The Bombay High Court has reaffirmed that termination of a workman during the pendency of an industrial reference, without obtaining prior approval under Section 33(2)(b) of the Industrial Disputes Act, 1947, is legally inoperative. The Court held that such termination does not sever the employment relationship and mandates reinstatement with back wages, unless compelling and evidence-based reasons exist to the contrary.
Background & Facts
The Dispute
The dispute arose from the termination of Santosh Chandrkant Potdar, a workman with over thirteen years of service at Bajaj Auto Limited, on 17 October 2014. The termination followed a domestic enquiry that found him guilty of misconduct under multiple Standing Orders. However, the termination occurred while an industrial dispute between the company and the recognised Union, Vishwakalyan Kamgar Sanghatana, remained pending before the Industrial Tribunal.
Key Facts
- The petitioner was served a charge-sheet on 12 October 2012 alleging misconduct under Standing Orders Nos. 31(I), (III), (VIII), (XI), (XXXIV), (XL), (XLIII), and (XIII).
- A domestic enquiry was conducted, culminating in a report dated 31 July 2014, finding the petitioner guilty.
- On 14 August 2014, the company and the Union entered into a Memorandum of Understanding (MoU) concerning the suspension of eighteen workmen, including the petitioner. The MoU provided for reinstatement of thirteen workmen upon apology and undertaking, while disciplinary proceedings against five, including the petitioner, were to continue.
- The petitioner submitted an apology letter on 16 October 2014 and requested sympathetic consideration, citing that thirteen similarly situated workmen had received only four-day suspensions.
- Despite this, the company terminated the petitioner on 17 October 2014 without seeking prior approval under Section 33(2)(b) of the Industrial Disputes Act.
- The industrial dispute, originally filed as Complaint (IT) No. 1 of 2014, was pending before the Industrial Tribunal at the time of termination.
- The Union provided the petitioner financial assistance of Rs. 10,00,000 on 19 December 2014, repayable if he succeeded in challenging his dismissal.
- After termination, the petitioner remained unemployed for approximately two years, then started a grocery business in 2016, which closed during the Covid-19 pandemic due to losses.
Procedural History
- 12 October 2012: Charge-sheet issued against the petitioner.
- 31 July 2014: Enquiry Officer submitted findings of guilt.
- 14 August 2014: Memorandum of Understanding signed between company and Union.
- 16 October 2014: Petitioner submitted apology; Union made representation.
- 17 October 2014: Termination order issued without Section 33(2)(b) approval.
- 27 September 2019: Industrial Tribunal upheld fairness of domestic enquiry and findings.
- 18 January 2024: Industrial Tribunal awarded Rs. 7,00,000 as compensation but denied reinstatement, holding that reinstatement was not feasible after ten years.
- 2024: Both parties filed writ petitions before the Bombay High Court - the workman challenging denial of reinstatement, and the company challenging the finding that termination violated Section 33(2)(b).
Relief Sought
The petitioner sought reinstatement with full back wages from 17 October 2014, continuity of service, and restoration of all benefits. The company sought to set aside the finding that termination violated Section 33(2)(b) and to uphold the compensation award.
The Legal Issue
The central question was whether termination of a workman during the pendency of an industrial reference, without obtaining prior approval under Section 33(2)(b) of the Industrial Disputes Act, 1947, renders the termination void ab initio, and whether reinstatement with back wages is the mandatory remedy under such circumstances.
Arguments Presented
For the Petitioner-Workman
The petitioner’s counsel relied on the Constitution Bench judgment in Jaipur Zila Sahakari Bhoomi Vikas Bank Ltd. v. Ram Gopal Sharma & Others (2002) 2 SCC 244, arguing that termination without approval under Section 33(2)(b) is legally inoperative and treated as if it never occurred. She further cited Grindlays Bank Ltd. v. Central Government Industrial Tribunal (1980) Supp SCC 420 to establish that proceedings remain pending until the award becomes enforceable under Section 17A, which requires thirty days from publication. She contended that since the reference was still pending on 17 October 2014, approval was mandatory. She also invoked Deepali Gundu Surwase v. Kranti Junior Adhyapak Mahavidyalaya (2013) 10 SCC 324 to argue that reinstatement is the norm when termination is found illegal, and compensation is only an exception requiring strong justification.
For the Respondent-Company
The company’s counsel argued that the reference had been settled and withdrawn before termination, and that Section 33(2)(b) was intended to protect against victimisation during active adjudication, not to create perpetual procedural hurdles. He relied on Sanjay V. Redkar v. State of Goa (2020) 4 Mh.L.J. 242 to contend that statutory fictions must not be extended beyond their legislative purpose. He further argued that Section 20(3) applies only to adjudicated awards, not to settlements, and that requiring approval after settlement would be absurd and contrary to business realities.
The Court's Analysis
The Court undertook a detailed statutory interpretation of Section 33(2)(b) and Section 20(3) of the Industrial Disputes Act. It held that the pendency of an industrial reference is not extinguished merely because the parties have reached a settlement or the award has been pronounced. The Supreme Court in Grindlays Bank Ltd. clarified that proceedings remain pending until the award becomes enforceable under Section 17A, which occurs thirty days after publication. The Court found that the reference in this case was still pending on 17 October 2014, as the award recording settlement had not yet become enforceable.
"The order of dismissal or discharge passed invoking Section 33(2)(b) dismissing or discharging an employee brings an end of relationship of the employer and employee from the date of his dismissal or discharge but that order remains incomplete and remains inchoate as it is subject to approval of the authority under the said provision. In other words, this relationship comes to an end de jure only when the authority grants approval. If approval is not given, nothing more is required to be done by the employee, as it will have to be deemed that the order of discharge or dismissal had never been passed."
The Court emphasized that the Constitution Bench in Jaipur Zila Sahakari Bhoomi Vikas Bank Ltd. established that failure to obtain approval renders the termination legally non-existent. The employer’s unilateral act cannot sever the employment relationship. The Court rejected the company’s argument that the requirement of approval was a mere technicality, stating that such an interpretation would nullify the legislative intent behind Section 33(2)(b), which is to prevent victimisation during pendency.
The Court further held that once illegality is established, reinstatement is not a discretionary remedy but a legal consequence. The Industrial Tribunal erred in substituting compensation for reinstatement on the basis of conjecture about changed workplace dynamics. The Court noted that no evidence was adduced to show that the petitioner’s reinstatement was impossible, impractical, or that the establishment had closed. Mere passage of time cannot override statutory rights.
Regarding back wages, the Court adopted a balanced approach. It held that the petitioner was entitled to full back wages from termination until he commenced his grocery business in 2016, as he had no other source of income. For the period of business operation (2016 - Covid), a 50% reduction was justified due to partial income generation. After closure of the shop during the pandemic, full back wages were restored, as no alternative employment was proven.
The Verdict
The petitioner succeeded. The Court set aside the Industrial Tribunal’s award to the extent it denied reinstatement and awarded compensation. The termination order dated 17 October 2014 was declared inoperative. The respondent-company was directed to reinstate the petitioner in his original or an equivalent post with identical pay, status, and service benefits within eight weeks. The petitioner is entitled to continuity of service for all purposes, including seniority and retiral benefits. Back wages are payable in three tranches: full wages from 17 October 2014 to 2016; 50% wages from 2016 until closure of the grocery shop during the Covid period; and full wages thereafter until reinstatement. Arrears must be computed and paid within twelve weeks of reinstatement. Any interim earnings or amounts paid under the impugned award are subject to adjustment.
What This Means For Similar Cases
Reinstatement Is the Default Remedy for Section 33(2)(b) Violations
- Practitioners must argue that any termination during pendency without approval is void ab initio - no separate reinstatement petition is required.
- Compensation is not a substitute unless the employer proves exceptional circumstances like closure, abolition of post, or physical impossibility of reinstatement.
- Courts cannot deny reinstatement on speculative grounds like ‘changed work culture’ or ‘lapse of time’ without concrete evidence.
Pendency Under Section 20(3) Extends Beyond Award Pronouncement
- The 30-day period under Section 17A for award enforceability is part of the statutory pendency - employers cannot act during this window.
- Settlements or withdrawals do not extinguish pendency until the award becomes enforceable.
- Employers must verify the enforceability status before taking any disciplinary action against workmen involved in pending references.
Back Wage Calculations Must Reflect Actual Earnings
- Employers bear the burden of proving alternative income; mere assertion of business activity is insufficient without financial records.
- Courts may apply reasonable deductions for partial income but cannot presume profits or losses without evidence.
- Pandemic-related losses are judicially noticeable and may support claims of unemployment.
