JAMMU AND KASHMIR AND LADAKH HIGH COURT: ENTERPRISE SHUTTING DUE TO FINANCIAL DIFFICULTIES NOT 'UNAVOIDABLE CIRCUMSTANCE' TO DENY RETRENCHMENT COMPENSATION

The Jammu and Kashmir and Ladakh High Court in the case Davinder Kumar Batra Vs the Authority Under Payment of Wages Act 1936 and Ors observed and has ruled that the closure of an enterprise due to financial difficulties cannot be deemed an unavoidable circumstance as stated under Section 25-FFF of the Industrial Disputes Act, thereby reinforcing the entitlement of employees to retrenchment compensation.

The bench headed by Justice Wasim Sadiq Nargal in the case observed while citing the explanation to Section 25-FFF of the Industrial Disputes Act that when an undertaking is closed down due to financial difficulties which is the case in the present petition, shall not be deemed to be closed down on account of unavoidable circumstances beyond control of the employer.

In the present case, the petitioner closed of the business in March 2017, which lead to termination of respondent Nos.2 to 5 i.e., its former employees. Thus, these ex-employees had approached respondent No.1/ Authority under Payment of Wages Act, 1936 wherein seeking inter-alia retrenchment compensation. Despite petitioner’s objection, the Authority passed an order for payment of retrenchment compensation, which was challenged before the court.

The petitioner in the plea argued that the Authority had exceeded its jurisdiction, as claim for retrenchment compensation falls within the purview of Industrial Disputes Act, 1947, and should be adjudicated by an Industrial Tribunal.