Short-service daily-wage workers were awarded ₹2 lakh lump-sum compensation each instead of reinstatement.

The petitioners were engaged as Security Guards by the respondent authority.

In SCA No. 12833 of 2012, the petitioner claimed service from 15 September 1994 until oral termination on 5 September 2000, amounting to approximately six years of service. In SCA No. 12839 of 2012, the petitioner claimed service from 9 December 1995 until 5 September 2000

The petitioners contended that their termination was contrary to Section 25F of the Industrial Disputes Act, 1947.

The Labour Court, Junagadh, partly allowed the references and awarded lump-sum compensation of ₹21,000 and ₹18,000 respectively, instead of reinstatement with back wages and continuity of service.

The petitioners challenged those awards and sought reinstatement with consequential benefits.

During the proceedings, reliance was placed on Division Bench decisions prescribing compensation based on length of service and on a Coordinate Bench decision awarding ₹2,00,000 in comparable circumstances.

Whether the petitioners were entitled to reinstatement with continuity of service and full back wages notwithstanding the lapse of time and the nature of their engagement as daily-wage workers?

Whether the lump-sum compensation awarded by the Labour Court should be enhanced in light of the petitioners’ length of service, alleged illegal termination, delay in raising the industrial dispute, and the prevailing approach of the High Court?

The Court considered the requirement of compliance with Section 25F of the Industrial Disputes Act, 1947, governing retrenchment of eligible workmen, as pleaded by the petitioners.

It applied the principle that, where reinstatement is not considered appropriate because of the nature of employment, the passage of time, delay, or other factual circumstances, lump-sum compensation may be granted in lieu of reinstatement and back wages.

The Court relied on the Division Bench decision dated 18 April 2024 in Letters Patent Appeal No. 908 of 2023 and allied matters, which assessed compensation with reference to the length of service, while taking delay in raising the reference into account; the indicative amounts were ₹3 lakh for 5–10 years, ₹5 lakh for 10–15 years, and ₹7.5 lakh for 15–20 years of service.

It also relied on the Coordinate Bench’s decision dated 2 March 2026 in SCA No. 7229 of 2024, where ₹2 lakh was awarded considering short service, illegal appointment, and absence of a sanctioned establishment.

The Court accepted that the petitioners had rendered approximately six years and nearly five years of service respectively, but treated reinstatement as inappropriate in view of the nature of their engagement, the lapse of time, and the surrounding circumstances.

Although the Division Bench’s compensation formula could have supported a higher amount for the period of service, the Court considered the delay of approximately three years and one month in raising the references, along with the respondents’ contention that the petitioners were daily-wage workers and not regular employees.

Following the Coordinate Bench’s approach in awarding ₹2 lakh in a comparable case involving limited service and irregular appointment, the Court concluded that the Labour Court’s awards of ₹18,000 and ₹21,000 were inadequate and required modification.

The Court declined to grant reinstatement, continuity of service, or full back wages, and modified the Labour Court’s awards.

Each petitioner was awarded lump-sum compensation of ₹2,00,000 in full and final settlement of all claims, with credit for the amount already awarded by the Labour Court; the respondents were directed to pay the differential amount within four weeks of receiving the judgment.

Failure to comply would attract interest at 9% per annum.