Larger bench to decide if Labour and Industrial Courts have power to order regularisation

Supreme Court: The bench of Dr. DY Chandrachud and Ajay Rastogi, JJ has called for the reconsideration of the division bench verdict in Oil and Natural Gas Corporation Limited v Petroleum Coal Labour Union, (2015) 6 SCC 494  [PCLU] and has, hence, referred the matter to a larger bench.

The issues referred to the larger bench are:

  • The interpretation placed on the provisions of clause 2(ii) of the Certified Standing Orders;
  • The meaning and content of an unfair labour practice under Section 2(ra) read with Item 10 of the Vth Schedule of the ID Act; and
  • The limitations, if any, on the power of the Labour and Industrial Courts to order regularisation in the absence of sanctioned posts. The decision in PCLU would, in our view, require reconsideration in view of the above decisions of this Court and for the reasons which we have noted above.

The Court was hearing a batch of appeals from the judgments of the High Courts of Andhra Pradesh, Delhi, Madras and Uttarakhand wherein the PCLU judgment was relied upon. The Court noticed that in PCLU judgment, clause 2(ii) of the Certified Standing Orders had been construed to confer a right to regularisation on the completion of 240 days of service in a calendar year. However, while construing the provisions of clause 2(ii), the Court did not consider the earlier decisions in:

Noticing that the PCLU judgment did not consider earlier judgments and hence, required reconsideration, the bench explained that the decision in PCLU holds that the workmen upon completion of 240 days? service in a period of 12 calendar months “are entitled for regularisation of their services into permanent posts of the corporation”. The Court further held that under clause 2(ii), upon the completion of 240 days of service in a calendar year, the workmen have “acquired valid statutory right” and ought to have been “granted the status of regular employees” of the corporation on the ground that the corporation which is an instrumentality of the State under Article cannot act arbitrarily or unreasonably.

“Whether the provisions of clause 2(ii) confer an absolute right to regularisation merely on the completion of 240 days of service in a calendar year is a point which needs to be reconsidered both having regard to the express language of the provision as well as the earlier decisions of this Court including that in the case of Engineering Mazdoor Sangh.”

The Court also analysed the applicability of the principles set out and formulated by the Constitution Bench in Secretary, State of Karnataka v Umadevi, (2006) 4 SCC 1 in the context of industrial adjudication wherein a distinction was made between appointments or selections which are merely irregular and those which are illegal.

After analysing all various decisions, the Court made the following propositions:

  • Wide as they are, the powers of the Labour Court and the Industrial Court cannot extend to a direction to order regularisation, where such a direction would in the context of public employment offend the provisions contained in Article 14 of the Constitution;
  • The statutory power of the Labour Court or Industrial Court to grant relief to workmen including the status of permanency continues to exist in circumstances where the employer has indulged in an unfair labour practice by not filling up permanent posts even though such posts are available and by continuing to employ workmen as temporary or daily wage employees despite their performing the same work as regular workmen on lower wages;
  • The power to create permanent or sanctioned posts lies outside the judicial domain and where no posts are available, a direction to grant regularisation would be impermissible merely on the basis of the number of years of service;
  • Where an employer has regularised similarly situated workmen either in a scheme or otherwise, it would be open to workmen who have been deprived of the same benefit at par with the workmen who have been regularised to make a complaint before the Labour or Industrial Court, since the deprivation of the benefit would amount to a violation of Article 14; and
  • In order to constitute an unfair labour practice under Section 2(ra) read with Item 10 of the Vth Schedule of the ID Act, the employer should be engaging workmen as badlis, temporaries or casuals, and continuing them for years, with the object of depriving them of the benefits payable to permanent workmen.

The Court, hence, held that the decision in PCLU needs to be revisited in order to set the position in law which it adopts in conformity with the principles emerging from the earlier line of precedent. It, hence, referred the matter to a larger bench.

[Oil and Natural Gas Corporation v. Krishan Gopal, 2020 SCC OnLine SC 150, decided on 07.02.2020]

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