Modification of Labour Court award to substitute reinstatement and backwages with a lump-sum settlement.

The petitioner-employer challenged an award dated 31.01.2025 passed by the Labour Court, Vadodara in Reference (LCV) No. 109 of 2017.

The Labour Court had originally granted the respondent-workman reinstatement with continuity of service and 25% backwages.

During the pendency of the writ petition before the High Court, the parties entered into an amicable settlement outside the court on 13.02.2026.

The respondent-workman agreed to waive his right to reinstatement and backwages in exchange for a lump-sum compensation.

1. Whether the impugned award of the Labour Court can be modified in terms of a private settlement agreement arrived at between the employer and the workman during the pendency of the writ petition.

The Court primarily applied Sections 2(p) and 18 of the Industrial Disputes Act, 1947, which govern settlements arrived at between employers and workmen outside of conciliation proceedings.

The Court also exercised its discretionary jurisdiction under Articles 226 and 227 of the Constitution of India to substitute the judicial award with the terms of a voluntary settlement agreement provided it is fair and arrived at without coercion.

The Court examined the "Memorandum of Settlement" submitted by the parties, noting it was recorded in the vernacular language and signed by both sides.

Under the terms of the settlement, the petitioner agreed to pay a total of ₹4,11,000 (divided into ₹3,70,000 to the workman and ₹41,000 as Union Levy) as a full and final settlement of all claims.

The Court observed that the workman voluntarily accepted this amount in lieu of his rights to reinstatement, backwages, and any other pending dues arising from the Labour Court's order.

The Court found that the agreement was made with "full wisdom and intellect" and without pressure.

Consequently, the Court determined that the original award should be modified to reflect this consensus, thereby resolving the industrial dispute in its entirety.

The Court modified the impugned award of the Labour Court dated 31.01.2025 to the extent of the terms and conditions stipulated in the settlement agreement.

The workman’s right to reinstatement was waived, and the petition was partly allowed in terms of the settlement, effectively disposing of all claims including Recovery Application No. 240/2025.