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LAWS(SC)-2024-12-28

SUPREME COURT OF INDIA

Coram : Pamidighantam Sri Narasimha, SANDEEP MEHTA JJ.

Decided On : December 11, 2024

Appeal Type : CIVIL APPEAL NO. 14299 OF 2024 @ SLP (CIVIL) NO. 29929 OF 2024

Appellant(s) :

Dushyant Janbandhu

Respondent(s) :

Hyundai Autoever India Pvt. Ltd

Equivalent Citation :

LAWS(SC)-2024-12-28

Referred Judgement(s) :
- Perkins Eastman Architects Dpc And Anr. V. Hscc (India) Ltd, [2020 20 SCC 760] [Referred To]
- Vidya Drolia And Others Vs. Durga Trading Corporation , [2021 2 SCC 1] [Referred To]
Referred Act(s) :
- Arbitration And Conciliation Act, 1996, S.11(6), S.11
- Industrial Disputes Act, 1947
- Payment Of Wages Act, 1936, S.15(2)

Judgment :

PAMIDIGHANTAM SRI NARASIMHA,J.

(1.) Delay condoned. Leave Granted.

(2.) Questioning the appointment of an arbitrator by the High Court of Madras under Sec. 11(6) of the
Arbitration and Conciliation Act, 1996(Hereinafter referred to as the 'Act'.), by the order impugned
before us(Order passed by the High Court of Judicature at Madras in Arb O.P. No. 31 of 2022 dtd.
20/12/2022.), the appellant has filed this appeal on the ground that the dispute with the respondent-
employer, M/S Hyundai AutoEver India Pvt. Ltd. is governed by statute under the Payment of Wages
Act, 1936(Hereinafter referred to as the 'PW Act'.) and the Industrial Disputes Act, 1947(Hereinafter
referred to as the 'ID Act'). In the normal course and in recognition of judicial restraint, as incorporated
in Sec. 5 of the Act, we would have asked the appellant to raise these objections before the Arbitral
Tribunal itself. However, as the following narration of facts speaks for itself, we have found that the
application under Sec. 11 of the Act is a clear abuse of the remedial process. We have therefore

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allowed the appeal and dismissed the Sec. 11(6) petition with cost.

(3.) The appellant was appointed as an Assistant Manager on 15/3/2019. Within a year, due to Covid-
19 pandemic, the appellant was asked to work from home from 22/3/2020 to 6/1/2021. However, the
respondent 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 4/9/2020, followed by an inquiry,
report of which is in the following terms;

"Conclusion

* There has been prima facie evidence against Dushyant for his purposeful absenteeism to
work and its impact on Company's business and Customer relations.

* Possibility of too due to his absenteeism. A detailed Charge sheet can be issued to Mr.
Dushyant and refer to Disciplinary committee to take final decision.

* Till the final decision, he should attend office regularly as per the roster.

* If he is having access from remote, those days should be recorded separately by his HOS.

* Based on the final decision of the disciplinary committee further action can be taken."

(4.) The inquiry led to issuance of a charge memo on 25/11/2020 for violating certain contractual
clauses and these related to noncooperation and absenteeism. It is necessary to mention here itself that
there is no reference to Clause 19("You will not give out to any one, by word of mouth or otherwise,
particulars of HAEI's business or an administrative or organizational matter of a confidential nature
which may be your privilege to know by virtue of you being HAEI's employee.") of the appointment
conditions relating to violation of the non-disclosure obligation. Ultimately, an order of termination
was passed on 21/1/2021, the relevant portion of the said order of termination is important for our
consideration and it is extracted hereinbelow for ready reference.

"Please refer our Show Cause Notices dtd. 4/9/2020, Emails dated (05th Aug, 3/9/7 Sep
2020 and 7/1/2021) and the charge sheet dated (26/11/2020). You have continued to remain absent at
work premises without authorisation and also you did not present yourself for our enquiry meetings
called for as per our disciplinary Policy. Considering all the above, as per your agreed employment
terms Clause 11, 12(V), 17, 24 and 25, your employment has been terminated with effective from the
closing hours of 6/1/2021. [...]"

(5.) It is evident from the above that there is no allegation whatsoever that the appellant has violated
clause 19 of the appointment order leading to the order of termination.

(6.) During the pendency of disciplinary action, as the appellant was not paid his salary, he issued a
legal notice for payment of wages on 29/5/2021 and filed a petition under Sec. 15(2) of the PW Act
before the authority under the PW Act. As a counterblast, the respondent issued a notice alleging that
the disputes must be settled through arbitration and proceeded to unilaterally appoint an arbitrator. We
may mention here itself that even in the said reply notice dtd. 22/6/2021 issued by the respondent,

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there is no specific allegation of violation of the non-disclosure obligations by the appellant herein.
The claim for arbitration naturally related to stoppage of payment of wages, which according to the
appellant was within the jurisdiction of the Authority under the PW Act as per its statutory provisions.

(7.) Before we deal with the facts relating to the proceedings before the Authority under the PW Act,
it is necessary to mention that as the unilaterally appointed arbitrator commenced the arbitral
proceedings, the appellant filed an application under Sec. 16 of the Act calling upon the arbitrator to
rule on his competence. It is interesting to note that the arbitrator himself passed an order on 1/5/2022
taking into account the decision of this Court in Perkins Eastman Architects DPC & Anr. v. HSCC
(India) Ltd,(2020) 20 SCC 760 and closing the arbitral proceedings. The relevant portion is
reproduced here as follows:

"[...] In the present case, as detailed herein above, the appointment of the undersigned as
the Arbitrator and the Constitution of the Arbitral Tribunal thereof are without the consent or the
participation of the Respondent. Once the jurisdiction of this Arbitral Tribunal has been put into
question on that ground, this Tribunal ceases to have the power or authority to proceed with the matter
in any manner.

I therefore have no hesitation in holding that the constitution of this Arbitral Tribunal is not
in accordance with or in consonance with the provisions of Sec. 11 of the Arbitration and Conciliation
Act as amended, particularly in the light of the ratio set out by the Hon'ble Supreme Court in Perkins
Eastman Architects DPC and another V/s HSCC (India) Ltd.

In the light of the same, the arbitral proceedings between the parties above-named before
this Tribunal is closed forthwith with liberty being granted to both the parties to work out their
respective remedies in accordance with law."

(8.) Returning to the proceedings commenced before the Authority, we note that the respondent
moved an application under Sec. 8 of the Act seeking reference of the dispute involved in the petition
under Sec. 15(2) of the PW Act to arbitration. The Authority under PW Act dismissed the said
application on 3/3/2022 holding that; "In view of Sec. 23 of the Payment of Wages Act, arbitration
agreement cannot stand in the way of the claimant in respect of illegally deducted wages under
Payment of Wages Act."

(9.) There is yet another development. Questioning the order of termination dtd. 21/1/2021, the
appellant approached the Industrial Tribunal by filing a petition under Sec. 2(A) of the ID Act and the
same is pending adjudication and determination by the Industrial Tribunal.

(10.) It is in the above referred background that the respondent approached the High Court by filing a
petition under Sec. 11(6) of the Act in August 2022 seeking appointment of an arbitrator. The disputes
between the appellant and the respondent, as indicated in the arbitration petition relate to non-payment
of wages and also the legality and validity of termination order dtd. 21/1/2021. Over and above these
disputes, for the first time the respondent sought to give a new angle to the dispute by stating that the
appellant has also violated the non-disclosure obligations under clause 19 of the appointment order.

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(11.) In the order impugned before us, the High Court has proceeded to note an arbitration agreement
and therefore, appointed an advocate as the arbitrator.

(12.) 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 on
4/9/2020, nor was it a part of the inquiry report, the relevant portion of which we have extracted in the
para 3 above. This is also not a part of the charge memo dtd. 25/11/2020.

(13.) Crucially, the termination was not based on any such allegation as is evident from the
termination order dtd. 21/1/2021 that we have extracted earlier. Under these circumstances, we can
conclude that there is no dispute about violation of nondisclosure obligations and Sec. 11(6) petition,
to this extent is non-existent.

(14.) Insofar as other disputes are concerned, they relate to nonpayment of wages and the legality and
validity of the order of termination dtd. 21/1/2021. The appellant approached the Authority under the
PW Act much before the order of termination and the said authority would exercise jurisdiction under
Sec. 15 (2) of the PW Act to the exclusion of civil courts and these disputes are non-arbitrable. Sec. 22
of the PW Act reads as under:

"22. Bar of Suits.-No Court shall entertain any suit for the recovery of wages or of any
deduction from wages in so far as the sum so claimed-

(a) forms the subject of an application under sec. 15 which has been presented by the
plaintiff and which is pending before the authority appointed under that sec. or of an appeal under sec.
17; or

(b) has formed the subject of a direction under sec. 15 in favour of the plaintiff; or

(c) has been adjudged, in any proceeding under sec. 15, not to be owed to the plaintiff; or

(d) could have been recovered by an application under sec. 15."

(15.) Equally, legality of the order of termination dtd. 21/1/2021 is within the jurisdiction of Industrial
Tribunal under Sec. 2(A) of the ID Act and it is important to mention that the jurisdiction of the
Industrial Court is also to the exclusion of the civil courts and is not arbitrable. It is also important to
note that remedies under these statutes were invoked much prior to the filing of petition under Sec.
11(6) by the respondent. In Vidya Drolia v. Durga Trading Corporation,(2021) 2 SCC 1 the principle
of subject-matter arbitrability is enunciated as follows:

"76. In view of the above discussion, we would like to propound a fourfold test for
determining when the subjectmatter of a dispute in an arbitration agreement is not arbitrable:

76.1 (1) When cause of action and subject-matter of the dispute relates to actions in rem,
that do not pertain to subordinate rights in personam that arise from rights in rem.

76.2 (2) When cause of action and subject-matter of the dispute affects third-party rights;

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have erga omnes effect; require centralised adjudication, and mutual adjudication would not be
appropriate and enforceable.

76.3 (3) When cause of action and subject-matter of the dispute relates to inalienable
sovereign and public interest functions of the State and hence mutual adjudication would be
unenforceable.

76.4 (4) When the subject-matter of the dispute is expressly or by necessary implication
non-arbitrable as per mandatory statute(s)."

(emphasis supplied)

(16.) Having considered the factual background in which the Sec. 11(6) petition has been filed, we are
of the opinion that it is an abuse of process. It was clearly intended to threaten the appellant for having
approached the statutory authorities under the PW Act and the ID Act. There is no basis for invoking
clause 19 of the agreement and demanding compensation of Rs.14,02,822.00 when that fact situation
did not arise.

(17.) The Sec. 11(6) petition has two facets. The first relates to 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 second facet relates to the alleged violation of clause 19
relating to nondisclosure obligation, which was not raised in the show cause notice, inquiry report,
chargesheet and termination order and as such is non-existent.

(18.) In view of the above, we allow the Civil Appeal and set-aside the judgment and the order passed
by the High Court and dismiss the petition under Sec. 11(6) filed by the respondent under the
Arbitration and Conciliation Act.

(19.) The appellant will also be entitled to cost quantified at Rs.5.00 lakhs payable within a period of
3 months from today.

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