High Court Holds Labour Court Exceeded Terms of Reference, Quashes Reinstatement Awards in Closure Dispute

A single-judge bench of Justice Hemant M. Prachchhak heard challenges to five labour references arising from the closure of a Mother Dairy Neem Biocide plant and the termination of several employees, and considered whether the Labour Court had travelled beyond the scope of its terms of reference under Section 10 of the Industrial Disputes Act while awarding reinstatement.

The High Court allowed the petitions, held that the Labour Court exceeded its jurisdiction and quashed the awards dated 27.12.2019 that had directed reinstatement with continuity of service. The Court emphasised the confined scope of adjudication under Section 10 and relied on a line of Apex Court authority that a tribunal must “confine its adjudication to those points and matters incidental thereto.” The Court, in its reasoning, observed: “By doing so, the Labour Court exceeded its jurisdiction and committed errors in appreciating the facts and the law. The impugned orders are therefore against the settled legal position laid down by the Hon'ble Apex Court and this Court regarding the limited scope of powers under Section 10 of the I.D. Act. The settled law, as laid down by Hon'ble Apex Court and this Court clearly states that under Section 10 of the I.D. Act, the labour Court must confine itself strictly to the terms of the reference. Since the Labour Court ignored this limitation, the impugned orders are contrary to law and therefore, cannot be sustained.” The High Court quashed and set aside the impugned awards and made the rule absolute; it also vacated interim conditions relating to compliance with Section 17-B of the I.D. Act and made no order as to costs.

Background

The petitioner, Mother Dairy Fruit & Vegetable Pvt. Ltd., operated a Neem Biocide plant at Anand which it found commercially unviable and decided to close. The respondents had been engaged initially on contract from 1997 and were regularised in 2004; their appointment letters contained a clause permitting transfers. When operations ceased in early 2014, the company issued transfer orders directing the workmen to report at other units in West Bengal, Uttar Pradesh, Kashmir and other locations. The employees did not report and the company, after depositing what it described as all admissible terminal and retiral dues (including retrenchment compensation, gratuity and notice pay), terminated their services by orders dated 19.12.2014. The employees accepted the deposited amounts but thereafter raised industrial disputes and the Assistant Labour Commissioner referred the matters to the Labour Court as References (L.C.A.) Nos.103–107 of 2015.

Before the Labour Court the respondents claimed illegal termination and sought reinstatement with back wages; the Labour Court partly allowed the references and directed reinstatement with continuity of service. Mother Dairy challenged those awards under Articles 226 and 227, contending the Labour Court exceeded the terms of reference and went into matters not referred for adjudication. The respondents relied on Section 17-B and other statutory provisions and said the Labour Court correctly addressed alleged breaches of Section 25-O and the legality of termination.

The High Court reviewed the evidence, noting admissions that terminal dues had been paid and accepted and that respondents had not rejoined or made written objections to transfers. The Court examined precedents including Bhogpur Cooperative Sugar Mills Ltd. v. Harmesh Kumar and Oshiar Prasad v. Bharat Coking Coal Ltd., reiterating that a tribunal must not enlarge the scope of a reference under Section 10(1)(c). The High Court found the Labour Court had travelled beyond the limited issues referred, committed factual and legal errors, and therefore set aside the awards. The interim directions permitting payment under Section 17-B were vacated forthwith.

Case Details:
Case No.: C/SCA/7736/2020 (with R/SCA Nos. 7863/2020, 7864/2020, 7865/2020, 7866/2020)
Case Title: Mother Dairy Fruit and Vegetable Pvt. Ltd. Versus Dilipbhai Bhagvansinh Padhiyar
Appearances:
For the Petitioner(s): Mr. D.C. Dave, Senior Counsel with Mr. Jigar M. Patel
For the Respondent(s): Mr. Girish M. Das

Source: 2026 CaseBase(GUJ) 27