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Indian Case Summary

Muir Mills Unit Of N.T.C. (U.P) Ltd vs Swayam Prakash Srivastava & Anr on 1 December, 2006 – Case Summary

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In the case of Muir Mills Unit Of N.T.C. (U.P) Ltd vs Swayam Prakash Srivastava & Anr on 1 December, 2006, the Supreme Court of India was faced with a dispute involving the termination of a probationary employee and the subsequent legal fallout. The case was presided over by Dr. Ar. Lakshmanan and Altamas Kabir.

Facts of the Case

The appellant, Muir Mills, a subsidiary of the National Textile Corporation Ltd. of Uttar Pradesh, had offered the respondent, Swayam Prakash Srivastava, an appointment as a Legal Assistant in the litigation section on a probation period of one year. Srivastava joined his duties on 12.06.1982. However, six months into his probation, a letter was written by the Senior Legal Assistant to the General Manager of the Mill stating that Srivastava was not fully understanding the work of his post and his work was not up to the mark. Despite this, it was decided to give Srivastava an opportunity to improve his performance.

Upon the expiry of the probation period, a letter was issued to Srivastava stating that his performance had not been satisfactory and he had failed to complete the probationary period successfully. This led to Srivastava raising an industrial dispute which was referred for adjudication by the State of Uttar Pradesh to the Labour Court.

Issues Raised

The issues that were raised in this case were:

  1. Whether a ‘legal assistant’ falls under the definition of a workman under the Industrial Disputes Act.
  2. Whether the High Court failed to appreciate that the award was perverse inasmuch as it directed the reinstatement with backwages of a probationer whose services had been discontinued upon completion of the probationary period on account of unsatisfactory work.
  3. Whether the High Court failed to appreciate that Srivastava, having worked as a probationer for just a year, had enjoyed over 15 years of wages without having worked for the same and that in the facts and circumstances even if the termination was held to be illegal, these wages paid should have been held to be treated as compensation in lieu of reinstatement.

Court’s Observations

The court observed that Srivastava was not a workman as understood under the Industrial Disputes Act. His work was essentially of a supervisory nature and he was being paid a sum of Rs. 866.51 as salary. The court also noted that the High Court failed to appreciate that the award of the Labour Court was perverse as it directed the reinstatement with backwages of a probationer whose services had been discontinued upon completion of the probationary period on account of unsatisfactory work.

The court also observed that the High Court failed to appreciate that Srivastava had been receiving interim wages for over 15 years without having worked at all and without having established his unemployment. The High Court failed to appreciate that the award itself had only granted reinstatement to Srivastava as a probationer giving the petitioner the right to take a decision on confirmation.

The court further observed that, assuming but not conceding that the termination of the service of Srivastava was illegal, given the fact that all that the Labour Court directed was that Srivastava be reinstated as a probationer and given the fact that the Mill itself had been closed down and the appellant declared a Sick Industrial Company in respect of which a revival scheme was sanctioned, the logical relief would be to be compensated in lieu of reinstatement, which in the given case could be deemed to set off and satisfied by the payment received by Srivastava of wages pursuant to the interim order of the High Court dated

02.12.1987.

The court also noted the argument of the appellant that the huge financial liability of Rs.7 lakhs in wages to a probationer who had worked for only about a year was something which the appellant, being a Sick Industrial Company, would find impossible to bear and if this liability is saddled upon the appellant, it could prejudice the sanctioned scheme for revival of two remaining mills. Almost 6898 employees have been retired under a voluntary retirement scheme.

The court also took into account the argument that the NTC (UP) Ltd. was managing 11 nationalised textile mills in the State of Uttar Pradesh. On account of huge losses, obsolete technology, excess labour/staff force the company was referred to the Board for Industrial and Financial Reconstruction (BIFR) under the Sick Industrial Companies (Special Provisions) Act in the year 1992-1993. The IFCI has prepared a Revival Scheme on the basis of which the BIFR has approved of a sanctioned scheme. Under the Scheme, 9 of the 11 mills, including the Muir Mills where Srivastava had served as a probationer, have been closed down. About 6898 employees have opted for VRS.

The respondents submitted that Srivastava was appointed as Legal Assistant in the appellant’s organization where he worked with full devotion, sincerity and to the full satisfaction of the employers but his services were terminated on 04.06.1983 without any reason. It was submitted that, Srivastava was on leave on 04.06.1983 and 05.06.1983 (being a Sunday) and on 06.06.1983 when he went for work he was given the termination order. Srivastava was not issued a charge sheet or notice during the period before the termination of his services.

The court observed that even before the Labour Court as a preliminary objection, it was contended by the appellant that, Srivastava was not under the category of workman as defined in section 2 of the U.P. Industrial Disputes Act, 1947. Hence the reference order is not covered under the U.P. Industrial Disputes Act, 1947; and the reference order is totally vague, bad in law and is liable to be rejected.

Court’s Decision

After hearing the parties in detail and perusing through all the written records placed before it, the court was of the opinion that the arguments of the appellant merited favourable consideration. The court held that Srivastava did not fall into the category of a workman as contended by the respondents as Srivastava falls under exception (iv) of section 2 (z) of the U.P.I.D Act, 1947. The court also held that Srivastava was a professional and never can a professional be termed as a workman under any law. The court concluded that the High Court failed to appreciate that the petitioner-Company itself had been declared a Sick Industrial Company and the Muir Mills wherein Srivastava worked had been closed down and the reinstatement in any event was an impossibility.