Section 25FFF of Industrial Disputes Act 1947 - Compensation to Workmen on Closure
Section 25FFF of the Industrial Disputes Act, 1947 dealt with the right of eligible workmen to notice and compensation when an undertaking was closed down. This article explains the provision in the legal framework applicable before the Bharatiya Sakshya Adhiniyam, 2023 came into force.
Meaning and scope of Section 25FFF
Section 25FFF addressed compensation when an undertaking closed. In general, a workman who had been in continuous service for not less than one year immediately before closure was entitled, subject to the section, to notice and compensation in accordance with Section 25F as if the workman had been retrenched.
The provision should not be confused with Section 25FFA, which dealt with advance notice of an employer's intention to close down an undertaking. Section 25FFF principally dealt with the workman's compensation consequences of closure.
Section 25FFF - compensation to workmen in case of closing down of undertakings
Sub-section (1): Where an undertaking is closed down for any reason whatsoever, every workman who has been in continuous service for not less than one year in that undertaking immediately before closure is, subject to sub-section (2), entitled to notice and compensation in accordance with Section 25F as if the workman had been retrenched.
Where closure is on account of unavoidable circumstances beyond the control of the employer, the compensation payable under Section 25F is subject to the statutory ceiling of average pay for three months.
The statutory explanation provides that closure merely because of financial difficulties, including financial losses; accumulation of undisposed stocks; expiry of a lease or licence; or, for a mining undertaking, exhaustion of minerals in the relevant area, is not by itself treated as closure due to unavoidable circumstances beyond the employer's control for this purpose.
How Section 25F applies to closure compensation
Section 25FFF incorporated the notice and compensation standard of Section 25F. Under the central provision, Section 25F required one month's notice in writing stating the reasons for retrenchment, or wages in lieu of notice, and retrenchment compensation equivalent to fifteen days' average pay for every completed year of continuous service or any part exceeding six months, together with the prescribed notice to the appropriate Government or specified authority.
Section 25B contained the statutory rules for determining continuous service. Whether a particular workman satisfied the one-year requirement therefore depended on the facts and the statutory test of continuous service.
Unavoidable circumstances beyond the employer's control
The proviso to Section 25FFF(1) limited compensation where an undertaking closed because of unavoidable circumstances beyond the employer's control. The explanation narrowed that exception by expressly excluding specified commercial or operational reasons from being treated, merely by themselves, as such unavoidable circumstances.
Mining undertakings - sub-sections (1A) and (1B)
For a mining undertaking closed merely because minerals in the relevant area were exhausted, sub-section (1A) provided an exception from notice or compensation under Section 25F where all statutory safeguards concerning alternative employment were satisfied. These included alternative employment from the date of closure at the same remuneration and on the same service conditions, no interruption of service, and preservation of the employer's liability to calculate any later retrenchment compensation on the basis of uninterrupted continuous service.
Sub-section (1B) adopted the meanings of "minerals" and "mining operations" assigned by clauses (a) and (d) of Section 3 of the Mines and Minerals (Development and Regulation) Act, 1957.
Construction undertakings - sub-section (2)
Where an undertaking established for construction of buildings, bridges, roads, canals, dams or other construction work closed because the work was completed within two years from the date the undertaking was set up, the provision excluded compensation under Section 25F(b). If the construction work was not completed within that two-year period, the workman became entitled to notice and compensation under Section 25F for every completed year of continuous service or any part exceeding six months, subject to the statutory conditions.
State amendments retained from the source page
Andhra Pradesh
The source page records an Andhra Pradesh amendment inserting a proviso that prior payment of compensation to the workman is a condition precedent to closure of an undertaking, with the existing proviso correspondingly becoming a further proviso, referring to Andhra Pradesh Act No. 32 of 1987.
West Bengal
The source page records a West Bengal amendment inserting a proviso that prior payment of compensation to workmen is a condition precedent to closure of an undertaking, with the existing proviso becoming a further proviso, referring to West Bengal Act No. 57 of 1980.
Related provisions
For the surrounding statutory scheme, see Section 25B - continuous service, Section 25F - conditions precedent to retrenchment, and the main Industrial Disputes Act 1947 page.
This article explains the historical statutory provision for general legal information. Application of labour law may depend on the date of closure, establishment, jurisdiction, state amendments and subsequent labour-code commencement.