Supreme Court on Statutory Rights of Employees On Illegal Termination, Labor Rights, and Regularization

This case involves a dispute between workmen (gardeners) and their employer, the Ghaziabad Nagar Nigam (the Municipality), where the appellant workmen claimed they had been working as gardeners in the Horticulture Department since 1998 or 1999, performing duties like planting trees, maintaining parks, and beautifying public spaces under the direct supervision of the Municipality.

They alleged they were not issued formal appointment letters and were denied minimum wages and other statutory benefits.

In 2004, the workmen raised an industrial dispute seeking regularization and statutory benefits, and in mid-July 2005, the Municipality allegedly terminated the services of numerous workmen orally, without any notice or compensation. The workmen argued that their termination during pending conciliation proceedings violated the U.P. Industrial Disputes Act, 1947.

The State Government referred the disputes to the Labour Court, Ghaziabad for adjudication, and the Labour Court issued two sets of conflicting orders. Some orders (dated 03.06.2011) held the terminations illegal due to non-compliance with Section 6N of the U.P. Industrial Disputes Act, and directed reinstatement with 30% back wages. However, other orders (dated 11.10.2011) dismissed the claims of some workmen, stating they were engaged through a contractor and had no right to reinstatement or regularization.

High Court: Both the Municipality and the aggrieved workmen filed writ petitions before the Allahabad High Court. The High Court partially modified the Labour Court's conclusions, directing re-engagement of the workmen on daily wages with pay equivalent to the minimum in the regular pay scale, while also allowing for future consideration of their regularization.

The High Court acknowledged the Labour Court’s jurisdiction under the U.P. Industrial Disputes Act, as municipalities can be treated as "industry". The High Court also noted factual complexities regarding whether the workmen were direct employees of the Nagar Nigam or were provided by contractors and further noted a ban on fresh recruitments in Municipal Corporations.

Both workmen and the Municipality filed an appeal before the Supreme Court against the judgment of the High Court. The workmen prayed for complete reinstatement with back wages and regularization. The Municipality prayed to set aside the modifications on the ground that the High Court had exceeded its jurisdiction by granting relief akin to regular employees.

The Supreme Court observed that the Municipality, while conciliation proceedings before the Conciliation Officer were pending, removed the workmen from service in contravention of Section 6E of the U.P. Industrial Disputes Act, 1947, which prohibits any change in conditions of service pending conciliation proceedings without prior approval.

The Court observed that the Municipality did not adduce any evidence to show compliance with Section 6N of the U.P. Industrial Disputes Act, 1947, which requires issuance of a proper notice, wages in lieu thereof and retrenchment compensation for termination of employees, whether permanent or temporary.

The Court held that the case of the Municipality for having engaged the workmen through a contractor was not proved. The Municipality did not produce any contract papers, copies of license, or invoices to prove the plea of contractor-based engagement.

The workmen were held to be reporting to the Horticulture Department, taking instructions from them, and received their remuneration from the Municipality, thus establishing direct employer-employee relationship.

The Supreme Court highlighted that the work entrusted to the Appellant Workmen was perennial in nature, consisting of maintenance of parks, horticultural work, and beautification of cities. held that the Municipality committed unfair labour practice by exacting the same work from the Appellant Workmen as from regular Gardeners but without paying them adequately.

The Supreme Court observed that the principle of “equal pay for equal work” could not be disregarded for long-serving workers.

The court stated that Uma Devi (supra) cannot be used as a justification for long periods of exploitative engagements by the employer without proper recruitment.

The Court highlighted the misuse of temporary contracts, and the exploitation faced by temporary employees, and it also noted that Indian labor laws strongly disfavors the practice of perpetual daily-wage or contractual engagement.

The Court stated that the High Court’s order for re-engagement on daily wages only perpetuated the uncertainty for the workmen.

The Supreme Court stated that the concerns of the municipal budget and compliance with recruitment rules, cannot negate the legitimate rights of the workmen.

The Supreme Court allowed the workmen's appeals and dismissed the Municipality's appeals and held that the termination of the Appellant Workmen was declared illegal, and all termination orders were quashed.

The Apex Court also held that the workmen are to be treated as continuing in service from the date of their termination, and the Municipality was directed to reinstate the workmen within four weeks of the judgment. Furthermore, the workmen entire period of absence was to be counted for continuity of service, seniority and other benefits.

The workmen were entitled to receive 50% of their back wages from the date of termination to the date of reinstatement. Further, in view of the fact that workmen had discharged perennial municipal duties, the municipality was directed to initiate a fair and transparent process for regularization within six months of reinstatement.

The Apex Court also directed that no educational or procedural criterion should be applied retrospectively if it has not been applied in the past to similarly situated regular employees.

Protection of Workmen: The Apex Court brought out the protection afforded to workmen's rights under the U.P. Industrial Disputes Act, 1947, during conciliation before the conciliation officer, and the Supreme Court ruled that termination not in accordance with due process and statutory safeguards amounts to illegal termination.

Employer-Employee Relationship: The Apex Court also analyzed the nature of the employment relationship and It pointed out that direct control and supervision indicate the existence of an employer-employee relationship.

Unfair Labor Practice: The court acknowledged the unfair labor practice of making workers do the same tasks as regular employees without giving them appropriate wages and benefits.

Principle of Equal Pay for Equal Work: The court gave very important importance to the principle of "equal pay for equal work," more so when the employee serves for a sufficiently long period.

Misuse of Temporary Contracts: In view of this abuse made in temporary contracts and exploitation of temporary employees, the court also observed that Indian labor laws strongly disfavor the practice of perpetual daily-wage or contractual engagement.

Regularisation of Employees: The court inter alia recognised the need for regularisation of employees who had been performing perennial duties and made it clear that budgetary allocation and recruitment rules cannot override statutory rights and entitlements of the workers.

Coram: Justice Vikram Nath and Justice Prasanna B. Varale
Between: Shripal & Anr. vs. Nagar Nigam, Ghaziabad
Date of Judgment: 31.01.2025