REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.   6710             OF 2008 [Arising out of SLP (Civil) No. 16653 of 2006]

M/s. Laxmi Rattan Cotton Mills Ltd. …Appellant

Versus

State of U.P. & Ors. …Respondents

J U D G M E N T  

S.B. SINHA, J :

1. Leave granted.

2. Principles governing grant of back wages is the question involved in

this  appeal  which  arises  out  of  a  judgment  and  order  dated  17.07.2006

passed by the High Court  of Judicature at  Allahabad in Civil  Misc. Writ

Petition No. 22003 of 1999.

3. Appellant used to run a cotton mill.   It was taken over in 1976 by

National  Textile  Corporation  which  was  established  by  the  Central

Government for augmenting the textile sector and to ensure and facilitate

the production and distribution of cloth at affordable price.

4. Respondent  Nos.  2,  7,  5,  3,  4  and  6  were  engaged  as  trainee

investigators  on  the  basis  of  the  applications  submitted  to  the  General

Manager of the Mills on 29.07.1980, 10.03.1981, 21.11.1980, 02.01.1981,

10.01.1981  and  30.03.1981,  respectively.   Appointments  were  made  on

monthly  stipends.   One  of  the  terms  and  conditions  in  the  letter  of

engagement as a trainee investigator reads, thus:

“4. That the management shall have no obligation whatsoever to provide you any job in these Mills after completion of the said period of training.”

5. Although no assurance was given to them that on completion of the

training  they  would  be  appointed  as  trainee  investigator,  they  were

appointed as clerks.  Allegedly, at that point of time, only the posts of clerks

were vacant.   

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Some of the terms of their appointments read as under:

“1. That you shall be paid a basic salary of Rs. 120/- per month in the scale of Rs. 120-8-160-10- 200-EB-13-265-16-345-EB-20-445-24-517.   In addition  you  will  be  paid  other  allowances  as applicable to other temporary clerks of the Mills. 2. That your appointment is for a period of six months on account of temporary exigency of work and after  completion  of  which  your  service  will stand  automatically  terminated.   However,  we reserve  the  right  to  terminate  your  service  ever earlier  at  any time without  assigning any reason and without any notice or payment in lieu thereof. 3. That  you  will  have  to  work  against absenteeism/ leave etc.  amongst  clerks  in  any of the departments/ sections in the General Office as well as in the Mills. 4. That  your  other  terms  and  conditions  of service  will  be  governed  by  standing  order applicable for clerks in this Mill. 5. *** ***

If  the  above  offer  is  acceptable  to  you, please  sign  copy  of  this  letter  in  token  of  your acceptance and report for joining immediately.”

They  were  offered  the  scale  of  pay  applicable  to  a  clerk.   They

accepted the said post without any protest or demur.  They were at a later

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date made permanent clerks also.  Yet again, they accepted the said status

without any demur whatsoever.   

The Company, however, became sick in October, 1991.  A reference

was made to the Board for Industrial and Financial Reconstruction (BIFR)

whereupon a proceeding  was  initiated.   Eventually,  the Mill  was  closed,

upon  obtaining  an  approval  from  the  Central  Government  in  terms  of

Section 25O of the Industrial Disputes Act, 1947.  Only after closure of the

said Mills sometime in October, 1991, the concerned respondents raised a

demand  through  a  Union  known  as  Kapda  Mills  Karamchari  Sangh  on

1.02.1992 seeking for the post of investigators and that too from the date of

their initial appointment with arrears and difference in pay.   

Pursuant to and in furtherance of the said demand, the State of Uttar

Pradesh, in exercise of its power conferred upon it under Section 4(k) of the

U.P. Industrial Disputes Act, 1947 made a reference for adjudication thereof

before the Tribunal by a notification dated 2.04.1993, which reads as under:

“Whether giving the designation of clerk and pay scale  to  its  6  workmen  mentioned  in  enclosed Schedule,  after  imparting training of Investigator to them, is appropriate and legal?  If not then what

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kind  of  relief,  the  concerned  employees  are entitled to get?  From which date with any other detail?”

6. Before  the  Tribunal,  the  respondents  sought  for  a  direction  for

appointment  in  the  post  of  investigators  from  the  date  of  their  initial

appointment.

7. Appellant in its written statement inter alia denied or disputed that the

Union at any point of time had made any demand or representation in regard

to the change of the status of the said employees.  It was contended that the

Management was not bound to provide any employment to the respondents,

upon completion of the terms of their training.  The fact that the production

of the Mill was lying closed was also brought to the notice of the Tribunal.   

Furthermore, it was urged that any fresh financial burden would have

adverse effect on the industry as any wage revision had been barred.   

8. The Industrial Court, however, by reason of an award dated 3.11.1988

directed:

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“…It  is  beyond  comprehension  as  to  how  the workmen  concerned  even  after  completion  of  a successful  training  period  would  prefer  to  be appointed for a lower post carrying less wages… For the sake of argument if it is assumed that no posts of investigators were available at the time of completion  of  their  training  then in  the event  of vacancy,  the  plaintiffs  would  have  been  given preference  for  appointment  to  the  post  of investigators…”  

It was held:

“15. Therefore, I order that the plaintiffs be treated as senior on the post of investigator to Sh. Sunil  Kumar Chaurasiya in  the  pay scale  of  Rs. 330-560  from the  date  of  absorption  and  in  the scale  of  Rs.  1400-2300  w.e.f.  31.12.95  and thereafter in the pay scale of Rs. 4500-7000/-.  The plaintiffs  are to  be fixed in the pay scale  of Rs. 330-560 w.e.f.  9.3.82 and subsequent  fixation of pay from different  dates  in  the  revised  scales  of pay and they will be paid the difference of pay as arrears  but  due to  delayed  raising  of  the matter/ litigation  the  plaintiffs  will  be  eligible  to  draw difference  of  pay  from the  date  of  reference  of matter to the Court.  They shall also be entitled of Central D.A. for the post of investigator.”

9. A writ petition preferred thereagainst has been dismissed by the High

Court by reason of the impugned judgment.   

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During pendency of the writ application, however, subsequent events

took place, which have been brought to the notice of this Court, by reason

of a supplementary affidavit filed on 25.04.2005, that the respondents, in the

meanwhile pursuant  to  a scheme floated for voluntary retirement scheme

known as the Modified Voluntary Retirement Scheme, applied therefor and

obtained compensation in the following terms:

Sl. No.

Name  of  the respondents

Date  of resignation

Net  amount paid (Rs.)

Date  of receipt

1. Sandip  Kumar  Bajpai (Res. No. 2)

12-07-2002 2,95,090/- 10-10-2003

2. Surendera  Ballab Goswami (Res. No. 3)

12-07-2002 3,26,779/- 29-05-2005

3. K.S. Usmani  (Res. No. 4)

12-07-2002 2,80,636/- 15-03-2004

4. Ramendra  Prasad Sharma (Res. No. 5)

12-07-2002 2,98,670/- 10-10-2003

5. Shankar Pathak (Res. No. 6)

12-07-2002 2,90,240/- 31-10-2003

6. Ram Kewal Kanojia (Res. No. 7)

12-07-2002 2,95,090/- 10-10-2003

10. By reason of the impugned judgment, however, the writ petition was

dismissed  opining  that  the  award  of  the  Industrial  Tribunal  was  neither

perverse nor suffered from any error apparent on the face of the record.

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11. Mr.  Sanjay  Ghosh,  learned  counsel  appearing  on  behalf  of  the

appellant, would submit:

(i) the respondents have not worked for a single day in the posts of

investigator;

(ii) From  October,  1991  and  till  the  employees  retired  under  the

voluntary retirement scheme in  2002, the Mill  was lying closed

and, therefore, there was no requirement of any investigator.

(iii) The National Textile Corporation is a sick industrial company and

its financial capacity or availability of post or requirements for job

by it had not been considered by the courts.

(iv) Engagement of the respondents as trainees did not confer any right

on them to be appointed substantively against the post and in any

event, the concept of seniority in the posts of trainees is wholly

unknown.   

(v) A  belated  attempt  to  raise  a  dispute  after  ten  years  seeking

reclassification or redesignation of the post and that too from the

initial date of appointment was wholly unwarranted.   

(vi) The  Industrial  Court  committed  a  serious  error  in  directing  the

appellant  to  grant  a  higher  post  and  that  too  de’hors  the  rules,

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vacancies  and requirements  of  the company.  In  any event,  the

same could not  have been granted with  retrospective effect  and

that too without taking into consideration the contentions raised by

the Management.   

(vii) The principles of “No Work No Pay” should have been applied in

the instant case.

12. Mr.  Bharat  Sangal,  learned  counsel  appearing  on  behalf  of  the

respondents, on the other hand, would contend that the action on the part of

the Management was wholly mala fide, in as much as the respondents had

been making  representations  for  a long  time pointing  out  that  in  similar

cases the trainees had been absorbed.

The learned counsel  would contend that  the fact  that  the appellant

adopted a policy to absorb such trainees on the post of investigators having

not  been  denied  or  disputed,  the  impugned  judgment  should  not  be

interfered with.

 As regards delay, Mr. Sangal  would contend that  in  its  award,  the

Industrial Court  had not granted the entire back wages as it  was directed

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“due to delayed raising of the matter/ litigation the plaintiffs will be eligible

to draw difference of pay from the date of reference of matter to the Court”.

13. The reference made by the appropriate government for adjudication

of the industrial dispute by and between the parties relates to a purported

legal right.  Whether the respondents, thus, were entitled to be appointed as

investigators was the question which should have been posed and answered

by the Industrial Court.  From the terms of offer of engagement issued in

favour of the respondents, it is evident that their job as trainee investigators

was temporary in nature.  They were not conferred with any status.  They

were  only engaged  as  trainee investigators.   Their  appointments  had  not

been  made in  strict  compliance  of  the  constitutional  scheme of  equality

contained in Articles 14 and 16 of the Constitution of India.  They were not

even appointed as apprentices within the meaning of the provisions of the

Apprentices Act, 1961.   

14. Respondents were offered the posts of clerk which was accepted by

them as the same were vacant.  They had no legal right to be appointed as

investigators.  They accepted the said offer without any demur whatsoever.

For a long time, no industrial dispute was raised nor any demand was made

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by them or the Union on their behalf.  The concerned respondents were not

illiterate.  They were aware of their rights.  If they stood by for a long time,

the doctrine of acquiescence and waiver would apply in their cases.  In its

award,  as  noticed  hereinbefore,  the  Industrial  Tribunal  commented  that

“how the workmen concerned even after completion of a successful training

period would prefer to be appointed for a lower post carrying less wages”,

but that is a question which was required to be answered by the workmen as

to why such offers were accepted.

15. It  is  one  thing  to  say  that  the  respondents  were  forced  to  accept

appointment in lower posts although they were entitled for appointment to

higher post, but, it is another thing to say that only because at a later point

of  time  services  of  one  gentleman  were  regularized  in  the  post  of

investigator would itself be determinative of the factor that the action on the

part of the employer was discriminatory and/ or malafide in nature.   

The opinion of the Industrial Court that even if no post of investigator

was  available,  as  soon  as  vacancy  occurred  the  same should  have  been

offered to the respondents cannot be held to be correct.  We say so firstly

because the respondents had no legal right to the said posts;  secondly, if

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they had accepted to work in the post of clerk for a long time, only because

subsequently  a  vacancy  arose,  the  same  in  law  was  not  required  to  be

offered  to  those  who  had  taken  training;  and  thirdly,  only  because  the

Management had spent some amount for their training, the same by itself is

not a ground that they should have been absorbed as investigators.

16. The act of discrimination and/ or inappropriate action on the part of

the  employer,  if  any,  should  have  been  the  subject  matter  of  a  demand

immediately after their appointment as clerks.  They not only accepted their

appointments to the post of clerk; as noticed hereinbefore, they were made

permanent in the said post.   

Another principle which was applicable in the instant case was also

lost sight of by the Tribunal, viz., that Article 14 of the Constitution of India

carries a positive concept and no equality can be claimed in illegality.

In Mahendra L. Jain and Others v. Indore Development Authority and

Others [(2005) 1 SCC 639], this Court held:

“19.  The  question,  therefore,  which  arises  for consideration  is  as  to  whether  they  could  lay  a valid claim for regularisation of their services. The answer thereto must be rendered in the negative. Regularisation  cannot  be  claimed  as  a  matter  of

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right.  An illegal appointment cannot be legalised by taking recourse to regularisation. What can be regularised is an irregularity and not an illegality. The constitutional  scheme which the country has adopted  does  not  contemplate  any  back-door appointment.  A  State  before  offering  public service  to  a  person  must  comply  with  the constitutional requirements of Articles 14 and 16 of the Constitution. All actions of the State must conform  to  the  constitutional  requirements.  A daily-wager in the absence of a statutory provision in  this  behalf  would  not  be  entitled  to regularisation.”

[See also M.P. Housing Board and Another v. Manoj Shrivastava (2006) 2

SCC 702, M.P. State Agro Industries Development Corpn. Ltd. and Another

v.  S.C. Pandey (2006) 2 SCC 716,  Indian Drugs & Phrmaceuticals Ltd. v.

Workmen,  Indian  Drugs  &  Pharmaceuticals  Ltd. (2007)  1  SCC  408,

Gangadhar Pillai v.  Siemens Ltd. (2007) 1 SCC 533 and C.S. Azad Krishi

Evam Prodyogiki  Vishwavidyalaya v.  United  Trades  Congress  and  Anr.

(2008) 2 SCC 552].

17. The Industrial Court, unfortunately, did not deliberate upon any of the

aforementioned issues which arose for its consideration.  The High Court

again failed to address itself the aforementioned principal issues.  It merely

endorsed  the  views  of  the  Industrial  Court  without  applying  its  mind

independently.

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18. We may also notice the subsequent events.  A voluntary retirement

scheme was floated.  Respondents even while opting therefor stated their

designations to be clerks.  That may not be decisive but then it is at least a

pointer to show that they had all along accepted the said position.   

19. The Industrial Court as also the High Court furthermore failed and/ or

neglected to consider the fact that the time when the industrial dispute was

raised, the Mill had already been closed.   

20. There cannot  be any doubt whatsoever that  the Industrial  Court  in

terms of Section 11A of the Industrial Disputes Act, 1947 exercises a wide

discretion.  But, such discretion must be exercised judiciously.  All attempts

must be made to strike a balance.  Even otherwise grant of back wages and

that too with retrospective effect may not be appropriate in all situations.

21. For the  reasons  aforementioned,  the impugned judgment  cannot  be

sustained which is  set aside accordingly.  However, if  any sum has been

paid to the workmen pursuant to the impugned award of the Tribunal and

the  judgment  of  the  High  Court,  the  same shall  not  be  recovered.   The

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appeal  is  allowed  with  the  aforementioned  directions.   In  the  facts  and

circumstances of the case, there shall be no order as to costs.

………………………….J. [S.B. Sinha]

..…………………………J.     [Cyriac Joseph]

New Delhi; November 19, 2008

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