When reinstatement of workmen is found to be inexpedient due to strained relations, the court has the authority to award equitable monetary compensation in lieu of reinstatement, factoring in the duration of service and the loss of future employment opportunities suffered by the workers.

Headnote:(A) Constitution of India - Article 226 - Industrial Disputes Act - Termination of service - Traineeship - Cessation of relationship - Compensation in lieu of reinstatement. Labour court is empowered to grant compensation when reinstatement is found to be not desirable or expedient due to strained relations or when continued employment is not practical. (Paras 4, 13, 17, 18)

(B) Service Law - Certified Standing Orders - Trainee status - Extension of training period - Premature termination - Employer's obligation - Expectations of employment - Impact on employability. Compensation must be fixed based on the length of service and the nature of the employment relationship, balancing the interests of both the management and the workmen. (Paras 12, 15, 19)

Facts of the case:
The workers were engaged as trainees under specific standing orders that allowed for a training period of one to three years. Upon completion or extension of these periods, the management terminated their training stating they were not suitable for permanent absorption. The workmen disputed this cessation as an illegal termination, leading to industrial disputes before the labor court.

Findings of Court:
The court held that while the management followed its standing orders regarding the traineeship, the act of extending the training of workmen even after their eligibility criteria were met created an expectation of permanent absorption. Given the strained relationship between the parties, reinstatement was deemed unfeasible, and monetary compensation was ordered instead, calculated based on the length of service rendered by each individual.

Issues: The main issues were whether the cessation of the traineeship amounted to illegal termination and whether the workmen were entitled to reinstatement or, in the alternative, appropriate compensation for the loss of opportunity.

Ratio Decidendi: Reinstatement is not a mandatory consequence of wrongful termination where the employment relationship is irretrievably broken and where such an order would be detrimental to both the industry and the worker. Compensation should be proportional to the tenure and the specific prejudice caused by the management's conduct in extending the traineeship.

Result: Management's petitions dismissed; compensation awarded to the workmen adjusted to a higher base amount based on the length of service.

Table of Content
1. dispute over cessation of traineeship status and industrial dispute. (Para 1 , 2 , 3 , 4 , 5)
2. parties argument on the legality of training termination versus absorption. (Para 6 , 7 , 8 , 9)
3. assessment of service duration and legitimate expectation of permanency. (Para 10 , 11 , 12 , 13 , 14 , 15)
4. principles for calculating compensation in lieu of reinstatement. (Para 16 , 18 , 19)
5. final outcome: dismissing management petitions and ordering revised compensation. (Para 20)

COMMON ORDER

Assailing the order passed by the Tribunal directing payment of compensation to the respondents the present petitions have been filed by the petitioner.

2. It is the case of the petitioner that it is engaged in the manufacture of steering gear assembly in addition to fasteners for automobiles. In the course of its operation, the petitioner, in addition to permanent employees, who were absorbed upon giving training and on being found fit and eligible, also offers training for persons over a period of one to three years and on satisfactory completion of the training and if the person is found suitable, then they are absorbed as permanent employees. However, if the person undergoing training is found not suitable for employment the persons were issued with a certificate and their training will be put an end to.

3. It is the further case of the petitioner that the respondents herein were inducted for training on various dates and upon completion of first years of training, they were given extension of training for another year. Either upon completion of three years of training or as the case may be of lesser period of training, the said persons, upon assessment, were found not suitable for being absorbed and, therefore, their training was put an end to by issuance of training completion certificate, which is in terms of the certified standing orders of the petitioner.

4. Aggrieved by the severance of the relationship, the respective respondents disputed that the cessation of traineeship would amount to termination and, therefore, raised a dispute and failure of the conciliation proceedings resulted in filing of the aforesaid industrial disputes before the Labour Court, Kancheepuram and since all the disputes pertained to disengagement after completion of training, they were taken up together under ID Nos.100 to 155, 214 to 218, 110 and 404 of 2018.

5. The Labour Court took up the dispute on file and on behalf of the workmen, W.W.s 1 to 22 were examined and Exs.W-1 to 179 were marked. On the side of the management/petitioner herein, M.W.s 1 and 2 were examined and Exs.M-1 to M-23. The Labour Court, on the basis of oral and documentary evidence, vide award dated 24.08.2023 though held that the workmen/respondents were not entitled to reinstatement, permanency of their job, continuity of service and consequential benefits thereto, however, granted compensation in a sum of Rs.4,00,000/- (Rupees Four Lakhs only) to each of the workmen. Aggrieved by the same, the present writ petitions have been filed.

6. Learned counsel appearing for the Management vehemently contended that when the Labour Court has given a categorical finding in favour of the Management with regard to its power to terminate the services of the trainees, viz., the workmen herein, the Labour Court had misdirected itself in ordering compensation, which is grossly arbitrary and unreasonable and the same deserves to be set aside.

7. Per contra, learned senior counsel appearing for the workmen submitted that the standing orders, which the Management had referred for the purpose of continuing the traineeship only provides for a period of three years and when the Management had thought it fit to extend the traineeship beyond three years and till the said period, the Management had not claimed that the services of the trainee were not satisfactory, it becomes imperative for the Management to absorb the workmen as employees. However, after taking their services for the period

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2026 Supreme(Online)(Mad) 46242

When reinstatement of workmen is found to be inexpedient due to strained relations, the court has the authority to award equitable monetary compensation in lieu of reinstatement, factoring in the duration of service and the loss of future employment opportunities suffered by the workers.

Cases Referred (2)