Reinstatement With Back Wages Is Not Automatic Even In Cases Of Illegal Termination, Courts Might Provide Lumpsum Compensation: Gujarat High Court

Brief Facts:

The Workmen initiated proceedings before the labour court in Rajkot by filing a reference. Subsequently, the Labor Court rendered a judgment and award declaring the termination of the workmen by the employer as illegal. The Labor Court directed the reinstatement of the workmen to their original positions with continuity of service, coupled with 20% back wages.

The Labor Court held that the termination of the workmen's services breached Sections 25F, 25G, and 25H of the Industrial Disputes Act, 1947 (“ID Act”).

The Municipality initially filed a Special Civil Application contesting the judgment and award issued by the Labor Court, which led to an order by the Single Judge of the Gujarat High Court (“High Court”) modifying the reinstatement with lump sum compensation for all the workmen. Consequently, cross-appeals were filed by both the Municipality and the workmen.

Observations by the High Court:

The High Court held that law has evolved to establish that a breach of Section 25F of the ID Act, as determined by a labour court or Industrial Tribunal, does not inevitably result in the reinstatement of the worker. This shift was emphasized by the Supreme Court in Bhopal Vs. Santosh Kumar Seal [(2010) 6 SCC 773] and Jagbir Singh Vs. Haryana State Agriculture Marketing Board [(2009) 15 SCC 327], where the SC held that lump-sum compensation could be an appropriate remedy in certain circumstances. The Supreme Court consistently held that reinstatement with back wages is not automatic, even in cases of illegal termination.

In other rulings, like Rajasthan Development Corporation Vs. Gitam Singh [(2013) 5 SCC 136], the Supreme Court reiterated that reinstatement is not an absolute right for wrongfully dismissed employees. Factors such as the manner of appointment, nature of employment, and length of service should be considered.

The High Court held that this decision outlined circumstances guiding the court's discretion in awarding lump-sum compensation instead of reinstatement, despite breaches of relevant sections of the ID Act. These factors, as highlighted in Bantva Municipality Vs. Amritlal Harji Chauhan, include the nature of employment, length of service, manner of appointment, and any special features of the case.

Furthermore, in BSNL v. Bhurumal [(2013) 5 SCC 136], the Supreme Court held that even after reinstatement, management retains the right to terminate the employee by providing retrenchment compensation. In cases involving daily-wage workers, reinstatement might not serve a useful purpose, and monetary compensation could be deemed appropriate by the court.

The High Court held that while such reinstatement may be applicable in cases involving regular or permanent employees, it is not automatically granted for daily-wage workers if the termination is found to be illegal due to procedural defects like a violation of Section 25-F of the ID Act. In such instances, the High Court held that in such cases courts consistently favour monetary compensation, considering the impracticality and lack of legal basis for reinstatement, especially when the terminated worker cannot claim regularization or continuation as a daily-wage worker.

The High Court reasoned that since reinstatement doesn't guarantee job security for daily-wage workers, and termination could occur again with only retrenchment compensation and notice pay provided, the relief of reinstatement after a prolonged period would serve no meaningful purpose. Therefore, the High Court held that the decision to grant lump sum compensation by the learned Single Judge, considering factors like the nature of employment, length of service, and time gap since termination, was reasonable.

Case Title: Jetpur Navagadh Municipality Versus Pathan Yunuskhan Jamyalkhan

LL Citation: 2024 LiveLaw (Guj) 56

Case Number: R/Letters Patent Appeal No. 1091 Of 2023 In R/Special Civil Application No. 17944 Of 2021 With R/Letters Patent Appeal No. 700 Of 2023 In R/Special Civil Application No. 18321 Of 2021 With R/Letters Patent Appeal No. 1182 Of 2023 In R/Special Civil Application No. 17944 Of 2021 With Civil Application (For Stay) No. 1 Of 2023 In R/Letters Patent Appeal No. 1182 Of 2023 In R/Special Civil Application No. 17944 Of 2021 With R/Letters Patent Appeal No. 1092 Of 2023 In R/Special Civil Application No. 18321 Of 2021 With Civil Application (For Stay) No. 1 Of 2023 In R/Letters Patent Appeal No. 1092 Of 2023 In R/Special Civil Application No. 18321 Of 2021 With R/Letters Patent Appeal No. 1093 Of 2023 In R/Special Civil Application No. 18334 Of 2021 With Civil Application (For Stay) No. 1 Of 2023 In R/Letters Patent Appeal No. 1093 Of 2023 In R/Special Civil Application No. 18334 Of 2021 With R/Letters Patent Appeal No. 1094 Of 2023 In R/Special Civil Application No. 17941 Of 2021 With Civil Application (For Stay) No. 1 Of 2023 In R/Letters Patent Appeal No. 1094 Of 2023 In R/Special Civil Application No. 17941 Of 2021 With R/Letters Patent Appeal No. 1095 Of 2023 R/Special Civil Application No. 1794 Of 2022 With Civil Application (For Stay) No. 1 Of 2023 In R/Letters Patent Appeal No. 1095 Of 2023 In R/Special Civil Application No. 1794 Of 2022 With R/Letters Patent Appeal No. 701 Of 2023 In R/Special Civil Application No. 18334 Of 2021

Advocate for the Petitioner: Bhavesh Trivedi and RR Trivedi

Advocate for the Respondent: Dhruv K Dave

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