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Provided that where the undertaking is closed down on account of unavoidable circumstances beyond the control of the employer, the compensation to be paid to the workman under clause (b) of section 25F shall not exceed his average pay for three months.
[Explanation : An undertaking which is closed down by reason merely of
(i) financial difficulties (including financial losses); or
(ii) accumulation of undisposed of stocks; or
(iii) the expiry of the period of the lease or licence granted to it; or
(iv) in a case where the undertaking is engaged in mining operations, exhaustion of the minerals in the area in which such operations are carried on, shall not be deemed to be closed down on account of unavoidable circumstances beyond the control of the employer within the meaning of the proviso to this sub-section.] 1A. [Not reproduced] 1B. [Not reproduced] (2) Where any undertaking set-up for the construction of buildings, bridges, roads, canals, dams or other construction work is closed down on account of the completion of the work within two years from the date on which the undertaking had been set up, no workman employed therein shall be entitled to any compensation under clause (b) of section 25F, but if the construction work is not so completed within two years, he shall be entitled to notice and compensation under that section for every [completed year of continuous service] or any part thereof in excess of six months."

It is pertinent to note that in Hariprasad Shivshanker Shukla and Anr. Vs. A.D. Divikar and Ors. (1957) SCR 121 the Supreme Court held that 'retrenchment' as defined in Section 2(oo) and as used in Section 25F has no wider meaning than the ordinary accepted connotation of the word, that is, discharge of surplus labour or staff by the employer for any reason whatsoever otherwise than by way of punishment inflicted in disciplinary action. Retrenchment was held to have no application where the services of all workmen were terminated by the employer on a real and bona fide closure of business or on the business or undertaking being taken over by another employer. The abovesaid view of the law taken by the Supreme Court resulted in promulgation of the Industrial Disputes (Amendment) Ordinance, 1957 with effect from 27.4.1957, later on replaced by an Act of Parliament (Act 18 of 1957) with effect from 6.6.1957 whereby Section 25FF and Section 25FFF were introduced in the body of the Industrial Disputes Act, 1957. Section 25FF deals with the case of transfer of undertakings with which we are not concerned. Section 25FFF deals with closing down of undertakings. The term 'undertaking' is not defined in the Act. The relevant provisions use the term 'industry'. Undertaking is a concept narrower than industry. An undertaking may be a part of the whole, that is, the industry. It carries a restricted meaning. (see Bangalore Water Supply & Sewerage Board etc. Vs. A. Rajappa and Ors. etc. (1978) 2 SCC 213 and the Management of Hindustan Steel Ltd. Vs. The Workmen & Ors. (1973) 3 SCC 564 ). With this amendment it is clear that closure of a project or scheme by the State Government would be covered by closing down of undertaking within the meaning of Section 25FFF. The workman would therefore be entitled to notice and compensation in accordance with the provisions of Section 25F though the right of employer to close the undertaking for any reason whatsoever cannot be questioned. Compliance of Section 25F shall be subject to such relaxations as are provided by Section 25FFF. The undertaking having been closed on account of unavoidable circumstances beyond the control of the employer, i.e. by its own force as it was designed and destined to have a limited life only, the compensation payable to the workman under clause (b) of Section 25F shall not exceed his average pay for three months. This is so because of failure on the part of respondent employer to allege and prove that the termination of employment fell within sub-Clause(bb) of Clause (oo) of Section 2 of the Act.