The law relating to disputes between employer and employees in India are to be resolved under the procedure prescribed by the Industrial Disputes Act. However, the Industrial Disputes Act, 1947 assuring job security to the workmen was enacted at a time when the country was in throes of partition. The Act was a mere bare bones legislation, enacting the barest minimum of provisions. Indeed, there are expressions like "social justice" of which the legislature did not seem to have had a clear cut conception. At any rate the Judges of the Supreme Court and the High Courts, in initial stages, expressed the view that social justice is a nebulous concept, incapable of being enforced in a Court of law. Although, there were radical changes in the industrial scenario and the provisions of Industrial Disputes Act became outdated but no government would dare to amend the archaic laws since the workers and their unions would lose faith in the government attempting for such amendment hence the status quo prevailed.
The ongoing globalisation and the accompanying intensification of competition besides opening doors for multinational companies had put the pressure upon the government to reduce the rigidities of labour laws particularly the Industrial Disputes Act since the foreign companies were accustomed with the system of 'hire and fire' and the extent of job security of the workmen in India did not exist in any country all over the world. However, in August 1984, clause (bb) was inserted in the definition of retrenchment under section 2(oo) of the Industrial Disputes Act which reads as under:
"(bb) Termination of the service of the workman as a result of the non - renewal of the contract of employment between the employer and the workman concerned on its expiry or of such contract being terminated under a stipulation in that behalf contained therein."
The above clause purports to exclude the following from the ambit of the definition of retrenchment : (i) the termination of the service of a workman as a result of the non - renewal of the contract of employment between the employer and the workman concerned, on its expiry; or (ii) the termination of the contract of employment in terms of a stipulation contained in the contract of employment, in that behalf. The first part relates to a termination of the service of a workman as a result of non - renewal of the contract of employment between the employer and the workman concerned, on its expiry. The second part refers to 'such contract' being terminated under a stipulation in that behalf, contained therein. The expression 'such contract', used in the second part, refers to the 'contract of employment between the employer and the workman', mentioned in the first part.
The ratios of some of the cases are summarized as under:
The object of clause (bb), as inserted by an amendment to section 2(oo) of the Industrial Disputes Act defining 'retrenchment', contains the expression 'contract of employment' even when a workman is directly employed on contract basis for the work of the establishment even when it was of regular nature and, as such, the automatic termination of the services of the workman at the end of the specified period will not be construed as retrenchment. (West Fort Hospital vs. State of Kerala, 2004 LLR 1025 (Ker. HC). Also, every retrenchment is termination but all terminations are not retrenchments. (Poeroorkada Service Co-operative Bank vs. Sheena, 2002 LLR 1104 (Ker. HC).
However, the termination of service of a workman appointed for fixed period for non - renewal of contract will amount to retrenchment and section 2(oo)(bb) of the Act will not be attracted when the letter of appointment was a camouflage to circumvent the benefit of permanency as held by the Kerala High Court (Manager, Jayabharath Printers & Publishers (P) Ltd., Kallai Road, Calcutta-2 vs. Labour Court, Kozhikode, 1993 LLR 413 (Ker. HC)) but at the same time termination of a workman though appointed for a fixed period with notional breaks, will amount to retrenchment. (Chief Administrator, Haryana Urban Development Authority, Manimajra vs. Industrial Tribunal, Rohtak, 1994 LLR 454 : 1994 (69) FLR 35 (P&H HC).
The Rajasthan High Court has observed that the termination of a workman appointed for a fixed period will not amount to retrenchment even if such a workman has continued to work after the stipulated period in anticipation of the sanction of the post. (Ram Prasad vs. State of Rajasthan, 1993 LLR 59 (Raj. HC).
The Supreme Court has held that where employment was given in a particular scheme to provide drinking water and construction, their termination with scheme ending, the employee could not be said to have a right to be regularized in service or claim benefit of section 25F of Industrial Disputes Act since the termination did not amount to retrenchment. (Executive Engineer, ZP Engg. Div. vs. Digambara Rao, 2004 LLR 1134 (SC). Also, when the workers are appointed for a specified period e.g. even for more than 240 days on contract basis pertaining to fixed - period of employment, termination of their service will not amount to retrenchment even when the work was of regular nature since there is no such prohibition for such appointment under clause (bb) of section 2(oo) of the Industrial Disputes Act excluding such termination from the definition of 'retrenchment'. (West Fort Hospital vs. State of Kerala, 2004 LLR 1025 (Ker. HC).
The Supreme Court has reiterated that the termination of an employee, appointed for a fixed period, will not amount to retrenchment. (State of Rajasthan vs. Rameshwar Lal Gahlot, 1996 LLR 482 : 1996 (1) LLJ 888 : 1996 Lab. IC 914 (SC). In one case, it was established that an employee, Susan was only a temporary hand and that extensions were granted only continually. She was appointed for specific periods and on purely temporary basis. There was nothing to show that the finding of fact was in any way erroneous. If that was so, the termination could not at all be called retrenchment. Termination is covered by clause (bb) of section 2(oo) of the Industrial Disputes Act. (General Secretary, Kerala Tourism Development Corporation Workers' Association vs. Labour Court, Kollam, 2002 (94) FLR 142 : 2002 LLR 922 (Ker. HC).