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Layoff under Industrial Dispute Act (Financial Constraints Cannot Be Valid Reason for Layoff):-


The novel Coronavirus is a new kind of challenge face by humanity. We have seldom faced such a challenge that is altering the very nature of our existence as social animals. As this viral infection spreads through contact the government of India has enforced a lockdown. The direct result of such harsh measures is that economy is losing its pace causing mass terminations and layoffs. Our aim is to see from a legal point of view, whether or not such terminations or layoffs are legal and justified.
Section 2(kkk) of the Industrial Dispute Act, 1947 defines layoff as “lay-off (with its grammatical variations and cognate expressions) means the –
Ø Failure, refusal or inability of an employer
Ø On account of the shortage of coal, power or raw materials or the accumulation of stocks or the breakdown of machinery or natural calamity or of any other connected reasons
Ø To give employment to a workman whose name is borne on the muster rolls of his industrial establishment and who has not been retrenched.
Thus the reason can only be a shortage of coal, power of raw materials, or the accumulation of stock or the breakdown of machinery or natural calamity or other connected reasons. Financial stringency is not a cause for which a lay-off could be given. So any reason arising out of the financial crisis that is the result of the current pandemic is absolutely irrelevant and it is not a reason for which layoff can be legally given. This fact has been substantiated by the honorable Madhya Pradesh High Court in the case of Hope Textiles Ltd vs State Of Madhya Pradesh. The honorable presiding judge V. Kokje further stated
“All the reasons shown by the petitioners are arising out of financial crisis which was being faced by the petitioners because the Government was not allowing it to develop its land and sell it. So far as the lay off is concerned, it is absolutely irrelevant whether the petitioners could raise funds by sale of land to run the unit. That is not a reason for which lay-off could be legally given. Respondent No. 2 has rightly held that financial stringency cannot be a reason for laying off the workmen.” Further they held “the mill has not been restarted as yet, the permission to lay-off is given when there is a temporary stoppage of work in the mill and there are chances of resumption of work within a reasonable time. The workers cannot be laid-off indefinitely without the reopening of the mill and resumption of work being in sight. In any case, when the mill has not yet started even after six years, it would be futile to consider a prayer for grant of permission to lay-off. For the aforesaid reasons the petition deserves to be dismissed and is hereby dismissed.”
The honourable Supreme Court has also interpreted the meaning of “any other connected reasons” by citing the decisions given in Management of Kairbetta v Rajamanickam [1960 AIR 893, 1960 SCR (3) 371] and Workmen Of Meenakshi Mills Ltd vs Meenakshi Mills Ltd [1994 AIR 2696, 1992 SCR (3) 409], while deciding Papnasam Labour Union vs Madura Coats Ltd [1995 AIR 2200, 1995 SCC (1) 501]. The Court stated that Section 2(kkk) defines a lay-off as meaning the failure, refusal or inability of an employer on account of shortage of coal, power or raw materials or the accumulation of stocks or the breakdown of machinery or for any other reason to give employment to a workman whose name is borne on the muster rolls of his industrial establishment and who has not been retrenched. There is an explanation to the definition which it is unnecessary to set out. It is clear that tile lay-off takes place for one or more of the reasons specified in the definition. Lay-off may be due to shortage of coal or shortage of power or shortage of raw materials or accumulation of stocks or breakdown of machinery or any other reason. " Any other reason " to which the definition refers must, we think, be a reason which is allied or analogous to reasons already specified. It has been urged before us on behalf of the respondents that " any other reason " mentioned in the definition need not be similar to the preceding reasons but should include any other reason of whatsoever character for which lay-off may have taken place; and in support of this argument reliance is placed on s. 25E(iii). Section 25E deals with three categories of cases where compensation is not liable to be paid to a workman even though he may have been laid-off. One of these is prescribed by s. 25E(iii); if the laying-off is due to a strike or slowing down of production on the part of workmen in another part of the establishment no compensation has to be paid. The argument is that laying-off which is specified in this clause has been excepted because, but for the exception, it would have attracted the definition of s. 2(kkk) and would have imposed an obligation on the employer to pay lay-off compensation. That no doubt is true; but we do- not see how the case specified in this clause is inconsistent with the view that " any other reason " must be similar to the preceding reasons specified in the definition. If there is a strike or slowing down of production in one part ,of the establishment, and if lay-off is the consequence, the reason for which lay-off has taken place would undoubtedly be similar to the reasons specified in the definition. We are, therefore, satisfied' that the expression " any other reason " should be construed to mean reason similar or analogous to the preceding reasons specified in the definition.
This serves as a valid proof the novel coronavirus in itself can not be a valid reason for layoff. 

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