S.M. Nilajkar v Telecom District Manager, Karnataka (2003)

This is the case on the exception in s. 2(oo)(bb), the sub-clause inserted by the Industrial Disputes (Amendment) Act 1984 with effect from 18 August 1984, which takes out of retrenchment a termination brought about by the non-renewal of a contract of employment on its expiry or by a stipulation in the contract itself.

Three things make it the leading authority for the casual labourer on a public project.

First, it accepts the policy reason for (bb) in terms more generous to the State than most judgments of this line, and explains why a welfare State's short-lived schemes should not be burdened out of existence.

Second, having accepted the policy, it lays down four cumulative conditions which must all be satisfied before a project or scheme employee's termination escapes the definition — conditions that are regularly cited as the test.

Third, and decisively for the practitioner, it places the burden of alleging and proving those conditions squarely on the employer, and holds that proof that the man was engaged as a daily-wager on a project proves nothing at all for this purpose.

A number of workers were engaged as casual labourers for the expansion of telecom facilities in the district of Belgaum, Karnataka, during 1985-86 and 1986-87. Their services were used "for digging, laying cables, erecting poles, drawing lines and other connected works". The project was completed in about 1986-87 and their services were terminated sometime in 1987, after which they were not engaged on work.

Meanwhile, in Daily Rated Casual Labour employed under P&T Deptt. through Bhartiya Dak Tar Mazdoor Manch v Union of India, decided 27 October 1987, the Supreme Court had directed the Department to formulate a scheme for absorbing casual labourers with more than one year's continuous service. The Department accordingly framed the Casual Labourers (Grant of Temporary Status and Regularisation) Scheme, 1989, in force from 1 October 1989, and a list was drawn up. On 16 January 1990 workers whose names were left out raised disputes before the Assistant Labour Commissioner, Mangalore; conciliation failed; proceedings under the Act were initiated on 28 December 1990; and references were made to the Labour Court between 1994 and 1997. Each reference asked, in substance, whether the termination of the named Casual Mazdoor with effect from a date in 1986 or 1987 was justified.

By a common award dated 21 June 1999 the Central Government Industrial Tribunal cum Labour Court, Bangalore, directed reinstatement with continuity of service and 50 per cent back wages. A learned Single Judge of the High Court of Karnataka, on 16 September 1999, held that the workers were not project employees, that sub-clause (bb) therefore did not govern them, that each had put in continuous service of over 240 days within s. 25B so that the termination was retrenchment invalid for non-compliance with s. 25F — but, because of the delay in raising the disputes, denied back wages while upholding reinstatement with continuity of service.

The Division Bench, on 9 February 2000, reversed. It held the workmen were employed under a project, were therefore covered by (bb), that on completion of the project "their services stood terminated ipso facto", and that the references were in any event vitiated by laches after a delay of 7 to 9 years. The employer relied on a Circular of 30 March 1985 of the Director General (Posts & Telegraphs), paragraph 3 of which said that for coaxial cable laying work in the projects organisation "The casual labour for such works in these units could be engaged only for specific jobs and retrenched as soon as the work is over", and on a Circular of 10 November 1988 laying down eligibility for regularisation, including service of a minimum of seven years as on 31 March 1986, which the workmen admittedly did not satisfy. The workers appealed by special leave.

The Supreme Court declined to disturb the concurrent finding of fact and recorded that "on the material available we are not inclined to upset the finding of fact arrived at in the impugned judgment that the appellant workmen are project employees and not employed in any department." The principal issue was then narrowed to this: "whether the workmen recruited for discharging temporary job under a project can insist on compliance of Section 25F of the Act if their services are dispensed with on the project coming to an end?"

The Court began with the reason for the exception. It is common knowledge that a welfare State floats schemes and projects generating employment opportunities "though they are short-lived", to meet the need of the moment, and for their duration they give employment and livelihood to persons who could not otherwise have secured it. If workmen so employed were "to become a liability on the employer-State by too liberally interpreting the labour laws in favour of the workmen", that might act as a disincentive and the State might keep away from such schemes even in times of dire need, feeling "that by opening the gates of welfare it would be letting-in onerous obligations entailed upon it by extended application of the labour laws." Sub-clause (bb) "was introduced to take care of such like-situations" by the amendment of 1984.

Against that the Court restated the width of the definition. Retrenchment in its ordinary connotation "is discharge of labour as surplus though the business or work itself is continued". But labour laws, being beneficial legislation, are to be interpreted in favour of the beneficiaries "in case of doubt or where it is possible to take two views of a provision"; and Parliament's use of "the termination by the employer of the service of a workman for any reason whatsoever" is "suggestive of the legislative intent to assign the term 'retrenchment' a meaning wider than what it is understood to have in common parlance."

There are four exceptions carved out of that artificially extended meaning — (a) voluntary retirement, (b) superannuation where the contract so stipulates, (bb) non-renewal or contractual termination, and (c) continued ill-health. Therefore "termination of service of a workman so long as it is attributable to the act of the employer would fall within the meaning of 'retrenchment' de hors the reason for termination", and "A termination of service which does not fall within the categories (a), (b), (bb) and (c) would fall within the meaning of 'retrenchment'."

This is the passage to learn. The termination of service of a workman engaged in a scheme or project "may not amount to retrenchment within the meaning of sub-clause (bb) subject to the following conditions being satisfied":

1. "that the workman was employed in a project or scheme of temporary duration";
2. "the employment was on a contract, and not as a daily-wager simplicitor, which provided inter alia that the employment shall come to an end on the expiry of the scheme or project";
3. "the employment came to an end simultaneously with the termination of the scheme or project and consistently with the terms of the contract";
4. "the workman ought to have been apprised or made aware of the abovesaid terms by the employer at the commencement of employment."

The Court then explained why the fourth condition is not a formality. "The engagement of a workman as a daily-wager does not by itself amount to putting the workman on notice that he was being engaged in a scheme or project which was to last only for a particular length of time or upto to the occurrence of some event". It is the contract consciously entered into that operates as notice on the very date the employment commences that the employment is short-lived and liable to end with the project, so that the workman "may not therefore complain that by the act of employer his employment was coming to an abrupt termination."

"To exclude the termination of a scheme or project employee from the definition of retrenchment it is for the employer to prove the abovesaid ingredients so as to attract the applicability of sub-clause (bb) abovesaid." On the facts the employer "has failed in alleging and proving the ingredients of sub-clause (bb)". All that had been proved was "that the appellants were engaged as casual workers or daily-wagers in a project." For want of that proof, "it has to be held that the termination of the services of the appellants amounted to retrenchment."

The Court then held that the appropriate provision governing these cases is s. 25FFF. It traced the history: Hariprasad Shivshanker Shukla v A.D. Divikar had confined retrenchment to the discharge of surplus labour and held it inapplicable to a real and bona fide closure or a transfer of the undertaking; that decision led to the Ordinance of 27 April 1957, replaced by Act 18 of 1957 with effect from 6 June 1957, which introduced ss. 25FF and 25FFF.

"Undertaking" is not defined. It "is a concept narrower than industry", may be a part of the whole and "carries a restricted meaning". With the amendment "it is clear that closure of a project or scheme by the State Government would be covered by closing down of undertaking within the meaning of Section 25FFF." The workman is accordingly entitled to notice and compensation in accordance with s. 25F, "though the right of employer to close the undertaking for any reason whatsoever cannot be questioned", and compliance is subject to the relaxations in s. 25FFF. Here the undertaking had been closed on account of unavoidable circumstances beyond the employer's control, "i.e. by its own force as it was designed and destined to have a limited life only", so the compensation under s. 25F(b) "shall not exceed his average pay for three months" — and all of this followed only "because of failure on the part of respondent employer to allege and prove that the termination of employment fell within sub-Clause(bb)".

The employer's plea of delay was rejected. The Court accepted the principle in Shalimar Works Ltd v Their Workmen that the absence of a period of limitation does not mean a dispute may be raised at any time regardless of delay, and noted that a delay of four years was fatal there, of seven years in Nedungadi Bank Ltd v K.P. Madhavankutty, and that in Ratan Chandra Sammanta v Union of India a retrenched casual labourer was held to deprive himself of his remedy by delay, lapse of time resulting "in losing the remedy and the right as well". Delay "would certainly be fatal if it has resulted in material evidence relevant to adjudication being lost and rendered not available."

But the High Court was "factually not correct" in speaking of 7 to 9 years. The terminations were in 1985-86 or 1986-87; the Department was then formulating the scheme pursuant to the Daily Rated Casual Employees judgment and "the appellants were justified in awaiting the outcome thereof"; they were refused accommodation on 16 January 1990 and initiated proceedings on 28 December 1990. The delay was therefore not "so culpable as to disentitle the appellants for any relief."

The appeals were allowed, the Division Bench's decision set aside and the Single Judge's judgment restored, "except for the finding that the appellants were not project employees" — so reinstatement with continuity of service stood, without back wages, the denial of back wages being "just and reasonable" and in any event not challenged by the workmen in appeal. Pending similar matters were directed to be decided in accordance with the law as stated. The Court added that as the project had ended the Government "may consider the appellants being accommodated in some other project or scheme or regular employment, if available", and if that were not possible it would be "at liberty to terminate the employment of the appellants after reinstating them" and then complying with s. 25F. Costs throughout to the appellants.

Termination of a project or scheme employee on the completion of the project is taken out of retrenchment by s. 2(oo)(bb) only where four conditions are cumulatively satisfied — a project or scheme of temporary duration; employment on a contract, not as a daily-wager simpliciter, providing that it ends with the scheme; termination simultaneous with the end of the scheme and consistent with the contract; and the workman having been made aware of those terms at the commencement of employment. The burden of alleging and proving them lies on the employer, and proof merely that the workman was a casual worker or daily-wager on a project does not discharge it. Failing that proof the termination is retrenchment; the closure of a project is the closing down of an undertaking under s. 25FFF, so notice and compensation under s. 25F are due, subject to the three-month cap where the closure is by unavoidable circumstances beyond the employer's control.