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Section 74: 60 days notice to be given of intention to close down any undertaking

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 73 All 104 Sections of Industrial Relations Code, 2020 Section 75

Legal Commentary & Landmark Judgments: Section 74

Section 74 of the Industrial Relations Code, 2020 imposes a mandatory statutory requirement on employers intending to close down an industrial undertaking to serve at least sixty days' prior notice on the appropriate Government, providing the state regulatory apparatus an opportunity to explore conciliation, financial rehabilitation, or workforce redeployment.

  • Mandatory Sixty Days' Prior Notice: An employer who intends to close down an industrial undertaking must serve, at least sixty days before the date on which the intended closure is to become effective, a notice in the prescribed form and manner on the appropriate Government, setting out explicitly the reasons for the intended closure.
  • Threshold Exemptions (Fewer than 50 Workers): The sixty-day notice requirement does NOT apply to: (a) an undertaking in which less than fifty workers are employed or were employed on average per working day in the preceding twelve months; or (b) an undertaking set up for the construction of buildings, bridges, roads, canals, dams, or other construction works.
  • Distinction between Chapter IX and Chapter X Closures: Section 74 operates as the general closure notice provision for establishments employing between 50 and 299 workers under Chapter IX. It requires prior 'notice' to the government, distinct from the stringent 'prior permission' regime under Section 80 of Chapter X which applies to establishments employing 300 or more workers.
Key Landmark Precedents:
  • Workmen of the Indian Leaf Tobacco Development Co. Ltd. v. Management AIR 1970 SC 860: The Supreme Court held that the right to close down a business is an integral component of the fundamental right to carry on trade under Article 19(1)(g) of the Constitution; industrial tribunals cannot compel an employer to continue an unviable business, though procedural statutory notice must be strictly complied with.
  • Avon Services Production Agencies (P) Ltd. v. Industrial Tribunal (1979) 1 SCC 1: The Supreme Court ruled that whether an action constitutes a genuine closure of an undertaking or a colorable device to retrench inconvenient workmen is a jurisdictional fact open to scrutiny by the Industrial Tribunal.
  • State of Haryana v. Subash Chander Marwaha (1974) 3 SCC 220: Affirmed that statutory notice requirements to the state government are designed to alert the administration to impending socio-economic disruption, enabling the state to mediate or prepare welfare safety nets.
Courtroom Practice & Strategic Litigation Guidance:

Before issuing closure notice under Section 74, audit average daily workforce figures for the preceding 12 months. If headcount is between 50 and 299, prepare the Form prescribed under the IR Rules, detailing audited financial losses, raw material obsolescence, or lease termination. Serve the notice simultaneously on the Secretary (Labour), the Labour Commissioner, and the District Magistrate via registered post and the electronic labor portal. Ensure 60 clear days expire before terminating operations and disbursing Section 75 compensation.

Section 73 All 104 Sections of Industrial Relations Code, 2020 Section 75