HC: Can’t force retrenched worker to depositcompensation for challenging termination

Nagpur: The Nagpur bench of Bombay high court recently ruled that employees cannot be forced to deposit retrenchment compensation as a precondition for challenging their termination."An employee may be forced to withdraw the challenge to retrenchment due to financial constraints. The right to receive retrenchment compensation is a statutory one for an employee whose services are terminated under Section 25(F) of the Industrial Disputes Act, 1947. It will therefore be inequitable to direct the employee to deposit the amount of retrenchment compensation as a condition for contesting the retrenchment," Justice Rohit Joshi said while quashing the industrial court orders that require such deposits.The case involved petitions filed by former Agrofab Machineries employees Surendra Dasariya and Ashish Gaikwad, whose services were retrenched on Dec 30, 2014. After they challenged the termination through counsels Ranjan Deshpande and Asavari Kale before the labour court, the employer sought directions to compel the workers to deposit the retrenchment compensation. While the labour court initially rejected the employer's plea, the industrial court later reversed the decision and dismissed the workers' complaints for non-compliance with its deposit order.Justice Joshi rejected the employer's reliance on Supreme Court rulings concerning voluntary retirement schemes, noting that those precedents did not apply to cases of retrenchment where the termination is initiated by the employer. "Retrenchment compensation is meant to provide subsistence to an employee whose services are retrenched. It is undesirable to direct the employee to deposit such compensation with the court as a condition for challenging retrenchment," the judge observed. He added that financial constraints could force workers to abandon legitimate challenges if deposits were mandated.Setting aside the industrial court's orders of Dec 2018, the HC restored the original complaints and directed both parties to appear before the labour court on Oct 13, 2025, without requiring fresh notices."If the employee does not opt for voluntary retirement, it is obvious that they will not be entitled to receive any amount under the voluntary retirement scheme. Therefore, if the employee accepts voluntary retirement and then challenges it, it is desirable that the amount received by them under the voluntary retirement scheme be deposited," the judge said.Justice Joshi added that in the case of retrenchment, the master-servant relationship is not severed at the behest of the employee. "In such cases, if the employee challenges the retrenchment and even if the challenge fails, they will be entitled to retain the amount of retrenchment compensation," he said.