Long-serving daily-wage workmen may receive lump-sum compensation instead of reinstatement for illegal termination.

The petitioner worked as a Watchman with respondent No. 1 from 1 July 1994. His services were terminated with effect from 15 July 2021, allegedly without compliance with the provisions of the Industrial Disputes Act, 1947. The petitioner claimed approximately 27 years of service.

He raised an industrial dispute, but the Labour Court, Nadiad, dismissed Reference (LCN) No. 4 of 2022 by judgment dated 16 July 2024 and did not grant lump-sum compensation.

Before the High Court, the petitioner relied on the Division Bench’s common judgment dated 18 April 2024 in Letters Patent Appeal No. 908 of 2023 and allied matters, which granted lump-sum compensation to similarly situated workmen or their families, while declining reinstatement, continuity of service and full back-wages.

The petitioner had filed the reference approximately six months after termination.

Whether the Labour Court erred in declining to grant lump-sum compensation to the petitioner despite his approximately 27 years of service and the precedent governing similarly situated daily-wage workmen?

Whether the period of delay in raising the reference was required to be deducted while computing the petitioner’s service period for determining lump-sum compensation?

Whether the petitioner was entitled to compensation in lieu of reinstatement, continuity of service and back-wages?

The Court applied the principles governing relief for illegal termination of daily-wage workmen under the Industrial Disputes Act, particularly the principle that breach of Sections 25F, 25G or 25H does not automatically require reinstatement with back-wages.

Relying on Bhopal v. Santosh Kumar Seal, Jagbir Singh v. Haryana State Agriculture Marketing Board, Rajasthan Development Corporation v. Gitam Singh, Uttaranchal Forest Development Corporation v. M.C. Joshi and BSNL v. Bhurumal, the Court held that monetary compensation may be appropriate depending on factors such as the manner of appointment, whether the workman was a daily wager, the nature and length of service, the time gap from termination, and delay in raising the dispute.

Following the Division Bench’s decision in LPA No. 908 of 2023 and allied matters, the applicable compensation scale was: ₹3 lakh for 5–10 years, ₹5 lakh for 10–15 years, and ₹7.5 lakh for 15–20 years or more of qualifying service, after deducting the period attributable to delay in raising the reference.

The High Court found that the petitioner had served for approximately 27 years and that the Labour Court had not considered the possibility of granting lump-sum compensation despite the governing Division Bench precedent.

Since the petitioner was a daily-wage workman and reinstatement with back-wages was not automatic, compensation was considered the appropriate relief in light of the Supreme Court principles and the lapse of time.

Applying the Division Bench’s method, the Court deducted six months for the delay in filing the reference, leaving 26 years and 6 months of service for compensation purposes. This period exceeded the highest threshold in the prescribed scale, entitling the petitioner to ₹7.5 lakh.

The High Court quashed and set aside the Labour Court’s judgment dated 16 July 2024 and directed respondent No. 1 to pay the petitioner ₹7.5 lakh as lump-sum compensation within four weeks from receipt of the order.

In default, the amount would carry interest at 9% per annum.

The Court granted compensation in lieu of reinstatement, continuity of service and back-wages.