Supreme Court holds delay in seeking reference may justify moulding relief; directs Rs.2.5 lakh compensation in lieu of back wages

A bench of Justices Ahsanuddin Amanullah and K. Vinod Chandran heard the State of Uttar Pradesh’s appeal challenging a High Court judgment that affirmed a Labour Court award which found the termination of a workman illegal and directed payment of back wages. The narrow question before the Court concerned the effect of a prolonged delay in seeking adjudication of the industrial dispute and whether that delay disentitled the workman from full relief.

The Court allowed the appeal in part, held that the illegality of termination stood established but moulded the relief in view of a 16-year delay in seeking reference. The bench set aside the orders of the Labour Court and the High Court to the extent of reinstatement and award of back wages, and directed payment of a lump-sum compensation of Rs.2,50,000 to the respondent within two months, failing which the State would pay interest at 7% per annum. The Court noted that the State had raised delay at the first instance before the Labour Court and that delay was a circumstance which the adjudicatory forum could reckon with when framing relief. The Court, in its reasoning, observed: “Even Shahaji1 relied on by the respondent-workman accepted the principle that the Labour Court, if finding the termination to be illegal could suitably mould the relief to be granted to the workman in view of the delay. Rajesh Kumar2 was a case in which the ground of stale claim was not raised before the Labour Court and was first urged before the High Court. As we noticed at the outset, in the present case, the failure of the State, or the conscious decision taken not to challenge the order of reference does not deny the employer-State the right to raise that contention before the Labour Court. Moreover, the same had been raised at the first instance before the Labour Court and this is not a case where for the first time the ground of delay was urged before the High Court or before this Court.”

Background The dispute arose from the termination of service of Krishna Murari Sharma, who had been engaged on a monthly honorarium and whose service effectively ceased in October 1990. A reference under Section 10 of the Industrial Disputes Act was placed before the Labour Court, which found the termination illegal and awarded back wages for the period commencing 31.05.2006 to 01.04.2015 — the commencement date being the date of reference because of a 15–16 year delay. The High Court upheld the Labour Court’s award. The State confined its challenge before the Supreme Court to the consequences of the long delay, contending that such delay disentitled the workman from full back wages; the State’s Senior Counsel informed the Court that the State was prepared to make a lump-sum payment (the Advocate-on-Record had instructions to concede Rs.99,000), while the workman sought full back wages and relied on precedents such as Shahaji v. Executive Engineer, PWD and U.P. State Electricity Board v. Rajesh Kumar.

The Supreme Court reviewed the jurisprudence addressing two distinct aspects: the competence of a High Court under Article 226 to test the validity of a reference, and the power of the Labour Court/Tribunal to mould relief where there was delay. The Court observed that “the mere failure, or a conscious decision not to challenge, the reference under Article 226 … can neither result in the contention being frustrated in every manner nor can there be a ground of acquiescence,” and noted authorities including National Engineering Industry v. State of Rajasthan, Nedungadi Bank Ltd., Ajaib Singh and Mohan Lal. Applying those principles and having regard to the State’s having raised delay at the first instance, the Court held that compensation in lieu of reinstatement and back wages was appropriate. The appeal was allowed accordingly and pending applications were disposed of.

Case No.: 2025 INSC 1500 (Civil Appeal No. ___ of 2025 @ SLP (C) No. 444 of 2024) Case Title: State of Uttar Pradesh v. Krishna Murari Sharma Appearances: For the Petitioner(s): Mr. Rana Mukherjee, Senior Counsel For the Respondent(s): Mr. Sukumar Patjoshi, Senior Counsel