Reinstatement Not Automatic In Cases Of Violation Of Retrenchment Conditions U/s 25F Industrial Disputes Act : Supreme Court

The Supreme Court observed that the reinstatement of terminated workmen cannot be automatic in cases of violation of retrenchment conditions under Section 25F of the Industrial Disputes Act, 1947.

"We find that reinstatement cannot be automatic, and the transgression of Section 25F being established, suitable compensation would be the appropriate remedy.", the bench of Justices KM Joseph and PS Narasimha observed in an appeal against a High Court Judgment which interfered with a Labour Court order to the extent it awarded reinstatement of a workman with 25 per cent back wages.  

The appellant, relying on the judgment in Ajaypal Singh v. Haryana Warehousing Corporation (2015) 6 SCC 321 contended that he should be reinstated in terms of the order of the Labour Court. On the other hand, the management referred to State of Uttarakhand and another v. Raj Kumar (2019) 14 SCC 353 to contend that an order of reinstatement may not be justified.

The court noticed that in Ajay Pal Singh (supra), it was observed that when the termination is effected of service of a daily wager, there must be compliance of Section 25F. T

"This Court, in fact, went on also to note that unlike a private body, in the case of a public body, while it may be open to resort to retrenchment of the workmen on the score that there is non-compliance of Articles 14 and 16 in the appointment, in which case, in the order terminating the services, this must be alluded to, it would still not absolve the public authority from complying with the provisions of Section 25F of the Act and, should it contravene Section 25F, it would amount to an unfair trade practice.".

However, the bench observed that there is another line of decisions. The court, particularly noted the following observations made in Raj Kumar:

1. The reasons for denying the relief of reinstatement in such cases are obvious. It is trite law that when the termination is found to be illegal because of non-payment of retrenchment compensation and notice pay as mandatorily required under Section 25-F of the Industrial Disputes Act, even after reinstatement, it is always open to the management to terminate the services of that employee by paying him the retrenchment compensation. Since such a workman was working on daily-wage basis and even after he is reinstated, he has no right to seek regularisation [see State of Karnataka v. Umadevi (3) [State of Karnataka v. Umadevi (3), (2006) 4 SCC 1 : 2006 SCC (L&S) 753] ]. Thus when he cannot claim regularisation and he has no right to continue even as a daily-wage worker, no useful purpose is going to be served in reinstating such a workman and he can be given monetary compensation by the Court itself inasmuch as if he is terminated again after reinstatement, he would receive monetary compensation only in the form of retrenchment compensation and notice pay. In such a situation, giving the relief of reinstatement, that too after a long gap, would not serve any purpose.
2.  We would, however, like to add a caveat here. There may be cases where termination of a daily-wage worker is  found to be illegal on the ground that it was resorted to as unfair labour practice or in violation of the principle of last come first go viz. while retrenching such a worker daily wage juniors to him were retained. There may also be a situation that persons junior to him were regularised under some policy but the workman concerned terminated. In such circumstances, the terminated worker should not be denied reinstatement unless there are some other weighty reasons for adopting the course of grant of compensation instead of reinstatement. In such cases, reinstatement should be the rule and only in exceptional cases for the reasons stated to be in writing, such a relief can be denied.

In this case, the court noted that the service of appellant was terminated, violating the mandatory provisions of Section 25F of the Act. It also noted that the appellant could not adduce convincing evidence to establish retention of junior workers and there is no finding of unfair trade practice.

"In such circumstances, we think that the principle, which is enunciated by this Court, in the decision, which is referred to in Raj Kumar (supra), which we have referred to, would be more appropriate to follow. In other words, we find that reinstatement cannot be automatic, and the transgression of Section 25F being established, suitable compensation would be the appropriate remedy.", the court said.

The court partly allowed the appeal directing that in place of Rs. 25000/- (Rupees Twenty Five Thousand), as lumpsum compensation, appellant be paid Rs.3.25 lakhs (Rupees Three Lakhs and Twenty Five Thousand), as compensation.

Know the Law

Section 25F lists the Conditions precedent to retrenchment of workmen. It reads as follows:

No workman employed in any industry who has been in continuous service for not less than one year under an employer shall be retrenched by that employer until—

(a) the workman has been given one month's notice in writing indicating the reasons for retrenchment and the period of notice has expired, or the workman has been paid in lieu of such notice, wages for the period of the notice;

(b) the workman has been paid, at the time of retrenchment, compensation which shall be equivalent to fifteen days' average pay 2 [for every completed year of continuous service] or any part thereof in excess of six months; and

(c) notice in the prescribed manner is served on the appropriate Government or such authority as may be specified by the appropriate Government by notification in the Official Gazette.

In BSNL vs. Bhurumal case, it was observed thus: "When the termination is found to be illegal because of non-payment of retrenchment compensation and notice pay as mandatorily required under Section 25-F of the Industrial Disputes Act, even after reinstatement, it is always open to the management to terminate the services of that employee by paying him the retrenchment compensation. Since such a workman was working on daily wage basis and even after he is reinstated, he has no right to seek regularization (See: State of Karnataka vs. Uma Devi (2006) 4 SCC 1). Thus when he cannot claim regularization and he has no right to continue even as a daily wage worker, no useful purpose is going to be served in reinstating such a workman and he can be given monetary compensation by the Court itself inasmuch as if he is terminated again after reinstatement, he would receive monetary compensation only in the form of retrenchment compensation and notice pay. In such a situation, giving the relief of reinstatement, that too after a long gap, would not serve any purpose."

Case: Ranbir Singh vs Executive Eng PWD ; CA 4483 OF 2010
Citation: LL 2021 SC 428
Coram: Justices KM Joseph and PS Narasimha
Counsel: Sr. Adv Manjeet Singh for appellant, AAG Samar Vijay Singh for respondent

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