Holding

Reinstatement and full back wages are not automatic; the employee must prove lack of gainful employment, and where the employer is a sick unit and the employee’s service is short, compensation may be awarded in lieu of reinstatement.

Summary

Talwara Cooperative Credit & Service Society Ltd terminated clerk Sushil Kumar after two short spells of employment (1987-1990 and 1995-1997) citing financial losses. The Labour Court awarded reinstatement with full back wages, which the High Court upheld. The Society appealed to the Supreme Court, arguing that reinstatement was inappropriate given its sick financial condition and the employee's brief service. The Court held that relief of reinstatement and back wages is discretionary, not automatic, and that the burden of proving gainful employment after termination rests on the employee under Section 106 of the Evidence Act. Considering the employer’s loss, the employee’s short tenure, and the nature of the appointment, the Court substituted reinstatement with a compensation of Rs.2,00,000. The appeal was allowed.

Issues considered

What factors should the Industrial Court consider when granting reinstatement and back wages under s.11A and s.25F of the Industrial Disputes Act?
Who bears the burden of proving that the workman was not gainfully employed after termination?
Whether a sick employer’s financial condition justifies awarding compensation instead of reinstatement with full back wages.

Legislation cited

Indian Evidence Act, 1872s. 106
Industrial Disputes Act, 1947s. 11A, s. 17-B, s. 25F

Subjects

Industrial Disputes Acttermination of servicereinstatementback wagesburden of proofgainful employmentsick unitcompensationSection 11ASection 25FSection 106

Judgment

[2008] 14 S.C.R. 53
=-

--\ TALWARA COOP. CREDIT & SERVICE S0CIETY LTD. A
v.
SUSHIL KUMAR
(Civil Appeal No. 5951 of 2008)
OCTOBER 1, 2008
B
[S.8. SINHA AND CYRIAC JOSEPH, JJ.]
)
Industrial Disputes Act, 1947 - ss. 11A and 25 F - Ter-
--....,_ mination of employee - As a result of loss occurred to the
employer concern - Courts below setting aside termination c
and directing reinstatement of the employee with back wages
- Burden to prove gainful employment placed on the employ-
ers - On appeal, held: In view of the facts that the employer
was running losses and the employment of the employee was
only for a short period, order of termination correct - Grant of
D
relief of reinstatement should be on consideration of nature of
service and mode of recruitment - Back wages should be di-
reefed to be paid only after considering the question of gainful
employment of the employee - Courts below failed to con-
sider such questions - Courts below were also wrong in plac-
ing the burden of proof of gainful employment on the employer E
- Onus to prove such question is on the employee - Where
the termination is on account of financial losses, the court
should pass such award adjusting the equities between the
parties - Interest of justice would be served if a compensation
'\
of Rs. 2, 00, 000 is paid in place of reinstatement and back F
wages - Evidence Act, 1872 - s. 106.
Services of the respondent-employee were termi-
nated by the appellant-employer after about three years
of his service. Labour Court had passed the award to re-
G
instate him. Thereafter in the meeting of Board of Direc-
tors of the appellant-employer a resolution was passed
to dispense with the services of some employees since
the concern was suffering losses. Consequently services
53 H
54 SUPREME COURT REPORTS [2008) 14 S.C.R. ,,..

A of the respondent amongst others was again terminated. t-·
In the industrial dispute, the labour court passed the
award setting aside the termination order and directing
to reinstate him with back wages with continuity and· all
other consequential benefits. Writ petition thereagainst
B was dismissed by High Court. Hence the present appeal.
Allowing the appeal, the Court
\-
HELD: 1.1 Grant of a relief of reinstatement, 'it is trite,
is not automatic. Grant of back wages is also not auto-
c matic. The Industrial Courts while exercising their power
u/s. 11A of the Industrial Disputes Act, 1947, are required
to strike a balance in a situation of this nature. For the
said purpose, certain relevant factors, as for example,
nature of service, the mode and manner of recruitment,
viz., whether the appointment had been made in accor-
D
dance with the statutory rules so far as public sector un-
dertaking is concerned etc., should be taken into consid-
eration. For the purpose of grant of back wages, one of
the relevant factors would indisputably be as to whether
the workman had been able to discharge his burden that
.E he had not been gainfully employed after termination of
his service. In the instant case, the Industrial court failed
and/or neglected to take the aforementioned factors into
consideration. The High Court also fell into the same er-
ror. [Paras 11 and 12] [58-E-G, 60-H, 61-A]
F r·
G.M. Haryana Roadways v. Rudhan Singh 2005 (5) sec
59; Correspondent, St. Michael's TT/. v. VN. Karpaga Mary
and Ors. 2008 (6) SCALE 621; U.PS.R. TC. Ltd. v. sarada
Prasad Misra and Anr. 2006 (4) SCC 733; Municipal Council,
Sujanpur VS. Surinder Kumar 2006 (5) sec 173 - relied on.
G
1.2 When the question arises as to how and in what
\-
manner balance should be struck, it is necessary
I
for the
Industrial Courts, also to consider as to whether the in-
'
dustry has been sick or not. If it is found that the industry
H is not in a position to bear the financial burden, an appro-
TALWARA COOP. CREDIT & SERVICE SOCIETY LTD. 55
v. SUSHIL KUMAR
-\ priate award, as a result whereof the equities between the A
parties can be adjusted, should be passed. In the instant
case, the respondent was employed for a short period
and that too in two different spells, viz., from 1987 to 1990
and from 1995 to 1997. Having regard to the fact that the
~
respondent has not worked for a long period and the ap- B
pellant does not have any capacity to pay as it is a sick
( --;
unit, interest of justice would be subserved if instead and
in place of an award of reinstatement with full back wages,
a compensation for a sum of Rs. 2,00,000/- (Rupees two
lakhs only) is directed to be paid. The said sum would be c
over and above the amount which the appellant has de-
posited in terms of the order of the High Court .under Sec-
tion 17-B of the Industrial Disputes Act. [Paras 14 and 15]
[61-H, 62-A-D]
2. The Industrial Court has placed the burden of proof D
on the management to show that the workman was not gain-
fully employed after his termination of service. The paradigm
shift in the matter of burden of p~oof as regards gainful em-
ployment on the part of the employer holding that having
regard to the provisions contained in Section 106 of the E
Evidence Act, the burden would be on the workman. The
burden, however, is a negative one. If only the same is dis-
charged by the workman, the onus of proof would shift on
to the employer to show that the concerned employee was
1
'\ in fact gainfully employed. [Paras 12 and 13] [61-A-D] F
Municipal Council, Sujanpur vs. Surinder Kumar 2006
(5) sec 173 - relied on.
CASE LAW REFERENCE
2005 (5) sec 591 Relied on. Para '11 G
.... -j •
2008 (6) SCALE 621 Relied on. Para 11
2006 (4) sec 733 Relied on. Para 11
2006 (5) sec 113 Relied on. Paras 11
and 13. H
56 SUPREME COURT REPORTS [2008] 14 S.C.R.
r-

A CIVILAPPELLATE JURISDICTION: Civil Appeal No. 5951 t-
of 2008
From the final Judgment and Order dated 17.8.2004 of
the High Court of Punjab and Haryana at Chandigarh in C.W.P.
No. 9147 of 2002
B
Dinesh Kumar Garg, Ritu Puri, Dr. B.P. Singh andAbhishek r;.7·
Garg for the Appellant. -~ 1~
Shikha Roy Pabbi, Ajit Kumar and S.K. s,abharwal for the

c
Respondent.

The Judgment of the Court was delivered by
--
~

S.B. SINHA, J : 1. Leave granted.
2. This appeal is directed against a judgment and order
dated 17.08.2004 passed by the Punjab and Hatyana High
D
Court in C.W.P. No. 9147 of 2002 whereby and whereunder the \..
writ petition filed by the appellant questionini;J the validity of an
award dated 14.03.2002 directing it to reinstate the respon-
dent workman with full back wages was dismissed.

E 3. Appellant is a cooperative society. It appointed the re- ...
spondent on 1.07.1987 on the post of clerk. His services were
terminated in the year 1990. Questioning the said order ofter- ~
mination, an industrial dispute was raised. An award was made
on 3.11.1995 directing the appellant to reinstate the respon-
F dent workman. Appellant Society, however, had been suffering '(
losses. Till 1996, it suffered a loss of Rs. 18.95 lakhs. The Board
of Directors held a meeting on 21.02.1997 wherein a resolu-
tion was passed to the effect that the services of some of the
employees should be dispensed with. Pursuant thereto or in
furtherance thereof, the services of the respondent amongst
G
others were dispensed with on payment of one month's salary.
\- r
Yet again, an industrial dispute was raised. By an award
dated 14.03.2002, the Industrial Tribunal cum Labour Court di-

H
rected:
, .
TALWARA COOP. CREDIT & SERVICE SOCIETY LTD. 57
v. SUSHIL KUMAR [S.B. SINHA, J]
. -\
"21. Sequal to the findings on above issues, this reference A
is hereby answered accordingly against the respondents
Society and in favour of the workman, to the effect that
termination of services of Sushil Kumar was neither in
order, nor justified. He is entitled to reinstatement with full
back wages, with continuity and with all other consequential B
service benefits."
1
4. A writ petition preferred thereagainst has been dis-
missed by reason of the impugned judgment.
~,

5. Mr. Dinesh Kumar Garg, learned counsel appearing on c
behalf of the appellant, at the outset drew our attention to an
interim order passed by the High Court on 22.10.2002 which is
to the following effect:
"In the meantime, execution of the award shall remain
stayed subject to the provisions of Section 17-B of the D
Industrial Disputes Act."
6. The learned counsel pointed out that the said order has
been complied with. The contention of the learned counsel is
.. that having regard to the financial position of the cooperative
E
society which was on the verge of closure and furthermore in
view of the fact that the respondent workman was in the ser-
vices of the cooperative society only for the period 1987-1990
and again from 1995-1997, award of reinstatement with full back
'\ wages should not have been passed.
F
7. It was contended that even if there was a technical vio-
lation of the provisions of Section 25F of the Industrial Disputes
Act, 1947, as has been held by the High Court, the Industrial
Tribunal as also the High Court ought not to have direct~d rein-
statement of the respondent with full back wages.
G
1 8. Ms. Shikha Roy Pabbi, learned counsel appearing on
behalf of the respondent, on the other hand, submitted that the
cooperative society has merged with apex body and. the latter
has earned a huge profit and in that view of the matter this Court
may not exercise its discretionary jurisdiction. It was submitted H
58 SUPREME COURT REPORTS [2008] 14 S.C.R.

A that even after the termination of services of the respondent r
workman, some other workmen had been appointed who were ,1
in fact junior to him.
9. The fact that the respondent was employed for a very
short time is not in dispute. He admittedly was appointed in
\
B . 1987 and was in service till 1990. Only on or about 3.11.1995,
the award directing reinstatement was passed. The said award
has been implemented.
10. Neither the learned Industrial Court nor the High Court
c arrived at a finding that the resolution passed on 21.02.1997,
wherein a total loss of Rs. 18.95 lakhs was shown to have suf-
fered by the cooperative society, was incorrect. It is furthermore
not in dispute that rightly or wrongly 'a decision was taken to
terminate the services· of some of the employees, pursuant
whereto only the services of the respondent had been termi-
D
nated. The fact that the appellant society was financially in bad ...
shape is also not in dispute.
11. Grant of a relief of reinstatement, it is trite, is not auto-
matic. Grant of back wages is also not automatic. The Industrial
E Courts while exercising their power under Section 11A of the
Industrial Disputes Act, 1947 are required to strike a balance in
a situation of this nature. For the said purpose, certain relevant
factors, as for example, nature of service, the mode and man-
ner of recruitment, viz., whether the appointment had been made
F in accordance with the statutory rules so far as a public sector
undertaking is concerned etc., should be taken into consider-
ation.
For the purpose of grant of back wages; one of the rel-
evant factors would indisputably be as to whether the workman
G had been able to discharge his burden that he had not been
gainfully employed after termination of his service.
: r
Some of the other relevant factors in this behalf have been
noticed by this Court in G.M. Haryana Roadways v. Rudhan
Singh, [(2005) 5 SCC 591], stating:
H
TALWARA COOP. CREDIT & SERVICE SOCIETY LTD. 59
v. SUSHIL KUMAR [S.B. SINHA, J]

"8. There is no rule of thumb that in every case where the A
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.
whether after prope·r advertisement of the vacancy or s
inviting applications from the employment exchange, nature
) of appointment, namely, whether ad hoc, short term, daily
wage, temporary or permanent in character, any special
qualification required for the job and the like should be
weighed and balanced in taking a decision regarding c
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
y..torkman 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 D
fact that at his age and the qualification possessed by him
he may not be in a position to get another employment.
However, where the total length of service rendered by a
workman is very small, the award of back wages for the
complete period i.e. from the date of termination till the E
date of the award, which our experience shows is often
quite large, would be wholly inappropriate. Another
important factor, which requires to be taken into
consideration is the nature of employment. A regular
service of permanent character cannot be compared to F
short or intermittent daily-wage employment though it may
be for 240 days in a calendar year."
[See also Correspondent, St. Michael's TT I. v. V N.
Karpaga Mary and Ors. 2008 (6) SCALE 621]
G
In U.PS.R. TC. Ltd. v. Sarada Prasad Misra and another,
[(2006) 4 SCC 733], this Court held :
"16. From the above cases, it is clear that no precise
formula can be adopted nor "cast- iron rule" can be laid
H
60 SUPREME COURT REPORTS (2008] 14 S.C.R.

/-
A down as to when payment of full back wages should be '
allowed by the court or tribunal. It depends upon the facts
and circumstances of each case. The approach of the
court/tribunal should not be rigid or mechanical but flexible
and realistic. The court or tribunal dealing with cases of
B industrial disputes may find force in the contention of the
employee as to illegal termination of his services and may
come to the conclusion that the action has been taken ~
otherwise than in accordance with law. In such cases
obviously, the workman would be entitled to reinstatement
c but the question regarding payment of back wages would ·
be independent of the first question as to entitlement of 1
reinstatement in service. While considering and (
determining the second question, the court or tribunal \
would consider all relevant circumstances referred to
above and keeping in view the principles of justice, equity
D
and good conscience, should pass an appropriate order."
In Municipal Council, Sujanpur v. Surinder Kumar [(2006)
SCC 173], this Court observed:
"Apart from the aforementioned error of law, in our
E considered opinion, the Labour Court and consequently
the High Court completely misdirected themselves insofar
as they failed to take into consideration that relief to be
granted in terms of Section 11A of the said Act being
discretionary in nature, a Labour Court was required to ,.
F consider the facts of each case therefor. Only because
relief by way of reinstatement with full back wages would
be lawful, it would not mean that the same would be granted
automatically.
For the said purpose, the nature of the appointment, the
G
purpose for which such appointment had been made, the
duration/tenure of work, the question whethe(the post was
a sanctioned one, being relevant facts, must be taken into
consideration:''
H 12. In the instant case, the Industrial Court failed and/ or
TALWARA COOP. CREDIT & SERVICE SOCIETY LTD. 61
v. SUSHIL KUMAR [S.B. SINHA, J]
-\I
neglected to take the aforementioned factors into consideration. A
The High Court also fell into the same error. In fact the Industrial
Court has placed the burden of proof on the management to
show that the workman was not gainfully employed after his ter-
mination of service. •
13. This Court in a large number of cases noticed the para- B
,,._ digm shift in the matter of burden of proof as regards gainful
employment on the part of the employer holding that having re-·
gard to the provisions contained in Section 1'06 of the Indian
Evidence Act, the burden would be on the workman. The bur-
c
\ den, however, is a negative one.

If only the same is discharged by the workman, the onus of
proof would shift on to the employer to show that the concerned
employee was in fact gainfully employed.

In Surinder Kumar (supra), this Court held: D

"The Labour Court and the High Court also proceeded
wrongly on the premise that the burden of proof to establish
non-completion of 240 days of work within a period of
twelve months preceding the termination, was on the
management. The burden was on the workman. [See UP
E
State Brassware Corporation & Ors. v. Udit Narain
Pandey, JT 2005 (10) SC 344 and State of M.P v. Arjan
Lal Rajak, (2006) 2 sec 61 O].
"<
Equally well settled is the principle that the burden of proof, F
having regard to the principles analog us to Section 106 of
the Evidence Act that he was not gainfully employed, was
on the workman. [See Manager, Reserve Bank of India,
Bangalore v. S. Mani & Ors., {2005) 5 SCC 100]
It is also a trite law that only because some documents G
have not been produced by the management, an adverse
inference would not be drawn against the management.
[See S. Mani (supra)]"

14. When the question arises as to how and in what man-
H
62 SUPREME COURT REPORTS [2008] 14 S.C.R.

f-·
A ner balance should be struck, it is necessary for the Industrial
Courts also to consider as to whether the industry has been
sick or not. If it is found that the industry is not in a position to
bear the financial burden, an appropriate award, as a result
whereof the equities between the parties can be adjusted,
B should be passed.
15. We have noticed hereinbefore that the respondent was
employed for a short period and that too in two different spells,
viz., from 1987 to 1990 and from 1995 to 1997. Having regard
to the fact that the respond_ent has not worked for a long period ,/
C and the appellant does not have any capacity to pay as it is a
sick unit, interest of justice would be subserved if in stead and
place of an award of reinstatement with full back wages, a com-
pensation for a sum of Rs. 2,00,000/- (Rupees two lakhs only)
is directed to be paid. The said sum would be over and above
D the amount which the appellant has deposited in terms of the
order of the High Court under Section 17-B of the Industrial Dis-
putes Act.
16. The appeal is allowed with the aforementioned direc-
tions. No costs.
E
K.K.T. Appeal allowed.

y