Supreme Court clarifies continuity of service for re-engaged contract employees: APSRTC vs. A.U.M. Rao (2018)

Date of the Judgment: 7 December 2018
Citation: 2018 INSC 1018
Judges: Hon’ble Dr. Justice D.Y. Chandrachud and Hon’ble Mr. Justice M.R. Shah
Can a contract employee, re-engaged after termination, claim continuity of service for the period between termination and re-engagement? The Supreme Court of India addressed this issue in a case involving the Andhra Pradesh State Road Transport Corporation (APSRTC). The Court clarified that continuity of service cannot be granted if the initial termination was not challenged and a fresh appointment was made. This judgment was delivered by a two-judge bench comprising Hon’ble Dr. Justice D.Y. Chandrachud and Hon’ble Mr. Justice M.R. Shah, with the opinion authored by Hon’ble Dr. Justice D.Y. Chandrachud.

Case Background

The respondent, A.U.M. Rao, was initially appointed as a driver on contract with APSRTC in February 2007, after a selection process. He was working at the Waltair Depot in Visakhapatnam. Following a disciplinary enquiry, his services were terminated. After a departmental appeal was dismissed, a departmental review led to his re-engagement on contract on 3 February 2012. Subsequently, the respondent filed a writ petition in the High Court of Andhra Pradesh, seeking continuity of service with consequential benefits.

Timeline:

Course of Proceedings

The learned Single Judge of the High Court allowed the respondent’s petition, relying on a previous judgment dated 29 February 2012 in Writ Petition No. 2786 of 2012. The Single Judge held that since the Corporation had re-engaged the workman, he should be given continuity of service for regularization purposes, excluding the period of absence, but without monetary benefits. The Division Bench of the High Court upheld this order in a Writ Appeal. The APSRTC then appealed to the Supreme Court.

Legal Framework

The judgment primarily deals with the interpretation of service law principles related to termination and re-engagement of contract employees. There is no specific statute or provision mentioned in the judgment, but the case revolves around the concept of continuity of service and its implications for regularization of employment. The High Court’s decision was based on an earlier judgment which laid down guidelines for re-engagement and continuity of service for contract employees of APSRTC.

Arguments

Arguments of the Appellant (APSRTC):

• The appellant argued that the High Court erred by granting continuity of service to the respondent.
• The initial termination of the respondent’s services was a result of a disciplinary enquiry.
• The respondent was given a fresh appointment as a contract driver after a departmental review.
• Neither the termination nor the fresh appointment was challenged by the respondent.
• The respondent did not approach the Industrial Court, unlike some other employees.
• The High Court’s decision was based on an earlier judgment, which did not consider the facts of individual cases.
• The grant of continuity of service would place the respondent on the same footing as other contract employees with unblemished records.

Arguments of the Respondent (A.U.M. Rao):

• The respondent sought continuity of service from the date of termination until re-engagement.
• The respondent relied on the High Court’s earlier judgment which granted continuity of service to similarly placed contract employees.
• The respondent argued that since the Corporation had re-engaged him, he should get the benefit of continuity of service.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section, but the core issue was:

1. Whether a contract employee, re-engaged after termination, is entitled to continuity of service from the date of termination until re-engagement, especially when the termination was not challenged and a fresh appointment was given.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

• Judgment of a learned Single Judge of the High Court of Judicature of Andhra Pradesh dated 29 February 2012 in Writ Petition No. 2786 of 2012.

Judgment

How each authority was viewed by the Court?

The Supreme Court distinguished the earlier judgment of the High Court in Writ Petition No. 2786 of 2012, stating that it was delivered in a batch of cases with varying facts. The Court observed that the earlier judgment was based on the premise that in some cases, termination orders were issued without an enquiry, or the enquiry was not in accordance with the principles of natural justice. However, in the present case, a disciplinary enquiry was conducted, and the employee was terminated. The Court held that the High Court erred in applying the directions in the earlier judgment to the present case.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• The fact that the respondent’s initial termination was not challenged.
• The respondent accepted the fresh appointment as a contract driver.
• The principle that continuity of service is typically granted when a termination order is set aside.
• The need to maintain a distinction between employees with and without disciplinary issues.

The Court emphasized that “continuity can be granted when an order of termination is set aside, to ensure that there is no hiatus in service.” In this case, since the termination was not challenged, the grant of continuity was not sustainable. The Court also noted that “granting continuity of service to a person such as the respondent, who was found to have committed misconduct, would place him on the same footing as other contractual employees who have a record without blemish.” The Court further stated, “once a fresh appointment was given to the respondent and neither the termination nor the fresh engagement was placed in issue, the grant of continuity of service by the High Court was manifestly misconceived.”

The Supreme Court did not consider any alternative interpretations of the law. The Court focused on the principle that a fresh appointment, without challenging the previous termination, does not automatically entitle an employee to continuity of service. The Court’s decision was based on the premise that the respondent’s termination was a result of a disciplinary enquiry and that he accepted the fresh appointment without challenging the prior termination.

The Supreme Court allowed the appeal and set aside the High Court’s judgment. The Court clarified that the seniority of the respondent would be counted from the date of his fresh appointment.

Key Takeaways

• A contract employee who is terminated and then re-engaged is not automatically entitled to continuity of service for the period between termination and re-engagement.
• Continuity of service is typically granted only when a termination order is set aside.
• If an employee accepts a fresh appointment without challenging a prior termination, their seniority will count from the date of the fresh appointment.
• Courts must consider the facts of each individual case and not apply general directions without regard to specific circumstances.

Directions

The Supreme Court directed that the seniority of the respondent shall be counted with effect from the date of his fresh appointment in the service of the Corporation.

Development of Law

The ratio decidendi of this case is that when an employee’s service is terminated after a disciplinary enquiry, and the employee is later re-engaged with a fresh appointment, the employee is not entitled to continuity of service for the period between the termination and the re-engagement, unless the termination order is challenged and set aside. This judgment clarifies that a fresh appointment starts a new service period, and seniority is counted from the date of the new appointment. This is a change from the position taken by the High Court, which had granted continuity of service based on a previous judgment without considering the specific facts of the case.

Conclusion

In the case of APSRTC vs. A.U.M. Rao, the Supreme Court clarified that a re-engaged contract employee is not entitled to continuity of service if the initial termination was not challenged. The Court emphasized that a fresh appointment starts a new service period, and seniority is counted from the date of the new appointment. This decision ensures that employees with disciplinary issues are not placed on the same footing as those with unblemished records.

Category

• Service Law
  • Contractual Employment
  • Termination of Service
  • Re-engagement
  • Continuity of Service
  • Seniority
• Service Law
  • Article 226, Constitution of India

FAQ

Q: What is continuity of service in the context of employment?

A: Continuity of service refers to the uninterrupted duration of an employee’s service with an organization. It is important for various benefits like seniority, regularization, and pension.

Q: If a contract employee is terminated and then re-engaged, are they entitled to continuity of service?

A: Not automatically. According to the Supreme Court, if the termination was not challenged and the employee accepts a fresh appointment, they are not entitled to continuity of service for the period between termination and re-engagement.

Q: What does the Supreme Court’s judgment in APSRTC vs. A.U.M. Rao say about this?

A: The Supreme Court held that a contract employee who was terminated after a disciplinary enquiry and then re-engaged on contract is not entitled to continuity of service from the date of termination until re-engagement. The employee’s seniority will be counted from the date of the fresh appointment.

Q: What should an employee do if they believe their termination was unjust?

A: If an employee believes their termination was unjust, they should challenge the termination order through appropriate legal channels. If they accept a fresh appointment without challenging the termination, they may lose their claim to continuity of service.

Q: How does this judgment affect contract employees in India?

A: This judgment clarifies that a fresh appointment starts a new service period. Contract employees need to be aware that accepting a fresh appointment without challenging a previous termination may affect their seniority and other service benefits.