This article is for educational and legal awareness purposes only. It does not constitute legal advice or solicitation. Please consult a qualified advocate for advice on specific legal matters.
Overview
For decades, the relationship between an industrial employer and its workforce in India was governed chiefly by the Industrial Disputes Act, 1947 (ID Act) at the central level, and, in Uttar Pradesh, by a parallel state enactment — the U.P. Industrial Disputes Act, 1947. Three questions have occupied courts more than any other under this framework: Who qualifies for its protection as a “workman”? What counts as “retrenchment”, and what happens when an employer terminates service without following the mandatory procedure? And when a termination is found illegal, should the remedy be reinstatement in service, or monetary compensation?
This article traces how the Supreme Court of India answered each of these questions in three landmark decisions, and how the Allahabad High Court, Lucknow Bench, applied the state-law counterpart of these principles to a Uttar Pradesh public corporation. It also sets out, as accurately as could be verified, where this body of law stands today following the commencement of India’s four Labour Codes.
Part I — The Statutory Framework, Then and Now
The Position Under the Industrial Disputes Act, 1947
Section 25F of the ID Act provided that no workman who had been in continuous service for at least one year could be retrenched until the employer had (a) given one month’s written notice stating the reasons, or wages in lieu of notice, (b) paid retrenchment compensation equal to fifteen days’ average pay for every completed year of service, and (c) served notice on the appropriate Government in the prescribed manner.
Uttar Pradesh had — and continues to have on its statute book — its own, older enactment on the same subject: the U.P. Industrial Disputes Act, 1947, whose Section 6-N mirrors Section 25F almost word for word. It provides that no workman employed in any industry who has been in continuous service for not less than one year “shall be retrenched by that employer” until written notice with reasons is given, retrenchment compensation equivalent to fifteen days’ average pay for every completed year of service is paid, and notice is served on the State Government in the prescribed manner. This state Act has applied to industries and undertakings within Uttar Pradesh (including State corporations, as the case discussed below shows) alongside the central Act.
What Has Changed Since November 2025
Readers should be aware that the statutory landscape has moved. The four Labour Codes — the Code on Wages, 2019; the Industrial Relations Code, 2020 (IRC); the Code on Social Security, 2020; and the Occupational Safety, Health and Working Conditions Code, 2020 — have been reported as brought into effect from 21 November 2025. Commencement and the accompanying rules are notified in stages, and the position could not be confirmed here against the Gazette directly. The operative status of any particular provision, and of the rules made under it, should therefore be checked against the Gazette of India or the Ministry of Labour and Employment before it is relied on.
Section 104 of the Industrial Relations Code, 2020 repeals three central enactments — the Trade Unions Act, 1926, the Industrial Employment (Standing Orders) Act, 1946, and the Industrial Disputes Act, 1947 — subject to a savings clause under which anything done or action taken under the repealed laws is deemed to have been done under the corresponding provisions of the Code, and Section 6 of the General Clauses Act, 1897 continues to govern transitional matters. The retrenchment safeguard formerly at Section 25F now appears, in near-identical language, at Section 70 of the IRC: no worker in continuous service for not less than one year may be retrenched until written notice with reasons, retrenchment compensation of fifteen days’ average pay per completed year of service, and notice to the appropriate Government are all satisfied. The defined term has also changed from “workman” to “worker” — Section 2(zr) of the IRC excludes persons employed mainly in a managerial or administrative capacity, and (per the exclusion carried over from the old law, with the wage ceiling revised upward) persons in a supervisory capacity drawing wages above a specified monthly threshold.
Because the operative test and procedure under Section 70 and Section 2(zr) track the earlier Section 25F and the “workman” definition so closely, the Supreme Court’s reasoning in the cases below — decided under the repealed Act — remains the primary guide to how these provisions will be read going forward. What could not be independently confirmed for this article is the precise status of state-level Rules under the new Codes in Uttar Pradesh, or whether the State Legislature has taken any step affecting the continued operation of the U.P. Industrial Disputes Act, 1947 alongside the central Code. That is a state-law question on which readers dealing with a live matter should take specific, current advice rather than relying on this article.
Part II — Who Is a “Workman”? The Control Test
Dharangadhara Chemical Works Ltd. v. State of Saurashtra, decided by the Supreme Court on 23 November 1956 (AIR 1957 SC 264), remains the starting point for identifying who is a “workman” under Section 2(s) of the ID Act (a definition the IRC has now recast, in substance, at Section 2(zr)).
Facts. The dispute concerned agarias — workers engaged in salt manufacture at the Dharangadhara works, who worked seasonally, had no fixed hours, were paid on a piece-rate basis, and sometimes engaged their own family members or other labourers to help them. The company argued they were independent contractors, not its employees, so that a dispute about their conditions could not be an “industrial dispute” at all.
What the Court held. The Supreme Court held that the agarias were workmen. It identified the touchstone of an employment relationship as the employer’s right not merely to direct what work is to be done, but also the manner in which it is to be done. Piece-rate payment and seasonal, irregular hours did not, by themselves, take a person outside the definition. Nor did engaging assistants defeat workman status where the person continued personally to perform the work himself — the Court observed that a person who agrees to work “does not cease to be such by reason merely of the fact that he gets other persons to work along with him.”
Why it matters. Dharangadhara established a functional, control-based test rather than a formal, label-based one. Employers cannot avoid the Act’s protections merely by structuring engagement as piece-work, seasonal work, or work performed with informal assistance, so long as the substance of the relationship shows the employer’s right to direct both what is done and how it is done. This control test continues to be applied — including, as later courts note, to determine who is a “worker” under the new statutory language.
Part III — The Wide Net of “Retrenchment”
State Bank of India v. N. Sundara Money, decided by the Supreme Court on 16 January 1976 ((1976) 1 SCC 822), settled how broadly “retrenchment” under Section 2(oo) of the ID Act was to be read — and, correspondingly, how narrow the room was for an employer to escape the Section 25F conditions.
Facts. The respondent had been engaged by the State Bank of India on a series of short, fixed-term appointments as a cashier, each ending on the expiry of its own term. When his engagement was not renewed, the Bank contended this was a simple case of a contract running its course — not a “termination” attracting Section 25F at all.
What the Court held. A bench of Justices V.R. Krishna Iyer, Y.V. Chandrachud and A.C. Gupta held that “retrenchment” bore its ordinary, wide meaning: termination of service “for any reason whatsoever”, and was not confined to termination by a deliberate act of dismissal. Termination “embraces not merely the act of termination by the employer, but the fact of termination howsoever produced” — including automatic cessation on the expiry of a fixed term. Since the Bank had not complied with the notice, compensation and government-intimation requirements of Section 25F, the termination was held invalid and inoperative.
Why it matters. Sundara Money closed off what would otherwise have been the most obvious route around Section 25F: engaging workers on a rolling series of short, fixed terms and then simply letting each one lapse. Once a court characterises non-renewal as “retrenchment,” the employer’s failure to give notice, pay compensation, and intimate the Government renders the termination bad in law — the same consequence as an outright, uncompensated dismissal.
Part IV — Reinstatement or Compensation? The Discretion Doctrine
If the first two cases decide who is protected and what counts as retrenchment, U.P. State Brassware Corporation Ltd. & Anr. v. Udai Narain Pandey, decided by the Supreme Court on 8 December 2005 ((2006) 1 SCC 479; AIR 2006 SC 586), decides what follows once a retrenchment is found illegal — and it did so in a case arising directly under the U.P. Industrial Disputes Act’s Section 6-N.
Facts. The respondent, a daily-wage employee of a Uttar Pradesh State public sector corporation, was retrenched without compliance with Section 6-N. The Labour Court and the writ court had ordered reinstatement with back wages; the Corporation, which had in the meantime closed the relevant unit, appealed against the extent of back wages awarded.
What the Court held. A bench of Justices S.B. Sinha and P.K. Balasubramanyan held that reinstatement with full back wages is not automatic merely because Section 6-N (or, under the central Act, Section 25F) has been violated. The Court stated: “No precise formula can be laid down as to under what circumstances payment of entire back wages should be allowed… It would, however, not be correct to contend that it is automatic.” Payment of back wages, it held, “has a discretionary element involved in it” and must be decided “in the facts and circumstances of each case and no straight-jacket formula can be evolved.” Relevant factors include the length and nature of service, whether the engagement was short or intermittent daily-wage work rather than permanent employment, and, here, the subsequent closure of the establishment. On the facts, the Court restricted the award to 25% of back wages, rather than the full amount ordered below.
Why it matters. This decision confirms that an employer’s non-compliance with the mandatory conditions makes a retrenchment illegal, but does not automatically dictate the remedy. Courts weigh the character of the employment — a long-serving permanent employee stands on a different footing from a short-term daily-wager — before deciding between full reinstatement, reinstatement with reduced back wages, or, in some cases, compensation in lieu of reinstatement altogether. Because the case itself turned on Section 6-N of the U.P. Act, it is directly relevant precedent for Uttar Pradesh establishments, not merely persuasive authority from elsewhere.
Part V — The Allahabad High Court, Lucknow Bench, on Section 6-N
The Allahabad High Court’s Lucknow Bench has itself applied these principles to a Uttar Pradesh public corporation. In U.P. State Warehousing Corporation v. Sunil Kumar Srivastava & Anr. (Special Appeal No. 399 of 2011, decided 20 March 2013), a Division Bench of Justices Devi Prasad Singh and Vishnu Chandra Gupta considered the position of daily-wage and contract workers engaged by the Corporation between 1999 and 2001, whose continued engagement was put in jeopardy when the Corporation issued a fresh recruitment advertisement for the posts they had been informally working against.
The Bench observed that the workers “seem to be workman keeping in view the definition given” in the U.P. Industrial Disputes Act, and noted that dispensing with their services without following the procedure prescribed by Section 6-N would not be permissible. It was, however, careful not to finally decide their status: “we are not recording any finding on the right available to the respondents as workmen and leave it open for the appellant to take a decision in accordance with law.” The Court additionally struck down the recruitment advertisement itself on the separate ground that it exceeded the constitutional 50% ceiling on reservation for one category of technical posts, and directed the Corporation’s Board of Directors to take a fresh, considered decision on the workers’ position rather than displace them through the flawed advertisement.
The case does not decide the workman question definitively, and this article does not overstate it as doing so. What it does show is a UP appellate court treating Section 6-N as a real constraint on how a State corporation may deal with long-serving daily-wage staff — an employer cannot simply advertise their posts afresh and displace them without first confronting whether Section 6-N’s procedure applies.
Takeaway
Read together, these decisions trace the shape of statutory protection for industrial workers in India. Dharangadhara supplies a functional control test for who counts as a workman, resistant to labels like “piece-rate” or “seasonal.” Sundara Money reads “retrenchment” broadly enough to catch termination by any means, including the simple non-renewal of a fixed-term engagement, so that the Section 25F/6-N conditions cannot be sidestepped by contractual drafting. Udai Narain Pandey then confirms that non-compliance renders a retrenchment illegal, but leaves the remedy — reinstatement, reinstatement with reduced back wages, or compensation — to judicial discretion exercised on the specific facts, with the length and character of service as the central consideration. And the Lucknow Bench’s approach in the Warehousing Corporation case shows Uttar Pradesh courts applying the same procedural safeguard under the State’s own Section 6-N to protect long-serving daily-wage employees against summary displacement.
With the Industrial Relations Code, 2020 now in force and its Section 70 and Section 2(zr) substantially reproducing the older Section 25F and “workman” definition, this body of case law — though decided under a since-repealed statute — remains the framework through which the corresponding provisions of the new Code are likely to be read and applied.
Useful Resources
- Indian Kanoon — Dharangadhara Chemical Works Ltd. v. State of Saurashtra (1956)
- Indian Kanoon — State Bank of India v. N. Sundara Money (1976)
- Indian Kanoon — U.P. State Brassware Corporation Ltd. v. Udai Narain Pandey (2005)
- Indian Kanoon — U.P. State Warehousing Corporation v. Sunil Kumar Srivastava (2013)
- Indian Kanoon — Section 6-N, U.P. Industrial Disputes Act, 1947
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