BACK WAGES TO A

 

REINSTATED WORKMAN

In a judgment of March 2009 again Hon’ble Supreme Court has been held that even if services of the workman is terminated unjustifiably and illegally, it itself does not create a right of reinstatement with full employment benefits and full back wages. The court has followed a series of cases on this subject.

The appeal in hand was directed against the judgment and order passed by the High Court of Judicature at Allahabad in Civil Miscellaneous Writ Petition No. 32250 of 1990 dated 21.5.2007. The facts in nutshell are as follows: Mahendra Ram, was recruited on casual basis sometime in the year 1981 in M/s P.V.K. Distillery Ltd. (now rechristened as Lords Distillery Ltd.). On 14.8.1982 he was shifted to bottling section as a permanent workman by the orders of the General Manager. On 9.1.1985 his services were terminated by an oral order from the employer. Aggrieved by the said order, he went before the Labour Court inter-alia alleging that he was employed in the establishment of the employer and that his services were terminated orally in an unjustifiable and illegal manner.

The employer on the other hand contended, that, he was engaged by Gaya Singh Yadav, contractor and therefore he was never in their employment and thus master-servant relationship never existed between them.

Labour Court after considering and appreciating the oral and documentary evidence on record, has come to the conclusion, that, Mahendra Ram, was in the continuous employment of the establishment since 1980 and the employer unjustifiably and illegally terminated workman’s services from 19.1.1985. The labour court also came to the conclusion that the workman has worked for more than 240 days in a calendar year, as required by section 25B(2) (a) of Industrial Disputes Act, 1947, and therefore he is entitled for reinstatement with continuity of service and full employment benefits and back wages.

In the interregnum, the factory remained closed for years together and ultimately it was declared as a sick unit. Management of the company was substituted with the present management for its rehabilitation/ reconstruction. The Company then went before the High Court challenging the validity and legality of the award by which the workman has been reinstated with continuity of service and full employment benefits and back wages. By the impugned order, the High Court has stated that there is no reason to doubt the findings given by the Labour Court and declined to interfere with the award passed by the Labour Court in Adj. Case N0. 32/87. Aggrieved by the said order, employer approached the Supreme Court by this special leave petition.

In the supreme court it was ascertained that, the Labour Court on appreciation of evidence on record has rendered a finding that there exists a master-servant relationship between the employer and Mahendra Ram. Section 11A of Industrial Disputes Act gives power to the Labour Courts to give appropriate relief in case of discharge and dismissal of a workman in exceptional circumstances. Labour Court after appreciating the facts and evidence on record rightly held that his services have been unjustifiably and illegally terminated by the employer without complying with the procedure and accordingly directed his reinstatement in service with all other service and monetary benefits.

The only question which required consideration by supreme court in the appeal was whether the Labour Court was justified in awarding full back wages, while directing the employer to re-instate the workman in service.

Learned counsel for the employer contended that the High Court has acted erroneously by declining to interfere with the award of the Labour Court and that the grant of relief of reinstatement and back wages is not automatic in all matters arising under the provisions of Industrial Disputes Act. and also urged that the employer will suffer irreparable loss and injury, if it has to employ a contractor’s  workman on its rolls with full back wages even for the period when the establishment was closed.

Although it was argued that his services were terminated in the year 1985 and since then the case is pending for the last two decades in different courts the court found it as having no relevance, since he had approached the court within a reasonable time and it is not his fault that the case was pending before the court for long period. it was observed that these grounds could not be held against him for denying the relief of back wages otherwise he would suffer double jeopardy of losing back wages and delay in getting the reinstatement for no fault of his. Therefore, the court further observed that it would have been more enlightening, had the High Court reasoned out as to why the appellant should reinstate the respondent with full employment benefits and should pay full back wages to him for nothing in return from him in terms of work, production etc.

Giving a realistic approach to the matter and in spite of all these circumstances the supreme court restricting itself to the question of 50% of the total back wages, held that although services of the respondent have been terminated unjustifiably and illegally, it itself does not create a right of reinstatement with full employment benefits and full back wages. The matter was viewed in the context of the fact that the factory has been taken over by a new management altogether and by asking the management to pay full back wages for the long interregnum would be unfair and unjust.

Therefore, the court finally held that, it would be unreasonable to put a huge burden on the employer by directing them to reinstate respondent with continuity of service and with full back wages, because the factory had been declared sick and remained closed for many years and has been assigned to a new management in order to rehabilitate/reconstruct it. In view of this the honble court opined that it would be fair and reasonable to direct the employer to deposit 50% of back wages by way of arrears of back wages, instead of full wages awarded by the Labour Court.

Accordingly, the judgment and order of the Labour Court and the High Court were set aside and it was declared that the Mahendra Ram shall be entitled to 50% of the total back wages payable during the aforesaid period and the employer was directed to calculate 50% of the total back wages payable during the aforesaid period and to deposit the same in the Labour Court within 6 weeks from the date of the order. Labour Court, was further directed to deposit the said amount in a fixed deposit in a nationalized bank within two weeks thereafter. If for any reason, Mahendra Ram claims the said amount within two years from the date of deposit of the said amount in the Labour Court, the Labour Court is directed to take effective steps to ascertain the identity of him and on determining the same; the said amount shall be disbursed to the him with interest. If for any reason, he does not claim the said amount within two years from the date of deposit of the said amount in the Labour Court, the same should be handed over to the District Legal Service Authority with interest.

 

ANALYSIS

In the back drop of this case, it would be interesting to analyze some of the case laws on the issue of back wages to a reinstated workman.

We will start with the land mark decision of Supreme Court in Western India Match Co. Ltd. v. Third Industrial Tribunal, West Bengal, 1978 Lab IC 179 (SC). In this case considering the claim of workman it was held that “in deciding the question, as to whether the employee should be recompensed with full back wages and other benefits until the date of reinstatement, the tribunals and the courts have to be realistic albeit the ordinary rule of full back wages on reinstatement.

 

But in Hindustan Tin Works (P) Ltd. v. Employees, (1979) 2 SCC 80, the Court held that the relief of reinstatement with continuity of service can be granted where termination of service is found to be invalid. However this was only an enabling order not a mandatory order to be followed. Therefore, it  did not lay down a law in absolute terms to the effect that the right to claim back wages must necessarily follow an order declaring that the termination of service is invalid in law.

When it came to the case of Surendra Kumar Verma v. Central Govt. Industrial Tribunal-cum-Labour Court, (1980) 4 SCC 443, the Court further observed that the plain common sense dictates that the removal of an order terminating the services of workmen must ordinarily lead to the reinstatement of the services of the workmen. It is as if the order has never been, and so it must ordinarily lead to back wages too. But the court however clearly spelt out that there may be exceptional circumstances which make it impossible or wholly inequitable vis-à-vis the employer and workmen to direct reinstatement with full back wages. For instance the court cited that in an industry which is closed down or in severe financial doldrums; and where the workmen concerned have secured better or other employment elsewhere and so on, the court may even deny reinstatement where reinstatement is impossible because the industry has closed down. It was hence held that there shall be a vestige of discretion left in the court to make appropriate consequential orders in such cases. It was also held that the court in its discretion can deny the relief of award of full back wages where that would place an impossible burden on the employer. In such and other exceptional cases the court may mould the relief keeping the facts of the case and circumstances in to consideration.

In the case of P.G.I. of M.E. and Research, Chandigarh v. Raj Kumar, (2001) 2 SCC 54, the court held that the payment of back wages having a discretionary element involved in it, has to be dealt with, in the facts and circumstances of each case and no straight-jacket formula can be evolved, though, however, there is statutory sanction to direct payment of back wages in its entirety. The issue as raised in the matter of back wages has been dealt with by the Labour Court in the manner as above having regard to the facts and circumstances of the matter in the issue, upon exercise of its discretion and obviously in a manner which cannot but be judicious in nature. There exists an obligation on the part of the High Court to record in the judgment, the reasoning before however denouncing a judgment of an inferior Tribunal, in the absence of which, the judgment cannot stand the scrutiny of otherwise being reasonable.

In the case of Hindustan Motors v. T. K. Bhattacharya, (2002) 6 SCC 41, the Supreme Court stated that section 11-A of Industrial Dispute Act 1947 as amended in 1971, is couched in wide and comprehensive terms. It vests a wide discretion in the Tribunal in the matter of awarding proper punishment and also in the matter of the terms and conditions on which reinstatement of the workman should be ordered. It necessarily follows, that, the Tribunal is duty-bound to consider whether in the circumstances of the case, back wages have to be awarded and if so, to what extent. Court also held that Industrial Tribunal and Division Bench of High Court erred in proceeding on the assumption that quashment of dismissal order should be followed by reinstatement with full back wages as a matter of course. On consideration of the entire matter in the light of the observations referred to supra in the matter of awarding back wages, the court  viewed that in the context of the facts of this particular case including the vicissitudes of long-drawn litigation, it will serve the ends of justice if the respondent is paid 50% of the back wages till the date of reinstatement.

In Allahabad Jal Sansthan v. Daya Shankar Rai, (2005) 5 SCC 124,the Supreme Court has observed that “ A law in absolute terms cannot be laid down as to in which cases, and under what circumstances, full back wages can be granted or denied. The Labour Court and/or Industrial Tribunal before which industrial dispute has been raised, would be entitled to grant the relief having regard to the facts and circumstances of each case. For the said purpose, several factors are required to be taken into consideration.

 

In Madurantakam Coop. Sugar Mills Ltd. v. S. Viswanathan, (2005) 3 SCC 193, the quantum of back wages was confined to 50%, stating: It is an undisputed fact that the workman had since attained the age of superannuation and the question of reinstatement does not arise. Because of the award, the respondent workman will be entitled to his retiral benefits like gratuity, etc. and accepting the statement of the learned Senior Counsel for the appellant Mills that it is undergoing a financial crisis, on the facts of this case we think it appropriate that the full back  wages granted by the Labour Court be reduced to 50% of the back wages.”

 

In U.P. State Brassware Corp. Ltd. v. Uday Narain Pandey, (2006) 1 SCC 479, it was observed by the Supreme Court that the person is not entitled to get something only because it would be lawful to do so. If that principle is applied, the functions of an Industrial Court shall lose much of their significance. Although direction to pay full back wages on a declaration that the order of termination was invalid used to be the usual result but now, with the passage of time, a pragmatic view of the matter is being taken by the court realizing that an industry may not be compelled to pay to the workman for the period during which he apparently contributed little or nothing at all to it and/or for a period that was spent unproductively as a result whereof the employer would be compelled to go back to a situation which prevailed many years ago, namely, when the workman was retrenched.

 

In the case of Haryana Urban Development Authority v. Om Pal, (2007) 5 SCC 742, it was stated by the Supreme Court that, it is also well-settled that despite a wide discretionary power conferred upon the Industrial Courts under Section 11A of the 1947 Act, the relief of reinstatement with full back wages should not be granted automatically only because it would be  lawful to do so. Grant of relief would depend on the fact situation obtaining in each case. It will depend upon several factors; one of which would be as to whether the recruitment was effected in terms of the statutory provisions operating in the field, if any.

 

As a concluding remark, now it can be understood based on the consistent and confirming decisions of the Supreme Court continuously during these years that the back wages and even reinstatement is not a sine qua non** for any illegal or unjustifiable retrenchment, removal, dismissal etc of a workman from service and the facts and circumstance would only determine the effect and consequence of such an act of the management, on a case to case basis.

*ratio decidendi = the reasoning for a judgment which, later other courts are bound to follow

 

* sine qua non = an essential condition or a prerequisite