Your conspectus of the case reminds me of the proverb - " It is always better to nip in the bud".
Whether the employee who is now 52 years old is of sound health or not, he has not attained the age of superannuation and as such after reinstatement he has the prereogative to decide retiring voluntarily on health grounds any time before his actual superannuation.
Similarly, whether the employee's initial appointment was on compassionate ground or not, he was in continuous service of the establishment from 1986 to some time in 2012 the date on which the Labour Court awarded reinstatement with with backwages. There is still a presumption that he is in the service of the establishment though an appeal by the management against the award is pending in the High Court. Your post is purposively or purposely silent about the orders, if any passed by the High Court u/s 17-B of the Industrial Disputes Act,1947 granting the interim relief of lastdrawn full wages. It, therefore, gives rise to another inevitable presumption that for all practical purposes now he would be drawing a salary of Rs.45000-00p.m on the analogy of his peer mentioned in your post. In such a perplex situation, people like us can not come to a conclusion whether the amount of Rs25lakh offered by the Management as one-time-settlement including past claims towards notional salary and terminal benefit like gratuity etc., is very reasonable.
I would appreciate the present move of the management in principle for an Out-of-Court Settlement. But its reasonableness depends upon the actual calculation of the dues. Better talk to the employee and his counsel and arrive at an amicable settlement. If possible seek the assistance of the Conciliation Officer for the area.
12th April 2017 From India, Salem
14th April 2017 From India, Chennai
14th April 2017 From India, Salem