Holding

Gainful employment includes self‑employment, therefore the Labour Court's view that agricultural income is not gainful employment is erroneous and the award of full back wages must be restored.

Summary

The respondent, M. Nagangouda, a former conductor of the North East Karnataka Road Transport Corporation, was dismissed for alleged misconduct. He later claimed entitlement to full back wages, arguing that his agricultural self‑employment during the dismissal period constituted gainful employment. The Labour Court initially awarded only 50% back wages, but on remand the Tribunal granted full back wages, a decision the corporation challenged. The High Court upheld the Tribunal’s award, holding that the corporation had not proved the respondent was gainfully employed. The Supreme Court held that "gainful employment" includes self‑employment, so agricultural income cannot be excluded, and restored the Labour Court’s original award of full back wages. Consequently, the appeal was allowed and the corporation may recover any overpaid amounts.

Issues considered

Whether income from agricultural self‑employment qualifies as "gainful employment" for the purpose of awarding back wages.
Whether the Labour Court's reasoning that agricultural income is not gainful employment is legally correct.

Subjects

labour lawback wagesgainful employmentagricultural incomeself‑employmentdismissalreinstatementindustrial tribunal

Judgment

A NORTH EAST KARNAT AKA ROAD TRANSPORT CORPORATION
v.
M.NAGANGOUDA

JANUARY 9, 2007

B [DR. AR. LAKSHMANAN AND ALTAMAS KABIR, JJ.]

Labour laws:
+ \....

Full Back wages-Entitlement fer-During period of termination,
C workman engaged in agricultural work and receiving certain income
therefrom-Labour Court held that Income so received could not be
equated with income from gainful employment-Justification of-Held, not
justified- 'Gainful employment' would also include self-employment
wherefrom income is generated-Income either from employment in an
D establishment or from self-employment merely differentiates the sources
from which income is generated, the end use being the same.

Words and phrases:

'Gainful employment '---Connotation of-Explained. I
E t=
Respondent-workman was found guilty of misconduct and was dismissed
from service. Labour Court ordered his reinstatement into service with full
back wages. Aggrieved Appellant-Corporation filed writ petition. High
Court dismissed the Writ Petition holding that the management had not
F been able to establish that the respondent was engaged in any gainful
employment d11ring the period of dismissal and that since the misconduct
was not proved, there could be no justification in denying grant of back
wages and that the conclusion arrived at by the Labour Court was neither
perverse nor arbitrary. Hence the present appeal.

G Allowing the appeal, the Court

HELD: The reasoning of the Labour Court that the Income received
by the respondent from agricultural pursuits could not be equated with
income from gainful employment in any establishment cannot be accepted.
H "Gainful employment" would also include self-employment wherefrom
282
NORTH EAST KARNATAKA ROAD TPT. CORPN. v. M. NAGANGOUDA [KABIR, J.] 283

income is generated. Income either from employment in an establishment A
or from self-employment merely differentiates the sources from which
income is generated, the end use being the same. Since the respondent was
earning some amount from his agricultural pursuits to maintain himself,
the Labour Court was not justified in holding that he could not be treated
to be engaged in "gainful employment." [Para 17) [287-B-D) B

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 129 of2007.
..
_
.-1.
From the Judgment and final Order dated 1. 7.2005 of the High Court
ofKamataka at Bangalore in W.A. No. 2446/2005.
c
Basava Prabhu S. Patil, V.N. Raghupathy, B. Subrahmanya Prasad and
Narayan P. Kengasur for the Appellant.

G. V. Chandrashekar and Anj ana Chandrashekar for the
Respondent. D

) The Judgment of the Court was delivered by

ALT AMAS KABIR, J. : 1. Leave granted.

2. This appeal is directed against the judgment and final order dated E
1st July, 2005 passed by the High Court of Kamataka at Bangalore in Writ
Appeal No. 2446/2005 choosing not to interfere with the findings recorded
in the award of the Tribunal as also the order of the learned Single Judge
that on account of the forced idleness of the respondent-workman, he
would be entitled to full back wages on reinstatement. F

3. For a proper appreciation of the order passed by the Tribunal and
the High Court, it is necessary to set out a few facts in brief.

4. The respondent-workman was working as a Conductor of Kudligi G
Depot of the appellant-corporation. On 5th October, 1980, while the said
respondent was on duty in vehicle No.MYF-2613 plying between Hadagali
to Medalagatta, the said bus came to be checked by the Central Line
Checking Squad, Bangalore at Medalgatta Stage No.3. The allegation
against the respondent is that he had failed to issue tickets of 0.90 paise
H
284 SUPREME COURT REPORTS [2007] I S.C.R.

A denomination to four passengers despite collection of requisite fare at the
boarding point. On the basis of the report submitted by the Checking
Squad, disciplinary proceedings were initiated against the respondent and
he was served with Articles of Charges. The respondent filed his written
statement of defence denying the charges levelled against him. However,
the disciplinary authority was not satisfied with the defence taken by the
B respondent and appointed the Assistant Traffic Manager as Enquiring
Authority to conduct an enquiry against the respondent.

5. Enquiry was duly conducted on 21st January, 1981 and on the
materials available, the Enquiring Authority held the respondent to be guilty
C of misconduct. Accepting the reports submitted by the Enquiring Authority, ...
the Disciplinary Authority by its order dated 27th August, 1981 dismissed
the respondent from service with immediate effect under powers vested in
it by Regulation 19 (3) under Part-III of the KSRTC Servants (C & D)
Regulations, · 1971. The respondent approached the Assistant Labour
Commissioner for conciliation. As the same failed, the matter was referred
D
to the Labour Court by the Government of Kamataka vide Reference dated
22nd Nove~ber, 1982. The Terms of Reference were as follows:-

"(!) Is the Management justified in dismissing M. Nagangouda,
Ex-Conductor, Kudligi Depot, Bellari Division from service
E with effect from 27.08.1981?

(ii) If not to what other relief the said workman is entitled?"

6. The said reference, being Reference No.46/1992, came up before the
F Labour Court which in its tum framed the following issues for consideration:-

(a) Whether the domestic enquiry is fair and proper ?

(b) Whether the order of termination passed by the respondent
is legal and valid ?
G
(c) What order ?"

7. On 20th October, 1994, the Labour Court heard issue No.1 as a
preliminary issue and held that the domestic enquiry was not fair and
H proper.
. - NORTH EAST KARNATAKA ROAD TPT. CORPN. v. M. NAGANGOUDA [KABIR, J.] 285

8. On 3rd January, 1995, while the proceedings were pending before the
Labour Court, the respondent filed an interim application which was allowed
by the Labour Court and the appellant-corporation was directed to pay
50 % of the salary last drawn by the respondent. In view of the aforesaid
A

order, the appellant was permitted to obtain work from the respondent on
the strength of a joint memorandum filed by the parties. Subsequently,
on 23rd Febraury, 1998, the Labour Court allowed the respondent's claim
B
petition by ordering his reinstatement into service and also holding that he
+ was entitled to receive 50 % of the back wages. Aggrieved by the aforesaid
order, the respondent filed a Writ Petition No.26409/1998 before the High
Court ofKarnataka which remitted the matter back to the Labour Court with
a direction to pass appropriate orders with regard to back wages, continuity C
of service and other consequential benefits, after affording an opp01tunity
to both the parties. After remand, the Tribunal vi de its Order dated 10th
August, 200 I, allowed the Reference and held that the respondent was
entitled to receive full back wages from the date of the order of dismissal
till the date of the award with continuity of service and all consequential D
benefits.

9. The appellant-corporation challenged the award passed by the
Tribunal by way of a Writ Petition No.46673/2003 contending that the award
of the Labour Court was erroneous on the face of the record and the
E
conclusions arrived at were untenable. One of the grounds taken by the
appellant was that the Labour Court having found that the respondent is
engaged in agricultural operations, should not have held that the same was
not an· alternative employment.

10. The Writ Petition filed by the appellant came to be listed for finai F
hearing before the learned Single Judge on 2nd February, 2005, and by his
Order of even date the Single Judge dismissed the Writ Petition holding
that the management had not been able to establish that the respondent
was engaged in any gainful employment during the period of dismissal.
The learned Judge also came to a finding that when the misconduct was G
not proved, there could be no justification in denying grant of back wages
and that the conclusion arrived at by the Industrial Tribunal was neither
perverse nor arbitrary.

11. Being aggrieved by the above, the appellant preferred an appeal. H
286 SUPREME COURT REPORTS [2007] 1 S.C.R.

A The Writ Appeal was taken up for hearing by the Division Bench of the
High Court on 1st July, 2005 and was dismissed, thus confirming the orders
passed by the learned Single Judge and the Industrial Tribunal.

12. As indicated hereinbefore, this appeal is directed against the
B judgment and order of the Division Bench.

13. At the very outset it was submitted on behalf of the appellant that
the Corporation had no grievance against the award as was made by the + \...,
Labour Court on 23rd February, 1998 and that the Corporation was ready
and willing to reinstate the respondent and to pay 50 % of the salary last
c drawn by him. The Corporation was, however, aggrieved by the subsequent
award passed by the Labour Court after remand whereby the Labour Court
altered its earlier directions after coming to a finding that the respondent
was entitled to full back wages and not 50 % as had been directed earlier.

D 14. It was sought to be urged that after coming to a finding on the
basis of the evidence of the respondent himself that the during the period
of termination of his sen1 ices, he was engaged in agriculture and that he
was receiving certain amounts therefrom, it was not open to the Labour
Court to observe that "gainful employment" would not include such income
E from agriculture. It was urged that income from any source, whether from
employment in an establishment or. from self-employment, would have to be
treated as income for the purposes of deciding whether the respondent
would be entitled to receive full back wages. It was urged that both the
Tribunal and the High Court erred in taking a view to the contrary and the
orders passed on the basis thereof were liable to be set aside.
F
15. On behalf of the respondent the stand taken before the Labour
Court and the High Court was reiterated and it was contended that engaging
in agricultural work would not amount to being gainfully employed and
hence the orders passed by the Tribunal as affirmed by the High Court for
G payment of full back wages to the respondent, did not call for any
interference.

16. We have carefully considered the submissions made on behalf of
the respective parties in the backdrop of the facts of the case. Since the
H finding on the issue as to whether the domestic enquiry had been fairly and
NORTH EAST KARNATAKA ROAD TPT CORPN. v. M. NAGANGOUDA [KABIR, J.] 2.87

properly held had been decided in favour of the respondent and had not A
been challenged by the appellant, the only issue which was remitted by
the High Court to the Tribunal was whether the respondent would be
entitled to full back wages from the date of his dismissal till the date of the
award, with continuity of service and consequential benefits.

17. On the said question, we are unable to accept the reasoning of the
B
Labour Court that the income received by the respondent from agricultural
pursuits could not be equated with income from gainful employment in any
establishment. In our view, "gainful employment" would also include self-
employment wherefrom income is generated. Income either from employment
in an establishment or from self-employment merely differentiates the sources c
from which income is generated, the end use being the same. Since the
respondent was earning some amount from his agricultural pursuits to
maintain himself, the Labour Court was not justified in holding that merely
because the respondent was receiving agricultural income, he could not be
treated to be engaged in "gainful employment". D
18. The Single Judge of the High Court without looking into this
aspect of the matter merely observed that the management had not
established that the workman was engaged in any gainful employment
during the period of dismissal and on such finding, the learned Single Judge
chose not to interfere .with the award as passed by the Tribunal after E
remand.

19. The Division Bench which heard the Writ Appeal did not also
consider the aforesaid aspect of the matter and mechanically disposed of the
appeal with the observation that after going through the order of the F
learned Single Judge and the award of the Tribunal, it found no ground to
interfere with the findings recorded therein.

20. In view of what we have stated hereinabove regarding the income
received by the respondent for the period of his dismissal from service till
the date of the award, we are of the view that the award passed by the G
Tribunal after remand and affirmed by the High Court, both by the learned
Single Judge and the Division Bench is liable to be modified and the earlier
award of the Labour Court dated 23rd February, 1998 is liable to be restored.

21. We, accordingly, allow the appeal and restore the award passed by H
288 SUPREME COURT REPORTS [2007] I S.C.R.

A the Labour Court dated 23rd February, 1998 and direct the respondent to
give effect to the same expeditiously, if the same has not already been
implemented.

22. In the event full back wages from the date of dismissal till the date
of the award has already been paid to the respondent, the appellant-
B Corporation will be entitled to recover the same from the respondent.

23. There will be no order as to costs.

D.G. Appeal allowed.