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Structured Summary of the Opinion (Deepak Gupta, J.)

Factual and Procedural Background

This petition by the State challenges an order of the H.P. State Administrative Tribunal I in O.A. No. 385 of 1991, decided on 18 August 2006.

The respondent was initially engaged as a helper on a daily-waged temporary basis on 20 June 1984. On 28 February 1986 his services were continued on an ad hoc basis under an appointment letter stating it was "a purely stop gap arrangement" and that "his services shall be terminated ... with one month's notice on either side."

The respondent's services were terminated by order dated 29 December 1987 (an innocuous, non-stigmatic order). The respondent filed an original application before the Administrative Tribunal in March 1991 challenging that termination. The State contested the application inter alia on the ground of delay.

The Tribunal initially allowed the original application on 29 May 2000. The State obtained a writ before this Court (CWP No. 919 of 2000), and this Court allowed the writ primarily because no condonation of delay had been sought; the Tribunal's order was set aside and the matter remanded. After remand the employee applied for condonation of delay; the Tribunal on 27 August 2004 condoned the delay but (initially) treated the employee as a daily-waged workman and held it had no jurisdiction, relying on Himachal Pradesh Agro Industries Corporation v. Raj Kumar. The employee's review petition (No. 20 of 2004) contended he was ad hoc/temporary rather than daily-waged; the Tribunal allowed the review on 30 June 2005, concluded he was not a daily-waged employee, and ordered a re-hearing. Those orders condoning delay and allowing review were not challenged further.

On re-hearing, the Tribunal (following Kuldip Singh v. State of Himachal Pradesh) concluded that the termination, alleged to be for negligence/gross misconduct, was illegal because it was issued without notice. The Tribunal set aside the termination, ordered reinstatement in the same post and granted consequential benefits (including back-wages). The present writ petition challenges that part of the Tribunal's order awarding consequential benefits.

Legal Issues Presented

  1. Whether the termination of the respondent's services on 29 December 1987 was lawful given the appointment terms and the absence of notice.
  2. Whether, assuming the termination was illegal, the respondent is entitled to full back-wages (i.e., "consequential benefits") for the entire intervening period, or whether a different remedy (partial back-wages or compensation) is appropriate in view of the governing authorities and facts.

Arguments of the Parties

Petitioner-State's Arguments

  • The Tribunal erred in granting "all consequential benefits" (including full back-wages) to the respondent.
  • The termination occurred on 29 December 1987 and the respondent has not worked since; there is no material showing the respondent remained unemployed in the intervening period, so he should not be awarded full back-wages.

Respondent-Employee's Arguments

  • Because the order of termination was illegal, the respondent is entitled to full back-wages for the period he was kept out of service.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Himachal Pradesh Agro Industries Corporation, Ltd. v. Raj Kumar [2002 L. & I.C. 1342] Authority relied on by the Tribunal to treat the employee as a daily-waged workman and hold lack of jurisdiction. The Tribunal relied on this judgment to hold it had no jurisdiction when it treated the respondent as a daily-waged workman; the present Court notes that view was subsequently revisited after review and re-hearing.
Kuldip Singh v. State of Himachal Pradesh [1988 L. & I.C (NOC) 22] Principle that termination for alleged misconduct/neglect issued without notice is illegal. The Tribunal followed this judgment to conclude that the respondent's termination (issued without notice) was illegal; the present Court accepted that conclusion.
Allahabad Jal Sansthan v. Daya Shankar Rai [2005 (2) L.L.N 967] Explains shift from automatic reinstatement with full back-wages to a pragmatic approach; indicates that 50% back-wages can be appropriate where employee does not prove unemployment. The Court cited the case for the proposition that full back-wages are not automatically awarded and observed that in that case 50% back-wages were directed where the employee had not shown he remained unemployed.
General Manager, Haryana Roadways v. Rudhan Singh [2005 (3) L.L.N 754] There is no "rule of thumb" requiring full back-wages in every case; multiple factors must be weighed (nature of appointment, duration, length of service, qualifications, etc.). The Court relied on this authority to emphasize that award of back-wages is discretionary and must consider relevant factors; it applied that reasoning in limiting back-wages here.
Uttar Pradesh State Road Transport Corporation, Ltd. v. Sarada Prasad Misra [2006 (2) L.L.N 831] Payment of back-wages is discretionary; initial burden on the employee to prove he remained unemployed; reinstatement and back-wages are distinct remedies. The Court cited this case for the propositions that the employee bears initial burden to show non-employment and that back-wages are not an automatic consequence of reinstatement.
Post Graduate Institute of Medical Education and Research, Chandigarh v. Post Graduate Institute Raj Kumar [2001 (1) L.L.N 804] Authority cited to support the discretionary nature of awarding back-wages (as referenced in the opinion). Referenced as part of the chain of authorities establishing that back-wages are discretionary and not automatic.
Hindustan Motors, Ltd. v. Tapan Kumar Bhattacharya [2002 (3) L.L.N 767] One of several authorities showing discretion in awarding back-wages. Referenced to support the principle that a "straitjacket formula" should not dictate back-wages awards.
Kendriya Vidyalaya Sangathan v. S.C. Sharma [2005 (1) L.L.N 1047] Prima facie burden is on the employee to show non-employment when claiming back-wages. Cited for the proposition that the employee must prima facie prove that he was not gainfully employed during the period for which back-wages are claimed.
M.P. State Electricity Board v. Jarina Bee (Smt.) [2003 (3) L.L.N 722] Reinstatement and back-wages are distinct; payment of back-wages is not automatically consequent upon setting aside dismissal. Referenced to underline that back-wages are not a natural consequence of reinstatement and must be separately considered.
Haryana State Co-operative Land Development Bank v. Neelam [2005 (2) L.L.N 653] Payment of back-wages should be considered having regard to the aim of Industrial Disputes Act and the conduct of the workman; back-wages not automatic. Used to support the point that social justice must be balanced with conduct and that back-wages are not automatic relief.
Municipal Council, Sujanpur v. Surinder Kumar [2006 (3) L.L.N 806] Burden of proof on the workman; relief under the relevant provision (S. 11A referred) is discretionary and must consider facts such as nature and tenure of appointment and whether post was sanctioned. Cited to highlight that the Labour Court and High Court must consider discretionary factors and that reinstatement with full back-wages is not automatic; the Court relied on it in explaining the factors to be considered.
Uttar Pradesh State Road Transport Corporation v. Mitthu Singh [2006 (4) L.L.N 23] Reiterates that award of back-wages is discretionary and that in appropriate facts back-wages need not be awarded. Quoted to emphasize the discretionary nature of awarding back-wages and that no universal rule applies.

Court's Reasoning and Analysis

The Court's analysis proceeds in two connected stages: (A) legality of termination; and (B) appropriate relief on a finding of illegality.

A. Legality of Termination

  1. The respondent's appointment history and terms are recited: temporary/daily-waged in 1984 and an ad hoc appointment in February 1986 with an explicit clause that services "shall be terminated ... with one month's notice on either side."
  2. The services were terminated on 29 December 1987 but no notice (as stipulated) was given.
  3. The termination was said to be on account of alleged misconduct; however, the order of termination was made without giving the employee the stipulated notice.
  4. Applying the Tribunal's reliance (and the Court's acceptance) of the principle in Kuldip Singh that an order of termination issued without notice when termination is for misconduct/neglect is illegal, the Court concluded the termination was illegal and the Tribunal was correct to set it aside.

B. Appropriate Relief (Reinstatement and Back-wages)

  1. The Court acknowledged the historical shift in appellate jurisprudence: earlier practice favored reinstatement with full back-wages as the norm; more recent decisions of the Apex Court have moved towards a discretionary, pragmatic approach where back-wages are not automatically awarded.
  2. The Court surveyed several decisions of the Apex Court (cited above) to extract recurrent principles:
    • Award of back-wages is a matter of discretion and depends on facts and circumstances of each case rather than a rigid rule.
    • The initial burden is on the employee to prove he remained unemployed during the intervening period (prima facie burden to show non-employment).
    • Relevant factors include the nature of appointment (permanent, temporary, ad hoc, daily wage), duration/tenure of work, whether the post was sanctioned, length of service, the method of selection/appointment, and the employee's ability to obtain alternative employment given age and qualifications.
    • In some cases compensation in lieu of back-wages or partial back-wages (e.g., 50%) has been directed depending on the facts.
  3. Applying these principles to the present case, the Court noted:
    • The termination occurred on 29 December 1987; the respondent approached the Tribunal only in March 1991. Although the delay has been condoned, the employee cannot benefit from his own delay.
    • There is no adequate material on record to show whether the employee remained unemployed during the entire intervening period.
  4. Weighing these facts against the cited authorities, the Court determined that reinstatement in service is appropriate but that full back-wages for the entire period are not justified on the available material.
  5. The Court therefore modified the Tribunal's award of consequential benefits by granting reinstatement but limiting back-wages to 50% from 1 April 1991 until the respondent's reinstatement. The Court also permitted the State, if advised, to hold an inquiry into the alleged misconduct in accordance with law.

Holding and Implications

Holding: The petition is allowed in part. The Court upheld that the termination was illegal and ordered reinstatement, but limited the award of back-wages to 50% for the period from 1 April 1991 until reinstatement. The petition was disposed of accordingly and there were no costs.

Implications

  • Direct effect on the parties: The respondent is to be reinstated to the same post; the State must pay 50% of back-wages from 1 April 1991 until the date of reinstatement. The State may, if so advised, hold an inquiry into alleged misconduct in accordance with law.
  • On precedent and wider legal principle: The Court applied and followed recent Apex Court jurisprudence that (a) reinstatement does not automatically carry full back-wages, (b) the award of back-wages is discretionary and fact-specific, and (c) the employee bears the initial burden to prove non-employment for the claimed period. The decision applies those established principles to the facts of the case rather than announcing a novel legal rule.

Disposition recorded in the opinion: petition allowed to the limited extent described; no costs.

    State Of Himachal Pradesh v. Des Raj

    Deepak Gupta, J.:— This petition by the State is directed against the order of the learned H.P State Administrative Tribunal I in O.A No. 385 of 1991, decided on 18 August 2006.

    2. This case has a rather chequered history. The respondent was appointed as a helper on daily waged basis on purely temporary basis in the mini workshop of GAD on 20 June, 1984. On 28 1986 he was appointed on ad hoc basis and the relevant portion of the appointment letter reads as follows:

    “This is a purely stop gap arrangement and his services shall be terminated without assigning any reason thereof with one month's notice on either side.”

    3. Thereafter the services of the respondent were terminated on 29 December, 1987 by an order which on the face of it was an innocuous and non-stigmatic order. The respondent challenged the order of termination by filing an original application before the learned Administrative Tribunal in March, 1991. The original application was contested by the petitioner-State on various grounds including the ground that the application was delayed. The original application was allowed by the Bench of the learned Tribunal on 29 May, 2000. The State challenged this order before this Court in CWP No. 919 of 2000. The writ petition was allowed by this Court mainly on the ground that no application for condonation of delay had been filed by the employee and, therefore, the delay could not have been condoned. The order of the learned Tribunal was set aside and the matter was remanded to the learned Tribunal with direction to decide the matter afresh in accordance with law. After the matter was sent back to the learned Tribunal, the employee filed an application for condonation of delay and the learned Tribunal vide its order, dated 27 August, 2004, condoned the delay in filing the original application and held that the same was not barred by limitation. However, the learned Tribunal by treating the em ployee as a daily waged workman and following the judgment of this Court rendered in Himachal Pradesh Agro Industries Corporation, Ltd. v. Raj Kumar, [2002 L. & I.C 1342], held that the Tribunal had no jurisdiction to entertain the original application and held that the remedy of the employee lay before some other forum. The employee filed review petition No. 20 of 2004 on the ground that he was not a daily waged employee, but an ad hoc temporary employee and, therefore, the final portion of the order, dated 27 August 2004, of the learned Tribunal may be reviewed. This review petition No. 20 of 2004, was allowed by the learned Tribunal on 30 June 2005 and the learned Tribunal came to the conclusion that the employee was not a daily waged employee and the matter was ordered to be re-heard. It would be pertinent to mention that no challenge has been made before us to the aforesaid orders of the learned Tribunal condoning the delay and allowing the review petition.

    4. Thereafter the original application was heard by the learned Tribunal. The learned Tribunal following a judgment of this Court In Kuldip Singh v. State of Himachal Pradesh, [1988 L. & I.C (NOC) 22], came to the conclusion that since the order of termination was based on an alleged act of negligence and gross misconduct on the part of the employee, the same was illegal since the order had been issued without an notice to him. The order was set aside and the employee was ordered to be reinstated in the same piace and in the same job from where his services were terminated. The employee was also held entitled to all consequential benefits. The aforesaid order of the leaned Tribunal is under challenge in the present writ petition.

    5. As far as the validity of the order is concerned, it would be pertinent to mention that the order passed originally condoning the delay in filing the application as well as the order passed in the review petition have never been challenged and even in the present writ petition no challenge is laid to those orders. Therefore, the said orders have attained finality. The only question which arises for consideration is whether the termination of services of the employee was proper or not.

    6. No doubt, the employee was appointed on temporary basis, but on 28 February 1986, when his services were extended, it was clearly mentioned that his services are liable to be terminated with one months' notice on either side. No notice, as aforesaid, was given. Further, it is also apparent that the services of the employee were terminated on account of alleged misconduct on his part. Therefore, in our opinion, the learned Tribunal rightly held that the order terminating the services of the employee was illegal.

    7. The main contention of the petitioner-State is that the learned Tribunal has gravely erred in ordering that the respondent-employee be granted all consequential benefits. It is contended that the services of the workman were terminated as far back as on 29 December, 1987. The employee has never worked during this entire period and there is no material to show that the employee was without job during this period and, therefore, it is contended that the employee is not entitled to back-wages. On the other hand, Sri J.L Bhardwaj, learned counsel for the employee contends that since the termination of the services of the employee is illegal, he is entitled to get entire back-wages. Both the parties have cited a number of judgments on this aspect of the matter.

    8. We find from the decisions of the Apex Court rendered in 1970s and 1980s that reinstatement with consequential benefits of back-wages was the norm in most case where the order of termination of services of the employee/workman was held to be illegal. There is no doubt that earlier the law was that in case the order of termination of an employee or a workman is set aside then reinstatement with full back-wages was the norm. The law has however been developing and keeping pace with the changing needs of the economy and industry. Now the decisions of the Apex Court have veered to the view that reinstatement with back-wages is not the norm and that in appropriate cases compensation can be awarded in lieu of reinstatement.

    9. In Allahabad Jal Sansthan v. Daya Shankar Rai, [2005 (2) L.L.N 967], the Apex Court after considering the entire law on the subject held as follows, in Para. 18, at page 970:

    “We have referred to certain decisions of this Court to highlight that earlier in the event of an order of dismissal being set aside, reinstatement with full back-wages was the usual result. But now with the passage of time, it has come to be realized that industry is being compelled to pay the workman for a period during which he apparently contributed little or nothing at all, for a period that was spent unproductively, while the workman is being compelled to go back to a situation which prevailed many years ago when he was dismissed. It is necessary for us to develop a pragmatic approach to problems dogging industrial relations. However, no just solution can be offered but the golden mean may be arrived at.”

    10. In the aforesaid case the Apex Court held that in view of the fact that the respondent has been reinstated in service and keeping in view the fact that the employee had not raised any plea or adduced any evidence to the effect that he remained unemployed, the interest of justice would be served if the employer is directed to pay 50 per cent of the back-wages.

    11. Again in General Manager, Haryana Roadways v. Rudhan Singh, [2005 (3) L.L.N 754], a three Judge Bench of the Apex Court held as follows, in Para. 8, at page 758:

    “8. There is no rule of thumb that in every case where the Industrial Tribunal gives a finding that the termination of service was in violation of S. 25F of the Act, entire back-wages should be awarded. A host of factors like the manner, and method of selection and appointment, i.e, whether after proper advertisement of the vacancy or inviting applications from the Employment Exchange, nature of appointment, namely, whether ad hoc, short term, daily wage, temporary or permanent in character, any special qualification required for the job and the like should be weighed and balanced in taking a decision regarding award of back-wages. One of the important factors, which has to be taken into consideration, is the length of service, which the workman had rendered with the employer. If the workman has rendered a considerable period of service and his services are wrongfully terminated, he may be awarded full or partial back-wages keeping in view the fact that at his age and the qualification possessed by him he may not be in a position to get another employment. However, where the total length of service rendered by a workman is very small, the award of back-wages for the complete period, i.e, from the date of termination till the date of the award, which our experience shows is often quite large, would be wholly inappropriate. Another important factor, which requires to be taken into consideration is the nature of employment. A regular service of permanent character cannot be compared to short or intermittent daily wage employment though it may be for 240 days in a calendar year.”

    12. In the aforesaid case the Apex Court while upholding the reinstatement set aside the award regarding payment of 50 per cent back-wages.

    13. In Uttar Pradesh State Road Transport Corporation, Ltd. v. Sarada Prasad Misra, [2006 (2) L.L.N 831], the Apex Court held as follows, in Para. 13, at pages 834 and 835:

    “But even otherwise, the award passed by the Labour Court as also the order of the High Court granting back-wages deserves interference. In several cases, this Court has held that payment of back-wages is a discretionary power which has to be exercised keeping in view the facts and circumstances of each case and neither straitjacket formula can be evolved, nor a rule of universal application can be adopted (vide Post Graduate Institute of Medical Education and Research, Chandigarh v. Post Graduate Institute Raj Kumar, [2001 (1) L.L.N 804], Hindustan Motors, Ltd. v. Tapan Kumar Bhattacharya, [2002 (3) L.L.N 767]. In Kendriya Vidyalaya Sangathan v. S.C Sharma, [2005 (1) L.L.N 1047], this Court held that when question of determination of entitlement of back-wages comes up for consideration, prima facie, it is for the employee to prove that he had not been gainfully employed. Initial burden is on the employee to show that he remained without any employment. In several cases, similar view has been taken by this Court in recent years. In M.P State Electricity Board v. Jarina Bee (Smt)., [2003 (3) L.L.N 722], it was observed that reinstatement in service and payment of back-wages are two different things and payment of back-wages is not a natural consequence of setting aside an order of dismissal. In Allahabad Jal Sansthan v. Daya Shankar Rai, [2005 (2) L.L.N 967] (vide supra), it was indicated that the law is not in absolute terms that in all cases of illegal termination of services, a workman must be paid full back-wages. In Haryana State Co-operative Land Development Bank v. Neelam, [2005 (2) L.L.N 653] it was stated that the aim and object of the Industrial Disputes Act is to impart social justice to the workman but keeping in view his conduct. Payment of back-wages, therefore, would not be automatic on entitlement of the relief of reinstatement. In General Manager, Haryana Roadways v. Rudhan Singh., [2005 (3) L.L.N 754], the Court reiterated that there is no rule of thumb that in each and every case, where the Industrial Tribunal records a finding that the order of termination of service was illegal that an employee is entitled to full back-wages. A host of factors which are relevant, must be taken into account.”

    14. In this case the Apex Court held that the ends of justice would be met in case the workman is held entitled to 50 per cent of the back-wages till his reinstatement into service.

    15. The Apex Court in Municipal Council, Sujanpur v. Surinder Kumar., [2006 (3) L.L.N 806], held as follows, in Paras. 13 to 16, at pages 808 and 809:

    “13. Equally well-settled is the principle that the burden of proof, having regard to the principles analogous to S. 106 of the Evidence Act that he was not gainfully employed, was on the workman.

    14. xxx

    15. Apart from the aforementioned error of law, in our considered opinion, the Labour Court and consequently the High Court completely misdirected themselves in so far as they failed to take into consideration that relief to be granted in terms of S. 11A of the said Act being discretionary in nature, Labour Court was required to consider the facts of each case therefor. Only because relief by way of reinstatement with full back-wages would be lawful, it would not mean that the same would be granted automatically.

    16. For the said purpose, the nature of the appointment, the purpose for which such appointment had been made, the duration/tenure of work, the question whether the post was a sanctioned one, being relevant facts, must be taken into consideration.”

    16. The Apex Court in [2006 (4) L.L.N 23], Uttar Pradesh State Road Transport Corporation v. Mitthu Singh has again held as follows, in Para. 12, at page 26:

    “Since limited notice was issued with regard to payment of back-wages, we do not enter into the larger question whether the action of terminating the services of the respondent was legal, proper and in consonance with law. But we are fully satisfied that in the facts and circumstances of the case, back-wages should not have 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 formula can be evolved nor a rule of universal application can be laid down in such cases.”

    17. From the reading of the aforesaid judgments, it is clear that the Apex Court has now clearly laid down that reinstatement and back-wages do not automatically follow the setting aside of the order of termination. Each case has to be decided on its own facts. The Apex Court in some cases has neither granted reinstatement nor back-wages even though the order of termination has been found to be illegal and has compensated the employee by giving him lumpsum compensation. In other cases reinstatement has been allowed, sometimes without back-wages and in some cases with 50 per cent back-wages.

    18. In the present case the termination of the services of the employee took place on 29 December 1987. He approached the learned Tribunal only in March, 1991. No doubt, the delay has been condoned, but he cannot be given benefit for his own delay. There is also no adequate material on record to show whether the employee during this period was employed or not. Therefore, following the aforesaid judgments of the Apex Court, we are of the view that in the present case the relief which can be granted to the workman is that he should be reinstated in service in the same job from where his services were terminated. As ordered by the learned Tribunal, the petitioner-State, if so advised, may hold inquiry with regard to the alleged misconduct in accordance with law. As far as consequential benefits are concerned, we hold that the petitioner shall only be entitled to 50 per cent of back-wages from 1 April 1991 till his reinstatement.

    19. The petition is allowed to the extent mentioned above and disposed of accordingly. No costs.

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    Comments

    State Of Himachal Pradesh v. Des Raj
    (Dec 28, 2006)