EMPLOYMENT LAW UPDATE
19th December, 2024
Issue No. 22/24-25
SUPREME COURT CLARIFIES DISPUTES RELATED TO WAGES AND TERMINATION OF AN EMPLOYEE ARE NON-ARBITRABLE
In a significant ruling, the Supreme Court of India in the case of Dushyant Janbandhu v. Hyundai Autoever India Pvt. Ltd.[1] addressed the complexities surrounding arbitration in employment disputes. The Court’s decision, delivered on December 11, 2024, clarified the application of Section 11(6) of the Arbitration and Conciliation Act, 1996, and highlighted the non-arbitrability of certain employment-related disputes.
BACKGROUND
The Appellant in Supreme Court, Dushyant Janbandhu, was employed as an Assistant Manager at Hyundai Autoever India Pvt. Ltd. (Respondent). Due to the COVID-19 pandemic, he worked from home from March 22, 2020, until January 6, 2021. However, in August 2020, the employer mandated his return to the office. When the Appellant refused to comply with this directive, he received a show cause notice on September 4, 2020. Following an inquiry into alleged violations of contractual obligations related to absenteeism and non-cooperation, a charge memo was issued on November 25, 2020. Ultimately, his employment was terminated on January 21, 2021.
During the pendency of disciplinary action, as the Appellant was not paid his salary, he issued a legal notice for payment of wages under Section 15(2) of the Payment of Wages Act, 1936 (“PW Act”) and filed a petition before the concerned authority. As a counterblast, the Respondent issued a notice alleging that the disputes must be settled through arbitration and proceeded to unilaterally appoint an arbitrator. The Appellant filed an application under Section 16 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) calling upon the arbitrator to rule on his competence, however, the arbitrator himself held that the constitution of the arbitral tribunal was not in accordance with Section 11 of the Arbitration Act and closed the arbitral proceedings.
In response to his termination, the Appellant filed a petition with the Industrial Tribunal under Section 2(A) of the Industrial Disputes Act (“ID Act”), which is still pending before the Industrial Tribunal.
In light of the above, the Respondent, Hyundai Autoever, then moved a petition before the Madhya Pradesh High Court under Section 11(6) of the Arbitration Act in seeking the appointment of an arbitrator. The High Court then proceeded to note an arbitration agreement and therefore, appointed an advocate as the arbitrator. The Appellant appealed against this order in the Supreme Court.
SUPREME COURT’S FINDINGS
The Supreme Court’s Division Bench, consisting of Justice PS Narasimha and Justice Sandeep Mehta, undertook a detailed examination of the issues presented in the impugned High Court Order. The Court identified two primary facets of Section 11(6):
Pending Disputes: The first aspect pertains to disputes that were already before statutory authorities (Industrial Tribunal) concerning wage non-payment and the legality of termination. On this, the Court concluded these issues are deemed non-arbitrable.
Allegations of Non-Disclosure: The second aspect involved allegations regarding violations of clause 19 of the appointment order concerning non-disclosure obligations. However, these allegations were not referenced in any prior notices or reports related to the Appellant’s termination. The Court concluded that since these allegations were not part of the disciplinary proceedings leading to termination, they were effectively non-existent.
The Supreme Court ultimately ruled in favor of the Appellant by allowing his appeal and setting aside the High Court’s order appointing an arbitrator. The Court dismissed Hyundai Autoever’s petition under Section 11(6), labeling it a misuse of process intended to intimidate the Appellant for seeking redress through statutory channels. Additionally, the Court imposed a cost of Rs. 500,000 on the Respondent Hyundai Autoever and stated that the application under Section 11 of the Act was a clear abuse of the remedial process.
CONCLUSION
The Dushyant Janbandhu v. Hyundai Autoever India Pvt. Ltd. ruling serves as a pivotal reference point for understanding the limits of arbitration in employment disputes within India. It reaffirms that issues related to wage disputes and termination legality fall under statutory authority jurisdiction and are thus non-arbitrable. This ruling emphasizes the judiciary’s stance against attempts by employers to circumvent statutory remedies available to employees by resorting to arbitration in cases where employment rights are at stake. This decision not only protects employees’ rights but also reinforces judicial integrity against potential abuse by employers seeking arbitration as a means to evade legal accountability.
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[1] Dushyant Janbandhu v. Hyundai Autoever India (P) Ltd., 2024 SCC OnLine SC 3691, decided on 11th December, 2024.