Back Wages Cannot Be Defeated by Liquidation: Karnataka High Court Orders Release of Deposited Amount to Workman
- REEDLAW
- 4 hours ago
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REEDLAW Legal News Network reports: In a pivotal ruling, the Karnataka High Court held that the liquidation of an employer cannot defeat a workman’s vested entitlement to back wages that had already crystallised under a lawful award. The Court clarified that an interim stay cannot divest the workman of accrued rights and applied the principle of actus curiae neminem gravabit to prevent prejudice caused solely by the pendency of court proceedings.
The Karnataka High Court Division Bench comprising Justice D.K. Singh and Justice Venkatesh Naik T., while adjudicating a writ petition, held that although reinstatement had become impossible due to the employer’s liquidation, the workman’s entitlement to 50% back wages had already crystallised on the date of the Industrial Tribunal’s award. The Bench observed that an interim stay could not annul or diminish this vested right and, applying the maxim actus curiae neminem gravabit, directed release of the deposited amount along with interest, thereby restoring the workman to the position he would have occupied had the interim order not intervened.
The respondent had been appointed as a Customer Service Assistant in 1999 and, after completion of probation, was confirmed in service in 2000. Following allegations of misconduct, disciplinary proceedings were initiated and concluded with an order of dismissal in August 2008. The respondent challenged this dismissal before the Industrial Tribunal, which, in January 2017, held that the disciplinary proceedings violated principles of natural justice and that the alleged misconduct was not proved. The Tribunal accordingly directed reinstatement with continuity of service and 50% back wages.
The petitioner challenged the award through a writ petition, in which an interim order required the deposit of ₹13,00,000/- towards 50% back wages. The respondent appealed the interim order, and the Division Bench directed payment of 30% of the last drawn wages during the pendency of the writ petition. Meanwhile, the petitioner entered liquidation pursuant to orders of the Supreme Court, rendering reinstatement impossible as the petitioner had ceased business operations.
While examining the challenge to the award, the Court found no perversity or legal infirmity in the Tribunal’s findings. The Tribunal had correctly appreciated the evidence and concluded that the charges were unproved and the disciplinary process defective. The Court therefore dismissed the writ petition, upholding the award.
The remaining issue concerned entitlement to the 50% back wages, especially in light of the liquidation of the petitioner. The Court noted that the respondent’s right to receive 50% back wages crystallised with the Tribunal’s award in January 2017. The deposit made pursuant to the interim order represented wages that would have been payable but for the Court’s intervention. Applying the equitable maxim actus curiae neminem gravabit, the Court held that the respondent should not suffer because of the pendency of proceedings or the interim order granted earlier.
The Court rejected the liquidator's contention that the deposited amount formed part of the liquidation estate, holding that the respondent’s entitlement arose prior to commencement of CIRP or liquidation. Since the writ petition was ultimately dismissed, the interim order merged with the final order, and the respondent was entitled to the deposited amount. The Court therefore directed the release of ₹13,00,000/- with accrued interest to the respondent in full and final settlement of his claims. The writ petition stood dismissed.
Mr. P.P. Hegde, Senior Advocate for Mr. Dharma Tej, Advocate, represented the Petitioner.
Mr. Prashanth Rao appeared (Party-in-Person).
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