Lump-sum compensation may replace reinstatement and back wages for illegally terminated daily-wage workers.

The petitioner worked as a daily-wage Gardener with the respondent Forest Department.

Although the petitioner’s service commencement was referred to as 1998 in the submissions, the Court proceeded on the basis that he had worked from 1992, resulting in approximately 18 years of service.

His services were terminated on 1 September 2010.

In the ensuing proceedings, the Labour Court reinstated him by treating his past service as continuous.

His services were again terminated on 1 October 2016, allegedly without compliance with Section 25F of the Industrial Disputes Act, 1947.

The Labour Court, Nadiad, in Reference (LCN) No. 26 of 2019, partly allowed the petitioner’s claim and awarded lump-sum compensation of Rs.20,000 in lieu of back wages and continuity of service by order dated 30 January 2024.

It was undisputed that there was a delay of approximately two years and seven months in raising the reference.

Whether, in the circumstances of the petitioner’s termination as a daily-wage worker, reinstatement, continuity of service, and full back wages should be granted, or whether lump-sum compensation would constitute appropriate relief?

Whether the petitioner’s compensation should be calculated by deducting the period of delay in raising the reference from his total period of service?

Whether the lump-sum compensation awarded by the Labour Court should be enhanced, and if so, to what amount?

The Court considered the alleged breach of Section 25F of the Industrial Disputes Act, 1947, but applied the principle that breach of retrenchment procedure does not automatically entitle a daily-wage worker to reinstatement and back wages.

Relying on the Division Bench’s common order dated 18 April 2024 in Letters Patent Appeal No. 908 of 2023 and allied matters, and the Supreme Court decisions in 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 compensation may appropriately replace reinstatement and back wages, particularly where the worker is a daily wager, does not hold a permanent post, and the passage of time and other circumstances make reinstatement inappropriate.

Relevant factors include the nature and manner of appointment, length of service, daily-wage status, time elapsed since termination, delay in raising the reference, and other case-specific circumstances.

Under the Division Bench’s compensation framework, service of 5–10 years attracted Rs.3 lakh, 10–15 years attracted Rs.5 lakh, and 15–20 years attracted Rs.7.5 lakh; the period attributable to delay in raising the reference was to be deducted while computing qualifying service.

The Court treated the petitioner as a daily-wage worker and found that reinstatement with full back wages was not an automatic consequence of the alleged Section 25F violation.

Applying the Division Bench’s precedent, it considered the petitioner’s approximately 18 years of service, the substantial passage of time, the nature of his employment, and the delay of two years and seven months in raising the reference.

Deducting the delay period from the total service resulted in approximately 15 years and five months of qualifying service.

This placed the petitioner within the 15–20 year category under the prescribed compensation table, entitling him to Rs.7.5 lakh.

The Court further directed that the Rs.20,000 already awarded by the Labour Court should be adjusted against that amount.

The High Court modified the Labour Court’s order by enhancing the lump-sum compensation from Rs.20,000 to Rs.7.5 lakh, instead of granting reinstatement, continuity of service, or full back wages.

If the Rs.20,000 had already been paid, the respondent was directed to pay the balance of Rs.7.30 lakh; if unpaid, the respondent was required to pay the full Rs.7.5 lakh.

Payment was to be made within four weeks of receiving the order, failing which the outstanding amount would carry interest at 9% per annum from expiry of that period until realization.