The Supreme Court of India has recently clarified the legal position on payment of back wages to an employee whose services are wrongfully terminated. In the case of Jayantibhai Raojibhai Patel v. Municipal Council, Narkhed & Ors., the bench comprising Justice DY Chandrachud and Justice Indira Banerjee relied on precedents laid by the Supreme Court, to hold that an employee whose services are found to have been wrongfully terminated, will be entitled to receive the back wages.
In the Jayantibhai Case, the appellant was a headmaster at a government school, who was served a show cause notice in February 1994 for alleged misappropriation of funds. An inquiry was conducted by the Municipal Council, and the appellant was found to not be guilty of the misconduct alleged. However, soon after, a second inquiry was conducted, despite the appellant objecting to the conduct of the same. In course of this second inquiry, the appellant was found guilty and his employment was terminated.
The appellant filed a writ petition at the High Court, challenging his removal. The High Court, by its judgment and order dated 12th August 2014 quashed the order of removal of the appellant. Since the appellant had already attained the age of superannuation, the High Court held that no back wages should be paid to the appellant for the period for which he had not rendered service. However, at the same time, the High Court directed the disbursement of retiral benefits to the appellant, treating him to be in continuity of service until the date of superannuation.
It is with respect to the issue of non-payment of back wages that the appellant approached the Supreme Court.
The Supreme Court agreed with the High Court in that a fresh appointment of an inquiry officer could not have been made without recording reasons why the disciplinary authority disagreed with the first inquiry report. However, the bench disagreed with the High Court's stance that back wages should not be paid for the period for which the appellant had not rendered service.
The bench relied on several cases which had already clarified the legal position regarding payment of back wages:
- In the case of Hindustan Tin Works (P) Ltd v Employees it has been held by a three-judge bench of the Supreme Court that "...Full back wages would be the normal rule and the party objecting to it must establish the circumstances necessitating departure." The bench also observed that this ratio has been subsequently followed in various decisions by the Supreme Court.
- In the case of Surendra Kumar Verma v. Central Government Industrial Tribunal-cum-Labour Court, a three-judge bench of the Supreme Court stated that, "... Plain common-sense dictates that the removal of an order terminating the services of workmen must ordinarily lead to the reinstatement of the services of the workmen. It is as if the order has never been, and so it must ordinarily lead to back wages too...". It further held that only in exceptional circumstances the court may exercise its discretion to deny the relief of full back wages, for example: when it would place an impossible burden on the employer.
- The bench finally relied on the case of Deepali Gundu Surwase v. Kranti Junior Adhyapak Mahavidyalaya which laid down certain principles for the payment of back wages, and unequivocally stated that, "...In cases of wrongful termination of service, reinstatement with continuity of service and back wages is the normal rule...". The aforesaid rule is subject to the rider that the adjudicating authority/courts may take into consideration "...the length of service of the employee/workman, the nature of misconduct, if any, found proved against the employee/workman, the financial condition of the employer and similar other factors...". It further held that, "...If the employer wants to deny back wages to the employee or contest his entitlement to get consequential benefits, then it is for him/her to specifically plead and prove that during the intervening period the employee was gainfully employed and was getting the same emoluments...". The denial of back wages to an employee, who has suffered due to an illegal act of the employer would amount to indirectly punishing the employee concerned, by relieving the employer of the obligation to pay back wages.
In view of the precedents, the Supreme Court held in the Jayantibhai Case that the High Court was not justified in denying the back wages to the appellant. The first inquiry into the appellant's alleged misconduct had concluded that the allegations were unsubstantiated. However, the second inquiry, which was convened without recording reasons for convening the same, found him guilty. The bench stated that ideally the High Court should have remanded the matter back to the Municipal Council to take a fresh decision, however, given that the proceedings before the High Court were pending for eighteen years, a remand at this stage would be impracticable.
The Supreme Court directed that a lumpsum payment of the back wages due to the appellant be made, as full and final settlement of his claim for back wages from the date of his removal till the date of his superannuation. This payment would be in addition to the retiral benefits already granted to him by the High Court.
 Civil Appeal No. 6188 of 2019, dated 21st August, 2019.
 (1979) 2 SCC 80
 (1980) 4 SCC 443
 (2013) 10 SCC 324
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.