The High Court of Andhra Pradesh upholds established Supreme Court precedent: reinstatement with back wages is not automatic for unlawfully retrenched daily wage or NMR (Nominal Muster Roll) workers, especially when the employing establishment has ceased operations. Instead, reasonable compensation is to be awarded. This judgment affirms existing precedent and is binding within Andhra Pradesh, with notable persuasive value elsewhere in labour matters involving public sector undertakings.
Summary
| Category | Data |
|---|---|
| Case Name | WP/29153/2016 of M/s. Kovur Co-Operative Sugar Factory Ltd. Vs The State of Andhra Pradesh, CNR APHC010324642016 |
| Date of Registration | 29-08-2016 |
| Decision Date | 16-10-2025 |
| Disposal Nature | DISMISSED NO COSTS |
| Judgment Author | Justice Maheswara Rao Kuncheam |
| Court | High Court of Andhra Pradesh |
| Bench | Single Judge (Justice Maheswara Rao Kuncheam) |
| Precedent Value | Binding on subordinate courts in Andhra Pradesh; persuasive elsewhere |
| Overrules / Affirms |
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| Type of Law | Labour & Service Law / Industrial Disputes |
| Questions of Law |
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| Ratio Decidendi |
The court holds that mere procedural illegality in terminating daily wage/NMR workers does not mandate automatic reinstatement, especially when the employer—here, a public sector undertaking—has ceased functioning. Instead, reasonable compensation suffices. Financial incapacity or non-functioning of the employer does not absolve a public sector entity of its statutory obligations towards workers; compensation must be paid, but reinstatement is not warranted where the establishment is non-operational. The supervisory jurisdiction under Article 226 is limited: the High Court will not reappreciate evidence or sit in appeal against an award unless there is perversity or error apparent on the face of the record. |
| Judgments Relied Upon |
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| Logic / Jurisprudence / Authorities Relied Upon by the Court |
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| Facts as Summarised by the Court |
The workman was engaged as an NMR Security Guard, terminated along with 281 others in April 2005 due to the financial non-viability and non-functionality of the Sugar Factory. The earlier High Court writ proceedings culminated in a direction for the workman to approach the Tribunal, which awarded compensation of Rs.50,000/-, not reinstatement. Both employer and workman challenged the award—the former seeking total quashing, the latter seeking reinstatement and full back wages. |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | All subordinate courts and authorities within the State of Andhra Pradesh. |
| Persuasive For | Other High Courts and labour tribunals across India; relevant to cases concerning public sector undertakings and NMR/daily wage terminations. |
| Follows |
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What’s New / What Lawyers Should Note
- Reaffirms that illegal termination of NMR/daily wage workers entitles them primarily to compensation, not automatic reinstatement, especially if the employer’s undertaking is non-operational.
- Confirms that public sector undertakings (as “State” under Article 12) cannot avoid statutory liabilities to workmen on the mere plea of financial incapacity.
- Clarifies the narrow scope of writ jurisdiction under Article 226 for reviewing labour awards: mere disagreement on facts or reappreciation of evidence is not a ground for interference.
- Stresses that compensation should be reasonable and is considered just where reinstatement is impractical or purposeless.
Summary of Legal Reasoning
- The court first examined the status of the Sugar Factory, noting its prolonged non-functionality since 2003 and the absence of work for NMRs, as well as the fact that the workman was not a permanent employee, nor had he produced an appointment order.
- The court relied on Supreme Court authorities including Metropolitan Transport Corporation v. V. Venkatesan, Coal India Ltd. v. Ananta Saha, and especially Bharat Sanchar Nigam Ltd. v. Bhurumal, which state that reinstatement with back wages is not automatic for daily wage/NMR workers whose termination is found illegal only due to procedural lapse (such as violation of Sec. 25-F ID Act); instead, monetary compensation is proper, particularly when the establishment is non-operational.
- The court found that no manifest error of law, procedural flaw, or perversity existed in the Labour Court’s award granting compensation in lieu of reinstatement.
- The court cited Kapila Hingorani v. State of Bihar and Haryana State Minor Irrigation Tubewells Corp. v. G.S. Uppal to emphasize that a public sector undertaking’s financial inability does not excuse it from statutory obligations to workers.
- It further cited precedents (Shamshad Ahmad v. Tilak Raj Bajaj and Ajay Singh v. Khacheru) to reiterate the limited writ jurisdiction of the High Court under Article 226 in labour award matters: the court should not reweigh evidence or substitute its judgment for that of the Tribunal unless grave miscarriage of justice is shown.
- Both writ petitions (from the workman and the Factory) were thus dismissed, confirming compensation as the proper remedy in the circumstances.
Arguments by the Parties
Petitioner (Workman):
- Claimed appointment as NMR Security Guard against regular vacancies.
- Asserted continuous service; alleged the Sugar Factory failed to comply with Sec. 25-F ID Act mandatory procedure during termination.
- Argued termination was unjust; sought reinstatement, back wages, and all attendant benefits.
- Pointed out the Sugar Factory is under State control (Article 12), so cannot waive statutory obligations by pleading financial distress.
Respondent (Sugar Factory):
- Submitted the Factory was non-operational since 2003 due to financial losses; thus, reinstatement was impractical.
- Deny that the workman was a regular/confirmed employee.
- Claimed financial inability to pay even the awarded compensation.
- Withdrew any plea regarding lack of Tribunal jurisdiction during argument, as per instructions from the Director of Sugar and Cane Commissioner.
Factual Background
The workman was engaged as an NMR Security Guard by the Kovur Co-Operative Sugar Factory in 1989. In April 2005, citing financial non-viability and following recommendations for downsizing by relevant authorities, the Factory terminated the services of 281 NMR employees via proceedings dated 04.04.2005. The workman disputed this action. Initial writ proceedings in 2005 resulted in directions to approach the industrial forum, leading to the Tribunal’s award of compensation (Rs. 50,000/~) in lieu of reinstatement and other benefits. Both parties filed writ petitions challenging the Labour Court’s order—one seeking reinstatement, the other seeking to quash the award.
Statutory Analysis
- Industrial Disputes Act, 1947, Section 25-F: The Tribunal and the High Court considered procedural requirements for retrenchment of workmen; held that non-compliance with Sec. 25-F (notice and compensation) can render retrenchment illegal but does not always warrant reinstatement with back wages, especially for daily wage/NMR staff.
- Article 226, Constitution of India: The judgment analyzes the scope of writ jurisdiction—emphasizing non-interference absent jurisdictional or manifest error, or violation of natural justice.
- Article 12, Constitution of India: The judgment assesses whether Kovur Co-Operative Sugar Factory is an instrumentality of State; confirms public sector undertakings’ obligations.
- Part IV, Constitution of India (Directive Principles): Referenced in respect of the State’s social welfare obligations.
Alert Indicators
- Precedent Followed – The judgment affirms and applies established Supreme Court precedent regarding compensation versus reinstatement for NMR/daily wage retrenchment cases.