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Industrial Disputes Act, 1947 · Chapter VA: Lay-Off and Retrenchment

Section 25F: Conditions precedent to retrenchment of workmen

The Industrial Disputes Act, 1947 was repealed and replaced by the Industrial Relations Code, 2020 from 21 November 2025. It still applies to matters and proceedings from before that date, as the repealing law provides.

In plain words

A workman with at least one year of continuous service cannot be retrenched unless all of the following conditions are met first.

  • One month's written notice giving reasons, or wages for the notice period instead.
  • Retrenchment compensation paid at the time of retrenchment, equal to fifteen days' average pay for every completed year of service, counting any part over six months as a year.
  • Notice served on the appropriate Government or the authority it specifies.
  • A retrenchment without meeting these conditions is invalid, and the workman is usually treated as continuing in service.

Example: A worker with several years of service is retrenched without notice pay or compensation. The retrenchment is invalid.

A simplified explanation, prepared with AI assistance from the official text below and checked automatically against it for numbers and cross-references. The official text is the law and prevails over this summary. Not legal advice.

Read the in-depth explanation, with key Supreme Court rulings ↓

Official text

No workman employed in any industry who has been in continuous service for not less than one year under an employer shall be retrenched by that employer until—

(a) the workman has been given one month’s notice in writing indicating the reasons for retrenchment and the period of notice has expired, or the workman has been paid in lieu of such notice, wages for the period of the notice; * * * * *

(b) the workman has been paid, at the time of retrenchment, compensation which shall be equivalent to fifteen days' average pay [for every completed year of continuous service] or any part thereof in excess of six months; and

(c) notice in the prescribed manner is served on the appropriate Government [or such authority as may be specified by the appropriate Government by notification in the Official Gazette].

Source: India Code (Legislative Department), the text of the Act as it stood before its repeal. Words in square brackets [ ] were inserted or substituted by later amending Acts, and *** marks words omitted by an amendment. The amendment footnotes are not reproduced here. Official text on India Code.

Understanding this section

Section 25F sets three conditions before a workman with at least one year of continuous service can be retrenched: one month's notice with reasons or pay in lieu, compensation of fifteen days' average pay for every completed year of service, and notice to the appropriate Government.

What counts as retrenchment

Retrenchment is defined in section 2(oo) as termination for any reason whatsoever, except punishment by disciplinary action, voluntary retirement, superannuation, non renewal of a fixed term contract and termination on continued ill health. An early view limited it to discharge of surplus staff. From the mid 1970s the Supreme Court read the words literally, so that termination for failing a test or on the automatic expiry of an appointment is retrenchment unless an exception applies.

Continuous service and burden of proof

Section 25B treats a workman as in continuous service for one year if they actually worked 240 days in the twelve months before termination. The workman who claims the benefit must prove those days, ideally with documents. A bare affidavit is usually not enough when the employer denies it.

Effect of breach and the remedy

Clauses (a) and (b) are conditions precedent. A retrenchment without them was held void. But the remedy has changed over time: for daily wagers and short term workers the Court now often awards compensation instead of reinstatement with back wages.

Key Supreme Court rulings

  • State Bank of India v. N. Sundara Money 1976 INSC 3

    Termination for any reason whatsoever includes the automatic end of service under a term in the appointment order, so it was retrenchment and invalid without compliance with section 25F.

  • Santosh Gupta v. State Bank of Patiala 1980 INSC 97

    Termination for failing to pass a test was retrenchment under section 2(oo), and as section 25F had not been complied with, the termination was bad.

  • Mohan Lal v. Management of Bharat Electronics Ltd. 1981 INSC 97

    Non compliance with the conditions in section 25F renders the retrenchment void ab initio, and the workman is treated as continuing in service.

  • Range Forest Officer v. S.T. Hadimani 2002 INSC 85

    The burden is on the workman to prove 240 days of work in the year before termination, and a mere affidavit is not sufficient evidence.

  • B.S.N.L. v. Bhurumal 2013 INSC 821

    Where a daily wage worker's termination breached section 25F, reinstatement with back wages is not automatic and monetary compensation may meet the ends of justice, unless juniors have been regularised.

Common mistakes

  • Reading retrenchment as limited to surplus staff. The definition is far wider.
  • Counting calendar days of engagement instead of days actually worked under section 25B.
  • Assuming a breach of section 25F always leads to reinstatement with full back wages.

Read with: Section 2 Industrial Disputes Act, 1947, Section 25B Industrial Disputes Act, 1947, Section 25G Industrial Disputes Act, 1947

Prepared with AI assistance as a study aid. Every ruling listed was checked against the Supreme Court's own judgments on this site, and quoted words appear in those judgments; linked names open the full judgment. Read the judgments themselves before relying on them. Not legal advice.

Supreme Court judgments citing the section 25F