Closure

2 (h) "closure" means the permanent closing down of a place of employment or part thereof;

It is not necessary that the whole establishment is closed; a closure may be partial also. In
case of closure of one establishment or undertaking of the employer, the workmen have the
only right to compensation under this section and they cannot claim any right for re-
employment or reinstatement in any other establishment or undertaking of the employer.

 The word ‘permanently’ only means that at the time of the closure, the employer had
unequivocal intention to permanently close down the business. A sham or mere pretense of
closure will not constitute closure in the eye of law.
 In contra-distinction to a lockout, in a closure the employer not only merely closes down the
place of employment, but closes down his business finally and irrevocably.

Express Newspaper Ltd v Workmen (1962) - (a) The closure or stoppage of the whole or a
part of the business is the function of the management which is entirely in the discretion of
the employer carrying on the business. It is not open to industrial adjudication to interfere
with the discretion exercised by the employer in such a matter. (b) If the closure is bonafide
and genuine, the dispute raised in respect of such a closure, will not be an industrial dispute at
all.

Hathisingh Mfg. Co. Ltd. V Union of India (1960) - The carrying on of a business is a right
and not an obligation. It is, therefore, as much as the right of the businessman to close down
the business as to carry it on. The provisions of Sec.25FFF is not violative of Art.19(1)(g) of
the Constitution.

Workmen of ILTD Co. Ltd. V ILTD Co. Ltd. (1970) - Industrial Tribunal has no power to
direct an employer to continue the whole or part of the business which the employer has
decided to shut down. Nor it can direct an employer to reopen the business which he has once
closed down.

MOTIVE :- Indian Hume Pipe Co. Ltd. V Workmen (1969) - Once the Tribunal finds that
the employer has closed his factory, as a matter of fact, it is not concerned to go into the
question as to the motive which guided him and to come to a conclusion that because of the
previous history of the dispute between the employer and the employees, the closure was not
justified. The essence of the matter, therefore, is the factum of the closure by whatever reason
motivated.

UNDERTAKING :– It must mean ‘ a separate and distinct business or commercial or trading

of industrial activity’. In Mgmt of Hindustan Steel Ltd. v Workmen (1973) the word
‘undertaking’ as used in Sec.25FFF appears to have been used in its ordinary sense connoting
thereby ‘any work, enterprise, project or business undertaking’. It is not intended to cover the
entire industry or business of the employer.
 But ‘undertaking’ cannot comprehend an infinitesimally small part of a manufacturing
process.

CLOSURE IN STAGES :-Workmen of Straw Board Mfg. Co. Ltd. v Management (1974)
An employer is also entitled to close down an establishment by stages as it may be done to
prevent unnecessary inconvenience to both the management and the workmen. Where the
business has been closed and it is either admitted or found that the closure is real and
bonafide, any dispute arising with reference thereto would fall outside the purview of ID Act
as the industry has already died with closure. The matter may be different if under the guise
of the closure, the establishment is being carried on in some other form or at a different place
and the closure is only a ruse or pretense. Obligations under Sec.25FFF are not pre-conditions
to the closure. This right accrues to the workmen only upon the closure of the undertaking.

74. Sixty days’ notice to be given of intention to close down any undertaking –

(1) An employer who intends to close down an undertaking shall serve, at least sixty days
before the date on which the intended closure is to become effective, a notice, in such manner
as may be prescribed, on the appropriate Government stating clearly the reasons for the
intended closure of the undertaking:

Provided that nothing in this section shall apply to—

(i) an industrial establishment in which less than fifty workers are employed or were
employed on any day in the preceding twelve months;
(ii) an industrial establishment set up for the construction of buildings, bridges, roads, canals,
dams or for other construction work or project.

(2) 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 an extraordinary situation such as natural calamities 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.

75. Compensation to workmen in case of closing down of undertakings –

(1) Where an establishment is closed down for any reason whatsoever, every worker who has
been in continuous service for not less than one year in that undertaking immediately before
such closure shall, subject to the provisions of sub-section (2), be entitled to notice and
compensation in accordance with the provisions of section 70, as if the worker had been
retrenched:

Provided that where the undertaking is closed down on account of unavoidable circumstances
beyond the control of the employer, the compensation to be paid to the worker under clause
(b) of section 70, shall not exceed his average pay for three months.

Explanation.—An industrial establishment which is closed down by reason merely of—

(i) financial difficulties (including financial losses); or
(ii) accumulation of un-disposed stocks; or
(iii) the expiry of the period of the lease or license granted to it; or
(iv) in case where the undertaking is engaged in mining operations, exhaustion of the
minerals in the area in which operations are carried on,
shall not be deemed to be closed down on account of unavoidable circumstances beyond the
control of the employer within the meaning of the proviso to this sub-section.

(2) Notwithstanding anything contained in sub-section (1), where an undertaking engaged in

mining operations is closed down by reason merely of exhaustion of the minerals in the area
in which such operations are carried on, no worker referred to in that sub-section shall be
entitled to any notice or compensation in accordance with the provisions of section 70, if—

(a) the employer provides the worker, at the place located within a radius of twenty
kilometres from such undertaking engaged in mining operation is closed down, with
alternative employment with effect from the date of closure at the same remuneration as he
was entitled to receive, and on the same terms and conditions of service as were applicable to
him, immediately before the closure;

(b) the service of the worker has not been interrupted by such alternative employment; and

(c) the employer is, under the terms of such alternative employment or otherwise, legally
liable to pay to the worker, in the event of his retrenchment, compensation on the basis that
his service has been continuous and has not been interrupted by such alternative employment.

(3) For the purposes of sub-sections (1) and (2), the expressions "minerals" and "mining
operations" shall have the meanings respectively assigned to them in clauses (a) and (d) of
section 3 of the Mines and Minerals (Regulation and Development) Act, 1957.

(4) Where any undertaking set up for the construction of buildings, bridges, roads, canals,
dams or other construction work is closed down on account of the completion of the work
within two years from the date on which the undertaking had been set up, no worker
employed therein shall be entitled to any compensation under clause (b) of section 70, but if
the construction work is not so completed within two years, he shall be entitled to notice and
compensation under that section for every completed year of continuous service or any part
thereof in excess of six months.

Hathisingh Manufacturing Co Ltd v Union of India (1960) – The restrictions imposed by

s 25FFF including its proviso, are not unreasonable restrictions on the exercise of the
fundamental rights of the employers to conduct or close their undertakings. The provision
requiring the employers to pay compensation to their employees, though restrictive of the
fundamental freedom guaranteed by Art.19(1)(f), is evidently in the interest of general public,
and is saved by Art. 19(6) of the constitution from the challenge that it infringes the
fundamental rights of the employers.

Section 80. Procedure for closing down an establishment

(1) An employer who intends to close down an undertaking of an industrial establishment to
which this Chapter applies shall, electronically or otherwise, apply in such manner as may be
prescribed, 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 workers in such manner as may be prescribed:

Provided that nothing in this sub-section shall apply to an undertaking set up for the
construction of buildings, bridges, roads, canals, dams or for 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 workers 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 workers.

(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 as applied for on the expiration
of the said period of sixty days and the application shall be deemed to have been disposed of
accordingly by the appropriate Government.

(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 worker, review its order granting or refusing to grant permission under
sub-section (2) within the prescribed time from the date on which such order is made 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 workers 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 worker 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, or average pay of such days as may be notified by the appropriate
Government, for every completed year of continuous service or any part thereof in excess of
six months.