Supreme Court Clarifies Re-employment Rights Under Section 25(H) of the Industrial Disputes Act: Management of the Barara Cooperative Marketing vs. Workman Pratap Singh (2019)

Date of the Judgment: January 02, 2019

Citation: 2019 INSC 1

Judges: Abhay Manohar Sapre, J., Indu Malhotra, J.

Can an employee, who was previously terminated and compensated, claim re-employment under Section 25(H) of the Industrial Disputes Act, 1947, when their former employer regularizes existing employees? The Supreme Court of India addressed this question in a recent case, clarifying the scope and applicability of Section 25(H). The Court held that regularization of existing employees does not trigger the re-employment rights of retrenched workers under the said provision. This judgment clarifies the distinction between fresh employment and regularization of existing services in the context of labour law. The judgment was delivered by a two-judge bench comprising Justice Abhay Manohar Sapre and Justice Indu Malhotra, with Justice Sapre authoring the opinion.

Case Background

The respondent, Pratap Singh, was employed as a Peon with the appellant, the Barara Cooperative Marketing Society, from July 1, 1973. His services were terminated on July 1, 1985. Following this, the respondent raised an industrial dispute, and the Labour Court declared his termination illegal. However, instead of reinstatement, the Labour Court awarded him a lump sum compensation of Rs. 12,500, which he accepted. In 1993, the respondent sought re-employment, citing the regularization of two other peons by the appellant in 1992. He claimed this regularization entitled him to re-employment under Section 25(H) of the Industrial Disputes Act, 1947.

Timeline:

Course of Proceedings

The Labour Court initially ruled against the respondent, stating that he was not entitled to re-employment under Section 25(H). The respondent then filed a writ petition in the High Court. A Single Judge of the High Court overturned the Labour Court’s decision and directed the appellant to re-employ the respondent. The appellant appealed this decision before the Division Bench of the High Court, which upheld the Single Judge’s order. The employer then appealed to the Supreme Court.

Legal Framework

The core legal provision in question is Section 25(H) of the Industrial Disputes Act, 1947, which states:

“Where any workmen are retrenched, and the employer proposes to take into his employment any persons, he shall, in such manner as may be prescribed, give an opportunity to the retrenched workmen who are citizens of India to offer themselves for re-employment, and such retrenched workmen who offer themselves for re-employment shall have preference over other persons.”

The Supreme Court also considered Rule 78 of the Industrial Disputes (Central) Rules, 1957, which outlines the procedure for implementing Section 25(H). This rule specifies that the employer must notify retrenched employees when filling vacancies.

Arguments

Appellant’s Arguments:

• The appellant argued that the respondent’s termination was not a retrenchment under Section 25(H) of the Industrial Disputes Act, 1947, as he was compensated for the termination.
• They contended that Section 25(H) applies only when the employer is filling new vacancies, not when regularizing existing employees.
• The regularization of other employees’ services does not constitute “fresh employment” and therefore does not trigger Section 25(H).

Respondent’s Arguments:

• The respondent argued that the regularization of two other peons’ services in 1992 created a situation where he was entitled to re-employment under Section 25(H) of the Industrial Disputes Act, 1947.
• He claimed that the regularization of other employees was akin to filling new vacancies, thus entitling him to preference.

Submissions of Parties

Issues Framed by the Supreme Court

The Supreme Court framed the following issue:

1. Whether the respondent was entitled to claim re-employment in the appellant’s services in terms of Section 25(H) of the Industrial Disputes Act, 1947.

Treatment of the Issue by the Court

Authorities

The Court did not rely on any specific case laws or books in this judgment.

Judgment

How each authority was viewed by the Court?

The Court interpreted Section 25(H) of the Industrial Disputes Act, 1947* to mean that it applies only when an employer is filling new vacancies, and not when regularizing existing employees. The Court also used Rule 78 of the Industrial Disputes (Central) Rules, 1957* to support its interpretation of Section 25(H), noting that the rule outlines the procedure for offering re-employment to retrenched workers when new vacancies arise.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the distinction between ‘retrenchment’ and ‘termination’, and between ‘fresh employment’ and ‘regularization’. The Court emphasized that Section 25(H) of the Industrial Disputes Act, 1947, is specifically designed to protect retrenched workers when new vacancies arise, not when employers regularize existing employees. The Court noted that the respondent had already accepted compensation in lieu of reinstatement, which was a crucial factor in the decision. The Court also considered the procedural aspects of Rule 78 of the Industrial Disputes (Central) Rules, 1957, to support its interpretation of Section 25(H).

Logical Reasoning:

The Court considered the argument that regularization of existing employees is akin to filling new vacancies. However, it rejected this interpretation, emphasizing that the term ’employment’ refers to fresh employment to fill vacancies, while ‘regularization’ pertains to making the services of existing employees permanent. The Court also noted that the respondent had already accepted compensation in lieu of reinstatement, which further weakened his claim for re-employment. The Court ultimately concluded that the High Court erred in directing the appellant to re-employ the respondent.

The Court stated, “In our view, the regularization of an employee already in service does not give any right to retrenched employee so as to enable him to invoke Section 25 (H) of the ID Act for claiming re-employment in the services.”

The Court further clarified, “In our view, there lies a distinction between the expression ‘employment’ and ‘regularization of the service’. The expression ‘employment’ signifies a fresh employment to fill the vacancies whereas the expression ‘regularization of the service’ signifies that the employee, who is already in service, his services are regularized as per service regulations.”

The Court also noted, “In the first place, the respondent having accepted the compensation awarded to him in lieu of his right of reinstatement in service, the said issue had finally come to an end; and Second, Section 25 (H) of the ID Act had no application to the case at hand.”

Key Takeaways

• Section 25(H) of the Industrial Disputes Act, 1947, applies only when an employer seeks to fill new vacancies.
• Regularization of existing employees does not constitute filling new vacancies and does not trigger the re-employment rights of retrenched workers.
• Acceptance of compensation in lieu of reinstatement extinguishes the right to claim re-employment under Section 25(H).
• There is a clear distinction between ’employment’ (fresh hiring) and ‘regularization’ (making existing services permanent).

Directions

The Supreme Court set aside the orders of the High Court and restored the award of the Labour Court, which had ruled against the respondent’s claim for re-employment.

Development of Law

The ratio decidendi of this case is that Section 25(H) of the Industrial Disputes Act, 1947, is not applicable when an employer regularizes the services of existing employees. This judgment clarifies the scope of Section 25(H) and distinguishes between fresh employment and regularization of service, thereby setting a precedent for future cases involving similar issues.

Conclusion

The Supreme Court’s judgment in Management of the Barara Cooperative Marketing-cum-Processing Society Ltd. vs. Workman Pratap Singh clarifies that Section 25(H) of the Industrial Disputes Act, 1947, is not applicable in cases where employers regularize existing employees. The Court emphasized that this provision applies only when employers seek to fill new vacancies, and it does not extend to situations where existing employees are made permanent. This decision provides a clear legal distinction between fresh employment and regularization of services, which is crucial for labour law jurisprudence.