Judgment:
ORDER
1. These two writ petitions arise out of an award of the Labour Court Hyderabad, in I.D. No. 15/1983. W.P. No. 17008/86 is filed by the Management of Oasis School, whereas Writ Petition No, 10904/88 is filed by the employee. I will refer to the parties as employer and employee respectively. The facts necessary for a proper appreciation of the controversy are the following :-
2. The employer is a Public School, run by a Society registered under the Societies Registration Act. The employee joined service of that school as an Accountant on May 1, 1970. The order of appointment discloses that one K. Venugopal Rao, Office Assistant, was to relieve the petitioner with mutual understanding, as and when occasions arise. The school has been progressing fairly well as a commercial proposition. It stated in rented premises. It could acquire ownership of the premises not much later Order assets are also acquired, out of the profits earned by the employer. The employer terminated the services of the employee on April 27, 1982. The reason for termination of has service was that a committee consisting of two members of the governing council prepared a review of the financial positions of the school and stated that it was necessary to prune the expenditure including that out laid for the school staff. The post of Accountant, which a few posts of Office Assistants were thus earmarked for abolition as a result of a policy decision taken by the governing council. Employees whose posts were abolished and whose services were consequently terminated were offered three months salary in lieu of notice, compensation etc. Two of the employees challenged the termination of their series as vitiated by mala fides and instances of victimisation, resulting from the fact that the employees had organised a trade union to espouse the cause of the employees of the school. Efforts of the conciliation officer having failed, the matter was referred to the State Government, which referred the two disputes to the Labour Court, Hyderabad, in almost similar terms. I am extracting only one of the references, since that alone is material.
'Whether termination of the services of Sri V. Mukundan, Ex-Accountant by the management of Oasis School, Darga, is justified If not, to what relief he is entitled ?'
3. It is relevant to note that the employer offered and the employee received retrenchment compensation, during the pendency of the conciliations proceedings. This dispute was tried along with I.D. 45/82 which also arose as a consequence of pruning the expenditure of the school by the Committee and since the issues which arose for consideration were identical. The employees examined himself as W.W. 1 in I.D. 15/83. The employer examined the correspondent of the school as M.W. 1. The employee marked the order of termination of service as Ex.W. 1, whereas the employer filed Exs. M-1 to M-14 in I.D. 45/82 and these were to be relied in both the disputes.
4. The Labour disputes found that the termination of service was not preceded or accompanied by payment of amounts due under Section 25-F of the Industrial Disputes Act and, therefore, the termination of services was illegal and unsustainable. It found that the termination of service was not mala fide and did not amount to victimisation or unfair labour practice. It also entered a finding that the termination of services of the employee did not violate Section 25(G) and (H) of the Industrial Disputes Act, read with Rules 78 to 80 of the A.P. Industrial Disputes Rules. Relying on the decision in Mount Mettur Pharmaceuticals v. Labour Court, Madras (1985-II-LLJ-505), the Labour Court found that it could exercise its discretion and direct payment of a just amount as compensation in lieu of reinstatement, even in a case of violation of Section 25-F of the Industrial Disputes Act. It exercised such discretion by ordering that the employee who was 57 years old on the date when he deposed as a witness on January 8, 1985, shall be paid wages for a period of two years as compensation in lieu of his reinstatement and quantified such amount of compensation as Rs. 20,400/-.
5. The employer submits that the Labour court erred in law in holding that the termination of service was illegal in spite of the fact that it had offered and the employee had received retrenchment-compensation, inclusive of amounts due under Section 25-F of the Act, amounting to Rs. 11,506.21. The employee, on the other hand, submits that the Labour court having found that the retrenchment was effected in violation of the provisions of Section 25-F of the Act, should have directed reinstatement and could not have ordered compensation in lieu of such reinstatement.
6. Mr. V. Venkataramana, appearing for the employer, submits that the termination of services of the employee was occasioned by policy decision of the management to reorganise and rationales the staff pattern in the establishment, to achieve economy in its operation operations. He relies on the observations contained in the decision in Mohanlal v. Bharath Electronics Ltd. (1981-II-LLJ-70). He refers to the decisions in Workmen of Subong Tea Estate v. Outgoing management : (1964)ILLJ333SC . (Para 19 at page 424), Parry & Co. Ltd. v. 2nd Industrial Tribunal, Calcutta (IFJ Vol. 38 (1970) page 164, Hindustan Steel v. Roy (A.K.) & Others (1970-II-LLJ-228), Mount Mettur Pharmaceuticals v. 2nd Additional Labour Court, Madras (Supra). He submits that if the Labour Court, in exercise of its discretion, directs payment of compensation in lieu of reinstatement, it is not for this court to interfere with the award of the Labour Court in exercise of jurisdiction under Article 226 of the Constitution of India. In support of this proposition he relied on Syed Yakoob v. K. S. Radhakrishnan and Others : [1964]5SCR64 .
7. Mr. Anjaneya Sharma, appearing for the employee, submitted that the Labour Court was wrong in its finding that the termination of service was not in violation of Section 25 (G) and (H) read with Rules 78 to 80 of the A.P. Industrial Disputes Rules. He submitted that it is evident from the order of appointment dt. May 1, 1970 that Sri K. Venugopal Rao was only an Office Assistant when the employee was appointed as an Accountant and that the retention of Sri K. Venugopal Rao as Cashier-cum-Accountant after terminating the services of the petitioner as Accountant was manifestly mala fide. He pointed out that the employer did not maintain a seniority list which was obligatory under Section 25G of the Industrial Disputes Act read with Rule 78 of the A.P. Industrial Disputes Rules, that the Labour Court therefore ought to have found that those provisions were violated in retrenchment of the employee from service. He submitted further that even assuming that those provisions were not violated, the Labour Court ought to have found that the retrenchment was violative of the provisions of Section 25-F of the Industrial Disputes Act. He referred to the decisions in Gammon India Ltd. v. Niranjan Das (1984-I-LLJ-233), Bhava Singh Babubna v. Union of India & Others 1989 LIC (NOC) 12, Ponnuswamy v. The Presiding Officer, Labour Court, Coimbatore & Another 1989 LIC 301, K. Somasekharan Nair v. The Labour Court & Another 1989 LIC 469.
8. Counsel for the employee submits that there was no sufficient justification for retrenchment of the employee from the post of Accountant, as a measure of rationalisation. I see considerable force in the submissions of the learned counsel for the employee that the employer had not specifically denied the definite assertion of the employee that after terminating his service, the employer had appointed Office Assistants. The very fact emerging from the recitals in the appointment order that the employee was appointed as an Accountant, whereas Sri Venugopala Rao who was already in service at that time was only an Office Assistant, lends credence to the submission of the employee that the retention of the latter as Cashier-cum-Accountant, after retrenching the employee from service, lacks good faith. It is not, however, necessary for me to deal with that aspect in view of the fact that the employee would by now have retired from service on attaining the age of superannuation, even if Labour Court had ordered his reinstatement.
9. The questions which I have to decide in these two writ petitions are :
1. Whether the Labour Court was right in its findings that the employer had substantially followed the provisions of Section 25-F of the Industrial Disputes Act, in retrenching the employee who had received retrenchment compensation, which was offered to him during the course of conciliation proceedings, and
2. Whether the Labour Court was right in ordering payment of compensation in substitution of the normal remedy of reinstatement.
10. The effect of non-compliance with Section 25-F of the Industrial Disputes Act in retrenching workmen and the order which the Labour Court/Tribunal may issue in consequence thereto, were the subject matter of a number of decisions of the Supreme Court.
11. In Swadesamitran Ltd. v. Their Workmen (1960-I-LLJ-504) the Supreme Court held that where the retrenchment was found to be illegal for non-compliance with the mandatory requirements of Section 25-F, it was imperative for the Tribunal to award reinstatement with full backwages and that it had no discretion to award any other relief. That decision was followed in a number of subsequent decisions, viz., Hindustan Steel Ltd. v. State of Orissa and Others (1977-I-LLJ-1), Avon Services (Production Agencies) Pvt. Ltd. v. Industrial Tribunal, Haryana, Faridabad and Others, (1979-I-LLJ-1), Mohanlal v. Bharat Electronics Ltd. (supra), Surendra Kumar Verma & Others v. Central Government Industrial Tribunal, New Delhi (1981-I-LLJ-336), State Bank of India v. N. Sundaramoney (1976-I-LLJ-478), Gamon India v. Niranjan Das (supra), Hari Mohan Rastogi v. Labour Court : (1984)ILLJ32SC . The effect of all the above decisions on this proposition is that non-compliance with the mandatory requirements of Section 25-F of the Industrial Disputes Act renders the offending termination of service ab initio invalid. In Mohan Lal v. Bharath Electronics Ltd. (supra), Justice Desai observed (p. 78) :
'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.'
In Surendra Kumar Verma v. Central Govt. Industrial Tribunal, New Delhi (supra), the Supreme Court has asserted that invalid retrenchment must ordinarily lead to reinstatement of the workman in service. Except in exceptional cases which can be spelt out of the facts of the case, the employee will, in that event, be entitled to backwages too. There may, perhaps, be exceptional circumstances which make it impossible or wholly inequitable vis-a-vis the employer or the workman to direct reinstatement with full backwages.
12. It is axiomatic that the three conditions mentioned in Section 25-F of the Industrial Disputes Act are necessary pre-conditions for retrenchment and non-compliance with those conditions will render the retrenchment inlaid ab initio. Initial invalidity cannot be cured by subsequent offer by the employer and receipt by the workman of any sum 'in full and final settlement' of his account, nor will that disentitled the employee to challenge the order of the retrenchment on the ground of non-compliance with the statutory requirements at the time of the offending termination of service. Dealing with the plea of estoppel against the workman who had received amounts 'in full and final settlement' of his account after retrenchment was effected without complying with the requirements of Section 25-F of the Industrial Disputes Act, the Calcutta High Court observed in B. N. Elias & Co. Ltd. v. Fifth Industrial Tribunal (1965-I-LLJ-324), that the rule of estoppel cannot be applied against retrenched workmen who have no freedom to refuse payment in view of their precarious financial position caused by retrenchment. I am in full agreement with the above view. Even apart from that, a remedy which the workman is entitled to can be refused only if it may not be equitable to do so or it furthers or perpetuates injustice. None of these considerations arise in the present case. I am therefore of the opinion that once the retrenchment is found to be invalid for non-compliance with the provisions of Section 25-F of the Industrial Disputes Act, the ordinary and almost invariable rule is reinstatement of the workman.
13. This is not to say that there is no discretion in the Labour Court/Tribunal in case of manifest impossibility in ordering reinstatement. In such exceptional cases where the retrenchment being bona fide, though invalid due to non-compliance with the requirements of Section 25-F, the Tribunal may perhaps direct payment of compensation. But that rule applies only to a very few and really exceptional cases. Such exceptions cannot convert themselves into the rule.
14. Counsel for the employer relied on the decision of the Supreme Court in Workmen of Subong Tea Estate v. Outgoing Management and Others (supra). Specific reference was made to the observations contained in para 19 of the above decision to the effect that -
'It is undoubtedly true that it is for the management to decide the strength of it labour force, for the number of workmen required to carry out efficiently the work involved in the industrial undertaking of any employer must always be left to be determined by the management in the discretion and so, occasion may arise when the number of employees may exceed reasonable and legitimate needs of the undertaking. In such a case, if any workmen become surplus, it would be open to the management to retrench them. Workmen may become surplus on the ground of rationalisation or on the ground of economy reasonably and bona fide adopted by the management, or of other industrial or trade reasons. In all these cases, the management would be justified in effecting retrenchment in its Labour force'.
Counsel also referred to the decision in Parry & Co. Ltd. v. Second Industrial Tribunal, Calcutta (supra) almost to the same effect, that it is within the managerial discretion of an employer to organise and arrange his business in the manner he considers best. So long as this is done bona fide, it is not competent for a Tribunal to question its propriety. It is the right of the employer to weed out surplusages by way of retrenchment and thus it is a matter within the managerial discretion of the employer. It is of course true that the employer has got a discretion to economies and rationalise and to prune the strength of personnel of his establishment, but is should be equally true that such discretion shall not become a camouflage for retrenchment for ulterior purposes. In a case where the Industrial Court is called upon to adjudicate upon the validity of any retrenchment, it will be necessary for that court to consider whether the retrenchment was justified for proper reasons. Managerial discretion cannot justify capricious or whimsical exercise of the power or retrenchment in the name of rationalisation. This clearly emerges from a closer reading of Subong Tea Estate case and Parry & Co. case (supra).
15. I do not feel called upon to consider the propriety of the retrenchment in the facts and circumstances of the present case. The Labour Court has entered a finding that there was no victimisation or mala fide or unfair labour practice involved in the retrenchment of the employee. The employee has not succeeded in showing that the Labour Court erred in that finding. I do not propose to interfere with that finding of the Labour Court on this count.
16. It is true that the Labour court may in exceptional cases of extraordinary circumstances refuse to order reinstatement, and instead, award compensation to the concerned workman who was a victim of an illegal order of retrenchment. But I do not find that the present case is one such extraordinary case; nor I am able to agree that the Labour Court exercised its discretion properly in refusing reinstatement. It is not as if in all cases where the retrenchment though invalid, was justified, that the Labour Court shall refuse reinstatement. There shall be other and more compelling reasons justifying departure from the ordinary course which the Industrial Court shall adopt as enjoined by the decisions of the Supreme Court, which I have referred to above. It is not as if the tribunal could not have reinstated the retrenched employees. The Tribunal has virtually found that excess funds were generated by the working of the school, during the period prior to the reorganisation and even thereafter. The Labour Court brushed aside this important fact by giving the explanation that 'it may be by effective management. It is also important to note that the management has not controverted the specific case advanced by the employee, that after his retrenchment, the employer had appointed others in the category of Assistants etc. There was, therefore, no such impossibility or inequity in ordering reinstatement of the retrenched employee.
17. In the light of the above discussion, my answer to the two questions which I have formulated above are -
1. That it is competent for the retrenched employee to challenge the validity of the retrenchment even after receiving retrenchment compensation during the course of conciliation proceedings. The invalidity of the retrenchment was not cured by subsequent payment of the amounts due under Section 25-F of the Industrial Disputes Act, nor did such receipt disentitled the workman to claim reinstatement if the retrenchment was found to be be invalid when it was effected; and
2. That the normal relief in a case where retrenchment was found to be invalid for non-compliance with Section 25-F of the Industrial disputes Act is reinstatement, except in exceptional cases involving extraordinary circumstances which render it impossible or inequitable to direct such reinstatement.
18. On the facts of the present case, I find further that the Labour Court did not advert to any such exceptional circumstances of an extraordinary nature which justified exercises of its discretion to refuse reinstatement which was the normal remedy.
19. The Labour court ordered payment of an amount of Rs. 20,400/- as compensation in lieu of reinstatement for the reason that the employee was aged about 57 years at the time when he was examined on January 8, 1985. It is obvious from the findings contained in paragraph 25 of the award of the Labour Court that the amount was fixed as compensation with reference to the period of service which he had yet to render. One important circumstance which the Labour Court completely missed is that the necessary consequence of its finding that the retrenchment was invalid was as found in Mohan Lal v. Bharath Electronics Ltd. (supra) that the employee would continue in service or be deemed to be continued in service notwithstanding the invalid retrenchment. That naturally entitled the employee to salary and other monetary benefits atleast till the date on which the Tribunal passed its award on July 14, 1986 and the same was published on August 2, 1986. Since retrenchment had been given effect to on April 30, 1982 he was entitled to receive remuneration for a period of over three years and five months till the award of the Labour Court. Even assuming that the substitution of compensation for reinstatement was justified, the retrenched employee would still be entitled to receive his wages till the date of such substitution.
20. It may be that in certain circumstances, the Labour Court, in exercise of its discretion, may direct that only a portion of backwages need be paid. But such a direction will be justified only on the basis of a positive finding that the employee was at fault or that it was unjust or inequitable or that the employee was profitably employed elsewhere during the intervening period, and not as a matter of course in all circumstances. The Labour Court has not adverted to any such circumstances that justify denial of backwages altogether to the employee. I am therefore inclined to agree with the learned counsel for the employee that the Labour Court misdirected itself in confining its award to compensation in lieu of reinstatement, without adverting to the legitimate claim of the employee for backwages for the period from May 1, 1982 to September 26, 1986. Since the petitioner reached the age of superannuation during the pendency of this writ petition. I feel that the interest of justice will be served by a direction that the employer shall pay a further amount of Rs. 30,600/- representing the salary and other emoluments due to the employee for a period of three more years. There shall be a direction that the employer shall pay this amount along with the balance of amount due as per the award of the Labour Court, to the employee, within a period not exceeding two months from the date of receipt of a copy of this order.
21. In case if the amount is not paid, the same or any portion thereof shall bear interest at the rate of 12% per annum till the date of payment.
22. I, therefore, dismiss Writ Petition No. 17008/86 and allow Writ Petition No. 10904/88 with the above directions. The employee shall be entitled to recover costs in both the writ petitions, along with Advocate's fee of Rs. 500/- in each of the writ petitions.