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 45
Judges: Dr. Justice D.Y. Chandrachud and Justice A.S. Bopanna

Is a short overseas business trip the same as a formal deputation? The Supreme Court of India recently addressed this question in a case involving a software developer who was asked to repay expenses after resigning shortly after returning from a work visit to the US. The core issue was whether the employee’s visit to the US constituted a ‘deputation’ as per her employment contract, which would obligate her to serve a minimum period upon return or repay the costs of her trip. The Supreme Court bench, consisting of Dr. Justice D.Y. Chandrachud and Justice A.S. Bopanna, delivered the judgment.

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 terms included a clause stating she could be posted at any of the company’s locations, domestic or overseas. The clause also stipulated that if she went on an overseas deputation, she was required to serve a minimum period upon return, or else repay the company for expenses incurred on her travel, visa, and other related costs.

On August 22, 2013, she was sent to the US for a meeting, initially for one week. This trip was later extended to September 20, 2013. She returned to India on September 21, 2013, and was promoted to Senior Project Manager on September 27, 2013, with a revised annual package of Rs 16 lakhs. She resigned on December 12, 2013, after working for 82 days post her return from the US, citing issues with the new management. Her resignation was accepted on December 14, 2013, and she was relieved on December 18, 2013.

On May 22, 2014, the company sent her a notice demanding Rs 5,70,753, including expenses for her US trip and salary for the notice period, with a 24% interest rate. The employee responded on June 3, 2014, denying liability.

Timeline

Course of Proceedings

The company filed a suit in the Civil Judge (Senior Division), Gurgaon, to recover Rs 5,70,753 with 24% 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, representing the expenses for her US trip. This decision was upheld by the Additional District Judge, Gurugram, on November 29, 2017. The High Court of Punjab & Haryana dismissed the second appeal on August 1, 2018. The matter was then appealed to the Supreme Court of India.

Legal Framework

The core of the dispute revolves around 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.”

This clause stipulates that an employee could be posted anywhere, including overseas, and that an ‘overseas deputation’ would require the employee to serve a minimum period upon return, failing which they would have to repay the company’s expenses.

Arguments

Appellant’s (Ms. Sarita Singh) Submissions:

• The appellant argued that she was sent to the US for a business meeting, not a deputation.
• She contended that there was no formal letter or agreement specifying that her visit to the US was a deputation.
• She emphasized that the company failed to prove that she was sent on deputation, which is a crucial requirement for invoking the repayment clause in her employment contract.

Respondent’s (M/s Shree Infosoft Private Limited) Submissions:

• The respondent argued that the appellant’s overseas visit was a deputation, and therefore, she was liable to serve a minimum period upon return or repay the expenses incurred by the company.
• They relied on Clause II(5) of the employment contract, which stipulated that the employee was liable to serve a minimum period after an overseas deputation.
• The company claimed that since the appellant did not serve the required period, she was liable to repay the expenses incurred on her trip.

Issues Framed by the Supreme Court

The Supreme Court framed the following key issue:

1. Whether the appellant’s visit to the US constituted an “overseas deputation” as per Clause II(5) of her employment contract, thereby obligating her to serve a minimum period upon return or repay the expenses incurred by the company.

Treatment of the Issue by the Court

The following table demonstrates how the Court decided the issue:

Authorities

The Supreme Court considered the following authorities:

• State of Punjab v. Inder Singh [(1997) 8 SCC 372]: The Supreme Court defined ‘deputation’ as service outside the cadre or parent department, requiring the employee’s consent. The Court emphasized that a deputation involves a transfer to another department on a temporary basis and that 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.
• Umapati Choudhary v. State of Bihar [(1999) 4 SCC 659]: The Supreme Court clarified that a deputation is a tripartite agreement involving the lending employer, borrowing employer, and the employee. It emphasized that 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.
• Union of India v. S N Maity [(2015) 4 SCC 164]: The Supreme Court interpreted the terms of deputation strictly, disallowing arbitrary actions by the employer. The Court held that deputation 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.

Judgment

How each authority was viewed by the Court:

• The Court relied on State of Punjab v. Inder Singh [(1997) 8 SCC 372]* to define deputation, emphasizing the requirement of consent and a temporary transfer outside the parent department.
• The Court used Umapati Choudhary v. State of Bihar [(1999) 4 SCC 659]* to highlight the tripartite nature of a deputation, involving the lending employer, borrowing employer, and the employee.
• The Court cited Union of India v. S N Maity [(2015) 4 SCC 164]* to stress that the terms of deputation must be interpreted strictly 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 supporting the claim that the appellant was sent on deputation. The Court emphasized that a deputation requires a formal agreement and the consent of the employee, which were absent in this case. The Court also highlighted that the burden of proof was on the respondent to establish that the appellant was sent on deputation, which they failed to do. The Court was also concerned about the harassment faced by the appellant, who was subjected to litigation after resigning due to workplace concerns.

Logical Reasoning:

The Court rejected the company’s argument that the appellant’s visit to the US was a deputation. The Court reasoned that the term ‘deputation’ has a specific legal meaning and requires a formal agreement and the consent of the employee. The Court emphasized that the company had not provided any evidence to prove that the appellant was sent on deputation. The Court also noted that a transient business visit without a written agreement does not qualify as a deputation. The Court also observed that the company had not substantiated its claim, and therefore, the suit for recovery was dismissed.

The Court observed that the appellant had been subjected to needless harassment and litigation after raising concerns about workplace conditions. The Court emphasized that such actions would not be tolerated by the legal system. The Court imposed costs of Rs 1 lakh on the respondent to be paid to the appellant.

The Supreme Court stated, “The respondent as a claimant and plaintiff had to discharge the initial burden of establishing that the appellant was sent on deputation overseas. Significantly, while the terms and conditions of employment have been reduced to writing, there is no valid evidence on the basis of which it can be deduced that the appellant was sent on deputation overseas.”

The Court further stated, “A deputation would also involve a third party – the borrowing employer who discharges specific rights and obligations towards the employee and the lending employer. A transient business visit without any written agreement detailing terms of deputation will not qualify as a deputation unless the respondent were to lead cogent evidence to indicate that the appellant was seconded to work overseas on deputation.”

The Court also said, “Courts must send a strong message that such things shall not come to pass and will not be tolerated by the legal system.”

Key Takeaways

• Definition of Deputation: The Supreme Court clarified that a ‘deputation’ is a formal arrangement requiring the consent of the employee and a clear agreement between the lending and borrowing employers. A simple business visit does not qualify as a deputation.
• Burden of Proof: The burden of proof lies with the employer to establish that an employee was sent on deputation. In the absence of such proof, the employer cannot claim repayment of expenses.
• Protection Against Harassment: The Court emphasized that employees should not be subjected to harassment and litigation for raising workplace concerns.
• Importance of Formal Agreements: Employers must ensure that all terms of employment, especially those related to overseas deputation, are clearly documented in formal agreements.

Directions

The Supreme Court directed that the suit for recovery instituted by the respondent be dismissed. The Court also directed the respondent to pay the appellant costs of litigation quantified at Rs 1 lakh, to be deposited in the Registry of the Court within one month, which would then be disbursed to the appellant.

Development of Law

The ratio decidendi of this case is that a deputation requires a formal agreement and the consent of the employee. A simple business trip does not qualify as a deputation. This judgment reinforces the importance of formal documentation and the protection of employee rights in employment contracts. There was no change in the previous position of law, but it clarified the existing legal position on deputation.

Conclusion

In the case of Ms. Sarita Singh v. M/s Shree Infosoft Private Limited, the Supreme Court ruled that an employee’s overseas visit for a business meeting does not automatically constitute a deputation. The Court emphasized that a deputation requires a formal agreement and the employee’s consent. The Court dismissed the company’s suit for recovery and ordered them to pay costs to the appellant, reinforcing the need for clear contractual terms and protection against workplace harassment.