Subsistence Allowance during Adjudication

The Industrial Disputes Act, 1947 [“IDA”], provides for an elaborate system of adjudication of disputes between employers and workmen, and litigation over “subsistence allowance” is by no means uncommon, not only for tactical reasons, but also because it is often the only means of survival for an employee facing disciplinary proceedings. In this context, a single judge of the Bombay High Court has advanced an interesting proposition of law, in a careful judgment delivered a few weeks ago in Mumbai Cricket Association v Shinde.

Mr. Shinde had been employed as a typist by the MCA, and was chargesheeted under the Model Standing Orders for accepting an illegal gratification. Following an inquiry, the charges were found proved, and he was dismissed on 25 November, 2002. Mr. Shinde sought and obtained a reference from the appropriate Government, and challenged his dismissal before the Labour Court. As is well known, the dispute resolution mechanism in s. 10 of the IDA is activated only upon a reference by the appropriate Government. The Labour Court found that the inquiry was “perverse” but gave the employer an opportunity to prove the charges in court by adducing evidence. Again, this practice is widely followed in industrial adjudication to avoid unnecessary delay in remitting the case back for an inquiry, following which there is inevitably another reference to the Court on the same facts. At this stage, Mr. Shinde sought an order for “subsistence allowance” in accordance with s. 10A of the Industrial Employment (Standing Orders) Act 1946 [“IESO”], which provides that an employer is obliged to pay the employee a specified percentage of his wages during his suspension and pending the result of the inquiry.

The obvious difficulty Mr. Shinde faced was that the order of the Labour Court permitting the employer to prove the charges was technically not an “inquiry” and he could not be said have been “suspended”, since the order of dismissal had not formally been set aside. Nevertheless, the Labour Court took the view that this was akin to an inquiry, that “equity” demanded the payment of subsistence allowance and so ordered. The question of law before the single judge was whether this is a correct construction of the IDA and the IESA.

It is convenient to begin by setting out the operative part of s. 10A IESA:

10-A. Payment of subsistence allowance.-(1) Where any workman is suspended by the employer pending investigation or inquiry into complaints or charges of misconduct against him, the employer shall pay to such workman subsistence allowance…

Dharmadhikari J., for two reasons, held that this provision is irrelevant in circumstances where the Labour court directs the employer to prove the charges of a “perverse” inquiry in court. First, there is authority for the proposition that the order of dismissal is not set aside by the direction of the Labour court to adduce fresh evidence – indeed, if the Labour court affirms the dismissal on appreciating evidence, the order “relates back” to the date of dismissal. If this is true, it must inevitably follow that s. 10A is unavailable, because the workman cannot on any view be “suspended” when his “dismissal” order is effective, albeit in abeyance. To support this proposition, Dharmadhikari J. turned to the decision in Engineering Laghu v Labour Court, AIR 2004 SC 4951, where the Supreme Court had held that the dismissal order remains valid “until it is set aside” and therefore, if confirmed, must be given effect not from the date of the judgment, but from the date of the passing of the dismissal order. It was argued in that case that there is a distinction at any rate between cases where an employee is dismissed without an inquiry, and those where dismissal follows an inquiry that is found to be defective. The contention was that the dismissal is “void” in the first case, and therefore takes effect only from the date of judgment. Krishna Iyer J. had accepted this view but was overruled in Engineering Laghu, because of settled authority that the doctrine of relating back applies in both cases. Dharmadhikari J. therefore rightly observed that:

The order of dismissal remains and is not set aside. If upheld by the Court, it will be after the order of the Court in that behalf. However, it relates back to the date of punishment. If what is postponed is its coming into effect or operation, then, the argument of Mr. Pathak that it is held in abeyance must be straightway rejected. His argument would render doctrine of relation back completely nugatory

The second reason is as compelling – even on the assumption that the employee may be said to be “suspended” for the purposes of s. 10A, it must still be established that he is suspended “pending investigation or inquiry into complaints or charges of misconduct…” The fact that the Labour Court, when no inquiry has been conducted, is entitled to hear all the evidence and make findings of fact and law, cannot elide an “inquiry or investigation” and an adjudication. As Dharmadhikari J. noted,

The employee sought a reference from the Appropriate Government and that is how the matter of his dismissal is referred to the Labour Court and that is how the Court is seized of the matter. The Court cannot be equated with an employer as it is only performing a judicial function of giving an opportunity to the petitioner to adduce evidence to prove charges of misconduct before it, and that is because the law postulates such an opportunity. The law does not equate this situation with suspension by the employer pending domestic enquiry or investigation into any complaints [emphasis mine].

The final argument advanced was that the Court is nevertheless entitled to award subsistence allowance as a matter of “justice, equity and good conscience” bearing in mind the impecunious condition of the employee and his stated inability to sustain himself during the pendency of the proceedings. Dharmadhikari J. emphatically rejected this contention, observing that the Labour court is not empowered to grant subsistence allowance “on specious grounds of equity and justice,” and that writ jurisdiction under Art. 226 of the Constitution cannot be exercised “contrary to law”. “Ultimately, equity and justice require that legal principles are adhered to and not given a go-by completely.” There was some doubt over whether this was contrary to the decision of a Division Bench of the Bombay High Court in Air India, but Dharmadhikari J. held that it was not, because that case was decided under s. 33 IDA, not s. 10. Since, however, the observations of the Division Bench were broad in that case, it remains to be seen whether the single judge’s view will be affirmed.

In sum, it is submitted that Dharmadhikari J.’s conclusion is plainly correct as a matter of statutory interpretation – indeed, it would be odd to accept the proposition that a dismissed employee is also a “suspended” employee, and that adjudication of the legality of dismissal is in fact an “investigation or inquiry” to ascertain whether dismissal is appropriate. That does not, of course, mean that this is a desirable state of affairs, but if the view is taken that the benefit of subsistence allowance must extend to confirmatory proceedings in the Labour Court, that is perhaps best left to the legislature.

Hat-tip: Mihir Naniwadekar

About the author

V. Niranjan


  • Judges like Justice Dharmadhikari are extremely rare. Most judge administer law, according to justice. Justice Dharmadhikari administers justice strictly in accordance with law. Both views have their merits; but perhaps in labour law and welfare legislation, the former is more desirable. As for waiting for Parliament to do so, our Parliament is almost non-functional. Saying that because Parliament hasn't acted, the will of the people must be to not act- may not be true in the Indian context. As far as overall weakening of institutional structures in concerned, indian judges have shown themselves capable of being able to draw the line, especially when issues affecting industry are present.

  • I'm not sure the principle that social welfare legislation must be construed purposively is helpful in this context. It is only a rule of construction that allows a judge to choose between two plausible interpretations, and is not a reason to read terms into a statutory provision that are plainly outside its scope. I think Justice Dharmadhikari's approach deserves the highest acclaim because, as you rightly note, principle is often subordinated to the exigencies of the individual case in India. I don't intend to suggest that doing justice in individual cases is unimportant – but as Dillon LJ eloquently pointed out (Bishopgate Investment, p. 219),even that exercise must be guided by recognised principles of construction.

  • I agree with Niranjan here. A very rare decision though, going by my experience in the Courts, to say that justice must be strictly in accordance with the law.

  • the last para i.e. para 20 of the judgment of the court in Air India is merely obiter dicta.
    The court in that case was called upon to decide whether a dismissed employee can claim subsistence allowance when the approval of tribunal was pending under Section 33(2)(b).
    the question was not that can the employee claim allowance when the approval was rejected on the basis that enquiry was perverse and a de-novo enquiry is to be conducted before the court.
    So the observation in air india case was obiter which the court in mumbai cricket association case was not bound to follow.

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