Hariprasad Shiv Shankar Shukla v. A.D. Divelkar AIR 1957 SC 121

HARIPRASAD SHIV SHANKAR SHUKLA V. A.D. DIVELKAR

Whether the erstwhile workmen were entitled to claim compensation under clause (b) of Section 25F of the Industrial Dispute Act, 1947?
Whether the workmen had been retrenched within the meaning of the expression ‘retrenchment’ in the Industrial Dispute Act of 1947?

Retrenchment refers to the discharge of surplus labor in a continuing business and does not include termination due to a bona fide closure or transfer of ownership.

Two appeals were filed regarding retrenchment compensation.
Barsi Light Railway Company built and operated a railway under an agreement allowing the government to take over after twelve months’ notice.
In 1952, the government gave notice and took over in 1953, leading to the termination of all workmen. Some were re-employed, while others sought retrenchment compensation. Initially dismissed, the High Court later ruled in favor of the workers.
Dinesh Mills Ltd., facing financial losses, closed its woollen mill in 1953, terminating 450 workmen and 20 clerks. The workers sought retrenchment compensation.
Initially dismissed, the High Court ruled that the authority had jurisdiction to hear the claim. Both employers appealed to the Supreme Court.

The Supreme Court set aside the decisions of the Bombay High Court and held that the appellants were not liable to pay any compensation under section 25F.
The court considered whether termination of service due to the closure of a business constitutes retrenchment under the Act and noted that while certain sections of the Act apply to a running or continuing business, they do not definitively determine what is included in the definition of retrenchment.
The court highlighted that the Act primarily focuses on existing or continuing industries, not on closed or dead industries.
The court clarified that retrenchment refers to the discharge of surplus workers in an existing or continuing business, and does not include discharge due to bona fide closure of business.
The court found that its construction of the definition clause and section 25F, which excludes closure of a business from the scope of retrenchment, negates the need to rule on the constitutional question.
The court held that since section 25F does not apply to closed or dead industries, and the cases in question involved genuine closures, the court held that no compensation was payable to the former employees.