Supreme Court In A Service Appeal Modified The Quantum Of Back Wages Award in Wrongful Dismissal

The Supreme Court while hearing the appeal in the service matter upheld the High Court's decision to set aside the dismissal of Mahadeo Krishna Naik, a bus driver, by the Maharashtra State Road Transport Corporation (MSRTC) and the subsequent award of the Labour Court that had denied him reinstatement.

Brief of the Case Background:
Mahadeo Krishna Naik, a bus driver with the Maharashtra State Road Transport Corporation, was involved in a fatal accident in May 1996. After a disciplinary inquiry, he was removed from service in May 1997. His departmental appeal failed, and the Labour Court later upheld his removal, holding the inquiry to be fair and the penalty proportionate.

Mahadeo then filed a writ petition in the High Court, which was also dismissed. Later, Mahadeo became aware that in compensation proceedings initiated by the accident victims' families before the MACT, the Corporation had taken the stand that the accident was solely due to the negligence of the lorry driver, and the MACT had exonerated the Corporation. Following this contradictory position, Mahadeo presented a review petition to the High Court, which was granted, reversing his dismissal and ordering payment of arrears. The High Court order was appealed against by the Corporation in the current appeal to the Supreme Court.

Supreme Court noted that the Corporation had contended in the MACT that the 1996 accident, which resulted in Mahadeo's termination, was caused entirely by the negligence of the lorry driver. Yet, before the Labour Court, the Corporation asserted that Mahadeo was negligent. The Court held that the Corporation's non-disclosure of its MACT pleadings and the MACT award (which did not implicate the Corporation) to the Labour Court amounted to grave suppression of material facts, which is tantamount to fraud on the court. While acknowledging that an MACT award is not binding on a Labour Court, the Supreme Court emphasized that the Corporation could not resile from its own sworn statements made before the MACT.

The Court also observed that the Corporation's act of suggestio falsi (false representation) and suppresio veri (suppression of truth) in not revealing its contradictory position adopted earlier before the Motor Accidents Claims Tribunal (MACT) in the disciplinary action against Mahadeo.

The Court also observed that the Corporation's actions deprived Mahadeo of a secure livelihood. Insofar as back wages were concerned, the Court reiterated that whereas reinstatement with continuity and back wages is the general rule in cases of wrongful dismissal, the award of full back wages is not mandatory and depends upon considerations such as gainful employment during the passing period. Since Mahadeo had admitted that he had been working on badli duty, the Court considered award of 75% back wages as justifiable.

The Apex Court obeserved that the Corporation's non-disclosure of its stand before the MACT and the MACT award to the Labour Court amounted to suggestio falsi and suppresio veri, which the Court considered a serious impropriety akin to fraud on the court.

The Court further observed that while an award of the MACT is not binding on a Labour Court, a party cannot contradict its own sworn statements made in earlier judicial proceedings. Reinstatement with continuity of service and back wages is the normal rule in cases of wrongful termination.

The grant of full back wages is not automatic and requires a fact-finding exercise regarding the employee's gainful employment during the period of termination.

The burden of proving gainful employment of the terminated employee shifts to the employer if the employee pleads non-employment.

Thus, the Apex Court modified the High Court's order of 100% back wages to 75% considering Mahadeo's admission of engaging in badli work on a daily wage basis. However, the Apex court modified the quantum of back wages awarded, reducing it from 100% to 75% from the date of his termination until his superannuation.

Coram: Justice Dipankar Dutta and Justice Sandeep Mehta
Between: MAHARASHTRA STATE ROAD TRANSPORT CORPORATION (MSRTC) VS MAHADEO KRISHNA NAIK 2025 INSC 218
Date of Judgment: 14-02-2025