Supreme Court Upholds Regularization of Casual Workers: Food Corporation of India vs. Their Workmen (2023)

Date of the Judgment: 3 July 2023

Citation: 2023 INSC 608

Judges: Hon’ble Mr. Justice Krishna Murari and Hon’ble Mr. Justice Sanjay Kumar

Can an employer reverse its decision to regularize employees after years of compliance with an industrial tribunal award? The Supreme Court of India addressed this question in a recent case involving the Food Corporation of India (FCI) and its workmen. The core issue revolved around the regularization of 21 casual workers who were initially retrenched, then reinstated and absorbed into regular service following an industrial dispute award. The Supreme Court, in this judgment, upheld the regularization of the workmen, emphasizing the principle of estoppel and the employer’s conduct. The judgment was delivered by a two-judge bench consisting of Justice Krishna Murari and Justice Sanjay Kumar, with Justice Sanjay Kumar authoring the opinion.

Case Background

The dispute began when the Food Corporation of India (FCI) retrenched 21 casual workers on 10 May 1990. The Executive Staff Union of FCI raised an industrial dispute, which was referred to the Central Government Industrial Tribunal No. 2, Dhanbad. The Tribunal ruled in favor of the workmen on 18 March 1997, ordering their reinstatement, regularization, and payment of 75% back wages. The FCI challenged this award in the Jharkhand High Court, which initially granted an interim stay on 5 August 1999, subject to the FCI paying full wages to the workers. Subsequently, the FCI implemented the award by reinstating and regularizing the workers, but continued to challenge the award in the High Court. The High Court initially upheld the award on 1 November 2018, but a Division Bench later modified it, setting aside the regularization order on 17 December 2020. This led to appeals by both the workmen and the FCI in the Supreme Court.

Timeline

Course of Proceedings

The Central Government Industrial Tribunal No. 2, Dhanbad, ruled in favor of the workmen, directing reinstatement, regularization, and 75% back wages. The FCI challenged this award in the Jharkhand High Court. Initially, a single judge of the High Court upheld the Tribunal’s award, observing that the management had chosen to comply with the award without abiding by the condition imposed in the interim order, and that the workmen had been availing the benefit of the award for more than 18 years. However, a Division Bench of the High Court modified the order, setting aside the regularization of the workers, stating that such relief could not be sustained when there was no term of regularization in the reference of the industrial dispute. This led to the appeals before the Supreme Court.

Legal Framework

The case primarily revolves around the interpretation and application of Section 25F of the Industrial Disputes Act, 1947, which mandates that a workman who has worked for 240 days in the preceding 12 months cannot be retrenched without notice or compensation in lieu thereof. The Supreme Court also considered Section 10(1)(d) of the Industrial Disputes Act, 1947, which pertains to the reference of industrial disputes for adjudication. The Court also referred to Section 17B of the Industrial Disputes Act, 1947, relating to the payment of full wages last drawn by the workmen during the pendency of the writ petition. The Court also discussed the principle of ‘approbate and reprobate’, which is a species of estoppel dealing with the conduct of a party.

Arguments

Arguments on behalf of the Workmen:

• The workmen argued that the Tribunal’s award was valid and should be upheld.
• They contended that the FCI had voluntarily implemented the award, including regularization, and should not be allowed to reverse its decision after 18 years.
• They asserted that they had altered their position by remaining with the FCI and foregoing other employment opportunities.

Arguments on behalf of the Food Corporation of India (FCI):

• The FCI argued that the Tribunal’s award of regularization was beyond the scope of the reference under Section 10(1)(d) of the Industrial Disputes Act, 1947.
• They contended that the interim order of the High Court only required them to pay wages and not regularize the workers.
• They claimed that their implementation of the award was subject to the outcome of the writ petition.

The workmen argued that the FCI, by its conduct, had accepted the award in its entirety, including the regularization of services. They emphasized that the FCI had not only reinstated the workers but had also issued a corrigendum to the order, changing the term from “reinstated” to “absorbed,” indicating a clear intention to regularize their services. The FCI, on the other hand, maintained that it was compelled to comply with the award due to the threat of contempt and that the regularization was not part of the interim order of the High Court. The FCI argued that the Tribunal’s direction for regularization was beyond the scope of the reference made by the Government.

Issues Framed by the Supreme Court

The Supreme Court addressed the following issues:

1. Whether the management of FCI could challenge the award after having implemented it, including regularization, for an extended period.
2. Whether the Division Bench of the High Court was justified in setting aside the regularization of the workmen.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

How each authority was viewed by the Court?

The Supreme Court relied on Union of India and others vs. N. Murugesan and others [(2022) 2 SCC 25]* to explain the principle of ‘approbate and reprobate’. The Court stated that the management of FCI cannot accept and reject the same thing. The Court also considered Section 25F of the Industrial Disputes Act, 1947, to highlight the mandatory provisions for retrenchment of workmen. The Court referred to Section 10(1)(d) of the Industrial Disputes Act, 1947, to highlight the reference of industrial disputes for adjudication and Section 17B of the Industrial Disputes Act, 1947, to highlight the payment of full wages last drawn by the workmen during the pendency of the writ petition. These provisions were used to emphasize the procedural and legal context of the dispute.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the conduct of the Food Corporation of India (FCI). The Court noted that the FCI had voluntarily implemented the Tribunal’s award, including the regularization of the workmen, despite having the option to only pay wages as per the interim order of the High Court. The Court emphasized that the FCI had not only reinstated the workers but had also issued a corrigendum to the order, changing the term from “reinstated” to “absorbed,” indicating a clear intention to regularize their services. The Court also considered the fact that the workmen had been in regular service for 18 years, and reversing their regularization would cause great hardship to them. The Court highlighted the principle of ‘approbate and reprobate’, stating that the FCI could not challenge the award after having implemented it for such a long period. The Court’s reasoning was thus heavily based on the principle of estoppel and the conduct of the management.

The Court’s reasoning was heavily fact-based, with the conduct of the FCI and the long period of compliance being the primary factors influencing the decision. The legal principle of ‘approbate and reprobate’ was used to support the factual analysis.

The Supreme Court’s decision was primarily based on the principle of estoppel, which prevents a party from going back on its own actions, especially when the other party has relied on those actions to their detriment. The Court found that the FCI had voluntarily implemented the award, including the regularization, and could not now challenge it. The Court also emphasized the long period of compliance and the hardship that would be caused to the workmen if the regularization was reversed. The Court rejected the argument of the FCI that it was compelled to comply with the award due to contempt proceedings, noting that the contempt proceedings were closed long before the FCI issued the orders of reinstatement and absorption. The Court also rejected the argument that the regularization was beyond the scope of the reference, stating that the FCI had acquiesced to the award by its conduct.

“In the case on hand, the management of FCI filed a writ petition challenging the Award passed by the Tribunal but having secured conditional interim relief therein, the management chose to implement the impugned Award though it was under no compulsion to do so.”

“In effect, the management of FCI, be it for whatever reason, chose to acquiesce with and accept the Award in its entirety, though it made such compliance subject to the result of the writ petition.”

“Having allowed the workmen to put in regular service to its own benefit for over two decades, the management can no longer claim an indefeasible right to continue with and canvass its challenge to the Award, merely because it made its compliance with the Award conditional long ago.”

Key Takeaways

• An employer cannot reverse its decision to regularize employees after years of compliance with an industrial tribunal award.
• The principle of ‘approbate and reprobate’ prevents a party from accepting and rejecting the same thing.
• Long-term compliance with an award, even if initially conditional, can estop an employer from challenging it later.
• Employers must be cautious about the implications of their actions during the pendency of legal challenges.

Directions

The Supreme Court restored the order of the single judge of the Jharkhand High Court and the Award of the Central Government Industrial Tribunal No.2, Dhanbad, subject to the observations in the order dated 26.07.2022 passed by the Court in Contempt Petition (C) No. 366 of 2021 in SLP (C) No. 3656 of 2021.

Development of Law

The ratio decidendi of this case is that an employer cannot challenge an industrial tribunal award after voluntarily implementing it for an extended period, especially when the implementation includes regularization of services. This case reinforces the principle of estoppel and highlights the importance of an employer’s conduct in legal proceedings. There is no change in the previous position of law but it reinforces the principle of estoppel in industrial dispute cases.

Conclusion

The Supreme Court’s judgment in the case of Food Corporation of India vs. Their Workmen upholds the regularization of 21 casual workers, emphasizing the principle of estoppel and the employer’s conduct. The Court found that the FCI had voluntarily implemented the Tribunal’s award, including regularization, and could not now challenge it after 18 years. This decision underscores the importance of consistency and fair play in labor disputes and sets a precedent against employers reversing their decisions after prolonged compliance.