Domestic Enquiry Fairness | Industrial Court Must Record Separate Findings on Procedural Compliance and Perversity: Bombay HC

The Bombay High Court has underscored the necessity for Industrial Courts to record separate, comprehensible findings on preliminary issues such as fairness of domestic enquiry and perversity in findings. In this case, the High Court found the Industrial Court’s order incomprehensible and lacking reasoned conclusions, warranting remand for fresh adjudication. The judgment reinforces that procedural fairness and evidentiary evaluation must be explicitly addressed in industrial disputes, failing which appellate intervention is justified.

Background & Facts

The Dispute

The petitioner, The Chembur Nagrik Sahakari Bank Ltd., dismissed the respondent, Roshan Kadam, from service following a domestic enquiry into allegations of misconduct. The respondent, who worked as a peon, was charged with:

1. Conspiracy with third parties (Mrs. Rupali Sawant and a moneylender, Mr. Anilmon Mohan Kozhiparambil) to disburse gold loans against fake gold pledges, causing financial loss to the bank.
2. Destruction of evidence related to the above misconduct.

The Enquiry Officer held the charges proved, and the respondent was dismissed on 11 August 2020 after being afforded an opportunity to respond to the findings.

Key Facts

• Chargesheet issued: 3 April 2019
• Domestic enquiry conducted: Dates not specified, but findings held charges proved
• Dismissal order: 11 August 2020
• Alleged misconduct: Disbursal of gold loans against fake pledges, conspiracy with third parties, and destruction of evidence
• Financial loss: Implied but not quantified in the judgment

Procedural History

The respondent challenged the dismissal before the Labour Court, Thane, in Application (MIR) No. 1/2020. The Labour Court framed two preliminary issues:

1. Whether the domestic enquiry was conducted fairly.
2. Whether the findings of the Enquiry Officer were perverse.

• 20 June 2022: Labour Court answered both issues in favour of the petitioner-bank, holding that:

  • The enquiry was fair, as the respondent was afforded active participation (cross-examination of management witnesses and opportunity to present defence evidence).
  • The findings of the Enquiry Officer were not perverse, as the charges were proved based on evidence.

• Appeal (IC) No. 2/2022: Respondent appealed to the Industrial Court, Thane.

• 4 July 2023: Industrial Court set aside the Labour Court’s order, holding that the Labour Court’s findings on both preliminary issues were incorrect.

• 29 August 2023: Bombay High Court stayed the Industrial Court’s order and further proceedings before the Labour Court.

• 29 June 2026: Present writ petition filed by the bank, challenging the Industrial Court’s order.

Relief Sought

The petitioner sought:

• Quashing of the Industrial Court’s order dated 4 July 2023.
• Restoration of the Labour Court’s order dated 20 June 2022.
• Remand of the appeal to the Industrial Court for fresh adjudication on merits.

The Legal Issue

The central question was whether the Industrial Court erred in law by:

1. Failing to frame separate issues or record distinct findings on the fairness of the domestic enquiry and perversity in the Enquiry Officer’s findings.
2. Setting aside the Labour Court’s order without reasoned conclusions or evidentiary evaluation, rendering its judgment incomprehensible.

Arguments Presented

For the Petitioner (Bank)

• The **Industrial Court’s judgment was vague and incomprehensible, lacking separate discussion on the two preliminary issues.
• The Labour Court had correctly evaluated the enquiry proceedings, noting that the respondent was given full opportunity to cross-examine witnesses and present defence evidence.
• The Industrial Court failed to assess the fairness of the enquiry and instead focused solely on the correctness of the Labour Court’s order.
• The Industrial Court’s findings on perversity were flawed, as it ignored substantial evidence proving the charges while cherry-picking admissions by the respondent.

For the Respondent (Employee)

• The domestic enquiry was unfair, as the Enquiry Officer did not independently evaluate evidence for each charge.
• The findings of the Enquiry Officer were perverse, as sufficient evidence was not recorded to prove all charges, particularly those relating to breach of standing orders, negligence, and procedural lapses.
• The Industrial Court correctly set aside the Labour Court’s order, as the Labour Court failed to maintain evidentiary equilibrium between the parties.

The Court's Analysis

The High Court critically examined the Industrial Court’s judgment and identified two glaring errors:

1. Failure to Record Separate Findings on Preliminary Issues The Industrial Court did not frame distinct issues for the fairness of the enquiry and perversity in findings. Instead, it clubbed both issues into a singular question: whether the Labour Court’s order was correct. The judgment lacked clarity, with the only reference to fairness appearing in para 23, which merely stated that the respondent was provided an opportunity to defend without emphatically concluding whether the enquiry was fair.

   "The learned Member of the Industrial Court framed singular issue about correctness of order passed by the Labour Court on preliminary issues. Perusal of order passed by the learned Member of the Industrial Court would indicate that there is no separate discussion on the two preliminary issues... In my view therefore, the judgment and order of the learned Member of the Industrial Court on preliminary issue no.1 relating to fairness in the enquiry is clearly unsustainable."

2. Inadequate Evaluation of Evidence on Perversity The Industrial Court failed to properly evaluate the evidence proving the charges. While it acknowledged the respondent’s admissions (e.g., securing loans against another person’s gold), it disregarded substantial evidence supporting the other charges, such as breach of standing orders, negligence, and procedural lapses. The Court observed:

   "The Industrial Court has not taken care to evaluate the evidence and has recorded vague findings for setting aside the order of the Labour Court... The findings recorded by the Industrial Court in para-24 of the judgment are not convincing."

   The Labour Court, in contrast, had thoroughly examined the evidence of three management witnesses and upheld the Enquiry Officer’s findings. The Industrial Court’s vague reasoning and lack of evidentiary analysis rendered its conclusions unsustainable.

3. Remand as the Only Viable Option Given the incomprehensibility of the Industrial Court’s judgment, the High Court held that remand was necessary to ensure proper adjudication. The Court emphasized that appellate intervention under Article 227 is not meant to re-evaluate findings but to correct jurisdictional errors. Since the Industrial Court failed to perform its duty, remand was the only appropriate remedy.

   "Remand is necessitated in the facts of the present case since this Court has found it difficult to comprehend the judgment of the Industrial Court. The Industrial Court has also not recorded separate findings on two preliminary issues of fairness in the enquiry and perversity in the findings of the Enquiry Officer."

4. Failure to Declare Findings After Setting Aside Labour Court’s Order The Industrial Court erred by merely setting aside the Labour Court’s order without declaring its own findings on the fairness of the enquiry or perversity in the Enquiry Officer’s report. The High Court held that such an omission is legally impermissible, as the Industrial Court must conclusively determine the preliminary issues after overturning the lower court’s order.

The Verdict

The High Court partly allowed the writ petition and passed the following directions:

1. Set aside the Industrial Court’s order dated 4 July 2023.
2. Remanded Appeal (IC) No. 2/2022 to the Industrial Court for fresh adjudication.
3. Directed the Industrial Court to decide the appeal on merits without being influenced by observations in the present order.
4. Kept all rights and contentions of the parties open for agitation before the Industrial Court.
5. Requested expeditious disposal of the appeal, with an outer limit of four months from the date of appearance.
6. Ordered parties to appear before the Industrial Court on 9 July 2026 with a copy of the High Court’s order.

The Court declined to award costs.

What This Means For Similar Cases

Industrial Courts Must Record Separate, Reasoned Findings

• Mandatory Separation of Issues: Industrial Courts must frame and address distinct issues for fairness of enquiry and perversity in findings. Clubbing both issues into a singular question renders the judgment vulnerable to challenge.
• Evidentiary Rigour: Courts must evaluate evidence comprehensively, avoiding selective reliance on admissions while ignoring other material evidence. Cherry-picking evidence weakens the judgment’s credibility.
• Clarity and Comprehensibility: Judgments must be clearly reasoned and easy to comprehend. Vague or ambiguous findings invite appellate intervention.

Remand Is the Remedy for Jurisdictional Failures

• Appellate Courts Under Article 227 will not re-evaluate evidence but will correct jurisdictional errors. If the lower court fails to perform its duty, remand is the preferred remedy.
• Opportunity for Fresh Adjudication: Remand ensures that parties receive a fair hearing on merits, particularly when the lower court’s order is incomprehensible or procedurally flawed.

Employers Must Ensure Procedural Fairness in Domestic Enquiries

• Active Participation: Employers must ensure that domestic enquiries afford the delinquent employee full opportunity to cross-examine witnesses and present defence evidence. Documenting such participation strengthens the enquiry’s fairness.
• Evidence Documentation: Enquiry Officers must record detailed findings for each charge, correlating evidence with allegations. Vague or generalized findings risk being set aside.
• Natural Justice Compliance: While procedural compliance (e.g., opportunity to defend) is essential, substantive fairness (e.g., unbiased evaluation) is equally critical. Courts will scrutinize both aspects.