Section 75: Compensation to workers in case of closing down of undertakings

Finin2min analysis — what the section actually does

Full statutory text — Section 75

75. Compensation to workers in case of closing down of undertakings.—(1) Where an
establishment is closed down for any reason whatsoever, every worker who has been in continuous
service for not less than one year in that undertaking immediately before such closure shall, subject to
the provisions of sub-section (2), be entitled to notice and compensation in accordance with the
provisions of section 70, as if the worker had been retrenched:
   Provided that where the undertaking is closed down on account of unavoidable circumstances
beyond the control of the employer, the compensation to be paid to the worker under clause (b) of
section 70, shall not exceed his average pay for three months.
   Explanation.—An industrial establishment which is closed down by reason merely of—
      (i) financial difficulties (including financial losses); or
      (ii) accumulation of un-disposed stocks; or
      (iii) the expiry of the period of the lease or license granted to it; or
      (iv) in case where the undertaking is engaged in mining operations, exhaustion of the minerals in
   the area in which operations are carried on,
shall not be deemed to be closed down on account of unavoidable circumstances beyond the control of
the employer within the meaning of the proviso to this sub-section.
   (2) Notwithstanding anything contained in sub-section (1), where an undertaking engaged in mining
operations is closed down by reason merely of exhaustion of the minerals in the area in which such
operations are carried on, no worker referred to in that sub-section shall be entitled to any notice or
compensation in accordance with the provisions of section 70, if—
       (a) the employer provides the worker, at the place located within a radius of twenty kilometres
   from such undertaking engaged in mining operation is closed down, with alternative employment
   with effect from the date of closure at the same remuneration as he was entitled to receive, and on
   the same terms and conditions of service as were applicable to him, immediately before the closure;
       (b) the service of the worker has not been interrupted by such alternative employment; and (c)
   the employer is, under the terms of such alternative employment or otherwise, legally liable to pay
   to the worker, in the event of his retrenchment, compensation on the basis that his service has been
   continuous and has not been interrupted by such alternative employment.
   (3) For the purposes of sub-sections (1) and (2), the expressions “minerals” and “mining operations”
shall have the meanings respectively assigned to them in clauses (a) and (d) of section 3 of the Mines
and Minerals (Regulation and Development) Act, 1957 (67 of 1957).

   (4) Where any undertaking set up for the construction of buildings, bridges, roads, canals, dams or
other construction work is closed down on account of the completion of the work within two years from
the date on which the undertaking had been set up, no worker employed therein shall be entitled to any
compensation under clause (b) of section 70, but if the construction work is not so completed within
two years, he shall be entitled to notice and compensation under that section for every completed year
of continuous service or any part thereof in excess of six months.

How to apply this provision

1. Primary statutory test — (1) Where an establishment is closed down for any reason whatsoever, every worker who has been in continuous service for not less than one year in that undertaking immediately before such closure shall, subject to the provisions of sub-section (2), be entitled to notice and compensation in accordance with the provisions of section 70, as if the worker had been retrenched:
2. Additional operative limb — Provided that where the undertaking is closed down on account of unavoidable circumstances beyond the control of the employer, the compensation to be paid to the worker under clause (b) of section 70, shall not exceed his average pay for three months.
3. Qualification / exception to test — Provided that where the undertaking is closed down on account of unavoidable circumstances beyond the control of the employer, the compensation to be paid to the worker under clause (b) of section 70, shall not exceed his average pay for three months.
4. Numerical or timing control — Compensation to workers in case of closing down of undertakings.—(1) Where an establishment is closed down for any reason whatsoever, every worker who has been in continuous service for not less than one year in that undertaking immediately before such closure shall, subject to the provisions of sub-section (2), be entitled to notice and compensation in…
5. Evidence file — retain facts and records proving the role/status of: Employer, Worker.

Rules, forms and cross-references

A direct concordance is not exhaustive. Central/State jurisdiction, schemes, authority appointments, saved instruments and later notifications may change the practical route without changing the section wording.

Worked example

Q&A — Section 75

Source & verification trail