Retrenchment Case Chandigarh Panchkula Mohali Kharar

What constitutes Retrenchment?

This term is defined in Industrial Dispute Act which means termination by the employer for any reason whatsoever, other than a punishment given in disciplinary proceeding. Its wide meaning is given under Section 2(oo). It was not included in the original form, was inserted in 1953. In this case study, Delhi High Court was given the question of the scope of retrenchment and whether a retrenchment includes contractual service.

P.K. Sharma vs Municipal Corporation Of Delhi

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Facts of the case

The petitioner got appointed as Data Entry Operator on ad hoc basis by the respondent where he was entitled against the vacant post of Head Clerk, S.A.U., Minto Road, Delhi. The petitioner started working in the office from 27.03.2001, however respondent informed the petitioner to stop his service from 5.2.2004 leading to halt of his duties. The petitioner file a petition in the Industrial Tribunal No. 1, Karkardooma Courts, Delhi (hereinafter, ‘the Industrial Tribunal’) claiming that the termination of his service was illegal and has right to be given some monetary relief along with consequential benefits in addition to the petitioner also claimed that he, is entitled to be regularized in the service of the post of Data Entry Operator from the initial date of his appointment i.e. from 27.03.2001 with all consequential benefits.

The industrial tribunal held that the petitioner falls under the  Section 2(oo)(bb) of the Industrial Disputes Act, 1947, and stated that the termination of the service of the petitioner is not illegal and thus he was not entitled to the relief of reinstatement. The industrial dispute concluded that since the petitioner got appointed as Data Entry Operator through ad hoc basis and there were no notified recruitment rules sanctioning the said post, the respondent was under no positive obligation to regularize his services. petition filed this present writ petition in Delhi High Court under Articles 226 and 227 of the Constitution of India to set aside the award by industrial tribunal pleading that respondent should be directed to reinstate him on the post of Data Entry Operator and that he should be entitled to his salary and allowances with effect from the date of his removal from service.

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Arguments put by the petitioner

The petitioner claimed that the industrial tribunal while concluding that the petitioner is not entitled to reinstatement and regularization of his service, did not apply the just application of facts and the law and has put forth two assertions:

The petitioner who has worked with the respondent continuously for a period of more than 240 days did not get any notice, compensation, etc., as stated in Section 25F which are mandatory in nature, which is an illegal retrenchment and the petitioner is entitled to the relief of reinstatement with consequential benefits.

The petitioner was a regular appointee of the respondent and the post of Data Entry Operator held by him still continues to exist and as mentioned above the petitioner also completed statutory the period of 240 days of continuous service and thus, his services are liable to be regularised.

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Reply from the Respondent

The petitioner was appointed ad hoc through a contract where he was to do his work as Data Entry Operator for a specific period of time and upon expiry of that period his services were dispensed with. The respondent has further contended that the petitioner, at the time of his appointment, was well aware that his services were ad hoc in nature and that they had been availed by the respondent only for a limited period for completion of a specific project. Due to the petitioner’s service being purely in contractual in nature, the termination is valid under of Section 2(oo)(bb) of the Industrial Disputes Act, 1947 and thus he is not entitled to the relief of reinstatement.

As, there were neither any sanctioned post of Data Entry Operator in the M.C.D. nor any notified Recruitment Rules, the petitioner is not entitled to regularisation of his services.

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Observation by court

Two important question emerged while hearing arguments from both the side

• Whether the termination of the petitioner’s services by the respondent constitutes illegal retrenchment thereby entitling him to the relief of reinstatement with other consequential benefits?
• Whether the services of the petitioner are liable to be regularised by the respondent?

For answering the first question, the focus should be in the meaning and scope of the expression ‘retrenchment’.

Retrenchment means termination of service of a workman by the employer by any reason but other than punishment or disciplinary action. It is when an employer discharges or removes any workman or staff member on the ground of surplus labour or staff, but not as a disciplinary action. It is the discharge of surplus labour in a running or continuing industry for any reason whatsoever, otherwise than as a punishment by way of disciplinary action. The reasons behind the discharge of labour as surplusage in a running or continuing industry may be multifarious, viz. change in the economic policy of the industry, rationalisation in the industry, installation of a new labour-saving machinery, etc.

This term is defined in  Section 2(oo)  as

‘retrenchment’ means the termination by the employer of the service of a workman for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action. Here, ‘for any reason whatsoever’ implies a wide scope of interpretation which includes any and every termination in its fold. Hoeever, Section 2(oo) also gives four exception which are voluntary retirement of the workman retirement of the workman on reaching the age of superannuation if the contract of employment between the employer and the workman concerned contains a stipulation in that behalf termination of the service of the workman as a result of the non-renewal of the contract of employment between the employer and the workman concerned on its expiry or of such contract being terminated under a stipulation in that behalf contained therein termination of the service of a workman on the ground of continued ill-health.

The aim of the act is to protect the manner in which retrenchment is carried out by the management, Section Section 25F puts check in the management and gives them condition in which retrenching a workman would take place. The section states differences between legal retrenchment and illegal retrenchment. If conditions mentioned in this section are followed it will constitute a legal retrenchment, these are

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No workman employed in any industry who has been in continuous service for not less than one year under an employer shall be retrenched by that employer until-

(a) the workman has been given one month’s notice in writing indicating the reasons for retrenchment and the period of notice has expired, or the workman has been paid in lieu of such notice, wages for the period of the notice;

(b) the workman has been paid, at the time of retrenchment, 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; and

(c) notice in the prescribed manner is served on the appropriate government or such authority as may be specified by the appropriate Government by notification in the Official Gazette.

The workman needs to complete 240 days of continuous service preceding the date of his retrenchment. The petitioner in Labour Court have argued that the petition has completed the period of 240 days of continuous service thus his services cannot be terminated by the respondent without due compliance with the mandatory conditions under Section 25F

The respondent in response stated that the petitioner was appointed on an ad hoc basis for a specific period and the termination of his service could not be said to be retrenchment under Sub-clause (bb) of Section 2(oo) , which submits an exception to the definition of retrenchment, which is, Retrenchment means-but does not include- (bb) termination of the service of the workman as a result of non-renewal of the contract of employment between the employer and the workman concerned on its expiry or of such contract being terminated under a stipulation in that behalf contained therein;

In 1984, the insertion of this sub clause was to exclude class of employees who are engaged on a contractual basis for a specific period from the rigour of Section 25F .  Sub-clause (bb) seeks to exclude the following from the purview of retrenchment: (i) the termination of the service of a workman as a result of the non-renewal of the contract of employment between the employer and the workman concerned, on its expiry; or (ii) the termination of the contract of employment in terms of a stipulation contained in the contract, in that behalf. As mentioned above, employment on the basis of the contractual agreement between the parties been excluded from the definition of retrenchment by this sub-clause. The cases contemplated under both parts, therefore, will not be retrenchment.

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 In S.M. Nilajkar and Ors. v. Telecom, District Manager, Karnataka, Supreme Court gave four-fold test whether a termination of workman engaged in a scheme or project may not amount to retrenchment, which are

(i) that the workman was employed in a project or scheme of temporary duration;

(ii) the employment was on a contract, and not as a daily-wager simpliciter, while providing, inter alia, that the employment shall come to an end on the expiry of the scheme or project;

(iii) the employment came to an end simultaneously with the termination of the scheme or project and consistently with the terms of the contract; and

(iv) the workman ought to have been apprised or made aware of the above said terms by the employer at the commencement of the employment.

Given there were no objection raised by the petitioner, there is no argument that the petitioner got appointed by the respondent for the service Data Entry Operator on an ad hoc basis. The meaning of ad hoc is necessary in determine the question prevailing this case. The Black’s Law Dictionary (Eight Edition) states that ‘ad hoc’ is a Latin phrase meaning ‘formed for a particular purpose’. It can be said that the meaning of ad hoc is specific purpose which could be for appointment in a leave vacancy, appointment to a post created for a limited period or duration, appointment to a post till the regularly selected candidate after following the prescribed procedure is made available and the like.

Evidence put by the Respondent

A copy of Office Order is placed which shows that services of the petitioner were availed by the respondent during the period 1994-2002 for the project, namely, ‘India Population Project- VIII’ in addition to it gives out the names of the other persons, besides the petitioner, who were recruited as Data Entry Operators by the respondent on a contractual basis for completion of the said Project which is stated to have been funded by the World Bank.

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To sum up the petitioner worked with the respondent the for a specific project whereof his services were dispensed with in terms of Section 2(oo)(bb)  thereby bringing such termination outside the purview of retrenchment, whereas the petitioner contends that even in those cases where a workman has been employed in a time-bound project, the automatic cessation of his services by effluxion of time amounts to retrenchment and is thus no reason to dispense with the mandatory conditions stipulated in Section 25F , particularly when such workman has completed the statutory period of 240 days of continuous service with the management.

The contention of the petitioner does not hold water. The service of the petitioner was ad hoc in nature were liable to be terminated on the completion of the project. Further Section 25F’s intention is to compensate the workman for loss of employment so as to provide him the wherewithal to subsist until he finds fresh employment. However, when the workman is aware of that he is employed ad hoc on a contractual basis would be terminated after completion of the project, compliance with the mandatory provisions of Section 25F  becomes uncalled for and may be dispensed with by the management.  The compliance of the mandatory conditions under Section 25F  is called for only when there has been retrenchment in the first place. And thus, the Industrial Tribunal has correctly held the petitioner not entitled to reinstatement and regularisation of his services and there is no grounds to interfere therewith.

Also Read- Retrenchment under Industrial Dispute Act, 1947

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