Bombay High Court Quashes Industrial Court Order on Retrenchment Compensation
Employees' Statutory Right to Retrenchment Compensation Upheld; Industrial Court's Directions Deemed Inequitable
In a significant ruling, the Bombay High Court's Nagpur Bench, presided over by Justice Rohit W. Joshi, has quashed the Industrial Court's directive requiring employees to deposit retrenchment compensation as a condition for contesting their retrenchment. The decision, delivered on September 15, 2025, in the case of Surendra and Others versus Agrofab Machineries (I) Pvt. Ltd., underscores the statutory right of employees to retain retrenchment compensation under the Industrial Disputes Act, 1947.
The case arose when Surendra and other petitioners, who were terminated by Agrofab Machineries on December 30, 2014, challenged their retrenchment. The Industrial Court had earlier ordered the petitioners to deposit their retrenchment compensation, a directive that was contested in the Bombay High Court.
Justice Joshi emphasized that retrenchment compensation is a statutory right, not a bargaining chip, and that requiring its deposit could force financially constrained employees to abandon legitimate challenges against retrenchment. The court clarified that retrenchment is distinct from voluntary retirement, where similar deposit requirements might apply, citing Supreme Court precedents that do not align with retrenchment scenarios.
The judgment sets aside previous Industrial Court orders, reinstating the employees' complaints and directing the parties to appear before the Labour Court on October 13, 2025. This decision reinforces the legal protection of employees' rights in retrenchment cases, ensuring that financial constraints do not impede access to justice.
Bottom Line:
Retrenchment compensation is a statutory right of an employee and cannot be made a condition for challenging retrenchment. Directions to employees to deposit retrenchment compensation as a condition for contesting retrenchment are inequitable and undesirable.
Statutory provision(s): Industrial Disputes Act, 1947, Section 25(F)
Surendra v. Agrofab Machineries (I) Pvt. Ltd., (Bombay)(Nagpur Bench) : Law Finder Doc Id # 2783239
