Civil Appeal No 656 of 1978
Appeal by Special Leave from the Award dated 21 9 1977 of the Labour Court Meerut in Adjudication Case No 16074
G B Pia L R Singh R P Singh R K lain Suman Kapoor and Sukumar Sahu for the Appellant
R K Garg V J Francis and Madan Mohan for Respondent No l G N Dikshit and o P Rana for Respondents 2 3
The Judgment of the Court was delivered by F DESAI J
This appeal by special leave limited to the question of grant of back wages raises a very humane problem in the field of industrial jurisprudence namely where termination of service either by dismissal discharge or even retrenchment is held invalid and the relief of reinstatement with continuity of service Is awarded what ought to be the criterion for grant of compensation to the extent of full wages or a Part of it  A few relevant facts will highlight the problem posed
Appellant is a private limited Company having set up an industrial unit in engineering industry
The raw material for its manufacturing process is tin plates
The appellant served notice of retrenchment on 56 workmen in February 1974 alleging non availability or raw material to utilise the full installed capacity power shedding limiting the 566 working of the Unit to 5 days a week and the mounting loss
Subsequently negotiations took place between the Union and the appellant leading to an agreement dated 1st April 1974 whereby the workmen who were sought to be retrenched were taken back in service with continuity of service by the appellant and the workmen on their part agreed to co operate with the management in implementing certain economy measures and in increasing the productivity so as to make the undertaking economically viable
Simultaneously the workmen demanded a revision of the wage scales and the appellant pleaded its inability in view of the mounting losses
Some negotiations took place and a draft memorandum of settlement was drawn up which provided for revision of wages on the one hand and higher norms of production on the other but ultimately the settlement fell through
Appellant thereafter on 1st July 1974 served a notice of retrenchment on 43 workmen
The Tin Workers  Union Ghaziabad espoused the cause of such retrenched workmen and ultimately the Government of Uttar Pradesh by its notification dated 9th october 1974 issued in exercise of the power conferred by Section 4 K of the UP lndustrial Disputes Act 1947
referred the industrial dispute arising out of retrenchment of 43 workmen between the parties for adjudication to the Labour Court
Names of the retrenched workmen were set out in an Annexure to the order of reference
The Labour Court after examining the evidence led on both sides and considering various relevant circumstances held that the reasons stated in the notice dated 1st July 1974 Ext
E 2 viz heavy loss caused by non availability of tin plates persistent power curbs and mounting cost of production were not the real reasons for affecting retrenchment but the real reason was the annoyance felt by the management consequent upon the refusal of the workmen to agree to the terms of settlement contained in the draft dated 5th April 1974 and therefore the retrenchment was illegal
The Labour Court by its award directed that all the workmen shall be reinstated in service from 1 st August 1974 with full back wages permitting the appellant to deduct any amount paid as retrenchment compensation from the amount payable to the workmen as back wages
the Appellant challenged the Award in this appeal
When the special leave petition came up for admission Court rejected the special leave petition with regard to the relief of reinstatement but limited the leave to the grant of full back wages
The question whether the workmen who were retrenched were entitled to the relief of reinstatement is no more open to challenge
Another words
it would mean that the retrenchment of workmen was invalid for the reasons found by the Labour Court and the workman were 567 entitled to the relief of reinstatement effective from the day on which A they were sought to be retrenched
The workmen were sought to be retrenched from 1st August 1974 and the Labour Court has directed their reinstatement effective from that date
The Labour Court has also awarded full back wages to the workmen on its finding that the retrenchment was not bona fide and that the non availability of the raw material or recurrent power shedding and lack of profitability was a mere pretence or a ruse to torment the workmen by depriving them of their livehood the real reason being the annoyance of the appellant consequent upon the refusal of the workmen to be a party to a proposed settlement by which work load was sought to be raisedl
Mr Pai learned counsel for the appellant in his attempt to persuade us to give something less than full back wages attempted to re open the controversy concluded by the order of this Court while granting limited leave that the retrenchment was inevitable in view of the mounting losses and falling production for want OF raw material and persistent power shedding
It was said that for the limited purpose of arriving at a just decision on the question whether the workmen should be awarded full back wages we should look into the compelling necessity for m retrenchment of the workmen
Once leave against relief of reinstatement was rejected the order of the Labour Court holding that retrenchment was invalid and it was motivated and the relief of reinstatement must follow has become final
Under no pretext or guise it could now be re opened
Before dealing with the contentions in this appeal we must bear in mind the scope of jurisdiction of this Court under Article 136 of the Constitution vis a vis the Awards of the Industrial Tribunals
Article 136 of the Constitution does not envisage this Court to be a regular Court of appeal but it confers a discretionary power on the Supreme Court to grant special leave to appeal inter alia against the Award of any Tribunal in the territory of India
The scope and ambit of this wide constitutional discretionary power cannot be exhaustively defined
lt cannot obviously be so construed as to confer a right to a party which he has none under the law
The Court will entertain a petition for special leave in which a question of general public importance is involved or when the decision would shock the conscience of this Court
the lndustrial Disputes Act is intended to be a self contained one and it seeks to achieve social justice on the basis of collective bargaining collaboration and arbitration
Awards are given on circumstances peculiar to each dispute and the Tribunals are to a large extent free from resrtrictions of technical considerations imposed on courts
A free and 568 liberal exercise of the power under Article 136 may materially affect the fundamental basis of such decisions viz quick solution of such disputes to achieve industrial peace
Though Article 136 is couched in widest terms it is necessary for this Court to exercise its discretionary jurisdiction only in cases where Awards are made in violation of the principles of natural justice causing substantial and grave injustice to parties or raises an important principle of industrial law requiring elucidation and final decision by this Court or discloses such other exceptional or special circumstances which merit consideration of this Court See Bengal Chemical  Pharmaceutical Works Ltd Calcutta vs Their Workman 1 The question in controversy which fairly often is raised in this Court is whether even where reinstatement is found to be an appro priate relief what should be the guiding considerations for awarding full or partial back wages
This question is neither new nor raised for the first time
It crops up every time when the workman questions the validity and legality of termination of his service howsoever brought about to wit by dismissal removal discharge or retrenchment and the relief of reinstatement is granted
As a necessary corollary the question immediately is raised as to whether the workman should be awarded full back wages or some sacrifice is expected of him
Let us steer clear of one controversy whether where termination of service is found to be invalid reinstatement as a matter of course should be awarded or compensation would be an adequate relief
That question does not arise in this
appeal
Here the relief of reinstatement has been granted and the award has been implemented and the retrenched workmen have been reinstated in service
The only limited question is whether the Labour Court in the facts and circumstances of this case was justified in awarding full back wages
It is no more open to debate that in the field of industrial jurisprudence a declaration can be given that the termination of service is bad and the workman continues to be in service
The spectre of common law doctrine that contract of personal service cannot be specifically enforced or the doctrine of mitigation of damages does not haunt in this branch of law
The relief of reinstatement with continuity of service can be granted where termination of service is found to be invalid
It would mean that the employer has taken away illegally the right to the work of the workman contrary to the relevant law or in breach of contract and simultaneously deprived deprived workman of his earnings
if 1 1959 Suppl
2 SCR 136 at 140
569 thus the employer is found to be in the wrong as a result of which the workman is directed to be reinstated the employer could not shirk his responsibility of paying the wages which the workman has been deprived of by the illegal or invalid action of the employer
Speaking realistically where termination of service is questioned as invalid or illegal and the workman has to go through the gamut of litigation his capacity to sustain himself throughout the protracted litigation is itself such an awesome factor that he may not survive to see the day when relief is granted
More so in our system where the law s proverbial delay has become stupefying
If after such a protracted time and energy consuming litigation during which period the workman just sustains himself ultimately he is to be told that though he will be reinstated he will be denied the back wages which would be due to him the workman would be subjected to a sort of penalty for no fault of his and it is wholly undeserved
Ordinarily therefore
a workman whose service has been illegally terminated would be entitled to full back wages except to the extent he was gainfully employed during the enforced idleness
That is the normal rule
Any other view would be a premium on the unwarranted litigating activity of the employer
If the D employer terminates the service illegally and the termination is motivated as in this case viz  to resist the workman s demand for revision of wages
the termination may well amount to unfair labour practice
In such circumstances reinstatement being the normal rule it should be followedl with full back wages
Articles 41 and 43 of the Constitution would assist us in reaching a just conclusion in this respect
By a suitable legislation to wit the UP  the State has endeavored to secure work to the workmen
In breach of the statutory obligation the services were terminated and the termination is found to be invalid the workmen though willing to do the assigned work and earn their livelihood were kept away therefrom
On top of it the were forced to litigation upto the apex Court and now they are being told that something less than full back wages should be awarded to them
If the services were not terminated the workmen ordinarily would have continued to work and would have earned their wages
When it was held that the termination of services was neither proper nor justified it would not only show that the workman were always willing to serve but if they rendered service they would legitimately be entitled to the wages for the same
If the workman were always ready to work but they were kept away therefrom on account of invalid act of the employer there is no justification for not awarding them full back wages which were very legitimately due to them
A Division Bench of the Gujarat High Court in Dhari Gram Panchayat vs Safai Kamldar Mandal1 and a Division Bench of the Allahabad 1 11 971 I Labour Law Journal 508 570 High Court in Postal Seals Industrial Co operative Society Ltd vs Labour Court 11 Lucknow  orsl have taken this view and we are of the opinion that the view taken therein is correct
The view taken by us gets support from the decision of this Court in workman of Calcutta Dock Labour Board  Anr
Employers in relation to Calcutta Dock Labour Board  ors2
In this case seven workmen had been detained under the Defence of India Rules and one of the disputes was that when they were released and reported for duty they were not taken in service and the demand was For their reinstatement
The Tribunal directed reinstatement of five out of seven workmen and this part of the Award was challenged before this Court
This Court held that the workmen concerned did not have any opportunity of explaining why their services should not be terminated and therefore reinstatement was held to be the appropriate relief and Act aside the order of the Tribunal
It was observed that there was to justification for not awarding full back wages from the day they offered to resume work till their reinstatement
Almost an identical view was taken in Management of Paniltole Tea Estate vs The Workmen3
In the very nature of things there cannot to a straight jacket formula for awarding relief of back wages
All relevant considerations will enter the verdict
More or less it would be a motion addressed to the discretion of the Tribunal
Full back wages would be the normal rule and the party objecting to it must establish the circumstances necessitating departure
At that stage the Tribunal will exercise its discretion keeping in view all the relevant circumstances
But the discretion must be exercised in a judicial and judicious manner
The reason for exercising discretion must be cogent and convincing and must appear on of the face of
the record
When it is said that something is to be done within the discretion of the authority that something is to be done according to the rules of reason and justice according to law and not humor
It is not to be arbitrary vague and fanciful but legal and regular See Susannah Sharm vWorkfild4
It was however very strenuously contended that as the appellant company is suffering loss and its carry forward loss as on 31st March 1978 is Rs 81241690 in order to see that the industry survives and the workmen continue to get employment there must be come sacrifice on the part of workmen
If the normal rule in a case like this is to award full back wages the burden will be on the appellant employer l 1971 I Law Journal 327
2 3  1 31 179
571 to establish circumstances which would permit a departure from the A normal rule
To substantiate the contention that this is an exceptional case for departing from the normal rule it was stated that loss is mounting up and if the appellant is called upon to pay full back wages in the aggregate amount of Rs 2800OO  it would shake the financial viability of the company and the burden would be unbearable
Often when some monetary claim by the workmen is being examined this financial inability of the company consequent upon the demand being granted is voiced
Now undoubtedly an industry is a common venture the participants being the capital and the labour
Gone arc the days when labour was considered a factor of production
Article 43A of the Constitution requires the State to take steps to secure the participation of workmen in the management of the undertaking establishments or other organisations engaged in any industry
Thus from being a factor of production the labour has become a partner in industry
lt is a common venture in the pursuit of desired goal
Now if a Sacrifice is necessary in the overall interest of the industry D or a particular undertaking it would be both unfair and iniquitous to expect only one partner of the industry to make the sacrifice
Pragmatism compels common sacrifice on the part of both
The sacrifice must come from both the partners and we need not state the obvious that the labour is a weaker partner who is more often called upon to make the sacrifice
Sacrifice for the survival of an industrial undertaking cannot be an unilateral action
It must be a two way traffic
The management need not have merry time to itself making the workmen the sacrificial goat
If sacrifice is necessary those who can afford and have the cushion and the capacity must bear the greater brunt making the shock of sacrifice as less poignant as possible for those who keep body and soul together with utmost difficulty
F The appellant wants us to give something less than full back wages in this case which the Labour Court has awarded
There is nothing to show whether the Managing Director has made any sacrifice whether his salary and perks have been adversely affected whether the managerial coterie has reduced some expenses on itself
If there is no such material on record how do we expect the workmen the less affording of the weaker segment of the society to make the sacrifice because sacrifice on their part is denial of the very means of livelihood
We have also found that since 1976 77 the appellant is making profit
A Statement of Account certified by the Chartered Accountants of the company dated 25th July 1978 shows that the appellant has been making profit since 1976 77
The unit is therefore looking up
572 One relevant aspect which would assist us in reaching a just con clusion is that after retrenching 43 workmen effective from 1st August 1974 36 of them were recalled for service on large number of days in 1975 1976 and 1977 the maximum being the case of Jai Hind who was given work for 724 14 days and the minimum being Harsaran so Baldev who was given work for 15 days
An amount of Rs 7458726 was paid to these 36 workmen for the work rendered by them since the date of retrenchment
Certainly the appellant would get credit for the amount so paid plus the retrenchment compensation it must have paid
Even then we were told that the employer will have to pay Rs 280OOO by way of back wages
We were also told that the appellant had offered to pay by way of settlement 50 of the back wages
Therefore the only question is whether we should confirm the Award for full back wages
Now undoubtedly the appellant appears to have turned the corner
The industrial unit is looking up
It has started making profits
The workmen have already been reinstated and therefore they have started earning their wages
It may however be recalled that the appellant has still not cleared its accumulated loss
Keeping in view all the facts and circumstances of this case it would be appropriate to award 75 of the back wages to the workmen to be paid in two equal instalments
It may well be that in appropriate cases the Court may in the spirit of labour and management being partners in the industry direct scaling down of back wages with some sacrifice on management s part too
We were even here inclined to saddle the condition that till the loss is totally wiped out the Managing Director and the Directors shall not charge any fee for the services rendered as Director no dividend shall be paid to equity shareholders and the Managing Director shall not be paid any overriding commission if there be any on the turnover of the company since this will account for the pragmatic approach of common sacrifice in the interest of the industry
We indicate the implications of Article 43A in this area of law but do not impose it here for want of fuller facts
The Award shall stand accordingly modified to the effect that the retrenched workmen who are now reinstated shall be paid 75 of the back wages after deducting the amount paid to them as wages when recalled for work since the date of retrenchment and adjustment of the retrenchment compensation towards the amount found due and pay able
The appellant shall pay the costs of the respondents as directed while granting special leave
NVK Appeal dismissed


Summary:
Awarding full or partial back wages Plinciples for awarding Employee s financial viability to pay baek wages lf could be a factor for not awarding full back wages
The management Appellant retrenched 56 of its worltnell alleging nonavailability of raw material to ntilise the fnll installed capacity power shcdding limiting the working of the unit to 5 days a week and mounting losses
As a result of negotiations between the parties the retrenched workmen were taken back in service
A few days later however the workmen demanded revision of wage scales but the appellant pleaded inability to revise the pay scales in view of the mounting losses
Thereafter the employer reternched 43 workmen
The dispute resulting out of the retrenchment was referred to adjudication under section 4k of the UP
The Labour Court held that the real reason for retrenchment was annoyance felt by the management when the employees refused to agree to the terms oil settlement and that it was not for the reasons stated by the employer
The Labour Court ordered reinstatement of the retrenched workmen with full back wages
In the Special leave petition the employer questioned the correctness of the Labour Court s view that the retrenched workmen should be reinstated
This Court rejected this prayer and limited the special leave to the question of granting back wages to the retrenched workmen ordered to be reinstated
 HELD 1
Since the emoloyer s prayer in the special ieave petition that the retrenched workmen should not be reinstated was rejected by this Court it meant that the Labour Court s view that retrenchment was unjusified was correct
For the reasons found by the Labour Court retrenchment was motivated and so invalid
The workmen were entitled to the relief of reinstatement from the date they were sought to be retrenched
The order of the Labour Court on the question of reinstatement became final
567 C E 2
Article 136 of the Constitution does not envisage this Court to be a regular Court of Appeal but it confers a discretionary power on it to grant special leave to appeal inter Ala against the Award of any Tribunal
The scope and ambit of this vide constitutional discretionary power cannot be 564 exhaustively defined
It cannot be so construed as to confer a right to a party when he has none under the law
The Court will entertain a petition for special leave in which a question of general public importance is involved or when the decisions would shock the conscience of this Court
The is intended to be a self contained code and it seeks to achieve social justice on the basis of collective bargaining conciliation and arbitration
Awards are given on circumstances peculiar to each dispute and the Tribunals are to a large extent free from restrictions of technical consider rations imposed on Courts
A free and liberal exercise of the power under Article 136 may materially affect the fundamental basis of such decisions viz quick solution of such disputes to achieve industrial peace
567 F 568 A Bengal Chemical  Pharmaceutical Works Ltd Calcutta vs Their Workmen 1959 Suppl
2 SCR 136 at 140 referred to
In the field of industrial jurisprudence a declaration can be given that the termination of service is bad and the workman continues to be in service
The common law doctrine that contract of personal service cannot be specifically enforced or the doctrine of mitigation of damages does not haunt in this branch of law
The relief of reinstatement with continuity of service can be granted where termination of service is found to be invalid
568 G H 3
Where termination of service is questioned as being invalid or illegal and the workman has to go through the litigation his capacity to sustain himself throughout the protracted litigation is itself so precarious that he may not survive to see the day when relief is granted
If after such prolonged litigation the workman is not paid his back wages it would amount to a penalty for no fault of his
The workman whose service has been illegally terminated would be entitled to full back wages except to the extent he was gainfully employed during the enforced idleness
If the termination is illegal or motivated it may amount to unfair labour practice
Tn such circumstances reinstatement being the normal rule it should be done with full back wages
569 B D Workmen of Calcutta Dock Labour Board  Anr
vs Employers in relation to Calcutta Dock Labour Board  ors  referred to
Management of Panitole Tea Estate vs The Workmen referred to
Dhari Gram Panchayat vs Safai Kamdar Mandal approved
Postal Seals Industrial Co operative Society Ltd vs Labour Court ll Luck now  Ors
approved
For awarding relief of back wages all relevant considerations will enter The verdict of the Tribunal
Full back wages would be the normal rule and the party objecting to it must establish the circumstances necessitating departure
The Tribunal will then exercise its discretion But the discretion must be exercised in a judicial and judicious manner
The reason for exercising discre tion must be cogent and convincing and must appear on the face of the record
It should not be arbitrary vague and fanciful but legal and regular
570 GE Susannah Sharn vs Wakefield at 179 referred to
565 on the question of the employer s financial viability to pay back wages view of mounting losses the Supreme Court held
Industry is a common venture the participants being capital and labour Article 43A requires the State to take steps to secure participation of workman in the management
From being a factor of production labour has become a partner in industry
It is a common venture in pursuit of a desired goal
If sacrifice is necessary in the overall interest of the industry it would be unfair to expect only labour to make the sacrifice
It should be common sacrifice
If sacrifice is necessary those who can afford and have the capacity must bear the brunt
571 A F b In the present case there is nothing to show that the Managing Director has made any sacrifice
In the absence such information the weaker section of society cannot be expected to make a greater sacrifice than the directors In an appropriate case it would be appropriate to direct that till the loss is wiped out the managing directors shall not charge any fees for the services rendered and no dividend shall be paid
571 G 572 E F c As the appellant has turned the corner and the industrial unit is looking up and started making profits the retrenched workmen having already been reinstated and started earing their wages it would be appropriate to award 75 of the backs wages to the workmen to be paid in two equal instalments
572 D