Industrial Dispute Raised After 16 Years: Supreme Court Replaces Reinstatement With ₹2.5 Lakh Compensation

The Supreme Court recently held that an inordinate delay in raising an industrial dispute, though not fatal to the claim itself, can be a decisive factor while moulding relief, including denial of reinstatement and back wages.

The bench of Justice Ahsanuddin Amanullah and Justice K. Vinod Chandran observed thus in an appeal filed by the State of Uttar Pradesh against a judgment of the high court which had upheld an award passed by the labour court in favour of Krishna Murari Sharma, a workman whose termination had been held to be illegal. While the finding on illegality was not disturbed, the Supreme Court substantially interfered with the relief granted, citing a delay of nearly 16 years in seeking reference under the Industrial Disputes Act.

The labour court had earlier directed reinstatement of the workman along with back wages for the period from May 31, 2006, the date of reference, till April 1, 2015, after noting the long lapse of time. This award was affirmed by the high court, prompting the State to approach the Supreme Court of India.

Before the Supreme Court, the State confined its challenge to the relief granted and did not dispute the finding that the termination was illegal. It was argued that the respondent had ceased to be engaged as early as October 1990 and had not taken any steps to seek reinstatement for more than 15 years thereafter. According to the State, such a stale claim, even if adjudicated, could not justify reinstatement or back wages. The State submitted that it was willing to pay a reasonable lump sum compensation instead.

The respondent-workman opposed the appeal, contending that the back wages payable would amount to nearly ₹15 lakh and that the award of the labour court ought not to be interfered with. It was also argued that the State had not challenged the reference order under Article 226 of the Constitution and therefore could not raise the issue of delay at a later stage.

The Supreme Court rejected this contention, holding that failure to challenge the reference did not bar the employer from raising delay during adjudication. The bench noted that the State had specifically raised the plea of delay at the very first instance before the labour court through written submissions. It clarified that mere non-challenge to the reference could neither be treated as acquiescence nor construed as a waiver of the employer’s objection on the ground of delay.

Court then examined the broader legal position on delay in industrial disputes. It drew a clear distinction between challenging the validity of a reference and considering the effect of delay while deciding the relief. The bench reiterated that while the Limitation Act does not apply to proceedings under the Industrial Disputes Act, delay remains a relevant circumstance which labour courts are entitled to consider.

Referring to a consistent line of precedent, the Supreme Court observed that even where termination is found to be illegal, reinstatement and back wages do not follow automatically. Courts and tribunals have the discretion to mould relief depending on the facts of each case, particularly where a workman approaches the adjudicatory forum after a prolonged and unexplained delay. Court emphasised that while delay may not defeat the claim itself, it has a direct bearing on the nature and extent of relief that can be granted.

Applying these principles to the facts of the present case, the bench noted that the respondent had approached the authorities after a delay of nearly 16 years, which it described as “gross”. It held that such a delay could not be ignored while determining the appropriate relief, notwithstanding the illegality of the termination.

Accordingly, the Supreme Court set aside the directions for reinstatement and payment of back wages passed by the labour court and affirmed by the high court. While upholding the finding that the termination was illegal, court substituted the relief with a lump sum compensation of ₹2.5 lakh to be paid to the respondent-workman.

Court directed the State to pay the compensation within two months from the date of receipt of the certified copy of the order, failing which the amount would carry interest at the rate of 7% per annum. With these directions, the appeal filed by the State of Uttar Pradesh was allowed.

Case Title: State of Uttar Pradesh Vs Krishna Murari Sharma

Bench: Justice Ahsanuddin Amanullah and Justice K. Vinod Chandran