M/S. P.V.K.Distillery Ltd vs Mahendra Ram

M/s P.V.K. Distillery Ltd. ..........Appellant

Versus

Mahendra Ram ........Respondent

ORDER

Leave granted in the special leave petition.

1)This appeal is directed against the judgment and order passed by the

High Court of Judicature at Allahabad in Civil Miscellaneous Writ

Petition No. 32250 of 1990 dated 21.5.2007.

2)The facts in nutshell are as follows: the respondent, Mahendra Ram,

was recruited on casual basis some time in the year 1981 in M/s P.V.K.

Distillery Ltd. (now rechristened as Lords Distillery Ltd.). On 14.8.1982

he was shifted to bottling section as a permanent workman by the orders

1 of the General Manager. On 19.1.1985 services of the respondent were

terminated by an oral order from the employer. Aggrieved by the said

order, respondent went before the Labour Court inter-alia alleging that

he was employed in the establishment of the employer and that his

services were terminated orally in an unjustifiable and illegal manner.

Appellants on the other hand contended, that, respondent was engaged

by Gaya Singh Yadav, contractor and therefore respondent was never in

their employment and thus master-servant relationship never existed

between them.

3)Labour Court after considering and appreciating the oral and

documentary evidence on record, has come to the conclusion, that, the

respondent, Mahendra Ram, was in the continuous employment of the

establishment since 1980 and the employer unjustifiably and illegally

terminated workman's services from 19.1.1985. The labour court has

also come to the conclusion that the respondent-workman has worked

for more than 240 days in a calendar year, as required by section 25B(2)

(a) of Industrial Disputes Act, 1947, and therefore he is entitled for

reinstatement with continuity of service and full employment benefits

and back wages.

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4)In the interregnum, the appellant's factory remained closed for years

together and ultimately it was declared as a sick unit. Management of the

company was substituted with the present management for its

rehabilitation/reconstruction.

5)Appellant then went before the High Court challenging the validity and

legality of the award by which the workman has been reinstated with

continuity of service and full employment benefits and back wages. By

the impugned order, the High Court has stated that there is no reason to

doubt the findings given by the Labour Court and declined to interfere

with the award passed by the Labour Court in Adj. Case N0. 32/87.

Aggrieved by the said order, appellant is before us by this special leave

petition.

6)Notice was ordered to be issued to the respondent on 25.1.2008. The

order reads :

"Issue notice to the limited to the question of 50% back wages".

7)Pursuant to the order passed by this Court, notice was issued to the

respondent to the address furnished in his claim statement filed before

the Labour Court. Since the same was returned unserved, the Registrar of

this Court on 7.8.2008 ordered that two weeks time is granted to the

appellant to file application for substituted service. Learned counsel for

3 the appellant on 20.8.08 filed an application for substituted service by

way of publication in the newspaper. In spite of such publication, the

respondent has not appeared before this court either in person or through

his learned counsel. Therefore we are deciding this appeal after hearing

the learned counsel for the appellant.

8)In the instant appeal, the Labourt Court on appreciation of evidence on

record has rendered a finding that there exists a master-servant

relationship between the employer i.e. appellant and Mahendra Ram.

9) Section 11A of Industrial Disputes Act gives power to the Labour

Courts to give appropriate relief in case of discharge and dismissal of a

workman in exceptional circumstances. Labour Court after appreciating

the facts and evidence on record has rightly held that services of

respondent have been unjustifiably and illegally terminated by the

appellant without complying with the procedure prescribed in Section 6-

N of the U.P. Industrial Disputes Act, and accordingly has directed

reinstatement of respondent in service with all other service and

monetary benefits.

10)The only question which requires to be considered by us in this appeal

is, whether the Labour Court was justified in awarding full back wages,

while directing the employer to re-instate the workman in service.

4 Learned counsel for the appellant in this regard contends that the High

Court has acted erroneously by declining to interfere with the award of

the Labour Court. He would urge that the grant of relief of reinstatement

and back wages is not automatic in all matters arising under the

provisions of Industrial Disputes Act. He would also urge that the

appellant will suffer irreparable loss and injury, if it has to employ a

contractor workman on its rolls with full back wages even for the period

when the establishment was closed. In support of his arguments, reliance

is placed on the observations made by this court.

11)In the case of P.G.I. of M.E. and Research, Chandigarh v. Raj Kumar,

(2001) 2 SCC 54, this court has held that the payment of back wages

having a discretionary element involved in it, has to be dealt with, in the

facts and circumstances of each case and no straight-jacket formula can

be evolved, though, however, there is statutory sanction to direct

payment of back wages in its entirety. The issue as raised in the matter of

back wages has been dealt with by the Labour Court in the manner as

above having regard to the facts and circumstances of the matter in the

issue, upon exercise of its discretion and obviously in a manner which

cannot but be judicious in nature. There exists an obligation on the part

of the High Court to record in the judgment, the reasoning before

5 however denouncing a judgment of an inferior Tribunal, in the absence

of which, the judgment in our view cannot stand the scrutiny of

otherwise being reasonable.

12)In the case of Hindustan Motors v. T. K. Bhattacharya, (2002) 6 SCC

41, this court has stated that section 11-A as amended in 1971, is

couched in wide and comprehensive terms. It vests a wide discretion in

the Tribunal in the matter of awarding proper punishment and also in the

matter of the terms and conditions on which reinstatement of the

workman should be ordered. It necessarily follows, that, the Tribunal is

duty-bound to consider whether in the circumstances of the case, back

wages have to be awarded and if so, to what extent. Court then held that

Industrial Tribunal and Division Bench of High Court erred in

proceeding on the assumption that quashment of dismissal order should

be followed by reinstatement with full back wages as a matter of course.

On consideration of the entire matter in the light of the observations

referred to supra in the matter of awarding back wages, we are of the

view that in the context of the facts of this particular case including the

vicissitudes of long-drawn litigation, it will serve the ends of justice if

the respondent is paid 50% of the back wages till the date of

reinstatement.

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13)In U.P. State Brassware Corp. Ltd. v. Uday Narain Pandey,

(2006) 1 SCC 479, it is observed that the person is not entitled to get

something only because it would be lawful to do so. If that principle is

applied, the functions of an Industrial Court shall lose much of their

significance. Although 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 is 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 and/or for a period that was spent

unproductively as a result whereof the employer would be compelled to

go back to a situation which prevailed many years ago, namely, when the

workman was retrenched.

14)In the case of Haryana Urban Development Authority v. Om Pal,

(2007) 5 SCC 742, it is stated that, it is now also well-settled that despite

a wide discretionary power conferred upon the Industrial Courts under

Section 11A of the 1947 Act, the relief of reinstatement with full back-

wages should not be granted automatically only because it would be

lawful to do so. Grant of relief would depend on the fact situation

obtaining in each case. It will depend upon several factors; one of which

7 would be as to whether the recruitment was effected in terms of the

statutory provisions operating in the field, if any.

15)In deciding the question, as to whether the employee should be

recompensed with full back wages and other benefits until the date of

reinstatement, the tribunals and the courts have to be realistic albeit the

ordinary rule of full back wages on reinstatement. [Western India Match

Co. Ltd. v. Third Industrial Tribunal, West Bengal, 1978 Lab IC 179

(SC).]

16)In Hindustan Tin Works (P) Ltd. v. Employees, (1979) 2 SCC 80, this

Court has held that the relief of reinstatement with continuity of service

can be granted where termination of service is found to be invalid. It,

therefore, does not lay down a law in absolute terms to the effect that the

right to claim back wages must necessarily follow an order declaring that

the termination of service is invalid in law.

17)In the case of Surendra Kumar Verma v. Central Govt. Industrial

Tribunal-cum-Labour Court, (1980) 4 SCC 443, this Court has observed

that the 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

8 may be exceptional circumstances which make it impossible or wholly

inequitable vis-`-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.

18)In Allahabad Jal Sansthan v. Daya Shankar Rai, (2005) 5 SCC 124,

this Court has observed: A law in absolute terms cannot be laid down as

to in which cases, and under what circumstances, full back wages can be

granted or denied. The Labour Court and/or Industrial Tribunal before

which industrial dispute has been raised, would be entitled to grant the

relief having regard to the facts and circumstances of each case. For the

said purpose, several factors are required to be taken into consideration.

19)In Madurantakam Coop. Sugar Mills Ltd. v. S. Viswanathan, (2005)

3 SCC 193, the quantum of back wages was confined to 50%, stating: It

9 is an undisputed fact that the workman had since attained the age of

superannuation and the question of reinstatement does not arise. Because

of the award, the respondent workman will be entitled to his retiral

benefits like gratuity, etc. and accepting the statement of the learned

Senior Counsel for the appellant Mills that it is undergoing a financial

crisis, on the facts of this case we think it appropriate that the full back

wages granted by the Labour Court be reduced to 50% of the back

wages."

20)In the instant case, the notice had been issued limiting the question to

the payment of 50% of the total back wages. This does not mean that the

respondent is not entitled to further relief. The point that his services

were terminated in the year 1985 and since then the case is pending for

the last two decades in different courts also has no relevance, since he

had approached the court within a reasonable time. It is not his fault that

the case is still pending before the court. These grounds could not be

held against him for denying the relief of back wages otherwise he would

suffer double jeopardy of losing back wages and delay in getting the

reinstatement for no fault of his. Therefore, it would have been more

enlightening, had the High Court reasoned out as to why the appellant

should reinstate the respondent with full employment benefits and should

10 pay full back wages to him for nothing in return from him in terms of

work, production etc.

21)Giving a realistic approach to the matter and in spite of all these

circumstances we are restricting ourselves to the question of 50% of the

total back wages. Although services of the respondent have been

terminated unjustifiably and illegally, it itself does not create a right of

reinstatement with full employment benefits and full back wages. The

notice was issued with a view that the appellant's factory has been taken

over by a new management altogether and by asking the appellant to pay

full back wages for the long interregnum would be unfair and unjust. The

workman has not entered appearance to justify the award passed by the

Labour Court. Therefore, in our view, it would be unreasonable to put a

huge burden on the appellant by directing them to reinstate respondent

with continuity of service and with full back wages, because the

appellant's factory had been declared sick and remained closed for many

years and has been assigned to a new management led by its Chief

Executive Director, Sri M.K. Pilania in order to rehabilitate/reconstruct

it.

22)In view of the above discussion, we are of the opinion that it would be

fair and reasonable to direct the employer to deposit 50% of back wages

11 by way of arrears of back wages, instead of full wages awarded by the

Labour Court.

23)Accordingly, the judgment and order of the Labour Court and the

High Court are set aside and it is declared that the respondent herein

shall be entitled to 50% of the total back wages payable during the

aforesaid period in terms of Section 6-N of the U.P. Industrial Disputes

Act.

24)The appellant is directed to calculate 50% of the total back wages

payable during the aforesaid period and to deposit the same in the

Labour Court, Nati Imli, Varanasi, U.P. within 6 weeks from the date of

the order. Labour Court, Nati Imli, Varanasi, U.P. is further directed to

deposit the said amount in a fixed deposit in a nationalized bank within

two weeks thereafter. If for any reason, the respondent claims the said

amount within two years from the date of deposit of the said amount in

the Labour Court, the Labour Court is directed to take effective steps to

ascertain the identity of the respondent and on determining the same; the

said amount shall be disbursed to the respondent with interest. If for any

reason, respondent does not claim the said amount within two years from

the date of deposit of the said amount in the Labour Court, the same

12 should be handed over to the District Legal Service Authority with

interest.

25)For the reasons aforementioned, the appeal is allowed in part and to

the extent mentioned hereinbefore. However, there shall be no order as

to costs.

.......................................J. [ TARUN CHATTERJEE ]

.......................................J. [ H.L. DATTU ] New Delhi, March 02, 2009.

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