Continuity Of Service With Back Wages Can Be Directed In Cases Where The Retrenchment Was Not Bona Fide : Supreme Court

The Supreme Court observed that continuity of service can be directed in cases where the retrenchment was not bona fide.

Armed Forces Ex Officers Multi Services Cooperative Society Ltd 'retrenched' the services of fifty-five employees, on the grounds that it had closed its business. Retrenchment compensation as per Section 25F of the Industrial Disputes Act, 1947, was also offered.  Before the Industrial Tribunal, Pune, the Government referred the dispute regarding a demand of the workmen for reinstatement of fifty-five drivers with continuity of service and full back wages. The orders of termination were set aside by the Tribunal and the workmen were directed to be reinstated with continuity of service and 75% back wages, save eight employees who admitted to gainful employment post retrenchment. The Bombay High Court upheld this order of the Tribunal.

In appeal, the Apex Court bench agreed with the view of the Tribunal that the method and manner by which the workmen were retrenched clearly demonstrates that it is virtually a closure and that he entirety of business is not lost due to the strike and the retrenchment seems to have been imposed as retribution against the workmen for going on a strike. 

The court then considered the submission that the Tribunal is not justified in directing continuity of service, as in the case of retrenchment followed by reemployment, the workmen are not entitled to continuity of service. The court observed:

"Even here, there is no quarrel with the principle of law that reemployment of retrenched workmen does not entitle them to claim continuity of service as held in Cement Corpn. of India Ltd. v. Presiding Officer Industrial Tribunal-cum-Labour Court and Anr. , as well as the Maruti Udyog Ltd v. Ram Lal and Ors.. However, the principle laid down in these judgments will only apply to cases where the retrenchment is bona fide. The Tribunal has held that the retrenchment of all the drivers followed by an offer of re-employment on new terms and conditions is not bona fide. Once the orders of retrenchment are set aside, the workmen will naturally be entitled to continuity of service with order of back wages as determined by a Tribunal or a Court of law.

Regarding the submission that the management has a right to organise its business based on economic considerations, the court observed:

There is also no quarrel with the principle of Parry & Co. Ltd. v. P.C. Pal , which laid down the proposition that a bona fide policy decision for reorganising the business based on economic considerations is within an enterprise's proprietary decision and retrenchment in this context must be accepted as an inevitable consequence. The answer is here itself, and pertains to the material requirement of bona fide of the decision. In the present case, the Tribunal has come to the conclusion that the entirety of business is not lost due to the strike and the retrenchment seems to have been imposed as retribution against the workmen for going on a strike. It is for this reason that the decision of this Court in the case of Parry Company (supra) will not apply to the facts of the present case.

While dismissing the appeal, the court also refused to interfere with the direction of the Tribunal to award 75% back wages.

Case details

Armed Forces Ex Officers Multi Services Cooperative Society Ltd vs Rashtriya Mazdoor Sangh (INTUC) | 2022 LiveLaw (SC) 674 | CA 2393 of 2022 | 11 August 2022 | Justices BR Gavai and PS Narasimha

Counsel: Sr. Adv Chander Uday Singh, Adv Pratap Venugopal, Adv Surekha Raman, Adv Atman Mehta, Adv Anand Pai, Adv Akhil Abraham Roy, Adv Viddushi and Adv Bidya Mohanty for appellant, Adv Nitin A. Kulkarni, assisted by Adv Nitin S. Tambwekar, Advocate and AOR Seshatalpa Sai Bandaru for respondents.

Headnotes

Industrial Disputes Act, 1947 ; Section 25F - Retrenchment - Principle of law that reemployment of retrenched workmen does not entitle them to claim continuity of service - This principle will only apply to cases where the retrenchment is bona fide - When retrenchment is not bona fide and once the orders of retrenchment are set aside, the workmen will naturally be entitled to continuity of service with order of back wages as determined by a Tribunal or a Court of law. (Para 16)

Industrial Disputes Act, 1947 ; Section 25F - Retrenchment - Principle that a  policy decision for re-organising the business based on economic considerations is within an enterprise's proprietary decision and retrenchment in this context must be accepted as an inevitable consequence - The material requirement of bona fide of the decision - When the retrenchment seems to have been imposed as retribution against the workmen for going on a strike, this principle will not apply. (Para 15)

Constitution of India, 1950 ; Article 136 - Industrial Disputes Act, 1947 ; Section 25F - Whether a workman was gainfully employed or not is again a question of fact, and the finding of the Tribunal as upheld by the High Court, cannot be interfered with by the Supreme Court in exercising its power under Article 136 of the Constitution of India. (Para 18)

Industrial Disputes Act, 1947 ; Section 25F - If the employer wants to avoid payment of full back wages, then it has to plead and also lead cogent evidence to prove that the employee/workman was gainfully employed and was getting wages equal to the wages he/she was drawing prior to the termination of service - Referred to Deepali Gundu Surwase v. Kranti Junior Adhyapak Mahavidyalaya (2013) 10 SCC 324. (Para 19)

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