Supreme Court Upholds Retrenchment Rules: Mohd. Ali vs. State of H.P. (2018)

Introduction

Date of the Judgment: 16 April 2018

Citation: (2018) INSC 317

Judges: R.K. Agrawal J., S. Abdul Nazeer J.

Can a casual laborer claim the protection of retrenchment laws if they haven’t consistently worked for 240 days in the year before their job ends? The Supreme Court of India recently addressed this question, focusing on the interpretation of Section 25F and Section 25B of the Industrial Disputes Act, 1947. This case revolves around the rights of a worker who was engaged on a casual basis and later claimed to be illegally retrenched.

The core issue is whether a worker, who has worked for more than 240 days in some years but not in the year immediately preceding their termination, is entitled to retrenchment benefits. The Supreme Court, in this judgment, clarifies the conditions required for a worker to be considered to have completed one year of continuous service, which is a prerequisite for claiming retrenchment benefits.

The judgment was delivered by a two-judge bench comprising Justice R.K. Agrawal and Justice S. Abdul Nazeer. The majority opinion was authored by Justice R.K. Agrawal.

Case Background

Mohd. Ali, the appellant, was engaged as a casual laborer at the Agriculture Seed Multiplication Farm Bhagni, Himachal Pradesh, in 1980. He worked on a muster roll basis under different work schemes, such as Rabi and Kharif, until 1991. The appellant claimed to have worked for 240 days in the calendar years 1980, 1981, 1982, and 1986 to 1989.

According to the respondents, the State of Himachal Pradesh, the appellant’s work record was as follows:

The respondents contended that after 1991, the appellant abandoned his work without informing the in-charge of the Seed Multiplication Farm and never returned.

In 2005, the appellant made a representation to the State Government, seeking a reference under Section 10 of the Industrial Disputes Act, 1947. Subsequently, the State Government made a reference to the Industrial Tribunal-cum-Labour Court, Shimla.

The Industrial Tribunal ruled in favor of the appellant on 23 April 2009, ordering his reinstatement with seniority and continuity, but without back wages. The State of Himachal Pradesh challenged this order in the High Court of Himachal Pradesh.

A single judge of the High Court set aside the Industrial Tribunal’s award on 7 July 2010. The appellant then filed a Letters Patent Appeal, which was dismissed by a Division Bench of the High Court on 18 November 2014, upholding the single judge’s decision.

The appellant then approached the Supreme Court by way of special leave.

Timeline

Course of Proceedings

The Industrial Tribunal-cum-Labour Court, Shimla, initially ruled in favor of the appellant on 23 April 2009, directing the respondent-State to reinstate him with seniority and continuity, but without back wages. The Tribunal did not specify its reasoning in the judgment.

The State of Himachal Pradesh filed a writ petition (CWP No. 3761 of 2009) before the High Court at Shimla, challenging the Industrial Tribunal’s award. The single judge of the High Court allowed the writ petition on 7 July 2010, setting aside the Tribunal’s order. The High Court did not specify its reasoning in the judgment.

The appellant then filed a Letters Patent Appeal before the Division Bench of the High Court, which was dismissed on 18 November 2014. The Division Bench upheld the single judge’s decision, agreeing that the appellant did not meet the requirements for retrenchment benefits under Section 25F of the Industrial Disputes Act, 1947. The High Court did not specify its reasoning in the judgment.

Legal Framework

The case primarily revolves around the interpretation of Section 25F and Section 25B of the Industrial Disputes Act, 1947.

Section 25F of the Industrial Disputes Act, 1947, outlines the conditions precedent to the retrenchment of workmen. It states:

“25F. Conditions precedent to retrenchment of workmen .—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 — (a) the workman has been given one month’s notice in writing indicating the reasons for retrenchment and the period of notice has expired, or the workman has been paid in lieu of such notice, wages for the period of the notice; (b) the workman has been paid, at the time of retrenchment, compensation which shall be equivalent to fifteen days’ average pay for every completed year of continuous service or any part thereof in excess of six months; and (c) notice in the prescribed manner is served on the appropriate Government or such authority as may be specified by the appropriate Government by notification in the Official Gazette.”

Section 25B of the Industrial Disputes Act, 1947, defines “continuous service.” It states:

“25B. Definition of continuous service .- For the purposes of this Chapter,- (1) a workman shall be said to be in continuous service for a period if he is, for that period, in uninterrupted service, including service which may be interrupted on account of sickness or authorised leave or an accident or a strike which is not illegal, or a lock- out or a cessation of work which is not due to any fault on the part of the workman; (2) where a workman is not in continuous service within the meaning of clause (1) for a period of one year or six months, he shall be deemed to be in continuous service under an employer- (a) for a period of one year, if the workman, during a period of twelve calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than – (i) one hundred and ninety days in the case of a workman employed below ground in a mine; and (ii) two hundred and forty days, in any other case ; (b) for a period of six months, if the workman, during a period of six calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than– (i) ninety- five days, in the case of a workman employed below ground in a mine; and (ii) one hundred and twenty days, in any other case. Explanation.- For the purposes of clause (2), the number of days on which a workman has actually worked under an employer shall include the days on which- (i) he has been laid-off under an agreement or as permitted by standing orders made under the Industrial Employment (Standing Orders) Act, 1946 (20 of 1946 ), or under this Act or under any other law applicable to the industrial establishment; (ii) he has been on leave with full wages, earned in the previous years; (iii) he has been absent due to temporary disablement caused by accident arising out of and in the course of his employment; and (iv) in the case of a female, she has been on maternity leave; so, however, that the total period of such maternity leave does not exceed twelve weeks.”

The interplay between these sections is crucial. Section 25F mandates certain conditions for retrenchment, including prior notice and compensation, but only applies to workmen who have been in continuous service for not less than one year. Section 25B defines what constitutes ‘continuous service,’ including a deeming provision that if a workman has worked for 240 days in the 12 months preceding the date of calculation, they are deemed to have been in continuous service for one year.

Arguments

The arguments presented by both sides are as follows:

Appellant’s Arguments:

• The appellant’s counsel argued that the appellant’s dismissal was in violation of Section 25F read with Section 25B of the Industrial Disputes Act, 1947.
• The counsel contended that the High Court misinterpreted Section 25B along with Section 25F of the Act.
• It was submitted that it is not necessary for a workman to complete 240 days of service during the 12 months immediately preceding disengagement.
• The appellant argued that once a worker completes 240 days of service in any calendar year of their employment, they become entitled to the benefits of Section 25F of the Industrial Disputes Act, 1947.

Respondent’s Arguments:

• The respondent-State argued that the appellant’s service was not retrenched but that the appellant abandoned the work himself.
• It was submitted that the appellant approached the State Government after a delay of more than 12 years, which was not properly explained.
• The respondent contended that the appellant was negligent in his actions, and therefore, no interference is required in the matter.

The core of the appellant’s argument was that the 240-day requirement should be considered across the entire period of employment, not just the 12 months immediately preceding the termination. The respondent argued that the appellant’s abandonment of work and the delay in raising the issue negated any claim for retrenchment benefits.

Issues Framed by the Supreme Court

The Supreme Court framed the following issue for consideration:

✓ Whether, in the present facts and circumstances, the impugned order of the High Court calls for any interference?

Treatment of the Issue by the Court

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

Authorities

The Court considered the following authorities:

Judgment

The Court’s treatment of submissions and authorities is as follows:

The Court’s view on the authorities is as follows:

✓ The Supreme Court relied on Surendra Kumar Verma and Others vs. Central Government Industrial Tribunal-Cum-Labour Court, New Delhi and Another (1980) 4 SCC 443* to clarify the theory of 240 days as contemplated under Section 25B of the Industrial Disputes Act, 1947. The Court reaffirmed that the 240 days must be within the 12 months preceding the date of retrenchment.

✓ The Supreme Court also relied on Mohan Lal vs. Management of M/s Bharat Electronics Limited (1981) 3 SCC 225* to interpret Section 25B(2)(a) of the Industrial Disputes Act, 1947. The Court held that the provision clearly stipulates that the 240 days should be calculated with reference to the 12 calendar months just preceding the date of retrenchment.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the clear language of Section 25B(2)(a) of the Industrial Disputes Act, 1947, which specifies that the 240 days of work must be within the 12 calendar months preceding the date of retrenchment. The Court emphasized that the Industrial Disputes Act is a welfare legislation intended to protect employees from arbitrary retrenchments.

The Court also considered the fact that the appellant did not work for 240 days in the year immediately preceding his termination. The Court also noted the delay in approaching the State Government, which was not properly explained by the appellant.

The following table shows the ratio of fact to law that influenced the court:

The court’s reasoning can be summarized as follows:

The Court considered the alternative interpretation that the 240 days could be counted across the entire period of employment, but rejected it because it is not supported by the language of Section 25B(2)(a) of the Industrial Disputes Act, 1947. The Court emphasized that the language of the provision is clear and unambiguous.

The Court concluded that the appellant’s case did not meet the criteria for retrenchment benefits, and therefore, the High Court’s decision was upheld.

The Court’s reasoning was based on the following key points:

• The language of Section 25B(2)(a) of the Industrial Disputes Act, 1947 is clear and unambiguous, requiring 240 days of work in the 12 months preceding the date of termination.
• The appellant did not meet this requirement, as he worked only 195 days in 1990 and 19.5 days in 1991.
• The appellant’s delay in approaching the State Government was not properly explained.

The Court quoted the following from the judgment:

“The theory of 240 days for continuous service is that a workman is deemed to be in continuous service for a period of one year, if he, during the period of twelve calendar months preceding the date of retrenchment has actually worked under the employer for not less than 240 days.”

“It is not necessary for the purposes of clause (2)( a) that the workman should be in service for a period of one year. If he is in service for a period of one year and that if that service is continuous service within the meaning of clause (1) his case would be governed by clause (1) and his case need not be covered by clause (2). Clause (2) envisages a situation not governed by clause (1). And clause (2)( a) provides for a fiction to treat a workman in continuous service for a period of one year despite the fact that he has not rendered uninterrupted service for a period of one year but he has rendered service for a period of 240 days during the period of 12 calendar months counting backwards and just preceding the relevant date being the date of retrenchment.”

“In view of the aforesaid principles laid down by this Court and also the categorical findings of the High Court, the contention of the appellant herein is not sustainable in the eyes of law since the provisions are very clear qua the calculation of period.”

Key Takeaways

• For a casual laborer to claim retrenchment benefits under Section 25F of the Industrial Disputes Act, 1947, they must have worked for at least 240 days in the 12 calendar months immediately preceding their termination.
• The 240-day requirement is not satisfied if the worker has worked for 240 days in some years but not in the year immediately before their termination.
• This judgment reinforces the strict interpretation of Section 25B(2)(a) of the Industrial Disputes Act, 1947, emphasizing the importance of continuous service in the 12 months preceding termination for claiming retrenchment benefits.

The judgment clarifies the conditions for claiming retrenchment benefits, and it is likely to be relied upon in future cases involving similar issues. It reinforces the importance of the 12-month period preceding the date of termination for determining continuous service.

Directions

No specific directions were given by the Supreme Court in this case.

Specific Amendments Analysis

There were no specific amendments discussed in this judgment.

Development of Law

The ratio decidendi of the case is that a workman is only entitled to retrenchment benefits under Section 25F of the Industrial Disputes Act, 1947, if they have completed 240 days of work within the 12 calendar months immediately preceding their termination, as defined in Section 25B(2)(a) of the Act.

This judgment does not change the previous positions of law but reinforces the existing interpretation of Section 25B(2)(a) of the Industrial Disputes Act, 1947, as laid down in Surendra Kumar Verma and Mohan Lal.

Conclusion

In conclusion, the Supreme Court dismissed the appeal, upholding the High Court’s decision. The Court reiterated that for a workman to be eligible for retrenchment benefits under Section 25F of the Industrial Disputes Act, 1947, they must have worked for at least 240 days in the 12 calendar months immediately preceding their termination. The Court emphasized that the language of Section 25B(2)(a) of the Industrial Disputes Act, 1947, is clear and unambiguous, requiring strict adherence to the 12-month period.