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Section 70: Conditions precedent to retrenchment of workers

The Industrial Relations Code, 2020 (Act No. 35 of 2020) • Official Statutory Text & Plain English Practice Guide

Statutory Mandate
Chapter IX: Lay-off, Retrenchment and Closure
Competent Labour Forum
Act No. 35 of 2020
Section 69 All 104 Sections of Industrial Relations Code, 2020 Section 71

Legal Commentary & Landmark Judgments: Section 70

Section 70 of the Industrial Relations Code, 2020 prescribes mandatory statutory conditions precedent to the retrenchment of workers with at least one year of continuous service under Chapter IX—requiring one month's written notice stating reasons or wages in lieu, 15 days' average pay compensation per year of service, and notice to the Government—rendering any non-compliant retrenchment void ab initio.

  • One Month's Written Notice or Wages in Lieu: Employer must serve one month's advance written notice indicating the specific reasons for retrenchment, or pay wages for the notice period in lieu thereof simultaneously with the retrenchment.
  • 15 Days' Average Pay Retrenchment Compensation: Worker must be paid, at the time of retrenchment, compensation equivalent to fifteen days' average pay for every completed year of continuous service or any part thereof in excess of six months.
  • Mandatory Government Notice & Voidness Ab Initio: Statutory notice must be served on the appropriate Government; non-compliance with any of these conditions precedent renders the retrenchment invalid, void ab initio, and entitles the worker to reinstatement with full back-wages.
Key Landmark Precedents:
  • State Bank of India v. N. Sundara Money (1976) 1 SCC 822: Landmark Constitution Bench decision holding that retrenchment encompasses termination of service for any reason whatsoever, and non-payment of statutory compensation simultaneously with termination renders the retrenchment invalid and void ab initio.
  • Punjab Land Development and Reclamation Corpn. Ltd. v. Presiding Officer (1990) 3 SCC 682: A 5-Judge Constitution Bench held that retrenchment under industrial law covers any termination of service by the employer, except voluntary retirement, superannuation, or ill-health, and compliance with conditions precedent is mandatory.
  • Delhi Cloth and General Mills v. Shambhu Nath Mukherji (1977) 4 SCC 415: Supreme Court held that striking off the name of a worker from the rolls without complying with retrenchment conditions is illegal retrenchment void ab initio, requiring full reinstatement.
  • D.K. Yadav v. J.M.A. Industries Ltd. (1993) 3 SCC 259: Landmark ruling that termination of service, even under standing orders for continuous absence, affects the right to livelihood under Article 21 and must adhere to principles of natural justice and retrenchment compliance.
  • Sundarambal v. Govt. of Goa (1988) 4 SCC 42: Supreme Court examined worker definitions and reiterated that retrenchment requires strict adherence to statutory conditions precedent regarding notice and compensation.
  • Anoop Sharma v. Executive Engineer (2010) 5 SCC 497: Supreme Court held that compliance with conditions precedent is mandatory; failure to pay compensation at the time of retrenchment renders termination void ab initio with full back-wages.
Courtroom Practice & Strategic Litigation Guidance:

When executing a retrenchment under Chapter IX, calculate 15 days' average pay based on the daily average of the preceding 3 calendar months (including all basic wages and DA). Ensure the compensation and notice pay are credited to the worker's bank account on or before the effective moment of retrenchment, and dispatch the prescribed Form to the Labour Commissioner on the same day.

Section 69 All 104 Sections of Industrial Relations Code, 2020 Section 71