Holding

The Supreme Court held that forfeiture of 50% back wages was not an adequate punishment for the serious misconduct and that no back wages should be awarded, with the burden of proving lack of gainful employment resting on the employee.

Summary

The respondent, a peon employed since 1974, was dismissed in 1984 for multiple instances of misconduct including unauthorized absences, late attendance, leaving the premises without permission, and falsifying the muster roll. He sought reinstatement with continuity of service and full back wages before the Labour Court, which, finding the dismissal disproportionate, ordered reinstatement with 50% back wages; this order was upheld by the appellate authority and the High Court. On appeal, the Supreme Court examined whether forfeiture of 50% back wages constituted an adequate punishment for the serious misconduct and whether the employer bore the burden of proving the workman was not gainfully employed under Section 106 of the Evidence Act. The Court held that the misconduct was grave, the forfeiture of half the back wages was not a sufficient penalty, and no back wages should be awarded. It also clarified that the initial burden to show lack of gainful employment rests on the employee, not the employer, and that the evidence of the respondent running a footwear shop did not justify a reduced award. Consequently, the High Court judgment was modified, and the appeal was partly allowed with no back wages granted.

Issues considered

Whether dismissal of the workman for the alleged misconduct was a grossly disproportionate punishment warranting an award of back wages.
Whether forfeiture of 50% of back wages constitutes an adequate punishment in view of the seriousness of the misconduct.
Who bears the burden of proof to establish that the workman was not gainfully employed under Section 106 of the Evidence Act.
Whether the respondent's alleged gainful employment (running a footwear shop) affects his entitlement to back wages.

Legislation cited

Subjects

back wagesdismissaldisproportionate punishmentburden of proofgainful employmentindustrial disputelabour courtreinstatementmisconduct

Judgment

[2008) 15 S.C.R. 446

A . M.0. BALASAHEB DESAI SAHAKARI S.K. LTD.
v.
KASHINATH GANAPATI KAMBALE
(Civil Appeal No. 7249 of 2008)
DECEMBER 12:, 2008
B
[S.B. SINHA AND CYRIAC JOSEPH, JJ.]

Labour laws: Back wages - Workman found guilty of
indiscipline at work place, unautf10risedly absent without
c leave, misbehaviour with superiors, leaving place of work early
withoutpermission - Dismissal from service - Award of re-
instatement with 50% back wages - Held: Since charges were
serious in nature, forfeiture of Sb% back wages- was not
adequate punishment- No back wages awarded in his favour.
D Industrial Disputes Act, 1947: s.11A - Power under -
Scope of. 1

Evidence Act, 1872: s.106 - Burden of proof of gainful
employment - Held: Is on workmap. t
I
•'
Respondent-workman was found guilty of
E misconduct including being absent without leave, late
attendance and for leaving the work place without
permission etc. A departmental proceeding was held and
he was dismissed from servicei He filed an application
praying for re~instatement with continuity of service and
F full back wages. Before labour court, appellant-employer
examined several witnesses to e,stablish that respondent
was running a footwear shop. ' +
Labour court, while holding ithat the respondent. was
found guilty of committing the ,misconduct, passed an
G award of re-instatement with continuity of service with
50% back-wages on the .premise that the punishment of
termination from service was disproportionate to the
charges of misconduct leveHed against him. The
appellate authority upheld th~ order of labour court.
+
H 446
M.D. BALASAHEB DESAI SAHAKARI S.K. LTD. v. 447
KASHINATH GANAPATI KAMBALE

Appellant filed writ petition before High Court. It held that A
labour court and appellate authority were right in holding
that the lesser punishment of forfeiture of 50% of back
wages was adequate punishment and accordingly
dismissed the writ petition. Hence the present appeal.
Partly allowing the appeal, the Court B
HELD: 1. The labour court while exercising its
jurisdiction under Section 11A of the Industrial Disputes
)':.- Act is entitled to consider as to whether the punishment
awarded is wholly disproportionate to the delinquent
employee or not However, the discretion vested in it must
be exercised in a judicious manner. The labour court
c
ordinarily should not interfere with the discretion
exercised by the employer unless the same is found to
be inconsistent with the provisions of a statute or
otherwise perverse or unjust. It may be true that in terms
D'
of the Model Standing Order framed under the Industrial
Employment Standing Orders Act, 1946, ordinarily fine for
+
~.
wrongful absence was to be imposed but in this regard
the number of o·ccasions on whiCh the workman had
remained on unauthorized absence was also required to
be taken into consideration. In the instant case, apart from E
remaining· unauthorizedly absent without leave, the
respondent was found guilty of indiscipline at the work
place, misbehaviour with his superiors, leaving place of
work early without permission and without leave, signing
the muster for showing presence although he was F'
~
absent. Forfeiture of 50% back wages, thus, was not an
~ adequate punishment. In a case of such nature, he should
have been awarded some punishment in lieu of the order
of dismissal. [Paras 15 and 16] (453-D-G; 454-A]
2. Having regard to the principles contained in G'
Section 106 of the Evidence Act, the burden of proof to
show that the workman was not gainfully employed is not
on the employer. In this case, the burden of proof had
wrongly been placed upon the appellant-employer. Some
materials were brought on record to show that the H,
448 SUPREME COURT REPORTS [2008] 17 S.C.R.

A respondent was gainfully employed. The evidence
adduced by the appellant on· that behalf, were not
considered on its proper perspective. The Industrial r
Court while holding that no licence is necessary to run a \-

, footwear shop in a small town committed a serious
B
illegality in arriving at his finding that the respondent t
must have been doing so, to meet his both ends. It may
be correct that a person cannot afford to remain ....
unemployed for a long time, but for arriving at a ~
,'-

conclusion that the respondent~was gainfully employed -~

or not, a large number of factors are required to be taken ~
c into consideration ..[Paras 12 and 14] [452..C; 453..a..c]
U.P. State Brassware Corpn. L.td. v. Uday Narain Pandey I-
(2006) 1 sec 479, relied on. "
3. No back-~ages should have been awarded in
favour of the respondent. A sum of Rs.60,000/- has
D alrea~y been paid to the respondent. It is, therefore,
~:~
directed that any amount paid to the respondent, if any,
shall not be recovered. The impugned judgment of the - +,..
High Court is modified to that extent. ·(Paras 18 and 19]
[454-E-G]
E
U.P. SRTC v. Mitthu Singh (2006) 7 sec 180, relied on.
Case Law Reference:
(2006) 1 sec 479 relied on Para 13 '
(2006) 7 sec 180
'
relied
i
on Para 17 ~

CIVIL ,A.PPELLATE JURISqlCTION : Civil Appeal No. I;-
F
7249 of 2008. _.4.
l
From the final Judgment and Order dated 23.4.2007 of the • l•
High Court of Judicature at Bombay in Letters Patent Appeal
·No. 62 of 2007.
G Shivaji M. Jadhav for the Appellant.
Manish Pita le, Vinay Navare iand Abha R. Sharma for the
Respondent.
I

The Judgment of the Court 'fas delivered by
+-
,
'-
H S.B. SINHA, J. 1. Leave granted.

-
M.D. BALASAHEB DESAI SAHAKARI S.K. LTD. v. 449

--
;
KASHINATH GANAPATI KAMBALE [S.S. SINHA, J.]

2. Appellant herein· is a Cooperative Society. It runs a A,
sugar factory. Respondent was appointed as a peon in July
...,-
1974. On or about 1.12.1983, a show cause notice was issued
seeking an explanation from him as regards some alleged
misconduct on his part. He was placed under suspension. A
charge sheet dated 29.12.1983 was issued against him, inter B
alia, in respect of the following charges:
"(i) Late attendance between 2. 7 .1983 to 20.12.1983
~
on 16 occasions.
(ii) Absence without leave between 6.10.1983 to
22.12.1983 for 20 days. c
(iii) Leaving the place of work without permission and
-· without seeking leave and attempt to obtain wages
between 23rd to 30th November, 1983.
(iv) Leaving premises without permission and leave
between 2.12.1983 to 20.12.1983 on 6 occasions. D
(v) Signing the muster without remaining present and
;.
)..
attempting to seek wages between 16.9.1983 to
16.11.1983 for 9 days.
(vi) Signing the muster for showing presence on
E
1.12.1983 on next day.
(vii) Disobeying order of Shri Mahadik regarding
storage of water on 12.12.1983, refusing to deliver
letter as directed by Shri Chavan clerk on
19.12.1983 not attending the,office on 14.12.1983 F.
... though asked to attend for the purpose of audit."

• 3. A departmental proceeding was held in which he was
found guilty of the said charges. He was dismissed from
services by the appellant by an order dated 5.7.1984.
Respondent filed an Application under Sections 78 of the GI
Bombay Industrial Relations Act, 1946 before the Labour
Court, Sangli praying for his reinstatement with continuity of
._... service and full ba.cl~ wages, which was registered as B.l.R. No .
..... 16 of 1984 .
4. A preliminary issue as regards validity or otherwise of H
e
-
'F-
450 SUPREME COURT REPORTS [2008] 17 S.C.R. I
\

A the said disciplinary proceeding, wllich appears to have been
decided against the respondent, had been framed.
r
Apart from the said preliminary issue, the Labour Court
framed the following issues:
"1. ·whether the applicant proves that the opponent
B terminated him from service illegally and
wrongfully?
2. Whether the enquiry c<i>nducted
I
by the opponent
41,.
against the applicant is legal proper and valid?

c 3. Whether the termination of the employment is a
grossly disproportionate punishment?
4. Whether the applicant is entitled to reinstatement,
continuity of service anp full back wages?
·-
5. Appellant examined some witnesses to establish that
D the respondent had been running .a footwear shop under the
name and style of Amal Footwear! The Labour Court did not
place any reliance thereupon holding that the appellant had not
produced any licence on record tq show that the respondent
+.....
I
was running the said shop.
E The Labour Court, while holding that the respondent had
been found guilty of committing the misconduct, passed an
award of reinstatement with continuity of service with 50% back-
wages on the premise that the punishment of termination from
service was disproportionate to the charges of misconduct
leveled against him.
F
6. An appeal preferred thereagainst by the.appellant was
+
dismissed. On the question as to whether the respondent was •
gainfully employed or not, the Appellate Authority while holding
that the provisions of Shops and Establishments Act were not
applicable at Patan where the said footwear shop was being
G
run, opined that the Labour Court was correct in denying 50%
of back wages on the premise that the respondent had been
carrying on the said business to meet his both ends. tt was held: -r +
"Moreover, the Respondent1 has produced reasonable · '!".,
evidence to show special circumstances which may justify
H
M.D. BALASAHEB DESAI SAHAKARI S.K. LTD. v. 451
KASHINATH GANAPATI KAMBALE [S.B. SINHA, J.]

denial of 50% of back wages. In these circumstances, I find A
no reason to allow full back wages to original petitioner in
his appeal. Consequently, I hold that the labour court was
correct in awarding 50% back wages."
7. A writ petition filed by the appellant was dismissed by
a learned single judge of the Bombay High Court stating: B
" .... .The Labour Court, in exercise of its jurisdiction under
this Section, has concluded that the punishment imposed
was disproportionate. Both, the Labour Court and the
Industrial Court were of the opinion that a lesser
punishment of forfeiture of part of the back wages was the c

-· punishment which was adequate. Both the courts below
have exercised their discretion fairly and judiciously.
9. In my view, therefore, there is no need to interfere with
the orders of the Courts below."
\

8. By reason of the impugned judgment, an intra court D
appeal preferred by the appellant has been dismissed.
-,..+ Hence this Appeal by special leave.
9. A notice was issued by this Court only on the quantum
of back wages.
E
10. Mr. Shivaji M. Jadhav, learned counsel appearing on
behalf of the appellant would submit that the Industrial Court as
also the High Court committed a serious error in granting
reinstatement with continuity of service and half back wages in
favour of the respondent by wrongly placing the onus of proof
t on the appellant. Leaned counsel would contend that it is now F
..... well settled that back wages ought not to be automatically
granted and keeping in view of the fact that the services of the
respondent were terminated in the year 1984 and the award
of the labour court having been rendered in the year 1991, the
grant of 50% back wages was wholly unjustified. G
11. Mr. Vinay Navare, learned counsel appearing on behalf
..... of the respondent, on the other hand, would support the

- impugned judgments contending that in terms of the provis.ions
of the Industrial Employment Standing Orders Act, .1946 only a
H
452 SUPREME COURT REPORTS [2008] 17 S.C.R.
e
I
~

A fine could be imposed on the r~spondent for his alleged
unauthorized absence. Our attention was further drawn to the
fact that while passing the order of termination, records of past
service of the respondent had not been taken into
consideration.
B 12. Charges against the respondent as noticed
hereinbefore were serious in natur~. During the period between
July 1983 and December 1983, he not only absented himself
from work without leave but also had been reporting to the work
place late and leaving factory p,remises without permission
early. He was also found guilty of indiscipline.
c
It is now well settled by a cat~na of decisions of this Court
.....
that having regard to the principles.contained in Section 106
of the Indian Evidence Act the burden
I
of proof to show that the
workman was not gainfully employed is not on the employer. In
this case, the burden of proof had wrongly been placed upon
D
the appellant.
1

. .

13. This Court in U.P. Stat~ Brassware Corpn. Ltd. vs. +....
Uday Narain Pandey [(2006) 1 SCC 479] held:
61. It is not in dispute that the Respondent did not raise
E any plea in his written statement that he was not gainfully
employed during the said period. It is now well-settled by
various decisions of this Court that although earlier this
Court insisted that it was for the employer to raise the
aforementioned plea but having regard to the provisions
F
of Section 106 of the Indian 'Evidence Act or the provisions
analogous thereto, such a plea should be raised by the _,
workman. I .....
.62. In Jf.endriya Vidyalaya Sangathan v. S.C. Sharma
[(2005) 2 sec 363], this Court held: (SCC p. 366, para
.. v
16)
G I

" ... When the question of determining the entitlement of a
person to back wages is cqncerned, the employee has to _,..
show that he was not gainfully employed. The initial burden
is on him. After and if he places materials in that regard, ~
the employer can bring on record materiats to rebut the
H
M.D. BALASAHEB DESAI SAHAKARI S.K. LTD. v. 453
KASHINATH GANAPATI KAMBALE [S.B. SINHA, J.]

claim. In the instant case, the respondent had neither A
~- p1eaded nor placed any material in that regard."
{See also Allahabad Jal Sansthan vs. Daya Shankar Rai
[(2005) 5 sec 124], para 6}"
14. Furthermore, some materials had been brought on
record to show that the respondent was gainfully employed. The
BI
evidence adduced on behalf of the appellant in that behalf, in
our opinion, had not been considered on its proper perspective.
The Industrial Court while holding that no licence is necessary
to run a footwear shop in a small town committed a serious
illegality in arriving at his finding that the respondent must have c
been doing so, to meet his both ends. It may be correct that a
person cannot afford to remain unemployed for a long time but
for arriving at a conclusion that the respondent was gainfully
employed or not, a large number of factors are required to be
taken into consideration. D
15. Indisputably, the labour court while exercising its
+ jurisdiction under Section 11 A of the Industrial Disputes Act was
)
entitled to consider as to whether the punishment awarded is
wholly disproportionate to the delinquent employee or not but
it is well known that the discretion vested in it must be exercised E
in a judicious manner. The Labour Court ordinarily should not
interfere with the discretion exercised by the employer unless
the same is found to be inconsistent with _the provisions of a
statute or otherwise perverse or unjust. It may be true that in
terms of the Model Standing Order framed under the Industrial
F
Employment Standing Orders Act, 1946, ordinarily fine for

- i>
wrongful absence was to be imposed but in this regard the
number of occasions on which the workman had remained on
unauthorized absence was also required to be taken into
consideration. In this case, apart from remaining unauthorizedly
absent without leave, the respondent had been charged with G
indiscipline at the work place. He not only was found guilty of
remaining unauthorizedly absent but also guilty of misbehaviour
-+
- with his superiors, leaving place of work early without
permission and without leave, signing the muster for showing
presence although he was absent. H
A
454 SUPREME COURT REPORTS [2008) 17 S.C.R.

16. Forfeiture of 50% back wages, in our opinion, thus, was
- --~

not an adequate punishment. In a case of this nature, he should --;.
have been awarded some punishment in lieu of the order of
dismissal and furthermore the question as to whether the
respondent was entitled to the full back wages or not should
B have been considered on the basis of the materials brought on
record by the parties.
17. We may notice that in U.P. SRTC vs. Mitthu Singh
((2006) 7 SCC 180], this Court has held: ~
~ f ••

·.· "12. Since limited notice !was issued with regard to
c payment of back wages, Wf3 do not enter into the larger
question whether the action' of terminating the services of
the respondent was legal, p:roper and in consonance with
law. Bu~ we are fully satisfied that in the facts and -
circumstances of the case,1 back wages should not have
D been awarded to the respondent workman. In several
cases, this Court has held that payment of back wages is
a discretionary power which has to be exercised by a -+
court/tribunal keeping in view the facts in their entirety and ..(
neither straitjacket formul~ can be evolved nor a rule of
universal application can be laid down in such cases."
E
18. We are, therefore, of the opinion that in this case, no
back-wages should have been awarded in favour of the
respondent.
We have been, however, i.nformed by the Bar that a sum
F of Rs.60,000/- has already been paid to the respondent. It is,
therefore, directed that any aniount paid to the respondent, if
any, shall not be recovered.
I
..
-i·

19. For the aforementioned reasons, the impugned
judgment of the High Court is r;nodified to the aforementioned
G extent. The appeal is allowed in part. There shall, however, .be
no order as to costs.
D.G. Appeal partly allowed.
-}-

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