Section 25O of Industrial Disputes Act 1947 - Procedure for Closing Down an Undertaking

Section 25O formed part of Chapter V-B of the Industrial Disputes Act, 1947 and prescribed a prior-permission procedure where an employer intended to close an undertaking of an industrial establishment to which that Chapter applied.

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

What is Section 25O?

Section 25O was titled "Procedure for closing down an undertaking." Its Central framework required an employer covered by Chapter V-B to seek prior permission at least 90 days before the proposed closure, state the reasons for closure and simultaneously serve the workmen's representatives as prescribed.

Section 25O(1) - Application at least 90 days before closure

An employer intending to close an undertaking of an industrial establishment to which Chapter V-B applied had to apply in the prescribed manner for prior permission at least 90 days before the intended closure became effective. The application had to be made to the appropriate Government, clearly state the reasons for the intended closure, and be served simultaneously on the representatives of the workmen in the prescribed manner.

The Central provision excluded an undertaking set up for construction of buildings, bridges, roads, canals, dams or other construction work from this sub-section.

Section 25O(2) - Enquiry and hearing

The appropriate Government could make such enquiry as it considered fit and had to give a reasonable opportunity of being heard to the employer, workmen and persons interested in the closure. In deciding whether to grant or refuse permission, it was required to consider the genuineness and adequacy of the employer's reasons, the interests of the general public and all other relevant factors. The decision had to record reasons in writing and be communicated to the employer and workmen.

Section 25O(3) - Deemed permission after 60 days

If the appropriate Government did not communicate an order granting or refusing permission 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 25O(4) - Finality and duration of order

Subject to the review or reference mechanism in sub-section (5), an order granting or refusing permission was final and binding on all parties and remained in force for one year from its date.

Section 25O(5) - Review or Tribunal reference

The appropriate Government could review its order on its own motion or on an application by the employer or any workman. It could alternatively refer the matter to a Tribunal for adjudication. Where such a reference was made, the Tribunal was required to pass an award within 30 days from the date of reference.

Section 25O(6) - Effect of closure without permission

If the required application was not made within the statutory period, or permission for closure was refused, the closure was deemed illegal from the date of closure. The workmen were entitled to all benefits under the law for the time being in force as if the undertaking had not been closed down.

Section 25O(7) - Exceptional circumstances

Despite the preceding provisions, the appropriate Government could, where exceptional circumstances such as an accident in the undertaking, death of the employer or similar circumstances made it necessary, direct by order that sub-section (1) would not apply to the undertaking for the period specified in that order.

Section 25O(8) - Compensation on permitted closure

Where closure was permitted under sub-section (2), or permission was deemed to have been granted under sub-section (3), every workman employed in the undertaking immediately before the date of the permission application was entitled to compensation equivalent to 15 days' average pay for every completed year of continuous service or any part thereof in excess of six months.

Meaning of important expressions

Industrial establishment: Section 25L contained the Chapter V-B definition relevant to establishments covered by this special regime. Appropriate Government: Section 25L also contained a Chapter-specific rule for determining the appropriate Government. Average pay: Section 2(aaa) defined average pay for purposes of the Act. Continuous service: Section 25B dealt with continuous service.

Section 25O compared with Sections 25FFA and 25FFF

Section 25FFA dealt with advance notice of an intended closure under Chapter V-A, whereas Section 25O imposed a prior-permission regime for undertakings within Chapter V-B. Section 25FFF dealt with compensation to workmen in case of closing down undertakings, subject to the statutory scheme and the provisions applicable to the establishment.

State amendments preserved from the source

The uploaded page contains substantial State-specific modifications. Because these can materially change procedure, appellate rights, compensation requirements and other obligations, the applicable State text should be read with the Central provision and verified for the relevant date.

Madhya Pradesh

For section 25-O, the following section shall be substituted,

namely :-

"25-O. Procedure for closing down an undertaking.-(1) An

employer who intends to close down an undertaking of an

industrial establishment to which this Chapter applies shall

apply for prior permission at least ninety days before the date

on which the intended closure is to become effective, to the

State Government, stating clearly the reasons for the intended

closure of the undertaking and a copy of such application shall

also be served simultaneously on the representatives of the

workmen by registered post with acknowledgement due.

(2) Where a notice has been served on the State Government by

an employer under sub-section (1) of section 25FFA and the

period of notice has not expired at the commencement of the

Industrial Disputes (Madhya Pradesh Amendment) Ordinance, 1983,

such employer shall not close down the undertaking but shall,

within a period of fifteen days from such commencement, apply

to the State Government for permission to close down the

undertaking.

(3) Where an application for permission has been made under

sub-section (1) or sub-section (2) the State Government, after

making such enquiry as it thinks fit and after giving a

reasonable opportunity of being heard to the employer, the

workmen and the persons interested in such closure may, having

regard to the genuineness and adequacy of the reasons stated by

employer, the interests of the general public and all other

relevant factors, by order and for reasons to be recorded in

writing grant or refuse to grant such permission and a copy of

such order shall be communicated to the employer and the

workmen.

(4) Where an application has been made under sub-section (1)

or sub-section (2), as the case may be, and the State Government

does not communicate the order granting or refusing to grant

permission to the employer within a period of sixty days from

the date on which such application is made, the permission

applied for shall be deemed to have been granted on the

expiration of the said period of sixty days.

(5) An order of the State Government granting or refusing to

grant permission shall, subject to the provisions of sub-section

(6), be final and binding on all the parties and shall remain in

force for one year from the date of such order.

(6) The State Government may, either on its own motion or on

the application made by the employer or any workmen, review its

order granting or refusing to grant permission under sub-section

(3) or refer the matter to the Tribunal for adjudication:

Provided that where a reference has been made to a Tribunal

under this sub-section, it shall pass an award within a period

of thirty days from the date of such reference.

(7) Where no application for permission under sub-section (1)

or sub-section (2) is made within the period specified therein,

or where the permission for closure has been refused, the

closure of the undertaking shall be deemed to be illegal from

the date of closure and the workmen shall be entitled to all the

benefits under any law for the time being in force as if the

undertaking had not been closed down.

(8) Notwithstanding anything contained in the foregoing

provisions of this section, the State Government may, if it is

satisfied that owing to such exceptional circumstances as

accident in the undertaking or death of the employer or the like

it is necessary so to do, by order, direct that the provisions

of sub-section (1) shall not apply in relation to such

undertaking for such period as may be specified in the order.

(9) Where an undertaking is permitted to be closed down under

sub-section (3) or where permission for closure is deemed to be

granted under sub-section (4), every workman who is employed in

that undertaking immediately before the date of application for

permission under this section, shall be entitled to receive

compensation which shall be equivalent to fifteen days' average

pay for every completed year of continuous service or any part

thereof in excess of six months." - Madhya Pradesh Act No. 32 of

1983.

Maharashtra

For section 25-O, the following section shall be substituted,

namely:-

"25-O. Application to be made for obtaining permission to

close down any undertaking ninety days before closure.-(1) An

employer, who intends to close down an undertaking of an

industrial establishment to which this Chapter applies, shall

submit, for permission, at least ninety days before the date on

which the intended closure is to become effective, an

application, in the prescribed manner, to the appropriate

Government, stating clearly the reasons for the intended closure

of the undertaking. A copy of such application shall be served

by the employer simultaneously on the representatives of the

workmen in the prescribed manner:

Provided that nothing in this section shall apply to an

undertaking set up for the construction of buildings, bridges,

roads, canals, dams, or other construction works.

(2) On receipt of an application under sub-section (7), the

appropriate Government, after holding such inquiry as it deems

fit, and after giving a reasonable opportunity of being heard to

the applicant and the representatives of the workmen, may, for

the reasons to be recorded in writing, by order grant the

permission for closure, or if it is satisfied that the reasons

given for the intended closure of the undertaking are not

adequate and sufficient, or are not urged in good faith or are

grossly unfair or unjust, and in any case such closure would be

prejudicial to the interests of the general public, it may, for

the reasons to be recorded in writing, by order refuse to grant

the permission and direct the employer not to close such

undertaking. A copy of any decision given by the appropriate

Government under this sub-section shall be sent by it

simultaneously to the representatives of the workmen.

(3) Where an application for permission has been made under

sub-section (1), and the appropriate Government does not

communicate the refusal to grant the permission to the employer,

within a period of sixty days from the date of receipt of the

application by it, the permission applied for shall be deemed to

have been granted on the expiration of the said period of sixty

days.

(4) Any employer or any workman affected by any order made

under sub-section (2) or any workman affected by the permission

deemed to be granted under sub-section (3), may, within thirty

days from the date of the order or from the date from which the

permission is deemed to be granted, as the case may be, prefer

an appeal to such Industrial Tribunal as may be specified by the

appropriate Government by notification in the Official Gazette

for such area or areas or for the whole State, as may be

specified therein. The Industrial Tribunal shall, after holding

such inquiry as it deems fit, as far as possible within thirty

days from the date of filing the appeal, pass an order, either

affirming or setting aside the order of the appropriate

Government or the permission deemed to be granted, as the case

may be.

(5) Any order made by the appropriate Government under

sub-section (2) or any permission deemed to be granted under

sub-section (3), subject to an appeal to the Industrial

Tribunal, and any order made by the Industrial Tribunal in such

appeal, shall be final and binding on all the parties concerned.

(6) Any order refusing to grant permission for closure made

by the appropriate Government under sub-section (2) shall

remain in force for a period of one year from the date of such

order, unless it is set aside earlier by the Industrial Tribunal

in appeal.

(7) When no application for permission under sub-section (7)

is made, or where the permission for closure has been refused,

the closure of the undertaking shall be deemed to be illegal

from the date of closure, and the workman shall be entitled to

all the benefits under any law for the time being in force, as

if no notice had been given to him.

(8) Notwithstanding anything contained in sub-section (1),

the appropriate Government may, if it is satisfied that owing to

such exceptional circumstances as accident in the undertaking

or death of the employer or the like, it is necessary so to do,

by order, direct that the provisions of sub-section (1) shall

not apply in relation to such undertaking for such period as may

be specified in the order.

(9) Where an undertaking is permitted to be closed down under

sub-section (2) or where permission for closure is deemed to be

granted under sub-section (3), every workman in the said

undertaking, who has been in continuous service for not less

than one year in that undertaking immediately before the date of

application for permission under this section, shall be entitled

to notice and compensation as specified in section 25N, as if

the said workman has been retrenched under that section." -

Maharashtra Act No. 3 of 1982.

Rajasthan

For section 25-O the following section shall be substituted,

namely:-

"25-0. Procedure for closing down an undertaking. - (1) An

employer who intends to close down an undertaking of an

industrial establishment to which this Chapter applies including

an employer who has served a notice under sub-section (1) of

section 25FFA on the State Government of his intention to close

down such an undertaking but the period of such a notice has not

expired at the commencement of the Industrial Disputes

(Rajasthan Amendment) Ordinance, 1983, shall apply for prior

permission at least ninety days before the date on which the

intended closure is to become effective, to the State

Government, stating clearly the reasons for the intended closure

of the undertaking and a copy of such application shall also be

served simultaneously on the representatives of the workmen by

registered post with acknowledgement due.

(2) Where an application for permission has been made under

sub-section (1), the State Government, after making such enquiry

as it thinks fit and after giving reasonable opportunity of

being heard to the employer, the workmen and the persons

interested in such closure may, having regard to the

genuineness and adequacy of the reasons stated by employer, the

interests of the general public and all other relevant factors,

by order and for reason to be recorded in writing, grant or

refuse to grant such permission and a copy of such order shall

be communicated to the employer and the workmen.

(3) Where an application has been made under sub-section (1),

and the State Government does not communicate the order granting

or refusing to grant permission to the employer within a period

of sixty days from the date on which such application is made,

the permission applied for shall be deemed to have been granted

on the expiration of the said period of sixty days.

(4) An order of the State Government granting or refusing to

grant permission shall, subject to the provisions of sub-section

(5), be final and binding on all the parties and shall remain in

force for one year from the date of such order.

(5) The State Government may, either on its own motion or on

the application made by the employer or any workman, review its

order granting or refusing to grant permission under sub-section

(2) or refer the matter to a Tribunal for adjudication:

Provided that where a reference has been made to a Tribunal

under this sub-section, it shall pass an award within a period

of thirty days from the date of such reference.

(6) Where no application for permission under sub-section (1)

is made within the period specified therein, or where the

permission for closure has been refused, the closure of the

undertaking shall be deemed to be illegal from the date of

closure and the workmen shall be entitled to all the benefits

under any law for the time being in force as if the undertaking

had not been closed down.

(7) Notwithstanding anything contained in the foregoing

provisions of this section, the State Government may, if it is

satisfied that owing to such exceptional circumstances as

accident in the undertaking or death of the employee or the like

it is necessary so to do, by order, direct that the provisions

of sub-section (1) shall not apply in relation to such

undertaking for such period as may be specified in the order.

(8) Where an undertaking is permitted to be closed down under

sub-section (2) or where permission for closure is deemed to be

granted under sub-section (3), every workman who is employed in

that undertaking immediately before the date of application for

permission under this section, shall be entitled to receive

compensation which shall be equivalent to fifteen days' average

pay for every completed year of continuous service or any part

thereof in excess of six months," - Rajasthan Act No. 8 of 1984.

West Bengal

In section 25-O,-

(a) in sub-section (1), after the first proviso, the following

proviso shall be inserted:-

"Provided further that every application for permission to

close down an undertaking shall, having regard to the first

proviso to section 25FFF, contain the particulars of the

quantum, mode, manner and time of payment of compensation to the

workmen, in the manner prescribed, and such employer shall

furnish such guarantee as may be required by the appropriate

Government to discharge his liability for payment of

compensation and other statutory dues to the workmen in the

event of such permission being granted under sub-section (2) or

deemed to have been granted under subsection (3).";

(b) after sub-section (1), the following sub-section shall be

inserted:-

"(1A) Where an application for permission has been made under

sub-section (1), the appropriate Government may, having regard

to the reasons adduced in such application and the interests of

the undertaking and the concerned workmen, issue such directions

as may be necessary for maintaining normalcy and continuity of

work during the notice period.";

added:-

Explanation : "Benefit under any law" shall include benefits

under any contract, agreement, award or settlement under any

law;

(d) after sub-section (7), the following sub-section shall be

inserted:-

'(7A) Every order of the appropriate Government under

sub-section (7) shall indicate, for reasons to be recorded, the

extent to which compensation computed under sub-section (8)

shall be payable in the case, having regard to the facts and

circumstances of the same and for securing such payment, the

appropriate Government may obtain such information and guarantee

specified in the second proviso to sub-section (1) as may be

considered necessary.'

(e) in sub-section (8), after the words "shall be entitled to

receive" the words and brackets, "in addition to all legal dues

(including gratuity)", shall be inserted. - West Bengal Act 33

of 1989.

Orissa

For section 25-O of the principal Act, the following section

shall be substituted, namely:-

"25-O. Procedure for closing down an undertaking.-(1) An

employer who intends to close down an undertaking of an

industrial establishment to which this Chapter applies shall, in

the prescribed manner, apply, for prior permission at least

ninety days before the date on which the intended closure is to

become effective, to the appropriate Government, stating clearly

the reasons for the intended closure of the undertaking and a

copy of such application shall also be served simultaneously on

the representatives of the workmen in the prescribed manner:

Provided that nothing in this sub-section shall apply to an

undertaking set up for the construction of buildings, bridges,

roads, canals, dams or other construction work.

(2) Where an application for permission has been made under

sub-section (1), the appropriate Government, after making such

enquiry as it thinks fit and after giving a reasonable

opportunity of being heard to the employer, the workmen and the

persons interested in such closure may, having regard to the

genuineness and adequacy of the reasons stated by the employer,

the interests of the general public and all other relevant

factors, by order and for reasons to be recorded in writing,

grant or refuse to grant such permission and a copy of such

order shall be communicated to the employer and the workmen.

(3) Where an application has been made under sub-section (1)

and the appropriate Government does not communicate the order

granting or refusing to grant permission to the employer within

a period of sixty days from the date on which such application

is made, the permission applied for shall be deemed to have been

granted on the expiration of the said period of sixty days.

(4) An order of the appropriate Government

granting or refusing to grant permission shall,

subject to the provisions of sub-section (5), be

final and binding on all the parties and shall

remain in force for one year from the date of such

order.

(5) The appropriate Government may, either on its own motion

or on the application made by the employer or any workman,

review its order granting or refusing to grant permission under

sub-section (2) or refer the matter to a Tribunal for

adjudication:

Provided that where a reference has been made to a Tribunal

under this sub-section, it shall pass an award within a period

of thirty days from the date of such reference.

(6) Where no application for permission under sub-section (1)

is made within the period specified therein, or where the

permission for closure has been refused, the closure of the

undertaking shall be deemed to be illegal from the date of

closure and the workmen shall be entitled to all the benefits

under any law for the time being in force as if the undertaking

had not been closed down.

(7) Notwithstanding anything contained in the foregoing

provisions of this section, the appropriate Government may, if

it is satisfied that owing to such exceptional circumstances as

accident in the undertaking or death of the employer or the like

it is necessary so to do, by order direct that the provisions of

sub-section (1) shall not apply in relation to such undertaking

for such period as may be specified in the order.

(8) Where an undertaking is permitted to be closed down under

sub-section (2) or where permission for closure is deemed to be

granted under sub-section (3) every workman who is employed in

that undertaking immediately before the date of application for

permission under this section, shall be entitled to receive

compensation which shall be equivalent to fifteen days' average

pay for every completed year of continuous or any part thereof

in excess of six months service - Orissa Act No. 6 of 1983.

Practical checklist for Section 25O

Confirm that Chapter V-B applied to the industrial establishment under Section 25K and any applicable State amendment.
Identify the undertaking proposed to be closed and check whether the construction-work exclusion applied.
Apply for prior permission in the prescribed manner at least 90 days before the intended effective date.
Clearly state the reasons for closure and simultaneously serve the workmen's representatives as prescribed.
Check the applicable hearing procedure and the statutory factors governing the decision.
Track the 60-day period relevant to deemed permission.
Check whether review, reference or a State-specific appeal mechanism applies.
Do not proceed contrary to a refusal of permission; Section 25O prescribed consequences for an illegal closure.
Calculate compensation and other statutory dues under the applicable Central and State provisions.
Verify the applicable rules, forms, State amendments and Gazette notifications before acting.

Related Chapter V-B provisions

Section 25K governed application of Chapter V-B; Section 25L supplied definitions; Section 25M concerned lay-off; Section 25N concerned retrenchment; and Section 25R dealt with penalties relating to closure.

Official legal resources

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