Holding

An employee who was gainfully employed during the period of termination is not entitled to full back wages; reasonable deductions must be made, and the award was reduced to Rs. 4 lakhs.

Summary

The Supreme Court examined whether V. Venkatesan, a former employee of Metropolitan Transport Corporation who was terminated in 1996 and later reinstated in 2004, was entitled to full back wages under Section 33C(2) of the Industrial Disputes Act despite having been enrolled and practicing as an advocate from December 2000 to June 2004. The Court held that back wages are not an automatic consequence of reinstatement and that income earned from gainful employment, including self‑employment, must be deducted. Relying on earlier decisions, the Court found that the respondent had likely earned from his legal practice and therefore could not claim the full amount awarded by the Labour Court. A reasonable deduction was ordered, reducing the back wages to Rs. 4 lakhs instead of Rs. 6.54 lakhs. The appeal was partly allowed, directing the corporation to pay the reduced amount with interest if delayed.

Issues considered

Whether an employee who was gainfully employed as an advocate during the period of termination is entitled to full back wages under Section 33C(2) of the Industrial Disputes Act.
Whether the award of back wages should be reduced on account of alternative gainful employment.

Legislation cited

Indian Evidence Act, 1872s. 106
Industrial Disputes Act, 1947s. 178, s. 25F, s. 33A, s. 33C(2), s. 6N

Subjects

Industrial Disputes ActBack wagesReinstatementGainful employmentAlternative employmentSection 33C(2)Deduction of earningsSupreme Court of India

Judgment

[2009] 12 S.C.R. 583

,, ~
METROPOLITAN TRANSPORT CORPORATION A
v.
V. VENKATESAN
(Civil Appeal No. 6167 of 2009)
AUGUST 7, ·2009
B
[TARUN CHATIERJEE AND R.M. LODHA, JJ.]

> -I
Industrial disputes Act, 1947: s.33C(2) - Back wages -
Reinstatement of terminated employee - During period of
c
termination, he was enrolled as an advocate and practiced till
date of reinstatement - Labour court allowed claim of
employee to the extent of Rs.6.54 lacs towards full back wages
- Challenged - Held: Employee not entitled to full back
wages - Income received from profession has to be treated
as income from gainful employment - Reasonable D
'( ·~
deductions to be made while determining back wages - In the
ends of justice, employee awarded back wages of Rs.4 lacs
instead of 6.54 lacs.

The question which arose for consideration in the
present appeal was whether the respondent-employee is E
entitled fo claim full back wages from December 12, 1996
)
• the date on· which he was removed from service till the
date of his reinstatement on June 15, 2004 although he
was enrolled as an advocate on December 12, 2000 and
thereby gainfully employed. F

Partly allowing the appeal, the Court

HELD: 1.1. The relief of reinstatement with back-
wages is not automatic and may be wholly inappropriate
-t in a given fact situation even though the termination of G
an employee is tleld to be in contravention to the
prescribed procedure. In view of the fact that resp·ondent
was enrolled as an advocate on December 12, 2000 and
583 H
584 SUPREME COURT REPORTS [2009] 12 S.C.R.

A continued to be so until the date of his reinstatement .. .
(June 15, 2004), he cannot be held to be entitled to full
back wages. The income received by the respondent
while pursuing legal profession has to be treated as
income from gainful employment. Gainful employment
B would also include self employment. [Para 10 and 12]
[593-C; 594-E-F]

UP. State Brassware Corporation v. Uday Narain
Pandey (2006) 1 SCC 479; J.K. Synthetics Ltd. v. K.P. ~ '
Agrawal and Anr. (2007) 2 SCC 433; G.M. Haryana
c Roadways v. Rudhan Singh (2005) 5 SCC 591 ;. S.M. Saiyad
v. Baroda Municipal corporation, Baroda (1984) Supp) SCC
378; Jagbir Singh v. Haryana State Agriculture Marketing
Board' and Anr. JT(2009) 9 SC 396; Not1h East Kamataka
Road Transpot1 Corporation v. M. Nagangouda (2007) 10
D sec 765, relied on. > .
1.2. It is difficult to accept the submission for the
respondent that he had no professional earnings as an
advocate and except conducting his own case, the
respondent did not appear in any other case. The fact that
E
he resigned from service after 2-3 years of reinstatement
and re-engaged himself in legal profession shows that he
had some practiee in law after he took sanad on ' '
December 12, 2000 until June 15, 2004, otherwise he
would not have resigned from the settled job and
F resumed profession of glorious uncertainties. In this view
of the matter, reasonable deduction needs to be made
while determining the back wages to which respondent
may be entitled. Taking overall facts and circumstances
of the case and all other aspects including the aspect that
G he was enrolled as an advocate from December 12, 2000 .,_

to June 15, 2004, demand of justice would be met if the
respondent is awarded back wages in the sum of Rs. 4
lacs instead of Rs. 6,54,7661-. [Para 13] [594-G; 595-A-C]

H
METROPOLITAN TRANSPORT CORPORATION v. V. 585
VENKATESAN
Case Law Reference: A
' -I
(2006) 1 sec 479 relied on Para 7

(2007) 2 sec 433 relied on Para 8

(2005) 5 sec 591 relied on Para 9
B
(1984) Supp) SCC 378 relied on Para 10

JT (2009) 9 SC 396 relied on Para 11

} ,;. (2007) 10 sec 765 relied on Para 12
c
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
5167 of 2009.

From the Judgment & Order dated 24.06.2008 of the High
Court of Judicature at Madras in Writ Appeal No. 682 of 2008.
D
r _., Mohan Parasaran, ASG, T. Harish Kumar, Prasanth P., V.
Vasudevan, for the Appellants.

K.V. Viswanathan, P.V. Yogeswaran, for the Respondents.

The Judgment of the Court was delivered by E·

R.M. LODHA, J. 1. Leave granted.

2. The question that falls for determination in this appeal
by special leave is: is the respondent entitled to claim full back F
wages for the period from December 12, 1996 the date on
which he was_ removed from service till the date of his
__ _reins~a!ement on June 1-5, 2004 althougtrne was enrq_ll~9 . .9.~"' .~ .-- -
an aavocatt:- tiri Do<>-'?f'l'.'IJ::ii:>r 12. _?,00.0 and thereby·-g'ainfully
employed? ·
G \
-r 3. Facts are these, briefly put. V. Venkatesan, respondent, __.,-
was initially employed as conductor on May 7, 1980 by Pall;;wt\n
. Transport Corporation. On formation of Metropolitan,Trc:insport
Corporation (for short, "Corporation"), the appella'nt, became
H
586 SUPREME COURT REPORTS [2009] 12 S.C.R.

A its employee. The respondent was promoted as Junior
Assistant and subsequently as an Assistant by the Corporation.
• •
The respondent seems to have acquired Law degree and he
was selected for the post of Superintendent (Legal) as trainee.
But during the training period his performance was not found
B satisfactory and he was reverted back to the post of Assistant.
On January 31, 1995, the respondent was transferred to
Poonamallee Depot but he did not join his duties there and
remained absent for about three months without any prior
sanction of leave or intimation. The case of the Corporation is t '
c that on March 28, 1995, a memo of charge was issued to the
respondent to which he filed his written response but as his
reply was not found satisfactory and a domestic inquiry was
instituted to inquire into his misconduct. The respondent did not
attend the domestic inquiry despite repeated letters and
notices including a notice published in local newspaper.
D
Ultimately, by an order dated December 12, 1986, the
>
Corporation removed the respondent from its service. '
4. The respondent filed a complaint before the Industrial
Tribunal, Chennai under Section 33(2)(b) of the Industrial
E Disputes Act, 1947 (for short, "ID Act") alleging the contravention
of the provisions of Section 33A of the ID Act in removing him
from service although the Industrial Dispute No. 62/82
concerning the entire transport workers was pending before the ~

'
Industrial Tribunal, Chennai. The complaint was opposed by the
F Corporation on diverse pleas. The Industrial Tribunal by its order
dated July 11, 2003 held the order of removal void and
inoperative as the Corporation did not apply for approval. The
Industrial Tribunal also declared that the complainant is deemPrl
to have continued in service and he was entitled to all benefits
G available. The Corporation challenged the order dated July 11,
2003 passed by the Industrial Tribunal before the High Court. ~

By an interim order, initially, the High Court granted stay of the
order dated July 11, 2003 subject to the Corporation depositing 4

the entire bacl<.wages as awarded by Industrial Tribunal and
compliance of the previsions of Section 178 of the ID Act. The
H
METROPOLITAN TRANSPORT CORPORATION v. V. 587
VENKATESAN [R.M. LODHA, J.]

-I
Corporation instead of paying last drawn wages to the A
' respondent, reinstated him on June 15, 2004 without prejudice
to the pending writ petition. The said writ petition came to be
dismissed on August 30, 2006 and, thus, the order dated July
11, 2003 passed by the Industrial Tribunal attained finality.
B
5. Since the backwages for the period from December 12,
1996 until June 15, 2004 was not paid by the Corporation, the
respondent approached the concerned Labour Court under
Section 33C(2) of the ID Act claiming a sum of Rs. 8,08,698/
> -1 - as the sum due and payable by the Corporation. The
Corporation contested the application under Section 33C(2). c
After hearing the parties, the Labour Court allowed the claim
of the respondent to the extent of Rs. 6,54,766/- towards full
back wages vide its order dated December 22, 2006. The
Corporation challenged the said order by filing a writ petition
before the Madras High Court; the principal ground being that D
f .. having been enrolled as an advocate on December 12, 2000,
the respondent was gainfully employed and not entitled to back
wages. The respondent also filed a writ petition before the High
Court seeking enforcement of the order dated December 22,
2006. The Corporation failed in its writ petition while in the writ E
petition filed by the respondent, the learned single Judge
directed the Labour Department to take necessary steps in
, 1· recovering the due sum from the Corporation. The Corporation
challenged the order of the learned single Judge whereby its
writ petition came to be dismissed, by filing a writ appeal which F
came to be dismissed on June 24, 2008 giving rise to the
present appeal by special leave.

6. In the backdrop of the aforenoticed facts, we now
~ examine the question set out above.
G
-"!
7. In UP. State Brassware Corporation vs. Uday Narain
Pandey1, this Court on consideration of a question whether the
direction to pay back wages consequent upon declaration that

1. (2006) 1 sec 479. H
588 SUPREME COURT REPORTS [2009] 12 S.C.R.

A a workman has been retrenched in violation of the provisions
of Section 6N of the U.P. Industrial Disputes Act, 1947 • •
(equivalent to Section 25F of the ID Act, 1947) as a rule was
proper exercise made the following observations:

"41. The Industrial Courts while adjudicating on
B
disputes between the management and the workmen,
therefore, must take such decisions which would be in
consonance with the purpose the law seeks to achieve.
When justice is the buzzword in the matter of adjudication
under the Industrial Disputes Act, it would be wholly ~ ..
c improper on the part of the superior courts to make them
apply the cold letter of the statutes to act mechanically.
Rendition of justice would bring within its purview giving a
person what is due to him and not what can be given to
him in law.
D
42. 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.
E
43. The changes brought about by the subsequent
decisions of this Court, probably having regard to the
changes in the policy decisions of the Government in the
wake of prevailing market economy, globalisation, ' .
privatisation and outsourcing, is evident.
F
44 . ......

45. The Court, therefore, emphasised that while
granting relief, application of mind on the part of the
Industrial Court is imperative. Payment of full back wages, ~
G
therefore, cannot be the natural consequence." ~

8. In the case of J.K. Synthetics Ltd. Vs. K.P. Agrawal and
Another", while dealing with the question whether an employee

H 2. (2007) 2 sec 433.
METROPOLITAN TRANSPORT CORPORATION v. V. 589
VENKATESAN [R.M. LODHA, J.]
is entitled to back wages from the date of termination to the A
" ....
date of reinstatement when the punishment of dismissal is
substituted by a lesser punishment (stoppage of increments for
two years), this Court held:

"15. But the manner in which "back wages" is viewed, has
B
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 UP.
State Brassware Corpn. Ltd. v. Uday Narain Pandey
(2006)1 SCC 479, this Court following Allahabad Jal c
Sansthan v. Daya Shankar Rai (2005) 5 SCC 124 and
Kendriya Vidyalaya Sangathan v. S.C. Sharma (2005)
2 SCC 363 held as follows: (Uday Narain Pandey case,
sec p. 480d-g)
D
f " "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.
E
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 court
realising that an industry may not be compelled to pay to
the workman for the period during which he apparently F
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 brought about by G
~
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,
globalisation, privatisation and outsourcing, is evident.
H
590 SUPREME COURT REPORTS [2009] 12 S.C.R.

A 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
B 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. While granting relief, application
of mind on the part of the Industrial Court is imperative. i ~

c Payment of full back wages cannot be the natural
consequence."

In G.M., Haryana Roadways v. Rudhan Singh (2005) 5
SCC 591 this Court observed: (SCC p.596, para 8)

D "8. 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 i.e.
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
F 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
G
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
H
METROPOLITAN TRANSPORT CORPORATION v. V. 591
VENKATESAN [R.M. LODHA, J,]

·' .. complete period i.e. from the date of termination till the date- - A
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- B
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 C
Vidyalaya Sangathan this Court held: (SCC p.366, para
16)

"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 0
burden ls 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 responden.t had neither
pleaded nor placed any material in that regard."
E
In U.P. State Brassware Corpn. Ltd. this Court observed:
(SCC p. 495, para 61)
> '
"61. 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 F
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 G
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 H
I
592 SUPREME COURT REPORTS [2009] 12 S.C.R.

.
A 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
B seldom visualised 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 '
c directed. We may in this behalf refer to the decisions of
this Court in A.P. SRTC v. S. Narsagoud (2003) 2 SCC
212, A.P. $,~TC v. Abdul Kareem (2005) 6 SCC 36 and
Rajasthan SRTC v. Shyam Bihari Lal Gupta (2005) 7
sec 406.
D 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
E 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
and Uday Narain Pandey. Therefore, it is necessary for
F 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
G 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."

9. In J.K. Synthetics Ltd. 2 , the Court extensively considered
H
METROPOLITAN TRANSPORT CORPORATION v. V. 593
VENKATESAN [R.M. LODHA, J.]
..
----,'
;
U.P. State Brassware Corporation 1 and G.M. Haryana .A
Roadways vs. Rudhan Singh 3 . Pertinently, it has been held that
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 several other factors. B
10. The learned Senior Counsel for the respondent
although did not dispute that the respondent was enrolled as
,,. ),
an advocate on December 1;z, 2000 and continued to be so
until the date of his reinstatement but he submitted that the
respondent had no earnings from the profession and, therefore, c
no amount should be deducted from the back wages. In this
regard he relied on a decision of this court in the case of S.M.
Saiyad vs. Baroda Municipal corporation, Baroda4 wherein this
Court observed:
... ,, D
"6. Appellant enrolled himself as an advocate after
taking requisite educational qualification on January 20,
1972. It was pointed out to us that the appellant admitted
that he was earning Rs 150 p.m. since he started his legal
practice. It was therefore, urged that no back wages for E
the period January 20, 1972 to October 26, 1976 should
be awarded. We are not impressed. Undoubtedly the
?
' respondent will be entitled to deduct the amount which the
appellant was admittedly earning from the back wages
payab1e to him. The question is from what date deduction
F
at the rate of Rs 150 p.m. should be permitted.

7. Appellant contended and in our opinion rightly that
deduction at the rate of Rs 150 p.m. should not commence
from the very day he was enrolled as an advocate because
... it is common knowledge that no one earns from the first G
day and therefore a reasonable period must be set apart
from finding a footing in the profession. The contention
deserves consideration. The appellant himself has been

3. (2005) 5 sec 591.
H
594 SUPREME COURT REPORTS [2009] 12 S.C.R.

A rather loose in his statement. It would be reasonable to
hold that he must have at least started earning at the rate
' -._
of Rs 150 p.m. as stated by him after the lapse of one
year from the date he was enrolled as an advocate."

11. First, it may be noticed that in seventees and eighties,
B
direction for reinstatement and payment of full back wages on
dismissal order having been found inv~lid would ordinarily
fol!ow as a matter of course. But there is change in legal
approach now. We recently observed in Jagbir Singh vs. ~ ...
Haryana state Agriculture Marketing Board & Anr. 5 that In
c recent past there has been a shift in the legal position and in
a long line of cases, this Court has consistently taken the view
that the relief of reinstatement with back-w<11ges is not automatic
and may be wholly inappropriate in a given fact situation even
though the termination of an employee is held to be in
D contravention to the prescribed procedure.
• .
12. Secondly, and more importantly, in view of the fact that
respondent was enrolled as an advocate on December 12,
2000 and continued to be so until the date of his reinstatement
E (June 15, 2004), in our thoughtful considaration, he cannot be
held to be entitled to full back wages. That the income received
by the respondent while pursuing legal profession has to be
treated as income from gainful employmant does not admit of ' ' '

any doubt. In the case of North Ea~t Karnataka Road
F Transport Corporation vs. M. Nagangouda , this Court held,
6

that "gainful employment" would also include self-employment.
We respectfully agree.

13. It is difficult to accept the submission of the learned
senior counsel for the respondent that he had no professional
G earnings as an advocate and except conducting his own case,
the respondent did not appear in any other case. The fact that
he resigned from service after 2-3 years of reinstatement and
5. JT 2009 (9) SC 396.

H 6. (2007) 1o sec 765.
M!ETROPOLITAN TRANSPORT CORPORATION v. V. 595
VE:NKATESAN [R.M. LODHA, J.]
. ' re-engagec! hirnself jn lega! prgfession leads us to assume that A
he had some practice in law after he took sanad on December
12, 2000 until June 15, 2004! otherwise he would not have
resigned from the settled job and resumed profession ()f
glorious uncertainties. In this view of the matter, reasonable
deduction needs to be made while determining the back wages B
to which respondent may be entitled. Taking overall facts and
circumstances of the case and all other aspects including the
aspect that he was enrolled as an advocate from December
- )< 12, 2000 to June 15, 2004, in our considered view, demand
of justice would be met if the respondent is awarded back C
wages in the sum of Rs. 4 lacs instead of Rs. 6,54,766/-. We
order accordingly.

14. The appeal is, therefore, allowed to the aforesaid
extent. The impugned judgments of the division bench as well
as the learned single Judge stand modified accordingly. Time D
of eight weeks is granted to +i,e Corporation to make payment
of Rs. 4 lacs to the respondent, if not paid so far, failing which
it shall carry simple interest @ 6 per cent per annum from June
115, 2004 wntil the date of payment. The parties will bear their
own costl>. E

D.G. Appeal partly allowed.