Supreme Court clarifies procedure for Labour Court in termination cases: Kurukshetra University vs. Prithvi Singh (2018)

Date of the Judgment: February 15, 2018
Citation: (2018) INSC 128
Judges: R.K. Agrawal, J. and Abhay Manohar Sapre, J.
The Supreme Court addressed the crucial question of how Labour Courts should handle cases of employee termination, especially when a domestic inquiry has been conducted. This case examines the correct procedure for Labour Courts to follow when reviewing termination orders, emphasizing the importance of a preliminary assessment of the domestic inquiry’s validity. The bench consisted of Justices R.K. Agrawal and Abhay Manohar Sapre, with the judgment authored by Justice Abhay Manohar Sapre.

Case Background

The case involves Kurukshetra University (the appellant) and Prithvi Singh (the respondent), a Security Guard employed on a daily-wage basis. On August 18, 1999, the respondent was accused of misbehaving with a female Research Scholar. Following this incident, the University initiated a departmental inquiry. The Enquiry Officer found the respondent guilty on September 20, 1999. Consequently, the University terminated the respondent’s services effective March 30, 2000, treating him as a daily-rated worker.

Timeline

Course of Proceedings

The termination led to an industrial dispute, and the matter was referred to the Labour Court, Ambala, under Section 10 of the Industrial Disputes Act, 1947. The Labour Court ruled in favor of the respondent on January 23, 2006, stating that the domestic inquiry was not conducted legally and that the termination was an illegal retrenchment. The University appealed this decision to the High Court of Punjab & Haryana, which dismissed the appeal on September 22, 2006, upholding the Labour Court’s award. The University then appealed to the Supreme Court.

Legal Framework

The judgment primarily concerns the interpretation and application of the Industrial Disputes Act, 1947, particularly Section 10, which deals with the reference of disputes to Labour Courts, and Section 2(oo), which defines “retrenchment.” The Court also discusses the principles of natural justice in the context of domestic inquiries.

Section 10 of the Industrial Disputes Act, 1947:

“Where the appropriate Government is of opinion that any industrial dispute exists or is apprehended, it may at any time, by order in writing refer the dispute or any matter appearing to be connected with, or relevant to, the dispute, if it relates to any matter specified in the Second Schedule, to a Labour Court for adjudication.”

Section 2(oo) of the Industrial Disputes Act, 1947 defines retrenchment as:

“the termination by the employer of the service of a workman for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action.”

Arguments

Appellant (Kurukshetra University) Arguments:

• The respondent was a daily wager employed for only 89 days and, therefore, not entitled to any benefits under the Industrial Disputes Act, 1947.
• The respondent was terminated due to misconduct, after a domestic inquiry, which was sufficient for a daily-rated employee.

Respondent (Prithvi Singh) Arguments:

• The respondent worked for more than 240 days in a calendar year, making him eligible for protection under the Industrial Disputes Act, 1947.
• The domestic inquiry was not conducted properly, as a regular departmental inquiry with a charge sheet was required.
• The termination was illegal, as it was deemed retrenchment without following due process.

The Labour Court agreed with the respondent that he had worked for more than 240 days and that the inquiry was not proper. The High Court upheld this decision.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues but addressed the following:

1. Whether the Labour Court and High Court correctly applied the legal principles for reviewing termination orders.
2. Whether the Labour Court erred in not framing a preliminary issue regarding the legality of the domestic inquiry.
3. Whether the Labour Court erred in not allowing the appellant to lead independent evidence to prove the misconduct.
4. Whether the termination of the respondent was a case of retrenchment.

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:

Judgment

The Supreme Court held that both the Labour Court and the High Court failed to apply settled legal principles. The Labour Court should have first determined the validity of the domestic inquiry as a preliminary issue. If the inquiry was found to be improper, the employer should have been given an opportunity to present independent evidence to prove the misconduct. The Court also clarified that termination as a punishment is not retrenchment under Section 2(oo) of the Industrial Disputes Act, 1947.

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

How each authority was viewed by the Court?

• Indian Iron & Steel Co. Ltd. & Anr. Vs. Their Workmen, AIR 1958 SC 130: The Court relied on this case to establish the foundational principles regarding the powers of the Labour Court in termination cases.
• Shankar Chakravarti vs. Britannia Biscuit Co. Ltd. & Anr., AIR 1979 SC 1653: The Court used this case to reiterate the legal position on the powers of the Labour Court and the procedure to be followed.
• Delhi Cloth & General Mills Co. vs. Ludh Budh Singh, 1972(3) SCR 29=1972(Lab IC) 573: The Court quoted this case to explain the specific procedure for Labour Courts when dealing with domestic inquiries, emphasizing the need for a preliminary issue on the validity of the inquiry.
• Karnataka State Road Transport Corpn. vs. Lakshmidevamma(Smt.) & Anr., 2001 (5) SCC 433: This case was cited to show that the principles laid down in the earlier cases were approved by a Constitution Bench.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to ensure that Labour Courts adhere to established legal procedures when dealing with termination cases. The Court emphasized the importance of a preliminary assessment of the validity of domestic inquiries and the right of employers to present evidence if the inquiry is deemed improper. The Court also clarified the definition of “retrenchment” under the Industrial Disputes Act, 1947, to ensure that termination by way of punishment is not incorrectly classified as retrenchment.

The Court stated, “In our considered opinion, neither the Judge of the Labour Court and nor the Judges of the High Court applied their judicial mind while deciding the issues arising in the case and completely ignored the settled legal principles…”

The Court further clarified, “By no stretch of imagination, in our view, the Labour Court could treat the respondent’s termination as ‘retrenchment’ much less an ‘illegal retrenchment’.”

The Court also noted, “The Labour Court failed to notice the definition of retrenchment in Section 2(oo) of the ID Act which, in clear terms, provides that retrenchment does not include termination of the service if it is imposed by way of punishment.”

The Court rejected the Labour Court’s finding that the termination was illegal retrenchment. The Court emphasized that the Labour Court should have first determined the validity of the domestic inquiry as a preliminary issue. If the inquiry was found to be improper, the employer should have been given an opportunity to present independent evidence to prove the misconduct. The Court also clarified that termination as a punishment is not retrenchment under Section 2(oo) of the Industrial Disputes Act, 1947.

The Court set aside the judgments of the High Court and the Labour Court and remanded the case to the Labour Court for fresh consideration. The Labour Court was directed to give the employer an opportunity to lead evidence to prove the misconduct and then decide the issue of termination.

Key Takeaways

• Labour Courts must first determine the validity of a domestic inquiry as a preliminary issue.
• If a domestic inquiry is found to be improper, the employer must be given an opportunity to present independent evidence.
• Termination as a punishment is not considered retrenchment under Section 2(oo) of the Industrial Disputes Act, 1947.
• Labour Courts must adhere to established legal procedures and principles while adjudicating labor disputes.

Directions

The Supreme Court directed the Labour Court to:

• Afford the appellant (employer) an opportunity to lead evidence to prove the misconduct.
• Decide the issue of termination based on the findings on the issue of misconduct.
• Issue fresh notice to the respondent for his appearance before the Labour Court.
• Decide the case within three months from the date of service of notice to the respondent.

Development of Law

The ratio decidendi of the case is that Labour Courts must follow a specific procedure when dealing with termination cases involving domestic inquiries. This includes first determining the validity of the domestic inquiry as a preliminary issue and, if the inquiry is found to be improper, allowing the employer to present independent evidence. This judgment reinforces the importance of procedural fairness and adherence to established legal principles in labor disputes. There is no change in the previous positions of law, but a reiteration of the same.

Conclusion

The Supreme Court’s decision in Kurukshetra University vs. Prithvi Singh clarifies the procedural requirements for Labour Courts when handling cases of employee termination. The Court emphasized the need for a preliminary assessment of the domestic inquiry’s validity and the employer’s right to present evidence if the inquiry is found to be improper. This judgment ensures that Labour Courts adhere to established legal principles, promoting fairness and justice in labor disputes.