2009 (12) TMI 853 - SC - Indian Laws

Whether the High court was justified in granting full back wages to the respondent in spite of the denial thereof by the Labour Court? Held that - The High Court was unjustified in awarding full back wages. We are also of the opinion that the Labour Court having found the termination to be illegal was unjustified in not granting any back wages at all. Thus we direct that the respondent shall be paid 50 per cent of the back wages from the date of termination of service till reinstatement. Appeal allowed.

Summary

Issues Involved:
1. Legality of the termination of the respondent's employment.
2. Entitlement to reinstatement and back wages.
3. High Court's modification of the Labour Court's award regarding back wages.

Detailed Analysis:

1. Legality of the termination of the respondent's employment:
The respondent was employed as a full-time accountant with the appellant, earning Rs. 1200/- per month, and his services were terminated on 11.6.87. The Labour Court found that the termination was improper and illegal as it was done without notice or retrenchment compensation, thus entitling the respondent to reinstatement from 12.6.87.

2. Entitlement to reinstatement and back wages:
The Labour Court awarded reinstatement but denied full back wages, reasoning that the respondent must have worked elsewhere to earn his livelihood during the 15-year gap between his termination and the award. The Labour Court stated, "Plaintiff is not entitled to get the pay and allowances for the period he did not perform any work."

3. High Court's modification of the Labour Court's award regarding back wages:
The High Court modified the Labour Court's award, granting full back wages from the date of termination till reinstatement, stating that the Labour Court's denial of full back wages was illegal. The appellant challenged this, arguing that the respondent failed to provide evidence of unemployment during the gap period and that entitlement to back wages is not automatic.

Supreme Court's Judgment:
The Supreme Court examined whether the High Court was justified in granting full back wages. It noted that the High Court erred by not examining the factual situation and merely stating that it was not the case of the employer that the workman had been gainfully employed elsewhere. The Supreme Court emphasized that the payment of back wages involves discretion and must be based on the circumstances of each case.

The Court cited several precedents, including:
- Hindustan Tin Works Pvt. Ltd. vs. The Employees of M/s. Hindustan Tin Works Pvt. Ltd. and Ors.: "Ordinarily, a workman whose service has been illegally terminated would be entitled to full back wages except to the extent he was gainfully employed during the enforced idleness."
- UP State Brassware Corpn. Ltd. vs. Uday Narain Pandey: Highlighted the need for a pragmatic view, recognizing that full back wages should not be granted automatically.
- P.V.K. Distillery Ltd. vs. Mahendra Ram: Reinforced that reinstatement with full back wages should not be automatic and must consider the specific circumstances of each case.

The Supreme Court concluded that the Labour Court's decision to deny any back wages was also unjustified. Balancing the equities, the Court directed that the respondent be paid 50% of the back wages from the date of termination till reinstatement, noting that the High Court should have recorded cogent reasons for modifying the Labour Court's award.

Final Order:
The appeal was allowed, and the respondent was directed to be paid 50% of the back wages within three months. No order as to costs was made.