Supreme Court Sets Aside Ex-Parte Award Due to Non-Impleadment of Employer: Bajaj Allianz Life Insurance Co. Ltd. vs. Saroj Kumar Panda (2024)

Introduction

Date of the Judgment: 23 September 2024
Citation: 2024 INSC 821
Judges: J.K. Maheshwari, J. and Rajesh Bindal, J.
Can an ex-parte award passed by an Industrial Tribunal be upheld if the actual employer was not made a party to the proceedings? The Supreme Court of India recently addressed this critical question in a case involving Bajaj Allianz Life Insurance Company Ltd. The core issue revolved around whether an award passed against a company’s officers, without including the company itself, is legally sound. This judgment clarifies the importance of proper impleadment of parties in legal proceedings, particularly in industrial disputes. The judgment was delivered by a two-judge bench comprising Justice J.K. Maheshwari and Justice Rajesh Bindal, with the opinion authored by Justice Rajesh Bindal.

Case Background

Saroj Kumar Panda, the respondent, was initially employed as a Branch Accountant by Bajaj Allianz Life Insurance Company Ltd. on May 9, 2006. He was later promoted to Senior Divisional Accountant on April 1, 2009, and subsequently redesignated as Business Supporting Officer (Managerial Post) on August 1, 2014. He was transferred multiple times within the company, eventually becoming redundant due to departmental restructuring. Consequently, his services were terminated on July 25, 2017, with a sum of ₹1,07,787 paid to him in lieu of notice. Panda, earning a monthly salary of ₹35,929 at the time of termination, challenged his termination before the Regional Labour Commissioner (Central), which led to conciliation proceedings. However, no settlement was reached, and he was issued a certificate on October 25, 2017, to approach the Tribunal directly.

Timeline

Course of Proceedings

The respondent, Saroj Kumar Panda, filed a claim petition before the Central Government Industrial Tribunal, Bhubaneswar, challenging his termination. However, instead of impleading Bajaj Allianz Life Insurance Company Ltd., he impleaded three of its officers: Tarun Chugh (CEO and Managing Director), Ruben Selvadoray (Chief Human Resource Officer), and Prabir Ranjan Prusty (Regional Head). Despite notices, none of the impleaded parties appeared before the Tribunal, leading to an ex-parte award on February 5, 2019. The Tribunal ruled the termination as unlawful and directed the company (though not a party) to reinstate Panda with back wages and other service benefits. The officers then filed a writ petition before the High Court of Orissa, Cuttack, challenging the ex-parte award. The High Court dismissed the writ petition on March 1, 2021, upholding the Tribunal’s award. The officers then appealed to the Supreme Court.

Legal Framework

The judgment primarily revolves around the principle of proper impleadment of parties in legal proceedings. The court emphasized that a corporate entity has a separate legal identity from its officers. Any contract or communication signed by an officer on behalf of the company does not make the officer individually liable unless a specific claim is made against them. The court noted that any order, decree, or award passed without proper impleadment of parties becomes inexecutable. The Industrial Disputes Act, 1947, was implicitly relevant as the case pertained to an industrial dispute, but no specific section was discussed in the judgment.

Arguments

Appellant’s Arguments:

• The appellant argued that the matter was initially entrusted to a counsel for appearance before the Tribunal. However, the counsel failed to properly handle the proceedings.
• The Legal Department officer left the company on September 26, 2018, and the Human Resource Department officer left on May 24, 2019, during the pendency of the dispute, leading to a lack of proper representation.
• The respondent failed to implead the employer, Bajaj Allianz Life Insurance Company Ltd., which had a privity of contract with him. Only company officers were impleaded, who had not engaged the respondent in their personal capacity.
• The respondent was initially appointed as Branch Accountant on May 9, 2006, and later promoted and redesignated to managerial posts. The appellant contended that as a manager, the respondent could not be treated as a workman, thus the Tribunal lacked jurisdiction.
• The order passed by the Tribunal was without jurisdiction and should have been examined on the facts brought on record.
• The appellant requested an opportunity to re-examine the matter on merits after impleadment of proper parties.

Respondent’s Arguments:

• The respondent argued that after due service of notice, no one appeared before the Tribunal, and hence, they were proceeded against ex-parte.
• The management was aware of the pendency of the matter before the Tribunal, and the plea that the employer was not impleaded is a hyper-technical submission that should be rejected.
• Since service to the respondent before the Tribunal was complete, the Award should not be set aside due to the appellant’s lapse in appearance.

[TABLE] of Submissions

Issues Framed by the Supreme Court

The Supreme Court considered the following issues:

1. Whether the ex-parte Award of the Tribunal is valid when the employer company was not impleaded as a party, and only its officers were named in the claim petition.
2. Whether the Tribunal had the jurisdiction to entertain the dispute, considering the respondent’s designation and job profile.

Treatment of the Issue by the Court

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

Authorities

The Court did not cite any specific cases or books in this judgment. The judgment primarily relied on the principle of proper impleadment of parties and the separate legal entity of a corporate body.

Legal Provisions Considered:

The Court implicitly considered the principles of the Industrial Disputes Act, 1947, but did not specifically cite any sections. The core of the judgment rested on the procedural aspect of impleading the correct parties in a legal proceeding.

[TABLE] of Authority Consideration

Judgment

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

How each authority was viewed by the Court?

• The principle of “Proper Impleadment” was central to the court’s decision. The court emphasized that for any order to be executable, the correct parties must be included in the proceedings.
• The principle of “Separate Legal Entity of a Corporate Body” was used to highlight that officers cannot be held personally liable for company actions unless specifically claimed.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily driven by the fundamental legal principle that proper impleadment of parties is essential for any legal proceeding to be valid and executable. The Court emphasized that a corporate entity is distinct from its officers, and therefore, the company itself should have been made a party to the proceedings. The Court also considered the fact that the Tribunal did not examine whether the respondent was a “workman” as defined under the Industrial Disputes Act, which is a prerequisite for the Tribunal to have jurisdiction. The Court found the appellant’s explanation for non-appearance plausible, as the officers dealing with the matter had left the company, and the counsel had not taken proper care of the matter.

[TABLE] of Sentiment Analysis of Reasons

Fact:Law Ratio

Logical Reasoning:

The Court’s reasoning was primarily focused on the procedural lapse of not impleading the employer company. The Court emphasized that the Tribunal’s award was inexecutable because the actual employer was not a party to the proceedings. The Court also highlighted that the Tribunal did not address the issue of whether the respondent was a ‘workman’ under the Industrial Disputes Act, which is a jurisdictional requirement. The Court’s decision was not based on the merits of the termination but rather on the procedural and jurisdictional flaws in the initial proceedings.

The Supreme Court did not consider any alternative interpretations that would have upheld the Tribunal’s award, given the fundamental procedural lapse. The Court’s decision was unanimous, with both judges agreeing on the necessity of proper impleadment and the jurisdictional issue.

The Court stated: “It is to observe that proper impleadment of parties in any proceedings is sine qua non in any matter coming before the court. However, what is noticed is that it has become a casualty in the process.” and “There can be privity of contract between the corporate and any other individual and that contract or communication may have been signed by any officer on its behalf as an authorized signatory. It does not mean that the officer signing the communication or the agreement or the executive head of the company becomes individually liable for any claim against the company…” and “Any order or decree or award passed by the Court, in case proper parties are not impleaded, becomes inexecutable.”

Key Takeaways

• Proper Impleadment: It is crucial to implead the correct parties in any legal proceeding, especially when dealing with corporate entities.
• Separate Legal Entity: A corporate entity is legally distinct from its officers, and officers cannot be held liable for company actions unless specifically claimed.
• Jurisdiction: Tribunals must ensure they have the jurisdiction to hear a case, which includes verifying if the individual is a ‘workman’ under the Industrial Disputes Act.
• Procedural Compliance: Strict adherence to procedural requirements is essential for the validity and executability of any legal award or order.

This judgment emphasizes the importance of procedural correctness in legal proceedings, particularly in industrial disputes. It serves as a reminder that awards passed without proper impleadment of parties can be set aside, regardless of the merits of the case. The decision may lead to increased scrutiny of the impleadment of parties, especially in cases involving corporate entities and their officers. It will also likely lead to Tribunals being more cautious in ensuring that they have jurisdiction before proceeding with a case.

Directions

The Supreme Court set aside the impugned order passed by the High Court and the Award of the Tribunal. The matter was remitted back to the Tribunal for fresh consideration on merits after proper parties are impleaded, giving due opportunity to both parties.

Specific Amendments Analysis

There was no specific amendment discussed in this judgment.

Development of Law

The ratio decidendi of this case is that an award passed by an Industrial Tribunal is invalid if the employer company is not impleaded as a party to the proceedings. This decision reinforces the principle that a corporate entity is a separate legal entity from its officers and must be properly represented in legal proceedings. The judgment does not change the existing law but rather reinforces the importance of adhering to established legal principles regarding the impleadment of parties. It clarifies that mere knowledge of the proceedings by the management does not substitute for proper impleadment.

Conclusion

In conclusion, the Supreme Court set aside the ex-parte award passed by the Industrial Tribunal and the subsequent order of the High Court, emphasizing that the employer company, Bajaj Allianz Life Insurance Co. Ltd., was not properly impleaded in the original proceedings. The Court stressed the importance of proper impleadment of parties and the separate legal identity of a corporate entity. The matter was remitted back to the Tribunal for fresh consideration after proper impleadment of parties, ensuring that both sides are given a fair opportunity to present their case. This judgment underscores the need for procedural compliance and jurisdictional scrutiny in legal proceedings.