Holding

The termination was not retrenchment; the employer was the Gram Panchayat, not the State, and the Labour Court erred in ordering reinstatement, but the State must pay Rs 30,000 as compensation under Article 142.

Summary

The State of Rajasthan and a Gram Panchayat jointly implemented the "Jal Pradyot Vojna" water‑supply scheme, under which the Gram Panchayat hired Sarjeet Singh as a pump driver on a fixed‑term contract that was extended until the scheme’s completion on 7 Nov 1997. When the scheme ended, his services were terminated. He sought regularisation; the Labour Court awarded reinstatement with 30% back wages, holding that the termination violated sections 25‑G and 25‑H of the Industrial Disputes Act. The State challenged the award; the High Court affirmed it. The Supreme Court allowed the appeal, holding that the Gram Panchayat, not the State, was the employer and that the termination fell under clause 2(oo)(bb) (non‑renewal of a fixed‑term contract), not retrenchment; consequently the Labour Court could not automatically order reinstatement. Nonetheless, exercising power under Article 142, the Court directed the State to pay Rs 30,000 to the worker as compensation.

Issues considered

Whether termination of a worker employed under a scheme for a fixed term amounts to retrenchment under the Industrial Disputes Act, 1947.
Who is the employer for purposes of the Act – the State or the Gram Panchayat.
Whether the Labour Court could award reinstatement with back wages in such circumstances.
Whether the State is liable to pay compensation under Article 142 of the Constitution.

Legislation cited

Constitution of Indias. 142
Industrial Disputes Act, 1947s. 11-A, s. 25-F, s. 25-G, s. 25-H, s. 2(oo)(bb)

Subjects

Industrial Disputes Actre‑trenchmentfixed‑term contractdual employerreinstatementback wagesArticle 142Gram PanchayatRajasthan water scheme

Judgment

A STATE OF RAJAS THAN
v.
SARJEET SINGH AND ANR.

OCTOBER 19, 2006

B [S.B. SINHA AND DAL VEER BHANDARI, JJ.]

Industrial Disputes Act, I 947:

ss. 2(oo)(bb), 25-G and 25-H-Termination ofcontract of employment-
c Pump driver-Employed by Gram Panchayat for a fixed term and specific
purpose under a Scheme funded equally by Gram Panchayat and State
Government-On scheme coming to an end, services of worker terminated--
Labour Court directing reinstatement with 30% back wages-Award affirmed '.

by High Court-Held, Labour Court misdirected itself in holding that order
D of termination was in violation of ss. 25-G and 25-H- If Gram Panchayat
was in Management of Scheme, employer would be Panchayat and not the
State-Labour Court and High Court failed to consider this vital aspect-
However, in exercise of jurisdiction under Article I 42 of the Constitution,
State directed to pay Rs.30,0001-to worker-Constitution of India-Article
142.
E
A scheme, known as 'Jal Pradyot Vojna' was made for supply of water
in the villages of Rajasthan. The State Government and the Gram Panchayat
were to contribute equally towards its cost. The scheme was to be completed
by 7. t t. 1997. The Gram Panchayat concerned employed respondent no. 1 as
pump driver under the said scheme, initially for a period of six months w.e.f.
F 19.9.1996. The term of his employment was extended from time to time till
7.11.1997 on which date the scheme came to an end and services ofrespondent
no. 1 were terminated. Respondent no. 1 tiled an application before the Labour
Welfare and Conciliation Officer for his regularization. He later filed an
application before the Industrial Court which passed an award of his
G reinstatement with continuity of service and 30% back wages holding that
while terminating the services mandatory provisions of sections 25-G and 25-
H of the Industrial Disputes Act, 1947 were not complied with. The State
Government after unsuccessfully challenging the said award in a writ petition

H
as also in an intra-court appeal before the High Court, filed the present appeal.

614 ..
STATE OF RAJASTHAN v. SAR.TEET SINGH 615

Allowing the appeal, the Court A
HELD: I. I. Although the Labour Court possesses discretionary
jurisdiction in moulding the relief in terms of Section 11-A of the Industrial
Disputes Act, 1947, the power thereunder must be judicially exercised. In
the instant case, respondent No. I was appointed under a Scheme for a specific
purpose. The fact that his initial appointment was for a period of six months B
is not disputed. The concept of there being 'dual employer' although may not
be unknown in industrial jurisprudence but the Labour Court misdirected
itself in holding that the termination of his services by the appellant was illegal
being in violation of Sections 25-G and 25-H of the Act. lfthe Gram Panchayat
was in management of the Scheme, the employer would be the Panchayat and C
not the State. In fact, respondent No. 1 impleaded both of them as parties.
The Labour Court and consequently the High Court failed to consider this
vital asptct of the matter. [621-A-CI

Municipal Council, Samra/av. Raj Kumar, [2006] 3 SCC 81; Municipal
Council, Samra/av. Sukhwinder Kaur, (2006) 7 SCALE 614 and The Ha1yana D
State Agricultural Marketing Board v. Subhash Chand & Anr., (2006) 2
SCALE 614, relied on.

S.M Nilajkar & Ors. v. Telecom District Manager, Karna/aka, [2003[ 4
sec 27, referred to.
E
1.2. Assuming that in terminating the services of respondent no. I,
violation of Section 25-G or 25-H of the Act occurred (although there is no
factual basis therefor), but in any event, the same would not mean that the
Labour Court should have automatically passed an award of reinstatement in
service with back wages. [621-Fl
F
State ofM.P. and Ors. v. Arjunla/ Rajak, (2006) 2 SCALE 610, referred
to.

2. Although the Court ordinarily would have set aside the impugned
award and consequently the judgment of the High Court, but in exercise of
jurisdiction under Article 142 of the Constitution of India, the State is directed G
to pay a sum of Rs. 30, 000/- to respondent no. 1. [621-F-G)

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4551 of2006.

From the Judgment and final Order dated 2.5.2005 of the High Court of H
616 SUPREME COURT REPORTS [2006] SUPP. 7 S.C.R.

A Judicature for Rajasthan in at Jodhpur D.B. Civil Special Appel No. 154/2005.
Kumar Kartikey and Aruneshwar Gupta for the Appellant.

S.N. Trivedi, D.P. Mukherjee and Nandini Sen for the Respondents.

B The Judgment of the Court was delivered by

S.B. SINHA, J. Leave granted.

The State of Rajasthan made a Scheme for supply of water in the
villages known as "Jal Pradyot Vojna". The State was to contribute 50% of
C the total costs whereas the rest 50% was to be borne by the Gram Panchayat.
Pursuant to or in furtherance of the Scheme, t_he Gram Panchayat of Indragarh
employed several persons including Respondent No. I herein as a pump
driver. He was initially appointed for a period of six months. The term of his
appointment was extended from time to time. The total period during which
Respondent No. I remained employed was from 19.9.1996 to 7.11.1997. The
D Scheme was to be completed upto 7.11.1997. As the Scheme came to an end,
the services of Respondent No. I were terminated. He filed an application for
his regularization of his services as a pump driver before the Labour Welfare
and Conciliation Officer, Hanumagarh. In reply to the notice issued by the
said authority, the Public Health & Engineering Department of the State inter
E alia contended that Respondent No. I had never been appointed by it and
in fact was appointed by the Sarpanch of the Gram Panchayat, lndragarh.

An industrial dispute was raised by Respondent No. I herein by filing
an application before the Industrial Court. By an award dated 9.5.2002, it was
held that while terminating the services of Respondent No. I herein, the
F mandatory requirements of Sections 25-G and 25-H of the Industrial Disputes
Act were not complied with and consequently an award ofreinstatement with
continuity of service was passed by the Labour Court. Respondent No. I
herein, however, was declared to be entitled to only 30% of the back wages.
The Labour Court while making the aforementioned award arrived at the
following findings:
G
(i) Respondent No. I herein had worked for a period of 13 months
and 18 days and the Gram Panchayat as well as the Department
made payment of his wages.
(ii) He had worked for more than 240 days. As his services had been
H terminated by a written notice, statutory provisions of Sections
ST ATE OF RA.IASTHAN v. SAR.IEET SINGH [S.B. SINHA, .I.] 617

25-G and 25-H of the Industrial Disputes Act had not been A
complied with.

A writ petition filed by Appellant herein was dismissed by a learned
Single Judge of the High Court opining :

"It is not in dispute that the workman had worked for more than 240 B
days, as he had worked from 19.9.1996 to 7.11.1997. Learned counsel
argued that the workman was appointed for a fixed tern1, and, therefore,
his removal does not amount to retrenchment in view of the provisions
of Section 2(oo )(bb) of the Industrial Disputes Act. However, learned
counsel for the Petitioner could not point out any document whereby
the requirements of Section 2(oo)(bb) may be established." C
A Division Bench of the High Court in an intra-court appeal affirmed
the said finding.

The Scheme for supplying water in the villages was a joint Scheme of
the State of Rajasthan through Public Health and Engineering Department and D
the Gram Panchayat. There is nothing on records to show that Respondent
No. l was appointed by the State. It is not in dispute that he was initially
appointed for a period of six months and that too by the Sarpanch Gram
Panchayat. Pursuant to or in furtherance of the Scheme, the Public Health and
Engineering Department might have released payments of his salary but the E
same would not lead to the conclusion that the relationship of an employer
and employee came into being.

Furthermore, Respondent No. l was appointed for a fixed period. His
services might have continued but it appears that the same was to remain in
force till the Scheme was completed. F
We may in the aforementioned backdrop notice the definition of
'retrenchment' as contained in Section 2(oo)(bb) of the Industrial Disputes
Act, which is in the following terms:

2(oo) "Retrenchment" means terniination by the employer of the service G
of a workman for any reason whatsoever, otherwise than as a
punishment inflicted by way of disciplinary action, but does not
include -

*** *** ***
"(bb) termination of the service of the workman as a result of the H
618 SUPREME COURT REPORTS [2006) SUPP. 7 S.C.R.

A non-renewal of the contract of employment between the employer and
the workman concerned on its expiry or of such contract being
terminated under a stipulation in that behalf contained therein; .."

It is a case which attracts clause (bb) of Section 2(oo) of the Industrial
Disputes Act.
B
In Municipal Council, Samra/av. Raj Kumar, [2006] 3 SCC 81, it was
held:

"The appellant is a Municipal Council. It is governed by the
provisions of a statute. The matter relating to the appointment of
c employees as also the terms and conditions of their services
indisputably are governed by the provisions of the relevant Municipal
Act and/or the rules framed thereunder. Furthermore, there is no doubt
that the matter relating to the employment in the Municipal Council
should be governed by the statutory provisions and thus such offer
of appointment must be made by a person authorised therefor. The
D agenda in question was placed before the Executive Council with a
view to obtain requisite direction from it wherefor the said letter was
written. The reason for such appointment on contract basis has
explicitly been stated therein, namely, that one post was vacant and
two employees were on leave and in that view of the matter, services
E of a person were immediately required in the Council. Thus, keeping
in view the exigency of the situation, the respondent came to be
appointed on the terms and conditions approved by the Municipal
Council.

We have noticed hereinbefore that the respondent understood
F that his appointment would be short-lived. He furthermore understood
that his services could be terminated at any point of time as it was
on a contract basis. It is only in that view of the matter, as noticed
hereinbefore, that he affirmed an affidavit stating that the Municipal
Council of Samrala could dispense with his services and that they
have a right to do so."
G
The said decision has been followed by this Court in Municipal Council,
Samra/a v. Sukhwinder Kaur, (2006) 7 SCALE 614 wherein the offer of
appointment to Respondent therein was in the following terms:

"Office of the Nagar Council, Samrala (Ludhiana)
H
.
··.'
STATEOFRAJASTHANv. SARJEETSINGH [S.B. SINHA,J.) 619
No.588 Dated: 06.11.1995 A
Office Order No.

On dated 6.11.1995 vide order dated 6. 11.1995 you are appointed
as clerk on the contract basis at the fixed rate of Rs. !000/- per month
as per the directions of the Government, it is purely temporary B
appointment. No one will force against this post. Executive Officer has
the powers to dismiss you without issuing any notice. All the terms
and conditions issued by the office will be accepted by you.

Sd/- Executive Officer
c
Nagar Council, Samrala"

Such an offer of appointment was held to attract Section 2(oo )(bb) of
the Act.

The learned counsel appearing on behalf of Respondent No. I placed D
strong reliance on S.M. Ni/ajkar & Ors. v. Telecom District Manager,
Karnataka, [2003] 4 SCC 27. The said decision was explained and held to
have been applied in the fact situation obtaining therein by this Court in Raj
Kumar (supra) stating:

"In the decision of this Court in S.M Nilajkar v. Telecom Dislt. E
Manager whereupon the learned counsel for the respondent placed
strong reliance, this Court was concerned with a different fact situation
obtaining therein. In that case, a scheme for absorption of the
employees who were appointed for digging, laying cables, erecting
poles, drawing lines and other connected works was made which came F
into force with effect from 1-10-1989, and only those whose names
were not included for regularisation under the said scheme, raised
disputes before the Assistant Labor Commissioner, Mangalore. The
termination of the services of casual mazdoors by the management of
Telecom District Manager, Belgaum, thus came to be questioned in the
reference made by the appropriate Government in exercise of its power G
conferred upon it under Section 10 of the Industrial Disputes Act.
This Court, having regard to the contentions raised by the respondents
that the appellant therein was engaged in a particular type of work,
namely, digging, laying cables, erecting poles, drawing lines and other
connected works in the project and expansion of the Telecom Office
H
620 SUPREME COURT REPORTS [2006] SUPP. 7 S.C.R.

A in the district of Belgaum was of the opinion : (SCC p. 37, para 13)

"13. The termination of service of a workman engaged in a scheme
or project may not amount to retrenchment within the meaning of sub-
clause (bb) subject to the following conditions being satisfied :

(i) that the workman was engaged in a project or scheme of
B temporary duration;

(ii) the employment was on a contract, and not as a daily-wager
simpliciter, which provided inter alia that the employment shall come
to an end on the expiry of the scheme or project;

C (iii) the employment came to an end simultaneously with the
termination of the scheme or project and consistently with the terms
of the contract; and

(iv) the workman ought to have been apprised or made aware of
the abovesaid terms by the employer at the commencement of
D employment."

Raj Kumar (supra) has also been followed by this Court in The Haryana
State Agricultural Marketing Board v. Subhash Chand & Anr., (2006) 2
SCALE 614 stating :

"It is the contention of the appellant that the respondent was
E
appointed during the 'wheat season' or 'paddy season'. It is also not
in dispute that the appellant is a statutory body constituted under the
Punjab and Haryana Agriculture Produce Marketing Board Act. In ,.
terms of the provisions of the said Act, indisputably, regulations are
framed by the Board laying down terms and conditions of services of
F the employees working in the Market Committees. A bare perusal of
the offer of appointment clearly goes to show that the appointments
were made on contract basis. It was not a case where a workman was
continuously appointed with artificial gap of I day only. Indisputably,
the respondent had been re-employed after termination of his services
on contract basis after a considerable period(s).
G
The question as to whether Chapter VA of the Act will apply or
not would dependent on the issue as to whether an order of
retrenchment comes within the purview of Section 2(oo)(bb) of the
Act or not. If the termination of service in view of the exception
contained in clauses (bb) of Section 2(oo) of the Act is not a
H
ST ATE OF RA.IASTHAN v. SARJEET SINGH [S.B. SINHA. J.] 621

'retrenchmenr, the question of applicability of Chapter VA thereof A
would not arise."

It is now well settled that although the Labour Court possesses
discretionary jurisdiction in moulding the relief in terms of Section 11-A o the
Industrial Disputes Act, the power thereunder must be judicially exercised.
Respondent No. 1 herein was appointed under a Scheme. He was appointed B
for a specific purpose. The fact that his initial appointment was for a period
of six months is not disputed. The concept of there being 'dual employer'
although may not be unknown in industrial jurisprudence but the Labour
Court, in our opinion, misdirected itself in holding that the termination of his
services by Appellant was illegal being in violation of Sections 25-G and 25- C
H of the Industrial Disputes Act. If the Gram Panchayat was in management
of the Scheme, the employer would be the Panchayat and not the State. In
fact, Respondent No. 1 herein impleaded both of them as parties. The learned
Labour Court and consequently the High Court failed to consider this vital
aspect of the matter.

In State of M.. P. and Ors. v. Arjunlal Rajak, (2006) 2 SCALE 610, this
D
Court opined:

" ... It is, however, true that while terminating the services of the
respondent the appellants had not complied with the mandatory
requirements of Section 25F of the Industrial Disputes Act and, thus, E
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 granted."

In terminating the services of Respondent No. I, we would assume that F
violation of Sections 25-G or 25-H occurred (although there is no factual basis
therefor), but in any event, the same would not mean that the Labour Court
should have automatically passed an award of reinstatement in service with
back wages. We, however, although ordinarily would have set aside the
impugned award and consequently the judgment of the High Court, in exercise
of our jurisdiction under Article 142 of the Constitution of India, we direct the G
State to pay a sum of Rs. 30,000/- to Respondent No. I. Such payment should
be made within eight weeks from date failing which the same shall carry
interest at the rate of 9% per annum. The appeal is allowed with the aforesaid
directions. The parties shall pay and bear their own costs.

RP. Appeal allowed. H