Law and You > Labour Laws > The Industrial Relations Code, 2020 > Closure under Industrial Relations Code, 2020
The Industrial Disputes Act, 1947, originally does not contain the provisions relating to the closure of an industry. The provisions relating to the law of closure were inserted in the year 1957 in view of the Supreme Court judgment in case Hariprasad Shivshankar Shukla v/s. A.D. Diwelkar, AIR 1957 SC 121. According to Section 2(h) of the Industrial Relations Code, 2020 “closure” means the permanent closing down of a place of employment or part thereof.
Notice of Closure:
- According to Section 74(1) of the Industrial Relations Code, 2020 an employer who intends to close down an undertaking shall serve, at least sixty days before the date on which the intended closure is to become effective, a notice, in such manner as may be prescribed, on the appropriate Government stating clearly the reasons for the intended closure of the undertaking.
This provision is not applicable to—
- an industrial establishment in which less than fifty workers are employed or were employed on any day in the preceding twelve months;
- an industrial establishment set up for the construction of buildings, bridges, roads, canals, dams or for other construction work or project.
- According to Section 74(2) of the Industrial Relations Code, 2020 notwithstanding anything contained in sub-section (1), the appropriate Government may, if it is satisfied that owing to such exceptional circumstances as accident in the undertaking or death of the employer or an extraordinary situation such as natural calamities or the like, it is necessary so to do, by order, direct that the provisions of sub-section (1) shall not apply in relation to such undertaking for such period, as may be specified in the order.
Compensation in Case of Closure:
According to Section 75(1) of the Industrial Relations Code, 2020 where an establishment is closed down for any reason whatsoever, every worker who has been in continuous service for not less than one year in that undertaking immediately before such closure shall, subject to the provisions of sub-section (2), be entitled to notice and compensation in accordance with the provisions of section 70, as if the worker had been retrenched:
Provided that where the undertaking is closed down on account of unavoidable circumstances beyond the control of the employer, the compensation to be paid to the worker under clause (b) of section 70, shall not exceed his average pay for three months.
Explanation.—An industrial establishment which is closed down by reason merely of—
(i) financial difficulties (including financial losses); or
(ii) accumulation of un-disposed stocks; or
(iii) the expiry of the period of the lease or license granted to it; or (iv) in case where the undertaking is engaged in mining operations, exhaustion of the minerals in the area in which operations are carried on, shall not be deemed to be closed down on account of unavoidable circumstances beyond the control of the employer within the meaning of the proviso to this sub-section.
Procedure of Closure of Establishment:
According to Section 80(1) of the Industrial Relations Code, 2020 an employer who intends to close down an undertaking of an industrial establishment to which this Chapter applies shall, electronically or otherwise, apply in such manner as may be prescribed, for prior permission at least ninety days before the date on which the intended closure is to become effective, to the appropriate Government, stating clearly the reasons for the intended closure of the undertaking and a copy of such application shall also be served simultaneously on the representatives of the workers in such manner as may be prescribed: Provided that nothing in this sub-section shall apply to an undertaking set up for the construction of buildings, bridges, roads, canals, dams or for other construction work.
According to Section 80(2) of the Industrial Relations Code, 2020 where an application for permission has been made under sub-section (1), the appropriate Government, after making such enquiry as it thinks fit and after giving a reasonable opportunity of being heard to the employer, the workers and the persons interested in such closure may, having regard to the genuineness and adequacy of the reasons stated by the employer, the interests of the general public and all other relevant factors, by order and for reasons to be recorded in writing, grant or refuse to grant such permission and a copy of such order shall be communicated to the employer and the workers.
According to Section 80(3) of the Industrial Relations Code, 2020 where an application has been made under sub-section (1) and the appropriate Government does not communicate the order granting or refusing to grant permission to the employer within a period of sixty days from the date on which such application is made, the permission applied for shall be deemed to have been granted as applied for on the expiration of the said period of sixty days and the application shall be deemed to have been disposed of accordingly by the appropriate Government.
According to Section 80(4) of the Industrial Relations Code, 2020 an order of the appropriate Government granting or refusing to grant permission shall, subject to the provisions of sub-section (5), be final and binding on all the parties and shall remain in force for one year from the date of such order.
According to Section 80(5) of the Industrial Relations Code, 2020 the appropriate Government may, either on its own motion or on the application made by the employer or any worker, review its order granting or refusing to grant permission under sub-section (2) within the prescribed time from the date on which such order is made Provided that where a reference has been made to a Tribunal under this sub-section, it shall pass an award within a period of thirty days from the date of such reference.
According to Section 80(6) of the Industrial Relations Code, 2020 where no application for permission under sub-section (1) is made within the period specified therein, or where the permission for closure has been refused, the closure of the undertaking shall be deemed to be illegal from the date of closure and the workers shall be entitled to all the benefits under any law for the time being in force as if the undertaking had not been closed down.
According to Section 80(7) of the Industrial Relations Code, 2020 notwithstanding anything contained in the foregoing provisions of this section, the appropriate Government may, if it is satisfied that owing to such exceptional circumstances as accident in the undertaking or death of the employer or the like it is necessary so to do, by order, direct that the provisions of sub-section (1) shall not apply in relation to such undertaking for such period as may be specified in the order.
According to Section 80(8) of the Industrial Relations Code, 2020 where an undertaking is permitted to be closed down under sub-section (2) or where permission for closure is deemed to be granted under sub-section (3), every worker who is employed in that undertaking immediately before the date of application for permission under this section, shall be entitled to receive compensation which shall be equivalent to fifteen days average pay, or average pay of such days as may be notified by the appropriate Government, for every completed year of continuous service or any part thereof in excess of six months.
Conclusion:
The closure of establishments under the Industrial Relations Code, 2020, marks a significant shift in India’s labour law framework. This code aims to simplify and consolidate various labour laws, focusing on enhancing the ease of doing business while also addressing workers’ rights. The code defines closure as the permanent shutdown of an establishment. This can impact various businesses, particularly in terms of compliance requirements when deciding to close operations. Employers are required to provide advance notice of closure. The code stipulates that affected workers are entitled to compensation, often calculated based on their duration of service. This provision seeks to protect the financial interests of employees during abrupt closures. The code emphasizes that closures must adhere to specific conditions and legal procedures, reducing arbitrary shutdowns and ensuring that employers cannot dismiss workers without just cause. While the code facilitates easier business operations, it also seeks to balance employer interests with worker rights, ensuring that closures are not detrimental to employee welfare.
In conclusion, the Industrial Relations Code, 2020, introduces structured guidelines for the closure of establishments, emphasizing notice, compensation, and legal compliance. This framework aims to protect workers while recognizing the need for businesses to adapt and make necessary operational changes.