Section 25-O of IDA : Section 25-O: Procedure For Closing Down An Undertaking

Explanation using Example

Imagine a scenario where XYZ Textiles Ltd., which is an industrial establishment, has been facing severe financial losses for the past two years. The management decides that the only viable option to prevent further losses is to shut down the manufacturing plant. According to Section 25-O of The Industrial Disputes Act, 1947, the employer must follow a specific procedure before closing down the undertaking.

In compliance with the law, XYZ Textiles Ltd. submits an application for closure to the appropriate government authority ninety days before the intended closure date, stating the financial crisis as the reason for shutdown. They also serve a copy of this application to the representatives of the workmen.

The government then conducts an inquiry and provides a hearing opportunity to the employer and the workmen. Despite the discussions, the government does not communicate its decision within sixty days. As per sub-section (3) of Section 25-O, the closure permission is deemed to be granted after this period lapses.

Following the deemed permission, XYZ Textiles Ltd. is required to compensate the workers. Each workman employed at the time of the closure application is entitled to receive compensation equivalent to fifteen days' average pay for every completed year of service, as per sub-section (8) of Section 25-O.