Supreme Court Upholds Termination of Employee Refusing Alternate Job: Manju Saxena vs. Union of India (2018)

Date of the Judgment: 3rd December 2018

Citation: (2018) INSC 1016

Judges: Abhay Manohar Sapre, J., Indu Malhotra, J.

Can an employee’s refusal to accept alternate job offers from their employer be considered an abandonment of service, thus justifying termination? The Supreme Court of India recently addressed this question in a case involving an employee who declined multiple alternative positions after her original role became redundant. This judgment clarifies the circumstances under which an employee’s actions can be interpreted as a voluntary abandonment of employment.

The case was decided by a two-judge bench comprising Justice Abhay Manohar Sapre and Justice Indu Malhotra, with the majority opinion authored by Justice Indu Malhotra.

Case Background

Manju Saxena, the appellant, was initially employed as a “Lady Confidential Secretary” by HSBC Bank (referred to as R2-Bank) on April 1, 1986. She was promoted to “Senior Confidential Secretary” on April 23, 1992.

In May 2005, her position became redundant after the officer she was attached to left the bank. The bank offered her four alternative positions with the same pay scale: (i) Business Development Officer, (ii) Customer Service Officer, (iii) Clearing Officer, and (iv) Banking Services Officer. Saxena declined these offers, stating that the jobs were either temporary or that she lacked the necessary experience.

On October 1, 2005, the bank terminated her services, citing the redundancy of her position. She was offered a severance package which included six months’ compensation in lieu of notice, along with an additional compensation equivalent to 15 days’ salary for each completed year of service, totaling Rs. 8,17,071/-.

Saxena raised an Industrial Dispute before the Regional Labour Commissioner on October 3, 2005, seeking an enhanced severance package. She did not, however, seek reinstatement.

Timeline

Course of Proceedings

The Central Government Industrial Tribunal (CGIT) initially directed the R2-Bank to reinstate Saxena with full terminal benefits on June 1, 2009. However, the Delhi High Court remanded the matter back to the CGIT on March 22, 2013, to reconsider whether Saxena qualified as a “workman” under the Industrial Disputes Act, 1947.

The CGIT reaffirmed its earlier decision on July 15, 2015, holding Saxena to be a “workman” and directing reinstatement with continuity of service, full back wages, and all consequential benefits.

The R2-Bank challenged this decision in the Delhi High Court, which on April 12, 2017, set aside the CGIT award, stating that Saxena’s refusal to accept alternate positions constituted an “abandonment” of her job. The High Court also directed Saxena to refund the amounts she had received, except for the initial compensation of Rs. 8,17,071/-.

A Division Bench of the Delhi High Court upheld the Single Judge’s decision on July 14, 2017, but modified the refund order, exempting the initial compensation, litigation expenses, and payments made under Section 17B of the Industrial Disputes Act, 1947. A Review Petition was also dismissed on September 13, 2017.

Legal Framework

The case primarily revolves around the interpretation of the Industrial Disputes Act, 1947, specifically:

• Section 2(oo): This section defines “retrenchment” and “continuous service”.
• Section 25F: This section outlines the conditions precedent to retrenchment of workmen. It states:

  “25F. Conditions precedent to retrenchment of workmen.­ No workman employed in any industry who has been in continuous service for not less than one year under an employer shall be retrenched by that employer until—
  (a) The workman has been given one month’s notice in writing indicating the reasons for retrenchment and the period of notice has expired, or the workman has been paid in lieu of such notice, wages for the period of the notice;
  (b) the workman has been paid, at the time of retrenchment, compensation which shall be equivalent to fifteen days’ average pay [for every completed year of continuous service] or any part thereof in excess of six months; and
  (c) notice in the prescribed manner is served on the appropriate Government [or such authority as may be specified by the appropriate Government by notification in the Official Gazette].”

Arguments

Appellant’s (Manju Saxena) Submissions:

• Saxena claimed a severance package of Rs. 69.99 lakhs, calculated as her last drawn salary of Rs. 58,330 per month for 10 years (120 months).

  [Severance Package = Last drawn monthly Salary x 120 months]; [Rs. (58,330 x 120) = Rs. 69,99,600/-]

• She argued that she had been in “continuous service” for over 20 years and was entitled to all benefits payable to a ‘workman’ under the Industrial Disputes Act, 1947.

• Saxena contended that the terms of her Housing Loan provided for certain benefits to employees, and her outstanding loan should be waived by the R2-Bank.

• She argued that the R2-bank had illegally deducted Tax Deducted at Source (TDS) on all payments made to her during the legal proceedings and was entitled to a refund of Rs. 13,69,083/-.

Respondent’s (HSBC Bank) Submissions:

• The bank submitted that Saxena’s position had become redundant, and she was offered four alternate positions with the same pay scale, which she declined.

• The bank stated that they complied with all mandatory requirements under Section 25F(a) and (b) of the Industrial Disputes Act, 1947, by paying a severance amount of Rs. 8,17,071/-.

• The bank argued that Saxena had already received monetary benefits in excess of the compensation she was legally entitled to.

• The bank submitted that during conciliation proceedings, they offered a severance package of Rs. 32.79 lakhs, calculated based on her last drawn Basic Salary + Monthly Allowances for past 10 years (120 months).

  Severance Package = (Monthly basic component x 120 months) = Rs. 27,330 x 120 = Rs. 32,79,600/-

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section. However, the core issue that the court addressed was:

1. Whether the Appellant’s refusal to accept alternative job offers from the R2-Bank amounted to abandonment of service, thereby disentitling her to claim the benefits of a “workman” under the Industrial Disputes Act, 1947.

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:

Judgment

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

How each authority was viewed by the Court?

• The Court followed The Buckingham & Carnatic Co. Ltd. v Venkatiah & Ors. [1964] 4 SCR 265* and Vijay S Sathaye v Indian Airlines Ltd. & Ors. (2013) 10 SCC 253* to determine that the appellant’s actions constituted abandonment of service.
• The Court discussed Hathisingh Manufacturing Ltd. v Union of India AIR 1960 SC 923* to understand the conditions precedent for retrenchment under Section 25F of the Industrial Disputes Act, 1947.
• The Court followed Gurmail Singh & Ors. v State of Punjab & Ors. (1991) 1 SCC 189* and Pramod Jha & ors. v State of Bihar & Ors. (2003) 4 SCC 619* to hold that compliance with clause (c) of Section 25F of the Industrial Disputes Act, 1947 is directory and not mandatory.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the fact that the appellant had refused all four alternative job offers made by the bank, which were at the same pay scale. This refusal, along with her focus on monetary compensation rather than reinstatement, led the Court to conclude that she had voluntarily abandoned her service. The Court also emphasized that the bank had complied with the essential requirements of Section 25F of the Industrial Disputes Act, 1947.

Fact:Law Ratio

The Court’s reasoning was more influenced by the factual aspects of the case, particularly the appellant’s refusal to accept alternate job offers and her pursuit of monetary compensation, than by purely legal considerations.

Logical Reasoning

Judgment

The Supreme Court held that the appellant’s refusal to accept the alternative job offers constituted a voluntary abandonment of service. The Court observed that the appellant’s claims before various forums were primarily for monetary compensation, not for reinstatement. The Court noted that the bank had complied with the statutory requirements under Section 25F of the Industrial Disputes Act, 1947, by paying a sum of Rs. 8,17,071/- which included 6 months’ pay in lieu of Notice under S. 25F(a) and an additional amount calculated on the basis of 15 days’ salary multiplied by the number of years of service, in compliance with S. 25F(b). The Court also noted that no Notice was sent to the Appropriate Government or authority notified, in compliance with S. 25F(c) of the I.D. Act, but held that the requirement of clause (c) of S. 25F can be treated only as directory and not mandatory. The Court noted that the appellant had already received a sum of Rs. 1,07,73,736/- under various heads, which was more than double the amount claimed by her.

The Court modified the impugned judgment of the Division Bench to the extent that the amounts received by the appellant were to be treated as a final settlement of all her claims. The Civil Appeals were dismissed with no order as to costs.

The Court stated:

“In the present case, the High Court has held that the Appellant had “abandoned” her job, on her refusal to accept any of the alternative positions with the bank, on the same pay scale.”

“In the case before us, the intentions of the Appellant can be inferred from her refusal to accept any of the 4 alternative positions offered by the R2-Bank. It is an admitted position that the alternative positions were on the same pay scale, and did not involve any special training or technical knowhow.”

“Once it is established that the Appellant had voluntarily abandoned her service, she could not have been in “continuous service” as defined under S. 2(oo) the I.D. Act, 1947.”

Key Takeaways

• An employee’s refusal to accept reasonable alternative job offers from their employer, especially when the original position becomes redundant, can be construed as an abandonment of service.
• If an employee focuses solely on monetary compensation rather than reinstatement, it can further support the inference of voluntary abandonment.
• Employers must comply with the essential requirements of Section 25F of the Industrial Disputes Act, 1947, while retrenching a workman.
• The requirement of sending notice to the appropriate government under Section 25F(c) of the Industrial Disputes Act, 1947, is directory and not mandatory.

Directions

The Supreme Court directed that the amounts received by the appellant, totaling Rs. 1,07,73,736/-, were to be treated as a final settlement of all her claims. No further directions were given.

Development of Law

The ratio decidendi of this case is that an employee’s refusal to accept reasonable alternative job offers from their employer, especially when the original position becomes redundant, can be construed as an abandonment of service. This judgment reinforces the principle that an employee cannot claim the benefits of a “workman” under the Industrial Disputes Act, 1947, if they have voluntarily abandoned their service by refusing reasonable alternative employment options. The judgment also reiterates that the requirement under Section 25F(c) of the Industrial Disputes Act, 1947 is directory and not mandatory, thus not requiring strict compliance.

Conclusion

The Supreme Court dismissed the appeals filed by Manju Saxena, upholding the termination of her services by HSBC Bank. The Court concluded that Saxena’s refusal to accept alternative job offers constituted a voluntary abandonment of service. The Court also held that the bank had complied with the statutory requirements under Section 25F of the Industrial Disputes Act, 1947. The Court further directed that the amounts already received by Saxena would be considered the final settlement of all her claims.

Category

Parent Category: Industrial Disputes Act, 1947

Child Categories:

• Section 2(oo), Industrial Disputes Act, 1947
• Section 25F, Industrial Disputes Act, 1947
• Abandonment of Service
• Retrenchment
• Workman

FAQ

Q: What does it mean if an employee “abandons” their job?

A: Abandonment of job means that an employee voluntarily leaves their employment and does not intend to return. This can be inferred from their actions and conduct, such as refusing reasonable alternative job offers.

Q: Can an employer terminate an employee if their position becomes redundant?

A: Yes, an employer can terminate an employee’s services if their position becomes redundant, provided they offer reasonable alternative employment options and comply with the legal requirements for retrenchment.

Q: What are the requirements for retrenchment under Section 25F of the Industrial Disputes Act, 1947?

A: Under Section 25F of the Industrial Disputes Act, 1947, an employer must provide one month’s notice or pay in lieu of notice, pay retrenchment compensation equivalent to 15 days’ average pay for each completed year of service, and serve notice to the appropriate government. However, the requirement of notice to the appropriate government is directory and not mandatory.

Q: What is the significance of this judgment for employees?

A: This judgment emphasizes that employees must consider reasonable alternative job offers made by their employers, especially when their original positions become redundant. Refusing such offers could be interpreted as abandoning their service, potentially leading to termination without the benefits of a “workman” under the Industrial Disputes Act, 1947.

Q: What is the significance of this judgment for employers?

A: This judgment provides clarity to employers on the concept of abandonment of service and the importance of offering reasonable alternative positions to employees whose roles become redundant. It also highlights the need for compliance with the essential requirements of Section 25F of the Industrial Disputes Act, 1947.