*THE HON’BLE SRI JUSTICE SANJAY KUMAR +WRIT PETITION NOs.10608, 10609, 18377 AND 19051 OF 2005 % 29-10-2010 # Smt.P.Pentamma and Others. … Petitioners Vs. $ The Presiding Officer, Labour Court, Guntur, Guntur District and Others. … Respondents <GIST: >HEAD NOTE: ! Counsel for petitioners : Sri P.Raghavendra Reddy & Sri R.Dheeraj Singh ^ Counsel for respondents : G.P. for Labour, Sri S.Nageswara Reddy & Sri M.Pitchaiah ? CASES REFERRED: 1) (2010) 6 SCC 773 2) (1979) 2 SCC 80[1] 3) AIR 1980 SC 1896 4) 1980) 4 SCC 443 5) (1981) 3 SCC 225 6) (1983) 4 SCC 491 7) (2007) 2 SCC 433 8) 1995 Supp. (4) SCC 548 9) 1995 Supp. (4) SCC 549 10) (1997) 11 SCC 396 11) (1990) 3 SCC 682 12) 2004 (III) LLJ 946 13) (2006) 1 SCC 479 14) (2007) 9 SCC 353 15) (2007) 1 SCC 575 16) (2007) 9 SCC 748 17) (2008) 5 SCC 75 18) (2006) 11 SCC 684 19) (2008) 4 SCC 261 20) (2008) 1 SCC 575 21) (2009) 15 SCC 327 22) 2010 (1) SCALE 613 = (2010) 3 SCC 192 23) (2010) 3 SCC 637 24) AIR 1999 SC 1351 25) 2006(1) ALD 512 THE HON’BLE SRI JUSTICE SANJAY KUMAR WRIT PETITION NOs.10608, 10609, 18377 AND 19051 OF 2005 Smt.P.Pentamma and Others. … Petitioners And The Presiding Officer, Labour Court, Guntur, Guntur District and Others. … Respondents THE HON’BLE SRI JUSTICE SANJAY KUMAR WRIT PETITION NOs.10608, 10609, 18377 AND 19051 OF 2005 C O M M O N O R D E R These four cases grounded on similar facts raise the same issue. Hence, this common order. The Machilipatnam Municipality engaged the services of the four writ petitioners as malaria workers/drain cleaner during the years 1990- 1993. The character of their engagement is in dispute but the fact remains that the Municipality conceded before the Labour Court, Guntur, that they worked for more than the requisite 240 days during the 12 months prior to their disengagement from service in the year 1993. There is also no dispute that such disengagement was not in compliance with the provisions of the Industrial Disputes Act, 1947 (for brevity, ‘the Act of 1947’). These facts stood affirmed by the Labour Court, Guntur, in the separate Awards dated 30.11.2004 passed by it in the individual Industrial Disputes raised by these petitioners under Section 2-A(2) of the Act of 1947. These I.Ds. were instituted with delay in the year 1998 and in the case of one petitioner, in 1999. The Labour Court, Guntur, having found in favour of the petitioners on the above facts, directed payment of compensation quantified at three months salary amounting to less than Rs.5,000/- each, being notice pay for one month along with two months pay for 24 months service. The Labour Court further granted interest of 6% per annum from the date of filing of the I.D. and costs of Rupees One thousand. The Labour Court took into account the delay on the part of the petitioners in invoking its jurisdiction and relying upon precedents, it passed Awards as aforestated. Aggrieved by the denial of the reliefs of reinstatement in service with back wages and continuity of service, the petitioners are before this Court. In its counters filed in three out of the four cases, the Machilipatnam Municipality took the stand that the petitioners had only been engaged as badili (substitute) workers in temporary leave vacancies. While admitting the length of service rendered by them, the Municipality stated that pursuant to the instructions of the Commissioner and Director of Municipal Administration, Andhra Pradesh, engagement of badili workers was discontinued in the 1993. It stated that two of such disengaged workmen raised industrial disputes – I.D.Nos.281 and 282 of 1996 and ex parte Awards dated 30.10.1997 were passed therein directing their reinstatement in service along with back wages and continuity of service. The Municipality alleged that taking a cue from this, the petitioners in these four cases belatedly sought the same relief before the Labour Court. The Municipality sought to support the Awards passed by the Labour Court directing payment of compensation. It pointed out that there was a long gap of five years after the disengagement of the petitioners from service and therefore, award of compensation was the right relief to be granted. The Municipality further stated that there were no vacancies either in the posts of badili workers or regular public health workers and that it was not in a position to meet the regular salaries of its existing workers and employees. It accordingly sought dismissal of the writ petitions. Sri M.Pitchaiah, learned counsel for the petitioners, contended that once the Labour Court came to the conclusion that the petitioners were retrenched from service within the meaning of Section 2(oo) of the Act of 1947 and such retrenchment was in violation of the statutory procedure prescribed under Section 25-F of the Act of 1947, it ought to have followed the normal rule of directing reinstatement in service. He argued that the Municipality had not pleaded any special circumstances warranting deviation from such rule necessitating the award of compensation in lieu of reinstatement. He therefore prayed for a direction for reinstatement in service of all the petitioners with consequential benefits. He relied on case law in support of his contention. The learned counsel appearing for the Municipality, on the other hand, relied on the recent judgment of the Supreme Court in SENIOR SUPERINTENDENT, TELEGRAPH (TRAFFIC), BHOPAL V/s. SANTOSH KUMAR SEAL[1]. He submitted that given the facts of the cases on hand, even if the termination of the petitioners from service was in contravention of the prescribed procedure, compensation, as held by the Labour Court, would meet the ends of justice. It would be apt to trace the evolution of judicial thought in the arena of illegal retrenchment, reinstatement, back wages and payment of compensation in lieu of reinstatement. I n M/s. HINDUSTAN TIN WORKS PRIVATE LIMITED V/s. EMPLOYEES[2], a three Judge Bench of the Supreme Court observed: “9. 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 work of the workman contrary to the relevant law or in breach of contract and simultaneously deprived the workman of his earnings. If 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 litigative activity of the employer. If the employer terminates the service illegally and the termination is motivated as in this case, viz., to resist the workmen’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 followed with full back wages. …” In GUJARAT STEEL TUBES LIMITED ETC., V/s. GUJARAT STEEL TUBES MAZDOOR SABHA[3], the majority opinion (2 : 1) was to the effect that where the termination from service was illegal, the discretion to deny reinstatement or pare down the quantum of back wages was absent save for exceptional reasons. If the discharge was bad, the majority opined that reinstatement is the rule. The Court was however quick to point out that particular circumstances of each case may induce the modification of the direction as to the quantum of back wages payable as most rules have exceptions wrought by the pressure of life. I n SURENDRA KUMAR VERMA V/s. CENTRAL GOVERNMENT INDUSTRIAL TRIBUNAL-CUM-LABOUR COURT, NEW DELHI[4], the Supreme Court reaffirmed the earlier view taken by it in M/s.SWADESAMITRAN LIMITED, MADRAS V/s. WORKMEN (AIR 1960 SC 762) that if the retrenchment was unjustified and improper, ordinarily such a workman would be entitled to claim reinstatement. It was pointed out therein that in a case of wrongful dismissal, discharge or retrenchment, a claim for reinstatement could not be defeated merely because time had lapsed or the employer had engaged fresh hands. The further observations of the Supreme Court in SURENDRA KUMAR VERMA (4 supra) are of relevance: “6. … 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 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 industry might have closed down or might be in severe financial doldrums; the workmen concerned might have secured better or other employment elsewhere and so on. In such situations, there is a vestige of discretion left in the court to make appropriate consequential orders. The court may deny the relief of reinstatement where reinstatement is impossible because the industry has closed down. The court may 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, but, ordinarily the relief to be awarded must be reinstatement with full back wages. That relief must be awarded where no special impediment in the way of awarding the relief is clearly shown. True, occasional hardship may be caused to an employer but we must remember that, more often than not, comparatively far greater hardship is certain to be caused to the workmen if the relief is denied than to the employer if the relief is granted.” I n MOHAN LAL V/s. MANAGEMENT OF M/s.BHARAT ELECTRONICS LTD.[5], the Supreme Court held that termination of services without satisfying the pre-conditions under the Industrial Disputes Act, 1947 would be ab initio void, invalid and inoperative. In such a case, the Court was of the opinion that there was no cessation of service and a mere declaration would follow that the workman continued to be in service. Accepting that there were judgments which held that before granting reinstatement, the Court must weigh all the facts and exercise discretion properly whether to grant reinstatement or to award compensation, the Supreme Court said that the normally accepted approach of the Courts in the field of social justice was that where the termination was illegal, especially where there is an ineffective order of retrenchment, there is neither termination nor cessation of service and a declaration follows to that effect. Stating so, the Supreme Court turned down the request of the management to award compensation instead of directing reinstatement. In SHAMBHU NATH GOYAL V/s. BANK OF BARODA[6], the Supreme Court held against the management for not having got an issue framed before the Tribunal with regard to the gainful employment of the workman during the intervening period and for not adducing necessary evidence in this regard. As such, that plea had been raised for the first time by the management only in the High Court and there was no material on record to indicate the gainful employment of the workman anywhere. That being so, the Court was of the opinion that the workman was not expected to prove the negative. I n J.K.SYNTHETICS LIMITED V/s. K.P.AGRAWAL[7], the Supreme Court drew a distinction between cases of reinstatement arising out of termination/retrenchment which was held to be illegal for non-compliance with statutory requirements and cases where the reinstatement was owing to exercise of discretion under Section 11-A of the Industrial Disputes Act, 1947. Having referred to the earlier case law on this aspect, the Supreme Court laid down the law with regard to payment of back wages in cases of the latter type. The decisions relied upon by the Labour Court mostly turned upon facts. No principle was laid down in these decisions to the effect that as a general rule compensation should be substituted for the relief of reinstatement. In GUJARAT STATE ROAD TRANSPORT CORPORATION V/s. MULU AMRA[8], the Supreme Court taking into account the lapse of 25 years since the disengagement of the workman directed payment of lump sum compensation quantified to at Rs.75,000/-. The case therefore turned on its particular facts. I n ROLSTON JOHN V/s. CENTRAL GOVERNMENT INDUSTRIAL TRIBUNAL-CUM-LABOUR COURT[9], the Supreme Court having found that the termination of the workman from service constituted retrenchment under Section 2(oo) of the Act of 1947 held that the same was void and ineffective being in contravention of the mandatory provisions of Section 25-F of the Act of 1947. However, keeping in view the facts and circumstances of the case, the Supreme Court did not consider it appropriate to give the relief of reinstatement. This again was a case which turned on its own peculiar facts. I n RATTAN SINGH V/s. UNION OF INDIA[10], the Supreme Court was dealing with a case where the workman had continuously worked for more than 240 days during the relevant period and was entitled to the protection of Section 25-F of the Act of 1947. The Court further held that the protection under the said provision could not be denied to him on the ground that he was a daily-rated worker. The Supreme Court therefore held that his termination from service could not be upheld and had to be set aside. However, as nearly 20 years had elapsed since then, the Court was not inclined to direct reinstatement of the appellant, but ordered payment of a consolidated sum of Rs.25,000/- as compensation in lieu of back wages and reinstatement. I n PUNJAB LAND DEVELOPMENT AND RECLAMATION CORPORATION LTD., CHANDIGARH V/s. PRESIDING OFFICER, LABOUR COURT, CHANDIGARH[11], a Constitution Bench of the Supreme Court dealt with the meaning and scope of ‘retrenchment’ as defined in Section 2(oo) of the Act of 1947. In that context, it also considered the issue of payment of retrenchment compensation. The said judgment did not deal with payment of compensation in lieu of reinstatement, if such retrenchment was held to be illegal. The reliance placed by the Labour Court upon the said judgment is therefore misconceived. The Labour Court also placed reliance upon the judgment of a Division Bench of the Rajasthan High Court in ARJUN SINGH V/s. LABOUR COURT, JODHPUR[12]. The said case involved daily wagers whose services were terminated in violation of Section 25-F of the Act of 1947. Upon challenge, the Labour Court awarded compensation in lieu of reinstatement. Aggrieved thereby, the workmen approached the High Court. The High Court found on facts that the workmen had not gone through a process of selection when they were appointed on daily wage basis and that the time lag between their termination from service and the award by the Labour Court was substantial. Relying on case law, the High Court upheld the direction of the Labour Court awarding compensation in lieu of reinstatement. The case therefore turned upon the facts obtaining therein. Reference may also be made to the Judgments relied upon by the Supreme Court in SANTOSH KUMAR SEAL (1 supra). I n U.P. STATE BRASSWARE CORPN. LTD. V/s. UDAY NARAIN PANDEY[13], the issue before the Supreme Court was whether retrenchment in violation of the prescribed procedure results as a rule in entitlement to back wages. The Court observed that a 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 was 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. Stating so, the Court further opined that no precise formula can be laid down as to under what circumstances payment of entire back wages should be allowed and that, indisputably, it would depend upon the facts and circumstances of each case. However, it would not be correct to contend that it is automatic and that it should be granted mechanically only because on technical grounds or otherwise an order of termination is found to be in contravention of the statutory provisions. This Judgment did not turn upon the question as to in what circumstances compensation should be awarded in lieu of reinstatement. I n UTTARANCHAL FOREST DEVELOPMENT CORPN. V/s. M.C.JOSHI[14], the Supreme Court was dealing with the case of a daily wager who had worked for a short period and was terminated from service without following the due procedure. He raised an industrial dispute with a delay of six years. In those circumstances, the Supreme Court was of the opinion that he was entitled to compensation of Rs.75,000/- in lieu of reinstatement with back wages. The Supreme Court observed that it was well settled that the relief of reinstatement with full back wages would not be granted automatically only because it is lawful to do so and that for the said purpose several factors are required to be taken into consideration, one of them being as to whether such an appointment had been made in terms of the statutory rules. Delay in raising an industrial dispute was also said to be a relevant factor. Relevant to note, the decision turned upon the nature and period of the services rendered by the workman in that case, as also the period for which he had worked and the delay of six years on his part in raising the dispute. In those circumstances, the Court was of the opinion that interest of justice would be met by substituting the relief of reinstatement and back wages with the award of compensation of Rs.75,000/-. I n STATE OF M.P. V/s. LALIT KUMAR VERMA[15], the Supreme Court was dealing with a similar situation involving a daily wager whose appointment was not in terms of the statutory rules. He was terminated from service without following the procedure prescribed under the Act of 1947. Keeping in mind the peculiar facts and circumstances of the case, the Supreme Court directed payment of a sum of Rs.1,50,000/- towards compensation in lieu of regularization in service which had been awarded by the Courts below. This Judgment therefore does not lay down any ratio relevant in the context of the present case. I n MADHYA PRADESH ADMINISTRATION V/s. TRIBHUBAN[16], the Supreme Court was dealing with a case where the Industrial Court had directed payment of compensation in the backdrop of violation of Section 25-F of the Act of 1947. The Supreme Court was of the opinion that each case was required to be dealt with in the fact situation obtaining therein and observed that the High Court ought to have taken into consideration the discretionary jurisdiction exercised by the Industrial Court, while directing reinstatement with full back wages. The Supreme Court therefore, keeping in view the peculiar facts and circumstances of that case, directed payment of Rs.75,000/- by way of compensation in lieu of reinstatement. I n SITA RAM V/s. MOTI LAL NEHRU FARMERS TRAINING INSTITUTE[17], the Supreme Court was dealing with a case where the Labour Court had directed reinstatement of the retrenched workmen with 25% back wages. The High Court interfered with the said Award on the ground that the burden of proof had been placed on the management to prove that the workmen had not worked for 240 days during the relevant period. While confirming the settled position that it would be for the workman to prove that he had worked for 240 days during the relevant period, the Supreme Court on the facts of that case disagreed with the High Court that the Award passed by the Labour Court suffered from an error of law. However, keeping in view the period during which the workmen had rendered services and the fact that the management had stopped its operations the Supreme Court was of the opinion that it was not a fit case where reinstatement could be directed. As the very availability of the job was in question, the Court was of the opinion that the facts and circumstances of the case warranted payment of Rs.1,00,000/- each to the workmen to meet the ends of justice. In JAIPUR DEVELOPMENT AUTHORITY V/s. RAMSAHAI[18], the Supreme Court was dealing with a case where the workman was appointed on daily wages and had not completed 240 days during the relevant period. Retrenchment of the said workman therefore did not require compliance with the provisions of Section 25-F of the Act of 1947. The only issue before the Court was the alleged violation of the Rule of ‘last come first go’ under Section 25-G of the Act of 1947. The Court was of the view that even if there was violation of Sections 25-G and H of the Act of 1947, the same would not mean that the Labour Court should pass an Award of reinstatement with entire back wages. The Court pointed out that the exercise of jurisdiction under Section 11- A of the Act of 1947 must be judicious. As in that case, the workman had not served the management regularly, his job was not of a perennial nature and his services were dispensed with as long back as in the year 1987, the Court was of the view that interest of justice would be subserved if instead of reinstatement a sum of Rs.75,000/- was awarded to the workman by way of compensation. I n GHAZIABAD DEVELOPMENT AUTHORITY V/s. ASHOK KUMAR[19], the Supreme Court was dealing with a case of a daily wager whose services were terminated in violation of the prescribed procedure. However, as the post did not exist the Supreme Court was of the opinion that the Labour Court should not have directed reinstatement. Further, a long lapse of time also intervened between the date of disengagement and the direction of reinstatement. In such circumstances and in the interest of justice, the Supreme Court directed payment of a sum of Rs.50,000/- to the workman. In MAHBOOB DEEPAK V/s. NAGAR PANCHAYAT, GAJRAULA[20], the Supreme Court was dealing with a case of a daily wager whose services were terminated on the ground of misconduct but without following the due procedure. In that view of the matter, the argument advanced before the Court was that as the workman had completed 240 days during the period of 12 months preceding his disengagement, the provisions of Section 6-N of the U.P. Industrial Disputes Act, akin to Section 25-F of the Act of 1947, ought to have been complied with. However, the Supreme Court pointed