Mohan Lal v Management of M/s Bharat Electronics Ltd (1981)

The wide reading of "retrenchment" in s. 2(oo) is only half the protection. The other half is the eligibility qualification in s. 25F: the workman must have been "in continuous service for not less than one year". An employer who could not escape s. 2(oo) could still escape s. 25F by pointing out that the workman had been on the rolls for only ten or eleven months.

Mohan Lal shuts that door too. It holds that s. 25B(2)(a) is a deeming fiction in its own right: a workman who has actually worked 240 days in the twelve calendar months counting backwards from the date of retrenchment is deemed to be in continuous service for one year, whether or not he was in employment for twelve months at all. The case is therefore the authority on the 240-day rule, and it is also a clean application of the s. 2(oo) line to a termination dressed up as the discharge of a probationer.

The appellant, Mohan Lal, was employed by Bharat Electronics Ltd as a salesman at its Delhi Sales Depot on a salary of Rs. 520 per month from 8 December 1973. His service was, in the Court's word, "abruptly terminated" by letter dated 12 October 1974 with effect from 19 October 1974. The Delhi Administration referred the dispute to the Labour Court, Delhi, on 24 April 1976, in these terms: whether the termination was illegal and/or unjustified, and if so to what relief he was entitled.

The management first failed to appear, and an ex parte award of 2 May 1977 directed reinstatement with continuity of service and full back wages. That award was set aside on the management's application and the reference reheard. The management then pleaded that the appellant had been appointed a probationer for six months, that the probation had been extended to 8 September 1974, and that on the expiry of the extended probation his service was terminated as he was not found suitable.

The Labour Court accepted that case, held that the termination was in accordance with the standing orders permitting removal of an employee on unsuccessful probation, held that it was therefore not retrenchment within s. 2(oo) read with s. 25F, and dismissed the claim.

Desai J began by exposing what he called "an apparent contradiction which stares in the eye", overlooked by the Labour Court.

The appointment order of 21 July 1973 said in paragraph 2: "This appointment will be temporary in the first instance but is likely to be made permanent." Paragraph 4 made temporary service terminable without notice or compensation on either side; paragraph 6 subjected the employment to the company's rules, regulations and standing orders. There was "not even a whisper of any period of probation" in the appointment order, nor any suggestion of rules placing the appellant initially on probation. Note 3 at the foot of the order said that on permanent appointment the temporary service put in would count as part of the probationary period — a consequence that could only follow if a permanent appointment were offered, and none was.

Even taking the management's own witness at his highest: the prescribed probation was six months, expiring 8 June 1974; the letter of 10 July 1974 purported to extend it, "as a special case", to 8 September 1974; no rule empowering that extension was shown. The probation was never extended further, and no order was passed during or at the end of it on the ground of unsuitability. So between 8 September 1974 and the termination effective 19 October 1974 the appellant "was unquestionably not on probation. He was either temporary or permanent but not a probationer." For the Labour Court to find that he was terminated during probation was "gross error apparent on the face of the record".

Section 2(oo) defines retrenchment as the termination by the employer of the service of a workman for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action, but excludes (a) voluntary retirement; (b) retirement on superannuation where the contract so stipulates; and (c) termination on the ground of continued ill-health.

"Niceties and semantics apart, termination by the employer of the service of a workman for any reason whatsoever would constitute retrenchment except in cases excepted in the section itself."

The Court applied that to the facts. It was not the employer's case that the termination was a punishment by way of disciplinary action — and had that position been adopted, the termination would have been "ab initio void for violation of principle of natural justice or for not following the procedure prescribed for imposing punishment". It was not voluntary retirement, not superannuation, not continued ill-health. "The case does not fall under any of the excepted categories. There is thus termination of service for a reason other than the excepted category. It would indisputably be retrenchment."

In reaching that conclusion the Court traced the line: Pipraich Sugar Mills and Hariprasad Shivshankar Shukla, whose "surplusage" passage was delivered in the context of the closure of an undertaking; State Bank of India v N. Sundara Money, where Krishna Iyer J held that "'Termination … for any reason whatsoever' are the key words. Whatever the reason, every termination spells retrenchment", that termination "embraces not merely the act of termination by the employer, but the fact of termination howsoever produced", and that writing the date of termination into the order of appointment "confers no moksha from section 25F(b)"; Hindustan Steel Ltd v Presiding Officer, Labour Court, Orissa, which held there was nothing in Shukla inconsistent with Sundara Money because Shukla concerned closure of the whole undertaking; Santosh Gupta v State Bank of Patiala, on failure to pass a confirmation test; and Delhi Cloth and General Mills Ltd v Shambhu Nath Mukerjee, on striking a name off the rolls.

The management's fallback was the eligibility condition: s. 25F protects only a workman "who has been in continuous service for not less than one year". Counsel argued that s. 25B(1) and (2) cover two different contingencies and that the appellant satisfied neither.

The Court rejected the dichotomy. "Sub-sections (1) and (2) introduce a deeming fiction as to in what circumstances a workman could be said to be in continuous service for the purposes of Chapter VA."

• Sub-section (1) deems service to be uninterrupted notwithstanding interruption by sickness, authorised leave, accident, a strike which is not illegal, a lockout, or a cessation of work not due to the workman's fault. These are "known hazards" of employment and the interruptions "are to be ignored".
• Sub-section (2) "incorporates another deeming fiction for an entirely different situation" — one not governed by sub-section (1). It treats a workman as in continuous service for one year "despite the fact that he has not rendered uninterrupted service for a period of one year", provided he has actually worked 240 days in the twelve calendar months counting backwards from the relevant date.

The Court set out the method in three steps: fix the relevant date, that is the date of the termination complained of as retrenchment; move backward twelve months from that date; and ask whether within those twelve months the workman actually worked 240 days. If all three are answered in his favour, the fiction operates.

The contrary construction — that even for sub-section (2) the workman must independently be shown to be in continuous service for a year — "would render sub-section (2) otiose and socially beneficial legislation would receive a set back by this impermissible assumption".

Sur Enamel and Stamping Works (P) Ltd v Their Workmen, which had required employment for not less than twelve calendar months and 240 days of work within them, was explained and distinguished: it turned on s. 25B as it then stood read with the since-deleted s. 2(eee), and both were altered by the Industrial Disputes (Amendment) Act 1964. The Court adopted Surendra Kumar Verma v Central Government Industrial Tribunal-cum-Labour Court, where Chinnappa Reddy J held that the 1964 changes "appear to be clearly designed to provide that a workman who has actually worked under the employer for not less than 240 days during a period of twelve months shall be deemed to have been in continuous service for a period of one year whether or not he has in fact been in such continuous service for a period of one year".

On the facts the appellant was on duty from 8 December 1973 to 19 October 1974; counting back twelve months from the relevant date he had admittedly worked 240 days; his case fell within s. 25B(2)(a).

The mandatory pre-conditions in s. 25F — one month's notice in writing indicating the reasons or wages in lieu, compensation at fifteen days' average pay for every completed year of continuous service or part thereof in excess of six months, and notice to the appropriate Government — admittedly had not been satisfied.

Following State of Bombay v The Hospital Mazdoor Sabha, failure to comply with s. 25F "renders the order of retrenchment invalid and inoperative. In other words, it does not bring about a cessation of service of the workman and the workman continues to be in service."

The employer asked for compensation in lieu of reinstatement. The Court refused. "If the termination of service is ab initio void and inoperative, there is no question of granting reinstatement because there is no cessation of service and a mere declaration follows that he continues to be in service with all consequential benefits." Ruby General Insurance Co Ltd v Chopra and Hindustan Steel Ltd, Rourkela v A.K. Roy — which require the court to weigh the facts before ordering reinstatement — were noticed, but "no case is made out for departure from this normally accepted approach of the Courts in the field of social justice".

The appeal was allowed, the award of 31 May 1980 set aside, the termination declared ab initio void and inoperative, and a declaration made that the appellant continued in service with all consequential benefits including full back wages. The case was remitted to the Labour Court to make the appropriate award, with costs of Rs. 2,000.

A termination that falls outside the four excepted categories in s. 2(oo) is retrenchment, whatever label the employer gives it; and s. 25B(2)(a) independently deems a workman who has actually worked 240 days in the twelve months preceding the date of retrenchment to be in continuous service for one year, even though he was never employed for a full twelve months. Non-compliance with s. 25F makes the retrenchment ab initio void, so that the workman is declared to continue in service rather than reinstated.