Hindustan Steel Ltd v The Presiding Officer, Labour Court, Orissa (1976)

Can an employer avoid s. 25F by hiring on fixed-term contracts and simply declining to renew them? If the contract "ends by itself", the employer says, nobody has terminated anything, so there is no retrenchment, no notice and no compensation.

A few months earlier, in State Bank of India v N. Sundara Money (1976), a three-judge bench had held that every termination, however produced, including the running out of a stipulated term, is retrenchment. Here the employer — represented by the Solicitor General — asked the Court to reconsider Sundara Money because it seemed to clash with the larger bench in Hariprasad Shivshankar Shukla v A.D. Divikar (1956). The Court refused. It followed Sundara Money, explained Hariprasad as a case about closure of the whole business, and held that non-renewal of a fixed-term contract is retrenchment.

It is the case to cite when you need to reconcile Hariprasad with the wide reading of s. 2(oo).

The respondents were Head Time Keepers in the Rourkela unit of Hindustan Steel Ltd. Two were appointed in September 1959 for three years each. The third was appointed as Time Keeper in 1957 for three years, extended from time to time until 15 October 1962, and promoted to Head Time Keeper in 1960.

Pursuant to an alleged policy to "streamline the organisation and to effect economies wherever possible", the company chose not to renew the contracts of the eight Head Time Keepers, including these three. There was no order terminating their services: according to the company, the termination was automatic on the expiry of the contractual period.

Through their Union, the Rourkela Mazdoor Sabha, the three raised an industrial dispute, which the Government of Orissa referred to the Labour Court, Bhubaneswar. By award of 12 December 1964 the Labour Court held that they had been retrenched without compliance with s. 25F, that the management had adopted unfair labour practice and had not acted bona fide, and that it was not proved they had alternative employment. It ordered reinstatement with continuity of service and full back wages. The Orissa High Court dismissed the company's writ petition. The company appealed by special leave.

1. Is termination of service by efflux of time — non-renewal of a fixed-term contract — "retrenchment" under s. 2(oo)?
2. Does State Bank of India v N. Sundara Money conflict with the larger bench in Hariprasad Shivshankar Shukla, so as to need reconsideration?
3. Were full back wages wrongly awarded without proof that the workmen had tried to mitigate their loss?

The appeal was dismissed with costs. The respondents had been retrenched contrary to s. 25F, and the award of reinstatement with full back wages stood.

Termination by efflux of time is retrenchment

The Solicitor General "frankly conceded that this appeal was covered by" Sundara Money. The Court set out the passage from that case it relied on: "Termination.. for any reason whatsoever are the key words. Whatever the reason, every termination spells retrenchment." And: "Termination embraces not merely the act of termination by the employer, but the fact of termination howsoever produced." Sundara Money was therefore "conclusive on the main question that arises for consideration in this appeal."

The proviso to s. 25F(a)

The Court gave one more reason. Section 25F(a) requires a month's notice or wages in lieu, and its proviso says "no such notice shall be necessary if the retrenchment is under an agreement which specifies a date for the termination of service". The proviso assumes that a termination on the date fixed by agreement is a retrenchment; it would be pointless if s. 2(oo) did not include termination by efflux of time under an agreement. This was "one more reason why it must be held that the Labour Court was right in taking the view that the respondents were retrenched contrary to the provisions of section 25F."

Hariprasad explained

The question in Hariprasad was whether retrenchment goes so far as to include termination of all workmen "when the industry itself ceases to exist on a bonafide closure or discontinuance of his business by the employer". It was answered no, because "it would be against the entire scheme of the Act to give the definition clause relating to retrenchment such a meaning as would include within the definition termination of service of all workmen by the employer when the business itself ceases to exist". Here, by contrast, "giving full effect to the words \"for any reason whatsoever\" would be consistent with the scope and purpose of section 25F". The Court concluded: "We do not find anything in Hariprasad's case which is inconsistent with what has been held in State Bank of India v.N. Sundara Money".

Back wages

The Labour Court's finding that the workmen had no alternative employment was not challenged in the writ petition, and the question of mitigation of loss had not been raised before the Labour Court at all. "That the respondents were unemployed cannot now be disputed." The High Court was right to refuse to interfere.

Termination of a workman's service on the expiry of a fixed-term contract that the employer chooses not to renew is "retrenchment" under s. 2(oo) — the words "for any reason whatsoever" cover it, and the proviso to s. 25F(a) confirms it. Non-compliance with s. 25F makes such a retrenchment unlawful. Hariprasad Shivshankar Shukla is confined to termination of all workmen on a bona fide closure of the business and does not conflict with Sundara Money.

• Direct question: Is non-renewal of a fixed-term contract retrenchment? Discuss with reference to Sundara Money and Hindustan Steel. Give the text of s. 2(oo), the Sundara Money passage, the proviso argument, and the explanation of Hariprasad.
• Reconciling cases: when a question sets Hariprasad against the wide reading of s. 2(oo), use this case: Hariprasad is about a closed or dead business; in a running business the words "for any reason whatsoever" get full effect.
• Problem question: a public-sector company, to save costs, lets three-year contracts lapse without any termination order. Apply this case: it is retrenchment; without notice or wages in lieu and compensation under s. 25F, it is contrary to law, and reinstatement with back wages may follow.
• Procedure point: mitigation of loss must be raised before the Labour Court; an employer who fails to do so cannot press it later in writ or appeal.