M/S P.V.K. DISTILLERY LTD.versusMAHENDRA RAM

                         [2009] 3 S.C.R. 896

                                                                             ---
A                   M/S P.V.K. DISTILLERY LTD.
                                  \I.
                          MAHENDRA RAM
                                                                             ...
                   (Civil Appeal No.1349 of 2009)

                          MARCH 2, 2009
B
          [TARUN CHATTERJEE AND H.L. DATTU, JJ.]

         Industrial Disputes Act, 1947:

c       s. 258(2)(a) - Workman - Labour Court holding his
  termination illegal and directing his reinstatement with full
  back wages - High Court declining to interfere - Appeal -
  Notice issued limited to question of 50% back wages - No
  appearance on behalf of workman - HELO: Unjustified and
                                                                             '
D illegal termination of services of workman itself does not
                                                                      '1


  create a right of reinstatement with full back wages - In the
  interregnum employers' factory remained closed for years
  together and ultimately declared as a sick unit -
  Management of factory substituted for its rehabilitation/
  reconstruction - In the circumstances, it would be
E
  unreasonable to put a huge burden on the employers
  requiring them to pay full back wages - Workman shall,
  therefore, be entitled to 50% of the total back wages in terms
  of s. 6-N of the U.P. Industrial Disputes Act, 1947 - U.P.
  Industrial Disputes Act, 1947 - s.6-N.
F                                                                          ....
        P.G.I. of M.E. and Research, Chandigarh v. Raj Kumar
    (2001) 2 SCC 54; Hindustan Motors v. T. K. Bhattacharya
    (2002) 6 SCC 41; UP. State Brassware Corp. Ltd. v. Uday
    Narain Pandey (2006) 1 SCC 479; Haryana Urban
G   Development Authority v. Om Pal (2007) 5 SCC 7 42;
    Western India Match Co. Ltd. v. Third Industrial Tribunal, West
    Bengal 1978 Lab IC 179(SC) Hindustan Tin Works (P) Ltd.           •
    v. Employees (1979) 2 SCC 80; Surendra Kumar Verma v.
    Central Govt. Industrial Tribunal-cum-Labour Court (1980) 4
H                                896
               P.V.K. DISTILLERY LTD. v. MAHENDRA RAM              897

     f
         SCC 443; Allahabad Jal Sansthan v. Daya Shankar Rai              A
         (2005) 5 SCC 124; Madurantakam Coop. Sugar Mills Ltd. v.
         S. Viswanathan (2005) 3 SCC 193, referred to.

                              Case Law Reference:
             (2001) 2 sec 54             referred to          para 10     B

             (2002) 6 sec 41             referred to          para 12
             (2006) 1 sec 479            referred to          para 13
             (2007) 5 sec 742            referred to          para 14     c
              1978 Lab IC 179(SC)        referred to          para 15
             (1979) 2 sec 80             referred to          para 16
             (1980) 4 sec 443            referred to          para 17
                                                                          D
             (2005) 5 sec 124            referred to          para 18
             (2005) 3 sec 193            referred to          para 19

              CIVIL APPELLATE JURISDICTION: Civil Appeal No.1349
         of 2009.                                                         E
               From the Judgment and Order dated 21.05.2007 of the
         High Court of Judicature at Allahabad in Civil Misc. Writ
 ~
         Petition No. 32250 of 1990.

             S.N. Mehrotra, Arun K. Sinha, Rakesh Singh, Sumit Sinha      F
         and Arun K. Sinha for the Appellant.

             The following Order of the Court was delivered :

         Leave granted in the special leave petition.
                                                                          G
             (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

                                                                          H
    898       SUPREME COURT REPORTS                [2009] 3 S.C.R.


A   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 Mis P.V.K. Distillery Ltd. (now rechristened
B as Lords Distillery Ltd.). On 14.8.1982 he was shifted to bottling
  section as a permanent workman by the orders 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-
C 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
D 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
E 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 yea·r, as required by section
F 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.

       (4) In the interregnum, the appellant's factory remained
  closed for years together and ultimately it was declared as a
G 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
H been reinstated with continuity of service and full employment
                P.V.K. DISTILLERY LTD. v. MAHENDRA RAM                  899
      ~

          benefits and back wages. By the impugned order, the High            A
          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 NO. 32/87.
          Aggrieved by the said order, appellant is before us by this
          special leave petition.                                             B
               (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".                                                        c
               (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
                                                                              D
          ordered that two weeks time is granted to the appellant to file
          application for substituted service. Learned counsel for 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
                                                                              E
          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 Labour Court on appreciation
          of evidence on record has rendered a finding that there exists      F
          a master-servant relationship between the employer i.e.
          appellant and Mahendra Ram.

               (9) Section 11 A of Industrial Disputes Act gives power to
          the Labour Courts to give appropriate relief in case of
                                                                              G
          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-
                                                                              H
    900        SUPREME COURT REPORTS                 [2009] 3 S.C.R.


A   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         ,.
8
  awarding full back wages, while directing the employer to re-
  instate the workman in service. 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
C 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.
D 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
E 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
F 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
G High Court to record in the judgment, the reasoning before
  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.
H Bhattacharya, (2002) 6 SCC 41, this court has stated that
          P.V.K. DISTILLERY LTD. v. MAHENDRA RAM                  901


    section 11-A as amended in 1971, is couched in wide and A
    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 B
    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 c
    consideration of the entire matter in the light of the obseNations
    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 seNe
    the ends of justice if the respondent is paid 50% of the back
                                                                         D
    wages till the date of reinstatement.

         (13) In UP. State Brassware Corp. Ltd. v. Uday Narain
    Pandey, (2006) 1 SCC 479, it is obseNed 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 E
    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 indusiry may oot be F
    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 G
    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
                                                              ,         H
    902       SUPREME COURT REPORTS                 [2009] 3 S.C.R.


A 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
B 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
c   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)
D 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
E 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
F
  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 may
  be exceptional circumstances which make it impossible or
  wholly inequitable vis-a-vis the employer and workmen to direct
G 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
H appropriate consequential orders. The court may deny the relief
                P.V.K. DISTILLERY LTD. v. MAHENDRA RAM                   903


    ..,   of reinstatement where reinstatement is impossible because            A
          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.
                                                                                B
               (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
                                                                                c
          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.                D
          Viswanathan, (2005) 3 SCC 193, the quantum of back wages
          was confined to 50%, stating: It 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         E
          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
          Cou"rt be reduced to 50% of the back wages."                          F
                (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              G
          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
                                                                                H
    904       SUPREME COURT REPORTS                [2009] 3 S.C.R.


A 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
B should 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
C 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
D 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
E 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.
F
        (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 by way of arrears of back wages,
  instead of full wages awarded by the Labour Court.
G        (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.
H
                P.V.K. DISTILLERY LTD. v. MAHENDRA RAM                905


    .J        (24) The appellant is directed to calculate 50% of the total   A
         back wages payable during the aforesaid period and to deposit
         the same in the Labour Court, Nati lmli, Varanasi, U.P. within
         6 weeks from the date of the order. Labour Court, Nati lmli,
         Varanasi, U.P. is further directed to deposit the said amount
         in a fixed deposit in a nationalized bank within two weeks          B
         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               c
         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 should be handed over to the District Legal Service
         Authority with interest.                                            o
              (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.

         RP .                                     Appeal partly allowed.     E




•