Closure:

Under the Industrial Disputes Act, 1947, closure refers to the complete
or partial shutdown of an industrial establishment or undertaking by
the employer.

The closure can be voluntary or forced, temporary or permanent, and

can be due to various reasons such as financial difficulties, labor
issues, or other unforeseen circumstances.

The Act lays down certain procedures that an employer must follow
before closing down an undertaking.

If the closure is due to unavoidable circumstances, such as natural

calamities, the employer must give notice of the closure to the
appropriate government authority and the workmen at least 15 days
in advance.

However, if the closure is for any other reason, the employer must
give notice of the closure to the appropriate government authority
and the workmen at least 60 days in advance.

The Act also provides for the payment of compensation to workmen

who are affected by the closure. If the closure is due to unavoidable
circumstances, the employer is not required to pay any compensation.
However, if the closure is for any other reason, the employer must
pay compensation to the workmen equivalent to 15 days’ average pay
for every completed year of continuous service.

If the closure is for any reason other than unavoidable circumstances,

the employer must also apply for prior permission to close down the
establishment to the appropriate government authority. The
government may grant or refuse permission for the closure based on
the reasons given by the employer and after considering the interests
of the workmen.

Overall, the Industrial Disputes Act provides a legal framework for

the closure of an industrial establishment and ensures that the
interests of the workmen are protected in case of closure. It also
provides for a conciliation process to resolve any disputes that may
arise between the employer and the workmen in the event of closure.

Provisions of Closure of an undertaking under section 25(0):

Section 25(O) of the Industrial Disputes Act, 1947 provides for the
closure of an undertaking or establishment, without prior permission
from the appropriate government authority, if certain conditions are
met. The following are the provisions of Section 25(O):

1. Conditions for closure: An employer can close down an

undertaking or establishment without seeking prior permission
from the appropriate government authority, if it has less than 50
workmen, and the employer pays compensation to the
workmen equivalent to 15 days’ average pay for every
completed year of continuous service.
2. Notice to the appropriate government authority: The employer
is required to give notice of the closure to the appropriate
government authority at least 60 days in advance, in the
prescribed manner.
3. Notice to workmen: The employer is required to give notice of
the closure to the workmen at least 60 days in advance, or pay
wages in lieu of such notice.
4. Procedure for payment of compensation: The compensation
payable to the workmen must be paid at the time of closure, or
within 15 days from the date of notice of closure, whichever is
earlier.
5. Penalty for non-compliance: If the employer fails to comply with
the provisions of Section 25(O), it shall be punishable with
imprisonment for a term of up to six months, or with a fine of up
to Rs. 5,000, or both.

It is important to note that Section 25(O) is applicable only to

establishments with less than 50 workmen. For establishments with 50
or more workmen, prior permission from the appropriate government
authority is required for closure under Section 25(N) of the Industrial
Disputes Act.

Undertakings covered under Section 25(0):

Under Section 25(O) of the Industrial Disputes Act, 1947, an employer
can close down an undertaking or establishment without prior
permission from the appropriate government authority, if it meets the
following conditions:

1. The establishment has less than 50 workmen, and

2. The employer pays compensation to the workmen equivalent to
15 days’ average pay for every completed year of continuous
service.

Therefore, only establishments that have less than 50 workmen are

covered under Section 25(O). However, it is important to note that the
term ‘workmen’ includes not only permanent employees, but also
contractual, casual, and temporary workers who have worked for
more than one year in the establishment.

It is also important to note that certain types of establishments are

exempted from the provisions of the Industrial Disputes Act, and
therefore, are not covered under Section 25(O). For example,
establishments that are engaged in agricultural or horticultural
operations, or in fishing or animal husbandry, are exempted from the
Act. Similarly, establishments that are owned or controlled by the
government are also exempted, unless they are engaged in
commercial activities.

Procedure for Closure of an Undertaking:

The procedure for closure of an undertaking or establishment under
the Industrial Disputes Act, 1947, depends on the number of
workmen employed in the establishment, and the reason for the
closure. The following are the general procedures for closure of an
undertaking:
 1. Closure of an undertaking with less than 50 workmen under
Section 25(O): If an undertaking has less than 50 workmen, the
employer can close down the establishment without seeking
prior permission from the appropriate government authority,
provided that the employer pays compensation to the workmen
equivalent to 15 days’ average pay for every completed year of
continuous service. The employer must give notice of the
closure to the appropriate government authority and the
workmen at least 60 days in advance.
2. Closure of an undertaking with 50 or more workmen under
Section 25(N): If an undertaking has 50 or more workmen, the
employer must seek prior permission from the appropriate
government authority before closing down the establishment.
The employer must give notice of the closure to the appropriate
government authority and the workmen at least 60 days in
advance. The government authority may grant or refuse
permission for the closure after considering the reasons given by
the employer and the interests of the workmen.
3. Voluntary retirement scheme (VRS): An employer may also opt
for a voluntary retirement scheme (VRS) to facilitate the closure
of the establishment. Under a VRS, the employer offers a
voluntary retirement package to the workmen, which typically
includes compensation, pension, and other benefits. The scheme
must be mutually agreed upon by the employer and the
workmen, and the terms and conditions of the scheme must be
specified in a formal agreement.
4. Conciliation process: In case of any disputes arising between the
employer and the workmen regarding the closure of the
establishment, the Industrial Disputes Act provides for a
conciliation process to resolve the disputes. The appropriate
government authority may appoint a conciliation officer to
mediate and bring about a settlement between the parties.

Undertakings excluded from obtaining prior

permission before Closure:
The Industrial Disputes Act, 1947 provides for the closure of an
undertaking or establishment with prior permission from the
appropriate government authority in most cases. However, certain
types of establishments are exempted from obtaining prior permission
before closure. The following are the undertakings excluded from
obtaining prior permission before closure:

1. Establishments with less than 100 workmen: As per Section

25FFA of the Industrial Disputes Act, an employer can close
down an establishment without obtaining prior permission from
the appropriate government authority, if the establishment has
less than 100 workmen on its rolls. However, the employer must
give notice of the closure to the government authority and the
workmen at least 60 days in advance.
2. Establishments due to natural calamities: An employer can close
down an establishment without obtaining prior permission from
the appropriate government authority in case of a natural
calamity, such as a flood, earthquake, or fire. The employer must
give notice of the closure to the government authority and the
workmen as soon as possible.
3. Establishments due to financial difficulties: An employer can
close down an establishment without obtaining prior permission
from the appropriate government authority in case of financial
difficulties. However, the employer must pay compensation to
the workmen equivalent to 15 days’ average pay for every
completed year of continuous service, and must give notice of
the closure to the government authority and the workmen at
least 60 days in advance.
4. Establishments engaged in seasonal work: Establishments
engaged in seasonal work, such as agricultural or horticultural
operations, are exempted from the provisions of the Industrial
Disputes Act. These establishments are not required to obtain
prior permission before closure.

It is important to note that even if an establishment is exempted from

obtaining prior permission before closure, the employer must still
comply with the notice and compensation requirements as specified
in the Industrial Disputes Act.

Grant and Refusal of Permission

Under the Industrial Disputes Act, 1947, an employer is required to
obtain prior permission from the appropriate government authority
before closing down an establishment, if the establishment has 50 or
more workmen on its rolls. The government authority may grant or
refuse permission for the closure after considering the reasons given
by the employer and the interests of the workmen.

The following are the procedures for grant and refusal of permission
for closure:

Grant of permission: If the government authority is satisfied

with the reasons given by the employer for closure, and if the
employer has complied with all the requirements of the Industrial
Disputes Act, the authority may grant permission for the closure. The
employer must give notice of the closure to the government authority
and the workmen at least 60 days in advance.

Refusal of permission: If the government authority is not

satisfied with the reasons given by the employer for closure, or if the
employer has not complied with the requirements of the Industrial
Disputes Act, the authority may refuse permission for the closure. In
such cases, the employer may approach the Labor Court or the
Industrial Tribunal for adjudication. The Labor Court or the Industrial
Tribunal may then examine the reasons for closure and the interests of
the workmen, and may either uphold the decision of the government
authority or order the employer to reinstate the workmen with back
wages.

Overall, the grant or refusal of permission for closure of an

establishment is subject to the discretion of the appropriate
government authority, and is based on the reasons given by the
employer and the interests of the workmen. Employers must comply
with the procedures specified in the Industrial Disputes Act to ensure
that the interests of the workmen are protected in case of closure.

When is permission deemed to be granted?

Under the Industrial Disputes Act, 1947, an employer is required to
obtain prior permission from the appropriate government authority
before closing down an establishment, if the establishment has 50 or
more workmen on its rolls. The government authority is required to
either grant or refuse permission for closure after considering the
reasons given by the employer and the interests of the workmen.

If the government authority does not communicate its decision within

the specified time, the permission for closure is deemed to have been
granted. The following are the time limits within which the
government authority must communicate its decision:

1. Within 60 days of the receipt of the application for permission, if

the establishment has less than 100 workmen on its rolls.
2. Within 90 days of the receipt of the application for permission, if
the establishment has 100 or more workmen on its rolls.

If the government authority fails to communicate its decision within

the specified time limit, the permission for closure is deemed to have
been granted. However, it is important to note that the employer must
still comply with the notice and compensation requirements as
specified in the Industrial Disputes Act, even if permission is deemed
to have been granted.

Appeal:
Under the Industrial Disputes Act, 1947, if the appropriate
government authority refuses permission for the closure of an
establishment, the employer may appeal to the Labor Court or the
Industrial Tribunal, as the case may be, within 60 days from the date
of the receipt of the order. The employer may also appeal to the Labor
Court or the Industrial Tribunal if the government authority has
granted permission subject to certain conditions that are not
acceptable to the employer.

The following are the procedures for appeal:

1. Filing of appeal: The employer must file an appeal with the

Labor Court or the Industrial Tribunal within 60 days from the
date of the receipt of the order of the government authority. The
appeal must be filed in the prescribed format and must be
accompanied by the necessary documents.
2. Notice to the other party: The employer must serve a notice of
appeal on the other party, i.e., the workmen or their
representatives, within 7 days of the filing of the appeal.
3. Hearing of the appeal: The Labor Court or the Industrial
Tribunal must hear the appeal within 45 days of the filing of the
appeal. The employer and the workmen or their representatives
must be given an opportunity to present their case and produce
evidence.
4. Decision of the Labor Court or the Industrial Tribunal: The
Labor Court or the Industrial Tribunal may either uphold the
decision of the government authority or order the employer to
reinstate the workmen with back wages. The decision of the
Labor Court or the Industrial Tribunal is final and binding on
both the parties.

Illegal Closure:
An illegal closure refers to a situation where an employer closes down
an establishment without following the procedures and requirements
specified in the Industrial Disputes Act, 1947. This is a serious
violation of the law and can lead to legal consequences for the
employer.

If an employer closes down an establishment:-

-- without obtaining prior permission from the appropriate

government authority or
--without giving notice to the workmen as required under the
Industrial Disputes Act, such closure is deemed to be illegal. In such
cases, the workmen are entitled to compensation for the closure.

The following are the legal consequences of an illegal closure:

1. Reinstatement with back wages: If an illegal closure has taken

place, the workmen are entitled to reinstatement with back
wages. The Labor Court or the Industrial Tribunal may order
the employer to reinstate the workmen with full back wages.
2. Penalty for illegal closure: If the employer is found guilty of an
illegal closure, he may be liable to pay a penalty. The penalty
may be up to three months’ wages of the workmen.
3. Criminal prosecution: In some cases, the employer may also be
liable to criminal prosecution for an illegal closure. The
punishment for such an offense may include imprisonment
and/or a fine.

Closure:

In conclusion, the closure of an establishment is a significant event

that can have far-reaching consequences for the employer and the
workmen. The Industrial Disputes Act, 1947, provides for the
regulation of closures of establishments and seeks to protect the
interests of the workmen in such situations.

Under the Act, an employer must obtain prior permission from the
appropriate government authority before closing down an
establishment, if the establishment has 50 or more workmen on its
rolls. The government authority must consider the reasons given by
the employer and the interests of the workmen before granting or
refusing permission for closure.

If an employer closes down an establishment without following the

procedures and requirements specified in the Act, such closure is
deemed to be illegal and can lead to legal consequences for the
employer. Therefore, it is important for employers to comply with the
procedures and requirements specified in the Act to avoid any legal
issues.

Overall, the Industrial Disputes Act provides a mechanism for the

regulation of closures of establishments and seeks to protect the
interests of the workmen. Employers must ensure that they follow the
procedures and requirements specified in the Act to ensure that their
interests are protected and to avoid any legal issues.