The Delhi High Court has reaffirmed that even where an employee admits non-compliance with a transfer order, termination without a prior disciplinary enquiry violates the principles of natural justice. The judgment underscores that the form of termination - whether framed as contractual discharge or punitive action - is determined by its substance, not its label.
Background & Facts
The Dispute
The dispute arose from the termination of Shri Sarabjeet Singh, a Medical Sales Representative (MSR), by M/s Novartis India Limited (formerly M/s Sandoz India Limited) on 01.11.1995. Singh had been employed since 26.08.1985 and was confirmed as a permanent employee on 04.06.1986. His terms of employment permitted transfer to any establishment in India, subject to one month’s notice or salary in lieu thereof.
Key Facts
- Singh was posted in Chandigarh and transferred to New Delhi around January 1990.
- A long-term settlement between the Management and the Association of Chemical Workers (ACW) governed service conditions from 08.08.1990 to 30.06.1992.
- Demand No.20 of the ACW, seeking mutual consent for transfers, was rejected by the Management.
- Singh was an active member of ACW; union subscription deductions continued even after he allegedly resigned in April 1995.
- On 05.09.1995, the Management froze Singh’s work without assigning any reason.
- Singh wrote to the Management on 13.09.1995 seeking reasons; no response was given.
- On 25.09.1995, the Government of Maharashtra referred an industrial dispute to the Industrial Tribunal, Mumbai (Reference IT No.55/1995), which included Demand No.20 on transfers.
- On 26.09.1995, the Management issued a transfer order directing Singh to report at Ratlam, Madhya Pradesh, effective 09.10.1995.
- Singh received the order on 05.10.1995 and submitted a representation on 07.10.1995 requesting deferment pending the industrial dispute.
- The Management rejected the representation on 13.10.1995.
- On 01.11.1995, Singh’s services were terminated by payment of one month’s salary in lieu of notice, without any show-cause notice, charge-sheet, or domestic enquiry.
- Singh had not joined duties at Ratlam.
Procedural History
- 01.11.1995: Termination of services.
- 1996: Singh filed Complaint (IT) No.1/1996 before the Industrial Tribunal, Mumbai under Section 33-A of the Industrial Disputes Act (ID Act).
- 30.06.2005: Industrial Tribunal held termination illegal.
- 21.12.2006: Single Judge of Bombay High Court set aside the Tribunal’s order.
- 07.08.2007: Division Bench of Bombay High Court affirmed the dismissal.
- 18.09.2009: Supreme Court, in Civil Appeal No.6473 of 2009, held that Section 33(2)(b) issues were concluded but directed adjudication of the termination on merits under Section 10 of the ID Act.
- 18.12.2009: Government of NCT of Delhi referred the dispute to Labour Court - XIX, Delhi as LIR No.547/2011.
- 24.02.2015: Labour Court set aside termination, ordered reinstatement with continuity of service and 25% back wages from 11.01.2010.
- 20.07.2015: Award published.
- 18.02.2026: Judgment reserved by Delhi High Court.
- 04.05.2026: Judgment delivered.
The Parties' Positions
For the Petitioner (Novartis India Limited)
- Argued that Singh was not a ‘workman’ under Section 2(s) of the ID Act, relying on H.R. Adyanthaya v. Sandoz (India) Ltd. (1994) 5 SCC 737.
- Contended that non-compliance with a lawful transfer order constituted wilful misconduct justifying termination.
- Asserted that no domestic enquiry was required since misconduct was admitted and self-evident.
- Claimed the termination was a discharge simpliciter under the appointment letter, not punitive.
- Alleged Singh was not concerned with the pending industrial dispute and had resigned from ACW.
For the Respondent (Sarabjeet Singh)
- Argued he was a ‘workman’ under the ID Act, as amended by the Sales Promotion Employees (Conditions of Service) Act, 1976.
- Maintained that the transfer was mala fide, timed to suppress union activity and punish dissent.
- Asserted that his non-compliance was based on a bona fide belief that the pending industrial dispute protected him.
- Highlighted absence of any show-cause notice, charge-sheet, or enquiry.
- Emphasized his 10-year unblemished service and the disproportionate nature of termination.
Relief Sought
The petitioner sought quashing of the Labour Court’s award dated 24.02.2015. The respondent sought upholding of the award and full implementation of reinstatement with all consequential benefits.
The Legal Issue
The central questions were: (1) Whether the respondent qualified as a ‘workman’ under Section 2(s) of the Industrial Disputes Act, 1947? (2) Whether termination for non-compliance with a transfer order, without a prior disciplinary enquiry, violates the principles of natural justice? (3) Whether the Labour Court’s findings were perverse or jurisdictionally flawed?
Arguments Presented
For the Appellant/Petitioner
The petitioner relied on H.R. Adyanthaya v. Sandoz (India) Ltd. to argue that Medical Sales Representatives are not ‘workmen’ under the ID Act. It contended that Singh’s admitted failure to join Ratlam constituted wilful misconduct, rendering a domestic enquiry redundant. It further claimed the termination was a contractual discharge under Clause (C) of the confirmation letter, not a punitive action. Reliance was placed on Gujarat Electricity Board v. Atmaram Sungomal Poshani to assert that rejection of a representation removes any obligation to defer transfer. It also cited Workmen v. Firestone Tyre & Rubber Co. and Amar Chakravarty v. Maruti Suzuki to argue that evidence before the Labour Court could justify termination even without prior enquiry.
For the Respondent/State
The respondent countered that the amended Sales Promotion Employees Act, 1976, deemed him a ‘workman’ since he was not in a managerial or supervisory role. He argued that the sequence of events - freezing of duties, sudden transfer during a pending industrial dispute, and hasty termination - revealed mala fides. He relied on Novartis India Ltd. v. State of West Bengal and Uptron India Ltd. v. Shammi Bhan to assert that even admitted misconduct requires a fair hearing before termination. He emphasized that the Labour Court correctly found his non-compliance was not wilful but based on a bona fide belief arising from the pending reference.
The Court's Analysis
The Court first addressed the preliminary issue of workman status. It held that the petitioner’s belated challenge to Singh’s status, raised only at final arguments after evidence concluded, was impermissible. The Court further held that under Section 6(2) of the Sales Promotion Employees (Conditions of Service) Act, 1976, as amended in 1987, field-level MSRs like Singh, not in managerial or supervisory roles, are deemed ‘workmen’ under the ID Act. The petitioner’s reliance on H.R. Adyanthaya was thus inapplicable.
The Court then turned to the core issue: whether termination without a disciplinary enquiry was lawful. It rejected the petitioner’s argument that the termination was a discharge simpliciter. The Court held that the substance of the action, not its form, determines its character. The termination letter explicitly cited non-compliance with the transfer order as the basis, and the Management’s written statement described the conduct as deliberate and defiant. This rendered the action punitive, not administrative.
“The termination dated 01.11.1995 being punitive in nature, compliance with the principles of natural justice was imperative. No show-cause notice was issued, no charge-sheet was framed, and no domestic enquiry was conducted prior to termination.”
The Court affirmed that the right to livelihood under Article 21 of the Constitution requires a fair hearing before termination. It cited D.K. Yadav v. J.M.A. Industries and Uptron India Ltd. v. Shammi Bhan to hold that even where misconduct is admitted, the employee must be given an opportunity to explain mitigating circumstances, such as bona fide belief or external pressures.
The Court accepted the Labour Court’s finding that Singh acted under a bona fide belief, given the pending industrial dispute involving transfer conditions and the unexplained freezing of his duties. It distinguished Gujarat Electricity Board and Y.P. Sarabhai on facts, noting the absence of prolonged absence or bad faith.
The Court also held that the Labour Court’s award of 25% back wages from 11.01.2010, while denying wages for the earlier period, reflected a balanced exercise of discretion under Section 11-A of the ID Act, taking into account both the illegality of termination and the employee’s conduct.
The Verdict
The petition was dismissed. The termination dated 01.11.1995 was set aside as illegal and unjustified. The respondent shall be deemed to have continued in service from 01.11.1995 until the date of superannuation, with full continuity of service for all purposes. He is entitled to back wages at 25% of his last drawn wages for the period from 11.01.2010 to 24.02.2015. For the period from 24.02.2015 until superannuation, he shall be entitled to full wages with all increments and benefits. The petitioner shall compute and release all consequential retiral benefits - including gratuity and provident fund - within twelve weeks from the date of judgment. In case of default, the amounts shall carry interest at 6% per annum from the expiry of the stipulated period until realization.
What This Means For Similar Cases
Disciplinary Enquiry Is Non-Negotiable for Punitive Terminations
- Employers cannot circumvent natural justice by labelling punitive terminations as ‘contractual discharges’.
- Even if misconduct is admitted, a show-cause notice and opportunity to explain must precede termination.
- The burden to prove the action was non-punitive lies with the employer.
Bona Fide Belief Can Mitigate Misconduct
- An employee’s genuine belief, based on pending industrial disputes or past practices, may negate wilfulness.
- Courts will examine the totality of circumstances - including timing, prior conduct, and union context - when assessing intent.
- Isolated income tax returns or unsubstantiated claims of gainful employment do not discharge the employer’s burden to prove alternative employment.
Workman Status Must Be Determined on Substantive Role, Not Title
- The definition of ‘workman’ under the ID Act is not static; statutory amendments like the SPE Act, 1976, expand coverage.
- Employers cannot raise objections to workman status belatedly, especially after having invoked tribunal jurisdiction earlier.
- Field-level sales personnel without supervisory authority are likely covered under the amended definition.
