Retrenchment :
“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, but does not include:
(a) voluntary retirement of the workman; or
(b) retirement of the workman or reaching the age of superannuation if the contract of employment between the employer and the workman concerned contains a stipulation in that behalf; or
(bb) 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.
(c) termination of the service of workman on the ground of continued ill-health.
Thus, the definition contemplates following requirements for retrenchment:
(i) There should be termination of the service of the workman.
(ii) The termination should be by the employer.
(iii) The termination is not the result of punishment inflicted by way of disciplinary action.
(iv) The definition excludes termination of service on the specified grounds or instances mentioned in it. [Section 2(oo)]
The scope and ambit of Section 2(oo) is explained in the case of Santosh Gupta v. State Bank of Patiala, (1980) Lab.I.C.687 SC), wherein it was held that if the definition of retrenchment is looked at unaided and unhampered by precedent, one is at once struck by the remarkably wide language employed and particularly the use of the word ‘termination for any reason whatsoever’. If due weight is given to these words, i.e. they are to be understood as to mean what they plainly say, it is difficult to escape the conclusion that retrenchment must include every termination of service of a workman by an act of the employer. In the case of Punjab Land Development Corporation Ltd. v. Labour Court, Chandigarh, (1990) II LLJ 70 SC, the Supreme Court held that expression “retrenchment” means termination by employer of services of workman for any reason whatsoever except those expressly excluded in the Section itself.
The expression “for any reason whatsoever” in Section 2(oo) could not be safely interpretted to include the case of discharge of all workmen on account of bona fide closure of business, because for the application of definition, industry should be a working or a continuing or an existing industry, not one which is altogether a closed one. So the underlying assumption would be of course, that the undertaking is running as an undertaking and the employer continues to be an employer (Hariprasad Shivshankar Shukla v. A.D.Divakar, (1957) SCR 121), hereinafter referred to as Hariprasad case.
The Hariprasad case and some other decisions, lead to the unintended meaning of the term “retrenchment” that it operates only when there is surplus of workman in the industry which should be an existing one. Thus, in effect either on account of transfer of undertaking or an account of the closure of the undertaking, there can be no question of retrenchment within the meaning of the definition contained in Section 2(oo). To overcome this view, the Government introduced new Sections 25FF and 25FFF, providing that compensation shall be payable to workmen in case of transfer of an undertaking or closure of an undertaking to protect the interests of the workmen. Thus, the termination of service of a workman on transfer or closure of an undertaking was treated as ‘deemed retrenchment’, in result enlarging the general scope and ambit of the expression (retrenchment) under the Act.
The Supreme Court in the Punjab Land Development Corporation Ltd. case clarified that the expression “retrenchment” does not mean only termination by the employer of service of surplus labour for any reason whatsoever. The expression “retrenchment” is not to be understood in the narrow, natural and contextual meaning but is to be understood in its wider literal meaning to mean termination of service of workman for any reason whatsoever.
The expression “for any reason whatsoever” in Section 2(oo), must necessarily draw within its ambit, the termination of the workers services due to reasons such as economy, rationalisation in industry, installation or improvement of plant or technique and the like. It is in conjunction with such reasons that the words “any reason whatsoever” must be read and construed (Kamleshkumari Rajanikant Mehta v. Presiding Officer, Central Government, Industrial Tribunal No.1, (1980) Lab I.C.1116).
A casual labourer is a workman and as such his termination would amount to retrenchment within Section 2(oo); 1981-II Labour Law Journal 82 (DB) (Cal.). Where persons are employed for working on daily wages their disengagement from service or refusal to employ for a particular work cannot be construed to be a retrenchment and that concept of retrenchment cannot be stretched to such an extent as to cover such employees (U.P. v. Labour Court, Haldwani, 1999 (81) FLR 319 All.).The Supreme Court observed that if the termination of an employee’s services is a punishment inflicted by way of disciplinary action, such termination would amount to retrenchment (SBI v. Employees of SBI, AIR 1990 SC 2034). But where the workmen were engaged on casual basis for doing only a particular urgent work, the termination of their service after the particular work is over, is not a retrenchment (Tapan Kumar Jana v. The General Manager, Calcutta Telephones, (1980) Lab.I.C.508).
The fact that the implementation of a reorganisation scheme adopted by an employer for reasons of economy and convenience would lead to the discharge of some of the employees, will have no material bearing on the question as to whether the reorganisation has been adopted by the employer bona fide or not. The retrenchment should be bona fide and there should be no victimisation or unfair labour practice on the part of the employer. The Supreme Court in the case of Workmen of Subong Tea Estate v. Subong Tea Estate, (1964) 1 L.L.J. 333, laid down following principles with regard to retrenchment:
1. The management can retrench its employees only for proper reasons, which means that it must not be actuated by any motive of victimisation or any unfair labour practice.
2. It is for the management to decide the strength of its labour force, and the number of workmen required to carry out efficiently the work in his industrial undertaking must always be left to be determined by the management in its discretion.
3. If the number of employees exceeds the reasonable and legitimate needs of the undertaking, it is open to the management to retrench them.
4. Workmen may become surplus on the ground of rationalisation or on the group of economy reasonably and bona fide adopted by the management or of other industrial or trade reasons.
5. The right of the employer to effect retrenchment cannot normally be challenged but when there is a dispute in regard to the validity of the retrenchment, it would be necessary for the tribunal to consider whether the impugned retrenchment was justified for proper reasons and it would not be open to the employer either capriciously or without any reason at all to say that it proposes to reduce its labour for no rhyme or reason.
The Section does not make any difference between regular and temporary appointment or an appointment on daily wage basis or appointment of a person not possessing requisite qualification (L.L.J.-II-1996 Mad. 216) or whether the appointment was held to be in accordance with law or not. In Prabhudayal Jat v. Alwar Sehkari Bhumi Vikas Bank Ltd., (1997) Lab IC Raj. 944, where the services of an employee irregularly appointed was terminated, the Court held, it was a fit case of retrenchment.
In Anand Behari v. RSRTC, AIR 1991 SC 1003, the services of bus conductors, were terminated on the ground of weak eye sight which was below the standard requirement. Supreme Court held that the termination is due to continued ill- health which has to be construed relatively in its context, and that must have a bearing on the normal discharge of their duties. Ill-health means disease, physical defect, infirmity or unsoundness of mind. Termination on account of lack of confidence is stigmatic and does not amount to retrenchment (Chandulal v. Pan American Airways, (1985) 2 SCC 727). Striking of the name of a worker from the rolls on the ground of absence for a specific period, provided under Standing Orders amounts to retrenchment (1993 II LLJ 696). Disengagement of workers of seasonal factories after season is not a retrenchment (LLJ I 98 SC 343).