Supreme Court Limits Full Back Wages in Reinstatement Cases: Rajasthan State Road Transport Corporation vs. Phool Chand (20 September 2018)

Introduction

Date of the Judgment: 20 September 2018
Citation: [Not Available in the source]
Judges: Abhay Manohar Sapre, J., S. Abdul Nazeer, J.
Can a dismissed employee automatically receive full back wages when reinstated? The Supreme Court of India addressed this critical question in a recent case, clarifying the conditions for awarding back wages. This judgment clarifies that reinstatement does not automatically guarantee full back wages; the employee must prove they were not gainfully employed during the dismissal period. The bench comprised of Justice Abhay Manohar Sapre and Justice S. Abdul Nazeer, with the opinion authored by Justice Abhay Manohar Sapre.

Case Background

The case involves a dispute between the Rajasthan State Road Transport Corporation (the appellant) and the legal representatives of the deceased employee, Phool Chand (the respondent). Phool Chand was employed as a driver by the corporation. He was dismissed following a departmental inquiry for dereliction of duties due to continuous absence from work. The Labour Court initially modified the punishment, but the High Court upheld the Labour Court’s decision to award full back wages. The Supreme Court was approached to determine if the award of full back wages was justified.

Timeline

Course of Proceedings

The Labour Court, while agreeing with the charge of dereliction of duty, modified the punishment to stoppage of four annual grade increments and directed reinstatement with full back wages. The Rajasthan High Court’s Single Judge dismissed the corporation’s writ petition, upholding the Labour Court’s decision. The Division Bench of the High Court also dismissed the intra-court appeal, leading to the corporation’s appeal to the Supreme Court.

Legal Framework

The judgment primarily addresses the principles governing the award of back wages in cases of reinstatement. The Supreme Court refers to previous judgments to establish the legal position that back wages are not an automatic right upon reinstatement. It emphasizes that the employee must demonstrate they were not gainfully employed during the dismissal period. The Court also invokes Article 142 of the Constitution of India to ensure complete justice.

Arguments

The appellant (Rajasthan State Road Transport Corporation) argued that the Labour Court and the High Court erred in awarding full back wages without considering whether the employee was gainfully employed during the dismissal period. The appellant contended that back wages cannot be awarded as a matter of right simply because the dismissal order was set aside.

The respondent (legal representatives of Phool Chand) likely argued in favor of the lower courts’ decisions, asserting that the full back wages were justified given the reinstatement order and the long period of unemployment resulting from the dismissal.

Innovativeness of the argument: The appellant’s argument was based on the established legal principle that back wages are not automatic upon reinstatement, emphasizing the need for proof of unemployment. This was not a novel argument but a reiteration of existing legal standards.

Issues Framed by the Supreme Court

The core issue before the Supreme Court was:

1. Whether the Courts below, namely, the High Court and the Labour Court were justified in awarding full back wages to the deceased workman after setting aside his dismissal order and directing his reinstatement.

Treatment of the Issue by the Court

Authorities

The Supreme Court relied on the following authorities to support its decision:

Judgment

How each authority was viewed by the Court?

The Court relied on the authorities, namely, M.P. State Electricity Board vs. Jarina Bee(Smt.), (2003) 6 SCC 141, G.M. Haryana Roadways vs. Rudhan Singh, (2005) 5 SCC 591, U.P. State Brassware Corporation vs. Uday Narain Pandey, (2006) 1 SCC 479, J.K. Synthetics Ltd. vs. K.P. Agrawal & Anr., (2007) 2 SCC 433, Metropolitan Transport Corporation vs. V. Venkatesan, (2009) 9 SCC 601, Jagbir Singh vs. Haryana State Agriculture Marketing Board & Anr., (2009) 15 SCC 327 and Deepali Gundu Surwase vs. Kranti Junior Adhyapak Mahavidyalaya(D.Ed.) & Ors., (2013) 10 SCC 324 to reiterate the settled legal position that back wages are not an automatic consequence of setting aside a dismissal order. These cases were used to emphasize that the employee has to prove lack of gainful employment to claim back wages. The Court used these authorities to establish that the lower courts had erred in awarding full back wages without considering the employee’s employment status during the dismissal period.

What weighed in the mind of the Court?

The Supreme Court was primarily concerned with ensuring a fair balance between the rights of the employee and the employer. The Court noted that the Labour Court and the High Court had not followed the established principles for awarding back wages. The Court emphasized that the employee must prove they were not gainfully employed during the dismissal period to be eligible for full back wages. However, considering the long litigation period and the death of the employee, the Court used its powers under Article 142 of the Constitution to award 50% back wages to the legal representatives.

Fact:Law Ratio

Logical Reasoning:

The Court considered the established legal position that back wages are not an automatic right upon reinstatement. It noted that the Labour Court and the High Court had failed to consider whether the employee was gainfully employed during the dismissal period. The Court also took into account the long period of litigation and the fact that the employee had passed away. The Court rejected the automatic award of full back wages, emphasizing the need for the employee to prove their unemployment. The Court ultimately decided to award 50% back wages to balance the interests of justice and the legal principles involved.

The Supreme Court stated that, “In our considered opinion, the Courts below completely failed to see that the back wages could not be awarded by the Court as of right to the workman consequent upon setting aside of his dismissal/termination order.” The court further stated that, “It is necessary for the workman in such cases to plead and prove with the aid of evidence that after his dismissal from the service, he was not gainfully employed anywhere and had no earning to maintain himself or/and his family.” The Court also noted that, “The employer is also entitled to prove it otherwise against the employee, namely, that the employee was gainfully employed during the relevant period and hence not entitled to claim any back wages.”

Key Takeaways

• ✓ Reinstatement does not automatically entitle an employee to full back wages.
• ✓ An employee must demonstrate they were not gainfully employed during the dismissal period to claim full back wages.
• ✓ Courts have the discretion to award full, partial, or no back wages based on the facts of each case.
• ✓ Employers can present evidence that the employee was gainfully employed to reduce or deny back wages.
• ✓ The Supreme Court can use its powers under Article 142 of the Constitution to ensure complete justice.

This judgment clarifies that the award of back wages is not a mere formality but a matter that requires careful consideration of the specific circumstances of each case. It sets a precedent for lower courts to follow when dealing with cases of reinstatement and back wages.

Directions

The Supreme Court directed the appellant to calculate and pay 50% of the total back wages to the respondents within 3 months from the date of the judgment.

Development of Law

The ratio decidendi of this case is that back wages are not an automatic right upon reinstatement; the employee must prove they were not gainfully employed during the dismissal period. This judgment reinforces the existing legal position and does not introduce a new principle but clarifies its application. The Supreme Court reiterated the settled law on back wages, emphasizing that the initial burden of proof lies with the employee to show they were not gainfully employed during the period of dismissal.

Conclusion

The Supreme Court’s decision in Rajasthan State Road Transport Corporation vs. Phool Chand clarifies that a reinstated employee is not automatically entitled to full back wages. The employee must prove they were not gainfully employed during the dismissal period. The Court modified the lower courts’ orders, awarding 50% back wages, balancing legal principles with the need for justice. This judgment reinforces the principle that back wages are not a matter of right but depend on the specific circumstances of each case.