Question

XYZ Textiles Ltd., a manufacturing company, recently terminated 4 workers without providing any compensation. The termination was because of misconduct on the part of the workers. The company issued a show-cause notice and conducted a disciplinary enquiry against them. On the basis of the recommendations of the committee, the services were rejected by the management. Aggrieved by the rejection, the workers filed a complaint in the Labour Court under the provisions of the Industrial Disputes Act, 1947, claiming retrenchment compensation. Based on the above problem, select the correct answer:

• A. The termination amounts to retrenchment, hence compensation will be awarded.
• B. The termination violated the provisions under the Industrial Disputes Act, 1947, hence the compensation will be awarded.
• C. The termination does not amount to retrenchment, hence no compensation.
• D. The termination amounts to lay-off, hence compensation will be awarded.

Hint:

Termination due to misconduct, after a fair disciplinary enquiry, is not treated as retrenchment under the Industrial Disputes Act, 1947.

Answer 1

The Correct Option is C

Step 1: Understanding “retrenchment” under Section 2(oo) of the Industrial Disputes Act, 1947.
“Retrenchment” means the termination of a worker’s service by the employer for any reason whatsoever, except in cases of: - Disciplinary action (misconduct), - Voluntary retirement, - Superannuation, or - Non-renewal of a contract.
Step 2: Application to the case.
In the given scenario, the workers were terminated because of misconduct, and a proper disciplinary enquiry was held. Termination on disciplinary grounds does not constitute “retrenchment” under Section 2(oo). Therefore, the workers are not entitled to retrenchment compensation.
Step 3: Analysis of options.
(A) Incorrect — Termination for misconduct is excluded from retrenchment.
(B) Incorrect — There is no violation if the disciplinary process was duly followed.
(C) Correct — Misconduct-based termination is not retrenchment; hence, no compensation.
(D) Incorrect — Lay-off occurs due to temporary inability to employ, not misconduct.
Step 4: Conclusion.
Thus, the termination does not amount to retrenchment and the workers are not entitled to compensation.