Lump-sum compensation may replace reinstatement and back wages for unlawfully terminated daily wagers.

The petitioner worked as a Security Guard/daily-wage workman under the respondent since 1988.

His services were terminated with effect from 1 October 2016, allegedly without complying with Section 25F of the Industrial Disputes Act, 1947.

The Labour Court, Nadiad, partly allowed Reference (LCN) No. 27 of 2019 and awarded ₹20,000 as lump-sum compensation in lieu of back-wages and continuity of service.

The petitioner challenged that award before the Gujarat High Court and sought full back-wages, continuity in service, and interest at 18%.

The respondents contended that the petitioner was a daily wager and 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 workman, relief in the form of reinstatement, continuity of service and back-wages ought to be substituted by lump-sum compensation.

Whether the lump-sum compensation should be calculated by considering the petitioner’s length of service after deducting the period attributable to delay in raising the reference.

Whether the Labour Court’s award of ₹20,000 should be enhanced in accordance with the principles laid down by the Division Bench in Letters Patent Appeal No. 908 of 2023 and allied matters.

The Court applied Section 25F of the Industrial Disputes Act, 1947, concerning the conditions precedent to retrenchment, while reiterating that breach of Section 25F does not automatically entitle a workman to reinstatement and back-wages.

Relying on Bhopal v. Santosh Kumar Seal, Jagbir Singh v. Haryana State Agriculture Marketing Board, U.P. State Brassware Corpn. Ltd. v. Uday Narain Pandey, Uttaranchal Forest Development Corporation v. M.C. Joshi, Rajasthan Development Corporation v. Gitam Singh and BSNL v. Bhurumal, the Court held that monetary compensation may be appropriate in cases involving daily-wage employment, depending on the nature and manner of appointment, length of service, the time elapsed since termination, and other relevant circumstances.

Under the Division Bench’s formula, compensation was fixed at ₹3 lakh for 5–10 years, ₹5 lakh for 10–15 years, and ₹7.5 lakh for 15–20 years of qualifying service; the period of delay in raising the reference could be deducted while assessing the relevant service period.

The Court found that the petitioner had approximately 26 years of service but had raised the reference after a delay of about two years and seven months.

Applying the Division Bench’s approach, the Court deducted the period of delay and treated the petitioner’s qualifying service for compensation as approximately 23 years and five months.

Given the petitioner’s status as a daily-wage workman, the considerable lapse of time, and the principle that reinstatement and back-wages are not automatic even where Section 25F is breached, the Court held that lump-sum compensation was the appropriate relief.

Without independently re-examining the merits, it followed the binding approach adopted in the Division Bench decision and enhanced the compensation to ₹7.5 lakh.

The Labour Court’s award was modified by enhancing the lump-sum compensation from ₹20,000 to ₹7,50,000; the claims for full back-wages and continuity in service were not granted.

If the earlier ₹20,000 had already been paid, the respondent was directed to pay an additional ₹7.30 lakh; otherwise, the respondent was required to pay the full ₹7.50 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.