Judgment

DESAI, J.:- Secretary (Labour) Delhi Administration referred the following industrial dispute between the management of M/s Lufthansa German Airlines and its workmen Shri Sant Raj and Shri Itwari Lal Sherya for adjudication to the Labour Court at Delhi. It reads as under

"Whether the termination of service of S/Shri Sant Raj and Itwari Lal Sherya is illegal and/or unjustified and if so to what relief are they entitled?"

The Labour Court after an exhaustive and in-depth examination of rival contentions held that termination of services of the aforementioned two workmen constituted retrenchment within the meaning of Sec. 25F read with S. 2(oo) of the Industrial Disputes Act, 1947 (Act for short) and as the provisions of S. 25F have not been complied with, the termination of service would be bad and illegal. The Labour Court then proceeded to examine whether the relief of reinstatement should be granted or compensation in lieu of reinstatement should be given. The Labour Court held that even where S. 25F of the Industrial Disputes Act is not complied with and therefore the termination of service is illegal and invalid, there is certainly a discretion with the Labour Court whether to order reinstatement of the workman or not. We have our serious reservations about the statement of law but it is not necessary to deal with it in the present case because instead of granting reinstatement, we propose to award adequate compensation taking into account both the backwages as well as compensation in lieu of reinstatement.

2. The Labour Court while proceeding to quantify the compensation observed that the termination of services of the two workmen was bona fide and not a colourable exercise of power in accordance with the service rules and then proceeded to award one years wages as compensation for the failure of the employer to comply with the requirements of provisions contained in S. 25F of the Act. The workmen have filed this appeal by special leave.

3. Ordinarily where the termination of service is found to be bad and illegal, in the field of industrial relations a declation follows that the, workman continues to be in service and has to be reinstated in service with full backwages. [See Hindustan Tin Works Pvt, Ltd. v. Employees of Hindustan Tin Works Pvt. Ltd. (179) 1 SCR 563, The Labour Court has, however, the discretion to award compensation instead of reinstatement if the circumstances of a particular case are unusual or exceptional so as to make reinstatement in expedlent or improper. [See Hindustan Steels Ltd., Rourkela v. A. K. Roy (1970) 3 SCR 343.

4. In the present case, the Labour Court having held that the termination of services of the appellants would constitute retrenchment and as the pre-requisite for a valid retrenchment having not been satisfied, the termination of service was bad, yet in the facts of the case in his discretion declined to grant the relief of reinstatement. Whenever, it is said that something has to be done within the discretion of the authority then that something has to be done according to the rules of reason and justice and not according to private opinion, according to law and not humour. It is to be not arbitrary, vague and fanciful but legal and regular and it must be exercised within the limit to which an honest man to the discharge of his office ought to find himself. (See Sharp v. Wakefield, 1891 AC 173. Discretion means sound discretion guided by law. It must be governed by rule, not by humour, it must not be arbitrary, vague and fanciful. [See S. G. Jaisinghani v. Union of India, (1967) 2 SCR 703.

5. The Labour Court while declining to grant the relief of reinstatement which should have ordinarily followed, consequent upon its finding that the termination of service was bad and illegal, in exercise of its discretion awarded one years wages as compensation in lieu of reinstatement on the ground that the termination of service of each of the appellant was bona fide and not a colourable ex