Supreme Court overturns High Court order on continuity of service for contract employees after misconduct: The Depot Manager vs. Sri R.K. Reddy (2018)

LEGAL ISSUE: Whether a contract employee, terminated for misconduct after a departmental inquiry, is entitled to continuity of service upon re-engagement. CASE TYPE: Service Law, Labour Law. Case Name: The Depot Manager vs. Sri R.K. Reddy. Judgment Date: 7 December 2018

Date of the Judgment: 7 December 2018
Citation: 2018 INSC 1057
Judges: Dr. Dhananjaya Y. Chandrachud, J., M.R. Shah, J.
The Supreme Court of India addressed the question of whether a contract employee, dismissed for misconduct after a full departmental inquiry, is entitled to continuity of service upon re-engagement. This case arose from a dispute where the High Court had ordered continuity of service for a terminated employee, even though the termination was a result of proven misconduct. The Supreme Court, in this judgment, clarified that continuity of service cannot be granted when the order of termination is not set aside, especially when the termination is due to misconduct established through a proper inquiry. The judgment was delivered by a two-judge bench consisting of Justice Dr. Dhananjaya Y. Chandrachud and Justice M.R. Shah, with Justice M.R. Shah authoring the opinion.

Case Background

The respondent, Sri R.K. Reddy, was initially appointed as a contract driver with the appellant corporation. Following a departmental inquiry, his services were terminated due to proven misconduct. His departmental appeal and subsequent appeal before the Regional Manager were both rejected. The Labour Court also dismissed his industrial dispute. Subsequently, Sri R.K. Reddy filed a writ petition in the High Court of Judicature at Andhra Pradesh at Hyderabad, challenging his termination.

Timeline:

Course of Proceedings

The High Court’s single judge allowed the writ petition filed by Sri R.K. Reddy, relying on a previous judgment in Writ Petition No. 2786 of 2012, which dealt with a batch of cases involving termination of contract employees. The single judge directed the corporation to re-engage the petitioner with continuity of service, although without monetary benefits for the period of absence. The Division Bench of the High Court affirmed this order in the writ appeal. The corporation then appealed to the Supreme Court.

Legal Framework

The judgment primarily deals with the principles of service law concerning termination and re-engagement of contract employees, and the concept of continuity of service. No specific statutes or sections were explicitly quoted in the judgment.

Arguments

Appellant’s Arguments (The Depot Manager):

• The Division Bench of the High Court erred in affirming the Single Judge’s order without considering the facts of the individual case.
• The Single Judge incorrectly relied on the order in Writ Petition No. 2786 of 2012, which was not applicable to the present case.
• In the present case, the respondent was dismissed after a full departmental inquiry where charges of misconduct were proven.
• Granting continuity of service to an employee found guilty of misconduct would place him on the same footing as employees with unblemished records.
• The High Court cannot grant continuity of service without setting aside the termination order.

Respondent’s Arguments (Sri R.K. Reddy):

The judgment does not explicitly detail the arguments made by the respondent. However, it can be inferred that the respondent relied on the High Court’s order, which granted him continuity of service based on the earlier judgment in Writ Petition No. 2786 of 2012.

Issues Framed by the Supreme Court

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

1. Whether the High Court was correct in directing re-engagement with continuity of service without setting aside the termination order, especially when the termination was based on proven misconduct after a departmental inquiry.
2. Whether the High Court was justified in relying on a previous judgment that was not directly applicable to the facts of the present case.

Treatment of the Issue by the Court:

Authorities

The Supreme Court did not explicitly cite any specific cases or legal provisions in its judgment. However, the judgment refers to the High Court’s reliance on its earlier decision in Writ Petition No. 2786 of 2012.

Judgment

How each authority was viewed by the Court?

The Supreme Court held that the High Court’s reliance on the order in Writ Petition No. 2786 of 2012* was incorrect. The Court noted that the earlier order was passed in a batch of cases, some of which involved termination without inquiry and others with flawed inquiries. The present case involved a full inquiry where misconduct was proven. Therefore, the earlier order was not applicable.

What weighed in the mind of the Court?

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

• The fact that the respondent was terminated after a full departmental inquiry where misconduct was proven.
• The principle that continuity of service cannot be granted unless the termination order is set aside.
• The need to differentiate between employees terminated for misconduct and those with clean records.
• The error of the High Court in applying a previous order without considering the specific facts of the case.

The Supreme Court reasoned that the High Court had erred in granting continuity of service without setting aside the termination order. The Court emphasized that when an employee is terminated for misconduct after a proper inquiry, they cannot be treated on par with employees who have a clean record. The Court further noted that the High Court should have considered the specific facts of the case instead of relying on a previous judgment that was not directly applicable. The Court observed that granting continuity of service in such cases would undermine the disciplinary process and create an unfair situation for other employees.

The Supreme Court considered the argument that the respondent was entitled to continuity of service based on the High Court’s order, but rejected it. The Court reasoned that the High Court’s order was based on a misapplication of a previous judgment and failed to consider the specific facts of the case. The Court emphasized that continuity of service can only be granted if the order of termination is set aside, which was not done in this case.

The Supreme Court stated, “Even otherwise such a direction cannot be issued by the learned Single Judge without the termination being set aside. The ground of continuity was not sustainable for the simple reason that unless the order of termination is set aside. As a matter of first principle, continuity cannot be granted. Continuity can be granted when the order of termination is set aside to ensure there is no hiatus in service.”

The Supreme Court also stated, “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.”

Further, the Court observed, “However, the learned Single Judge and the Division Bench both have materially erred in not appreciating the facts that in the present case the workman was dismissed from service after holding the departmental enquiry and having all the charges of misconduct proved, that was not the case in Writ Petition No.2786 of 2012.”

There were no dissenting opinions in this case. The judgment was delivered by a two-judge bench, with Justice M.R. Shah authoring the opinion.

Key Takeaways

• Continuity of service cannot be granted to an employee terminated for misconduct unless the termination order is set aside.
• Courts must consider the specific facts of each case and not rely blindly on previous judgments that are not directly applicable.
• Employees terminated for misconduct cannot be treated on par with those who have clean records.
• A full departmental inquiry, where charges are proven, is a valid basis for termination of service.

Directions

The Supreme Court set aside the impugned judgment and order dated 14.06.2013 in Writ Appeal No.690 of 2013 as well as the judgment and order passed by the learned Single Judge in Writ Petition No.34192 of 2012.

Development of Law

The ratio decidendi of this case is that continuity of service cannot be granted to an employee terminated for misconduct unless the termination order is explicitly set aside. This clarifies the position of law regarding the rights of contract employees terminated for misconduct and limits the scope of judicial intervention in such cases. This is a change in law as the High Court had earlier granted continuity without setting aside the termination order.

Conclusion

The Supreme Court’s judgment in The Depot Manager vs. Sri R.K. Reddy clarifies that a contract employee terminated for misconduct after a full departmental inquiry is not entitled to continuity of service upon re-engagement, unless the termination order is set aside. The Court emphasized that the High Court erred in relying on a previous judgment without considering the specific facts of the case. This judgment underscores the importance of disciplinary processes and ensures fairness in the treatment of employees based on their conduct.