Supreme Court clarifies the definition of “Deputation” in employment contracts: Sarita Singh vs. Shree Infosoft (2022)

Introduction

Date of the Judgment: 12 January 2022

Citation: (2022) INSC 24

Judges: Dr. Justice D.Y. Chandrachud and Justice A.S. Bopanna

Can an employer demand repayment of expenses from an employee who resigns shortly after returning from an overseas business trip, claiming it was a “deputation”? The Supreme Court of India recently addressed this question in a case between a software developer and her former employer. This case clarifies the legal meaning of “deputation” in employment contracts and protects employees from unfair demands. The judgment was delivered by a two-judge bench comprising Dr. Justice D.Y. Chandrachud and Justice A.S. Bopanna.

Case Background

Ms. Sarita Singh, a software developer, joined M/s Shree Infosoft Private Limited on November 15, 2012, with an annual package of Rs 13,50,400. Her employment contract stated that she could be posted at any of the company’s locations, domestic or overseas. It also stipulated that if she went on an “overseas deputation,” she would need to serve a minimum period upon return, failing which she would have to repay the company’s expenses for the trip.

In August 2013, Ms. Singh was sent to the US for a meeting, initially for one week, which was later extended to about a month. Upon returning to India on September 21, 2013, she was promoted to Senior Project Manager with a revised salary. However, after working for 82 days, she resigned on December 12, 2013, citing issues with the new management. The company accepted her resignation and relieved her immediately.

Subsequently, on May 22, 2014, the company sent Ms. Singh a legal notice demanding Rs 5,70,753, along with interest, for expenses related to her “overseas deputation” and salary for the notice period. Ms. Singh contested this demand.

Timeline:

Course of Proceedings

The respondent, M/s Shree Infosoft, filed a suit in the Civil Court, Gurgaon, seeking recovery of Rs 5,70,753 with interest. The Civil Judge (Junior Division), Gurgaon, partially decreed the suit on August 9, 2016, ordering Ms. Singh to pay Rs 3,14,590 with 9% interest, covering the expenses of her US trip. The Additional District Judge, Gurugram, upheld this decision on November 29, 2017. The High Court of Punjab & Haryana dismissed Ms. Singh’s second appeal on August 1, 2018.

Legal Framework

The core of the dispute revolves around Clause II(5) of Ms. Singh’s 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.”

This clause stipulates that in case of an “overseas deputation,” the employee must serve a minimum period upon return, failing which they are liable to repay the expenses incurred by the company.

Arguments

The appellant, Ms. Sarita Singh, argued that her visit to the US was for a business meeting and not a “deputation” as defined in service law. She contended that there was no formal deputation letter or agreement specifying the terms of her overseas assignment.

The respondent, M/s Shree Infosoft, argued that the terms of the employment contract, specifically Clause II(5), were clear and binding. They contended that Ms. Singh’s overseas visit was a deputation, and since she did not serve the required period after her return, she was liable to repay the expenses.

Issues Framed by the Supreme Court

The Supreme Court framed the following issue for consideration:

1. Whether the appellant’s visit to the US constituted a deputation within the meaning of Clause II(5) of the employment contract, thereby obligating her to serve a minimum period upon return or to repay the expenses incurred by the respondent.

Treatment of the Issue by the Court

Authorities

The Supreme Court relied on the following authorities to define and interpret the concept of “deputation”:

Judgment

The Supreme Court held that the respondent failed to prove that the appellant was sent on deputation. The Court emphasized that deputation has a specific meaning in service law, requiring a tripartite agreement with the consent of the employee. The Court noted that the appellant’s visit was a transient business visit without any formal deputation agreement.

The Court stated that the burden of proof was on the respondent to establish that the appellant was sent on deputation. The Court also noted that the absence of a formal deputation letter or agreement was crucial in determining the nature of the overseas visit.

The court observed that the lower courts had ignored the legal definition of deputation, and that the respondent’s claim was not substantiated by the contract.

The Supreme Court allowed the appeal, set aside the High Court’s judgment, and dismissed the suit for recovery. The Court also imposed a cost of Rs 1 lakh on the respondent, payable to the appellant, for the needless harassment and litigation.

The Supreme Court observed that the appellant was subjected to needless harassment and drawn into a vortex of litigation. The Court stated that such things will not be tolerated by the legal system.

The Court quoted the following from State of Punjab v. Inder Singh (1997) 8 SCC 372:
“The concept of “deputation” is well understood in service law and has a recognised meaning. “Deputation” has a different connotation in service law and the dictionary meaning of the word “deputation” is of no help. In simple words “deputation” means service outside the cadre or outside the parent department. Deputation is deputing or transferring an employee to a post outside his cadre, that is to say, to another department on a temporary basis. After the expiry period of deputation the employee has to come back to his parent department to occupy the same position unless in the meanwhile he has earned promotion in his parent department as per the Recruitment Rules. Whether the transfer is outside the normal field of deployment or not is decided by the authority who controls the service or post from which the employee is transferred. 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. The law on deputation and repatriation is quite settled as we have also seen in various judgments which we have referred to above…”

The Court quoted the following from Umapati Choudhary v. State of Bihar (1999) 4 SCC 659:
“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 necessity for sending on deputation arises in public interest to meet the exigencies of public service. The concept of deputation is consensual and involves a voluntary decision of the employer to lend the services of his employee and a corresponding acceptance of such services by the borrowing employer. It also involves the consent of the employee to go on deputation or not. In the case at hand all the three conditions were fulfilled…”

The Court quoted the following from Union of India v. S N Maity (2015) 4 SCC 164:
“The controversy that has emerged in the instant case is to be decided on the touchstone of the aforesaid principles of law. We have already opined that it is not a case of simple transfer. It is not a situation where one can say that it is a transfer on deputation as against an equivalent post from one cadre to another or one department to another. It is not a deputation from a government department to a government corporation or one Government to the other. There is no cavil over the fact that the post falls in a different category and the first respondent had gone through the whole gamut of selection. On a studied scrutiny, the notification of appointment makes it absolutely clear that it is a tenure posting and the fixed tenure is five years unless it is curtailed. But… this curtailment cannot be done in an arbitrary or capricious manner. There has to have some rationale. Merely because the words “until further orders” are used, it would not confer allowance on the employer to act with caprice .”

What weighed in the mind of the Court?

The Supreme Court’s decision was heavily influenced by the lack of evidence supporting the claim that Ms. Singh was on deputation. The court emphasized the legal definition of “deputation” which requires a tripartite agreement and the consent of the employee. The court also highlighted the fact that the respondent did not produce any formal deputation letter or agreement. The court was also concerned with the fact that the employee was subjected to needless harassment and litigation.

Logical Reasoning

Key Takeaways

• ✓ A mere overseas business trip does not automatically constitute a “deputation” under service law.
• ✓ “Deputation” requires a formal agreement, consent of the employee, and a tripartite relationship between the lending employer, borrowing employer, and the employee.
• ✓ Employers cannot demand repayment of expenses from employees who resign after a business trip, unless it is proven to be a formal deputation.
• ✓ Courts will not tolerate harassment of employees through baseless litigation.
• ✓ The burden of proof lies on the employer to establish that an employee was sent on deputation.

Directions

The Supreme Court directed the respondent to pay Rs 1 lakh as costs of the litigation to the appellant.

Specific Amendments Analysis

Not applicable as there was no specific amendment in this case.

Development of Law

The ratio decidendi of this case is that a mere overseas business trip does not constitute a deputation. The case clarifies the definition of “deputation” in employment contracts, emphasizing the need for a formal agreement, consent of the employee, and a tripartite relationship. This judgment reinforces the principle that employers cannot arbitrarily impose financial burdens on employees based on vague interpretations of contract clauses.

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. It protects employees from unfair demands by employers by emphasizing that a formal deputation requires a clear agreement, the employee’s consent, and a tripartite relationship. The Court’s decision underscores the importance of adhering to the established legal definition of “deputation” and the need for employers to act fairly and transparently in their dealings with employees.