in Labour Law Corporate Law Commercial Law
Asked August 02, 2021

Closure of a manufacturing company

  • 1 Answer

I have decided to close down one of my manufacturing industries. What is the legal process to apply for it and get it down? Also, please give details on how to compensate workers etc

Answer 1

The detailed procedure for closing down an industry is given under Section 25(O) of the Industrial Disputes Act, 1947. Firstly, you must apply for permission at least 90 days before when you want the closure to come into effect. You must state the reasons for the closure clearly. The notice that you give must seek the permission of the appropriate government or authority. A copy of the notice/application must be sent to the representative of the workmen. The government will then make an inquiry and decide whether or not to allow or refuse the application. 

After the industry is allowed to be closed down, workers must be compensated. Every worker in the industry who has been in service for not less than a year before the date of sending in the application for closure is must be given notice and compensation. They must be compensated with fifteen days’ average pay for every completed year of service or ‘any part thereof in excess of six months’. Now, the Industrial Relations Code has amended this compensation to not include full benefits but only wages. 

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