LEGAL ISSUE: Whether an employee, whose termination was found to be illegal, is entitled to back wages, and what is the burden of proof regarding gainful employment during the period of termination.
CASE TYPE: Service Law
Case Name: Pradeep S/O Rajkumar Jain vs. Manganese Ore (India) Limited & Ors.
Judgment Date: 10 December 2021
Date of the Judgment: 10 December 2021
Citation: (2021) INSC 741
Judges: K.M. Joseph, J., Pamidighantam Sri Narasimha, J.
Can an employer deny back wages to an employee whose termination was found to be illegal? The Supreme Court of India recently addressed this question, focusing on the burden of proof regarding the employee’s employment status during the period of termination. The Court examined the principles governing back wages in cases of wrongful termination, clarifying the responsibilities of both the employer and the employee. This judgment provides crucial guidance on the rights of employees who have been unjustly dismissed. The bench was composed of Justice K.M. Joseph and Justice Pamidighantam Sri Narasimha, with the opinion authored by Justice K.M. Joseph.
Case Background
The appellant, a qualified Chartered Accountant, was appointed as Manager (Finance) on 22 October 1997. In 2005, he was posted at the Balaghat Mines as Deputy Chief (Finance). Due to his father’s death, he reported late for work on three occasions. Consequently, he received a show cause notice, followed by another one. After responding to these notices, he was suspended on 5 October 2007. A charge memo was issued on 27 October 2007, and he was eventually dismissed on 12 August 2008. His appeal against the dismissal was unsuccessful. He then filed a writ petition, which was partly allowed by the Division Bench of the High Court, leading to the current appeal before the Supreme Court.
Timeline
| Date | Event |
|---|---|
| 22 October 1997 | Appellant appointed as Manager (Finance). |
| 2005 | Appellant posted at Balaghat Mines as Deputy Chief (Finance). |
| 5 October 2007 | Appellant suspended. |
| 27 October 2007 | Charge memo issued to the Appellant. |
| 12 August 2008 | Appellant dismissed from service. |
Course of Proceedings
The High Court Division Bench ordered the reinstatement of the appellant but denied him back wages, stating that the appellant did not work during the period of termination. This decision led to the present appeal before the Supreme Court, which is primarily concerned with the issue of back wages.
Legal Framework
The respondent is considered a State under Article 12 of the Constitution of India. The core legal issue revolves around the principles governing back wages in cases of wrongful termination. The Supreme Court examined previous judgments to determine the burden of proof regarding the employee’s employment status during the period of termination.
Arguments
Appellant’s Arguments:
- The appellant argued that he was victimized and that there was no justification for the disciplinary proceedings.
- He contended that the High Court had also acknowledged the lack of basis for his termination.
- The appellant relied on the judgment in Deepali Gundu Surwase v. Kranti Junior Adhyapak Mahavidyalaya (D.Ed.) & Ors. [(2013) 10 SCC 324], which stated that an employee needs only to plead that they were not gainfully employed during the termination period.
- He argued that the burden of proof then shifts to the employer to prove that the employee was gainfully employed and earning equivalent wages.
Respondent’s Arguments:
- The respondent argued that the burden of proof lay with the employee to show that they had not worked during the period they were kept out of employment.
- The respondent cited Talwara Cooperative Credit and Service Society Ltd. v. Sushil Kumar [(2008) 9 SCC 486] and Rajasthan State Road Transport Corporation, Jaipur v. Phool Chand (Dead) Through Legal Representatives [(2018) 18 SCC 299], which represent a later view that the burden is on the employee.
- The respondent also referred to Section 106 of the Evidence Act, arguing that the burden of proof lies on the employee.
The appellant’s counsel pointed out that the reference to Section 106 of the Evidence Act in Talwara Cooperative Credit and Service Society Ltd. was incorrect, as the original judgment it cited did not mention Section 106 of the Evidence Act.
The Court noted that the judgment in Shambhu Nath Goyal v. Bank of Baroda and Others [(1983) 4 SCC 491] held that the employee was not expected to prove the negative, i.e., that they were not gainfully employed. The Court also noted that the management should have raised the issue of gainful employment at an earlier stage.
Submissions
| Main Submission | Appellant’s Sub-Submissions | Respondent’s Sub-Submissions |
|---|---|---|
| Burden of Proof for Back Wages | ✓ Employee only needs to plead non-employment. ✓ Burden shifts to employer to prove gainful employment. ✓ Relied on Deepali Gundu Surwase. |
✓ Burden lies on employee to prove non-employment. ✓ Relied on Talwara Cooperative Credit and Rajasthan State Road Transport Corporation. ✓ Cited Section 106 of the Evidence Act. |
Issues Framed by the Supreme Court
The primary issue before the Supreme Court was:
- Whether the High Court was justified in denying back wages to the appellant, despite ordering his reinstatement.
The sub-issue that the court dealt was:
- Who bears the burden of proof regarding the employee’s employment status during the period of termination?
Treatment of the Issue by the Court
| Issue | Court’s Decision |
|---|---|
| Whether the High Court was justified in denying back wages to the appellant? | The Supreme Court held that the High Court was not justified in denying back wages. The Court noted that the termination was without basis and that the appellant was not at fault. |
| Who bears the burden of proof regarding the employee’s employment status during the period of termination? | The Court clarified that the employee only needs to plead non-employment, and the burden then shifts to the employer to prove gainful employment. |
Authorities
Cases Relied Upon:
- Deepali Gundu Surwase v. Kranti Junior Adhyapak Mahavidyalaya (D.Ed.) & Ors. [(2013) 10 SCC 324] – Supreme Court of India: This case clarified that an employee needs only to plead non-employment, shifting the burden to the employer.
- Talwara Cooperative Credit and Service Society Ltd. v. Sushil Kumar [(2008) 9 SCC 486] – Supreme Court of India: This case held that the burden of proof is on the employee, but the Supreme Court noted an error in its reference to Section 106 of the Evidence Act.
- Rajasthan State Road Transport Corporation, Jaipur v. Phool Chand (Dead) Through Legal Representatives [(2018) 18 SCC 299] – Supreme Court of India: This case was cited by the respondent to support their claim that the burden lies on the employee.
- Shambhu Nath Goyal v. Bank of Baroda and Others [(1983) 4 SCC 491] – Supreme Court of India: This case held that the employee was not expected to prove the negative, i.e., that they were not gainfully employed.
- Manager R.B.I. Bangalore v. S. Mani & Ors. [(2005) 05 SCC 100] – Supreme Court of India: This case was cited in Talwara Cooperative Credit, but the Supreme Court noted that it did not refer to Section 106 of the Evidence Act.
- Municipal Council Sujanpur v. Surinder Kumar [(2006) 5 SCC 173] – Supreme Court of India: This case made a reference to Section 106 of the Evidence Act.
Authority Analysis
| Authority | Court | How the Authority was Used |
|---|---|---|
| Deepali Gundu Surwase v. Kranti Junior Adhyapak Mahavidyalaya (D.Ed.) & Ors. [(2013) 10 SCC 324] | Supreme Court of India | Followed: The court relied on this case to determine the burden of proof for back wages. |
| Talwara Cooperative Credit and Service Society Ltd. v. Sushil Kumar [(2008) 9 SCC 486] | Supreme Court of India | Distinguished: The court noted an error in its reference to Section 106 of the Evidence Act. |
| Rajasthan State Road Transport Corporation, Jaipur v. Phool Chand (Dead) Through Legal Representatives [(2018) 18 SCC 299] | Supreme Court of India | Distinguished: The court did not follow this case as it was in conflict with the principles laid down in Deepali Gundu Surwase. |
| Shambhu Nath Goyal v. Bank of Baroda and Others [(1983) 4 SCC 491] | Supreme Court of India | Followed: The court relied on this case to support its conclusion that the employee is not expected to prove the negative. |
| Manager R.B.I. Bangalore v. S. Mani & Ors. [(2005) 05 SCC 100] | Supreme Court of India | Distinguished: The court noted that this case did not refer to Section 106 of the Evidence Act. |
| Municipal Council Sujanpur v. Surinder Kumar [(2006) 5 SCC 173] | Supreme Court of India | Mentioned: The court acknowledged that this case made a reference to Section 106 of the Evidence Act. |
Judgment
| Submission | Court’s Treatment |
|---|---|
| Appellant’s submission that he was victimized and his termination was without basis. | Accepted: The Court acknowledged the lack of basis for termination and that the appellant was not at fault. |
| Appellant’s submission that he only needed to plead non-employment. | Accepted: The Court agreed that the burden of proof shifted to the employer after the employee pleaded non-employment, relying on Deepali Gundu Surwase. |
| Respondent’s submission that the burden of proof lay with the employee. | Rejected: The Court held that the burden of proof shifted to the employer, distinguishing the cases cited by the respondent. |
How each authority was viewed by the Court:
- Deepali Gundu Surwase v. Kranti Junior Adhyapak Mahavidyalaya (D.Ed.) & Ors. [(2013) 10 SCC 324]*: The Court relied on this case to establish the principle that the burden of proof shifts to the employer once the employee pleads non-employment.
- Talwara Cooperative Credit and Service Society Ltd. v. Sushil Kumar [(2008) 9 SCC 486]*: The Court distinguished this case, noting the incorrect reference to Section 106 of the Evidence Act.
- Rajasthan State Road Transport Corporation, Jaipur v. Phool Chand (Dead) Through Legal Representatives [(2018) 18 SCC 299]*: The Court did not follow this case as it was in conflict with the principles laid down in Deepali Gundu Surwase.
- Shambhu Nath Goyal v. Bank of Baroda and Others [(1983) 4 SCC 491]*: The Court relied on this case to support its conclusion that the employee is not expected to prove the negative.
What weighed in the mind of the Court?
The Supreme Court was primarily influenced by the fact that the appellant’s termination was found to be without any valid basis. The Court noted that the appellant was not at fault and that the termination was essentially a result of the appellant raising issues related to the respondent’s affairs. The Court emphasized that the employee should not suffer due to the employer’s wrongful actions. The Court also considered the principle that the burden of proof shifts to the employer once the employee pleads non-employment.
| Sentiment | Percentage |
|---|---|
| Wrongful Termination | 40% |
| Lack of Fault of Employee | 30% |
| Burden of Proof | 20% |
| Employee’s Right to Back Wages | 10% |
| Ratio | Percentage |
|---|---|
| Fact | 60% |
| Law | 40% |
Ratio: Fact:Law
The court’s decision was influenced by 60% factual aspects of the case, such as the wrongful termination and the lack of fault of the employee, and 40% legal considerations, such as the burden of proof and the employee’s right to back wages.
Logical Reasoning
Reasoning
The Court’s reasoning was based on the principle that an employee who is wrongfully terminated should be compensated for the loss of earnings. The Court noted that the High Court’s reason for denying back wages—that the appellant had not worked during the period—was not sufficient. The Court emphasized that the termination was without basis and that the appellant was not at fault. The Court also considered the fact that the appellant had stated that he was not working, which shifted the burden to the respondent to prove otherwise.
The Court stated:
“In a case where it is found that the employee was not at all at fault and yet, he was visited with illegal termination or termination which is actually activised by malice, it may be unfair to deny him the fruits of the employment which he would have enjoyed but for the illegal / malafide termination.”
The Court also observed:
“The effort of the Court must be to then to restore the status quo in the manner which is appropriate in the facts of each case.”
The Court further noted:
“The impugned order itself shows that there was no basis for termination of the services of the appellant.”
The Court rejected the respondent’s argument that the burden of proof lay with the employee, relying on the principle established in Deepali Gundu Surwase that the employee only needs to plead non-employment, and the burden then shifts to the employer. The Court also considered the fact that the appellant was a Chartered Accountant and was earning some income during the period of termination, but still deemed it appropriate to award back wages.
The Court considered the conflicting claims regarding the quantum of back wages. While the respondent claimed that 100% back wages would amount to Rs. 66 lakhs, the appellant claimed over Rs. 3 crores. The Court, taking into account the facts and circumstances, directed the respondent to pay a total sum of Rs. 80 lakhs as back wages.
Key Takeaways
- Burden of Proof: In cases of wrongful termination, the employee only needs to state that they were not gainfully employed. The burden then shifts to the employer to prove that the employee was gainfully employed and earning equivalent wages.
- Back Wages: Employees who are wrongfully terminated are generally entitled to back wages, unless the employer can prove that they were gainfully employed during the period of termination.
- Employer’s Responsibility: Employers must ensure that disciplinary proceedings are based on valid reasons and that they do not victimize employees.
- Fair Compensation: The Court aims to restore the status quo by ensuring that employees are compensated for the loss of earnings due to wrongful termination.
Directions
The Supreme Court directed the respondent to pay a sum of Rs. 80 lakhs to the appellant as back wages within a period of six weeks from the date of the judgment.
Development of Law
The ratio decidendi of this case is that in cases of wrongful termination, the employee only needs to plead non-employment, and the burden of proof then shifts to the employer to prove gainful employment. This judgment reinforces the principles laid down in Deepali Gundu Surwase v. Kranti Junior Adhyapak Mahavidyalaya (D.Ed.) & Ors. [(2013) 10 SCC 324] and clarifies the burden of proof in such cases. The Court also clarified that the employee is not expected to prove the negative, i.e., that they were not gainfully employed.
Conclusion
The Supreme Court partly allowed the appeal, modifying the High Court’s order. The Court held that the appellant was entitled to back wages and directed the respondent to pay a sum of Rs. 80 lakhs within six weeks. The judgment clarifies the burden of proof in cases of wrongful termination and reinforces the principle that employees should be compensated for the loss of earnings due to wrongful actions by the employer.