Case Background
The appellant was an employee of United India Fire and General Insurance Company Limited at Exhibition Road, Patna. He was dismissed from service by an order dated 12.02.1976 after a departmental enquiry.
Feeling that this dismissal was wrong, he filed Title Suit No. 01 of 1979 before the Munsif III, Patna. In that suit he asked the Civil Court to declare that the allegations and enquiry against him were mala fide, and that the dismissal order dated 12.02.1976 was illegal, void, and unconstitutional.
He also asked for a mandatory injunction to direct the employer to reinstate him in his job, and for a decree of past and future damages in place of the emoluments (salary and other benefits) which, according to him, were payable to him. He also claimed costs and other reliefs.
On 15.09.1979, the Trial Court dismissed the title suit as not maintainable. The employee then filed Title Appeal No. 196 of 1979 / 35 of 1980, which was allowed on 12.02.1981 by the First Appellate Court.
The employer side then challenged this success of the employee. They filed Second Appeal No. 302 of 1981 and Miscellaneous Appeal No. 105 of 1981. Both were heard together, and on 20.11.1986, the matter was allowed in favour of the defendants, meaning the employee again lost.
The employee did not stop there. He approached the Hon’ble Supreme Court of India by filing S.L.P. No. 3186 of 1987. Leave was granted and the case was registered as Civil Appeal No. 2499 of 1988.
On 01.08.1988, the Supreme Court allowed the Civil Appeal. It set aside the judgments of the Trial Court, First Appellate Court, and Second Appellate Court and sent the matter back to the Trial Court for a fresh decision on merits.
After this remand, the Trial Court again heard the case and, by order dated 20.07.1989 in Title Suit No. 01 of 1979, dismissed the suit. The employee then filed Title Appeal No. 132 of 1989.
On 08.06.1990, the First Appellate Court partly allowed this appeal. It set aside the punishment of dismissal as being shockingly disproportionate to the charge and directed that only a minor penalty under Rule 23 of the United India Insurance Company (Conduct, Discipline and Appeal) Rules, 2014 should be imposed. But it at the same time clearly stated that the employee would not be entitled to any salary for the period during which he was not on duty because of the dismissal.
Still dissatisfied, the employee filed the present Second Appeal No. 306 of 1990 before the Patna High Court. On 10.03.1992, the High Court framed the following substantial question of law:
“Whether the Court below could refuse to grant decree for payment of salary when it set aside the order of dismissal?”
What the Court Examined and Decided
In this second appeal, both sides argued in detail on the single question of whether the employee should get salary for the period he remained out of service once his dismissal had been converted into a minor penalty.
The employee’s lawyer argued that he was entitled to payment of salary because the dismissal order had been set aside. He said that once the punishment of dismissal goes, the situation should be as if the employee was always in service, and he must therefore receive his past and future emoluments.
To support this, he relied on three decisions of the Patna High Court and one of the Supreme Court. He cited Md. Hassan Ansari v. The State of Bihar and Ors., (2005) 3 PLJR 304. From that case, he drew support for the idea that deductions from superannuation benefits must be repaid with interest when the underlying action is found illegal.
He also relied on Shashi Bhushan Pandey v. The State of Bihar and Ors., (2005) 4 PLJR 575. There, according to him, the Court had held that “no work, no pay” does not apply when the employee is not allowed to work because he is not given a posting, and therefore cannot be blamed for not working.
Next, he cited Ratan Kumar Sharma v. The State of Bihar, (2006) 3 PLJR 365, to reinforce that an employee kept out of service is entitled to salary for that period. Finally, he referred to the Supreme Court decision in Rajendra Kumar Kindra v. Delhi Administration, AIR 1984 SC 1805. On the strength of this, he submitted that simply living with one’s family and helping a relative in business does not amount to “gainful employment” that would bar back wages.
He stressed that the appellant had continuously fought the dismissal from the Civil Court up to the Supreme Court. The Supreme Court had already sent the case back, and ultimately the First Appellate Court had set aside the dismissal. According to him, once the dismissal was gone, the law and the cited judgments required that the Court grant him a decree for salary for the period he was out of service.
On the other side, the respondents’ counsel accepted that the earlier judgments of the Trial Court, First Appellate Court, and Second Appellate Court had been set aside by the Supreme Court and that a fresh order had been passed by the Trial Court after remand.
He explained that after remand, Title Suit No. 01 of 1979 was dismissed. Then, in Title Appeal No. 132 of 1989, the First Appellate Court partly allowed the appeal on 08.06.1990. The Appellate Court found the punishment of dismissal too harsh and disproportionate, and therefore converted it into a minor penalty under Rule 23 of the United India Insurance Company (Conduct, Discipline and Appeal) Rules, 2014. These rules had replaced the earlier General Insurance (Conduct, Discipline & Appeal) Rules, 1975.
Rule 23 of the 2014 Rules lists minor penalties like censure, withholding of increments, recovery of pecuniary loss, or reduction to a lower stage in the time-scale for a limited period. According to the respondent’s counsel, acting on the appellate judgment, the company imposed the minor penalty of withholding two increments upon the appellant.
He further stated that in compliance with this order, the employer treated the appellant as having continued in service and allowed him to retire as a Record Clerk on 31.05.2014. His pensionary benefits were also granted.
However, the employee wanted more: he wanted full salary for the entire period when he was under dismissal. This request for back wages had been rejected by the First Appellate Court, and that rejection was now challenged in the second appeal.
To answer this, the respondents relied not on High Court decisions but on Supreme Court judgments. They cited Banshi Dhar v. State of Rajasthan and Anr., 2007 (1) SCC 324, and P. Karupaiah v. General Manager, Thruuvalluvar Transport Corporation Limited, 2018 (12) SCC 663.
In Banshi Dhar, the Supreme Court clearly held that there is no hard-and-fast rule for granting back wages and that each case depends on its own facts. Even when an employee is acquitted in a criminal case or where natural justice was not followed, grant of back wages is not automatic. The Supreme Court said that back wages should not be treated as a routine consequence of setting aside dismissal.
In P. Karupaiah, the Supreme Court went further and clarified the modern legal position. It ruled that when a dismissal or removal is set aside and an employee is reinstated, the employee does not become entitled to back wages as a matter of right unless the reinstatement order itself specifically grants back wages and other benefits.
P. Karupaiah also explains that the employee must prove, by evidence, that he was not gainfully employed anywhere during the period he remained out of service. The employer can also bring evidence to the contrary. Depending on the facts proved, the court can grant full, partial, or no back wages. Courts can even apply the “no work, no pay” principle where appropriate.
The Patna High Court then turned back to the facts of this case and to the exact wording of the First Appellate Court’s order dated 08.06.1990. The operative part had clearly stated that:
“The order of dismissal should be declared invalid, and the competent authority should be directed to substitute the punishment of dismissal of the plaintiff from the service by a minor penalty as provided under Rule 23 by an order of mandatory injunction. A specific finding has been given that, however, the plaintiff-appellant cannot claim any salary for the period during which he was not on duty on account of the order of dismissal, so the plaintiff is entitled to this relief.”
The High Court read this to mean that while the dismissal was indeed set aside and replaced with a minor penalty, the appellate court had made it a clear condition that the appellant would not be entitled to salary for the period he did not work due to the dismissal.
The Court also noted that the judgments cited by the appellant were decisions of the Patna High Court, whereas the decisions relied upon by the respondents were from the Supreme Court of India. As a matter of legal hierarchy, the High Court is bound to follow the law laid down by the Supreme Court.
After carefully examining Banshi Dhar and P. Karupaiah, the Patna High Court concluded that the law is settled: there is no automatic right to back wages when dismissal is set aside. Unless the reinstatement order expressly grants salary for the past period, and unless supporting evidence is produced that the employee was not gainfully employed, courts need not grant back wages.
In this case, there was not only an absence of any express direction to pay salary; there was a specific and clear finding that the appellant would not be entitled to any salary for the period he was not on duty.
The Court therefore held that the substantial question of law must be answered against the appellant. Setting aside the dismissal order did not automatically entitle him to a decree for payment of salary.
The second appeal was accordingly dismissed by the Patna High Court on 25.11.2025.
Why This Judgment Matters
This judgment is important for employees in Bihar and across India who challenge their dismissal or removal in courts.
It makes clear that even if a court later finds the dismissal too harsh and changes it to a minor penalty, the employee will not automatically get back salary for the period spent out of service. For back wages, the order must specifically say so, and the employee must satisfy the legal tests laid down by the Supreme Court.
The decision also reminds lower courts that Supreme Court rulings on service matters, like Banshi Dhar and P. Karupaiah, are binding, and that the principle of “no automatic back wages” must be carefully followed.
For public and private sector employees alike, the message is that winning reinstatement is not the same as winning all past salary. Each case will turn on its own facts and the exact language of the court’s order.
Legal Issues and Answers
- Issue: When a dismissal order is set aside and converted into a minor penalty, does the employee automatically become entitled to salary for the period of dismissal?
Answer: No. The Patna High Court held that there is no automatic right to back wages. In this case, the First Appellate Court had specifically denied salary for the period the employee was not on duty, and Supreme Court decisions make it clear that back wages are not to be granted as a matter of course.
Cases Cited by the Court
- Md. Hassan Ansari v. The State of Bihar and Ors., (2005) 3 PLJR 304 (cited by appellant).
- Shashi Bhushan Pandey v. The State of Bihar and Ors., (2005) 4 PLJR 575 (cited by appellant).
- Ratan Kumar Sharma v. The State of Bihar, (2006) 3 PLJR 365 (cited by appellant).
- Rajendra Kumar Kindra v. Delhi Administration, AIR 1984 SC 1805 (cited by appellant).
- Banshi Dhar v. State of Rajasthan and Anr., 2007 (1) SCC 324 (relied upon by Court).
- P. Karupaiah v. General Manager, Thruuvalluvar Transport Corporation Limited, 2018 (12) SCC 663 (relied upon by Court).
Case Details
Case Number: Second Appeal No. 306 of 1990
Case Title: Sarjug Prasad v. Union of India and Ors.
Coram: Hon’ble Mr. Justice Dr. Anshuman
Date of Judgment: 25.11.2025
Citation: 2026 (1) PLJR 37
Advocates: Mr. Brajesh Sharma, Advocate for the appellant; Mr. Rupak Kumar, Advocate for the respondents; Mr. Subodh Kr. Jha, Sr. CGC for the respondents; Mr. Ram Tujabh Singh, CGC for the respondents.
Parties: Appellant – former employee of United India Fire and General Insurance Company Limited; Respondents – Union of India (as owner of General Insurance company) and various officers of United India Fire and General Insurance Company Limited.
Nature of the Case: Second appeal in a civil suit challenging dismissal from service and seeking reinstatement and salary (back wages).
Link to Full Judgment: Patna High Court Judgment in Second Appeal No. 306 of 1990
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