Holding

A daily wager does not hold a post; when the scheme or unit is abolished, reinstatement is not granted and only monetary compensation and wages for actual work are awarded.

Summary

Arjunlal Rajak was appointed as a daily‑wage chowkidar by the State of Madhya Pradesh without a written offer or compliance with recruitment rules. He worked in various departments, the last being the production division of the Forest Department, which was later abolished, and his services were terminated without observing the mandatory requirements of Section 25‑F of the Industrial Disputes Act, 1947. The Labour Court ordered his reinstatement with full back wages, a decision upheld by the High Court. On appeal, the Supreme Court held that a daily wager does not hold a post and that when the scheme or unit is abolished, reinstatement cannot be granted; only a modest monetary compensation and wages for the period actually worked are appropriate. Consequently, the awards of the Labour Court and the High Court were set aside and the appeal was allowed.

Issues considered

Whether a daily‑wage worker qualifies as an employee entitled to constitutional protection and the benefits of Section 25‑F of the Industrial Disputes Act.
Whether reinstatement with back wages is available when the unit or scheme in which the worker was employed has been abolished.
Whether the failure to comply with Section 25‑F mandates reinstatement or merely monetary compensation.

Legislation cited

Constitution of Indias. Article 14, s. Article 16, s. Article 309, s. Article 311
Industrial Disputes Act, 1947s. Section 25-B, s. Section 25-F
U.P. Industrial Disputes Acts. Section 6-N

Subjects

labour lawdaily wagerreinstatementback wagesIndustrial Disputes ActSection 25-Fabolition of schemeconstitutional protectionemployment status

Judgment

)·
STATE OF M.P. AND ORS. A
v.
ARJUNLAL RAJAK

FEBRUARY 24, 2006

[S.B. SINHA AND P.K. BALASUBRAMANY AN, JJ.] B

Labour Laws:

Re-instatement-Appointment of incumbent on daily wages-Abolition
of unit in which working and his termination thereof-Re-instatement with c
full back wages as incumbent worked for more than 240 days in a calendar
year-Correctness of-Held: Incumbent being daily wager does not hold
status as an employee-Appointment not made in conformity with
constitutional provisions, incumbent not entitled to the constitutional
protection-For non-compliance of section 25-F workman could be
reinstated with or without back wages, but Scheme being abolished, not
D
·...\
'j entitled to reinstatement-However, monetary compensation is granted to
serve interest ofjustice and also entitled to wages for the period he worked
pursuant to the order of reinstatement-Constitution of India, I950-Article
I 36, 309-Industrial Disputes Act, I947-Section 25-F.

Constitution of India, I950-Article 3I I-Constitutional protection
E
under-Entitlement of-Held: For acquiring status as employees and
constitutional protection, all appointments must be in conformity with the
constitutional Scheme, Rules made in terms of proviso to Article 309 or in
terms of legislative Act-Article 309 proviso and Articles 14 and 15.
~
F
-/ Respondent was appointed by the appellants without giving any offer of
appointment in writing and also the Recruitment Rules were not followed. It is
aUeged that he was engaged in the production division of forest department which
stood abolished. Thereafter, his services were terminated. Respondent challenged
his termination on the ground that he had worked in various departments for
more than 240 days in a year and his services were terminated without complying G
with the mandatory requirements of section 25-F of the Industrial Disputes Act,
> ~
1947. Labour Court directed the respondent to be reinstated with full back wages.
' · High Court upheld the order. Hence the present appeal
Allowing the appea~ the Court
625 H
626 SUPREME COURT REPORTS [2006] 2 S.C.R.

A HELD I.I. A daily wager does not hold a post The Forest Department is a
wing of the State. Its employees hold a status. For acquiring that status and for
obtaining the constitutional protection in terms of Article 311 of the Constitution
of India, all appointments must be made in conformity with the Constitutional
Scheme as laid down under Articles 14 and 16 of the Constitution of India as
well as the Rules made in terms of the proviso to Article 309 of the Constitution
B of India or in terms of a Legislative Act. Concededly, while appointing the
respondent, the constitutional provision or the statutory provisions had not been
followed. The.refore, the righ_ts and liabilities of the parties are to be governed by
the terms' of the contract and/or the provisions of the statute applicable in relation
thereto. [628-E-G]
c 1.2. While terminating the services of the respondent the appellants had
not complied with the mandatory requirements of Section 25-F of the Industrial
Disputes Act and, thus, ordinarily, the workman could have been directed to be
reinstated with or without back wages, but it is also well settled that a project or
a Scheme or an office itself is abolished, relief by way of reinstatement is not
D granted. [628-G-H; 629-A]

1.3. Even for grant of back wages, application of mind on the part of the
Industrial Court is imperative, as a relief of full back wages may not be granted
automatically. (630-C]

E 1.4. In view the fact that the services of the respondent were terminated on
the ground that the production unit in which he was working itself had been closed,
interest of justice would be sub-served if a monetary compensation of Rs. 10,000/
- is granted to him. He would be entitled to the wages for the period he had actually
worked pursuant to or in furtherance of the order of the Labour Court as also of
F the High Court upon his reinstatement. (630-F-GJ

Mahendra L. Jain & Ors. v. Indore Development Authority & Ors., (2005]
1 SCC 639; U.P. State Brassware Corpon. Ltd & Anr. v. Uday Narain Pandey,
(20061 1 sec 479, relied on.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1266 of2006
G
From the Final Judgment and Order dated 4.03.2004 of the Madhya
Pradesh High Court in W.P. No. 599 of 2000. ·" .
B.S. Banthia for the Appellants.
H Mrs. K. Sarada Devi for the Respondent.
STATE OF M.P. v. ARJUNLAL RAJ AK [SINHA, J.] 627
)- The Judgment of the Court was delivered by A
S.B. SINHA, J. Leave granted.

The respondent was appointed as a Chowkidar by the appellants.
Admittedly, no offer of appointment was issued to him nor the recruitment
rules applicable for filling up _of a permanent or temporary post have been B
followed. The appellants contend that the respondent was engaged in the
production division of Forest Department of District Guna which has since
been wound up. His services were thereafter terminated. Contending, inter
alia, that he had worked in different departments of the State from August,
1984 to July 8, 1992, his services were terminated without complying with the
requirements of Section 25F of the Industrial Disputes Act, 1947, a complaint C
petition was filed by the respondent before the Presiding Officer, Labour
Court No. 3, Gwalior. By reason of an award dated 12. 7.1999 on a finding that
the Respondent had worked for more than 240 days in a calendar year and
having regard to the fact that no retrenchment compensation was paid, he
was directed to be reinstated in service with full back wages. D
The Labour Court does not appear to have taken into consideration the
pleas raised by the appellant herein that the production division at Guna was
wound up by an order dated 3. 7 .1992 of the State of Madhya Pradesh, even
while considering the relief which was required to be given in the facts and
circumstances of the case. The High Court on a writ petition filed by the E
appellant although noticed the said fact dismissed the same petition stating:

"Even though on behalf of the employer, statement of one Ashok
Kumar was recorded but the aforesaid witness could not dispute the
fact with regard to working of the employee. On the contrary, the said
witness, in his cross-examination admitted that the certificates have F
been issued to the respondent/employee by the competent authority
of the employer and he had worked for more than 240 days in a
calendar year. Considering the fact that no show cause notice was
issued or retrenchment compens'ation was paid or enquiry was
conducted before terminating the service of respondent/employee, a G
finding has been recorded that the respondent No. I was in employment
since 1.8.1984 and he had completed more than 240 days continuous
service in a calendar year. That being so, in view of the provisions
of Section 25-B of the Industrial Disputes Act, 1947 service of
respondent/employee had been terminated without following the
mandatory provisions of Section 25-F, no show cause notice was H
628 SUPREME COURT REPORTS [2006] 2 S.C.R.

A issued or retrenchment compensation paid to him. Therefore, the
finding recorded is based on appreciation of evidence and material
available on record. The said finding is neither perverse nor warrant
interference in any manner whatsoever by this Court."

Mr. B.S. Banthia, the learned counsel appearing on behalf of the appellants
B would submit that having regard to the fact that the respondent was appointed
on daily wages and the unit in which he was working had been wound up,
the Respondent could not have been directed to be reinstated with full back
wages.

Mrs. K. Sharada Devi, learned counsel appearing on behalf of the
C respondent, on the other hand, would contend that the appellants had not
made out any case before the Labour Court that the respondent was appointed
under a Scheme. He, according to the learned counsel, might have been
shifted from one department to the other but the same would not mean that
he was appointed to work in a particular project/scheme. It was pointed out
D that by reason of the order of reinstatement, the respondent continues to be
a daily wager and there is, thus, no reason as to why after he having been
reinstated and having worked in one or the other department of the State from
2001, this Court should exercise its jurisdiction under Article 136 of the
Constitution of India.

E It is beyond any doubt or dispute that a daily wager does not hold a
post. The Forest Department is a wing of the State. Its employees hold a
status. For acquiring that status and for obtaining the constitutional protection
in tenns of Article 311 of the Constitution of India, all appointments must be
made in confonnity with the Constitutional Scheme as laid down under Articles

F
14 and 16 of the Constitution of India as well as the rules made in tenns of
the proviso to Article 309 of the Constitution of India or in tenns of a .•
Legislative Act. Concededly, while appointing the respondent, the
constitutional provision or the statutory provisions had not been followed.
The rights and liabilities of the parties are, therefore, governed by the terms
of the contract and/or the provisions of the statute applicable in relation
G thereto. The respondent was not given any offer of appointment in writing.
He admittedly worked in different departments of the State. His last posting
was in the production division of Forest Department in the District of Guna
which as noticed above stood abolished. It is, however, true that while
tenninating the services of the respondent the appellants had not complied
H with the mandatory requirements of Section 25-F of the Industrial Disputes
ST ATE OF M.P. v. ARJUNLAL RAJ AK [SINHA, J.] 629

Act and, thus, ordinarily, the workman could have been directed to be A
reinstated with or without back wages, but it is also well settled that a project
or a Scheme or an office itself is abolished, relief by way of reinstatement is
not granted.

The question came up for consideration before a Division Bench of this
Court in Mahendra L. Jain & Ors. v. Indore Development Authority & Ors., B
[2005] I SCC 639 wherein it was categorically held:
~
"This case involves 31 employees. A distinction is sought to be made
by Dr. Dhavan that out of them 27 had been appointed to a project
and not in a project. The distinction although appears to be attractive
at the first blush but does not stand a moment's scrutiny. As noticed c
hereinbefore, the High Court's observation remained unchallenged,
that the project was to be financed by ODA. The project was
indisputably to be executed by the Indore Development Authority;
and for the implementation thereof, the appointments had to be made
by it. If the appellants were appointed for the purpose of the project, D
_, they would be deemed to have been appointed therefor and only
~ because such appointments had been made by the respondent would
by itself not entitle them to claim permanency. The life of the project
came to an end on 30-6-1997. The maintenance job upon completion
thereof had been taken over by the Indore Municipal Corporation.
The appellants were aware of the said fact and, thus, raised an E
alternative plea in their statements of claims. The Labour Court could
not have granted any relief to them as prayed for, as the Indore
Municipal Corporation is a separate juristic person having been created
under a statute. Such a relief would have been beyond the scope and
purport of the reference made to the Labour Court by the State F
~ Government. Furthermore, the Indore Municipal Corporation was not
a party and, thus, no employee could be thrust upon it without its
consent.

In A. Umarani this Court held that once the employees are
employed for the purpose of scheme; they do not acquire any vested G
right to continue after the project is over (see paras 41 and 43 : sec
' ). -i'., paras 55 and 57). (See also Karnataka State Coop. Apex Bank Ltd.
v. Y.S. Shetty and MD., UP. Land Development Corpn. v. Amar
Singh10.)
It is furthermore evident that the persons appointed as daily- H
630 SUPREME COURT REPORTS [2006) 2 S.C.R.

A wagers held no posts. The appointments, thus, had been made for the
purpose of the project which, as indicated hereinbefore, came to an
end. The plea of Dr. Dhavan to the effect that the appellants in Civil
Appeal No. 337 of 2002 were asked to perform other duties also may
not be of much significance having regard to our foregoing findings.
However, it has been seen that even services of one of them had been
B requisitioned only for the project work. The High Court, in our opinion,
was right in arriving at the conclusion that the appellants were not
entitled to be regularised in service.'

It is also trite that even for grant of back wages, application of mind
on the part of the Industrial Court is imperative, as a relief of full back wages
C may not be granted automatically. In UP. State Brassware Corpon. Ltd &
Anr. v. Uday Narain Pandey, [2006] 1 SCC 479 this Court opined:

"No precise formula can be laid down as to under what circumstances
payment of entire back wages should be allowed. Indisputably, it
depends upon the facts and circumstances of each case. It would,
D however, not be correct to contend that it is automatic. It should not
be granted mechanically only because on technical grounds or
otherwise an order of termination is found to be in contravention of
the provisions of Section 6-N of the U.P. Industrial Disputes Act."

It was further held that while a decision to close down the establishment
E has been taken, ordinarily, back wages to a limited extent should be granted

The onus to prove that he had completed 240 days of work or he had
not been gainfully employed within the said period was on the workman.

Keeping in view the fact that the services of the respondent were
p terminated on the ground that the production unit in which he was working ,..
itself had been closed, we are of the opinion that interest of justice would be .
sub-served if a monetary compensation of Rs. 10,000/- is granted to him. It,
however, goes without saying that he would be entitled to the wages for the
period he had actually worked pursuant to or in furtherance of the order of
the Labour Court and as also of the High Court upon his reinstatement. The
G award of the Labour Court as also the judgment of the High Court are set
aside.

For the reasons aforementioned, the appeal is allowed to the
aforementioned extent. However, there shall be no order as to costs.

H N.J. Appeal allowed.