Against Wrongful Dismissal, Lumpsum Compensation Could Be Better Remedy Than Reinstatement With Backwages In Certain Cases : Supreme Court

Placing reliance on several cases including Deepali Gundu Surwase v. Kranti Junior Adhyapak Mahavidyala, (2013) 10 SCC 324, the Court observed that ordering back wages to be paid to a dismissed employee is not an automatic relief. The court has to ascertain whether the dismissed employee was gainfully employed post-termination.

“If the employee admits of any gainful employment and gives particulars of the employment together with details of the emoluments received, or, if the employee asserts by pleading that he was not gainfully employed but the employer pleads and proves otherwise to the satisfaction of the court, the quantum of back wages that ought to be awarded on reinstatement is really in the realm of discretion of the court…”

“We hasten to add that the courts may be confronted with cases where grant of lumpsum compensation, instead of reinstatement with back wages, could be the more appropriate remedy. The courts may, in such cases, providing justification for its approach direct such lumpsum compensation to be paid keeping in mind the interest of the employee as well as the employer.,” the Court added.

However, while determining the same, courts can also take into account whether the employee was unemployed for some time following his termination. Further, whether they took up that employment only for bare survival. A disciplinary action was initiated against him and he was dismissed from the service. Consequently, when the matter reached before the labour court, it held that the inquiry conducted was fair. The High Court affirmed the same.

It is important to note that while these proceedings were pending, a case was initiated by the claimants before the Motor Accidents Claims Tribunal. Contrary to its submission before the above courts, the Corporation had argued before the Tribunal that the incident occurred due to a lorry driver. Even the Tribunal observed that the accident took place because of rash and negligent driving of the lorry. In view of this, the respondent again approached the High Court, in its review jurisdiction. This time, the High Court allowed the review. Challenging this, the present appeal was filed.

At the outset, the Bench of Justices Dipankar Datta and Sandeep Mehta observed that “the Corporation indulged in the misadventure of suggestio falsi and suppresio veri is incontrovertible.” While suggestio falsi means false representation, suppresio veri means suppressing the truth.

Elaborating, the Court noticed that, before the labour court, the Corporation fervently asserted that the respondent was guilty of misconduct by driving rashly and negligently. However, its stance was opposite before the tribunal, thus, making false representation which resulted in suggestio falsi.

“Also, having not disclosed before the Labour Court the outcome of the proceedings before the MACT, a fortiori, that it had not been found liable to pay any compensation to the passengers who either died and were injured based on what the version in the written statement was and the argument advanced on its behalf to absolve itself of any liability, the Corporation is also guilty of suppresio veri.,” the Court added.

It also observed that though the law of evidence per se does not apply to industrial adjudication, general principles, including the one of natural justice, do apply. The manner in which the Corporation conducted itself before the Labour Court does not behove a creature of a statute. It has been far from fair in its dealings with Mahadeo., the court said.

It added that the Corporation did not deliberately refer to the award of the MACT and thus, actively suppressed relevant material from a court of law. It further observed:

“The contradictory nature of the stances taken by the Corporation before the Labour Court and the MACT reeks of the Corporation trying to approbate and reprobate on the same issue. It is bound to cause immense prejudice to Mahadeo if the Corporation is allowed to reverse its stance to suit its own interests.”

The Court also pointed out that though the driver was involved in eight collisions before the collision with the lorry, it was only in the present case that the Corporation dismissed him.

Building on this, the Court made the aforesaid observations on back wages. Speaking about the burden of proof, the Court observed that, as per certain precedents, it is on the employee to prove that he has not been gainfully employed. However, the Court, in this case, referred to Section 17-B of the Industrial Disputes Act which talks about employee's right to back wages. As per this, the employer has to satisfy the court as to why relief of back wages ought not to be granted.

“We see no reason why a similar approach may not be adopted. After the employee pleads his non-employment and if the employer asserts that the employee was gainfully employed between the dates of termination and proposed reinstatement, the onus of proof would shift to the employer to prove such assertion having regard to the cardinal principle that 'he who asserts must prove… However, it is elementary but requires to be restated that while grant of full back wages is the normal rule, an exceptional case with sufficient proof has to be set up by the employer to escape the burden of bearing back wages.,” the Court added.

Adverting to the facts of this case, the Court said that though the driver was engaged on a daily wage basis, he was unable to secure permanent employment. In view of this, the Court modified the impugned order of 100% back wages and awarded 75% of the back wages from the date of respondent's termination till the date of his superannuation. Along with this, the respondent was also entitled to full terminal benefits. Thus, the appeal was disposed of after modifying the impugned order to this extent.

Case Name: MAHARASHTRA STATE ROAD TRANSPORT CORPORATION v. MAHADEO KRISHNA NAIK

Citation : 2025 LiveLaw (SC) 212

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