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

The Petitioner company challenged an award dated January 31, 2025, passed by the Labour Court, Vadodara, in Reference (LCV) No. 106 of 2017.

The Labour Court had originally granted the Respondent (workman) reinstatement with continuity of service and 25% backwages.

The Petitioner filed this petition under Articles 226 and 227 of the Constitution of India and the Industrial Disputes Act, 1947, to set aside that award.

During the pendency of the High Court proceedings, the parties entered into a private settlement on February 13, 2026, to resolve all disputes outside of Court.

1. Whether the impugned award of the Labour Court, granting reinstatement and backwages, can be modified in light of an amicable settlement entered into by the parties during the pendency of the writ petition.

The court applied the provisions of Articles 226 and 227 of the Constitution of India regarding the High Court's supervisory jurisdiction over subordinate courts and tribunals.

It further relied on Section 2(p) of the Industrial Disputes Act, 1947, which defines and recognizes "settlements" arrived at between employers and workmen outside of conciliation proceedings, provided they are in writing and signed by the parties.

The court adhered to the principle that a settlement reached voluntarily and without coercion by the parties serves as a valid basis for disposing of industrial disputes and modifying judicial awards.

The Court reviewed the "Memorandum of Settlement" submitted by the parties, noting it was executed in the vernacular language and signed by both the company and the workman.

Under the terms of the settlement, the Respondent-workman agreed to waive his rights to reinstatement and backwages in exchange for a full and final lump-sum payment of ₹4,11,000, inclusive of union levies.

The Court observed that the workman explicitly declared that no further dues remained and that all pending recovery applications (specifically Recovery Application No. 237/2025) and disputes before various labor authorities were withdrawn as part of this agreement.

Since the parties confirmed the agreement was made with "full wisdom" and without "any kind of pressure," the Court found it legally sound to substitute the original Labour Court award with the terms of this voluntary settlement.

The Court held that the rights of the parties are now governed exclusively by the terms and conditions stipulated in the settlement agreement dated February 13, 2026.

Consequently, the Respondent is entitled to the settlement amount of ₹4,11,000, and the Petitioner is relieved of the obligation to reinstate the workman or provide the original 25% backwages.