Article (November-2017)


Reinstatement and back wages - Rarest of rare

Shanti Mal Jain

Designation : -   Advocate & Consultant, Tripti Banda Road

Organization : -  Bhawanimandi (Raj.)


10000+ View        

The evolution and exposition of Industrial Law have all along been scintillating and sensational. The judicial thinking has, during the last four decades undergone radical changes and the predictability and certainty which ought to be important hall - marks of judicial jurisprudence are lamentably lacking in the matter of interpreting welfare statutes. There was a time when political leaders in the country thought that workers could do no wrong, it was time when even illegal strikes were tolerated and condoned and some time wages for such strikes were paid. It was a time when we could not think of dismissing a worker even for a confessed grave misconduct. As was aptly put that it was easier to divorce your wife than dismiss your worker. This period was described as Krishan lyer-Desai-Chennapa Reddy era when legal formalism yielded to equitable pragmatism. However, it is now a relic of the past. Much water has flown down the street ever since. Now concepts and thinking both have undergone sea change. Those judges were trailblazing, restless and creative unto weaker segments.

As has been observed in the last decades law on industrial disputes has been substantially diluted by the law as laid down by the Supreme Court particularly in respect of reinstatement and back wages. The basics of the concept have changed. During those times when the Supreme Court held that every termination of service is retrenchment except the cases in the definition. It was time when conscience of judicial opinion was that if the termination was bad then reinstatement back wages must be paid. Gradually the judicial thinking underwent change and judiciary thought that instead of invariable reinstatement awarding liberal compensation could also serve the ends of justice. This trend of the court strikingly illustrated with the passage of time and the court started going for beyond the confines of cases to jettison the principle in favour of expediency which is very often subjective.

Thus the earlier stand of the Supreme Court was that it insisted that if the employer wished that back wages should be denied to a workman on the ground of his gainful employment during the period he was kept out of employment by his order, it was for the employer to raise such a plea that workman was gainfully employed during the period and prove it. However, the new approach is that such plea has to be raised by the workman and there must be some evidence in this regard. The court has changed the entire landscape. The initial burden is now on the workman and if he places materials in that context before the Labour Court or Tribunal as the case may be, the employer would be free to bring on record materials to rebut the workman's claims. If there was no such material to show that he was not gainfully employed the Tribunal would not be justified in granting full back wages. It therefore followed that a discernible trend surfaced in the judicial thinking as regards back wages and reinstatement. The emotional inclination unto the alleged weaker section of society started melting down.

On the question of awarding back wages, previously the normal rule was granting of full back wages for the period of unemployment caused by employer's order of termination or dismissal which was found to be unlawful or unsustainable on judicial scrutiny. Now a realization has dawned that the industries should not normally be compelled to pay the workman for a period during which he obviously did little or nothing at all and did not produce the goods.

In last few years the Supreme Court has been consistently holding that relief by way of reinstatement with back wages is not a rule nor it is automatic if the termination of an employee was found to be illegal or in contravention of the prescribed procedure. It has further held that the monetary compensation in lieu of reinstatement and back wages in cases of such nature would be appropriate and would meet the ends of justice. A reference could be made to the cases of Uttaranchal Forest Department Corporation V/s M.C. Joshi 2007 (iii) CLR 84: Sate of MP & ors. V/s Lalit Kumar Verma 2007 (1) SCC 575; M.P. Administration Vs. Tribhuvan 2007 (ii) CLR 694 (SC); Sita Ram and others V/s Motilal Nehrtu Farmers Training Institute 2008 (ii) CLR 763 (SC), Jaipur Development  Authority V/s. Ram Sahai & ano. (2006) (ii) SCC 681, Ghazibad Development Authority & ors. Ashok Kumar & anr. (2008) 4 SCC 261 and Mahaboob Deepak V/s. Nagar Panchayat Gajraula (2008) 1 SCC 575, Senior Superintendent Telegraph (Traffic) Bhopal V/s Santosh Kumar Seal and ors. 2010 III CLR 17, Incharge Officer and ors. V/s Shankar Shetty 2010 (9) SCC 126, Raj Kumar S/o Rohit Lal Mishra V/s Jalgawan Municipal Corporation 2013 LLR 305 (SC).

A dispassionate perusal of the ratio decidendi of the aforesaid holding would reveal that the adjudicatory geography of the Apex Court in this regard has undergone a sea change. In this context, in the case of Jagbir Singh V/s Haryana State Agriculture Marketing Board & anrs. 2009 (iii) (CLR 628 9SC) the Supreme Court succinctly made very pertinent observation as follows. 
"It is true that the earlier view of this court articulated in many decision reflected the legal position that if the termination of an employee was found to be illegal, the relief of reinstatement with full back wages would ordinarily follow. However, in recent past, there has been a shift in the legal position and in a long line of cases, this court has consistently taken the view that relief by way of reinstatement with back wages is not automatic and may be wholly inappropriate in a given fact situation even though the termination of an employee is in contravention of the prescribed procedure compensation instead of reinstatement has been held to meet the end of justice."

Endorsing this trend of decisions the Supreme Court very lately in the case of U.P. State Sugar Corporation Ltd. V/s Kaushal Kumar Sinha 2017 LLR 673 (SC) rules that in the event of termination of workman service being held illegal, relief of reinstatement with back wages is not to be automatically granted and awarding of reasonable monetary compensation would serve the ends of justice. Paradoxically enough in the case before their Lordship court granted a compensations of Rs. 2.5 Lac to the workman.

It would therefore, be seen from the decisions of Supreme Court rendered in 1970's and 1980's that reinstatement with back wages was the normal rule in cases where the termination of services of workman was held illegal but tables got turned in 1990's when the decisions rendered by the Supreme Court appeared to suggest that compensation in lieu of reinstatement and back wages is now the normal rule. In this regard the decision of the Constitution Bench in Punjab Land Development and Reclamation Corporation Ltd. 1990 (ii) LLJ 70 is note - worthy. In this Punjab Land Development case, the Supreme Court granted Rs. 1.25 lakh each of the two workmen in full and final settlement of all claims including that of reinstatement. Similar was the position in the case Roston John V/s CGIT-cum-Labour Court AIR 1994 SC 131 when the court refused to give relief of reinstatement and directed the employer to pay a sum Rs. 50,000/- to the workman in full and final settlement of all his claim and in lieu of reinstatement and consequent benefits. Chronologically, therefore, things started changing from 1990's.

It is expected that this trend of judgments ought to give a seamless working environment more particularly to new - age companies who should find this as spurring them on.

Besides the aforesaid, carving out an exception to the then general rule of reinstatement, there have been where the judiciary did not consider it desirable or expedient to reinstate a workman. So to enumerate these could be cases where there had been strained relations between master and servant, where the post held by the employee had been one of trust and confidence and the employee has forfeited confidence of his master or where the employee was found to have been guilty of activity subversive of or prejudicial to the interest of the industry. Then again an order of compensation instead of reinstatement was found proper when the employee held crucial and sensitive assignment where it was hazardous or prejudicial to the interest of the industry to continue him in service. These are some illustrative cases which could form the basis for making exception to general rule as it then existed.

So if an employer is prepared to dole out handsome compensation, he would get rid of "bad sheep" ensuring unhampered functioning of his establishment. This imperceptible propounded philosophy of the court would act as a non - financial motivator more effective in bringing about discipline in workforce. This is the position which is obtaining these days. The employer must now feel sure that his plight is no more like that of a cat thrown to the pigeon as he used to be long back.