Average pay for retrenchment compensation must follow the Industrial Disputes Act definition, not a borrowed 26-working-days formula.

For retrenchment compensation under Section 25F(b) of the Industrial Disputes Act, 1947, average pay must be computed strictly under Section 2(aaa) by reference to the three complete calendar months immediately preceding the relevant date. A monthly rated workman's wages cannot be divided by 26 to apply a 26-working-days formula, because that method is drawn from different statutory language in the Payment of Gratuity Act, 1972 and does not govern retrenchment compensation. The SC held the Labour Court's computation method legally unsustainable, set aside the Labour Court and High Court orders, and upheld the termination as valid for compliance with the compensation requirement.

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Issues: Whether, for retrenchment compensation under Section 25F(b) of the Industrial Disputes Act, 1947, the average pay of a monthly rated workman is to be computed by dividing monthly wages by 26 and applying the 26-working-days principle.

Analysis: Section 2(aaa) of the Industrial Disputes Act, 1947 defines average pay in clear terms and, for a monthly paid workman, requires calculation on the basis of the three complete calendar months immediately preceding the relevant date. The provision does not permit a hypothetical per-day computation by dividing monthly wages by 26. The approach adopted in gratuity cases under the Payment of Gratuity Act, 1972 rested on different statutory language and the later legislative explanation inserted into that Act; that principle was not imported into the Industrial Disputes Act, 1947. The Court therefore rejected the Labour Court's method of calculation as legally unsustainable.

Conclusion: The 26-working-days formula does not apply to retrenchment compensation under Section 25F(b) of the Industrial Disputes Act, 1947, and the compensation paid by the employer was held to be in accordance with law.

Final Conclusion: The award of the Labour Court and the High Court's order were set aside, and the termination was upheld as valid for compliance with the retrenchment compensation requirement.

Ratio Decidendi: Where a statute defines average pay for retrenchment compensation in specific terms, the computation must follow that definition and cannot be enlarged by borrowing a different formula from another enactment with materially different language.

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