Labour Court Can Draw Adverse Inference Against Employer For Non-Production Of Employment Records: P&H High Court

"The principle that a party in possession of the best evidence cannot withhold the same and thereafter seek to derive advantage from its own non-production is well recognised." Punjab & Haryana High Court, in a batch of fourteen connected writ petitions decided on September 14, 2026, held that a Labour Court is legally justified in drawing an adverse inference against a public department that fails to produce material employment records despite specific summons.

Justice Kirti Singh, presiding over the matter, emphasized that such an inference operates within the context of evidence already on record and does not shift the initial burden of proof from the workman, but rather addresses the management's failure to produce the "best available records."

The petitioner-department had challenged various awards granting reinstatement and back wages to workmen who claimed they had completed 240 days of continuous service. The management consistently argued that the workmen were engaged through contractors and Village Forest Committees since 2003, and therefore, no employer-employee relationship existed. Furthermore, the State argued that the Forest Department did not qualify as an "industry" under Section 2(j) of the Industrial Disputes Act, 1947, and that the workmen had failed to discharge the initial burden of proving 240 days of service as required by the Supreme Court in Range Forest Officer, Belgaum v. S.T. Hadimani.

The core legal issues centered on whether the management’s failure to produce attendance records and muster rolls, despite summons, warranted an adverse inference against the employer. The court also addressed whether the Forest Department of Haryana falls within the definition of "industry" under Section 2(j) and, consequently, whether the termination of the workmen violated the mandatory procedural requirements of Section 25-F of the Industrial Disputes Act.

Court Rejects "Industry" Status Challenge

The High Court decisively rejected the petitioner's argument that the Forest Department is not an "industry." Observing that the issue was not res integra, the bench referred to previous binding precedents, including State of Haryana v. Ram Avtar, which had already examined and dismissed the same contention. The court held that the systematic activity of the Forest Department, as it pertains to the workmen, brings it squarely within the ambit of an "industry" under Section 2(j) of the Act.

Court Clarifies Scope Of Adverse Inference

Addressing the evidentiary dispute, the court distinguished the present cases from the S.T. Hadimani precedent. Unlike Hadimani, where there was a complete lack of evidence, the workmen in the current matters provided corroborated proof, including bank statements and admissions from the management's own witnesses. The court held that the non-production of vital documents like muster rolls, despite being in the management's exclusive custody, justified the Labour Court's decision to draw an adverse inference.

Management Cannot Withhold Best Evidence

The court underscored that a party holding the best evidence cannot withhold it and then claim that the opposing party failed to prove their case. Referring to the Supreme Court's ruling in Gopal Krishnaji Ketkar v. Mohamed Haji Latif, the court held that an adverse inference is a necessary legal consequence when a party deliberately hides primary documentation. This principle was further reinforced by the recent Supreme Court judgment in Shripal and another v. Nagar Nigam, Ghaziabad, which reaffirmed that perpetual contractual engagements for permanent work without genuine documentation disfavors the employer’s position.

"Indian labour law strongly disfavors perpetual daily-wage or contractual engagements in circumstances where the work is permanent in nature."

Requirement Of Compliance Under Section 25-F

The court affirmed that the protection of Section 25-F is not limited to permanent employees but extends to any "retrenchment" as defined under Section 2(oo) of the Act. Once a workman has completed 240 days of continuous service, the employer is legally obligated to follow the mandatory notice and compensation procedures. The court noted that because the management failed to comply with these statutory requirements, the terminations were rightfully declared illegal by the lower courts.

Moulding Of Relief Due To Passage Of Time

While the court maintained the finding of illegal termination, it noted that over a decade had elapsed since the disputes arose. Following the principle established in Deepali Gundu Surwase v. Kranti Junior Adhyapak Mahavidyalaya and Sukhbir Singh v. State of Haryana, the court concluded that reinstatement was no longer the appropriate remedy given the long passage of time and the fact that the workmen were not appointed against regular posts. Instead, the court substituted the relief with lump-sum compensation calculated at Rs. 50,000 for every year of proved service.

The petitions were disposed of with the direction that the management must pay the quantified compensation within two months, failing which the amount would carry interest at the rate of 8% per annum. This ruling reinforces the judicial stance that public employers cannot circumvent labour law protections by relying on vague contractual arrangements while simultaneously withholding essential employment records from the scrutiny of the court.

Date of Decision: 14 September 2026