Supreme Court Upholds Regularization of FCI Workers after 18 Years: Food Corporation of India vs. Their Workmen (2023)

LEGAL ISSUE: Whether the Food Corporation of India (FCI) could deny regularization to its workmen after having implemented an award directing the same for over 18 years.

CASE TYPE: Industrial Dispute

Case Name: Their Workmen through the Joint Secretary (Welfare), Food Corporation of India Executive Staff Union vs. Employer in relation to the Management of the Food Corporation of India & Anr.

[Judgment Date]: July 3, 2023

Date of the Judgment: July 3, 2023

Citation: 2023 INSC 588

Judges: Krishna Murari, J., Sanjay Kumar, J.

Can an employer reverse course after implementing a court award for 18 years, especially when it involves regularizing employees? The Supreme Court of India recently addressed this critical question in a case concerning the Food Corporation of India (FCI). The core issue revolved around whether the FCI could deny regularization to its workmen after having implemented an award directing the same for over 18 years. This judgment clarifies the principles of estoppel and the importance of adhering to court orders, especially when employers have voluntarily complied with them for an extended period. The judgment was delivered by a two-judge bench comprising Justice Krishna Murari and Justice Sanjay Kumar, with Justice Sanjay Kumar authoring the opinion.

Case Background

The case began with an industrial dispute raised by the Executive Staff Union of the Food Corporation of India (FCI) on behalf of 21 casual workers. These workers were retrenched by the FCI at Patna. The Ministry of Labour, Government of India, referred the dispute to the Central Government Industrial Tribunal No. 2, Dhanbad, for adjudication. The Tribunal was tasked with determining whether the retrenchment was justified and what relief the workmen were entitled to.

Timeline:

Course of Proceedings

The Central Government Industrial Tribunal No. 2, Dhanbad, ruled in favor of the workmen, stating that their retrenchment was illegal as they were not given notice or compensation. The Tribunal directed the FCI to reinstate and regularize the 21 workmen with effect from 10.05.1990 and pay them 75% of their back wages. The FCI challenged this award before the Jharkhand High Court. A single judge of the High Court upheld the Tribunal’s award, noting that the FCI had already implemented the award for 18 years. However, a Division Bench of the High Court modified the order, setting aside the part of the award that directed regularization, stating that there was no term of regularization in the reference of the industrial dispute. The workmen and the FCI both appealed this decision to the Supreme Court.

Legal Framework

The judgment primarily revolves around the interpretation and application of the following legal provisions:

• Section 10(1)(d) of the Industrial Disputes Act, 1947: This section empowers the Government to refer industrial disputes for adjudication. The Court noted that the Ministry of Labour, Government of India, had referred the dispute under this provision.
• Section 25F of the Industrial Disputes Act, 1947: This section mandates that no workman employed for a continuous service of one year can be retrenched without prior notice or compensation. The High Court had noted that the workmen had worked for 240 days in the preceding 12 months and were terminated without complying with this provision.
• Section 17B of the Industrial Disputes Act, 1947: This section deals with the payment of full wages last drawn by the workmen when an employer challenges the award of the Labour Court or Tribunal. The Court observed that the management of FCI was required to pay the wages last drawn by the workmen, pending the disposal of the writ petition.

Arguments

Arguments on behalf of the Workmen:

• The workmen argued that the FCI had implemented the Tribunal’s Award in its entirety, including the regularization of their services, and had done so voluntarily.
• They contended that the FCI had not only reinstated them but had also “absorbed” them into regular service, as evidenced by the corrigendum dated 27.11.2000.
• The workmen highlighted that they had been working in regular service for over 18 years, and it would be unjust to reverse the situation at this stage.
• They cited the principle of estoppel, arguing that the FCI could not approbate and reprobate, i.e., accept and reject the same thing.

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

• The FCI argued that the Tribunal’s Award, to the extent that it directed regularization, was unsustainable because the original reference of the industrial dispute did not include any term of regularization.
• The FCI contended that they were compelled to comply with the Award due to the threat of contempt proceedings.
• The FCI argued that their compliance with the Award was subject to the final outcome of the writ petition filed before the High Court.

Innovativeness of the argument: The workmen’s argument that the FCI voluntarily implemented the award, including regularization, and should therefore be estopped from challenging it after 18 years was particularly innovative. This argument highlighted the practical implications of the FCI’s actions and the unfairness of reversing the situation after such a long period.

Issues Framed by the Supreme Court

The Supreme Court considered the following key issues:

1. Whether the management of FCI was justified in challenging the Award to the extent of directing reinstatement and payment of back wages, given that this point was not assailed before the Division Bench of the High Court.
2. Whether the Division Bench of the High Court was correct in setting aside the part of the Award that directed regularization of the workmen’s services.
3. Whether the management of FCI could be allowed to challenge the Award after having implemented it for over 18 years.

Treatment of the Issue by the Court

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

Authorities

The Supreme Court considered the following authorities:

Judgment

The Supreme Court allowed the appeal filed by the workmen and dismissed the appeal filed by the FCI. The Court restored the order of the single judge of the High Court and the original award passed by the Tribunal. The Court held that the FCI could not challenge the award after voluntarily implementing it for 18 years. The Court emphasized that the management of FCI had not only reinstated the workmen but had also “absorbed” them into regular service. The Court also relied on the principle of estoppel, stating that the FCI could not approbate and reprobate.

How each authority was viewed by the Court:

• Union of India and others vs. N. Murugesan and others [(2022) 2 SCC 25]: The Court used this case to define the legal principle of ‘approbate and reprobate’ and applied it to the facts of the case to hold that the FCI was estopped from challenging the award after voluntarily implementing it.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• Voluntary Implementation: The Court emphasized that the FCI had voluntarily implemented the Award, including the regularization of the workmen. The Court noted that the FCI went beyond the interim order and issued a corrigendum ‘absorbing’ the workmen in regular service.
• Long Period of Compliance: The fact that the FCI had complied with the Award for 18 years was a significant factor. The Court noted that it would be unjust to reverse the situation after such a long time.
• Principle of Estoppel: The Court applied the principle of estoppel, stating that the FCI could not approbate and reprobate. It could not accept the benefits of the award and then challenge it.
• Change in Workmen’s Position: The Court observed that the workmen had altered their position by remaining with the FCI, and it would be unfair to reverse the situation after they had foregone other opportunities.
• Somnolence of Management: The Court noted that the management had not sought expeditious disposal of the writ petition after complying with the Award, and this inaction weighed against the FCI.

Logical Reasoning:

The Court rejected the FCI’s argument that they were compelled to comply with the award. The Court observed that the contempt proceedings were closed long before the orders of reinstatement and absorption were issued. The Court also rejected the argument that the compliance was subject to the outcome of the writ petition. The Court noted that the FCI could not use this as a reason to challenge the award after having implemented it for 18 years. The Court stated, “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.”

The Court also observed, “In the light of their absorption in regular service, these workmen, who may have otherwise opted for employment opportunities elsewhere, altered their position and remained with the FCI. Having placed them in that position, it is no longer open to the management of FCI to seek to turn back the clock.” Further, the Court noted, “A party to a proceeding cannot be permitted to challenge the same but thereafter abide by it out of its own free will; garner benefit from it; get the opposite party to effectively alter its position; and then press its challenge after the passage of a considerable length of time.”

Key Takeaways

• An employer cannot challenge a court award after voluntarily implementing it for an extended period, especially when it involves regularization of employees.
• The principle of estoppel prevents a party from accepting and rejecting the same thing (approbate and reprobate).
• Employers must act diligently in pursuing legal challenges and cannot delay the process after complying with an award.
• The court will consider the practical implications of reversing a situation that has been in place for many years.

Directions

The Supreme Court restored the order of the single judge of the High Court and the original award passed by the Tribunal, subject to the observations in the order dated 26.07.2022 passed by this 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 award after voluntarily implementing it for a long period, particularly when it involves regularization of employees. This judgment reinforces the principle of estoppel and highlights the importance of adhering to court orders. This decision clarifies that once an employer chooses to implement an award, it cannot later seek to reverse its position, especially after a considerable length of time has passed and the employees have altered their position based on that implementation.

Conclusion

The Supreme Court’s judgment in this case is a significant win for the workmen of the Food Corporation of India. The Court upheld the principle of fairness and equity, ensuring that the workmen were not deprived of their rightful regularization after having served for 18 years. The judgment also serves as a reminder to employers that they cannot challenge awards after voluntarily implementing them for an extended period. The decision reinforces the importance of adhering to court orders and the principle of estoppel.