Which is Industrial Establishment under Sec 25(N) of ID Act, 1947

Hi Senior Members,

1. Does IT Companies comes under purview of industry as defined under Sec 2(j) of Industrial Dispute Act, 1947

2. Does Sec 25(N) applies to industry as given in sec 2(j)?
Because 25(L) refering to chapter V(B) to which 25(N) also belongs says
25L. Definitions.—For the purposes of this Chapter,—
(a) “industrial establishment” means—
(i) a factory as defined in clause (m) of section 2 of the Factories Act, 1948 (63 of 1948);
(ii) a mine as defined in clause (i) of sub- section (1) of section 2 of the Mines Act, 1952
(35 of 1952); or
(iii) a plantation as defined in clause (f) of section 2 of the Plantations Labour Act, 1951
(69 of 1951);

So, my question is here in 25(L), they have given narrow meaning of industry than sec 2(j), here it mentions only Factory, Mine & Plantation as industrial establishment.

So, kindly enlighten me with your wisdom which view is correct? Please mention any case laws.

For application of Chapter VB (relating to getting permission from the appropriate government for laying off, closure, retrenchment etc) the establishment should be a factory, mine or plantation. At the time of enactment of ID Act, the scope of organised sector was limited to factories, mines and plantations and hence commercial establishments which cover the larger employment faction as of now, was not given importance. The objective of Chapter VB was to separate big establishments, ie, establishments employing 100 employees from small establishments employing less than 100 or even less than 50 employees.

The matter is a question of law because IT companies are not solely service industries but most of them do produce 'goods'. The Supreme Court has also accepted this view in TCS's case. Though in Seelan Raj R and Ors vs. Presiding Officer 1st Additional Labour Court and Ors, the Apex Court has taken a view that IT companies do not fall under the scope of factories it was accepted in principle that they do manufacture some goods. But there is no direction from the Supreme Court to the effect that Chapter VB will apply to IT Companies and other commercial establishments employing 100 or more employees.

A close reading of the verdict in Cholamandalam Software case (management of Cholamandalam Software Limited Vs Addl. labour Commissioner...) will also help you to decide whether a software company employing 100 or more employees will come under the purview of Chapter VB.

Until the matter is settled by the Supreme Court, the issue would continue to be open to varied views on what is the best course to adopt and whether or not Chapter VB (Section 25N etc) of the ID Act to them and should they take prior permission from the authorities for retrenchment of employees, closure or transfer of undertaking.

Hi Madhu Sir,

Many thanks for your insightful views.

So, I just want to be sure whether IT companies comes under sec 2 (j) of ID Act, 1947 for the application of Sec 25(F) of said act?
Any case laws please.

Certainly YES because IT companies are industries since they have employee employer relationship. As such they are registered under the state's Shops and Commercial Establishments Act. Since there is nothing mentioned in the said Act (Shops..Act) regarding settlement of disputes, lay off, retrenchment etc, the provisions of ID Act will have to be referred to. This is true in the case of Factories coming under Factories Act also, and in the absence of any provision regarding settlement of disputes, procedures for closing own etc the ID Act is to be referred to.

The only confusion is with regard to the scope of section 25L and application of section 25N which are applicable to industrial undertaking defined under Factories Act, Mines Act and Plantation labour Act employing 100/ 300 employees. At the same time, whether provision relating to lay off (section 25B), payment of lay off compensation (section 25C) and employer's liability to maintain Muster roll (section 25E) may not be applicable to establishments other than factories, mines or plantations. That does not mean that a commercial establishment (IT Company) can declare lay off without paying any lay off compensation (at the rate of 50% of average wages) but it should be interpreted as such companies (who employ less than 50 workers and those who have no standing orders specifying the manner in which lay off can be declared) have no right to lay off their workmen and in case they lay off the employees would be entitled to FULL SALARY during the period of lay off as was decided in Workmen Vs Firestone Tyre & Rubber Co (1976 (1) LLJ 493 SC)

Section 25F which refers to procedures for retrenchment in a company which is not a seasonal establishment nor an establishment to which Chapter VB applies- as we saw above, industrial establishments employing more than 100 employees) reads as:
"No workman employed in any 'industry' who has been in continuous service.........." . There is no special treatment under this section. Moreover, various court interpretations lead that retrenchment in software companies without following section 25F is illegal.