Section 25N of Industrial Disputes Act 1947 - Conditions Precedent to Retrenchment

Section 25N formed part of Chapter V-B of the Industrial Disputes Act, 1947. It imposed special conditions before an employer could retrench a workman with at least one year of continuous service in an industrial establishment to which Chapter V-B applied.

Historical legal scope: This article explains Section 25N under the legal position applicable before the Bharatiya Sakshya Adhiniyam, 2023 came into force on 1 July 2024. That enactment concerns evidence law and did not itself amend Section 25N. State amendments, rules, notifications and the law applicable on the relevant date must also be checked.

What is Section 25N?

Section 25N was titled "Conditions precedent to retrenchment of workmen." The provision combined notice or wages in lieu of notice with a requirement of prior governmental permission and prescribed a detailed procedure for deciding the permission application.

Section 25N(1) - Conditions before retrenchment

A workman employed in an industrial establishment to which Chapter V-B applied, who had been in continuous service for not less than one year under the employer, could not be retrenched until both statutory requirements were satisfied:

  • Three months' notice or wages in lieu: the workman had to receive three months' written notice indicating the reasons for retrenchment and the notice period had to expire, or wages for that notice period had to be paid in lieu.
  • Prior permission: prior permission of the appropriate Government or the authority specified by it through Official Gazette notification had to be obtained on an application made for that purpose.

Meaning of retrenchment and continuous service

Retrenchment was defined in Section 2(oo) of the Industrial Disputes Act, subject to the exclusions contained in that definition. Continuous service was dealt with in Section 25B. These provisions were important when determining whether Section 25N applied to a particular termination and whether the workman satisfied its service requirement.

Section 25N(2) - Employer's application

The employer had to make the permission application in the prescribed manner and clearly state the reasons for the intended retrenchment. A copy of the application also had to be served simultaneously on the workmen concerned in the prescribed manner.

Section 25N(3) - Enquiry, hearing and written decision

After receiving the application, the appropriate Government or specified authority could conduct such enquiry as it considered fit. A reasonable opportunity of being heard had to be given to the employer, the workmen concerned and persons interested in the retrenchment.

The authority was required to consider the genuineness and adequacy of the employer's reasons, the interests of the workmen and all other relevant factors. Permission could then be granted or refused by a reasoned written order, a copy of which had to be communicated to the employer and workmen.

Section 25N(4) - Deemed permission after 60 days

If an application under Section 25N(1) had been made and no order granting or refusing permission was communicated to the employer within 60 days from the date of the application, the permission applied for was deemed to have been granted on expiry of that period.

Section 25N(5) - Finality and one-year operation

Subject to the review or reference provision in sub-section (6), an order granting or refusing permission was final and binding on all parties concerned and remained in force for one year from the date of the order.

Section 25N(6) - Review or reference to Tribunal

The appropriate Government or specified authority could review its order either on its own motion or on an application by the employer or any workman. Alternatively, it could refer, or cause the matter to be referred, to a Tribunal for adjudication. Where a reference was made, the proviso required the Tribunal to pass an award within 30 days from the date of reference.

Section 25N(7) - Illegal retrenchment

If no required permission application was made, or if permission for the retrenchment was refused, the retrenchment was deemed illegal from the date on which the notice of retrenchment was given. The workman was entitled to all benefits under the law for the time being in force as if no retrenchment notice had been given.

Section 25N(8) - Exceptional circumstances

The appropriate Government could direct that Section 25N(1) would not apply to an establishment for a specified period if exceptional circumstances made such a direction necessary. The statutory examples included an accident in the establishment or death of the employer.

Section 25N(9) - Retrenchment compensation

Where permission was granted under sub-section (3), or deemed to have been granted under sub-section (4), every workman employed in the establishment immediately before the date of the permission application was entitled, at the time of retrenchment, to compensation equivalent to 15 days' average pay for every completed year of continuous service or any part thereof in excess of six months.

Section 25N and Section 25F

Section 25F prescribed general conditions precedent to retrenchment for qualifying workmen under Chapter V-A. Section 25N was the special Chapter V-B provision for establishments within its scope and imposed the additional prior-permission regime together with the three-month notice requirement and its own compensation provision.

Relationship with Sections 25K and 25L

Section 25K determined application of Chapter V-B, while Section 25L supplied Chapter-specific definitions, including the meaning of industrial establishment and a special rule for identifying the appropriate Government.

Rajasthan State amendment

The source page records Rajasthan Act No. 8 of 1984 making detailed State-specific modifications to Section 25N. It extended the provision to establishments brought within Chapter V-B under the Rajasthan amendment to Section 25K and substituted a State-specific permission mechanism.

The historical Rajasthan text required three months' written notice stating the reasons for retrenchment to be served on the State Government or specified authority by registered post with acknowledgement due, with permission obtained under the amended procedure. On receipt, the State Government or authority could make an enquiry and had to give reasonable opportunity of hearing to the employer, workman and office-bearer of the representative union of the concerned industrial establishment.

The Rajasthan decision-making criteria reproduced in the source included the genuineness and adequacy of the employer's reasons, requirements of industrial peace, prevention of victimisation and unfair labour practice. The order had to record reasons and be communicated to the employer, workman and representative-union office-bearer.

The source further records that an order granting or refusing permission was, subject to review, final and binding and remained in force for one year. The State Government or authority could review its order or refer the matter to a Tribunal, which was required to pass an award within 30 days of reference. The Rajasthan amendment also renumbered and modified other sub-sections. The exact State text and subsequent amendments applicable to the relevant date should be verified before reliance.

Practical checklist for Section 25N

Related Chapter V-B provisions

Section 25M governed lay-off in Chapter V-B establishments. Section 25O governed closure. Section 25Q contained the related penalty for lay-off and retrenchment without previous permission.

Official legal resources

Central legislation can be checked through the India Code portal. Labour legislation, rules and notifications may also be checked through the Ministry of Labour and Employment. State amendments and notifications should be verified from the competent State Government or State Gazette source.