THE HON'BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION NO. 11662 OF 1997 Date: 05.02.2008 Between: Vadlakonda Ramachandram and another. … Petitioner and Industrial Tribunal-cum-Labour Court, Godavarikhani, Karimnagar District and another. …Respondents. THE HON'BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION NO. 11662 OF 1997 ORDER: Aggrieved by the award of the Industrial Tribunal-cum-Labour Court, Karimnagar, in I.D. No. 35 of 1994 dated 15.01.1997, the present writ petition is filed by the petitioner-workman. Alleging that his services were terminated contrary to Section 25- F of the Industrial Disputes Act, the petitioner herein filed an application, under Section 2-A(2) of the Industrial Disputes Act, before the Labour Court seeking reinstatement with continuity of service, full back wages and payment of wages from 01.04.1993 to 31.08.1993. The Tribunal noted the contention of petitioner that he had worked as a non-technical Work Inspector on daily wages of Rs.32.66 ps per day. The Industrial Tribunal also noted that the relevant non-muster rolls were produced wherein the relevant entries for the years 1992-1994 were at page No. 204 and that M.W-1 had admitted, in cross-examination, that the petitioner had worked continuously from December, 1991 till 31.03.1992. Relying on the said admission, in conjunction with the evidence of WWs- 1 and 2, the Industrial Tribunal held that the petitioner had worked continuously for more than 240 days and, since the statutory requirement of Section 25-F had not been complied with, his termination was illegal. The Tribunal held that the petitioner was paid Rs.1012.46 ps in the month of October, 1992. It also noted that, under Act 2 of 1994, appointment on daily wages was prohibited. Taking the monthly emoluments of Rs.1012.46 ps paid in October, 1992 as the basis for grant of compensation, the Labour Court held that two years compensation of Rs.24,300/- should be paid to the petitioner herein and that he was entitled to interest at 12% p.a. from the date of the petition till payment or realization. Sri Vedula Venkataramana, learned Counsel for the petitioner, would submit that the consequence, of an order of termination being passed contrary to Section 25-F of the Industrial Disputes Act, was that the workman concerned was entitled for reinstatement with full back wages and not payment of compensation in lieu thereof. I must express my inability to agree. It is well settled that the conditions prescribed under Section 25-F of the Industrial Disputes Act are required to be complied with prior to retrenchment and failure to comply with these pre-conditions would render termination of the services of a workman ab initio void. The question which, however, arises for consideration is as to whether in every case of failure to comply with Section 25-F of the Industrial Disputes Act the Industrial Tribunal/Labour Court has necessarily to direct reinstatement with full back wages or whether it has the discretion to award compensation in lieu of reinstatement. In Management of Coimbatore Pioneer B. Mills v. Presiding Officer, Labour Court, Coimbatore[1], the Labour Court found the retrenchment bona fide and the reasons given therefor legal and valid. It also found that there was non-compliance of the provisions of clause (b) of Section 25-F inasmuch as retrenchment compensation and notice pay was not paid before or simultaneously with the notice of retrenchment. The Labour Court held that the retrenchment was not valid. While refusing reinstatement, the Labour Court awarded each of the workmen one month’s wages as compensation in lieu of reinstatement. The Division Bench of the Madras High Court, while refusing to grant reinstatement, however, modified the award of the Labour Court substituting two months pay, for the one month pay granted by the Labour Court, as compensation in lieu of reinstatement. In this context the Division Bench held thus: “……….In a case where to the satisfaction of the Court it is established that there was need and necessity for retrenchment in the industry and the management for legal and valid reasons decided to retrench, the Labour Court in our view would have to consider whether it will be just and reasonable to order reinstatement while it gave a finding that S.25F had not been complied with. We are aware that the Supreme Court in clear and unmistakable terms has held in the decision in State of Bombay v. Hospital Mazdoor Sabha (1960-I LLJ 251), that the non-compliance with the conditions of S.25F(b) relating to payment of compensation would render the impugned retrenchment invalid and inoperative. The decision relied on by the learned counsel for the workers in Sridharan Motor Service v. Industrial Tribunal, Madras and others, (1959-I LLJ 380), and Indian General Navigation and Railway Company Ltd. And another v. Their Workmen, (1960-I, LLJ 13), do not in any way advance further than holding that an illegal action can never be justified. In fact, the decision of the Supreme Court in State of Bombay v. Hospital Mazdoor Sabha (supra) was interpreted and understood in Udaipur Mineral Development Syndicate Pvt. Ltd v. M.P. Dave and another (1975-II, LLJ 499), as holding that in such case there is no termination of the relationship of employer and employee. But in none of these decisions cited it has been held that even if the Labour Court were to find that there was need for retrenchment and the retrenchment was bona fide, there was no option for the Labour Court but to order reinstatement in all cases of non-compliance of the provisions of S.25-F of the Act ………… …………We are, therefore, of the view that in such circumstances of non- compliance with the provisions of S.25F(b) where bona fides or the need for retrenchment is justified, the Labour Court will have a discretion with reference to the facts in each case, either to order reinstatement or direct payment of compensation in lieu of such reinstatement. The order of the Labour Court in such circumstances will be open to question if it is arbitrary or not based on valid or relevant criteria……..” (emphasis supplied). This judgment of the Division Bench of the Madras High Court was affirmed in Workmen of Coimbatore Pioneer “B” Mills Ltd v. Labour Court and others[2], wherein the Supreme Court, on refusing to direct reinstatement, increased the compensation, payable to the workmen in lieu of reinstatement, from two months’ wages, as directed by the Division Bench of the Madras High Court, to four months’ wages. In Gujarat State Road Transport Corpn. V. Mulu Amra[3], the Supreme Court directed payment of lump-sum compensation of Rs.75,000/- in lieu of reinstatement, since the workman had been dismissed more than 14 years prior to the date of its order. In Rolston John Vs. Central Government Industrial Tribunal- cum-Labour Court[4], the Supreme Court held that retrenchment of the workman was in contravention of Section 25-F of the Industrial Disputes Act and void and ineffective. However, keeping in view the facts and circumstances of the case, the Supreme Court did not consider it appropriate to grant the relief of reinstatement and directed that, in full and final settlement of all claims of the workman, and in lieu of reinstatement and consequential benefits, the employer shall pay compensation of Rs.50,000/- to the workman and on such payment the matter would stand concluded between the parties. In Rattan Singh Vs. Union of India[5], the Supreme Court held that protection of Section 25-F of the Industrial Disputes Act could not be denied to the daily rated worker. While setting aside the order of termination of services of the workman, on the ground of violation of Section 25-F of the Industrial Disputes Act, the Supreme Court was not inclined to direct reinstatement since nearly 20 years had elapsed from the date on which the services of workman were terminated and directed that a consolidated sum of Rs.25000/- be paid to the workman as compensation, in lieu of back wages and reinstatement, and in full and final settlement of all claims of the workman. In Sain Steel Products Vs. Naipal Singh[6], the Labour Court, on finding that termination of the services of the workmen was without complying with Section 25-F of the Industrial Disputes Act and was therefore illegal, directed reinstatement of the workmen with back wages at the minimum rate of wages till the date of his reinstatement. The Supreme Court, while confirming the award of the Labour Court, considered the fact that, as the workman had not been in employment for more than 25 years, it would not be proper to put him back into service and instead some reasonable compensation could be paid to the workman in lieu of back wages and reinstatement. A sum of Rs.50,000/- was directed to be paid as compensation in lieu of reinstatement. In General Manager, Haryana Roadways Vs. Rudhan Singh[7] , the Tribunal held that termination of services of the workman, without complying with the requirement of Section 25-F of the Industrial Disputes Act, was illegal. The workman was directed to be reinstated with 50% back wages. The award of the Tribunal was confirmed by the Punjab and Haryana High Court. The Supreme Court also held that the provisions of Section 25-F of the Industrial Disputes Act were clearly applicable and that termination of the services of the workman was invalid. While examining the question as to whether award of 50% back wages to the workman was justified, the Supreme Court held thus: “………There is no rule of thumb that in every case where the Industrial Tribunal gives a finding that the termination of service was in violation of Section 25-F of the Act, entire back wages should be awarded. A host of factors like the manner and method of selection and appointment i.e., whether after proper advertisement of the vacancy or inviting applications from the employment exchange, nature of appointment, namely whether ad hoc, short terms, daily wages, temporary or permanent in character, any special qualification required for the job and the like should be weighed and balance in taking a decision regarding award of back wages. One of the important factors, which has to be taken into consideration, is the length of service, which the workman had rendered with the employer. If the workman has rendered a considerable period of service and his services are wrongfully terminated, he may be awarded full or partial back wages keeping in view the fact that at his age and the qualification possessed by him he may not be in a position to get another employment. However, where the total length of service rendered by a workman is very small, the award of back wages for the complete period i.e., from the date of termination till the date of the award, which our experience shows is often quite large, would be wholly inappropriate. Another important factor, which requires to be taken into consideration is the nature of employment. A regular service of permanent character cannot be compared to short or intermittent daily-wage employment though it may be for 240 days in a calendar year………” In Mount Mettur Pharmaceuticals Ltd Vs. Second Additional Labour Court, Madras[8], the Labour Court held that retrenchment effected by the management was bona fide and since Section 25-F of the Industrial Disputes Act had been violated, those workmen who had completed 240 days, within 12 calendar months preceding the order of retrenchment, were directed to be reinstated with full back wages. The award of the Labour Court was confirmed by a single judge of the Madras High Court and when the matter came up for consideration, before the Division Bench, it was held thus: “……In cases where the Labour Court specifically finds that the retrenchment effected by the management is justified and not malafide, the Labour Court should exercise discretion and pass, instead of directing reinstatement with full back wages, an award directing a just amount of compensation inn lieu of reinstatement. As already stated, it is not the law that in every case of infringement of S.25F, the award of reinstatement with back wages is a must by the Labour Court. In cases where the management is found to be justified in effecting retrenchment and its decision to effect retrenchment is not malafide, the Labour Court will be exercising its discretion properly if suitable compensation in lieu of reinstatement with back wages is ordered. In this case, the Labour Court has proceeded on the basis that since there is infringement of s.25F, it should straightway grant the relief of reinstatement with back wages, ignoring the fact that discretion if left with the Labour Court either to direct reinstatement with back wages or to award compensation instead. Since the Labour Court has not directed its mind to this aspect as to the relief to be granted to the concerned four workmen, we set aside the order of the learned Judge and also the award passed by the Labour Court and direct suitable compensation in lieu of reinstatement for these four workmen………….”(emphasis supplied). In Dungar Das Vs. UCO Bank[9] the Rajasthan High Court held that an employee, who was out of job for a number of years, loses his proficiency, productivity and efficiency and in case the respondents are directed to reinstate such a person into service after such a long time, it would lead to complications. It was held that the question whether an employee should be reinstated or not depends upon various factors such as (1) the nature of employment; (2) the period between the date of appointment and the date of termination i.e., length of service; (3) the period between the date of termination and the date of award; and (4) the period between the date of termination and the conclusion of proceedings. The Rajasthan High Court further held that, in case a person is appointed for a short period of time without making him go through a process of selection and the gap between the date of termination and the award of the Tribunal is not a large one, ordinarily the employee should be awarded compensation in lieu of reinstatement when it is found that his termination was in violation of the provisions of Section 25-F of the Industrial Disputes Act. The Rajasthan High Court held that the Labour Court had the discretion to award compensation in lieu of reinstatement, and when it had exercised its discretion awarding compensation, it could not be said that the Labour Court had committed any error, much less error on facts or law or a jurisdictional error, which called for interference of the High Court, in its supervisory jurisdiction, under Articles 226 and 227 of the Constitution of India. While retrenchment, in violation of Section 25-F, would render termination illegal and ab initio void, it would not automatically result in reinstatement of the workman with full back wages. Industrial Tribunals/Labour Courts, for just and valid reasons, have the discretion to award compensation in lieu of reinstatement. In the present case, the Industrial Tribunal has exercised its discretion to award compensation in lieu of reinstatement and has paid two years salary as compensation for the 14 months service rendered by the petitioner prior to his termination. It cannot be said that exercise of discretion by the Industrial Tribunal, to award compensation in lieu of reinstatement of two years remuneration, is illegal or is such as to necessitate interference in proceedings under Article 226 of the Constitution of India. Sri Vedula Venkataramana, learned Counsel for the petitioner, would submit that the second respondent-Municipality has not filed any writ petition against the award of the Industrial Tribunal-cum-Labour Court. It is, therefore, made clear that in case the amount as awarded by the Industrial Tribunal, as compensation in lieu of reinstatement, has not been paid till date, the second respondent shall make payment along with interest at 12% p.a. as directed by the Industrial Tribunal within a period of two months from the date of receipt of a copy of this order. Subject to the above, the writ petition fails and is, accordingly, dismissed. No costs. ____________________________ Date: 05.02.2008 RAMESH RANGANATHAN, J MRKR [1] 1979(1) LLJ 41 [2] 1980(1) LLJ 503 [3] AIR 1994 SC 112 [4] AIR 1994 SC 131 [5] (1997) 11 SCC 396 [6] AIR 2001 SC 2401 [7] (2005) 5 SCC 591 [8] 1985(2) LLJ 505 [9] 2005 (3) LLJ 17 (Rajasthan)