Saturday, February 24, 2007

Entitlement to Back Wages

Back Wages - Entitlement - Even when there is a finding that termination is not lawful, there is no automatic entitlement to back wages
Appeal (Civil) 3212 of 2002
Divisional Controller, G.S.R.T.C. Vs. Kadarbhai J. Suthar
DATE OF JUDGMENT: 13/02/2007
BENCH: Dr. ARIJIT PASAYAT & S.H. KAPADIA
(To read full text of the Judgment click on the above hyperlink)

When fixing the back wages several factors need to be noted. It is a well settled position in law that on the finding that termination was not lawful there is no automatic entitlement to full back wages. In Hindustan Tin Works Pvt. Ltd. v. The Employee of Hindustan Tin Works Pvt. Ltd. and Ors. (1979 (2) SCC 80), a three three-judge Bench of this Court laid down:

"In the very nature of things there cannot be a straight-jacket formula for awarding relief of back wages. All relevant considerations will enter the verdict. More or less, it would be a motion addressed to the discretion of the Tribunal. Full back wages would be the normal rule and the party objecting to it must establish the circumstances necessitating departure. At that stage the Tribunal will exercise its discretion keeping in view all the relevant circumstances. But the discretion must be exercised in a judicial and judicious manner. The reason for exercising discretion must be cogent and convincing and must appear on the face of the record. When it is said that something is to be done within the discretion of the authority, that something is to be done according to the rules of reason and justice, according to law and not humour. It is not to be arbitrary, vague and fanciful but legal and regular (See Susannah Sharp v. Wakefield, [1891] AC 173, 179)".

In P.G.I. of Medical Education and Research, Chandigarh v. Raj Kumar (2001 [2] SCC 54), this Court found fault with the High Court in setting aside the award of the Labour Court which restricted the back wages to 60% and directing payment of full back wages. It was observed thus:

"The Labour Court being the final Court of facts came to a conclusion that payment of 60% wages would comply with the requirement of law. The finding of perversity or being erroneous or not in accordance with law shall have to be recorded with reasons in order to assail the finding of the Tribunal or the Labour Court. It is not for the High Court to go into the factual aspects of the matter and there is an existing limitation on the High Court to that affect."

Again at paragraph 12, this Court observed:

"Payment of back wages having a discretionary element involvement in it has to be dealt with in the facts and circumstances of each case and no straight-jacket formula can be evolved, though, however, there is statutory sanction to direct payment of back wages in its entirety."
[See: Hindustan Motors Ltd. v. Tapan Kumar Bhattacharya and Anr. (2002 AIR SCW 3008)]."

Additionally, the Labour Court had taken note of the previous acts of misconduct by the workman while denying the back wages. That aspect was completely lost sight of by the learned Single Judge as well as the Division Bench. Merely because the Corporation did not challenge the order of reinstatement that does not lead to a conclusion that it accepted any illegality in the departmental proceedings. As a matter of fact, the Labour Court clearly noted that the workman admitted the legality and propriety of the inquiry
held against him.

In the aforesaid circumstances, the inevitable conclusion is that the direction of payment of back wages cannot be sustained. The orders passed by the learned Single Judge as partly modified by the Division Bench stand set aside to the aforesaid extent.

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