A) ABSTRACT / HEADNOTE

The landmark judgment in S.S. Shetty v. Bharat Nidhi Ltd., [1958] SCR 442, rendered by the Hon’ble Supreme Court, critically addressed the monetary quantification of the benefit of reinstatement awarded by an Industrial Tribunal. The appellant, an employee wrongfully dismissed by the respondent company, was directed to be reinstated by the Tribunal due to victimisation and unfair labour practices by the employer. However, due to non-implementation of the award by the employer, the appellant sought computation of the monetary value of reinstatement under Section 20(2) of the Industrial Disputes (Appellate Tribunal) Act, 1950. The apex court deliberated upon the proper method to compute the value of reinstatement and rejected the Civil Procedure Code Section 95 analogy, affirming that such computation must consider employment tenure, termination possibility, and surrounding industrial relations. The Court ultimately awarded Rs. 12,500 as a fair monetary equivalent of the reinstatement benefit, setting an important precedent for handling similar labour disputes where reinstatement is impractical.

Keywords: Reinstatement, Monetary Compensation, Industrial Disputes Act, Unfair Labour Practice, Computation under Section 20(2)

B) CASE DETAILS

i) Judgement Cause Title: S.S. Shetty v. Bharat Nidhi Ltd.

ii) Case Number: Civil Appeal No. 329 of 1956

iii) Judgement Date: 17th September, 1957

iv) Court: Supreme Court of India

v) Quorum: Justices N.H. Bhagwati, S.K. Das, and P.B. Gajendragadkar

vi) Author: Justice N.H. Bhagwati

vii) Citation: [1958] SCR 442

viii) Legal Provisions Involved:

• Section 20(1), (2) of the Industrial Disputes (Appellate Tribunal) Act, 1950

• Section 95 of the Code of Civil Procedure, 1908

• Section 19(6) of the Industrial Disputes Act, 1947

ix) Judgments overruled by the Case: None

x) Case is Related to which Law Subjects: Labour Law, Industrial Relations, Civil Procedure

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

This appeal challenged the computation of the monetary value of reinstatement after the respondent, Bharat Nidhi Ltd., failed to comply with a Tribunal award that directed reinstatement of the appellant, S.S. Shetty, a former bank employee discharged due to alleged redundancy. The Industrial Tribunal and Appellate Tribunal upheld his claim of wrongful termination owing to unfair labour practices and ordered reinstatement with back pay. Despite these directions, the respondent failed to reinstate him, prompting Shetty to seek monetary compensation under Section 20(2) of the Industrial Disputes (Appellate Tribunal) Act, 1950. The Labour Appellate Tribunal dismissed his appeal against a nominal award of Rs. 1,000 by the Industrial Tribunal, holding it lacked substantial legal questions. The Supreme Court stepped in to resolve the correct basis for computing the monetary benefit of reinstatement when reinstatement is not implemented.

D) FACTS OF THE CASE

Shetty had joined Bharat Bank Ltd. (later Bharat Nidhi Ltd.) in 1944 and was drawing a salary of Rs. 240 plus allowance when he was discharged on August 5, 1949, on grounds of surplus staff. The Industrial Tribunal in 1950 found this dismissal illegal due to victimisation and directed his reinstatement with back wages. The award was published in the Gazette of India in December 1950. The respondent filed an appeal which was dismissed in 1951. Shetty wrote to the employer to rejoin duty but received no instruction or reply. Consequently, he issued a legal notice claiming compensation of Rs. 32,388 for loss of income, gratuity, and provident fund benefits until his retirement at age 55. The respondent failed to respond, leading Shetty to file an application under Section 20(2) of the Industrial Disputes (Appellate Tribunal) Act seeking computation of the monetary value of his unfulfilled reinstatement benefit.

E) LEGAL ISSUES RAISED

i. Whether an employee denied reinstatement despite a Tribunal award can seek monetary compensation under Section 20(2) of the Industrial Disputes (Appellate Tribunal) Act, 1950?

ii. What is the appropriate basis for computing the monetary value of reinstatement?

iii. Can the employer claim inability to reinstate due to structural changes and cessation of business?

F) PETITIONER/ APPELLANT’S ARGUMENTS

i. The counsels for Petitioner / Appellant submitted that Shetty was dismissed illegally and reinstatement was directed, yet the employer ignored this lawful order. Since the employer did not issue a joining order despite his communication, Shetty argued that he could no longer be reinstated and thus deserved monetary compensation. The petitioner contended that the monetary value should be calculated based on his entire remaining service tenure, covering projected salary, benefits, gratuity, and provident fund. The compensation must reflect the loss of earnings due to the employer’s failure to implement a binding award. They urged that Section 20(2) allows for realistic computation of the reinstatement benefit and that a nominal sum of Rs. 1,000 assessed by the Tribunal under CPC Section 95 was arbitrary, misconceived, and disproportionately low.

G) RESPONDENT’S ARGUMENTS

i. The counsels for Respondent submitted that the petitioner failed to report for duty despite being asked to join at the registered office in Delhi. The respondent also contended that it had ceased its banking operations and had transferred its assets and liabilities to the Punjab National Bank, making it impractical to implement reinstatement. It further claimed that only a fraction of employees were absorbed by the new bank, and most others accepted retrenchment benefits. The employer argued that the award was enforceable only for a limited period under Section 19(3) of the Industrial Disputes Act, and post-termination, the reinstatement direction lapsed. They relied on their internal bye-laws that allowed termination upon notice and offered payment for a short period in lieu.

H) RELATED LEGAL PROVISIONS

i. Section 20(2) of the Industrial Disputes (Appellate Tribunal) Act, 1950: Enables computation of non-monetary benefits such as reinstatement in terms of money, for recovery.

ii. Section 95 of Code of Civil Procedure, 1908: Provides for limited compensation in cases of wrongful injunction, wrongly applied by the Tribunal in this labour dispute.

iii. Section 19(6) of Industrial Disputes Act, 1947: Allows employers to terminate awards after the prescribed period with notice.

H) JUDGEMENT

a. RATIO DECIDENDI

i. The Supreme Court ruled that the benefit of reinstatement must be computed not as breach of contract or tort but as a loss of a statutory right. The Court rejected the CPC Section 95 analogy, emphasising that the amount must reflect probable earnings lost due to non-implementation. It directed the Tribunal to consider factors like service tenure, employment conditions, possibility of future lawful termination, and industrial relations. Based on these, it assessed compensation at Rs. 12,500.

b. OBITER DICTA

i. The Court observed that reinstatement awards do not modify employment contracts but reset wrongful termination. Thus, they restore status quo ante and computation under Section 20(2) must reflect the tangible worth of that restoration.

c. GUIDELINES 

• Computation under Section 20(2) must account for:

  • Employee’s remaining service span

  • Terms of employment, including termination and retirement clauses

  • Employer’s ability to retrench legally

  • External factors like business closure or restructuring

  • Comparable reliefs granted in similar cases or awards

I) CONCLUSION & COMMENTS

The Supreme Court’s verdict in S.S. Shetty v. Bharat Nidhi Ltd. sets a crucial precedent for labor jurisprudence. It clarified that employers cannot shirk reinstatement orders under pretexts like structural changes or transferred liabilities. It reaffirmed the binding nature of Industrial Tribunal awards and the practical applicability of Section 20(2) of the Appellate Tribunal Act, advocating realistic monetary computation of unimplemented benefits. The ruling discourages tokenism in compensatory awards and mandates Tribunals to weigh economic and service-related realities. It also cautioned against applying civil remedies like Section 95 CPC in labor disputes. The Court adopted a fair, equitable, and practical approach, striking a balance between enforceability of industrial awards and changing business realities.

J) REFERENCES

a. Important Cases Referred

i. Salt v. Power Plant Co. Ltd., (1936) 3 All E.R. 322, 325 – [relied upon regarding employment expectancy and termination].

ii. Collier v. Sunday Referee Publishing Co. Ltd., [1940] 4 All E.R. 234 – [cited on wrongful dismissal compensation].

b. Important Statutes Referred

i. Industrial Disputes (Appellate Tribunal) Act, 1950, Section 20(1), 20(2)
Link: Section 20(2) – Indian Kanoon

ii. Industrial Disputes Act, 1947, Section 19(6)
Link: Section 19(6) – Indian Kanoon

iii. Code of Civil Procedure, 1908, Section 95
Link: Section 95 CPC – Indian Kanoon