Failure To Follow Retrenchment Procedure, Employee Crossing Retirement Age, Bombay HC Directs Lumpsum Compensation

Bombay High Court: A Single Judge Bench of Justice Sandeep V. Marne partially allowed a writ petition challenging a Labour Court order. The court held that an employee who had already crossed retirement age could not be reinstated, but was entitled to lumpsum compensation for the period between illegal termination and retirement. The court observed that while the employer had valid business reasons for reducing staff, failure to follow proper retrenchment procedures under the Industrial Disputes Act rendered the termination illegal. Thus, the court awarded a lumpsum compensation of Rs. 3,58,073 covering the period from termination until the employee's retirement date. Background J Fibre Corporation employed Maruti Harishchandra Amrute as a Shift Supervisor since 2011. In 2018, the firm terminated Amrute's services, citing unfavourable market conditions and reduced production. The management claimed they decided to operate only one of two manufacturing machines and have only one shift supervisor. Since Amrute was allegedly junior to other supervisors, the firm chose to terminate his employment. Amrute sought reinstatement through the Conciliation Officer. After conciliation failed, the Deputy Commissioner of Labour referred the dispute to the Labour Court. The company subsequently deposited Rs. 53,428 as retrenchment compensation with 10% interest in Amrute's account, and separately paid Rs. 68,817 towards gratuity and notice pay. Despite these payments, the Labour Court directed the firm to reinstate Amrute with full backwages and service continuity. The firm did not immediately challenge this award and attempted settlement with Amrute. Meanwhile, the Tahsildar tried to recover Rs. 7,23,450 from the firm toward execution of the award. Aggrieved, the firm filed the present writ petition. Arguments Mr. Shailesh K. More, representing the firm, contended that proper procedure was followed while retrenching Amrute. He argued that Amrute had already crossed retirement age and therefore could not be reinstated. He also maintained that Amrute was not a “workman” within the meaning of Section 2(s) of the Industrial Disputes Act, 1947, as his duties were primarily supervisory in nature. On the other hand, Amrute defended the Labour Court's award. He maintained that his termination was illegal as proper retrenchment procedures were not followed. He contested the firm's claim that he was not a 'workman' under the Industrial Disputes Act, arguing that his duties were predominantly technical rather than supervisory in nature. Court's Reasoning Firstly, the Court examined whether Amrute could be reinstated, given his age. The court noted that according to Amrute's PAN card, his date of birth was June 24, 1961. Assuming retirement age as 60 years, Amrute would have attained retirement age in 2021. Thus, the Court found that the Labour Court had “grossly erred” in directing reinstatement, when Amrute had already crossed retirement age. Secondly, the Court ruled that since the firm admitted in its petition that Amrute's retirement date was June 24, 2021, it was not necessary to determine the exact age of superannuation. Noting that Amrute had crossed retirement age, the court ruled that he could not be reinstated. Thirdly, regarding the legality of termination, the Court found that the petitioner had not followed due procedure. The retrenchment compensation was not offered at the time of issuing the termination letter but was credited to Amrute's account six months later. Moreover, the petitioner failed to produce a seniority list before the Labour Court to prove that Amrute was the junior-most supervisor. Thus, the court found “no serious flaw” in the Labour Court's finding that the termination was illegal. Fourthly, on the question of Amrute's status as a 'workman', the Court noted that the Labour Court had factually determined that his predominant work was technical in nature. Entries made in reports by Amrute were at best clerical work, not supervisory work. Thus, the Court declined to interfere with this finding. Finally, the court observed that while the termination was erroneous, reinstatement was impossible due to Amrute crossing retirement age. The Court noted that the firm had presented proper evidence of declining sales and insufficient work. It observed that the Labour Court might not have interfered had proper retrenchment procedures been followed. Thus, the Court concluded that a lumpsum compensation instead of backwages would “meet ends of justice” in the circumstances. Accordingly, the Court partly allowed the writ petition. It modified the Labour Court's order and awarded Amrute a lumpsum compensation of Rs. 3,58,073 instead of reinstatement and backwages. Case Title: J Fibre Corporation v. Maruti Harishchandra AmruteCitation: 2025 LiveLaw (Bom) 101 Counsel for the Petitioner: Mr. Shailesh K....

Failure To Follow Retrenchment Procedure, Employee Crossing Retirement Age, Bombay HC Directs Lumpsum Compensation

Pranav Kumar

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