Surendra Kumar Verma v Central Government Industrial Tribunal-cum-Labour Court (1980)

Two rules that students need for every retrenchment answer come from this case.

First, relief. When a retrenchment is struck down for breach of s. 25F, the normal result is reinstatement with full back wages. Other relief is the exception, allowed only for special reasons such as closure of the industry or an impossible financial burden. The Court refused to get drawn into whether a breach of s. 25F makes the termination "void ab initio" or only "invalid and inoperative"; what matters is the result.

Second, the 240-day rule. After the 1964 amendment to s. 25B, a workman who has actually worked 240 days in the preceding twelve months is deemed to have one year's continuous service, even if he has not been employed for a full year. The older decision in Sur Enamel and Stamping Works, which required twelve months of employment as well, no longer applies.

The second holding was adopted in Mohan Lal v Management of M/s Bharat Electronics Ltd (1981).

The appellants were temporary employees of a bank. The bank terminated their services because they had not passed the tests prescribed for permanent absorption. The facts were almost identical to Santosh Gupta v State Bank of Patiala, where the Supreme Court had held that such a discharge was retrenchment under s. 2(oo), so s. 25F had to be complied with.

On reference, the Central Government Industrial Tribunal-cum-Labour Court held that the terminations (except those of three workmen, S.C. Goyal, Usha Kumari and Madhu Bala) violated s. 25F and were invalid and inoperative. But it refused reinstatement with full back wages. It thought reinstatement would put these workmen on a par with those who had passed the test. Instead it awarded six months' salary as compensation on top of retrenchment compensation.

Usha Kumari and Madhu Bala had been employed from 4 May 1974 to 29 January 1975 and had worked 258 and 266 days. Because that period was less than a year, it was conceded before the Labour Court that s. 25F was not violated in their case. The concession rested on Sur Enamel. In the Supreme Court the concession was questioned, and since the facts were not disputed, the Court heard the point.

The bank argued that breach of s. 25F made the termination only invalid and inoperative, not void from the start, so the Court had full discretion to award compensation in place of reinstatement.

1. When a retrenchment is set aside for breach of s. 25F, is reinstatement with full back wages the ordinary relief, and did the Labour Court have good reason to depart from it?
2. Does it matter whether a termination in breach of s. 25F is described as void ab initio or as invalid and inoperative?
3. After Act 36 of 1964, is a workman who has worked 240 days in twelve months, but has not been employed for a full year, in continuous service for one year for the purposes of s. 25F?

The appeals were allowed. All the appellants, including Usha Kumari and Madhu Bala, were directed to be reinstated with full back wages, on conditions set out below.

"Void ab initio" versus "invalid and inoperative"

The Court declined the bank's distinction. "Semantic luxuries are misplaced in the interpretation of 'bread and butter' statutes. Welfare statutes must, of necessity, receive a broad interpretation. Where legislation is designed to give relief against certain kinds of mischief, the Court is not to make inroads by making etymological excursions." Whatever label is used, the parties care about the consequence of striking down the order.

Reinstatement with full back wages is the ordinary relief

"Plain common sense dictates that the removal of an order terminating the services of workmen must ordinarily lead to the reinstatement of the services of the workmen. It is as if the order has never been and so it must ordinarily lead to back wages too."

The Court kept a narrow discretion for exceptional cases: the industry may have closed down, or be in severe financial difficulty, or the workman may have found better employment. "In such and other exceptional cases the Court may mould the relief, but, ordinarily the relief to be awarded must be reinstatement with full back wages. That relief must be awarded where no special impediment in the way of awarding the relief is clearly shown." On hardship: "more often than not. comparatively far greater hardship is certain to be caused to the workmen if the relief is denied than to the employer if the relief is granted."

The Court relied on Santosh Gupta, Hindustan Steel Ltd v Presiding Officer, Avon Services v Industrial Tribunal, Swadesamitran Ltd v Their Workmen and State Bank of India v N. Sundara Money.

No special impediment here

The Labour Court's worry was groundless. Reinstated workmen would not be equal to those who passed the test, because reinstatement would not qualify them for permanent absorption: "They would continue to be temporary, liable to be retrenched." And "there is not a shred of evidence to suggest that their reinstatement would be a cause for dissatisfaction to anyone."

The 240-day rule after Act 36 of 1964

Section 25F protects a workman "in continuous service for not less than one year". The present s. 25B(2) begins "Where a workman is not in continuous service" and deems him to be in continuous service for one year if he has actually worked 240 days in the preceding twelve calendar months. The Court read this plainly: "There is no stipulation that he should have been in employment or service under the employer for a whole period of twelve months. In fact, the thrust of the provision is that he need not be."

The old s. 25B, read with the old definition of continuous service in s. 2(eee), supported Sur Enamel, which required twelve months of employment and 240 days of work. But Act 36 of 1964 repealed s. 2(eee) and recast s. 25B. These 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." So "It is enough that he has worked for 240 days in a period of 12 months; it is not necessary that he should have been in the service of the employer for one whole year." Usha Kumari and Madhu Bala were therefore in the same position as the others.

The order

Reinstatement with full back wages, subject to two conditions: salary on reinstatement is the salary drawn at retrenchment (with any intervening revision of scales), and the period between retrenchment and reinstatement does not count for seniority among temporary employees. The bank remained free to deal with its temporary employees according to law.

Pathak J's concurrence

Pathak J agreed with the order and with both holdings. He stated the relief rule this way: "Ordinarily, a workman who has been retrenched in contravention of the law is entitled to reinstatement with full back wages and that principle yields only where the justice of the case in the light of the particular facts indicates the desirability of a different relief." On s. 25B he held that the law declared in Sur Enamel "does not apply to situations governed by the subsequently substituted s. 25B of the Act."

(1) Where a retrenchment is set aside for non-compliance with s. 25F, the ordinary relief is reinstatement with full back wages; the Court may mould the relief only where a special impediment is clearly shown, such as closure, an impossible burden on the employer, or the workman's alternative employment. Whether the termination is called void ab initio or invalid and inoperative makes no difference. (2) Under s. 25B(2) as recast by Act 36 of 1964, a workman who has actually worked for not less than 240 days in the preceding twelve calendar months is deemed to be in continuous service for one year for s. 25F, whether or not he has been employed for a whole year. Sur Enamel does not apply to the present section.

• Direct question: What relief is a workman entitled to when his retrenchment violates s. 25F? Give the ordinary rule of reinstatement with full back wages, the exceptions the Court listed, and the Court's rejection of the void / invalid distinction.
• Direct question: Explain "continuous service" under s. 25B. Contrast Sur Enamel (old law: twelve months of employment plus 240 days) with Surendra Kumar Verma (present law: 240 days of actual work in twelve months is enough).
• Problem question: a temporary clerk employed for nine months, who worked 250 days, is dismissed without notice or compensation. Apply s. 25B(2)(a)(ii) as read in this case: s. 25F applies, the termination is bad, and reinstatement with back wages follows unless the employer shows a special impediment.
• Interpretation point: quote the "bread and butter statutes" passage for the principle that welfare legislation receives a broad interpretation.
• Link: read with Santosh Gupta v State Bank of Patiala and Mohan Lal v Bharat Electronics (1981) in Unit 6.