Rostrum’s Law Review | ISSN: 2321-3787

Summary Dismissal in Labour Laws: Need To Reform Existing Laws in India

Historical Background[i]

The history of labour legislation in India is naturally interwoven with the history of British colonialism. The industrial/labour legislations enacted by the British were primarily intended to protect the interests of the British employers. Considerations of British political economy were naturally paramount in shaping some of these early laws. The earliest Indian statute to regulate the relationship between employer and his workmen was the Trade Dispute Act, 1929 (Act 7 of 1929). Provisions were made in this Act for restraining the rights of strike and lock out but no machinery was provided to take care of disputes. There were substantial modifications in the post-colonial era because independent India called for a clear partnership between labour and capital. The content of this partnership was unanimously approved in a tripartite conference in December 1947 in which it was agreed that labour would be given a fair wage and fair working conditions and in return capital would receive the fullest co-operation of labour for uninterrupted production and higher productivity as part of the strategy for national economic development and that all concerned would observe a truce period of three years free from strikes and lockouts. Ultimately the Industrial Disputes Act (the Act) brought into force on 01.04.1947 repealing the Trade Disputes Act 1929, it has since then remained on statute book.

Object of the Act

The Act is therefore, the matrix, the charter, as it were to the industrial law. The Act and other analogous State statutes provide the machinery for regulating the rights of the employers and employees for investigation and settlement of industrial disputes in peaceful and harmonious atmosphere by providing scope for collective bargaining by negotiations and mediation and failing that; by voluntary arbitration or compulsory adjudication by the authorities created under these statutes with the active participation of the trade unions. With the aid of this machinery; industrial law covers a comprehensive canvas of state intervention of social control through law to protect directly the claims of workers to wages, bonus, retrial benefits (such as gratuity, provident fund and pension, claims), social security measures (such as workmen’s compensation, insurance, maternity benefits, safety welfare) and protection of minimum of economic well-being. Job security has been particularly protected by providing industrial adjudication of unfair discharges and dismissals and ensuring reinstatement of illegally discharged or dismissed workmen.

Protection was extended by laying down conditions of service in specific industries and establishments and limiting the hours of work. By and large, all these subjects are connected with employment or non-employment or terms of employment or with the conditions of labour of industrial employees. The basic intent in the mind of the framers of the Act was to provide security and protection to the labour class as against the capitalist.

The principal techniques of dispute settlement provided in the Industrial Disputes Act (hereinafter referred as ID Act) are collective bargaining, mediation and conciliation, investigation, arbitration, adjudication and other purposes.


Our experience with the British left us embittered and disillusioned. Having witnessed their thoughtless exploitation of our resources, the Indian conscience deemed capitalism as ‘bad’ and started afresh on a socialist path with the good wishes of several countries and bright predictions from several economists who at that time favoured such a shift in focus.

But somewhere along the way we got lost in the dreary cobwebs of bureaucracy, our ‘welfare’ goals were reduced to mere vote-gathering methods and our policies became stifling. The 1991 reforms finally unshackled the economy in a big way with Liberalization, Privatization and Globalization being the new motto to be achieved. Major reforms swept through the economy to create a profound impact on all facets of the nation ranging from industries to common masses[ii].

With the introduction of new reforms being majorly inclined towards favouring common masses somewhere in the middle of the path there emerged a need to relax employee-centric stringent labour laws.

This paper conducts comparative approach to analyze the term ‘summary dismissal’ among legal context of Austria and Taiwan. It will contribute to understand status quo of existing regulations and related laws regarding misuse of laws protecting workman or labour, as well as help to modify the related law and set up work rule for addressing the ever-growing phenomena within workplace.

The approach of the paper would be focused on providing a description of the kinds of disputes existing under labour laws i.e. Industrial Disputes, moving on to provide an elaborate description as to how industrial disputes are settled in Labour laws and the legal provision relating to termination of services. The next part of the paper provides an elaborate description of the sequence of events leading to strikes and agitation faced by the Maruti Suzuki India Limited over the past two years, following incident leading to the need to relax stringent labour laws and incorporate provisions relating to summary dismissal would compare the laws relating to summary dismissal existing in Taiwan, Austria and India. The last part of the paper provides a conclusive remark along with proposed suggestion dealing with the concerned issue.

Pre-requisite conditions for a dispute to be applicable under the Act

Before the provisions of the 1947 Act may become applicable, certain pre-requisite conditions must exist that the dispute must relate to an ‘Industry’ under Section 2(j) of The Act. The definition of industry in this clause is both exhaustive and inclusive and is quite comprehensive in its scope. The first part says that ‘it means any business, trade, undertaking, manufacture or calling of employees’ and then goes on to say that it, includes any calling, services employment, handicraft or industrial occupation or avocation or workmen. Thus one part of the definition defines it from the standpoint of the employer; the other from the standpoint of the employees.

Under this Act an Industrial Dispute can be raised only by ‘workman’ employed in an ‘industry’. Section 2(s) of the Act defines ‘workman’, “Workman” means any person (including an apprentice) employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied, and for the purposes of any proceeding under this Act in relation to an industrial dispute, includes any such person who has been dismissed, discharged or retrenched in connection with, or as a consequence of, that dispute, or whose dismissal, discharge or retrenchment has led to that dispute.

One of the basic short-comings that are being faced by the Industrial Disputes Act is to define the conduct of a workman within; along with the rights and duties that are required to be exercised irrespective of the status, position or wages.

Only disputes covered under the definition can be referred for conciliation or adjudication under the Act. The definition of ‘Industrial Dispute’ in section 2(k) can be divided into two parts namely between employer-employers, employer-workman and workman-workman. Subject matter of dispute could be connected with the employment or non-employment, the terms of employment or with the condition of labour.

Mechanism of Dispute Settlement

There are several techniques of dispute settlement provided in the I.D. Act are collective bargaining, mediation and conciliation, investigation, arbitration, adjudication and other purposes.

Collective bargaining

Collective bargaining is a technique by which disputes of employment are resolved amicably, peacefully and voluntarily by settlement between labour unions and managements. Under the provision of the Act, the settlement arrived at by process of collective bargaining with the employer has been given a statutory recognition under Section 18 of the Act. Two types of settlement have been recognized:

1. Settlement arrived in the course of conciliation proceeding before the authority.

2. Settlement not arrived in the course of conciliation proceedings but signed independently by the parties to the settlement.

Section 19 of the Act prescribes the period of operation inter alia of such a settlement and envisages the continuation of the validity of such a settlement unless the same is not replaced by another set of settlement, while Section 29 prescribes the penalty for the breach of such a settlement.

Mediation and Conciliation

Under the Act, an effective conciliation machinery has been provided which can take cognizance of the existing as well as apprehended dispute, either on its own or on being approached by either of the parties to the dispute. The Act further makes conciliation compulsory in majority of disputes.


Section 6 of the Act empowers the government to constitute a court of inquiry, for inquiring into any matter pertaining to an Industrial Dispute. The procedure of the court of inquiry has also been prescribed by Section 11. While the report of the court is not binding on the parties, many time it paves the way for an agreement.


Voluntary arbitration is a part of the infrastructure of resolving the Industrial Dispute in the Industrial adjudication. Section 10 of the Act provides for the provision for resolving the Industrial Dispute by way of arbitration, which leads to a final and binding award.


Adjudication means a mandatory settlement of Industrial Disputes by labour courts, Industrial Tribunals or National Tribunals under the Act or by any other corresponding authorities under the analogous state statutes. By and large, the ultimate remedy of unsettled dispute is by way of reference by the appropriate government to the adjudicatory machinery for adjudication. The adjudicatory authority resolves the Industrial Dispute referred to it by passing an award, which is binding on the parties to such reference.

Procedure for termination of services

Under the present law any Industrial Establishment employing more than 100 workers must make an application to the Government seeking permission before resorting to lay-off, retrenchment, or closure of undertaking. Employers resorting to any of the said forms of creating job losses without seeking prior permission as aforesaid act illegally and workers are entitled to receive wages for the period of illegality. However, an Industrial Establishment employing less than 100 workers can retrench its surplus employees in accordance with the provisions provided under Section 25F, 25G & 25H of the Act.

Retrenchment under that Act is defined as:

Section 2(oo) “Retrenchment” means the termination by the employer of the service of a workman for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action but does not include-

(a) Voluntary retirement of the workman; or

(b) Retirement of the workman on reaching the age of Superannuation if the contract of employment between the employer and the workman concerned contains a stipulation in that behalf; or

[(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; or]

(c) Termination of the service of a workman on the ground of continued ill-health[S1] .

Under Section 25F of the Act the retrenchment compensation to be offered to a retrenched workman has to be 15 days salary for every completed year of service and an amount equivalent to one month salary.

However, the service of an employee can be terminated by an order of dischargewithout complying with the provisions contained in Section 25F of the Act if such an employee has been appointed for a fixed period under the contract of fixed term appointment and his/ her services is terminated either on the ground of expiry of the fixed period or in stipulation of the provision contained therein. It is important to note that under the provision “termination should not be as a measure of punishment by way of disciplinary action” as under Section 2 (oo) of the Act.

Existing service conditions cannot be unilaterally altered without giving a notice of 21 days to the workers and the trade union. Similarly if an industrial dispute is pending before an authority under the Act, then the previous service conditions in respect of that dispute cannot be altered to the disadvantage of the workers without prior permission of the authority concerned.

A permanent worker can be removed from service only for proven misconduct or for habitual absence or due to ill health or on attaining retirement age. In other words the doctrine of ‘hire and fire’ or summary dismissal is not approved within the existing legal framework. Employers must follow principles of ‘natural justice’, which again is an area that is governed by judge-made law. This again is identified as an area where greater flexibility is considered desirable for being competitive.

Unrest in Maruti Suzuki Manesar plant

A significant example aimed at lifting the veil on the situation and the potential for workers’ autonomy that it contains which took blow twice in the year 2011 and 2012.

The first strike that broke out on the 4th day of June 2011 was for formation of a new union.  The 13-day strike at Maruti Suzuki, India’s largest automobile manufacturer has ended with an agreement being signed. The strike at the Manesar was over the issue of forming a second trade union with external affiliations. The company already has an older union the Maruti Udyog Kamgar Union (MSEU) that is dominated by workers from the older Gurgaon plant, near Delhi. Manesar workers have denounced this union as management-owned.

The accord entails the management taking lenient action against the striking workers, including reinstating 11 sacked employees. But it is silent on the formation of the new union. The strike ended after 13 days of complete shut-out. Due to the evident effect and loss suffered by the company the management refused to let the workers participating in the strike work without signing a “good conduct bond” that only 18 workers signed which resulted in a standoff. The month-long standoff between the Maruti Suzuki India Ltd. (MSIL) management and agitating Manesar (Haryana) plant workers ended on Saturday the 17th September, 2011. As per the agreement brokered by the Haryana Government, MSIL will conditionally take back 18 suspended trainees, while the workers have agreed to sign the ‘good conduct bond’ as desired by the management. However, MSIL has said it would not take back the 44 regular employees who were suspended earlier, ‘no work no pay policy’ would be implemented for the standoff period.

On 3rd October, 2011 the management refuses entry to 1200 temporary workers who participated in the demonstration and the occupation. Inside the factory, the management decides to transfer a large number of workers from one job to another, which provokes strong discontent[iii].

Maruti Suzuki, which seemed to have put its labour problems behind after workers resumed duty on 3-10-2011 on terms widely perceived to be favourable to the management, found itself facing renewed unrest on Friday evening (i.e. 7th October, 2011)

Workers at its Manesar car plant went on a flash strike, in which no notice is served on the management, virtually seizing the premises in protest of the management’s decision not to allow 1,100 casual workers to enter the factory[iv]. That ended after 14 days of unrest after signing a tripartite agreement between the management and the workers.

On 15th October, 2011 Workers at Suzuki Power train and Suzuki Motorcycles decide to end their occupation and continue the strike outside. The MSEU publishes a communiqué saying that they will maintain the unity between temp workers and permanents and that they call on all trade unions to show support[v]. Following the 3month long unrest in the factory the management dismissed 546 permanent workers on “disciplinary grounds” that received divided opinion if it was indeed a case of dismissal or retrenchment.

The incidence is self-explanatory of the misuse of the protection provided to the workers under the labour laws. Such incidents are times of distress for an employer where they have no resort to turn too; can such an incident be covered under the retrenchment provisions or dismissal? If the management acts on the provisions of retrenchment it bars them from dismissing an employee under the Act as a measure of punishment by way of disciplinary actions. If an employee waits long enough for an act to turn into an act of gross misconduct wherein the management suspends or terminates employees under Industrial Employment Standing Orders Act as a disciplinary action against his misconduct they are subject to violent demonstrations.

On July, 2012 in the Manesar Maruti Suzuki factory “an altercation between Jiyalal, a worker and his supervisor took place on the shop floor. Jiyalal allegedly slapped the supervisor, who in turn complained about it to the management — as a result of which Jiyalal was suspended. The workers union, Maruti Suzuki Workers’ Union, objected to the suspension and demanded that Jiyalal be reinstated. The company’s management met with union members to hold talks on the issue. Following the talks between the two parties, union members present in the conference room attacked the company’s senior management with chairs and rods, broke cars and burned them as informed by the HR officer” ASI Harish Kumar of the CID, where 85 were injured in the violence. A huge mob gathered outside the company’s gates in the evening at around 6 p.m. and torched the security office and the fire safety room at Gate no. 2 leading to death of a manager.

The above incidents make us think who exactly the sufferer is in the present times; the employee or the employer? With the company losing business worth hundreds of crores; management and administrative staff being injured and killed due to such agitated movements taking the form of rebel , can we really say there are appropriate laws protecting the interest of the employers?

Indian Labour Laws make it difficult for big companies to fire their employees until it does not constitute an act of such a degree and extent as that of the incident mentioned above, and by that time it is too late, and there has been a huge amount of loss of person and property. Indian Labour laws are still blurred with the colonial baggage of capitalist being bad. It seems over the time with laws and precedents providing a strong niche to protect workers over capitalist it seems the time has evolved to extent laws protecting the management and administration against such gross upsurge and unrest.

Summary Dismissal

Premature termination is an act of declaration by which the employment relationship is terminated ahead the time of maturity for significant reasons. If the employment relationship is ended by the employer for substantial reasons, one talks of summary dismissal. The declaration need not be given in a special form. It’s very important for the premature termination to be declared at once if a party has valid grounds. If an employer delays for too long, he loses his right to terminate prematurely. If a premature termination is declared, the substantial reason itself need not be given in the declaration at once. The possibility of premature termination always presupposes that one party cannot objectively be expected to continue the employment relationship, even for the period of notice. The employment relationship can be prematurely terminated for only substantial reasons.

Summary dismissal is the dismissal of an employee on the spot and without notice. Normally an employee will be entitled to the notice period provided by his contract or to the relevant minimum statutory notice period if greater. Only in exceptional circumstances will dismissal without notice be justified signifying that the employer can no longer be reasonably expected to continue the relationship even just for the period of notice. An employer is entitled to dismiss an employee without notice which is referred to as summary dismissal, for issues of gross misconduct. Such issues are normally detailed in the employer’s disciplinary policy, work rules or even in the law.

The term denotes unilateral termination of the employment relationship by the employer without observing the required period of notice, only justified circumstances for example untrustworthiness; incapacity to continue performing the agreed work; carrying on an activity in competition with the employer; unjustified absence from work; and acts constituting assault or defamation. These are merely examples cited that can be listed along with the substantial reasons, other reasons of comparable seriousness may also justify summary dismissal.

Hence, when an employer terminates a contract of employment with or without noticethe employee gets paid for the time he or she worked, plus any leave pay (if this is owing). With notice means the employer tells the employee to leave work after working for the required term of notice as prescribed in the contract of employment. Without notice means the employee leaves immediately and is not paid out notice. Dismissal without notice is called ‘Summary Dismissal’. Whilst Summary Dismissal might take place where an employee is guilty of a very serious act (for example theft), it will still be unfair procedurally if a fair hearing has not been held before the dismissal. If the employee has been summarily dismissed (with fair reasons and following a fair hearing), this means the employee has to leave immediately and the employer does not have to make any payment in lieu of notice.[vi]

The Terms and Practices of Summary dismissal in Austria[vii]

Term used in Austria to denote unilateral termination of the employment relationship by the employer without observing the required period of notice. According to law, it is justified only where there is a substantial reason signifying that the employer can no longer be reasonably expected to continue the relationship even just for the period of notice. In the case of white-collar workers the law Salary-Earning Employees’ Act of 1921 Par. 27 lists, as examples, a number of such reasons including the following circumstances on the employee’s side: untrustworthiness; incapacity to continue performing the agreed work; carrying on an activity in competition with the employer; unjustified absence from work; and acts constituting assault or defamation. Since the substantial reasons listed are merely cited by way of example, other reasons of comparable seriousness may also justify summary dismissal. In the case of manual workers, by contrast, an exhaustive list of reasons dating from the last century still applies. There are rising number of rulings in Austria, in which more and more cases of “untrustworthiness” are being regarded as a ground for summary dismissal[viii].

Where summary dismissal is based on a substantial reason attributable to culpable conduct on the part of the employee, the latter has no entitlement to severance pay. If, on the other hand, it is pronounced without a substantial reason, although it ends the employment relationship with immediate effect the employee who has been dismissed is entitled to compensation. This includes, in particular, pay in lieu of notice, i.e. the pay that would have been due up to the end of the relationship under a fixed-term employment contract or in the event of dismissal with the required period of notice under an employment contract of unspecified duration, although subject to certain conditions the dismissed employee’s income from other sources may be taken into account. However, the dismissed employee is also entitled to apply to the courts to have such summary dismissal declared invalid in accordance with the provisions on general protection against dismissal.

The Terms and Practices of Summary Dismissal in Taiwan

According to the Labor Standard Law (LSL)[ix], it is justified only where there is a substantial reason signifying that the employer can no longer be reasonably expected to continue the relationship even just for the period of notice. There is no difference between white-collar workers and manual workers like the way it is in Austria, both applied to the same principles in Taiwan.

Causes for dismissal due to employee misconduct are in practice generally enumerated in the employer’s work rules. The “Labor Standards Law” only requires that an employer who continuously employs 30 or more workers must draw up work rules, file them with the local Labor Standards Inspection Office, and make the work rules known to the employees[x].

Status relating to Summary Dismissal under Indian Law

An individual may enter into a contract with a corporation to render services to such a corporation. On entering into a contract of employment it binds both employer and employee with a set of rights and obligation towards each other that are required to be protected by law. With a manager dead, 90 employees in jail and an entire factory’s workforce under investigation for murder in Maruti Suzuki Manesar factory there seems to be a need to make stringent labour laws flexible in India. These are the times of distress for corporate houses, as immediate steps towards dismissal could not have been taken due to laws protecting immediate termination. There is a need for dual policy that not only protects rights of an employee but with changing times a need has arisen to extend protection towards rights of an employer as well.  A shameful incidence like this could have been avoided if there were flexible laws of immediate termination of instigators before the event took such an ugly turn of gross misconduct.

Industrial law covers a comprehensive canvas of state intervention of social control through law to protect directly the claims of workers to wages, bonus, retirement benefits such as gratuity, provident fund and pension, claims, social security measures such as workmen’s compensation, insurance, maternity benefits, safety welfare and protection of minimum of economic well-being along with providing several mechanism for dispute resolution. Job security has been particularly protected by providing industrial adjudication of unfair discharges and dismissals and ensuring reinstatement of illegally discharged or dismissed workmen. Protection has gone still further by laying down conditions of service in specified industries and establishments and limiting the hours of work. By and large, all these subjects are “connected with employment or non-employment or terms of employment or with the conditions of labour” of industrial employees. In other words, these matters are the subject matter of industrial disputes, which can be investigated and settled with the aid of the machinery provided under the Act or analogous State statutes.

The term summary dismissal does not exist under Indian Labour Law. An employer cannot terminate the services of a permanent employee without prior notice or on providing him with a notice. An employer cannot terminate the services of an employee on the spot, he can only an employee from his services on providing him with a notice 21 days prior to his termination stating the reasons for termination. Termination cannot be arbitrary and have to be executed on the principles of natural justice. Hence the concept of ‘Hire and fire’ policy or Summary Dismissal doesn’t exist in Indian Laws. Indian laws make it very difficult for an employer to terminate the services of an employee giving employee elasticity to perform at his own will; effecting the productivity and outcome of the industrial produce. An employee has an option to appeal against his termination to labour court.

Whereas, on the other hand an employer has very few rights as against an employees’ misconduct and cannot dismiss him summarily if the employee acts in an unprofessional or unethical manner. The Act provides stringent laws against capitalist or the employer. There is lack of any provisions providing an ethical code of conduct on behalf of the employee. It nowhere defines the word misconduct. Unlike laws in Taiwan and Austria, untrustworthiness cannot be used as against an employee to dismiss him from his services.


From what has been discussed above, this paper proposes some principles and contains as guidance for law modification. It is now realized that there is a need to set-out laws relating to duties and proper conduct while working in an establishment. There is a need to fill-in the loop-holes in the present labour laws and relax provisions relating to dismissal and termination. Act of theft, untrustworthiness, improper conduct, unjust cause of absence, inefficiency etc. should be considered as valid grounds for dismissal.

The concept of summary dismissal shall be incorporated and the power to dismiss without notice or approval from authorities shall be vested in the employer in certain cases of gross misconduct with effective mechanism to keep a check on such a power being granted. The employer shall be given power to define the scope of the term gross misconduct as according to the existing needs of their industry. The same shall be incorporated in the Model Standard Order.

There is a need to reform the labour laws relating to termination of employment and look into the aspect whether India is ready for hire and fire policy in Labour Laws on grounds of gross misconduct; in order to bring in favourable conditions for employee as well as an employer. It is the need of the hour to take measures in order to reform stringent labour laws to build a just labour relation system.

[i] Lalit Bhasin, “Labour and Employment Laws of India”, available at <https://unpan1.un.org/intradoc/groups/public/documents/apcity/unpan02943.html>  (Accessed on 27-11-2011, 1.05 pm ).
[ii] S.N. Mishra, “Labour and Industrial Laws”, 26th Edition, (Central Law Publications  2011).
[iii] Kolektivne Protu Kapitalu “Workers Autonomy Strikes in India” available at <https://protikapitalu.org/> (Accessed on 26-11-2012, 9.05 am).
[iv] “Fresh Maruti strike spreads; Manesar workers went on a flash strike” available at <https://articles.economictimes.indiatimes.com/2011-10-08/news/30258062_1_manesar-plant-workers-contractual-workers-13-day-strike> (Accessed on: 27-11-2012, 1.30 pm).
[v] “No Winners in 13-Day Maruti Strike” available at <https://knowledgetoday.wharton.upenn.edu/2011/06/no-winners-in-13-day-maruti-strike/>  (Accessed on 8-10-2012, 3.40 pm).
[vi] “Labour Law”, available at < https://www.paralegaladvice.org.za/docs/chap06/15.html> (Accessed on 26-11-2012, 12.40 am).
[ix] Promulgated on August 1, 1984.  Amended on December 27, 1996 and May 13, 1998;The LSL provide for minimum standards of employment such as work hours, holidays, accident compensation etc. Individual employment relationships between an employer and employee are regulated by the provisions of the LSL such that working conditions set forth by employment contracts, work rules, and collective agreements which are inferior to the standards required under the LSL are void and automatically replaced with the minimum requirements set forth in the LSL.
[x] Article 12 LSL
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