Rajasthan HC Cautions Employers Against Summarily Taking Away Employee's Livelihood On Stigmatic Grounds, Upholds Bank Manager's Reinstatement

Holding that an employer must be cautious before summarily taking away the right to livelihood of an employee on 'stigmatic grounds', the Rajasthan High Court has quashed an order passed by Kotak Mahindra Bank against a Senior Branch Manager accused of fraudulent activities.

The single-judge bench of Justice Arun Monga directed the Bank to comply with the impugned order of the Labour Commissioner, Jodhpur that deemed the termination of the respondent manager as illegal. The order dated 17.11.2022 passed by the Labour Commissioner also provided for the reinstatement of the manager with consequential benefits.

“Even otherwise, trite law it is in service jurisprudence that a stigmatic order passed on the ground of alleged misconduct cannot be sustained unless a proper enquiry in accordance with law has been conducted. Any stigma on the delinquent red flags him for rest of his life and almost renders him unemployable in future with any employer…”, the court noted after referring to Cox and Kings Limited v. Narendra Singh Rathore & Ors (2013) passed by the Jaipur bench of the court.

The court went on to observe that the delinquent employee was dismissed without allowing him to put forth his defence, and hence the dismissal order was 'stigmatic' in nature. Since the order was passed without proper enquiry, the violation of principles of natural justice alone would render it not legally sustainable.

Though the Bank prayed for liberty to institute fresh enquiry against the manager, the bench sitting at Jodhpur opined that the conduct of the Bank against the employee so far reveals prejudice and hence the request should be declined. The single judge bench further opined a 'post decisional inquiry' would prejudice the employee since an impartial enquiry can never be guaranteed.

The petitioner bank had initially contended that the senior manager comes within the definition of 'employer' given in Section 2(6) of the Rajasthan Shops and Commercial Establishments Act, 1958 and he is not a workman as per the Act. After analysing Section 2(5) [Employee] of the 1958 Act in conjunction with Section 2(3) [Commercial Establishment], the court inferred that Kotak Mahindra is a 'commercial establishment' within the ambit of Section 2(3) and the Senior Branch Manager is accordingly an 'employee' within the purview of the Act.

Since the Act was held to be squarely applicable to Kotak Mahindra Bank and its employees, the court then briefly referred to section 28-A of the 1958 Act and Rule 24-A(2) of the Rajasthan Shops and Commercial Establishments Rules, 1959.

“A perusal of the proviso of the section 28-A [Notice of Dismissal Of Discharge By Employer] read with sub rule 2 of the Rule 24 supra [List of Acts Termed As Misconduct], 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 judge made the position of law clearer by adding that the Kotak Mahindra's order remained 'stigmatic' regardless of whether the manager was indeed a workman or not.

Apart from the above, the Bank had also relied upon the defence that the Labour Officer did not pass an appropriate judicial order before the issuance of summons to the Bank. On this argument, the court clarified that an administrative authority that's also a quasi-judicial authority is not required to conduct a pre-notice preliminary judicial hearing before 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 single judge bench observed before adding that the Bank cannot resort to technicalities now once they have opted not to appear and join in the proceedings even after service was effected on the Bank.

Advocates Vinay Jain and Darshan Jain appeared for the petitioner Bank. Advocate Siddhart Tatia represented the respondent manager.

Case Title: Kotak Mahindra Bank Ltd., Through Authorized President & Ors. v. Aaraj Sharma & Anr.

Case No: S.B. Civil Writ Petition No. 4729/2023

Citation: 2023 LiveLaw (Raj)

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