CIVIL Appeal NO
650 of 1982
From the Award dated 63 1981 of the Labour Court Delhi in IClD No 41 Or 1979
PN Tewari and SR Srivastava for the Appellants
25F read with Sec 200 of the Industrial Disputes Act  1947  Act  for short and as the provisions of Sec
25F have not been complied with  the termination of service would be bad and illegal
The Labour Court then proceeded to examine whether the relief of reinstatement should be granted or compensation in lieu of reinstatement should be given
The Labour Court held that even where Sec
25F of the Industrial Disputes Act is not complied with and therefore the termination of service is illegal and invalid  there is certainly a discretion with the Labour Court whether to order reinstatement of the workman or not  We have our serious reservations about the statement of law but it is not necessary to deal with it in the present case because instead of granting reinstatement  we propose to award adequate compensation taking into account both the backwages as well as compensation in lieu of reinstatement
The Labour Court while proceeding to quantify the compensation observed that the termination of services of the two workmen was bonafide and not a colorable exercise of power in accordance with the service rules and then proceeded to award one year s wages as compensation  for the failure of the employer to comply with the requirements of provisions contained in Sec
25F of the Act
The workmen have filed this appeal by special leave
Ordinarily where the termination of service is found to be 626 bad and illegal  in the field of industrial relations a declaration follows that the workman continues to be in service and has to be reinstated in service with full backwages See Hindustan Tin Works Pvt Ltd vs Employees of Hindustan Tin Works Pvt
Ltd1
The Labour Court has  however  the discretion to award compensation instead of reinstatement if the circumstances of a particular case are unusual or exceptional so as to make reinstatement in expedient or improperSee Ms Hindustan Steels Ltd  Rourkela vs AK Roy  Ors2
In the present case  the Labour Court having held that the termination of services of the appellants would constitute retrenchment and as the pre requisite for a valid retrenchment having not been satisfied  the termination of service was bad  yet in the facts of the case in his discretion declined to grant the relief of reinstatement
Whenever  it is said that something has to be done within the discretion of the authority then that something has to be done according to the rules of reason and justice and not according to private opinion  according to law and not humour
It is to be not arbitrary  vague and fanciful but legal and regular and it must be exercised within the limit to which an honest men to the discharge of his office ought to find himself
See Sharp vs Wekfield3
Discretion means sound discretion guided by law
It must be governed by  rule  not by humour  it must not be arbitrary  vague and fanciful
See SD Jaisinghani vs Union of India  Ors4
The Labour Court while declining to grant the relief of reinstatement which should have ordinarily followed  consequent upon its finding that the termination of service was bad and illegal  in exercise of its discretion awarded one year s wages as compensation in lieu of reinstatement on the ground that the termination of service of each of the appellant was bonafide and not a colorable exercise of power in accordance with service rules  There is thus an error apparent on the face of the record of the case in as much as if the termination of service was according to service 1  2  3 11891 AC 173
4 11967 2 SCR 703  627 rules and Was bonafide it could not be simultaneously held to be illegal and invalid
Therefore the discretion was exercised on irrelevant and extraneous considerations or considerations not germane to the determination
As a necessary corollary  we would have granted the normal relief of reinstatement
Dr Chitley  learned counsel who appeared for the respondents attempted to take us through the evidence with a view to persuading us that the employer even if it acted contrary to law  should not be burdened with reinstatement because it had lost confidence in the appellants
The employer is a foreign air transport company
The workmen were loaders posted at Delhi Airport
In this far fetched hierarchical relationship  loss of confidence if it is to be considered a relevant factor would have hardly impressed us
However  as the workmen are out of job from August 30  1973 ie roughly for a period of 12 years  it is in their own interest  that instead of reinstatement in service under an unwilling if not a hostile employer
adequate compensation would meet the ends of justice
Therefore  in the special facts and circumstances of this case  though disagreeing with tile reasons given by the Labour Court for declining to grant the normal relief of reinstatement  we uphold the same but the meagre compensation awarded by the Labour Court namely one year s E wages requires to be adequately and properly modified
Dr Chiley gave us information about the last wages drawn by each of the workmen
That does not take care of over time allowance or bonus or other benefits that they enjoy
Roughly  the monthly pay packet of each workman appears to be around Rs 1000
Each one of them was a loader which means doing 1  manual job
Each one of them is entitled to backwages in full for a period of 12 years
Each one was therefore entitled to get Rs 150000 towards back wages
Adding to it the compensation in lieu of reinstatement in the amount of Rs 50000 we are of the opinion that a total compensation in the amount of Rs 200000 to each appellant would meet the ends of justice
Before we conclude this judgment  we would like to make it abundantly clear that the compensation of Rs 200000 I awarded to each appellant includes backwages for a period of 628 12 years
Now that the amount is being paid in one lump sum  it is likely that the employer may take recourse to Sec
192 of the Income Tax Act  1961 which provides that when any person responsible for paying any income chargeable under the head Salaries  shall  at the time of payment  deduct income tax on the amount payable at the average rate of income tax computed on the basis of the rates in force for the financial year in which the payment is made  on the estimated income of the assessee under this head for that financial year
If therefore the employer proceeds to deduct the income tax as provided by Sec 192  we would like to make it abundantly clear that each appellant would be entitled to the relief under Sec
89 of the Income Tax Act which provides that where  by reason of any portion of assessee s salary being paid in arrears or in advance or by reason of his having received in any one financial year salary for more than 12 months or a payment which under the provisions of clause 3 of Section 17 is a profit in lieu of salary  his income is assessed at a rate higher than that it would otherwise have been assessed  the Income tax Officer shall on an application made to him in this behalf grant such relief as may be prescribed
The prescribed relief is set out in Rule 21A of the Income tax Rules
Both the appellants are entitled to the relief under Sec 89 because compensation herein awarded includes salary which was in arrears for 12 years and it is being paid in one lump sum under the orders of this Court
Therefore  the salary has to be spread over for a period of 12 years as also the compensation in lieu of reinstatement and the relief should be given as provided by Sec 89 of the Income tax Act read with Rule 21A of the Income tax Rules
Both the appellants are entitled to the same
If any application is necessary to be made  the same may be made to the competent authority and the respondent employer shall assist the appellants in each case for obtaining the relief
When the hearing concluded and we indicated that we were inclined to award compensation for backwages and in lieu of reinstatement  we requested Shri SR Srivastava  learned counsel for the appellants to give us in a tabulated form the compensation to which each appellant would be entitled with a spread over from the date of the order of termination of service till the end of the present year
The tabulations have been supplied in respect of each of the appellants
We have gone through the tabulations and 629 we are satisfied that they represent the correct state of affairs and they are taken on record and are being treated as part of this judgment
Accordingly  this appeal is partly allowed and the award giving one year s wages as compensation is modified to the effect that each appellant should be paid Rs 200000 as and by way of backwages and in lieu of relief of reinstatement
As we have awarded adequate compensation  it is not necessary to award costs
We order accordingly
APJ Appeal partly allowed


Summary:
The services of the appellants workmen who were employed as loaders in a foreign air transport company was terminated by the respondent employer
On a reference made by the Secretary Labour Delhi Administration the Labour Court held that the termination of services of the appellants constituted retrenchment within the meaning of section 25F read with Section 2oo of the Industries Disputes Act  1947 and as the provisions of section 25F have not been complied with the termination of service would be bad and illegal
It was further held that even where section 25F of the Act is not complied with and the termination of service is illegal and invalid  there is certainly a discretion with the Labour Court whether to order reinstatement of the workmen or not
While quantifying the compensation  the Labour Court observed that the termination of services of the two workmen was bonafide and not a colourable exercise of power in accordance with the service rules and awarded one year s wages as compensation for the failure of the employer to comply with the requirements of section 25F
The workmen appealed to this Court
Partly allowing the Appeal
 HELD 1
Ordinarily  where the termination of service is found to be bad and illegal  in the field of industrial relations a declaration follows that the workman continues to be in service and has to be reinstated in service with full backwages
The Labour Court has however  the discretion to award compensation in respect of reinstatement if the circumstances of a particular case  are unusual or exceptional so as to make reinstatement inexpedient or improper
625H  626A B 624 2
Whenever it is said that something has to be done within the discretion of the authority then that something has to be done according to the rules of reason and Justice and not according to private opinion  according to law and not humor
It must not be arbitrary vague and fanciful
626D Hindustan Tin Works Pvt  Ltd vs Employees of Hindustan Tin Works Pvt Ltd 1979 I SCR 563  Ms Hindustan Steel Ltd  Rourkela vs AK Roy  Ors   Sharp vs Wekfield   SD Jaisinghani vs Union of India  Ors   relied on
Having regard to the facts and circumstances of the instant case  the reasons given by the Labour Court for declining to grant the normal relief of reinstatement are not tenable
The order of the Labour Court is  however  upheld
The award giving one year wages as compensation is modified to the effect that each appellant should be paid Rs 200000 as and by way of back wages in lieu of relief of reinstatement
626B C 4
The Labour Court while declining to grant the relief of reinstatement which should have ordinarily followed  consequent upon its finding that the termination of service was bad and illegal  in exercise of its discretion awarded one year s wages as compensation in lieu of reinstatement on the ground that the termination of service of each of the appellant was bonafide and not a colourable exercise of power in accordance with service rules 
There is thus an error apparent on the face of the record
inasmuch as if termination of service was according to service rules and was bonafide it could not be simultaneously held to be illegal and invalid
Therefore
this discretion was exercised on irrelevant and extraneous considerations or considerations not germane to the termination
626F H  627Al 5
The appellants are entitled to relief under section 89 of the Income Tax Act  1961 read with Rule 21A of the income Tax Rules  1962 because compensation herein awarded includes salary which was in arrears for 12 years and is being paid in one lump sum under orders of Court
Respondent employer shall assist the appellants for obtaining the relief
628E F