Industrial Disputes Act, 1947 · Chapter VB: Special Provisions Relating to Lay-Off, Retrenchment and Closure in Certain Establishments
Section 25-O: Procedure for closing down an undertaking
The Industrial Disputes Act, 1947 was repealed and replaced by the Industrial Relations Code, 2020 from 21 November 2025. It still applies to matters and proceedings from before that date, as the repealing law provides.
In plain words
An employer in an establishment covered by Chapter VB who wants to close an undertaking must apply for the government's prior permission at least ninety days before the closure, copying the workers' representatives.
- It does not apply to construction undertakings.
- The government decides after a hearing, considering the reasons, the public interest and other factors. Permission is treated as granted if no decision comes within sixty days.
- The order lasts one year and can be reviewed or referred to a Tribunal, which decides within thirty days.
- Closure without permission, or after refusal, is illegal and workmen keep all benefits.
- On permitted closure, each workman gets fifteen days' average pay for every completed year of service, counting any part over six months.
A simplified explanation, prepared with AI assistance from the official text below and checked automatically against it for numbers and cross-references. The official text is the law and prevails over this summary. Not legal advice.
Read the in-depth explanation, with key Supreme Court rulings ↓
Official text
(1) An employer who intends to close down an undertaking of an industrial establishment to which this Chapter applies shall, in the prescribed manner, apply, for prior permission at least ninety days before the date on which the intended closure is to become effective, to the appropriate Government, stating clearly the reasons for the intended closure of the undertaking and a copy of such application shall also be served simultaneously on the representatives of the workmen in the prescribed manner:
Provided that nothing in this sub-section shall apply to an undertaking set up for the construction of buildings, bridges, roads, canals, dams or for other construction work.
(2) Where an application for permission has been made under sub-section (1), the appropriate Government, after making such enquiry as it thinks fit and after giving a reasonable opportunity of being heard to the employer, the workmen and the persons interested in such closure may, having regard to the genuineness and adequacy of the reasons stated by the employer, the interests of the general public and all other relevant factors, by order and for reasons to be recorded in writing, grant or refused to grant such permission and a copy of such order shall be communicated to the employer and the workmen.
(3) Where an application has been made under sub-section (1) and the appropriate Government does not communicate the order granting or refusing to grant permission to the employer within a period of sixty days from the date on which such application is made, the permission applied for shall be deemed to have been granted on the expiration of the said period of sixty days.
(4) An order of the appropriate Government granting or refusing to grant permission shall, subject to the provisions of sub-section (5), be final and binding on all the parties and shall remain in force for one year from the date of such order.
(5) The appropriate Government may, either on its own motion or on the application made by the employer or any workman, review its order granting or refusing to grant permission under sub-section (2) or refer the matter to a Tribunal for adjudication:
Provided that where a reference has been made to a Tribunal under this sub-section, it shall pass an award within a period of thirty days from the date of such reference.
(6) Where no application for permission under sub-section (1) is made within the period specified therein, or where the permission for closure has been refused, the closure of the undertaking shall be
deemed to be illegal from the date of closure and the workmen shall be entitled to all the benefits under any law for the time being in force as if the undertaking had not been closed down.
(7) Notwithstanding anything contained in the foregoing provisions of this section, the appropriate Government may, if it is satisfied that owing to such exceptional circumstances as accident in the undertaking or death of the employer or the like it is necessary so to do, by order, direct that the provisions of sub-section (1) shall not apply in relation to such undertaking for such period as may be specified in the order.
(8) Where an undertaking is permitted to be closed down under sub-section (2) or where permission for closure is deemed to be granted under sub-section (3), every workman who is employed in that undertaking immediately before the date of application for permission under this section, shall be entitled to receive compensation which shall be equivalent to fifteen days’ average pay for every completed year of continuous service or any part thereof in excess of six months.]
Source: India Code (Legislative Department), the text of the Act as it stood before its repeal. Words in square brackets [ ] were inserted or substituted by later amending Acts, and *** marks words omitted by an amendment. The amendment footnotes are not reproduced here. Official text on India Code.
Understanding this section
Section 25-O requires an employer in a Chapter VB establishment who wants to close an undertaking to apply for the prior permission of the appropriate Government at least ninety days before the intended closure. Construction undertakings are excluded.
Procedure
The Government holds an inquiry, hears the employer, the workmen and other interested persons, and grants or refuses permission by a reasoned order, considering the genuineness of the reasons, the interests of the public and other relevant factors. If no order is communicated within sixty days, permission is deemed granted. A closure without permission, or after refusal, is illegal, and the workmen keep all benefits as if the undertaking had not closed.
Constitutional history
The original section 25-O, added in 1976, was struck down in 1978 because it allowed refusal without reasons, gave no time limit and no review. Parliament replaced it in 1982 with the present version, which requires reasons, sets the sixty day deemed permission and allows review. The new version was upheld in 2002.
Key Supreme Court rulings
Excel Wear v. Union of India 1978 INSC 192
The original section 25-O, which allowed the Government to refuse closure without reasons and without any time limit or appeal, was an unreasonable restriction under article 19(1)(g) and was struck down.
Orissa Textile and Steel Ltd. v. State of Orissa 2002 INSC 31
Section 25-O as amended in 1982 is constitutionally valid and is saved by article 19(6), applying the reasoning used to uphold section 25N.
Harinagar Sugar Mills Ltd. (Biscuit Division) v. State of Maharashtra 2025 INSC 801
Where the competent authority did not make and communicate an order within sixty days of a complete closure application, closure was deemed permitted; a letter from an official without that authority was not a valid refusal.
Common mistakes
- Citing Excel Wear as if it struck down the present section 25-O.
- Treating a letter from an officer without authority as a refusal of permission.
Read with: Section 25N Industrial Disputes Act, 1947, Section 25FFF Industrial Disputes Act, 1947
Prepared with AI assistance as a study aid. Every ruling listed was checked against the Supreme Court's own judgments on this site, and quoted words appear in those judgments; linked names open the full judgment. Read the judgments themselves before relying on them. Not legal advice.
Supreme Court judgments citing the section 25-O
No Supreme Court judgment in our database cites this section yet.