Supreme Court Clarifies “Deputation” in Employment Contracts: Sarita Singh vs. Shree Infosoft (2022)

Introduction

Date of the Judgment: 12 January 2022
Citation: (2022) INSC 17
Judges: Dr Dhananjaya Y Chandrachud, J and A S Bopanna, J.

Can an employee be held liable to pay back expenses for an overseas visit if they resign shortly after returning? The Supreme Court of India recently addressed this question, clarifying the legal meaning of “deputation” in employment contracts. This case highlights the importance of clearly defined terms in employment agreements, especially concerning overseas assignments.

The Supreme Court bench, comprising Justices Dr. Dhananjaya Y Chandrachud and A.S. Bopanna, delivered the judgment. The court’s decision clarifies the concept of deputation in service law and emphasizes the need for a clear agreement between the employer and employee for an overseas assignment to be considered a deputation.

Case Background

Ms. Sarita Singh, the appellant, was employed as a software developer by M/s Shree Infosoft Private Limited, the respondent, on 15 November 2012. Her employment contract stipulated that she could be posted at any of the company’s locations, including overseas. The contract also included a clause stating that if sent on “overseas deputation,” she would be required to serve a specific period upon her return, failing which she would be liable to repay the company’s expenses for her travel, accommodation, and other related costs.

In August 2013, Ms. Singh was sent to the US for a meeting, initially for one week, which was later extended to approximately one month. The company bore the expenses for her travel and stay. Upon her return on 21 September 2013, she was promoted to Senior Project Manager. However, due to issues with the new management, she resigned on 12 December 2013, after working for 82 days post her return from the US.

The company then sent her a notice demanding repayment of Rs 5,70,753, which included the expenses for her US visit and salary for the notice period. Ms. Singh contested this demand, leading to the company filing a suit for recovery.

Timeline:

Course of Proceedings

The respondent company filed a suit in the Civil Judge (Senior Division), Gurgaon, seeking recovery of Rs 5,70,753 from the appellant. The Civil Judge (Junior Division), Gurgaon, partially decreed the suit on 9 August 2016, ordering Ms. Singh to pay Rs 3,14,590, representing the expenses incurred by the company for her US visit, along with interest.

This decision was affirmed by the Additional District Judge, Gurugram, on 29 November 2017. The High Court of Punjab & Haryana dismissed the second appeal filed by Ms. Singh on 1 August 2018, upholding the lower courts’ decisions. Aggrieved by the High Court’s decision, Ms. Singh appealed to the Supreme Court.

Legal Framework

The core of the dispute revolves around the interpretation of Clause II(5) of the employment contract, which states:

“II (5) You are liable to be posted at any of the various divisions of SHREE INFOSOFT PRIVATE LIMITED (the Company)/ branches/subsidiaries/affiliates/associates/sister-concerns either domestic or overseas, wherever it may be situated. You will abide by the company’s rule and regulations as may be in effect from time to time with respect to your function, grade or location where you work in. Please note that, in lieu of clause 3 & 4 of Section II of the ‘Other Terms and Conditions’ of Annexure B, you are required to abide by the following in case of overseas deputation: While on and or return to India from overseas deputation, it is essential that you serve SHREE INFOSOFT PRIVATE LIMITED for a period as stated under, as applicable: Deputation Period Required months of service on and or return from overseas deputation as applicable 0 days to 30 days 3 months from the date of deputation/return 31 days to 90 days 6 months from the date of deputation/return More than 90 days 12 months from the date of deputation/return In the event of any aberration in serving Company as mentioned above, you are liable to repay the amount spent by Company on your deputation covering the cost of travel, insurance premium, per diem, visa fee and other associated expenses.”

The Supreme Court also considered the definition of “deputation” as established in previous judgments, particularly:

• State of Punjab v. Inder Singh [(1997) 8 SCC 372]: This case defined deputation as service outside the employee’s cadre or parent department, requiring the employee’s consent.
• Umapati Choudhary v. State of Bihar [(1999) 4 SCC 659]: This case highlighted the tripartite nature of deputation, involving the lending employer, borrowing employer, and the employee.
• Union of India v. S N Maity [(2015) 4 SCC 164]: This case emphasized that deputation terms must be strictly interpreted, and employers cannot act capriciously.

Arguments

Appellant’s Submissions:

• The appellant argued that her visit to the US was for a business meeting and not a deputation.
• She contended that there was no separate agreement specifying that her visit was a deputation.
• The appellant emphasized that the burden of proof was on the respondent to establish that she was sent on deputation, which they failed to do.

Respondent’s Submissions:

• The respondent argued that Clause II(5) of the employment contract clearly stipulated the conditions for overseas deputation and the liability to repay expenses if the service period was not completed.
• The respondent contended that the appellant’s visit to the US was a deputation, and she was therefore liable to repay the expenses.

Submissions Categorized by Main Arguments:

Issues Framed by the Supreme Court

The Supreme Court framed the following issue:

1. Whether the appellant’s visit to the US constituted a “deputation” as per the terms of her employment contract, and whether she was liable to repay the expenses incurred by the company.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court relied on the following authorities:

On the definition of Deputation:

• State of Punjab v. Inder Singh [(1997) 8 SCC 372] (Supreme Court of India): This case clarified that deputation means service outside the cadre or parent department and requires the employee’s consent. The Court emphasized that a deputation is a temporary transfer and the employee has a right to return to their parent department.
• Umapati Choudhary v. State of Bihar [(1999) 4 SCC 659] (Supreme Court of India): This case highlighted the tripartite nature of a deputation, involving the lending employer, borrowing employer, and the employee, all of whom must consent to the arrangement.
• Union of India v. S N Maity [(2015) 4 SCC 164] (Supreme Court of India): This case stressed that deputation terms must be strictly interpreted and that employers cannot act capriciously.

Authorities Considered by the Court:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• State of Punjab v. Inder Singh [(1997) 8 SCC 372]: The Court relied on this case to define “deputation” as requiring the employee’s consent and being a temporary transfer outside their parent department.
• Umapati Choudhary v. State of Bihar [(1999) 4 SCC 659]: The Court used this case to highlight the tripartite nature of deputation, involving the lending employer, borrowing employer, and the employee.
• Union of India v. S N Maity [(2015) 4 SCC 164]: The Court cited this case to emphasize that deputation terms must be strictly interpreted and that employers cannot act arbitrarily.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the lack of evidence presented by the respondent to establish that the appellant’s visit to the US was a deputation. The Court emphasized that the burden of proof rested on the respondent, which they failed to discharge. The Court also highlighted the importance of a clear, tripartite agreement for a deputation to be valid.

Sentiment Analysis of Reasons Given by the Supreme Court:

Fact:Law Ratio

The court’s decision was more influenced by the factual aspects of the case, particularly the lack of evidence to support the respondent’s claim, rather than purely legal considerations.

Logical Reasoning:

The court considered alternative interpretations, such as whether Clause II(5) of the contract automatically implied a deputation. However, the Court rejected this interpretation, emphasizing that a deputation requires a clear agreement and the consent of all parties involved.

The Supreme Court held that the respondent failed to establish that the appellant’s visit to the US constituted a “deputation.” The Court emphasized that a deputation requires a tripartite agreement between the lending employer, borrowing employer, and the employee, which was absent in this case. The Court also noted that the respondent did not provide any evidence to indicate that the appellant was sent on deputation, and the burden of proof was on the respondent to establish its case.

The court’s reasoning was based on the following points:

• The respondent failed to provide any evidence of a deputation agreement.
• The term “deputation” has a specific meaning in service law, requiring a tripartite agreement and the consent of the employee.
• The burden of proof was on the respondent to establish that the appellant was sent on deputation.

The Court quoted from the judgment:

“There can be no deputation without the consent of the person so deputed and he would, therefore, know his rights and privileges in the deputation post.”

“Deputation can be aptly described as an assignment of an employee (commonly referred to as the deputationist) of one department or cadre or even an organisation (commonly referred to as the parent department or lending authority) to another department or cadre or organisation (commonly referred to as the borrowing authority).”

“The controversy that has emerged in the instant case is to be decided on the touchstone of the aforesaid principles of law… It is not a deputation from a government department to a government corporation or one Government to the other.”

There were no dissenting opinions in this case.

The implications of this judgment are significant for employment contracts, particularly those involving overseas assignments. It clarifies that a mere clause in the employment contract is not sufficient to establish a deputation. There must be a clear agreement between the employer, employee, and the borrowing entity (if any) specifying the terms of the deputation. This decision also highlights that employers must be able to provide evidence to support their claims, and the burden of proof lies with the employer.

Key Takeaways

• Employers must have a clear, written agreement for any overseas deputation, specifying the terms, conditions, and duration.
• A mere clause in an employment contract is not sufficient to establish a deputation.
• The burden of proof lies with the employer to establish that an employee was sent on deputation.
• Employees cannot be held liable to repay expenses for overseas visits if those visits do not qualify as a deputation.
• This judgment emphasizes the importance of the tripartite nature of a deputation and the need for the employee’s consent.

This ruling will likely lead to more careful drafting of employment contracts and a clearer understanding of the term “deputation.” It will also protect employees from being held liable for expenses related to overseas visits that do not meet the legal definition of a deputation.

Directions

The Supreme Court directed that the respondent shall pay the appellant costs of litigation quantified at Rs 1 lakh, to be deposited in the Registry of the Court within one month from the date of the order. The Registry was directed to disburse the amount to the appellant.

Specific Amendments Analysis

There were no specific amendments discussed in this judgment.

Development of Law

The ratio decidendi of this case is that a mere clause in an employment contract is not sufficient to establish a deputation. A deputation requires a tripartite agreement between the lending employer, borrowing employer, and the employee, with the employee’s consent. The burden of proof lies with the employer to establish that an employee was sent on deputation. This decision reinforces the existing legal understanding of “deputation” and clarifies its application in employment contracts.

Conclusion

In conclusion, the Supreme Court’s judgment in Ms Sarita Singh vs. M/s Shree Infosoft Private Limited clarifies the legal meaning of “deputation” in employment contracts. The Court held that a mere clause in the employment contract is not sufficient to establish a deputation. A deputation requires a tripartite agreement between the lending employer, borrowing employer, and the employee, with the employee’s consent. The burden of proof lies with the employer to establish that an employee was sent on deputation. This decision protects employees from being held liable for expenses related to overseas visits that do not meet the legal definition of a deputation and emphasizes the need for clear, written agreements in employment contracts.