REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.1349  OF 2009 (Arising out of SLP(C) No. 595 of 2008)

M/s P.V.K. Distillery Ltd.                                                          ……….Appellant

Versus

Mahendra Ram                                                                    ……..Respondent

ORDER  

Leave granted in the special leave petition.

1)This appeal is directed against the judgment and order passed by the

High  Court  of  Judicature  at  Allahabad  in  Civil  Miscellaneous  Writ

Petition No. 32250 of 1990 dated 21.5.2007.

2)The facts in nutshell  are as follows: the respondent,  Mahendra Ram,

was recruited on casual basis some time in the year 1981 in M/s P.V.K.

Distillery Ltd. (now rechristened as Lords Distillery Ltd.). On 14.8.1982

he was shifted to bottling section as a permanent workman by the orders

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of the General Manager. On 19.1.1985 services of the respondent were

terminated by an oral order from the employer. Aggrieved by the said

order,  respondent went before the Labour Court inter-alia alleging that

he  was  employed  in  the  establishment  of  the  employer  and  that  his

services  were terminated orally in an unjustifiable and illegal  manner.

Appellants on the other hand contended, that, respondent was engaged

by Gaya Singh Yadav, contractor and therefore respondent was never in

their  employment  and  thus  master-servant  relationship  never  existed

between them.  

3)Labour  Court  after  considering  and  appreciating  the  oral  and

documentary evidence on record, has come to the conclusion, that, the

respondent,  Mahendra Ram, was in the continuous employment of the

establishment  since  1980  and  the  employer  unjustifiably and illegally

terminated  workman’s  services  from 19.1.1985.  The  labour  court  has

also come to the conclusion that the respondent–workman  has worked

for more than 240 days in a calendar year, as required by section 25B(2)

(a)  of  Industrial  Disputes  Act,  1947,  and  therefore  he  is  entitled  for

reinstatement  with  continuity  of  service  and full  employment  benefits

and back wages.  

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4)In the interregnum,  the appellant’s factory remained closed for years

together and ultimately it was declared as a sick unit. Management of the

company  was  substituted  with  the  present  management  for  its

rehabilitation/reconstruction.

5)Appellant then went before the High Court challenging the validity and

legality of  the award by which the workman has been reinstated with

continuity of service and full employment benefits and back wages. By

the impugned order, the High Court has stated that there is no reason to

doubt the findings given by the Labour Court and declined to interfere

with  the  award  passed  by the  Labour  Court  in  Adj.  Case  N0.  32/87.

Aggrieved by the said order, appellant is before us by this special leave

petition.

6)Notice was ordered to be issued to the respondent on 25.1.2008.  The

order reads :

“Issue notice to the limited to the question of 50% back wages”.

7)Pursuant  to the order passed by this  Court,  notice was issued to the

respondent to the address furnished in his claim statement filed before

the Labour Court. Since the same was returned unserved, the Registrar of

this  Court  on 7.8.2008 ordered that  two weeks  time is  granted to  the

appellant to file application for substituted service. Learned counsel for

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the appellant on 20.8.08 filed an application for substituted service by

way of publication in the newspaper. In spite of such publication,  the

respondent has not appeared before this court either in person or through

his learned counsel. Therefore we are deciding this appeal after hearing

the learned counsel for the appellant.  

8)In the instant appeal, the Labourt Court on appreciation of evidence on

record  has  rendered  a  finding  that  there  exists  a  master-servant

relationship between the employer i.e. appellant and Mahendra Ram.

9) Section  11A of  Industrial  Disputes  Act  gives  power  to  the  Labour

Courts to give appropriate relief in case of discharge and dismissal of a

workman in exceptional circumstances. Labour Court after appreciating

the  facts  and  evidence  on  record  has  rightly  held  that  services  of

respondent  have  been  unjustifiably  and  illegally  terminated  by  the

appellant without complying with the procedure prescribed in Section 6-

N  of  the  U.P.  Industrial  Disputes  Act,  and  accordingly  has  directed

reinstatement  of  respondent  in  service  with  all  other  service  and

monetary benefits.  

10)The only question which requires to be considered by us in this appeal

is, whether the Labour Court was justified in awarding full back wages,

while  directing  the  employer  to  re-instate  the  workman  in  service.

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Learned counsel for the appellant in this regard contends that the High

Court has acted erroneously by declining to interfere with the award of

the Labour Court. He would urge that the grant of relief of reinstatement

and  back  wages  is  not  automatic  in  all  matters  arising  under  the

provisions  of  Industrial  Disputes  Act.  He  would  also  urge  that  the

appellant  will  suffer  irreparable  loss  and injury, if  it  has  to  employ a

contractor workman on its rolls with full back wages even for the period

when the establishment was closed. In support of his arguments, reliance

is placed on the observations made by this court.  

11)In the case of P.G.I. of M.E. and Research, Chandigarh v. Raj Kumar,

(2001) 2 SCC 54, this court has held that the payment of back wages

having a discretionary element involved in it, has to be dealt with, in the

facts and circumstances of each case and no straight-jacket formula can

be  evolved,  though,  however,  there  is  statutory  sanction  to  direct

payment of back wages in its entirety. The issue as raised in the matter of

back wages has been dealt with by the Labour Court in the manner as

above having regard to the facts and circumstances of the matter in the

issue, upon exercise of its discretion and obviously in a manner which

cannot but be judicious in nature. There exists an obligation on the part

of  the  High  Court  to  record  in  the  judgment,  the  reasoning  before

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however denouncing a judgment of an inferior Tribunal, in the absence

of  which,  the  judgment  in  our  view  cannot  stand  the  scrutiny  of

otherwise being reasonable.  

12)In the case of Hindustan Motors v. T. K. Bhattacharya, (2002) 6 SCC

41,  this  court  has  stated  that  section  11-A  as  amended  in  1971,  is

couched in wide and comprehensive terms. It vests a wide discretion in

the Tribunal in the matter of awarding proper punishment and also in the

matter  of  the  terms  and  conditions  on  which  reinstatement  of  the

workman should be ordered. It necessarily follows, that, the Tribunal is

duty-bound to consider whether in the circumstances of the case, back

wages have to be awarded and if so, to what extent. Court then held that

Industrial  Tribunal  and  Division  Bench  of  High  Court  erred  in

proceeding on the assumption that quashment of dismissal order should

be followed by reinstatement with full back wages as a matter of course.

On consideration  of  the entire  matter  in  the  light  of  the  observations

referred to supra in the matter of awarding back wages, we are of the

view that in the context of the facts of this particular case including the

vicissitudes of long-drawn litigation, it will serve the ends of justice if

the  respondent  is  paid  50%  of  the  back  wages  till  the  date  of

reinstatement.

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13)In  U.P.  State  Brassware  Corp.  Ltd.  v.  Uday  Narain  Pandey,

(2006) 1 SCC 479, it  is observed that the person is not entitled to get

something only because it would be lawful to do so. If that principle is

applied,  the  functions  of  an  Industrial  Court  shall  lose  much of  their

significance. Although direction to pay full back wages on a declaration

that the order of termination was invalid used to be the usual result but

now, with the passage of time, a pragmatic view of the matter is being

taken by the court realizing that an industry may not be compelled to pay

to the workman for the period during which he apparently contributed

little  or  nothing  at  all  to  it  and/or  for  a  period  that  was  spent

unproductively as a result whereof the employer would be compelled to

go back to a situation which prevailed many years ago, namely, when the

workman was retrenched.

14)In  the  case  of  Haryana  Urban  Development  Authority  v.  Om Pal,

(2007) 5 SCC 742, it is stated that, it is now also well-settled that despite

a wide discretionary power conferred upon the Industrial  Courts under

Section 11A of the 1947 Act, the relief of reinstatement with full back-

wages  should  not  be  granted  automatically  only  because  it  would  be

lawful  to  do  so.  Grant  of  relief  would  depend  on  the  fact  situation

obtaining in each case. It will depend upon several factors; one of which

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would  be  as  to  whether  the  recruitment  was  effected  in  terms of  the

statutory provisions operating in the field, if any.

15)In  deciding  the  question,  as  to  whether  the  employee  should  be

recompensed with full back wages and other benefits until  the date of

reinstatement, the tribunals and the courts have to be realistic albeit the

ordinary rule of full back wages on reinstatement. [Western India Match

Co.  Ltd.  v.  Third Industrial  Tribunal,  West Bengal,  1978 Lab IC 179

(SC).]

16)In Hindustan Tin Works (P) Ltd. v. Employees, (1979) 2 SCC 80, this

Court has held that the relief of reinstatement with continuity of service

can be granted where termination of service is found to be invalid. It,

therefore, does not lay down a law in absolute terms to the effect that the

right to claim back wages must necessarily follow an order declaring that

the termination of service is invalid in law.

17)In  the  case  of  Surendra  Kumar  Verma  v.  Central  Govt.  Industrial

Tribunal-cum-Labour Court, (1980) 4 SCC 443, this Court has observed

that  the  plain  common  sense  dictates  that  the  removal  of  an  order

terminating  the  services  of  workmen  must  ordinarily  lead  to  the

reinstatement  of the services of the workmen. It  is  as if the order has

never been, and so it must ordinarily lead to back wages too. But there

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may be exceptional circumstances which make it impossible or wholly

inequitable vis-à-vis the employer and workmen to direct reinstatement

with full back wages. For instance, the industry might have closed down

or might be in severe financial doldrums; the workmen concerned might

have secured better or other employment elsewhere and so on. In such

situations,  there  is  a  vestige  of  discretion  left  in  the  court  to  make

appropriate  consequential  orders.  The  court  may  deny  the  relief  of

reinstatement where reinstatement is impossible because the industry has

closed down. The court may deny the relief of award of full back wages

where that would place an impossible burden on the employer. In such

and other exceptional cases the court may mould the relief.

18)In Allahabad Jal Sansthan v. Daya Shankar Rai, (2005) 5 SCC 124,

this Court has observed: A law in absolute terms cannot be laid down as

to in which cases, and under what circumstances, full back wages can be

granted or denied. The Labour Court and/or Industrial  Tribunal before

which industrial dispute has been raised, would be entitled to grant the

relief having regard to the facts and circumstances of each case. For the

said purpose, several factors are required to be taken into consideration.  

19)In Madurantakam Coop. Sugar Mills Ltd. v. S. Viswanathan, (2005)

3 SCC 193, the quantum of back wages was confined to 50%, stating: It

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is  an undisputed  fact  that  the  workman had since attained  the  age of

superannuation and the question of reinstatement does not arise. Because

of  the  award,  the  respondent  workman  will  be  entitled  to  his  retiral

benefits  like  gratuity,  etc.  and  accepting  the  statement  of  the  learned

Senior Counsel for the appellant Mills that it is undergoing a financial

crisis, on the facts of this case we think it appropriate that the full back

wages  granted  by  the  Labour  Court  be  reduced  to  50%  of  the  back

wages.”

20)In the instant case, the notice had been issued limiting the question to

the payment of 50% of the total back wages.  This does not mean that the

respondent  is  not  entitled to  further relief.  The point  that  his  services

were terminated in the year 1985 and since then the case is pending for

the last two decades in different courts also  has no relevance, since he

had approached the court  within a reasonable time. It is not his fault that

the case is  still  pending before the court.  These grounds could not  be

held against him for denying the relief of back wages otherwise he would

suffer  double  jeopardy of  losing  back wages  and delay in  getting  the

reinstatement  for  no fault  of his.  Therefore,  it  would have been more

enlightening, had the High Court reasoned out as to why the appellant

should reinstate the respondent with full employment benefits and should

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pay full back wages to him for nothing in return from him in terms of

work, production etc.

21)Giving  a  realistic  approach  to  the  matter  and  in  spite  of  all  these

circumstances we are restricting ourselves to the question of 50% of the

total  back  wages.  Although  services  of  the  respondent  have  been

terminated unjustifiably and illegally, it itself does not create a right of

reinstatement  with full  employment benefits and full  back wages.  The

notice was issued with a view that the appellant’s factory has been taken

over by a new management altogether and by asking the appellant to pay

full back wages for the long interregnum would be unfair and unjust. The

workman has not entered appearance to justify the award passed by the

Labour Court.  Therefore, in our view, it would be unreasonable to put a

huge burden on the appellant by directing them to reinstate respondent

with  continuity  of  service  and  with  full  back  wages,   because  the

appellant’s factory had been declared sick and remained closed for many

years  and  has  been  assigned  to  a  new  management  led  by  its  Chief

Executive Director, Sri M.K. Pilania in order to rehabilitate/reconstruct

it.  

22)In view of the above discussion, we are of the opinion that it would be

fair and reasonable to direct the employer to deposit 50% of back wages

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by way of arrears of back wages, instead of full wages awarded by the

Labour Court.

23)Accordingly,  the  judgment  and  order  of  the  Labour  Court  and  the

High Court  are set  aside and it  is  declared that  the respondent  herein

shall  be  entitled  to  50% of  the  total  back  wages  payable  during  the

aforesaid period in terms of Section 6-N of the U.P. Industrial Disputes

Act.  

24)The appellant  is  directed  to  calculate  50% of the  total  back wages

payable  during  the  aforesaid  period  and  to  deposit  the  same  in  the

Labour Court, Nati Imli, Varanasi, U.P. within 6 weeks from the date of

the order. Labour Court, Nati Imli, Varanasi, U.P. is further directed to

deposit the said amount in a fixed deposit in a nationalized bank within

two weeks thereafter. If for any reason, the respondent claims the said

amount within two years from the date of deposit of the said amount in

the Labour Court, the Labour Court is directed to take effective steps to

ascertain the identity of the respondent and on determining the same; the

said amount shall be disbursed to the respondent with interest. If for any

reason, respondent does not claim the said amount within two years from

the date of deposit  of the said amount in the Labour Court,  the same

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should  be  handed  over  to  the  District   Legal  Service  Authority  with

interest.   

25)For the reasons aforementioned, the appeal is allowed in part and to

the extent mentioned hereinbefore. However, there shall be no order as

to costs.

                                                                                     …………………………………J.                                                                                        [ TARUN CHATTERJEE ]

                                                                                     …………………………………J.                                                                                        [ H.L. DATTU ] New Delhi, March 02, 2009.

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