Stigmatic Orders Against Employees For Their Alleged Misconduct Cannot Be Passed Without Conducting Proper Enquiry: Rajasthan HC
The Rajasthan High Court, Jodhpur Bench observed that a dismissal order passed against an employee for misconduct cannot be sustained under Section 28A of the Rajasthan Shops and Commercial Establishments Act, 1958 (Act) unless satisfactory evidence is recorded and a proper inquiry is conducted.
Kotak Mahindra Bank challenged the order of the Labour Commissioner (Commissioner) to reinstate an employee, arguing that the Commissioner lacked jurisdiction. The Court dismissed the Petition of the Bank and affirmed the Commissioner’s order.
“A perusal of the proviso of the section 28-A read with sub rule 2 of the Rule 24 supra, clearly reflects that in the event of an employer dispensing with the services of an employee for misconduct, the same has to be supported by satisfactory evidence to be recorded by way of conducting an enquiry specifically held for the purpose of proving the misconduct in the prescribed manner, in accordance with law”, the Bench of Justice Arun Monga held.
Advocate Vinay Jain appeared for the Petitioners and Advocate Siddhart Tatia appeared for the Respondents.
The Petitioner, a Bank, approached the High Court challenging the order of the Labour Commissioner (Commissioner), directing the reinstatement of one of its employees, the First Respondent. The Bank alleged that the First Respondent was involved in fraudulent activities and was therefore terminated from his employment. The Bank also contended that the Labour Commissioner did not have the jurisdiction to pass the order of reinstatement. The Labour Commissioner found that the Bank had not followed the proper procedure for terminating the First Respondent’s employment and ordered his reinstatement.
The Court rejected the Bank’s contentions that the absence of a formal judicial order directing service of summons/notice invalidates the competent authority's final order under the Act.
“I am unable to convince myself with the over pedantic view taken by learned counsel for petitioner, that in the absence of a formal judicial order directing service of summons/notice, the competent authority could not have passed the final order under the Rajasthan Shops and Commercial Establishments Act, 1958”, the Bench noted.
Furthermore, the Bench observed that administrative authorities performing quasi-judicial functions are not bound by the same formal procedures as judicial officers or courts. Upon receiving a complaint, an administrative authority acting as a quasi-judicial body is not required to conduct a pre-notice preliminary judicial hearing before issuing a summons. The issuance of summons itself is deemed to have been done after due consideration of the complaint.
The Court observed, “An administrative authority, when simultaneously wears the hat of a quasi judicial authority, upon receipt of a complaint, is not ordinarily supposed to conduct a pre notice preliminary judicial hearing and then pass an appropriate judicial order directing issuance of summons. Suffice for his purpose, at that stage, once he has issued the notice in the form of summons, the same is deemed to have been done after seeing the contents of the complaint and due application of mind”.
The Bench noted that the Bank was a commercial establishment and that the First Respondent was an employee of the Bank within the meaning of the Act. The Court noted that the Bank had not conducted an enquiry into the alleged misconduct of the First Respondent before terminating his employment. The Bench held that the termination of the First Respondent’s employment was illegal.
“Even otherwise, trite law it is in service jurisprudence that a stigmatic order passed on ground of alleged misconduct cannot be sustained unless a proper enquiry in accordance with law has been conducted”, the Bench observed.
Additionally, the Court noted that a stigmatizing order against an employee can have severe consequences, potentially rendering them unemployable in the future. This deprivation of livelihood violates the fundamental right to life enshrined in Article 21 of the Constitution. Employers must therefore exercise caution before taking such action, the Court added.
Accordingly, the Court dismissed the Petition and affirmed the order of the Commissioner.
Cause Title: Kotak Mahindra Bank Ltd. v Aaraj Sharma (2023:RJ-JD:39164)
