Labour Law Case: Purushottam Bhandari vs. Ministry of Transport and Labour Management, NKP 2058 B.S, DN: 7545, Writ No. 3232, Shramsambandhi Mahatwapurna Najurharu, Part II, P. 379.
Case: Writ of Certiorari
Plaintiff/Applicant: Purushottam Bhandari former Junior Clerk at Necon Air Ltd.
Defendant/Respondent: Government of Nepal, Ministry of Labour and Transport Management along with Necon Air Ltd.
Decision Number: 7545
This case is related to the lawful retrenchment of employees under the Labour Act 2048 and the scope of “special circumstances”
Facts of the Case:
The petitioner was appointed as a Junior Clerk at Necon Air Ltd. on a one year probationary basis effective from 2055/09/01 and his service was made permanent from 2056/09/01 after satisfactory performance in the Customer Services Department. Necon Air Ltd., a private airline company operating domestic flights and mountain flights decided to reduce its workforce and by a decision dated 2058/09/20, the petitioner was informed that he had been retrenched.
The petitioner argued that the company had not demonstrated genuine “special circumstances” as defined under the explanation to Section 12(5) of the Labour Act 2048 and that neither the company nor the Ministry of Labour disclosed the basis or process by which government approval for retrenchment was obtained despite his request for information.
He filed this writ petition invoking Articles 23 and 88(2) of the Constitution seeking certiorari to quash the retrenchment decision and mandamus for reinstatement. Necon Air and the Ministry of Labour in their written replies stated that the company had suffered heavy financial losses as two aircraft had crashed, three were grounded and only two remained operational creating “special circumstances.” The company had formally applied to the Department of Labour seeking to cut 150 employees and later reduced to 69 after some resigned voluntarily. The Ministry granted approval on 2058/04/04 for retrenchment of 69 employees of whom 23 including the petitioner were separated following the legal rule of retrenching most recently appointed staff first. It was also stated that the petitioner had already accepted the compensation payable upon retrenchment without protest.
Legal Issues:
- Whether “special circumstances” as defined under the explanation to Section 12 of the Labour Act 2048 existed to justify the company’s retrenchment of employees?
- Whether the Government of Nepal’s approval for retrenchment was granted after proper investigation and in accordance with law?
- Whether the retrenchment procedure including the seniority based selection under Section 12(2) was properly followed?
- Whether acceptance of retrenchment compensation by the petitioner stopped him from challenging the retrenchment according to Section 34 of the Evidence Act 2031?
- Whether the Supreme Court under its extraordinary jurisdiction could direct a private industrial establishment to retain a specific number of employees?
Different Courts Decision:
Supreme Court:
The Joint Bench of the Supreme Court held that Necon Air Ltd. was a lawfully established private airline under the Industrial Enterprises Act 2049 and the petitioner’s employment status was undisputed. The company’s loss of revenue resulting from the two crashed aircraft, three grounded and only two in operation combined with a loss making balance sheet for fiscal years 2056/57 and 2057/58 established “special circumstances” as contemplated under Section 12.
The Court found that the retrenchment was carried out in accordance with Section 12(2) by removing recently appointed staff first. The petitioner and other retrenched employees had already accepted the compensation or benefits payable upon retrenchment.
Since the retrenchment process complied with the law and the writ petition could not be granted and it would not be appropriate for the Court under its extraordinary jurisdiction to direct an industrial establishment on exactly how many employees to retain. The Court dismissed the writ petition.
Principle Established:
- Under the explanation to Section 12 of the Labour Act 2048 “special circumstances” includes situations such as breakdown of machinery or equipment, unavailability of fuel, electricity or raw materials, natural calamities, unsold stock or similar conditions preventing normal operation.
- Where a company’s core income generating assets i.e aircraft are lost to accidents or rendered non-operational and resulting in financial loss then this constitutes valid “special circumstances” justifying retrenchment.
- The Supreme Court exercising extraordinary jurisdiction will not direct a private industrial establishment on the specific number of employees it must retain rather such matters fall within managerial discretion subject to compliance with statutory procedure.
- Retrenchment carried out following proper government approval and the statutory seniority rule i.e junior most employees retrenched first is lawful and not subject to certiorari.
Relevancy of the Case:
This decision is a significant precedent in Nepali Labour Law on the scope of employer initiated retrenchment under Section 12 of the Labor Act 2048.
