SUPREME COURT CLARIFIES BACK WAGES NORMS IN WRONGFUL TERMINATION WHEN EMPLOYER FAILS TO PROVE GAINFUL EMPLOYMENT

Introduction
The Supreme Court of India in Dinesh Chandra Sharma (Dead) Through LRs v. Bhartiya Paryatan Vikas Nigam Limited & Anr. (Civil Appeal arising out of SLP (C) No. 8180/2020) revisited the principles governing back wages in cases of wrongful termination. The Appeal was decided on 15 December 2025 by the Division Bench comprising Justice Manoj Misra and Justice Ujjal Bhuyan, setting aside a Division Bench decision of the Rajasthan High Court and restoring the order of the Single Judge. The ruling turns on the correct understanding of Deepali Gundu Surwase v. Kranti Junior Adhyapak Mahavidyalaya (2013) 10 SCC 324 and the allocation of burden of proof regarding gainful employment in the interregnum.
Factual Background
The Appellant, late Dinesh Chandra Sharma, employed as a room attendant (workman) with the first Respondent since December 1978, was dismissed from service on 24 July 1991 on allegations of misconduct. An industrial dispute was raised and referred to the Labour Court, which first found the domestic enquiry unfair on 16 March 2015 and then, after granting the management an opportunity to prove the charges, noted that no evidence was led to substantiate misconduct. By Award dated 22 December 2015, the Labour Court ordered reinstatement with continuity of service and full back wages, treating the termination as illegal and unsupported by proof.
Aggrieved, the Management filed a writ petition before the Single Judge of the Rajasthan High Court, which partly interfered only to the extent of reducing back wages to 50% while maintaining reinstatement and continuity. Both sides preferred intra‑court appeals: the Workman sought full back wages, while the Management challenged even the reduced award. The Division Bench dismissed the Workman’s Appeal but allowed the Management’s, setting aside back wages completely on the ground that the workman had not pleaded and proved that he remained unemployed in the interregnum.
Contentions of Parties
For the Appellants (LRs of the workman), it was argued that Deepali Gundu (supra) must be read as a whole and not selectively, especially since the misconduct charges were ultimately found unproved. Counsel contended that once termination founded on misconduct is declared illegal, reinstatement with back wages is the rule and denial of back wages would impermissibly allow the employer to benefit from its own wrongful act. They emphasized that (i) there was no pleading or proof by the management that the workman had been gainfully employed and (ii) an affidavit was filed before the writ court categorically stating that he was not gainfully employed in the interregnum, which remained un-rebutted yet was ignored by the Division Bench.
The management submitted that Sharma had not worked for them since July 1991 and, given the long gap of about 14 years till the award, the probability of his gainful employment elsewhere was high. Relying on para 38.3 of Deepali Gundu (supra), they argued that in the absence of a clear pleading before the Labour Court that he was not gainfully employed, back wages were rightly denied by the High Court Division Bench. It was further contended that the hotel where he worked stood transferred to the Government of Rajasthan during the writ proceedings and therefore the State should not be saddled with the burden of back wages when it could not realistically verify his employment status during the intervening years.
Court’s Decision
The Supreme Court closely examined Deepali Gundu (supra), particularly para 22 and para 38.3, and held that reinstatement with continuity of service and back wages remains the normal rule in cases of wrongful termination. The Bench underscored that para 38.3 uses the word “ordinarily”, indicating that the requirement of the employee pleading non‑employment is not an inviolable or rigid rule and that each case must be decided on its own facts. Simultaneously, the Court reiterated that if the employer seeks to avoid back wages, it must specifically plead and lead cogent evidence to show that the employee was gainfully employed on comparable wages during the relevant period, since proving a positive fact is easier than proving a negative.
Applying these principles, the Court noted several crucial facts: the workman had served about 13 years; the job did not require a high degree of technical skill; employment opportunities generally decline with age; and an affidavit before the writ court asserted that he was not gainfully employed, which remained un-rebutted. The Court also referred to M.L. Singla v. Punjab National Bank (2018) 18 SCC 21, where in a similar context 50% back wages were awarded and found the Single Judge’s approach of granting 50% back wages to be just and proper. Recognizing that wrongful termination inflicts stigma and hampers re‑employment and that occasional “odd jobs” for survival cannot be a ground to deny back wages, the Supreme Court set aside the Division Bench Judgment and restored the Single Judge’s order awarding 50% back wages with consequential benefits.
Conclusion
This Judgment reinforces a worker‑protective reading of Deepali Gundu (supra) case, clarifying that the obligation to plead and prove gainful employment primarily lies on the employer once wrongful termination is established. By treating the “ordinarily” requirement as flexible and fact‑sensitive, the Court ensured that procedural technicalities do not deprive a wrongfully terminated workman of meaningful relief, especially where the employer has neither rebutted an affidavit of non‑employment nor produced any positive evidence. The Judgment also signals that while full back wages are not automatic in every case, calibrated relief such as 50% back wages, grounded in length of service, age, stigma and delay, strikes a balance between equity to the workman and fairness to the employer or successor entity.

YASH HARI DIXIT
LEGAL ASSOCIATE
THE INDIAN LAWYER AND ALLIED SERVICES
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