'Abuse of process,' SC slaps Rs 5 lakh cost on employer for seeking arbitration of non-payment of wages, termination of employee

The court also noted the claim made by the employer related to the alleged violation of non disclosure obligation, which was not raised in the show cause notice, inquiry report, chargesheet and termination order, and as such was non-existent.

New Delhi: The Supreme Court has imposed Rs 5 lakh cost on an employer for seeking appointment of arbitral tribunal to resolve a dispute related to non payment of wages and termination of an employee.

A bench of Justices P S Narasimha and Sandeep Mehta termed the actions initiated by M/s Hyundai Autoever India Pvt Ltd against assistant manager Dushyant Janbandhu as an "abuse of the process" and "intended to threaten" the employee who approached the statutory authorities against denial of wages and termination.

"The disputes that were anyway pending before the statutory authorities, and they related to non-payment of wages and legality and propriety of termination which are non-arbitrable," the bench said, in its judgment on December 11.

The court also noted the claim made by the employer related to the alleged violation of the non-disclosure obligation, which was not raised in the show cause notice, inquiry report, chargesheet and termination order, and as such was non-existent.

The employee was appointed as assistant manager on March 15, 2019.

Within a year, due to Covid-19 pandemic, the appellant was asked to work from home from March 22, 2020, to January 6, 2021. However, the company called upon the appellant to resume physical attendance of office from August 2020. As the appellant refused to comply, a show cause notice was issued on September 4, 2020, following an inquiry, issuance of a charge memo and termination on January 21, 2021.

Since the employee was not paid a salary, he approached the statutory under the Payment of Wages Act.

As a counterblast, the employer unilaterally appointed an arbitrator, who himself ruled out the jurisdiction to resolve the dispute in view of objection raised by the employee.

The employer then approached the Madras High Court for appointment of arbitral tribunal. The HC appointed an advocate as an arbitrator since the employer for first time sought to give a new angle to the dispute raising the issue of violation of the non-disclosure obligation.

"The issue relating to violation of the non-disclosure obligation under clause 19 is only an afterthought. This was evidently not the ground when the respondent issued the show cause notice, nor was it a part of the inquiry report. This is also not a part of the charge memo," the bench said.

Under these circumstances, the court concluded that there is no dispute about violation of non disclosure obligations and Section 11(6) of the Arbitration and Conciliation Act petition, to this extent is non-existent.

The court also said the employee approached the authority under the Payment of Wages Act much before the order of termination and the said authority would exercise jurisdiction to the exclusion of civil courts and these disputes are non-arbitrable.

Similarly, the court said, equally, the legality of the order of termination is within the jurisdiction of the Industrial Tribunal which also exercised jurisdiction, to the exclusion of the civil courts and is not arbitrable.

Setting aside the Madras High Court's order, the bench opined that the application for appointment of an arbitral tribunal was an abuse of process.

"It was clearly intended to threaten the appellant for having approached the statutory authorities under the Payment of Wages Act and the Industrial Disputes Act," the bench said.

The court also found no basis for invoking the clause of the agreement related to the non-disclosure clause and demanding compensation of Rs 14,02,822 when that fact situation did not arise.

"In the normal course and in recognition of judicial restraint, we would have asked the appellant to raise these objections before the Arbitral Tribunal itself. However, as the narration of facts speaks for itself, we have found that the application under Section 11 of the Act is a clear abuse of the remedial process. We have therefore allowed the appeal and dismissed the Section 11(6) petition with cost," the bench said.