Full Judgment Text
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PETITIONER:
HINDUSTAN TIN WORKS PVT. LTD.
Vs.
RESPONDENT:
EMPkoYEES OF HINDUSTAN TIN WORKS PVT. LTD.
DATE OF JUDGMENT07/09/1978
BENCH:
DESAI, D.A.
BENCH:
DESAI, D.A.
KRISHNAIYER, V.R.
REDDY, O. CHINNAPPA (J)
CITATION:
1979 AIR 75 1979 SCR (1) 563
1979 SCC (2) 80
CITATOR INFO :
R 1980 SC1896 (142,143,147)
R 1985 SC 617 (3)
D 1985 SC1128 (9)
ACT:
Constitution of India 1950--Article 136-Scope of in
labour matters Article 43A-Eixplained-Participation of
workman in Managenuent.
Uttar Perdesh Industrial Disputes Act 1947-Workelrs
retrellcled on grounds of losses.-rrihullal found
retreluchllent unjustified-ordere reinstatement with back
wages Speeial leave refused regalding reinstatement-Employer
if could reopen at the time of hearing.
HEADNOTE:
Awarding full or partial back wages-Plinciples for
awarding Employee’s financial viability to pay baek wages-lf
could be a factor for not awarding full back wage,s.
The management (Appellant) retrenched 56 of its
worl;tnell alleging nonavailability of raw material to
ntilise the fnll installed capacity, power shcdding limiting
the working of the unit to 5 days a week and mounting
losses. As a result of negotiations between the parties, the
retrenched workmen were taken back in service. A few days
later, however, the workmen demanded revision of wage
scales, but the appellant pleaded inability to revise the
pay scales in view of the mounting losses. Thereafter, the
employer reternched 43 workmen.The dispute resulting out of
the retrenchment was referred to adjudication under section
4k of the U.P. Industrial Disputes Act, 1947.
The Labour Court held that the real reason for
retrenchment was annoyance felt by the management when the
employees refused to agree to the terms oil settlement and
that it was not for the reasons stated by the employer. The
Labour Court ordered reinstatement of the retrenched workmen
with full back wages.
In the Special leave petition the employer questioned
the correctness of the Labour Court’s view that the
retrenched workmen should be reinstated. This Court rejected
this prayer and limited the special leave to the question of
granting back wages to the retrenched workmen ordered to be
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reinstated.
^
HELD: 1. Since the emoloyer’s prayer in the special
ieave petition that the retrenched workmen should not be
reinstated was rejected by this Court it meant that the
Labour Court’s view that retrenchment was unjusified was
correct. For the reasons found by the Labour Court
retrenchment was motivated and so invalid. The workmen were
entitled to the relief of reinstatement from the date they
were sought to be retrenched. The order of the Labour Court
on the question of reinstatement became final. [567 C-E]
2. Article 136 of the Constitution does not envisage
this Court to be a regular Court of Appeal but it confers a
discretionary power on it to grant special leave to appeal,
inter Ala, against the Award of any Tribunal. The scope and
ambit of this vide constitutional discretionary power cannot
be
564
exhaustively defined. It cannot be so construed as to confer
a right to a party when he has none under the law. The Court
will entertain a petition for special leave in which a
question of general public importance is involved or when
the decisions would shock the conscience of this Court. The
Industrial Disputes Act is intended to be a self-contained
code and it seeks to achieve social justice on the basis of
collective bargaining, conciliation and arbitration. Awards
are given on circumstances peculiar to each dispute and the
Tribunals are to a large extent free from restrictions of
technical consider- rations imposed on Courts. A free and
liberal exercise of the power under Article 136 may
materially affect the fundamental basis of such decisions,
viz., quick solution of such disputes to achieve industrial
peace. [567 F-568 A]
Bengal Chemical & Pharmaceutical Works Ltd, Calcutta v.
Their Workmen [1959] Suppl. 2 SCR 136 at 140 referred to.
2. 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 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. [568 G-
H]
3. Where termination of service is questioned as being
invalid or illegal and the workman has to go through the
litigation, his capacity to sustain himself throughout the
protracted litigation is itself so precarious that he may
not survive to see the day when relief is granted. If after
such prolonged litigation the workman is not paid his back
wages it would amount to a penalty for no fault of his. The
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. If the
termination is illegal or motivated it may amount to unfair
labour practice. Tn such circumstances reinstatement being
the normal rule it should be done with full back wages. [569
B-D]
Workmen of Calcutta Dock Labour Board & Anr. v.
Employers in relation to Calcutta Dock Labour Board & ors.
[1974] 3 S.C.C. 216, referred to.
Management of Panitole Tea Estate v. The Workmen [1971]
3 SCR 771 referred to.
Dhari Gram Panchayat v. Safai Kamdar Mandal [1971] 1
LLJ 508 approved.
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Postal Seals Industrial Co-operative Society Ltd. v.
Labour Court ll Luck now & Ors. [1971] 1 LlJ 327 approved.
For awarding relief of back wages all relevant
considerations will enter The verdict of the Tribunal. Full
back wages would be the normal rule and the party objecting
to it must establish the circumstances necessitating
departure. The Tribunal will then exercise its discretion
But the discretion must be exercised in a judicial and
judicious manner. The reason for exercising discre tion must
be cogent and convincing and must appear on the face of the
record. It should not be arbitrary, vague and fanciful but
legal and regular. [570 GE]
Susannah Sharn v. Wakefield [1891] AC 173 at 179
referred to.
565
on the question of the employer’s financial viability
to pay back wages view of mounting losses the Supreme Court
held.
Industry is a common venture, the participants
being capital and labour Article 43A. requires the State to
take steps to secure participation of workman in the
management. From being a factor of production labour has
become a partner in industry. It is a common venture in
pursuit of a desired goal. If sacrifice is necessary in the
overall interest of the industry it would be unfair to
expect only labour to make the sacrifice. It should be
common sacrifice. If sacrifice is necessary those who can
afford and have the capacity must bear the brunt. [571 A-F]
(b) In the present case there is nothing to show that
the Managing Director has made any sacrifice. In the absence
such information the weaker section of society cannot be
expected to make a greater sacrifice than the directors In
an appropriate case it would be appropriate to direct that
till the loss is wiped out the managing directors shall not
charge any fees for the services rendered and no dividend
shall be paid. [571 G. 572 E-F]
(c) As the appellant has turned the corner, and the
industrial unit is looking up and started making profits,
the retrenched workmen having already been reinstated and
started earing their wages it would be appropriate to award
75% of the backs wages to the workmen to be paid in two
equal instalments. [572 D]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 656 of
1978.
Appeal by Special Leave from the Award dated 21-9-1977
of the Labour Court, Meerut in Adjudication Case No. 160/74.
G. B. Pia, L. R. Singh, R. P. Singh, R. K. lain, Suman
Kapoor and Sukumar Sahu for the Appellant.
R. K. Garg, V. J. Francis and Madan Mohan for
Respondent No. l.
G. N. Dikshit and o. P. Rana for Respondents 2-3.
The Judgment of the Court was delivered by F
DESAI J. This appeal by special leave, limited to the
question of grant of back wages, raises a very humane
problem in the field of industrial jurisprudence, namely,
where termination of service either by dismissal, discharge
or even retrenchment is held invalid and the relief of
reinstatement with continuity of service Is awarded what
ought to be the criterion for grant of compensation to the
extent of full wages or a Part of it ?
A few relevant facts will highlight the problem posed.
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Appellant is a private limited Company having set up an
industrial unit in engineering industry. The raw material
for its manufacturing process is tin plates. The appellant
served notice of retrenchment on 56 workmen in February 1974
alleging non-availability or raw material to utilise the
full installed capacity, power shedding limiting the
566
working of the Unit to 5 days a week, and the mounting loss.
Subsequently, negotiations took place between the Union and
the appellant leading to an agreement dated 1st April 1974
whereby the workmen who were sought to be retrenched were
taken back in service with continuity of service by the
appellant and the workmen on their part agreed to co-operate
with the management in implementing certain economy measures
and in increasing the productivity so as to make the
undertaking economically viable. Simultaneously, the workmen
demanded a revision of the wage scales and the appellant
pleaded its inability in view of the mounting losses. Some
negotiations took place and a draft memorandum of settlement
was drawn up which provided for revision of wages on the one
hand and higher norms of production on the other, but
ultimately the settlement fell through. Appellant thereafter
on 1st July, 1974 served a notice of retrenchment on 43
workmen. The Tin Workers’ Union, Ghaziabad, espoused the
cause of such retrenched workmen and ultimately the
Government of Uttar Pradesh by its notification dated 9th
october 1974, issued in exercise of the power conferred by
Section 4-K of the U.P. lndustrial Disputes Act, 1947.
referred the industrial dispute arising out of retrenchment
of 43 workmen, between the parties, for adjudication to the
Labour Court. Names of the retrenched workmen were set out
in an Annexure to the order of reference.
The Labour Court, after examining the evidence led on
both sides and considering various relevant circumstances,
held that the reasons stated in the notice dated 1st July,
1974, Ext. E-2, viz., heavy loss caused by non-availability
of tin plates, persistent power curbs and mounting cost of
production were not the real reasons for affecting
retrenchment but the real reason was the annoyance felt by
the management consequent upon the refusal of the workmen to
agree to the terms of settlement contained in the draft
dated 5th April, 1974 and, therefore, the retrenchment was
illegal. The Labour Court by its award directed that all the
workmen shall be reinstated in service from 1 st August,
1974 with full back wages, permitting the appellant to
deduct any amount paid as retrenchment compensation from the
amount payable to the workmen as back wages. the Appellant
challenged the Award in this appeal. When the special‘ leave
petition came up for admission Court rejected the special
leave petition with regard to the relief of reinstatement
but limited the leave to the grant of full back wages.
The question whether the workmen who were retrenched
were entitled to the relief of reinstatement is no more open
to challenge. Another words. it would mean that the
retrenchment of workmen was invalid for the reasons found by
the Labour Court and the workman were
567
entitled to the relief of reinstatement effective from the
day on which A they were sought to be retrenched. The
workmen were sought to be retrenched from 1st August, 1974
and the Labour Court has directed their reinstatement
effective from that date. The Labour Court has also awarded
full back wages to the workmen on its finding that the
retrenchment was not bona fide and that the non-availability
of the raw material or recurrent power shedding and lack of
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profitability was a mere pretence or a ruse to torment the
workmen by depriving them of their livehood, the real reason
being the annoyance of the appellant consequent upon the
refusal of the workmen to be a party to a proposed
settlement by which work-load was sought to be raised(l.
Mr. Pai, learned counsel for the appellant in his
attempt to persuade us to give something less than full back
wages, attempted to re-open the controversy concluded by the
order of this Court while granting limited leave that the
retrenchment was inevitable in view of the mounting losses
and falling production for want OF raw material and
persistent power shedding. It was said that for the limited
purpose of arriving at a just decision on the question
whether the workmen should be awarded full back wages, we
should look into the compelling necessity for m-retrenchment
of the workmen. Once leave against relief of reinstatement
was rejected, the order of the Labour Court holding that
retrenchment was invalid and it was motivated and the relief
of reinstatement must follow, has become final. Under no
pretext or guise it could now be re-opened.
Before dealing with the contentions in this appeal we
must bear in mind the scope of jurisdiction of this Court
under Article 136 of the Constitution vis-a-vis the Awards
of the Industrial Tribunals. Article 136 of the Constitution
does not envisage this Court to be a regular Court of appeal
but it confers a discretionary power on the Supreme Court to
grant special leave to appeal, inter alia, against the Award
of any Tribunal in the territory of India. The scope and
ambit of this wide constitutional discretionary power cannot
be exhaustively defined. lt cannot obviously be so construed
as to confer a right to a party which he has none under the
law. The Court will entertain a petition for special leave
in which a question of general public importance is involved
or when the decision would shock the conscience of this
Court. the lndustrial Disputes Act is intended to be a self-
contained one and it seeks to achieve social justice on the
basis of collective bargaining, collaboration and
arbitration. Awards are given on circumstances peculiar to
each dispute and the Tribunals are to a large extent free
from resrtrictions of technical considerations imposed on
courts. A free and
568
liberal exercise of the power under Article 136 may
materially affect the fundamental basis of such decisions,
viz., quick solution of such disputes to achieve industrial
peace. Though Article 136 is couched in widest terms, it is
necessary for this Court to exercise its discretionary
jurisdiction only in cases where Awards are made in
violation of the principles of natural justice causing
substantial and grave injustice to parties or raises an
important principle of industrial law requiring elucidation
and final decision by this Court or discloses such other
exceptional or special circumstances which merit
consideration of this Court (See Bengal Chemical &
Pharmaceutical Works Ltd., Calcutta v. Their Workman) (1)
The question in controversy which fairly often is
raised in this Court is whether even where reinstatement is
found to be an appro priate relief, what should be the
guiding considerations for awarding full or partial back
wages. This question is neither new nor raised for the first
time. It crops up every time when the workman questions the
validity and legality of termination of his service
howsoever brought about, to wit, by dismissal, removal,
discharge or retrenchment, and the relief of reinstatement
is granted. As a necessary corollary the question
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immediately is raised as to whether the workman should be
awarded full back wages or some sacrifice is expected of
him.
Let us steer clear of one controversy whether where
termination of service is found to be invalid, reinstatement
as a matter of course should be awarded or compensation
would be an adequate relief. That question does not arise in
this. appeal. Here the relief of reinstatement has been
granted and the award has been implemented and the
retrenched workmen have been reinstated in service. The only
limited question is whether the Labour Court in the facts
and circumstances of this case was justified in awarding
full back wages.
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
the work of the workman contrary to the relevant law or in
breach of contract and simultaneously deprived deprived
workman of his earnings. if
(1) [1959]] Suppl. 2 SCR 136 at 140.
569
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
litigating activity of the employer. If the D employer
terminates the service illegally and the termination is
motivated as in this case, viz ., to resist the workman’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(l
with full back wages. Articles 41 and 43 of the Constitution
would assist us in reaching a just conclusion in this
respect. By a suitable legislation, to wit, the U.P.
Industrial Disputes Act, 1947, the State has endeavored to
secure work to the workmen. In breach of the statutory
obligation the services were terminated and the termination
is found to be invalid; the workmen though willing to do the
assigned work and earn their livelihood, were kept away
therefrom. On top of it the were forced to litigation upto
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the apex Court and now they are being told that something
less than full back wages should be awarded to them. If the
services were not terminated the workmen ordinarily would
have continued to work and would have earned their wages.
When it was held that the termination of services was
neither proper nor justified, it would not only show that
the workman were always willing to serve but if they
rendered service they would legitimately be entitled to the
wages for the same. If the workman were always ready to work
but they were kept away therefrom on account of invalid act
of the employer, there is no justification for not awarding
them full back wages which were very legitimately due to
them. A Division Bench of the Gujarat High Court in Dhari
Gram Panchayat v. Safai Kamldar Mandal(1), and a Division
Bench of the Allahabad (1) 11-971] I Labour Law Journal 508
570
High Court in Postal Seals Industrial Co-operative Society
Ltd. v. Labour Court 11, Lucknow & ors.(l), have taken this
view and we are of the opinion that the view taken therein
is correct.
The view taken by us gets support from the decision of
this Court in workman of Calcutta Dock Labour Board & Anr.
v.Employers in relation to Calcutta Dock Labour Board &
ors.(2). In this case seven workmen had been detained under
the Defence of India Rules and one of the disputes was that
when they were released and reported for duty, they were not
taken in service and the demand was For their reinstatement.
The Tribunal directed reinstatement of five out of seven
workmen and this part of the Award was challenged before
this Court. This Court held that the workmen concerned did
not have any opportunity of explaining why their services
should not be terminated and, therefore, reinstatement was
held to be the appropriate relief and Act aside the order of
the Tribunal. It was observed that there was to
justification for not awarding full back wages from the day
they offered to resume work till their reinstatement. Almost
an identical view was taken in Management of Paniltole Tea
Estate v. The Workmen(3).
In the very nature of things there cannot to a straight
jacket formula for awarding relief of back wages. All
relevant considerations will enter the verdict. More or
less, it would be a motion addressed to the discretion of
the Tribunal. Full back wages would be the normal rule and
the party objecting to it must establish the circumstances
necessitating departure. At that stage the Tribunal will
exercise its discretion keeping in view all the relevant
circumstances. But the discretion must be exercised in a
judicial and judicious manner. The reason for exercising
discretion must be cogent and convincing and must appear on
of the face of. the record. When it is said that something
is to be done within the discretion of the authority, that
something is to be done according to the rules of reason and
justice? according to law and not humor. It is not to be
arbitrary, vague and fanciful but legal and regular (See
Susannah Sharm v.Workfild(4).
It was, however, very strenuously contended that as the
appellant company is suffering loss and its carry-forward
loss as on 31st March 1978 is Rs. 8,12,416.90, in order to
see that the industry survives and the workmen continue to
get employment, there must be come sacrifice on the part of
workmen. If the normal rule in a case like this is to award
full back wages, the burden will be on the appellant
employer
(l) [1971] I Law Journal, 327.
(2) [1974] 3 SCC 216.
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(3) [1971] 3 SCR 774.
(1) [1891] AC 173 31 179.
571
to establish circumstances which would permit a departure
from the A normal rule. To substantiate the contention that
this is an exceptional case for departing from the normal
rule it was stated that loss is mounting up and if the
appellant is called upon to pay full back wages in the
aggregate amount of Rs. 2,80,0OO/-, it would shake the
financial viability of the company and the burden would be
unbearable. More. Often when some monetary claim by the
workmen is being examined, this financial inability of the
company consequent upon the demand being granted is voiced.
Now, undoubtedly an industry is a common venture, the
participants being the capital and the labour. Gone arc the
days when labour was considered a factor of production.
Article 43A of the Constitution requires the State to take
steps to secure the participation of workmen in the
management of the undertaking, establishments or other
organisations engaged in any industry. Thus, from being a
factor of production the labour has become a partner in
industry. lt is a common venture in the pursuit of desired
goal.
Now? if a Sacrifice is necessary in the overall
interest of the industry D or a particular undertaking, it
would be both unfair and iniquitous to expect only one
partner of the industry to make the sacrifice. Pragmatism
compels common sacrifice on the part of both. The sacrifice
must come from both the partners and we need not state the
obvious that the labour is a weaker partner who is more
often called upon to make the sacrifice. Sacrifice for the
survival of an industrial undertaking cannot be an
unilateral action. It must be a two way traffic. The
management need not have merry time to itself making the
workmen the sacrificial goat. If sacrifice is necessary,
those who can afford and have the cushion and the capacity
must bear the greater brunt making the shock of sacrifice as
less poignant as possible for those who keep body and soul
together with utmost difficulty. F
The appellant wants us to give something less than full
back wages in this case which the Labour Court has awarded.
There is nothing to show whether the Managing Director has
made any sacrifice; whether his salary and perks have been
adversely affected; whether the managerial coterie has
reduced some expenses on itself. If there is no such
material on record, how do we expect the workmen, the less
affording of the weaker segment of the society, to make the
sacrifice, because sacrifice on their part is denial of the
very means of livelihood.
We have also found that since 1976-77 the appellant is
making profit. A Statement of Account certified by the
Chartered Accountants of the company dated 25th July, 1978
shows that the appellant has been making profit since 1976-
77. The unit is, therefore, looking up.
572
One relevant aspect which would assist us in reaching a
just con clusion is that after retrenching 43 workmen
effective from 1st August 1974, 36 of them were recalled for
service on large number of days in 1975-1976 and 1977, the
maximum being the case of Jai Hind who was given work for
724 1/4 days, and the minimum being Harsaran s/o Baldev who
was given work for 15 days. An amount of Rs. 74,587.26 was
paid to these 36 workmen for the work rendered by them since
the date of retrenchment. Certainly, the appellant would get
credit for the amount so paid plus the retrenchment
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compensation it must have paid. Even then we were told that
the employer will have to pay Rs. 2,80,OOO/- by way of back
wages. We were also told that the appellant had offered to
pay by way of settlement 50% of the back wages. Therefore,
the only question is whether we should confirm the Award for
full back wages.
Now, undoubtedly the appellant appears to have turned
the corner. The industrial unit is looking up. It has
started making profits. The workmen have already been
reinstated and therefore, they have started earning their
wages. It may, however, be recalled that the appellant has
still not cleared its accumulated loss. Keeping in view all
the facts and circumstances of this case it would be
appropriate to award 75% of the back wages to the workmen to
be paid in two equal instalments. It may well be that in
appropriate cases the Court may, in the spirit of labour and
management being partners in the industry, direct scaling
down of back wages with some sacrifice on management’s part
too. We were, even here, inclined to saddle the condition
that till the loss is totally wiped out the Managing
Director and the Directors shall not charge any fee for the
services rendered as Director, no dividend shall be paid to
equity shareholders, and the Managing Director shall not be
paid any overriding commission, if there be any, on the
turnover of the company since this will account for the
pragmatic approach of common sacrifice in the interest of
the industry. We indicate the implications of Article 43A in
this area of law but do not impose it here for want of
fuller facts.
The Award shall stand accordingly modified to the
effect that the retrenched workmen who are now reinstated
shall be paid 75% of the back wages after deducting the
amount paid to them as wages when recalled for work since
the date of retrenchment and adjustment of the retrenchment
compensation towards the amount found due and pay able. The
appellant shall pay the costs of the respondents as directed
while granting special leave.
N.V.K. Appeal dismissed.
573