Supreme Court Orders Payment Despite Appeal Win: Rajeshwar Mahto vs. Birla Corporation Ltd. (2018) INSC 129

Date of the Judgment: 23 February 2018

Citation: (2018) INSC 129

Judges: R.K. Agrawal, J. and Abhay Manohar Sapre, J.

Can an employer avoid paying wages to an employee as per an interim order if the employer wins the main case? The Supreme Court addressed this question in a contempt petition arising from a long-standing industrial dispute. The core issue was whether an interim order for payment of wages under Section 17-B of the Industrial Disputes Act, 1947, remains enforceable even if the employer wins the main appeal. The judgment was delivered by a division bench comprising Justices R.K. Agrawal and Abhay Manohar Sapre, with the majority opinion authored by Justice Abhay Manohar Sapre.

Case Background

Rajeshwar Mahto, the applicant, was an employee of Birla Corporation Ltd. (the Corporation). He was appointed on 04 December 1974. The Corporation terminated his services on 01 September 1985. At the time of termination, his last drawn salary was Rs. 1185/-.

Mahto raised an industrial dispute before the Industrial Tribunal, challenging the legality of his termination. The Industrial Tribunal ruled against him on 22 November 1991, stating he was not a “workman” under Section 2(s) of the Industrial Disputes Act, 1947. Mahto then filed a writ petition in the High Court at Calcutta.

A Single Judge of the High Court allowed the writ petition on 22 March 1996, setting aside the Tribunal’s award and holding that Mahto was indeed a workman. The Corporation appealed to the Division Bench of the High Court, which dismissed the appeal on 31 March 1998, upholding the Single Judge’s order. The Corporation then appealed to the Supreme Court.

During the pendency of the appeal, the Supreme Court, on 04 May 1999, ordered the Corporation to pay Mahto his last drawn wages, including maintenance allowance, from 01 May 1998, until the final disposal of the appeal, provided he submitted an affidavit stating he was not gainfully employed elsewhere. The Corporation was directed to pay the arrears within four weeks and subsequent monthly payments by the 7th of each month.

On 31 October 2000, the Supreme Court allowed the Corporation’s appeal, setting aside the High Court’s orders and upholding the Industrial Tribunal’s decision that Mahto was not a workman. However, the Court noted that the Corporation had offered to pay Mahto Rs. 2 lakhs as a full and final settlement, an offer made earlier during the appeal’s pendency.

Timeline

Course of Proceedings

The Industrial Tribunal initially ruled against the applicant, holding that he was not a “workman” under the Industrial Disputes Act, 1947. The Single Judge of the High Court reversed this decision, finding that the applicant was indeed a workman. The Division Bench of the High Court upheld the Single Judge’s decision. Subsequently, the Supreme Court allowed the Corporation’s appeal, setting aside the High Court’s orders and restoring the Industrial Tribunal’s finding that the applicant was not a workman. Despite this, the applicant filed a contempt petition, alleging non-compliance with the Supreme Court’s interim order dated 04 May 1999, which directed the Corporation to pay him his last drawn wages during the pendency of the appeal.

Legal Framework

The primary legal provision at the heart of this case is Section 17-B of the Industrial Disputes Act, 1947. This section deals with the payment of wages to a workman during the pendency of proceedings in which an award is challenged. The Court quoted the provision as follows:

“Section 17-B: Payment of full wages to workman pending proceedings in higher courts.—Where, during the pendency of proceedings in the High Court or the Supreme Court, an employer is found guilty of an offence under the Industrial Disputes Act, 1947, and the Labour Court or the Tribunal has ordered reinstatement of the workman, the employer shall be liable to pay such workman, during the period of pendency of such proceedings in the High Court or the Supreme Court, full wages last drawn by him, inclusive of any maintenance allowance admissible to him under any rule, regulation or order.”

The Supreme Court also referred to its previous judgments in Dena Bank vs. Kiritikumar T. Patel, (1999) 2 SCC 106 and Dena Bank vs. Ghanshyam, (2001) 5 SCC 169, which interpreted the scope and object of Section 17-B.

Arguments

Applicant’s (Employee) Arguments:

• The interim order dated 04 May 1999, passed by the Supreme Court under Section 17-B of the Industrial Disputes Act, 1947, is independent and must be complied with, regardless of the final outcome of the appeal.
• The Corporation has not complied with the interim order by not paying the full wages as directed.
• The amount offered by the Corporation is less than what is actually payable according to the order dated 04 May 1999.

Respondent’s (Corporation) Arguments:

• The Corporation raised certain technical pleas but admitted that they had not paid any amount in compliance with the order dated 04 May 1999.
• The Corporation stated that they had offered a sum to the applicant, but he declined to accept it, stating it was less than his actual entitlement.

The applicant argued that the interim order under Section 17-B is a separate and independent order and the employer’s obligation to comply with this order does not cease even if the employer eventually wins the appeal. The Corporation, while admitting non-compliance, did not provide any valid justification for not complying with the interim order.

Innovativeness of the argument: The applicant’s argument was innovative in the sense that it emphasized the independent nature of an interim order passed under Section 17-B, arguing that it does not merge with the final order of the appeal and remains enforceable even if the employer wins the main case.

Issues Framed by the Supreme Court

The main issue before the Supreme Court was:

1. Whether the applicant (employee) is entitled to claim any monetary benefits pursuant to the order dated 04 May 1999, and if so, how much?

Treatment of the Issue by the Court

Authorities

The Supreme Court relied on the following authorities:

The Court also considered Section 17-B of the Industrial Disputes Act, 1947, which mandates payment of full wages to a workman pending proceedings in higher courts.

Judgment

How each authority was viewed by the Court?

The Court relied on Dena Bank vs. Kiritikumar T. Patel, (1999) 2 SCC 106* and Dena Bank vs. Ghanshyam, (2001) 5 SCC 169* to affirm that the order under Section 17-B is independent and does not merge with the final order of the appeal. The Court interpreted these authorities to mean that the employer’s obligation to pay wages under the interim order remains even if the employer wins the main appeal.

What weighed in the mind of the Court?

The Court’s decision was primarily influenced by the principle that an interim order under Section 17-B of the Industrial Disputes Act, 1947, is independent and remains enforceable even if the employer wins the main appeal. The Court emphasized the need to provide subsistence allowance to the workman during the pendency of legal proceedings. The Court also considered the long pendency of the case, the nature of the interim order, the offer made by the Corporation for settlement, and the sum payable to the applicant under various heads.

Fact:Law Ratio

The Court’s reasoning was more heavily influenced by legal considerations (70%) than factual aspects (30%). The legal considerations included the interpretation of Section 17-B and the precedents set by previous Supreme Court judgments.

The Court reasoned that the interim order under Section 17-B has an independent existence and does not merge with the final order passed in the appeal. The Court observed that the object of Section 17-B is to provide subsistence allowance to the workman during the pendency of proceedings in higher courts. The Court also noted that the Corporation had not complied with the interim order and had offered a lesser sum than what was due to the applicant.

The Court considered the long pendency of the case, the nature of the interim order, the offer made by the Corporation for settlement, and the sum payable to the applicant under various heads. The Court decided that the applicant was entitled to claim a total sum of Rs. 7,50,000 towards all his claims arising out of his employment dispute with the Corporation.

The Court stated, “In other words, even if the employer eventually succeeds in its appeal against his employee, in which such order was passed during the pendency of employer’s appeal, the employer continues to remain under legal obligation to comply with such order passed by the Court under Section 17-B of the Act in favour of the employee.”

The Court also noted, “To put it in short, an order passed under Section 17-B of Act does not merge with the final order passed in the appeal and being an independent order, it remains alive for enforcement.”

Finally, the Court observed, “We have also worked out the amount payable to the applicant pursuant to the order dated 04.05.1999 under different Heads, such as monthly salary, its arrears, leave encashment, gratuity, bonus, interest, if held payable, on the entire sum at a reasonable rate from 04.05.1999.”

Key Takeaways

• An interim order for payment of wages under Section 17-B of the Industrial Disputes Act, 1947, is independent and remains enforceable even if the employer wins the main appeal.
• Employers are legally obligated to comply with such interim orders, regardless of the final outcome of the case.
• The purpose of Section 17-B is to provide subsistence allowance to the workman during the pendency of legal proceedings.
• Non-compliance with an interim order can lead to contempt proceedings.

Directions

The Supreme Court directed the Corporation to pay a sum of Rs. 7,50,000 to the applicant towards all his monetary claims in relation to his employment dispute. The Court also directed the applicant to vacate the Corporation quarter within three months from the date of the order. Upon vacating the quarter, the Corporation was directed to pay the sum of Rs. 7,50,000 within one week.

Development of Law

The ratio decidendi of this case is that an interim order passed under Section 17-B of the Industrial Disputes Act, 1947, is an independent order and does not merge with the final order of the appeal. This judgment reinforces the principle that employers are legally obligated to comply with such interim orders even if they eventually win the main appeal. There is no change in the previous position of the law, rather, this judgment clarifies the scope and enforceability of interim orders under Section 17-B.

Conclusion

The Supreme Court’s judgment in Rajeshwar Mahto vs. Birla Corporation Ltd. clarifies that an interim order for payment of wages under Section 17-B of the Industrial Disputes Act, 1947, is independent and remains enforceable even if the employer wins the main appeal. The Court ordered the Corporation to pay Rs. 7,50,000 to the applicant, emphasizing the importance of providing subsistence allowance to workmen during legal proceedings. This judgment reinforces the legal obligation of employers to comply with interim orders, regardless of the final outcome of the case.