Holding

The Supreme Court held that while the Labour Court could amend the award under Section 6(6) to correct an omission, it could not award back‑wages where a serious misconduct was proved and the dismissal was not shockingly disproportionate, and thus the dismissal was upheld.

Summary

J.K. Synthetics Ltd. dismissed employee K.P. Agrawal for misconduct after an inquiry that found all charges proved. The Labour Court later held the inquiry unfair, found only one charge proved, and substituted dismissal with a lesser punishment of withholding two annual increments, also adding a paragraph granting back‑wages under Section 6(6) of the U.P. Industrial Disputes Act. The employer challenged the amendment and the award, arguing that the Court could not amend after becoming functus officio and that back‑wages were unwarranted where serious misconduct was established. The Supreme Court held that the Labour Court had power under Section 6(6) to correct an omission but was not justified in awarding back‑wages because the misconduct was serious and the punishment was not shockingly disproportionate; therefore the dismissal stood. The Court set aside the High Court’s order and the Labour Court’s amendment, upheld the dismissal, and allowed the appeal.

Issues considered

Whether Section 6(6) of the U.P. Industrial Disputes Act empowers a Labour Court to amend an award to grant back‑wages that were omitted in the original award.
Whether an employee is entitled to full back‑wages when a dismissal is substituted by a lesser punishment and reinstatement is ordered.
Whether the Labour Court was justified in interfering with the punishment of dismissal on the ground that it was excessive.
Whether the employer can be penalised for not reinstating the employee despite the award not being stayed.

Legislation cited

Constitution of Indias. Article 226
U.P. Industrial Disputes Act, 1947s. 111, s. 11A, s. 6(6)

Subjects

Industrial Disputes ActSection 6(6)back wagesdismissalpunishmentlabour courtArticle 226amendment of awardmisconductreinstatementproportionality

Judgment

A J.K. SYNTHETICS LTD.
v.
K.P. AGRA WAL AND ANR.

FEBRUARY I, 2007

B [B.P. SINGHANDR.V. RAVEENDRAN,JJ.]

Constitution of India-Article 226-U.P. Industrial Disputes Act, 1947- -f
Section 6(6)-Charges framed against delinquent employee for misconduct-
C Punishment of dismissal imposed by employer after inquiry-Labour Court
imposing a lesser punishment of withholding two annual increments of the
employee after finding that one of the charges was proved-Application for
amendement of award by emp/1yee on the ground that the award is silent
about granting back wages-Labour Court allowed the application-Writ
Petition challenging the award and the amendment by the employer was
0 dismissed by High Court-Correctness of-Held, on facis, Labour Court had
the power to amend !he award-Awarding of back wages by Labour Court
was not warranted when a charges of serious misconduct was proved-
Labour Court cannot interfere with the punishment of dismissal without >-.
recording a finding that the punishment was disproportionate to the gravity
E of the charge-Hence, the punishment of dismissal upheld.

Backwages-Sec. 1lA of Industrial Disputes Act, 1947-Article. 226 of
Constitution of India-Principles stated-Difference between cases where
termination/dismissal is held to be illegal and invalid and cases where court
uphold the finding regarding misconduct, but only interferes with the quantum
F of punishment, for purposes of backwages.

Appellant--employer issued charge-sheets to respondent-employee for
various charges of misconduct Inquiry Officer held an inquiry and found all
the charges proved against the employee. On the basis of the Inquiry Report,
the employer imposed a punishment of dismissal on the employee. Labour
G Court, in its Award, held that the inquiry was not fair and proper; and found
that only one of the charges was proved against the employee. The Labour
Court, however, held that the punishment of dismissal was not warranted and
therefore, imposed a lesser punishment of withholding the two annual
increments since the employee was working for four years without any

H 60
J .K. SYNTHETICS LTD. v. K.P. AGRAWAL 61
blemish. The employee filed an application under section 6(6) of the U.P. A
Industrial Disputes Act, 1947 seeking amendment of the Award on the ground
that it was silent about reinstatement with continuity of service and back
wages. The employer resisted the application contending that the Labour Court
became jimctus officio after publication of the award and hence, it could not
amend the award; that the prayer amounted to seeking review of the award B
and there was no jurisdiction or power to grant such relief; and that the
respondent was not entitled to back wages as the Labour Court held that a
misconduct was proved. The Labour Court allowed the application and held
that the employee is entitled to full back wages. The employer filed a Writ
Petition challenging the award and the amendment before High Court. On
the basis of the submission made by the employee that he was not reinstated C
despite the Award of the Labour Court not being stayed by the High Court,
the High Court dismissed the Writ Petition of the employer holding that it
had wilfully violated the lawful order and hence not entitled to equitable
discretion under Article 226/227 of the Constitution of India. Hence the appeal
by the employer.
D
Allowing the appeal, the Court

HELD: 1.1. Under section 6(6) of the U.P. Industrial Disputes Act, 1947,
Labour Court has power to amend the award, either on its own motion or on
an application of any party to the dispute, if there is an arithmetical or clerical
or typographical error in the order; and if the court had said something, which E
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. 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. p
The power cannot be exercised to change the reasoning and conclusions.
(Paras 4 & 8) (66-G; 69-F)

1.2. On an application being made under Section 6(6) of the Act, 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. Labour G
Court had the power to amend the award. [Para 9) [69-H; 70-Aj

Master Construction Co. (P) Ltd. v. State of Orissa, (196613 SCR 99;
Tulsipur Sugar Company Ltd. v. State of U.P., (1970) 1SCR35 and U.P. SRTC
v. Imtiaz Hussain, (2006] 1 SCC 380, referred to.
H
62 SUPREME COURT REPORTS [2007) 2 S.C.R.

A 1.3. Where the power under Article 226 or section llA of the Industrial
Disputes Act, 1947 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
B 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. Where finding of misconduct is affirmed and only the punishment
is interfered with, 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
C 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
D punishing the employer for taking action for the misconduct committed by
the employee. That should be avoided. In this case, the Labour Court found
that a c~arge 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 two annual
E increments. In such circumstances, award of back wages was neither
automatic nor consequential. In fact, back wages was not warranted at all.
[Paras 19, 21) [75-G-H; 76-A-E; G-H; 77-A]

Hindustan Tin Works Pvt. Ltd. v. Employees of Hindustan Tin Works Pvt.
Ltd., [1979] 2 SCC 80; Surendra Kumar Verma v. Central Government
F Industrial Tribunal-cum-Labour Court, New Delhi, [1981) 1 SCR 789;
Mohan/al v. Bharat Electronics Ltd., [1981) 3 SCC 225; UP. State Brassware
Corpn. Ltd. v. Udai Narain Pandey, [2006) 1 SCC 479; Allahabad Jail
Sansthan v. Daya Shankar Rai, [2005) 5 SCC 124; Kendriya Vidyalaya
Sangathan v. S.C. Sharma, [2005) 2 SCC 363; General Manager, Haryana
Roadways v. Rudhan Singh, [2005) 5 SCC 591; A.P.S.R. T.C. v. S. Narasa Goud,
G [2003) 2 sec 212; A.P.S.R.T.C. v. Abdul Kareem, (2005) 6 sec 36 and
R.SR. T.C. v. Shyam Bihari Lal Gupta, [2005) 7 SCC 406, referred to.

1.4. 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
H ground that the employee had worked for four years without giving room for
J.K. SYNTHETICS LTD. v. K.P. AGRAWAL [RA VEENDRAN,J.] 63
any such complaint. It ignored the seriousness of the misconduct. That was A
not warranted. 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. The punishment of dismissal did
not call for interference. !Para 271 [79-A-BJ

Rama Kant Misra v. State of U.P., AIR (1982) SC 952; Hombe Gowda B
Educational Trust v. State of Karnataka, (200611 SCC 430; Mahindra and
Mahindra Ltd v. NB. Narawade, (2005) 3 SCC 134; Orissa Cement v. Adikand
Sahu, (1960) 1 LLJ 518; New Shorrock Mills v. Mahesh Bhai T Rao, [1996)
6 SCC 590; U.P. SRTC v. Subhash Chandra Sharma, [2000) 3 SCC 324;
Bharat Forge Co. Ltd. v. Uttam Manohar Nakate, [2005) 2 SCC 489; MP. C
Electricity Board v. Jagdish Chandra Sharma, (2005) 3 SCC 401 and Regional
Manager, Rajasthan State Road Corporation v. Ghanshyam Sharma, (2002)
1 LLJ, referred to.

2. The assumption by the High Court that there was lawful order or
that there was wilful violation thereof is not sound. Further, the employer was D
not given an opportunity to explain why the employee was not reinstated. The
mere fact that the first respondent was not reinstated in pursuance of the
award of the Labour Court result in dismissal of the Writ petition challenging
the award. [Para 28) 179-E-F]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7657 of2004.
E
From the Final Judgment and Order dated 28.7.2003 of the High Court
of Judicature at Allahabad in C.M.W.P. No. 10714/1983.

Nikhil Nayyar and Anl<it Singhal for the Appellant.

Bharat Sangal, Sangeeta Panicker, R.R. Kumar and Samyadip Chatterji F
1· for the Respondents.
I

The Judgment of the Court was delivered by

RAVEENDRAN, J. 1. 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 G
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 H
24.2.1977 (amended on 1.3.1977). First respondent filed his objections/
64 SUPREME COURT REPORTS [2007) 2 S.C.R.

A 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 proceedings initiated in respect of such dismissal,
B 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
c 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
D 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
E 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
F 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 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.
G 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
H 27.5.1983.
j
I

J.K. SYNTHETICS LTD. v. K.P. AGRAWAL [RAVEENDRAN, J.] 65
-+~ (2.4.) On 4.5.1983, first respondent filed an application under section A
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 a/ia that (i) the Labour Court
became functus officio after publication of the award on 27.4.1983 and therefore, B
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
t Labour Court had held that a misconduct was proved.

(2.5) The Labour Court by order dated 29.6.1983 allowed the application C
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 D
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. " E
[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 : F
"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 G
learned counsel for the petitioner cannot be accepted and in my
opinion, there was an omission which could be corrected u:i.der 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 H
)...
\.

66 SUPREME COURT REPORTS [2007] 2 S.C.R.

A 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 :

B "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
wilfully violates lawful orders is not entitled to equitable discretion
under Article 226 of the Constitution of India."

C 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:

(1) Whether a provision enabling a court to correct any clerical or
arithmetical mistake, or error in the order arising from any accidental
D 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
E the employee is entitled to back-wages from the date of termination
to date of reinstatement.
(iiO 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
F 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)

G 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
H award was silent on that issue.
J
I

J.K. SYNTHETICS LTD. v. K.P. AGRA WAL [RAVEENDRAN,J.] 67
-+- 5. While considering the scope of a similar provision (Rule 83 of the A
Orissa Sales Tax Rules), this Court in Master Construction Co. (P) Ltd, v.
State of Orissa, (1966] 3 SCR 99, observed thus:

"An arithmetical mistake is a mistake ofcalculation; 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 B
mistake or omission unintentionally made. The 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
c
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- D
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.,
v. State of U.P., [1970] I 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 E
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-
F
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 challengedon the ground that it was
not a consequence of any clerical or arithmetic error or accidental slip/ G
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
H
68 SUPREME COURT REPORTS [2007] 2 S.C.R.

A 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
B correctional jurisdiction could be exercised and, therefore, was not barred by
limitation.

7. Section 6(6) again came up for consideration in UP. SRTC v. lmtiaz
Hussain, [2006] I SCC 380 which related to the removal of a conductor after
C 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)
D 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
E 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
F 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
G 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
H
.i. I~
I

J.K. SYNTHETICS LTD. v. K.P. AGRA WAL [RAVEENDRAN, J.] 69
the two decisions considered two different situations. In Tulsipur Sugar A
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 B
part of the reference, which had earlier been omitted. Therefore, this Court
held that such correction was permissible. On the other hand in lmtiaz 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, C
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
~cl~~~: D
(a) If there is an arithmetical or clerical or typographical error in the
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 E
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 p
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 G
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
H
70 SUPREME COURT REPORTS [2007) 2 S.C.R.

A 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.

I 0. 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.
B
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
C a matter of course. Reliance is placed on the decisions of this Court in
Hindustan Tin Works Pvt. Ltd., v. Employees of Hindustan Tin Works Pvt.
Ltd., [ 1979] 2 SCC 80, Surendra Kumar Verma v. Central Government Industrial
Tribunal-cum-Labour Court, New Delhi, [1981] l SCR 789 and Mohan Lal v.
Bharat Electronics Ltd., [1981] 3 SCC 225.

D 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.
E 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
F 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
G 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
H be reinstated, he will be denied the back wages which would be due
1
J.K. SYNTHETICS LTD. v. K.P. AGRA WAL [RA VEENDRAN, J.] 71
to him, the workman would be subjected to a sort of penalty for no A
'r fault of his and it is wholly undeserved. Ordinarily, therefore, a workman
whose service has been 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
B
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.
~ c
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
J' discretion of the Tribunal. Full back wages would be the normal rule
-j. and the party objecting to ii must establish the circumstances
necessitating departure. At that stage the Tribunal will exercise its D
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 E
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 F
workmen in violation of section 25-F of the Industrial Disputes Act, 1947 ('JD
t'
' 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 G
circumstances which may make it impossible or wholly inequitable vis-a-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 H
72 SUPREME COURT REPORTS [2007] 2 S.C.R.

A was), held as follows :
"Ordinarily, a workman who has been retrenched in contraventio11 of
the law is entitled to reinstatement with full back wages and that
principle yields only where the justice of the case in tht: light of the
particular facts indicates the desirability of a different relief. It has not
B 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 :

C "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 continuot•s service .. If the
termination of service is ab in;tio void and inoperative, there is no
question of granting reinstatement because there is no cessation of
D 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., v. Chopra
(P.P) [1969] 3 SCC 653 and Hindustan Steels Ltd., v. A. K. Roy, [1969]
3 sec 513, it was held that the court before granting reinstatement
must weigh all the facts and exercise discretion properly whether to
E 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
F 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 t
propose to depart in this case."

15. But the manner in which 'back-wages' is viewed, has undergone a
G 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. v. Udai Narain Pandey, [2006] 1 SCC 479, this Court following
Allahabad Jal Sansthan v. Daya Shankar Rai, [2005] 5 SCC 124, and Kendriya
Vidyalaya Sangathan v. S. C. Sharma, [2005] 2 SCC 363 held as follows :
H
"A person is not entitled to get something only because it would be
J.K. SYNTHETICS LTD. v. K.P.AGRA WAL[RAVEENDRAN,J.) 73
lawful to do so. If that principle is applied, the functions of an A
Industrial Court shall lose much of their significance."

" .... although 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 B
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 ... The changes (were) brought C
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 D
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. E
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 v. Rudhan Singh, [2005] 5 SCC 591, p
this Court observed :

"There is no rule of thumb that in every case where the Industrial
Tribunal 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 G
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 characta, any special qualification required for the job and the like
should be weighed and balanced in taking a decision regarding award H
of back wages. One of the important factors, which has to be taken
74 SUPREME COURT REPORTS (2007] 2 S.C.R.

A 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
B 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
c 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
D in regard to back wages. In Kendriya Vidya!aya Sangathan (supra), this
Court held :

" ..... 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
E 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 :

F "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 I 06 of the Evidence Act or the provisions analogous thereto,
G such a plea should be raised by the workman."

I7. There is also a misconception that whenever reinstatement is directed,
'continuity of service' and 'consequential benefits' should follow, as a matter h
of course. The disastrous effect of granting several promotions as a
H 'consequential benefit' to a person who has not worked for I0 to 15 years
and who does not have the benefit of necessary experience for discharging
J.K. SYNTHETICS LTD. v. K.P. AGRA WAL [RA VEENDRAN, J.] 75

}· the higher duties and functions of promotional posts, is seldom visualized A
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 B
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 C
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 D
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. E
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 F
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, G
resulting in the reinstatement of employee. Where the power under Article 226
or section I IA 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 was illegal and H
f-

76 SUPREME COURT REPORTS [2007) 2 S.C.R.

A 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
B 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
C held to be illegal or void) is that there is no automatic reinstatement; and if
reinstatement is directed, it is not automatically~ ith 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
0
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,
E 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
F 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
G 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 dismi5sal was not warranted and therefore, imposed a
lesser punishment of withholding the two annual increments. In such
H circumstances, award of back wages was neither automatic nor consequential.
;

-f-
.l.K. SYNTHETICS LTD. v. K.P.AGRAWAL[RAVEENDRAN, J.) 77
In fact, back wages was not warranted at all. A
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 B
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 v. State ofU.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 C
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.
D
23. In Hombe Gowda Educational Trust v. State of Karnataka, [2006]
I 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 E
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 received a set back. In view of the
change in economic policy of the country, it may not now be proper F
to allow the employees to break the discipline with impunity."

24. In Mahindra and Mahindra Ltd. v. 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 G
was terminated after conducting an inquiry. Labour Court found the punishment
to be excessive and in exercise of power under section 11 A 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 v. Adikand Sahu, (1960) 1 LLJ 518
and New Shorrock Mills v. Mahesh Bhai T Rao, [1996] 6 SCC 590]. G
+-
78 SUPREME COURT REPORTS [2007] 2 S.C.R.

A 25. In U.P. SRTC v. 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
B 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
c 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
D 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
E 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., v. Uttam Manohar Nakate, [2005] 2 SCC
F 489, M.P. Electricity Board v. Jagdish Chandra Sharma, [2005] 3 SCC 401,
and Regional Manager, Rajasthan State Road Corporation v. Ghanshayam
Sharma, (2002) I LLJ 234, this Court held that power under section I IA 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 11 A
G 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
H
(
--f,
JK SYNTHETICS LTD. v. K.P. AGRA WAL (RA VEENDRAN, J.] 79

~-
against the employee was a serious one. The Labour Court did not record a 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
B
Labour Court should not interfere with the punishment. We, therefore, hold
that the punishment of dismissal did not call for interference.

Re : Question (iv)

28. It is true that when the employer challenged the award of the labour c
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 ifhe 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 D
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 E
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 F
t 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 8.3.1983 (as modified on G
29.6.1983) of the Labour Court and uphold the punishment of dismissal imposed
upon the first Respondent. Parties to bear their respective costs.
~
B.S. Appeal allowed.

H