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CASE NO.:

Appeal (civil) 7657 of 2004

PETITIONER:

J.K.Synthetics Ltd. \005 Appellant

RESPONDENT:

K.P.Agrawal & Anr. \005 Respondents

DATE OF JUDGMENT: 01/02/2007

BENCH:

B. P. Singh & R. V. Raveendran

JUDGMENT:

J U D G M E N T

RAVEENDRAN, J.

This appeal by special leave is against the judgment dated 28.7.2003

of the Allahabad High Court rejecting Civil Misc. W.P. No.10713/83 filed

by the appellant challenging the award dated 8.3.1983 and subsequent

modification order dated 29.6.1983 of Labour Court II, Kanpur.

2. Brief facts necessary for disposal of this appeal are as under :

2.1) The first respondent was working as an Assistant in the appellant

company. He was issued three charge-sheets dated 5.2.1977, 17.2.1977 and

24.2.1977 (amended on 1.3.1977). First respondent filed his

objections/explanation in respect of each charge-sheet. An inquiry was held

into the charges. Accepting the report of the Inquiry Officer, which held that

the charges were proved, the employer imposed the punishment of dismissal

on the first respondent, by order dated 6.4.1977.

2.2) Conciliation proceedidngs initiated in respect of such dismissal,

failed. Consequently, the State Government referred the following dispute

to the Labour Court for adjudication :

"Whether the termination of the services of its workman Shri Kashi Prasad

(s/o Shri Lala Shyam Lal), Assistant, Accounts Department by the

Employers from 6.4.1977 is proper, and/or legal ? If not, for what

benefits/compensation the workman is entitled to and any other, with

details."

2.3) By order dated 20.12.1980, the Labour Court held that the inquiry was

not fair and proper, and permitted parties to adduce evidence. The Labour

Court made its award dated 8.3.1983. The Labour Court held that the charge

of insubordination and disorderly behaviour in the first charge-sheet, was not

proved. The charge under the second charge-sheet, that the first respondent

made false (indecent) allegations against his superior officer, and thereby

violated office discipline, was held to be proved. In regard to the charge

under the third charge-sheet, the Labour Court found that the employee had

admitted that he had not prepared the annual accounts correctly, but gave the

employee the 'benefit of doubt' by holding that the mistakes in the accounts

might not have been committed knowingly or deliberately, and therefore,

may not amount to habitual negligence or carelessness. Thus in effect, the

findings in regard to three charges were (i) not proved, (ii) proved, and (iii)

entitled to benefit of doubt. On the said findings, it made an award dated

8.3.1983, the operative part of which reads thus :

"The concerned workman has been working in the company for four years

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and there was no such complaint against him in the past, hence instead of

the punishment of termination of service as a result of Ex. E-2 (dated

17.2.1977) being proved against him, I deem it proper that the increments

of two years of the concerned workman should be stopped as

punishment."

The said award was published on 27.4.1983 and became enforceable from

27.5.1983.

2.4) On 4.5.1983, first respondent filed an application under section 6(6)

of the U.P. Industrial Disputes Act, 1947 ('Act' for short) seeking

corrections of the award, stating that the workman was entitled to

reinstatement with continuity of service and full back-wages from 6.4.1977.

The appellant resisted the said application contending inter alia that (i) the

Labour Court became functus officio after publication of the award on

27.4.1983 and therefore, it could not amend the award; (ii) the prayer

amounted to seeking review of the award, and there was no jurisdiction or

power to grant such relief; and (iii) the first respondent was not entitled to

the relief of back-wages, as the Labour Court had held that a misconduct

was proved.

2.5) The Labour Court by order dated 29.6.1983 allowed the application

under section 6(6) and added the following paragraph at the end of the

Award, on the ground that it had been omitted due to an accidental slip :

"Hence, it is my decision in this case that the termination of services of

Mr. Kashi Prasad Agarwal, Assistant, Accounts Department from 6.4.77

by his employer will not be justified but instead, his two annual

increments which were admissible to him after the date of his termination,

i.e. 6.4.77, be stopped. In view of the punishment of stoppage of two

annual increments, the employer shall pay the full wages of the period

under unemployment i.e. 6.4.77 to the date of reinstatement in which the

amount which was paid to the workman as interim relief or any other

mode, shall be adjusted."

[emphasis supplied]

2.6) Appellant challenged the said award and the amendment thereto in

C.M.W.P. No.10714/83. A learned Single Judge of the High Court vide

order dated 28.7.2003 dismissed the petition holding as follows :

"From a perusal of the award of the labour court, it is apparent that the

tenor of the order is that the workman could not be punished by resorting

to termination. The spirit of the order also shows that in fact the labour

court had in mind to grant back-wages to the workman, but by omission,

the aforesaid mistake has crept in. The contention of the learned counsel

for the petitioner cannot be accepted and in my opinion, there was an

omission which could be corrected under section 6(6). Though a plea has

been made that the court becomes functus officio after tendering the

award, in my view, this argument has only to be stated to be rejected.

Section 6(6) gives power to the labour court for making corrections in an

award."

Referring to the submission of learned counsel for the employee that he had

not been reinstated in spite of refusal of stay, the learned Single Judge

observed thus :

"Learned counsel for the respondent workman has submitted that in spite

of the aforesaid fact till date the petitioner has not reinstated the workman

and, therefore, even equity is against him. A petitioner, who willfully

violates lawful orders is not entitled to equitable discretion under Article

226 of the Constitution of India."

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3. The said order of the learned Single Judge, is challenged in this appeal

by special leave. On the contentions urged, the following questions arise for

consideration :

(i) Whether a provision enabling a court to correct any clerical or

arithmetical mistake, or error in the order arising from any accidental

slip or omission, empowers the Labour Court to grant a relief of back-

wages, which was not granted in the original award.

(ii) When the punishment of dismissal is substituted by a lesser

punishment (stoppage of increments for two years), and consequently,

the employee is directed to be reinstated, whether the employee is

entitled to back-wages from the date of termination to date of

reinstatement.

(iii) Whether on the facts and circumstances, the Labour Court was

justified in interfering with the punishment of dismissal.

(iv) If the employer was otherwise entitled to relief, whether it could be

denied on the ground that it had failed to reinstate the employee, in

spite of the non-stay of the direction for reinstatement.

Re : Question (i)

4. Section 6(6) of the Act provides that a Labour Court may either on its

own motion or on the application of any party to the dispute, correct any

clerical or arithmetic mistakes in the award or errors arising therein from any

accidental slip or omission. The question is whether in exercise of such

power, the Labour Court could have awarded back-wages, even though the

original award was silent on that issue.

5. While considering the scope of a similar provision (Rule 83 of the

Orissa Sales Tax Rules), this Court in Master Construction Co. (P) Ltd., vs.

State of Orissa [1966 (3) SCR 99], observed thus :

"An arithmetical mistake is a mistake of calculation; a clerical mistake is a

mistake in writing or typing. An error arising out of or occurring from an

accidental slip or omission is an error due to a careless mistake or

omission unintentionally made. \005\005\005\005\005The accidental slip or

omission is an accidental slip or omission made by the court. The obvious

instance is a slip or omission to embody in the order something which the

court in fact ordered to be done. This is sometimes described as a decretal

order not being in accordance with the judgment. But the slip or omission

may be attributed to the Judge himself. He may say something or omit to

say something which he did not intend to say or omit. This is described as

a slip or omission in the judgment itself. The cause for such a slip or

omission may be the Judge's inadvertence or the advocate's mistake. But,

however wide the said expressions are construed, they cannot countenance

a re-argument on merits on questions of fact or law, or permit a party to

raise new arguments which he has not advanced at the first instance."

6. Section 6(6) itself was considered in Tulsipur Sugar Company Ltd.,

vs. State of U.P. [1970 (1) SCR 35]. In that case, two questions were referred

to Labour Court : (i) fitment of certain workmen in a new grade; and (ii) the

date from which such fitment should have effect. The Labour Court made an

award holding that the workmen should be fitted into certain grades and

directed the employer to do so within one month after the award became

enforceable. But it omitted to fix the date from which such fitment should be

effected. The employer fitted the workmen in the new grades prospectively.

The employees-Union applied under section 6(6) of the Act to amend the

award on the ground that it had omitted to answer the second question

referred to it. The Labour Court allowed the application and amended the

award and directed the employer to place the workmen in their respective

grades from 1.1.1960. The said amendment to the award was challenged on

the ground that it was not a consequence of any clerical or arithmetic error

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or accidental slip/omission. It was also contended that power under section

6(6) can only be exercised before the date on which the award became

enforceable and not thereafter. This Court negatived the said contentions.

This Court held that the reference comprised two questions, the first relating

to fitment, and the second relating to the date from which such fitment was

to have effect; that the award as originally made answered the first question

but did not decide the second question; that as the reference was in respect

of two questions, the Labour Court was bound to answer the second question

also; and the failure to do so was an error in the award due to an accidental

slip or omission and that could be corrected under section 6(6). This Court

also held that section 6(6) does not lay down expressly any time limit within

which the correctional jurisdiction could be exercised and, therefore, was not

barred by limitation.

7. Section 6(6) again came up for consideration in U.P. SRTC vs. Imtiaz

Hussain [2006 (1) SCC 380] which related to the removal of a conductor

after he had been found guilty of a charge in domestic inquiry. An industrial

dispute was raised questioning the legality of the order of removal. The

Labour Court held that the inquiry was not fair and proper and therefore, the

removal was bad. The Labour Court ordered reinstatement but held that the

employee was not entitled to any back wages, as his name was not found in

the list of permanent conductors. An application was filed under section 6(6)

of the Act contending that the conclusion of the labour court that he was not

in the permanent list was not correct. The Labour Court allowed the

application and modified the award. It issued certain directions about

payment of salary, allowances etc., from the date of termination till

reinstatement with continuity of service, though his name was not in the

waiting list. This Court held that such amendment or modification of the

award was impermissible in exercise of power under section 6(6). This

Court observed :

"Section 6(6) of the U.P. Industrial Disputes Act, 1947 is similar to

section 152 CPC. The settled position of law is that after the passing of the

judgment, decree or order, the same becomes final subject to any further

avenues of remedies provided in respect of the same and the very Court or

the tribunal cannot, on mere change of view, is not entitled to vary the

terms of the judgments, decrees and orders earlier passed except by means

of review, if statutorily provided specifically therefor and subject to the

conditions or limitations provided therein. The powers under Section 152

CPC are neither to be equated with the power of review nor can be said to

be akin to review or even said to clothe the Court concerned under the

guise of invoking after the result of the judgment earlier rendered, in its

entirety or any portion or part of it."

8. A careful reading of section 6(6) and the two decisions shows that the

two decisions considered two different situations. In Tulsipur Sugar

Company, this Court found that the reference to the Labour Court consisted

of two parts. The award answered only the first part and had omitted to

answer the second (consequential) part. While modifying the award on an

application under section 6(6), the Labour Court neither upset nor altered

any of the findings recorded in its original award, but only answered the

second part of the reference, which had earlier been omitted. Therefore, this

Court held that such correction was permissible. On the other hand in Imtiaz

Hussain, the Labour Court, in its award had specifically refused back-wages

to the employee on the ground that his name was not in the list of permanent

employees. But on an application under section 6(6), it re-examined the

issue and held that though his name was not in the list of permanent

employees, he was entitled to payment of salary and allowances from the

date of termination till the date of reinstatement with continuity of service.

In Tulsipur Sugar Company, there was a correction of an omission which

fell within section 6(6). In Imtiaz Hussain, there was a review of the original

order which of course, was impermissible. We may now summarize the

scope of section 6(6) of the Act thus :

a) If there is an arithmetical or clerical or typographical error in the

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order, it can be corrected.

b) Where the court had said something which it did not intend to say or

omitted something which it intended to say, by reason of any

accidental slip/omission on the part of the court, such inadvertent

mistake can be corrected.

c) The power cannot be exercised where the matter involves rehearing

on merits, or reconsideration of questions of fact or law, or

consideration of fresh material, or new arguments which were not

advanced when the original order was made. Nor can the power be

exercised to change the reasoning and conclusions.

9. In this case, the reference to Labour Court consisted of two parts -

whether the termination of the workmen was proper and legal, and if the

answer was in the negative, then the benefits or compensation to which the

workmen was entitled. The award originally made, answered the first part in

the negative, but did not answer the consequential second part of the

reference. In fact the award ended rather abruptly. On an application being

made under section 6(6), the Labour Court recorded that it had accidentally

omitted to answer the second part of the reference and rectified the omission

by adding a paragraph. This case, therefore, squarely falls under Tulsipur

Sugar (supra). We are of the view that the Labour Court had the power to

amend the award.

10. But whether such modification was warranted, is a different question.

The next question, therefore, is whether the facts and circumstances warrant

grant of back-wages, assuming that the punishment imposed was excessive.

Re : Question (ii)

11. Learned counsel for the employee relied on several decisions of this

Court to contend that where the order of dismissal or removal is set aside

and the employee is directed to be reinstated, full back-wages should follow

as a matter of course. Reliance is placed on the decisions of this Court in

Hindustan Tin Works Pvt. Ltd., vs. Employees of Hindustan Tin Works Pvt.

Ltd. [1979 (2) SCC 80], Surendra Kumar Verma vs. Central Government

Industrial Tribunal-cum-Labour Court, New Delhi [1981 (1) SCR 789], and

Mohan Lal vs. Bharat Electronics Ltd., [1981 (3) SCC 225].

12. Hindustan Tin Works Pvt. Ltd (supra), related to retrenchment of some

workmen on the ground that the employer was suffering mounting losses.

The labour court held that the real reason for retrenchment was the

annoyance felt by the management when the employees refused to agree to

its terms. Consequently, it directed the reinstatement with full back wages.

That was challenged by the employer. This Court granted leave to appeal,

only in regard to the question of back-wages, as it did not consider it

necessary to interfere with the direction for reinstatement. Ultimately, while

reducing the back-wages to 75%, this Court observed as follows :

"If thus the employer is found to be in the wrong as a result of which

the workman is directed to be reinstated, the employer could not shirk

his responsibility of paying the wages which the workman has been

deprived of by the illegal or invalid action of the employer. Speaking

realistically, where termination of service is questioned as invalid or

illegal and the workman has to go through the gamut of litigation, his

capacity to sustain himself throughout the protracted litigation is itself

such an awesome factor that he may not survive to see the day when relief

is granted. More so in our system where the law's proverbial delay has

become stupefying. If after such a protracted time and energy consuming

litigation during which period the workman just sustains himself,

ultimately he is to be told that though he will be reinstated, he will be

denied the back wages which would be due to him, the workman would be

subjected to a sort of penalty for no fault of his and it is wholly

undeserved. Ordinarily, therefore, a workman whose service has been

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illegally terminated would be entitled to full back wages except to the

extent he was gainfully employed during the enforced idleness. That is the

normal rule. Any other view would be a premium on the unwarranted

litigative activity of the employer. If the employer terminates the

service illegally and the termination is motivated as in this case, viz.,

to resist the workman's demand for revision of wages the termination

may well amount to unfair labour practice. In such circumstances

reinstatement being the normal rule, it should be followed with full

back wages.

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."

[emphasis supplied]

13. Surendra Kumar Verma (supra) related to retrenchment of several

workmen in violation of section 25-F of the Industrial Disputes Act, 1947

('ID Act' for short). This Court held that when the order of termination is set

aside as being invalid and inoperative, it must ordinarily lead to

reinstatement as if the order of termination was never made and that would

necessarily lead to back-wages too. This Court, however, observed that there

may be exceptional circumstances which may make it impossible or wholly

inequitable vis-`-vis employer and workmen to direct reinstatement with

full back-wages as for example, when the industry might have closed down

or might be in severe financial doldrums or where the concerned employee

might have secured other employment elsewhere and in such situations, the

court has the discretion to deny full back-wages. In the concurring judgment

Pathak J. (as he then was), held as follows :

"Ordinarily, a workman who has been retrenched in contravention of the

law is entitled to reinstatement with full back wages and that principle

yields only where the justice of the case in the light of the particular facts

indicates the desirability of a different relief. It has not been shown to us

on behalf of the respondent why the ordinary rule should not be applied."

14. Mohan Lal (supra) also related to retrenchment not in consonance

with section 25-F of ID Act. This Court held :

"As pre-condition for a valid retrenchment has not been satisfied the

termination of service is ab initio void, invalid and inoperative. He must,

therefore, be deemed to be in continuous service\005\005\005.. If the

termination of service is ab initio void and inoperative, there is no

question of granting reinstatement because there is no cessation of service

and a mere declaration follows that he continues to be in service with all

consequential benefits. Undoubtedly, in some decisions of this Court such

as Ruby General Insurance Co. Ltd., vs. Chopra (P.P) [1969 (3) SCC 653]

and Hindustan Steels Ltd., vs. A. K. Roy [1969 (3) SCC 513], it was held

that the court before granting reinstatement must weigh all the facts and

exercise discretion properly whether to grant reinstatement or to award

compensation. But there is a catena of decisions which rule that where the

termination is illegal especially where there is an ineffective order of

retrenchment, there is neither termination nor cessation of service and a

declaration follows that the workman concerned continues to be in service

with all consequential benefits. No case is made out for departure from

this normally accepted approach of the courts in the field of social justice

and we do not propose to depart in this case."

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15. But the manner in which 'back-wages' is viewed, has undergone a

significant change in the last two decades. They are no longer considered to

be an automatic or natural consequence of reinstatement. We may refer to

the latest of a series of decisions on this question. In U.P. State Brassware

Corpn. Ltd. vs Udai Narain Pandey [2006 (1) SCC 479], this Court

following Allahabad Jal Sansthan vs. Daya Shankar Rai [2005 (5) SCC

124], and Kendriya Vidyalaya Sangathan vs. S. C. Sharma [2005 (2) SCC

363] held as follows :

"A person is not entitled to get something only because it would be lawful

to do so. If that principle is applied, the functions of an Industrial Court

shall lose much of their significance."

"\005\005although direction to pay full back wages on a declaration that the

order of termination was invalid used to be the usual result, but now, with

the passage of time, a pragmatic view of the matter is being taken by the

courts realizing that an industry may not be compelled to pay to the

workman for the period during which he apparently contributed little or

nothing at all to it and/or for a period that was spent unproductively as a

result whereof the employer would be compelled to go back to a situation

which prevailed many years ago, namely, when the workman was

retrenched\005\005... The changes (were) brought about by the subsequent

decisions of the Supreme Court, probably having regard to the changes in

the policy decisions of the Government in the wake of prevailing market

economy, globalization, privatization and outsourcing, is evident.

No precise formula can be laid down as to under what circumstances

payment of entire back wages should be allowed. Indisputably, it depends

upon the facts and circumstances of each case. It would, however, not be

correct to contend that it is automatic. It should not be granted

mechanically only because on technical grounds or otherwise an order of

termination is found to be in contravention of the provisions of section 6-

N of the U.P. Industrial Disputes Act\005\005.. While granting relief,

application of mind on the part of the Industrial Court is imperative.

Payment of full back wages cannot therefore be the natural consequence.

In General Manager, Haryana Roadways vs. Rudhan Singh [2005 (5) SCC

591], this Court observed :

"There is no rule of thumb that in every case where the Industrial Tribuanl

gives a finding that the termination of service was in violation of Section

25-F of the Act, entire back wages should be awarded. A host of factors

like the manner and method of selection and appointment i.e. whether

after proper advertisement of the vacancy or inviting applications from the

employment exchange, nature of appointment, namely, whether ad hoc,

short term, daily wage, temporary or permanent in character, any special

qualification required for the job and the like should be weighed and

balanced in taking a decision regarding award of back wages. One of the

important factors, which has to be taken into consideration, is the length of

service, which the workman had rendered with the employer. If the

workman has rendered a considerable period of service and his services

are wrongfully terminated, he may be awarded full or partial back wages

keeping in view the fact that at his age and the qualification possessed by

him he may not be in a position to get another employment. However,

where the total length of service rendered by a workman is very small, the

award of back wages for the complete period i.e. from the date of

termination till the date of the award, which our experience shows is often

quite large, would be wholly inappropriate. Another important factor,

which requires to be taken into consideration is the nature of employment.

A regular service of permanent character cannot be compared to short or

intermittent daily-wage employment though it may be for 240 days in a

calendar year."

16. There has also been a noticeable shift in placing the burden of proof in

regard to back wages. In Kendriya Vidyalaya Sangathan (supra), this Court

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held :

"\005..When the question of determining the entitlement of a person to back

wages is concerned, the employee has to show that he was not gainfully

employed. The initial burden is on him. After and if he places materials in

that regard, the employer can bring on record materials to rebut the claim.

In the instant case, the respondent had neither pleaded nor placed any

material in that regard."

In U.P. State Brassware Corpn. Ltd. (supra), this Court observed :

"It is not in dispute that the respondent did not raise any plea in his written

statement that he was not gainfully employed during the said period. It is

now well settled by various decisions of this Court that although earlier

this Court insisted that it was for the employer to raise the aforementioned

plea but having regard to the provisions of section 106 of the Evidence

Act or the provisions analogous thereto, such a plea should be raised by

the workman."

17. There is also a misconception that whenever reinstatement is directed,

'continuity of service' and 'consequential benefits' should follow, as a

matter of course. The disastrous effect of granting several promotions as a

'consequential benefit' to a person who has not worked for 10 to 15 years

and who does not have the benefit of necessary experience for discharging

the higher duties and functions of promotional posts, is seldom visualized

while granting consequential benefits automatically. Whenever courts or

Tribunals direct reinstatement, they should apply their judicial mind to the

facts and circumstances to decide whether 'continuity of service' and/or

'consequential benefits' should also be directed. We may in this behalf refer

to the decisions of this Court in A.P.S.R.T.C. v. S. Narasa Goud [2003 (2)

SCC 212], A.P.S.R.T.C. v. Abdul Kareem [2005 (6) SCC 36] and R.S.R.T.C.

v. Shyam Bihari Lal Gupta [2005 (7) SCC 406].

18. Coming back to back-wages, even if the court finds it necessary to

award back-wages, the question will be whether back-wages should be

awarded fully or only partially (and if so the percentage). That depends

upon the facts and circumstances of each case. Any income received by the

employee during the relevant period on account of alternative employment

or business is a relevant factor to be taken note of while awarding back-

wages, in addition to the several factors mentioned in Rudhan Singh (supra)

and Udai Narain Pandey (supra). Therefore, it is necessary for the employee

to plead that he was not gainfully employed from the date of his termination.

While an employee cannot be asked to prove the negative, he has to at least

assert on oath that he was neither employed nor engaged in any gainful

business or venture and that he did not have any income. Then the burden

will shift to the employer. But there is, however, no obligation on the

terminated employee to search for or secure alternative employment. Be that

as it may.

19. But the cases referred to above, where back-wages were awarded,

related to termination/retrenchment which were held to be illegal and invalid

for non-compliance with statutory requirements or related to cases where the

court found that the termination was motivated or amounted to victimization.

The decisions relating to back wages payable on illegal retrenchment or

termination may have no application to the case like the present one, where

the termination (dismissal or removal or compulsory retirement) is by way

of punishment for misconduct in a departmental inquiry, and the court

confirms the finding regarding misconduct, but only interferes with the

punishment being of the view that it is excessive, and awards a lesser

punishment, resulting in the reinstatement of employee. Where the power

under Article 226 or section 11A of the Industrial Disputes Act (or any other

similar provision) is exercised by any Court to interfere with the punishment

on the ground that it is excessive and the employee deserves a lesser

punishment, and a consequential direction is issued for reinstatement, the

court is not holding that the employer was in the wrong or that the dismissal

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was illegal and invalid. The court is merely exercising its discretion to award

a lesser punishment. Till such power is exercised, the dismissal is valid and

in force. When the punishment is reduced by a court as being excessive,

there can be either a direction for reinstatement or a direction for a nominal

lump sum compensation. And if reinstatement is directed, it can be effective

either prospectively from the date of such substitution of punishment (in

which event, there is no continuity of service) or retrospectively, from the

date on which the penalty of termination was imposed (in which event, there

can be a consequential direction relating to continuity of service). What

requires to be noted in cases where finding of misconduct is affirmed and

only the punishment is interfered with (as contrasted from cases where

termination is held to be illegal or void) is that there is no automatic

reinstatement; and if reinstatement is directed, it is not automatically with

retrospective effect from the date of termination. Therefore, where

reinstatement is a consequence of imposition of a lesser punishment, neither

back-wages nor continuity of service nor consequential benefits, follow as a

natural or necessary consequence of such reinstatement. In cases where the

misconduct is held to be proved, and reinstatement is itself a consequential

benefit arising from imposition of a lesser punishment, award of back wages

for the period when the employee has not worked, may amount to

rewarding the delinquent employee and punishing the employer for taking

action for the misconduct committed by the employee. That should be

avoided. Similarly, in such cases, even where continuity of service is

directed, it should only be for purposes of pensionary/retirement benefits,

and not for other benefits like increments, promotions etc.

20. But there are two exceptions. The first is where the court sets aside the

termination as a consequence of employee being exonerated or being found

not guilty of the misconduct. Second is where the court reaches a conclusion

that the inquiry was held in respect of a frivolous issue or petty misconduct,

as a camouflage to get rid of the employee or victimize him, and the

disproportionately excessive punishment is a result of such scheme or

intention. In such cases, the principles relating to back-wages etc. will be the

same as those applied in the cases of an illegal termination.

21. In this case, the Labour Court found that a charge against the

employee in respect of a serious misconduct was proved. It, however, felt

that the punishment of dismissal was not warranted and therefore, imposed a

lesser punishment of withholding the two annual increments. In such

circumstances, award of back wages was neither automatic nor

consequential. In fact, back wages was not warranted at all.

Re : Question (iii)

22. This takes us to the next question as to whether the Labour Court was

justified at all in interfering with the punishment of dismissal. The Labour

Court held that one serious charge was proved, another charge was not

proved and in regard to the third charge gave 'benefit of doubt' to the

employee. The Labour Court also relied on the decisions of this Court in

Rama Kant Misra vs. State of U.P. [AIR 1982 SC 952], wherein it was held

that the punishment of dismissal was excessive where the employee was

found to have uttered indecent words and used abusive language and

substituted it by the lesser punishment of stoppage of two annual increments.

The said decision depended on its special facts and may not apply to this

case. The recent trend in regard to scope of interference with punishment in

matters involving discipline at the workplace has been different. We may

refer to some of the recent decisions.

23. In Hombe Gowda Educational Trust v. State of Karnataka [2006 (1)

SCC 430], this Court stressed the need to give importance to discipline at the

workplace. This Court observed :

"This Court has come a long way from its earlier viewpoints. The

recent trend in the decisions of this Court seek to strike a balance between

the earlier approach to the industrial relation wherein only the interest of

the workmen was sought to be protected with the avowed object of fast

industrial growth of the country. In several decisions of this Court it has

been noticed how discipline at the workplace/industrial undertakings

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received a setback. In view of the change in economic policy of the

country, it may not now be proper to allow the employees to break the

discipline with impunity."

24. In Mahindra and Mahindra Ltd. vs. N. B. Narawade [2005 (3) SCC

134], this Court considered a case where a workman used abusive and filthy

language against his superior officer, in the presence of his subordinates. He

was terminated after conducting an inquiry. Labour Court found the

punishment to be excessive and in exercise of power under section 11A of

the ID Act, imposed a lesser punishment. This Court held that the

misconduct cannot be termed to be an indiscipline calling for lesser

punishment than termination. A similar view was taken in Orissa Cement vs.

Adikand Sahu [1960 (1) LLJ 518] and New Shorrock Mills vs. Mahesh Bhai

T Rao [1996 (6) SCC 590].

25. In U.P. SRTC vs. Subhash Chandra Sharma [2000 (3) SCC 324], this

Court held that the punishment of removal, for abusing and threatening

another employee, was not shockingly disproportionate to the gravity of the

offence. In that case also, only one among three charges was established and

the Labour Court had interfered with the punishment, which was upheld by

the High Court. Reversing such decision, this Court held :

"The Labour Court, while upholding the third charge against the

respondent nevertheless interfered with the order of the appellant

removing the respondent, from the service. The charge against the

respondent was that he, in drunken state, along with a conductor went to

the Assistant Cashier in the cash room of the appellant and demanded

money from the Assistant Cashier. When the Assistant Cashier refused,

the respondent abused him and threatened to assault him. It was certainly a

serious charge of misconduct against the respondent. In such

circumstances, the Labour Court was not justified in interfering with the

order of removal of respondent from the service when the charge against

him stood proved. Rather we find that the discretion exercised by the

Labour Court in the circumstances of the present case was capricious and

arbitrary and certainly not justified. It could not be said that the

punishment awarded to the respondent was in any way "shockingly

disproportionate" to the nature of the charge found proved against him. In

our opinion, the High Court failed to exercise its jurisdiction under Article

226 of the Constitution and did not correct the erroneous order of the

Labour Court which, if allowed to stand, would certainly result in

miscarriage of justice."

26. In Bharat Forge Co. Ltd., vs. Uttam Manohar Nakate [2005 (2) SCC

489], M.P. Electricity Board vs. Jagdish Chandra Sharma [2005 (3) SCC

401], and Regional Manager, Rajasthan State Road Corporation vs.

Ghanshayam Sharma [2002 (1) LLJ 234], this Court held that power under

section 11A of ID Act (or under similar provisions) cannot be used to

interfere with the quantum of punishment, on irrational or extraneous

factors, or on compassionate grounds. This Court also observed that though

section 11A gives the jurisdiction and power to the labour court to interfere

with the quantum of punishment, the discretion has to be used judiciously

and not capriciously. This Court observed that harsh punishment wholly

disproportionate the charge should be the criterion for interference.

27. In this case, we have already found that the charge established against

the employee was a serious one. The Labour Court did not record a finding

that the punishment was harsh or disproportionately excessive. It interfered

with the punishment only on the ground that the employee had worked for

four years without giving room for any such complaint. It ignored the

seriousness of the misconduct. That was not warranted. The consistent view

of this Court is that in the absence of a finding that the punishment was

shockingly disproportionate to the gravity of the charge established, the

Labour Court should not interfere with the punishment. We, therefore, hold

that the punishment of dismissal did not call for interference.

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Re : Question (iv)

28. It is true that when the employer challenged the award of the labour

court and sought stay of the award, the High Court only stayed the order

dated 29.6.1983 in regard to the back-wages but did not stay the award dated

08.3.1983 directing reinstatement; and that if he had been reinstated in 1983,

he would have served till 31.3.1991 when he attained the age of

superannuation. The learned counsel for the employee made a submission

before the High Court at the final hearing that in spite of the award directing

reinstatement not being stayed, he was not reinstated. On the said

submission, the High Court held that the employer had wilfully violated the

lawful order and was not entitled to exercise of equitable discretion under

Article 226/227. Firstly, the assumption that there was a lawful order or that

there was wilful violation thereof is not sound. Further, the employer was

not given an opportunity to explain why the employee was not reinstated. In

fact, the contention of employer is that the first respondent did not report

back to service, even though it was ready to reinstate him subject to final

decision. Be that as it may. The mere fact that the first respondent was not

reinstated in pursuance of the award of the Labour Court cannot result in

dismissal of the writ petition challenging the award.

Conclusion :

29. In view of the above, we allow this appeal, set aside the order dated

28.7.2003 of the High Court as also the award dated 08.3.1983 (as modified

on 29.6.1983) of the Labour Court and uphold the punishment of dismissal

imposed upon the first Respondent. Parties to bear their respective costs.