchment, the workmen must be paid wages in lieu of such notice.

Brief Facts:

The Workmen, members of a Trade Union, were working at Trivedi Crafts (“Management”). The Management had employed 93 persons from the same Trade Union for different roles. To reduce costs and expenses, the Management decided to retrench 51 employees, including the Workmen. Notices for the retrenchment were posted on the notice board. However, the Workmen refused to accept the retrenchment orders and the proposed retrenchment dues. The Trade Union also raised a dispute, on behalf of the 51 employees, in the Labour Court.

During the pendency of the dispute, 45 helpers reached a settlement, but the 6 concerned Workmen refused to settle and proceeded with the reference. Subsequently, the Labour Court issued an award, directing the reinstatement of the 6 Workmen to their original positions with continuity of service and awarded them 15% back wages. However, the Labour Court rejected the reference concerning the other workers who had settled the dispute.

Dissatisfied with the award, the Management filed a writ petition before the High Court of Bombay. After considering various provisions of the Industrial Disputes Act, the High Court (single bench) concluded that the Labour Court had erroneously interpreted Section 25F of the Industrial Disputes Act and Rule 80B of the Industrial Disputes (Gujarat) Rules, 1966. Consequently, the award was quashed and set aside.

Feeling aggrieved, the Workmen filed an appeal against the single-judge bench decision of the Bombay High Court in the High Court of Gujarat (“High Court”).

Contentions of the Workmen (Appellants):

The Workmen argued that the interpretation of Section 25F of the ID Act alongside Rule 80-B of the Industrial Disputes (Gujarat) Rules, 1966 by the labour court was correct. Secondly, the Management failed to provide notice before the retrenchment of the Workmen, which constituted a clear breach of the ID Act. Further, such retrenchment should not have been permissible without due consideration for the livelihoods of the affected workers.

Contentions of the Management:

The Management argued that the single judge of the Bombay High Court accurately interpreted Section 25F of the ID Act along with Rule 80-B of the Industrial Disputes (Gujarat) Rules, 1966, particularly highlighting sub-clause (ii) of Rule 80-B. According to the Management, the prescribed procedure during the retrenchment process was adhered to. Further, the actions taken were in accordance with the provisions outlined in the Act and the accompanying rules.

Observations by the Gujarat High Court:

The High Court acknowledged that the Management decided to retrench workers due to an excess in the workforce and ongoing reconstitution. In this context, notice was issued on January 10, 1998, to the workers slated for retrenchment. Additionally, on the same date, the Management complied with Section 25F of the Act by offering one month's wages in lieu of notice through Banker's cheques to the affected workers. Therefore, the central issue before the High Court was whether the proper procedural requirements, as stipulated in Rule 80-B of the Industrial Disputes (Gujarat) Rules, were followed.

Upon examining the provisions of Section 25F of the ID Act alongside Rule 80-B of the Industrial Disputes (Gujarat) Rules, particularly sub-clause (ii) of clause (I) of Rule 80-B, it became apparent that the employer must serve notice within seven days of retrenchment if wages are paid in lieu of notice. In this case, the Workmen were indeed paid wages in lieu of notice on the same day as the retrenchment, i.e., January 10, 1998, and notice was issued accordingly on the same date. Therefore, the Labour Court's assertion that notice should have been given seven days before retrenchment was deemed unjustified.

Furthermore, Rule 80-B stipulates that notice must be given in the prescribed format, Form No. XXIV. It was confirmed through the documents on record that such notice was indeed provided promptly and in the prescribed format.

Thus, the contention put forth by the Management, asserting compliance with procedural aspects, was deemed valid. Consequently, the appeal was summarily dismissed and the order of the single judge of the Bombay High Court was upheld.

Case Title: Bhimnath R Yadav and Ors. Vs Trivedi Crafts Pvt. Ltd. and Anr.

LL Citation: 2024 LiveLaw (Guj) 50

Case No.: R/Letters Patent Appeal No. 196 of 2023 in R/Special Civil Application No. 9410 of 2013 with Civil Application (For Stay) No. 2 of 2022 in R/Letters Patent Appeal No. 196 of 2023

Advocate for the Appellants: Mr Yogen Pandya

Advocate for the Management: Mr DG Shukla and Ms Meshwa Bhatt (For R1)

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