A Supreme Court bench comprising Justice Dipankar Datta and Justice Sandeep Mehta has ruled that while reinstatement with full back wages is the norm in wrongful dismissal cases, lump sum compensation may be a more appropriate remedy in certain situations. The Court made this observation in Maharashtra State Road Transport Corporation (MSRTC) vs. Mahadeo Krishna Naik, where it modified a High Court order and awarded 75% back wages instead of full reinstatement.
Background of the Case
The case originated from a road accident on May 10, 1996, involving an MSRTC bus driven by Mahadeo Krishna Naik and a lorry. The accident resulted in two passenger deaths and multiple injuries. Following a departmental inquiry, MSRTC held Naik guilty of rash and negligent driving and dismissed him from service on May 27, 1997.
Naik’s appeals within the corporation failed, leading his union to raise an industrial dispute. The case was referred to the Labour Court, Mumbai, which upheld his dismissal. Naik subsequently filed a writ petition in the Bombay High Court, which was dismissed on February 7, 2017. However, after discovering that MSRTC had taken a contradictory stance before the Motor Accident Claims Tribunal (MACT)—absolving him of any negligence—Naik filed a review petition, which was allowed on November 30, 2018. The High Court set aside his dismissal and awarded full back wages.
Challenging this decision, MSRTC appealed to the Supreme Court.
Legal Issues Considered by the Supreme Court
1. Did MSRTC suppress crucial evidence before the Labour Court?
2. Was the Bombay High Court justified in reviewing its own order?
3. Was full back wages the correct remedy, or should an alternative relief be granted?
4. When should courts consider lump sum compensation instead of reinstatement?
Key Observations of the Supreme Court
– On Suppression of Evidence: The Supreme Court strongly criticized MSRTC for its failure to disclose crucial evidence. It noted that the corporation had claimed before the Labour Court that Naik was negligent, but took an entirely different stance before the MACT, where it attributed full responsibility for the accident to the lorry driver.
“The Corporation did not leave any stone unturned before the Labour Court to establish Naik’s negligence. However, before the MACT, it argued the exact opposite and conveniently failed to disclose this in subsequent proceedings. Such conduct is nothing short of fraud on the court.”
– On the High Court’s Review Order: The Supreme Court held that the High Court was justified in reviewing its own decision since the new evidence from the MACT proceedings could have altered the outcome. The Court emphasized that justice should not be sacrificed for procedural rigidity.
– On Back Wages: While the High Court had awarded full back wages, the Supreme Court modified the order, directing that Naik be paid 75% of back wages, considering that he had performed occasional daily-wage work after his dismissal.
“While reinstatement with full back wages is the general rule in wrongful dismissal cases, there can be exceptional situations where reinstatement is neither practical nor the most just solution. In such cases, lump sum compensation may be a more appropriate relief.”
– On Alternative Remedies: The Supreme Court reiterated that reinstatement is not an automatic relief in every wrongful dismissal case. Courts must consider:
– The financial burden on the employer
– The employee’s ability to secure alternative work
– The time elapsed in litigation
– Whether reinstatement is still a viable remedy
Final Judgment and Relief Granted
1. Reinstatement was denied, as Naik had already reached the age of superannuation.
2. 75% of back wages were awarded from the date of dismissal until retirement.
3. MSRTC was directed to release all terminal benefits with 6% interest.
4. Failure to comply within three months would attract an additional 2% interest.
