Supreme Court Modifies Reinstatement Order in Contractual Employment Case: MSRTC vs. Kalawati Fulzele (2022)

Introduction

Date of the Judgment: 31 January 2022

Citation: [Not Available in the provided text]

Judges: M.R. Shah, J. and B.V. Nagarathna, J.

Can an employee, hired on a contractual basis, claim reinstatement with back wages if their employment is terminated? The Supreme Court of India recently addressed this question in a case involving the Maharashtra State Road Transport Corporation (MSRTC) and one of its contractual employees. The core issue revolved around whether the termination of a contractual employee was in breach of the Industrial Disputes Act, 1947, specifically Sections 25-F and 25-G, and whether the employee was entitled to reinstatement with back wages. The Supreme Court, in this case, modified the order of reinstatement and instead awarded a lump sum compensation. The judgment was delivered by a two-judge bench comprising Justice M.R. Shah and Justice B.V. Nagarathna.

Case Background

The respondent, Kalawati Pandurang Fulzele, was initially appointed as a sweeper by the MSRTC on a contractual basis. Her first appointment order was dated 08 June 1989, followed by another on 01 April 1991, with a consolidated honorarium of Rs. 500 per month, later increased by Rs. 50. She continued to work as a sweeper until her services were terminated on 01 August 1994. The respondent’s husband, who was previously working as a coolie in the same organization, had become blind, leading to financial difficulties for the family. Consequently, the respondent was employed on a contractual basis.

The respondent filed a complaint with the Labour Court, Chandrapur, under Section 28 of the Maharashtra Recognition of Trade Unions & Prevention of Unfair Labour Practices Act, 1971, challenging her termination. She contended that she had worked continuously without any break and that her termination was unlawful as she was not paid retrenchment compensation, nor was she given a one-month notice or wages in lieu thereof. She also alleged that the MSRTC had violated Section 25-G of the Industrial Disputes Act, 1947, and Rule 81 of the Industrial Disputes (Bombay) Rules, 1957, by not preparing or publishing a seniority list.

Timeline

Course of Proceedings

The Labour Court, vide its judgment dated 20 June 2002, ruled in favor of the respondent, directing the MSRTC to reinstate her with back wages. The Labour Court held that the termination was in breach of Sections 25-F and 25-G of the Industrial Disputes Act, 1947, and that Section 2(oo)(bb) of the same act was not applicable in this case.

The MSRTC then filed a revision petition before the Industrial Court, which, on 01 July 2003, allowed the petition and set aside the Labour Court’s order.

Aggrieved by the Industrial Court’s decision, the respondent filed a writ petition before the High Court. The learned Single Judge of the High Court, on 04 June 2007, allowed the writ petition, setting aside the Industrial Court’s order and restoring the Labour Court’s award of reinstatement with back wages.

The MSRTC then filed a Letters Patent Appeal before the Division Bench of the High Court. The Division Bench, on 30 January 2020, dismissed the appeal, upholding the Single Judge’s decision.

Legal Framework

The case primarily revolves around the interpretation and application of the following provisions of the Industrial Disputes Act, 1947:

• Section 2(oo)(bb): This section defines “retrenchment” and excludes certain terminations from its ambit. It states that termination of the service of the workman as a result of the non-renewal of the contract of employment between the employer and the workman on its expiry or of such contract being terminated under a stipulation in that behalf contained therein shall not be regarded as retrenchment
• Section 25-F: This section mandates that no workman employed in any industry who has been in continuous service for not less than one year under an employer shall be retrenched by that employer until certain conditions are met, including payment of retrenchment compensation and giving notice.
• Section 25-G: This section prescribes the procedure for retrenchment, stating that the employer shall ordinarily retrench the workman who was the last person to be employed in that category, unless there is a valid reason for not doing so.

The Maharashtra Recognition of Trade Unions & Prevention of Unfair Labour Practices Act, 1971, under which the complaint was filed, also plays a role in the case.

Arguments

Appellant (MSRTC)’s Arguments:

• The appellant argued that the High Court erred in ordering reinstatement with back wages.
• It was contended that the High Court incorrectly confirmed the Labour Court’s finding that there was a breach of Sections 25-F and 25-G of the Industrial Disputes Act, 1947.
• The MSRTC submitted that the respondent’s appointment was purely contractual and for a specific period. Upon completion of the contractual period, her services were terminated.
• It was argued that since the respondent was a part-timer on a contractual basis, Section 2(oo)(bb) of the Industrial Disputes Act, 1947, would apply, and hence there was no question of a breach of Sections 25-F and 25-G of the Industrial Disputes Act, 1947.

Respondent (Kalawati Pandurang Fulzele)’s Arguments:

• The respondent argued that there were concurrent findings by the lower courts that her termination was in breach of Sections 25-F and 25-G of the Industrial Disputes Act, 1947.
• It was contended that once a breach of Sections 25-F and 25-G was established, the Labour Court rightly ordered reinstatement with back wages.
• The respondent submitted that her complaint was based on allegations of unfair labor practices.
• It was argued that she was appointed in place of her husband, who had become blind, and she worked continuously without any break until her termination.
• The respondent argued that since there was no break in service, her termination was rightly held to be in violation of Sections 25-F and 25-G of the Industrial Disputes Act, 1947.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in the provided text. However, the core issue before the Court was:

1. Whether the High Court was right in ordering reinstatement of the respondent with back wages, considering her appointment was on a contractual basis.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The judgment does not explicitly mention any authorities (cases or books) relied upon by the court. However, it does discuss the following legal provisions:

• Section 2(oo)(bb) of the Industrial Disputes Act, 1947: This section defines retrenchment and excludes certain terminations, such as those resulting from the non-renewal of a contract, from its scope.
• Section 25-F of the Industrial Disputes Act, 1947: This section lays down the conditions precedent to retrenchment of workmen, including payment of retrenchment compensation and notice.
• Section 25-G of the Industrial Disputes Act, 1947: This section specifies the procedure for retrenchment, requiring the employer to ordinarily retrench the last person employed in a category.

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• Section 2(oo)(bb) of the Industrial Disputes Act, 1947: The court did not explicitly state that this section applied, but it considered the contractual nature of the employment while deciding on the appropriate remedy.
• Section 25-F of the Industrial Disputes Act, 1947: The court acknowledged the Labour Court’s finding of breach, but did not uphold the remedy of reinstatement.
• Section 25-G of the Industrial Disputes Act, 1947: The court acknowledged the Labour Court’s finding of breach, but did not uphold the remedy of reinstatement.

What weighed in the mind of the Court?

The Supreme Court, while acknowledging the breach of Sections 25-F and 25-G of the Industrial Disputes Act, 1947, by the MSRTC, did not find it appropriate to order reinstatement with back wages. The Court emphasized the contractual nature of the respondent’s employment and the fact that she was hired on a fixed salary/honorarium. The Court also considered that the respondent had worked for approximately four years. The Court balanced the equities and decided that a lumpsum compensation would meet the ends of justice in this case. The sentiment analysis of the Supreme Court’s reasons reveals a strong inclination towards a practical and equitable solution rather than strict adherence to the reinstatement remedy.

Fact:Law Ratio

The ratio of fact to law indicates that the Court gave more weight to the factual aspects of the case, such as the contractual nature of employment and the fixed salary, while also considering the legal breach.

Logical Reasoning:

The Supreme Court considered the factual aspects of the case, such as the contractual nature of the employment and the fixed salary, in addition to the legal breach of Sections 25-F and 25-G of the Industrial Disputes Act, 1947. The court did not find it appropriate to order reinstatement with back wages, and instead, awarded a lumpsum compensation.

The court’s reasoning is based on the principle of balancing equities and providing a practical solution. The court considered the nature of the appointment, the duration of service, and the financial implications for both parties.

The court stated:

“…in lieu of reinstatement and back wages, if a lumpsum compensation of Rs.3,00,000/- (Rupees Three Lakhs only) is awarded, it will meet the ends of justice.”

“In the peculiar facts and circumstances of the case, when the appointment was purely on contractual basis and on a fixed salary/honorarium of Rs.500/- per month, the order of reinstatement with back wages was not warranted…”

“…instead if the lumpsum compensation is awarded in lieu of reinstatement and back wages as observed hereinabove, it will meet the ends of justice.”

Key Takeaways

• Contractual employees may not always be entitled to reinstatement with back wages even if there is a breach of Sections 25-F and 25-G of the Industrial Disputes Act, 1947.
• Courts may consider the nature of employment, duration of service, and other relevant factors while determining the appropriate remedy.
• Lumpsum compensation can be awarded in lieu of reinstatement and back wages in certain cases.

Directions

The Supreme Court directed the appellant (MSRTC) to pay a lumpsum compensation of Rs. 3,00,000 to the respondent within four weeks from the date of the judgment.

Development of Law

The ratio decidendi of this case is that in cases of contractual employment, where there has been a breach of Sections 25-F and 25-G of the Industrial Disputes Act, 1947, the court may not always order reinstatement with back wages. Instead, the court may award a lumpsum compensation, considering the facts and circumstances of the case. This judgment provides a nuanced approach to the remedies available in cases of contractual employment, moving away from a strict adherence to reinstatement.

Conclusion

The Supreme Court’s judgment in the case of Divisional Controller Maharashtra State Road Transport Corporation vs. Kalawati Pandurang Fulzele modifies the order of reinstatement passed by the lower courts. While acknowledging the breach of Sections 25-F and 25-G of the Industrial Disputes Act, 1947, the Supreme Court held that the respondent, who was a contractual employee, was not entitled to reinstatement with back wages. Instead, the Court awarded a lumpsum compensation of Rs. 3,00,000, considering the contractual nature of her employment and the fact that she had worked for approximately four years. This decision highlights a more practical approach to labour disputes, balancing the rights of employees with the realities of contractual employment.