Adverse Inference Drawn from Non-Production of Records Justifies Reinstatement with Continuity Over Lump Sum Compensation

The petitioner workman, Hirabhai Kalabhai Damor, was appointed as a Rojamdar/Watchman on May 1, 2001. On July 1, 2013, his services were terminated via an oral order.

The workman raised a dispute, leading to Reference (T) No. 47 of 2014. The Labour Court found the termination illegal but awarded a lump sum compensation of Rs. 1,98,000/- instead of reinstatement.

During the pendency of these petitions, the High Court directed interim reinstatement on December 6, 2021, and the petitioner has remained in service since December 24, 2021.

1. Whether the oral termination of the workman was in violation of the mandatory provisions of the Industrial Disputes Act, 1947.

2. Whether the workman was entitled to reinstatement with continuity of service instead of lump sum compensation, given the length of his service.

Industrial Disputes Act (ID Act), 1947, specifically regarding the procedures for valid termination and the consequences of "retrenchment" without due process.

Adverse Inference under the Indian Evidence Act; since the State failed to produce attendance and pay registers despite court orders, the court presumed the workman's claim of continuous service (240 days per year) to be true.

Article 226 of the Constitution to modify the relief from compensation to reinstatement based on the total length of service rendered.

The Court upheld the Labour Court’s finding that the oral termination was illegal due to non-compliance with the ID Act. The Court noted that the State failed to produce essential records (attendance and pay registers) that were within its possession, justifying the lower court's adverse inference that the workman had completed 240 days of continuous service annually from 2001 to 2013.

Regarding the relief, the High Court observed that the petitioner had served for over 12 years prior to termination and an additional 6 years following the interim reinstatement order. Given this extensive 18-year tenure and the fact that the workman was currently performing his duties, the Court reasoned that lump sum compensation was inadequate and a modification to reinstatement with continuity of service was legally justified.

The High Court partly allowed the workman's petition (SCA 13700/2021) and dismissed the State’s petition (SCA 18091/2021). The impugned award of the Labour Court was modified to substitute lump sum compensation with full reinstatement. No back wages were awarded for the specific period from the date of termination until interim reinstatement based on the workman’s undertaking.