Holding

Termination of service for failure to pass a confirmation test is retrenchment under Section 2(oo) and therefore attracts the provisions of Section 25F.

Summary

Santosh Gupta, a woman employee of State Bank of Patiala, was terminated on 21 August 1974 after failing a test required for confirmation. She contended that the termination amounted to "retrenchment" under Section 2(oo) of the Industrial Disputes Act, 1947, thereby invoking the procedural and compensation requirements of Section 25F. The bank argued that the dismissal was not due to surplus labour but to her failure to meet the test, and thus fell outside the definition of retrenchment. The Industrial Tribunal upheld the bank’s view. On appeal, the Supreme Court held that any termination by the employer for any reason, except the expressly excluded categories, is retrenchment; consequently, the termination for failure to pass the test attracted Section 25F. The Tribunal’s award was set aside, the appellant was ordered reinstated with full back wages and costs, and the appeal was allowed.

Issues considered

The termination of an employee for failure to pass a confirmation test constitutes "retrenchment" within the meaning of Section 2(oo) of the Industrial Disputes Act, 1947.
Whether Section 25F of the Industrial Disputes Act applies to such termination.
The proper interpretation of the phrase "termination by the employer of the service of a workman for any reason whatsoever" in Section 2(oo).

Legislation cited

Industrial Disputes Act, 1947s. 25F, s. 25FF, s. 25FFF, s. 2(oo)

Subjects

retrenchmentIndustrial Disputes Acttermination of serviceSection 25Femployment compensationstatutory interpretationbanking sector

Judgment

884

SANTOSH GUPTA
v.
STATE BANK OF PATIALA
April 29, 1980
B [V. R. KRISHNA !YER AND 0. CH!NNAPPA REnoY JJ.]
Industrial Disputes Act, 1941-Section 2 (00)-"Retrenchment"-Termina-
fion. ·.· •. ·.for t11lY rea'>'iO!. whatsoever, meaning uf Section 25 FF and Section
25 FFF object of. "

The appellant was employed in the State Bank of Patiala, The Mall, Paliala,
from July 13, 1973 till August 21, 1974, when her services were terminated. .. ~
c Despite some breaks in service for a few days, the appellant had admittedly
worked for 240 days in the year preceding August 21, 1974. According to the
workman, the termination of her service was "retrenchment" within the meaning
of that expression in Section 2(oo) of the Industrial Disputes Act, 1947, 1inco
it did not fall within any of the excepted cases mentioned in Section 2(00),
Since there was "retrenchment", it was bad for non-compliance with the provi·
sions of section 25 l' of the Industrial Disputes Act. On the· other ·hand, the
D contention of the management was that the termination of services was not due
to discharge of surplus labour. It was due to the failure of the workman to
pass the test which would have enabled him to be confirmed in the service.
Therefore, it was not retrenchment within the meaning of section 2 ( 00) of the,
Industrial Disputes Act. The Presiding Officer, Central Government, Industrial
Tribunal-cum·Labour Court, accepted the management's contention and decided
against the workman appellant. Hence the appeal by special leave.
E
Allowing the appeal, the Court
HELD : (i) The discharge of the workman on the ground that she did not
pass the test which would have enabled him to be confirmed was "retrenchment"
within the meaning of section 2(00) and, therefore, the requirements of section
25F had to be complied with. [892 F-GJ
F (ii) Section 2(00) of the Jndustirial Disputes Act uses a wide language_...~
particularly the words "term.iriation .............. for any reason whatsoever". '
The definition "retrenchment" expressly excludes termination of service as a /
..punishment inflicted by way of disciplinary action". It does not include, ~
voluntary retrenchment of the workman or retrenchmCnt of the workman on
reaching the age of superannuation or termination of the service of the workman
on the ground of continuous ill·health. The Legislature took special care to
G mention that these were not included within the meaning of "termination by the
employer of the service of a workman for any reason whatsoever". Th..i8
emphasises the broad interpretation to be given to the expression "retrenchment".
[887 E-H, 888 A]
2. If due weight is given to the words "the termination by the employer
of the service of a workman for any: reason whatsoever" and if the words 'for
any reason whatsoever" are understood to mean what they plainly say, iti is
H difficult to escape the conclusion that the expression 'retrenchment' must include
every termination of the service of a workman by an act of the employer. Tle
underlying assumption, of course, is that the undertaking is ru!!D.ing as an under-
SANTOSH GUPTA V, STATE BANK 885

taking and the employer continues Wi an employer but where either on account
of transfer of the undertaking or on account of the closure of the undertaking A.
tlie basic assumption disappears, there can be no question of '~etrenChment'
within the meaning of the definition contained in s. 2(00) of the Act.
[888 A-CJ

Hariprasad Shivshankar Shukla v. A. D. Divakar [1957] SCR 121; applied.

By introducing section 25 FF and Section 25 FFF, Parliament treated the B:
termination of the service of a work.man on the transfer or closure of an under-
taking as "deemed retrenchment". The effect was that every case of termination
of service by act of employer even if such termination was a consequence of
transfer or closure of the undertaking was to be treated as 'retrenchment' for
tho purposes of notice, compensation etc." The expression ''termination of
service for any reason whatsoever" now covers every kind of termination of
service. except those not expressly included in S. 25F or not expressly provided C'
for by ot'her provisions of theAct as 25 FF and 25 FFF. [888 C-F]

4. The manifest object of Section 25 FF and S. 25 FFF is to so compensate
the workman for loss of employment as to provide him the wherewithal to
subsist until he finds fresh employment. The non-inclusion of 'voluntary retire-
ment of the workmen, retirement of workmen, on reaching the age of superan-
nuation, termination of the service of a workman, on the ground of continued I)
ill-health' in the definition of 'retrenchment' clearly indicate and emphasise the
true object of 25F, 25 FF and 25 FFF and the nature of the compensation
provided by those provisions." [888 F-H]

Indian H111ne Pipe Co. Ltd. v. The Workman [1960] 2 SCR 32; followed.
5. The submission that notwithstanding the comprehensive language of the
definition of retrenchment" in section 2(00) the expression continues to retain E.
its original meaning, namely, discharg~ .from service on account of surplus age
is not correct. It cannot be assumed that Parliament was undertaking an exer-
cise in futility to give a long winded definition merely to say that the expression
means what it always meant. [889 D-EJ
Hariprasad Shivshankar Shukla v. A. D. Dii,akar [1957] SCR 121, Hin-
·rdustan Steel Ltd. v. 1 lu~ Presiding officer, Labour Court Orissa & Ors. [1977]
1 SCR 585; State Bank of /lldia v. Slzri N. Sundaramoney [1974] 3 SCR 160;
f Delhi Clath and General Mills Ltd. v. Slzambunath Mukherjee & Ors. [19781
1 SCR 591; explained and .followed.
Management of M/s. Willcose Buckwell India Lt<f. v. Jagannath & Ors.
' AIR 1974 S.C. 1164; L111ployees in Relation v. Dign1ode11 Colliery v. Tlieir
Wor!111e11 [1965] 3 SCR 4•S; distinguished.
G:
L. Robert D'Souza v. Executive Engineer, Southern Railway and Anr. (1979)
KLJ Kerala 211; The Managing Director, Natio11al Garage v. J. Gonsalves
fl962J KU 56. Good/as Nerolac Paints v. Cl1ief Commissioner, Delhi (1961)
1 LLJ. 545; Rajastlzan State Electricity Board v. Labour Court (1966) I LLJ.
381: over-ruled.

CIVIL APPELLATE JURISDICTION : Civil. Appeal No. 3563 of 1979. B
Appeal by special leave from the Award dated 9-7-1978 of the
Presiding Officer Central Government. Industrial Tribunal-Cum-
886 SUPREME COURT REPORTS [1980] 3 s.e.a,

A La'>our ···eourt, New Delhi in f.D0 No. 90 of 1977. published in
J!azette of India on )1-8-1979.
-~.
M. K. Ramamurthi, and Romes/! C. Pathak for the Appellant.
Dr. Anand Parkash, Aclarsh Kumar, Mrs. Laxmi Anand Parkash,
· and Jagat Arora for:the Respondent.
B
The Judgment of the Court was delivered by
CHI~APPA REDDY, J.-Santosh Gupta, the appellant-Work-
man (a woman), was employed in the State Bank of Patiala, the •
Mall, Patiala, from July 13, 1973, till August 21, 1974, when her
services were terminated. Though there were some breaks in
c service for a few days, those breaks are not relevant for the purpose
of deciding this case though we may have to advert to them in another
connection. Despite the breaks, the workman had admittedly
worked for 240 days in the year preceding Augnst 21, 1974. Accord-
ing to the workman the termination of her services was 'retrench-
ment' within the meaning of that expression ins. 2(00) of the Indus-
D trial Disputes Act, 1947, since it did not fall within any of the 3
excepted cases mentioned in s. 2(00). Since there was 'retrench-
ment', it was bad for non- compliance with the provisions of s. 25-F
of the Industrial Disputes Act. On the other hand the contention
of the management was that the termination of services was not due to
E discharge of surplus labour. It was due to the failure of the workman
to pass the test which would have enabled her to be confirmed in
the service. Therefore, it was not retrenchment within the meaning
of s. 2(00) of the Industrial Disputes Act.
S. 25-F prescribes that no workman employed in any industry
who has been in continuous service for not less than one year shall
F
be retrenched by the employer until-(a) the workman has been given '
one month's notice in writing indicating the reasons for retrench- ,
ment 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 bas 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 a excess
of six months; and (c) notice in the prescribed manner is served on
the appropriate Government or any such authority as may be spe- )'
cified by the appropriate Government by notification in the official
Gazette. There is a proviso to clause (a) which dispenses with the
H necessity for the notice contemplated by the clause if the retrench-
ment is under an agreement which specifies the date for the termina-
tion of service.
S/.NT05ll:'GIJPTA v. STATE BANK (Chinnappa Reddy,!.) 887

The expression retrenchment is specially defined by s. 2(00) A
ollf the Act and is as follows:
"2(00) 'retrenchment' means the termination by the
employer of the service of a workman for any reason
whatsoever, otherwise than as a punishment inflicted by
. way of disciplinary action, but does not include- B
(a) voluntary retirement of the workman; or
(b) retirement of the workman on reaching the age
• of superannuation if the contract of employment
between the employer and the workman concerned
contains a stipulation in that behalf; or
c
(c) termination of the service of a workman on the gtound
of continued ill-health;"

In Hariprasad Shivshankar Shukla v. A. D. Divikar (1.), the
'Supreme Court took the view that the word 'retrenchment' as de-
!fined ins. 2(00) did not include termination of services of all werk- D
men on a bonafide closure of an industry or on change of owner-
ship or Jnana~em•mt. of the industry. In order to provide for the
situations which the. Supreme Court held were not covered by the
-definition of the expression 'retrenchment', the Parliament added
s. 25 FF and s. 25 FFF providing for the payment of compensation
--'( to the workmen in case of transfer of undertakings and in case of E
dosure of undertakings respectively.

If the definition of 'retrenchment' is looked at unaided and
unhampered by precedent, one. is at once struck by the remarkably
wide language employed and particularly by the use of the words
' 6 "termination ...... for any reason whatsoever". The definition F
~ expressly excludes termination of service as a 'punishment inflicted
• ' by way of disciplinary action'. The definition does not include, so
it expressly says, voluntary retrenchment of the workman or re-
trenchment of the workman on reaching the age of superannuation or
' termination of the service of the workman on the ground of con-
tinuous ill-health. Voluntary retrenchment of a workman or re- G
trenchment of the workman on reaching the age of superannation
ean hardly be described as termination, by the employer, of the service
of a workman. Yet, the Legislature took special care to mention
that they were not included within the meaning of "termination. by
the employer of the serviee of a workman for any reason whatso-
• ever". This, in our opinion, emphasizes the broad interpretation to
R.

(I) [1957j S.C.R. 121.
A
888 SUPREME COURT REPORTS [19801 3 .x
be given to the expression 'retrenchment'. In our view if due weig~
is given to the words "the termination by the employer o.f the servic
of a workman for any reason whatsoever" and if the words 'for an
reason whatsoever' are understood to mean what they plainly sa
it is difficult to escape the conclusion that the expressi9n 'retrenchf
ment' must include every termination of the service of a workman bt
an act of the employer. Tbe underlying assumption, of course~
is that tbe undertaking is running as an undertaking, and the em
.
ployer continues as an employer but where either on account o
transfer of the undertaking or on account of the closure of the under1
taking the basic assumption disappears, there can be no question 011
•
'retrenchment' within the meaning of the definition contained in,I
c S. 2(00). This came to be realised as a result of the decision of this]
Court in Hariprasad Shivshanker Shukla v. A. D. Divikar (supra). I
The Parliament then stepped in and introduced 25 FF and 25FFFI
by providing that compensation shall be payable to workmen in I
case of transfer or undertaking or closure of undertaking as if the work· I
men had been retrenched. We may rightly say that the termination I
D of the service of a workman on the transfer or closure of an under· I
taking was treated by Parliament as 'deemed retrenchment'. The I
effect was that every case of termination of service by act of employer I
·even if such termination involved was a consequence of transfer or I
closure of the undertaking was to be treated as 'retrenchment' for the 1

purposes of notice, compensation etc. Whatever doubts might I 1

E have existed before Parliament enacted 25FF and 25FFF •about I
the width of 25F there cannot now be any doubt that the expression I
'termination' of service for any reason whatsoever now covers every I
kind of termination of service except those not expressly included" I
in S. 25F or not expressly provided for by other provisions of the I
Act such as Ss. 25FF and 25FFF. ~
F
In interpreting these provisions i.e. 25F, 25FF and 25FFF .' •
one must not ignore their object. The manifest object ofthese
provisions is to so compensate the workman for loss of employment
as to provide him the wherewithal to subsist until lie finds fresh em-·
, ~
G ployment. The non-inclusion of 'voluntary retirement of the work·
men, retirement of workmen on reaching the age of superannuation, I
termination of the service of a workman on the ground of couti11ued·
ill-health' in the definition of 'retrenchment' clearly indicate a1~<f
y
,,
emphasise what we have said about the true object of 25F, 25FF and" ;,
1:.
25FFF and the nature of the compensation provided by those "
H provisions. The nature of retrenchment con )lensation has been ;
explained in Indian Hume Pipe Co. Ltd. V. the Workmen,(') as follows:
~
(lJ [1960] 2 S.C.R. 32.
SANTOSH GUPTA v. STATE BANK (Chinnappa Reddy, /.) 889

"As the expression 'retrenchment compensation' in- A
dicates it is compensation paid to a workman on his
retrenchment and it is intended to give him some relief
and to soften the rigour of hardship which retrenchment
inevitably causes. The retrenched workman is, suddenly
and without his fault, thrown on the street and has to
R
face the grim problem of unemployment. At the com-
mencement of his employment a workmen naturally expects
and looks forward to security of service spread over a
long period but retrenchment destroys his hopes and
expectations. The object of retrenchment compensation
is to give partial protection to the retrenched employee and
his family to enable them to tide over the hard period of
c.
unemployment".
Once the object of 25F, 25FF and 25FFF is understood and the
true nature of the compensation which those provisions provide is
·realised, it is difficult to make any distinction between termination
))
of service for one reason and termination of service for another.

Df. Anand Prakash wants us to hold that notwithstanding
the comprehensive language of the defimtion of "retrenchment" in
s. 2 (00) the expression continues to retain its original meaning
which was, according to the counsel, discharged from service on
account of 'surplusage'. It is impossible to accept his submission. E
If the submission is right, there was no need to define the expression
'retrenchment', and in such wide terms. We cannot assume that the
Parliament ~s undertaking an exercise in futility to give a long winded
definition merely to say that the expression means what it always
meant.
F
·'-,A. Let us now examine the precedents of this Court to discover
~whether the true position in law is what has been stated by us in the
• previous paragraphs. The earliest of the cases of this Court
to which our attention was invited was Harprasad Shivashankar
• Shukla v. A. D. Divikar (supra). That was a case which was decided
before Ss. 25FF and 25FFF were brought on the statute book. In G
fact it was as a consequence of that decision that the Industrial Dis-
putes Act had to be amended and these two provisions came to be
introduced into the Act. The question which arose for decision in
that case was stated by the learned judges themselves as follows:
"The question, however, before us is-does this de- H
finition merely give effect to the ordinary, accepted notion
of retrenchment in an existing or running industry by
18-463SCl/80
890 SUPREME COURT REPORTS [1980] 3 s.c.R.

embodying the notion in apt and readily intelligible words
or does it go so far bcy,--nd the accepted notion of re-
trenchment as to include the termination of services of
all workmen in an industry when the industry itself
ceases to exist on a bonafide closure or discontinuance
of his business by the employer"
B
The question so stated was answered by the learned judges in the
following way :
"In the absence of any compelling words to indicate that the
intention was even to include a bonafide closure of the whole business, •
it would, we think, be divorcing the expression altogether from the
c context to give it such a wide meaning as is contended for by learned
counsel for the respondents ......•• it would be against the entire
scheme of the Act to give the definition clause relating to retrenchment
t such a meaning as would include within the definition termination of
service of all workmen by the employer when the business itself eeases
D to exist".
It is true that there are some observations which, if not properly
understood with referenee to the question at issue, seemingly support
the submission of Dr. Anand Prakash that 'termination of serviee
for any reason whatsoever' means no more and no less than discharge
of a labour force which is a surplus age. The misuuderstanding of the
E observations and the resulting confusion stem from not appreciating
(!)the lead question which was posed and answered by the learned
judges and (2) that the reference to 'discharge on account of surplus
age' was illustrative and not exhaustive and by way of contrast
with discharge on account of transfer or closure of business.
F Management of M/s Wi /cox Buckwe!l India Ltd. v. Jagannath
and Ors.(1) and Employers in Re a1·on to Digwadih Col iery v. Their ,
Workmen(2) were both cases where the termination of the Workman~
! from service was on account of "surplusage'' and, therefore, the ···
cases were clear cases of retrenchment. They do not throw any

G
light on the question now at issue.
.
In State Bank of India v. Shri N. Sundaramoney(3) a Bench of three
judges of this Court consisting of C!-candrachud J. (as he then was),
Krishna_ Iyer, J., and Gupta , J., considered the question whether
s. 25F of the Industrial Disputes Act was attracted to a ca'e where
the order of appointment carried an automatic cessation of service,
H (I) A.LR. 1974 S.C. 1166.
(2) [1%5] 3 S.C.R. 448.
(3) [1976] 3 S.C.R. 160.
SANTOSH GUPTA v. STATE BANK (Chirmappa Reddy,!.) 891

the period of employment working itself out by efflux of time and not A
by an act of employer, Krishna Iyer, J. who spoke for the Court
observed.
'Termination ...... for any reason whatsoever' are the key
words. Whatever the reason, every termination spells re-
trenchment. So the sole question is--has the employee's service B
been terminated? Verbal apparel apart, the substance is de-
cisive: A termination takes place where a term expires either by
the active step of the master of the running out of the stipulated
term. To protect the weak against the strong this policy of comp-
rehensive definition has been effectuated. Termination emb-
races not merely the act of termination by the employer, but the c
fact of termination howsoever produced. . ....... True, the
section speaks of retrenchment by the employer and it is urged
that some act of volition by the employer to bring about the
termination is essential to attract s. 25F and automatic
extinguishment'of service be effiuxion of time cannot be sufficient
... Words of multiple import have to be winnowed judicially to suit D
the social philosophy of the statute So screened We hold that
the transitive and intransitive senses are covered in the current
context. Moreover, an employer terminates employment not
merely by passing an order as the service runs. He can do so by
writing a composite order, one giving employment and the other
ending or limiting it. A separate, subsequent determination is E
no.t the sole magnetic pull of the provision. A pre-emptive pro-
vision to terminate is struck by the same vice as the post-appoint-
ment termination. Dexterity of diction cannot defeat the arti-
culated conscience of the provision".

In ffndustan Steel Ltd. v. the Presiding Officer, Labour Court, F
)""'"Orissa and Ors.(') the question again arose whether termination of ser-
\_ vice by effil'X of time was termination of service within the defini-
tion of retrenchment in s. 2 (00) of the Industrial Disputes Act. Both

. the earlier decisions of the Court in Hariprasad Shivshartkar Shukla
·v. A.D. Divikar and State Bank of India v. S. Sundaramoney (supra)
·were considered. There was also a request that N. Sundaramoney's
,,
~

'case con1ictcd with the decision in Harprasad Sh,.vshankar Shuk av.
'A. D. D'v kar and therefore required reconsideration. A Bench of
•threeiudges of this Court consisting ofChandrachud J (as he then was),
"Goswami J and Gupta J held that there was nothing in Huriparsad
"Shivshankar Shukla v. A.D. D"vikar which was inconsistent with the II
•decision in N. Sundaramoney' s case. They held that the decision in
(1) [1977] I S.C.R. 586.
892 SUPREME COURT REPORTS [1980] 3 S.C.R.
A llarivarsad Shivshankar's case was 1tat !le \101ds "fer any reason
whatsoever" used in the definition of retrencnmem would not include
a bonafide closure of the wh<.,,o uusmsse because it would be against
the entire scheme of the Act. The learned judges then observed
that, on the facts before them to give full effect to the words "for any
reason whatsoever" would be consistent with the scope and purpose
B
of s. 25 of the Industrial Disputes Act and r.ot contrary to the schen:e
of the Act. In Delhi Cloth and General Mills Ltd. v. Shambhunath
Mukherjee and Ors.,( 1) Goswami, Shinghal and Jaswant Singh JJ, held
that striking off the name of a workman from the rolls by the mana-
gement was termination of the service which was retrenchment within
c the meaning of s. 2(00) of the Industrial Disputes Act.
Dr. Anand Prakash, cited before us the decision of a Full Bench
of the Kerala High Court in L. Robert D'Souza v. Executive
Engineer, Southern Railway and Anr.(2) and some other
cases decided by other High Courts purporting to follow
the decision of this Court in llariparsad Shivshankar Shukla v.
D
A. D. Divikar's case, Shuk!a's case, we have explained. The ratio
of Shukla' s case in fact, has already been explained in
Hindustan Steel, Ltd., v. the Presiding Officer, Labour Court Orissa
and Ors. The decisions in Hindustan Steel Ltd. v. the Presiding Officer,
Labour Court Orissa and Ors., and State Bank of India v. N.Sundara·
E money have, in our view, properly explained Shuk/a'scase and have
laid down the correct! aw. The decision of the Kerala High Court in
L. Robert D'Souza v. Executive Engineer Southern Railway & Anr.,(2)
and the other decisions of the other High Courts to similar effect
viz. The'.Managing Director, National Garages v. J. Gonsalvel3) Good/as
· Nerolac Paints v. Chief Commissioner, Delhi(4) and Rajasthan State
F Electricity Board. v. Labour Court,(') are, therefore, over-ruled. We
hold, as a resul(of our discussion, that the discharge of the workman ~
on the ground-she did not pass the test which would have enabled \
her' to be confirmed was 'retrenchment' within the meaning of s. 2(00) · "
and, therefore, the requirements of s. 2SF had to be complied with. The
·order of the Presiding Officer, Central Govt. Industrial Tribunal-cum-
G , Labour Court, new Delhi, is set aside and the appellant is directed to
be reinstated with full back wages. The appellant is entitled to her
costs.
S. R. Appeal allowed.
(1) [1978] 1 S.C.R. 591.
H (2) [19791 1 L.L.J. 211.
(3) [1962) 1 L.L.J. 56.
(4) [1967] 1 L-L-J. 545.
(5) [1966] 1 L.L.J. 381.