Karnataka High Court gives relief to 84 workmen retrenched from service 17 years ago

In a relief to 84 workmen retrenched from service nearly 17 years ago, the High Court of Karnataka has directed a private pharmaceutical company to pay a lump sum compensation of ₹3 lakh to each of the retrenched workmen for terminating them from service without seeking permission from the State government as per the provisions of the Industrial Disputes (ID) Act, 1947.

A Division Bench comprising Justice D.K. Singh and Justice S. Rachaiah passed the order while allowing an appeal filed by retrenched workmen of Karnataka Malladi Biotics Ltd., (also known as Embio Ltd.), Mandya.

The Bench ruled that the company had illegally bypassed mandatory provisions of the ID Act by failing to seek prior government permission before laying off and retrenching 84 workers in 2009, wrongly claiming it employed fewer than 100 persons and was thus exempt from seeking such permission. Both the industrial tribunal and a single judge of the High Court had upheld the retrenchment.

The core dispute centred on whether the pharmaceutical company’s workforce in its Mandya plant, which was later closed, met the statutory threshold of 100 workmen, a prerequisite for invoking Chapter V-B of the ID Act, which mandates prior government approval for lay offs and retrenchment.

The workmen, represented by the Karnataka Malladi Biotics Employees Union, had argued that the management employed 92 permanent workers, 17 security guards and 28 contract/casual labourers, taking the total workforce well above the 100-mark. The company, however, contended that it had only 92 regular employees. The tribunal and the single judge had ruled that security guards and contract labourers could not be counted as “workmen” under Section 2(s) of the ID Act.

Rejecting the company’s claim, the Bench said that “any person employed in an industry to do manual, skilled, technical, or operational work for hire or reward is a workman”, and that the nature of employment — whether temporary, casual, or permanent — is irrelevant. The Bench also pointed out that the direct supervision and administrative control the management exercised over the security guards and contract workers brought them squarely within the statutory definition.

The court also drew an adverse inference against the company for deliberately withholding crucial employment records, including muster rolls and attendance registers of contract labourers, despite a specific order of the tribunal directing their production.