Supreme Court on Reinstatement of Contractual Employee due to Illegal Termination

 

INTRODUCTION

 

Today, I will talk about the case of Ram Manohar Joint Hospital and Others v. Munna Prasad Saini and Another, Civil Appeal No. 5810 of 2021, wherein the Hon’ble Supreme Court discussed whether a contractual employee working in a government establishment is entitled for reinstatement on account of his illegal termination or not.

 

The facts of the case are not relevant for the purposes of this show and hence, the same are not being discussed. But before adverting any further, a brief perusal of Section 25F of the Industrial Disputes Act, 1947 would be profitable to understand the legal conundrum in the present case.

 

SECTION 25F

 

Section 25F provides for the conditions precedent to retrenchment of a workmen and states that “no workman employed in any industry who has been in continuous service for not less than one year under an employer shall be retrenched by that employer until:-”

 

a. One month’s written and reasoned notice has been given and such notice period has expired, or the workman has been paid wages for such notice period.

 

b. 15 days average pay for every completed year of continuous service (including any part in excess of 6 months in an year) has been paid to the workman at the time of retrenchment; and

 

c. Notice is served on the appropriate government.

 

Thus, when the above-stated conditions of providing a notice and providing pay in terms of the above have been fulfilled, services of an employee could be terminated by an employer. Further, the word used in Section 25F is “shall” that makes it mandatory on part of the employer to comply with the mandate of the provision. If such conditions are not fulfilled, then the retrenchment or termination of an employee would be in violation of Section 25F of the Industrial Disputes Act.

 

PERTINENT OBSERVATIONS

 

In the present case, the Supreme Court heavily relied upon the observations made in the case of Bharat Sanchar Nigam Limited v. Bhurumal, (2014) 7 SCC 177, wherein following important points were underscored: -

 

A. “When the termination is found to be illegal because of non-payment of retrenchment compensation and notice pay as mandatorily required under Section 25-F of the Industrial Disputes Act, then even after reinstatement, it is always open to the management to terminate the services of that employee by paying him the retrenchment compensation.”

 

B. Violation of Section 25F of Industrial Disputes Act, 1947, is a procedural defect and in such cases, “reinstatement with back wages is not automatic and instead the workman should be given monetary compensation which will meet the ends of justice.”

 

C. “The ordinary principle of grant of reinstatement with full back wages, when the termination is found to be illegal is not applied mechanically in all cases.”

 

D. There is no blanket right to seek regularization in favour of the contractual employees and when a person is not entitled for regularization, then such person has no right to continue as a contractual employee. In such light, no useful purpose would be served by reinstating such a contractual employee and a better remedy would be provide him monetary compensation in terms of Section 25F.

 

E. The Court cautioned that the situation may be different in cases where the termination is illegal on account of unfair labour practice by the employer or where the contractual juniors of the terminated employee were retained. There could also be a situation where the juniors are regularized, and the concerned employee is terminated. In all such situations, reinstatement of the terminated employee should be the rule and unless there are some very cogent reasons available for granting compensation instead of reinstatement, relief of reinstatement should not be denied.

 

CONCLUSION

 

Thus, we see that there are two situations that may arise on account of illegal termination of a contractual employee: -

 

A. If termination is illegal on account of non-payment of retrenchment compensation, then reinstatement may not be useful as the management can always retrench such employee again immediately by paying retrenchment compensation. Thus, in such cases, directing payment of compensation is a better remedy.

 

B. If termination is illegal on account of unfair labour practice or retaining or regularization of contractual juniors, then generally, reinstatement of the terminated contractual employee is the rule.

 

Therefore, I hope that the contingencies that may arise in relation to reinstatement of contractual employees on account of illegal termination are clear by now.