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PETITIONER: SANT RAJ & ANR.

       Vs.

RESPONDENT: O.P. SINGLA & ANR

DATE OF JUDGMENT09/04/1985

BENCH: DESAI, D.A. BENCH: DESAI, D.A. MISRA RANGNATH

CITATION:  1985 AIR  617            1985 SCR  (3) 623  1985 SCC  (2) 349        1985 SCALE  (1)668  CITATOR INFO :  F          1985 SC1046  (16)  F          1985 SC1128  (10)

ACT:      Industrial Disputes  Act ,   1947  ,   Section 25F read with section  2(oo)-Termination  from  service-Validity  of- Termination   if    held   illegal-Reinstatement    follows- Inexpedient and  improper to  order reinstatement-Discretion of Court to grant compensation.      Income Tax  Act ,   1961  ,  Section 89 and Income Tax. Rules ,  1962 ,  Rules ,  2/(A) Compensation and back wages- Court ordered  payment in  lump sum  - Relief of Income Tax- Power of Court.

HEADNOTE:      The  services   of  the   appellants-workmen  who  were employed as  loaders in  a foreign air-transport company was terminated by  the respondent-employer.  On a reference made by the  Secretary (Labour)  Delhi Administration  the Labour Court  held   that  the   termination  of  services  of  the appellants constituted retrenchment within the meaning of s. 25F read  with Section 2(oo) of the Industries; Disputes Act ,   1947 and  as the  provisions of  s. 25F  have  not  been complied with  the termination  of service  would be bad and illegal. It  was further  held that even where s. 25F of the Act is  not complied  with and the termination of service is illegal and  invalid ,  there is certainly a discretion with the Labour  Court whether  to  order  reinstatement  of  the workmen or  not. While  quantifying the  compensation ,  the Labour Court  observed that  the termination  of services of the two  workmen was  bonafide and not a colourable exercise of power  in accordance  with the  service rules and awarded one year’s  wages as  compensation for  the failure  of  the employer to  comply with  the requirements  of s.  25F.  The workmen appealed to this Court.      Partly allowing the Appeal. ^      HELD; 1. Ordinarily ,  where the termination of service is found to be bad and illegal ,  in the field of industrial relations a  declaration follows  that the workman continues to be  in service  and has  to be reinstated in service with full  backwages.  The  Labour  Court  has  however  ,    the

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discretion to award compensation in respect of reinstatement if the  circumstances of a particular case ,  are unusual or exceptional so  as  to  make  reinstatement  inexpedient  or improper.                                             [625H ,  626A-B] 624      2. Whenever  it is  said that  something has to be done within the  discretion of  the authority then that something has to  be done according to the rules of reason and Justice and not according to private opinion ,  according to law and not humor.  It must  not be  arbitrary vague  and  fanciful. [626D]      Hindustan Tin  Works  Pvt  ,    Ltd.  v.  Employees  of Hindustan Tin  Works   Pvt. Ltd.  [1979] I  SCR 563  ,  M/s. Hindustan Steel  Ltd. ,  Rourkela v. A.K Roy & Ors. [1970] 3 SCR 343  ,   Sharp v.  Wekfield ,   [1891]  AC  173  &  S.D. Jaisinghani v.  Union of  India &  Ors. [1967]  2 SCR  703 , relied on.      3. Having  regard to the facts and circumstances of the instant case  ,   the reasons  given by the Labour Court for declining to  grant the  normal relief  of reinstatement are not tenable.  The order  of the Labour Court is ,  however , upheld. The  award giving  one year wages as compensation is modified to  the effect  that each  appellant should be paid Rs. 2,00,000  as and  by way of back-wages in lieu of relief of reinstatement. [626B-C]      4. The Labour Court while declining to grant the relief of reinstatement  which should  have ordinarily  followed  , consequent upon  its finding that the termination of service was bad and illegal ,  in exercise of its discretion awarded one year’s wages as compensation in lieu of reinstatement on the ground  that ’the  termination of service of each of the appellant was  bonafide and  not a  colourable  exercise  of power in  accordance with  service rules’.  There is thus an error apparent  on the  face of  the record.  inasmuch as if termination of  service was  according to  service rules and was bonafide  it could  not be  simultaneously  held  to  be illegal  and   invalid.  Therefore.   this  discretion   was exercised on  irrelevant and  extraneous  considerations  or considerations not  germane to  the termination.  [626F-H  , 627Al      5. The appellants are entitled to relief under s. 89 of the Income  Tax Act  ,   1961 read  with Rule  21(A) of  the income Tax Rules ,  1962 because compensation herein awarded includes salary  which was  in arrears  for 12  years and is being paid in one lump sum under orders of Court. Respondent employer shall  assist  the  appellants  for  obtaining  the relief. [628E-F]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: CIVIL  Appeal NO. 650 of 1982.            From the Award dated 6.3 1981 of the Labour Court Delhi in IClD No. 41 Or 1979.      P.N. Tewari and S.R. Srivastava for the Appellants.          Dr. Y.S. Chitale ,  Ashok Grover and David Frey for the Respondent , 625      The Judgment of the Court was delivered by A      DESAI ,   J  ,  Secretary (Labour) Delhi Administration referred  the   following  industrial  dispute  between  the management of  M/s Lufthansa German Airlines and its workmen Shri Sant Raj and Shri Itwari Lal Sherya for adjudication to

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the Labour Court at Delhi It reads as under           "Whether the termination of service of S/Shri Sant Raj and  Itwari Lal Sherya is illegal and or unjustified and if so to what relief are they entitled ?"      The Labour  Court  after  an  exhaustive  and  in-depth examination of  rival contentions  held that  termination of services of  the  afore-mentioned  two  workmen  constituted retrenchment within  the meaning  of Sec. 25F read with Sec. 2(00) of  the Industrial  Disputes Act  ,   1947 (’Act’  for short) and  as the  provisions of  Sec. 25F  have  not  been complied with ,  the termination of service would be bad and illegal. The  Labour Court then proceeded to examine whether the  relief   of  reinstatement   should   be   granted   or compensation in  lieu of  reinstatement should be given. The Labour  Court   held  that  ’even  where  Sec.  25F  of  the Industrial Disputes  Act is  not complied with and therefore the termination  of service  is illegal and invalid ,  there is certainly  a discretion  with the Labour Court whether to order reinstatement  of the  workman or  not.’ We  have  our serious reservations  about the  statement of  law but it is not necessary  to deal  with it  in the present case because instead of  granting reinstatement  ,   we propose  to award adequate compensation taking into account both the backwages as well as compensation in lieu of reinstatement.      The Labour  Court  while  proceeding  to  quantify  the compensation observed  that ’the  termination of services of the two workmen was bonafide and not a colorable exercise of power  in   accordance  with  the  service  rules  and  then proceeded to award one year’s wages as compensation’ for the failure of  the employer  to comply with the requirements of provisions contained  in Sec.  25F of  the Act.  The workmen have filed this appeal by special leave.      Ordinarily where the termination of service is found to be 626 bad and  illegal ,   in  the field of industrial relations a declaration follows  that the  workman continues  to  be  in service and  has to  be  reinstated  in  service  with  full backwages (See Hindustan Tin Works Pvt. Ltd. v. Employees of Hindustan Tin  Works Pvt.  Ltd.(1). The  Labour Court  has , however ,   the  discretion to award compensation instead of reinstatement if  the circumstances of a particular case are unusual or  exceptional  so  as  to  make  reinstatement  in expedient or  improper.(See  M/s  Hindustan  Steels  Ltd.  , Rourkela v. A.K. Roy & Ors.(2).      In the  present case  ,   the Labour  Court having held that the  termination of  services of  the appellants  would constitute retrenchment and as the pre-requisite for a valid retrenchment having not been satisfied ,  the termination of service was  bad ,   yet  in the  facts of  the case  in his discretion declined  to grant  the relief  of reinstatement. Whenever ,   it is said that something has to be done within the discretion  of the  authority then that something has to be done according to the rules of reason and justice and not according to  private opinion  ,   according to  law and not humour. It  is to be not arbitrary ,  vague and fanciful but legal and  regular and it must be exercised within the limit to which  an honest men to the discharge of his office ought to find himself. (See Sharp v. Wekfield(3). Discretion means sound discretion  guided by  law. It  must be  governed by , rule ,   not  by humour ,  it must not be arbitrary ,  vague and fanciful.  (See S.D.  Jaisinghani v.  Union of  India  & Ors.(4).      The Labour Court while declining to grant the relief of reinstatement  which   should  have  ordinarily  followed  ,

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consequent upon  its finding that the termination of service was bad and illegal ,  in exercise of its discretion awarded one year’s wages as compensation in lieu of reinstatement on the ground  that ’the  termination of service of each of the appellant was bonafide and not a colorable exercise of power in accordance  with service  rules.’ There  is thus an error apparent on the face of the record of the case in as much as if the termination of service was according to service (1) [1979] 1 SCR 563. (2) [1970] 3 S.C.R. 343. (3) 11891] A.C. 173. (4) 11967] 2 S.C.R. 703 , 627 rules and  Was bonafide  it could not be simultaneously held to be  illegal and  invalid. Therefore  the  discretion  was exercised on  irrelevant and  extraneous  considerations  or considerations  not  germane  to  the  determination.  As  a necessary corollary  ,   we would  have granted  the  normal relief of reinstatement.      Dr. Chitley  ,   learned counsel  who appeared  for the respondents attempted to take us through the evidence with a view to  persuading us  that the  employer even  if it acted contrary to law ,  should not be burdened with reinstatement because it  had  lost  confidence  in  the  appellants.  The employer is  a foreign  air-transport company.  The  workmen were loaders  posted at  Delhi Airport.  In this far-fetched hierarchical relationship  ,  loss of confidence if it is to be considered  a relevant factor would have hardly impressed us. However  ,  as the workmen are out of job from August 30 ,   1973 i.e.  roughly for  a period of 12 years ,  it is in their own  interest ,   that  instead  of  reinstatement  in service under  an  unwilling  if  not  a  hostile  employer. adequate  compensation  would  meet  the  ends  of  justice. Therefore ,   in the special facts and circumstances of this case ,   though  disagreeing with  tile reasons given by the Labour Court  for declining  to grant  the normal  relief of reinstatement  ,     we  uphold  the  same  but  the  meagre compensation awarded  by the  Labour Court namely one year’s E. wages requires to be adequately and properly modified.      Dr. Chiley  gave us  information about  the last  wages drawn by  each of  the workmen.  That does  not take care of over-time allowance  or bonus  or other  benefits that  they enjoy. Roughly  ,   the monthly  pay packet  of each workman appears to  be around  Rs. 1,000.  Each one  of them  was  a loader which  means doing 1’ manual job. Each one of them is entitled to backwages in full for a period of 12 years. Each one was therefore entitled to get Rs. 1,50,000 towards back- wages.  Adding   to  it   the  compensation   in   lieu   of reinstatement in  the amount  of Rs.  50,000, we  are of the opinion that  a total  compensation in  the  amount  of  Rs. 2,00,000 to each appellant would meet the ends of justice.      Before we  conclude this  judgment ,   we would like to make it  abundantly  clear  that  the  compensation  of  Rs. 2,00,000 [I awarded to each appellant includes backwages for a period of 628 12 years.  Now that the amount is being paid in one lump sum ,   it is likely that the employer may take recourse to Sec. 192 of  the Income  Tax Act ,  1961 which provides that when any person  responsible for  paying  any  income  chargeable under the  head ’Salaries’ shall ,  at the time of payment , deduct income  tax on the amount payable at the average rate of income-tax  computed on  the basis  of the rates in force for the  financial year  in which  the payment is made ,  on the estimated  income of  the assessee  under this  head for

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that financial  year. If  therefore the employer proceeds to deduct the  income tax  as provided  by Sec. 192 ,  we would like to  make it  abundantly clear that each appellant would be entitled  to the  relief under  Sec. 89 of the Income Tax Act which provides that where ,  by reason of any portion of assessee’s salary  being paid in arrears or in advance or by reason of  his having  received in  any one  financial  year salary for  more than 12 months or a payment which under the provisions of  clause (3)  of Section 17 is a profit in lieu of salary  ,   his income  is assessed at a rate higher than that it would otherwise have been assessed ,  the Income-tax Officer shall  on an  application made to him in this behalf grant such  relief as  may  be  prescribed.  The  prescribed relief is  set out  in Rule  21(A) of  the Income-tax Rules. Both the appellants are entitled to the relief under Sec. 89 because compensation  herein awarded  includes salary  which was in arrears for 12 years and it is being paid in one lump sum under  the orders of this Court. Therefore ,  the salary has to  be spread  over for a period of 12 years as also the compensation in  lieu of reinstatement and the relief should be given  as provided  by Sec. 89 of the Income-tax Act read with Rule 21(A) of the Income-tax Rules. Both the appellants are entitled to the same. If any application is necessary to be made  ,   the same may be made to the competent authority and the  respondent-employer shall  assist the appellants in each case for obtaining the relief.      When the  hearing concluded  and we  indicated that  we were inclined  to award  compensation for  backwages and  in lieu of reinstatement ,  we requested Shri S.R. Srivastava , learned counsel for the appellants to give us in a tabulated form the  compensation to  which  each  appellant  would  be entitled with  a spread  over from  the date of the order of termination of service till the end of the present year. The tabulations have  been supplied  in respect  of each  of the appellants. We have gone through the tabulations and 629 we are  satisfied that  they represent  the correct state of affairs and  they are  taken on record and are being treated as part of this judgment.      Accordingly ,   this  appeal is  partly allowed and the award giving one year’s wages as compensation is modified to the effect  that each  appellant should be paid Rs. 2,00,000 as and  by way  of  backwages  and  in  lieu  of  relief  of reinstatement. As  we have  awarded adequate  compensation , it is not necessary to award costs. We order accordingly. A.P.J.                                Appeal partly allowed. 630