Section 74 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 74 of the Industrial Relations Code, 2020 requires an employer who intends to close down an undertaking to serve a written notice on the appropriate Government at least sixty days before the closure takes effect. The notice must state the reasons. Small units and construction projects are outside the section, and the Government can switch the requirement off in exceptional circumstances.
An employer who intends to close an undertaking must serve a notice, in the prescribed manner, on the appropriate Government at least sixty days before the closure is to become effective, stating clearly the reasons. The section does not apply to an industrial establishment with fewer than fifty workers (employed on any day in the preceding twelve months) or to an establishment set up for construction work. The appropriate Government may, by order, suspend the requirement for a stated period after an accident, the employer's death or a natural calamity-type situation. For Central-sphere employers the notice goes in Form XIII under rule 29 of the Central Rules, 2026.
What section 74 says
| Sub-section | Rule |
|---|---|
| 74(1) | The employer who intends to close down an undertaking serves, at least sixty days before the intended effective date, a notice in the prescribed manner on the appropriate Government, stating clearly the reasons for the intended closure. |
| Proviso (i) | Section 74 does not apply to an industrial establishment in which less than fifty workers are employed or were employed on any day in the preceding twelve months. |
| Proviso (ii) | Nor to an industrial establishment set up for the construction of buildings, bridges, roads, canals, dams or other construction work or project. |
| 74(2) | If satisfied that, owing to exceptional circumstances such as accident in the undertaking or death of the employer, or an extraordinary situation such as natural calamities or the like, it is necessary, the appropriate Government may by order direct that s.74(1) shall not apply to that undertaking for the period specified in the order. |
The section sits in Chapter IX, which deals with lay-off, retrenchment and closure in general. It is a notice rule only. It does not ask the Government for permission. Establishments of 300 or more workers that fall under Chapter X need prior permission instead; see section 80. If you are unsure which track you are on, our labour law compliance team can map it against your headcount.
Who must serve the notice
The duty is on "an employer who intends to close down an undertaking". Three points follow from the text.
- Intention triggers the duty. The notice is to be served before the closure becomes effective, not after. A decision to wind up operations on a fixed future date is the moment to start the sixty-day count.
- Reasons are mandatory. The notice must state the reasons "clearly". A bare statement that operations will cease does not meet the wording.
- The recipient is the appropriate Government. Under s.2(b) that is the Central Government for Central-sphere establishments and the State Government for others; see the appropriate Government. "Closure" itself is defined in s.2; our article on lay-off, closure, retrenchment, strike and lock-out explains it.
The two carve-outs
The first carve-out uses a look-back. If fewer than fifty workers are employed and fewer than fifty were employed on any day in the preceding twelve months, the section does not apply. One day at fifty or more in that window is enough to bring the unit back within the notice rule. The count is of "workers" as defined in the Code; see the definition of worker.
The second carve-out is for construction establishments. The text lists buildings, bridges, roads, canals and dams and adds "other construction work or project". Such an establishment is not bound to give the sixty-day notice. The worker compensation position for construction undertakings is separate and sits in section 75.
The exceptional-circumstances order
Section 74(2) is a discretion of the appropriate Government, exercised by order. The Government must be satisfied that the circumstances are exceptional. The text gives examples (an accident in the undertaking, the employer's death, natural calamities "or the like") and requires the order to name the period for which s.74(1) is disapplied. An employer cannot assume the relief; it arises only from an order. The text does not say what happens after the stated period ends, so an employer should read the order itself.
Central Rules, 2026: rule 29
These rules apply to Central-sphere establishments. Where the State Government is the appropriate Government, the State's own industrial relations rules apply, and the form and mode of service may differ.
Rule 29 of the Industrial Relations (Central) Rules, 2026 (G.S.R. 342(E), 8 May 2026) says:
| Rule | Requirement |
|---|---|
| 29(1) | The employer gives notice in Form XIII at least sixty days before the date of intended closure to the Central Government, with a copy to the concerned Deputy Chief Labour Commissioner (Central), by e-mail or speed post. |
| 29(2) | A copy of the notice also goes to the registered Trade Unions or authorised representatives of workers, as the case may be, operating in the industrial establishment. |
Form XIII is also used for the retrenchment notice under rule 27; see rules 27 to 29 of the Central Rules. The Code text itself does not require a copy to the workers; that step comes from the rule.
Consequences of not serving the notice
Section 74 is not listed in s.86(1) to (4), which name sections 78, 79, 80, 67, 70, 73 and 75. The residual penalty in s.86(20) covers a contravention of "any other provision of this Code" or the rules: a fine which may extend to one lakh rupees. Under s.85(1), an officer not below the rank of Under Secretary may impose a penalty under s.86(20) after an enquiry; see sections 84 and 85. Read the penalty articles, sections 86(1) to (6) and 86(7) to (20), for the full ladder.
The old Industrial Disputes Act, 1947 also required a sixty-day closure notice; our post on closure of an undertaking under the old Act and the draft closure notice cover that law. The Code's version adds the prescribed-manner and Form XIII machinery described above.
Example. A packaging company with 120 workers decides to shut a unit effective at the end of a quarter. It counts back sixty days, sends Form XIII to the Central Government and the Deputy Chief Labour Commissioner (Central) by e-mail, and copies its registered union. It also sets out the reasons in the notice. If the unit had never had fifty workers on any day in the past twelve months, s.74 would not apply.
Need help with a closure notice?
A closure touches notice, compensation, statutory dues and often a permission filing. Our labour law compliance team can check whether s.74 or Chapter X applies, prepare the notice with reasons and track the timeline. Bring your twelve-month worker count and the intended effective date.
Key takeaways
- Serve the notice on the appropriate Government at least sixty days before closure, with clear reasons.
- Units with fewer than fifty workers (on any day in the preceding twelve months) and construction establishments are exempt from s.74.
- Only an order under s.74(2) removes the duty in exceptional circumstances.
- Central-sphere employers use Form XIII, copied to the Deputy Chief Labour Commissioner (Central) and to registered unions or worker representatives.
- Closure compensation is a separate matter under s.75.
Read next
- Section 75: compensation to workers on closure
- Section 80: prior permission for closing down an undertaking
- Rules 27 to 29: notice of retrenchment, re-employment and closure
- Industrial Disputes Act 1947: retrenchment, closure and strike-lockout rules
Disclaimer: Based on the Industrial Relations Code, 2020 (as enacted) and, where noted, the Industrial Relations (Central) Rules, 2026 (G.S.R. 342(E), 8 May 2026), as on 30 September 2026. The Code is in force from 21 November 2025; some provisions may be notified later, and State Governments make their own rules for establishments where the State is the appropriate Government. Verify the current position before acting.