Termination Clause in Service Regulations

Dear Ranju,

yes you can fight with you employer in court. it is the fashion of writing memorandums, but it is not so easy that without assigning any reasons, your employer would dismiss you. please provide further details, so that we may comments anything.

Yes, i agree with Mishraji.

It is against the principles of natural justice.

In the recent  judicial pronouncements, courts have held such termination as per terms of the contract. However if the employee at the time of seeking employment or during the period of employment brings his protest on this clause, the termination can be contested. In Government employment the same would be illegal in view of violation of article 14 of Constitution and also against  Public Policy. Refer the leading case of Central Inland Water Commission. (SC)

Please refer to two latest judgement of Delhi High Court for the month of August 2009

Y.K. Sethi v BASF India ( posted by me in judiciary files)

A.K. Shukul v Philips India  

Thanks for the advice

 such a condition is against PNJ(principles of natural justice) and violative of sec 25 F of ID Act besides violative of Art 14

Thanks for the info! for all of my learned forum members. What I understand that we have a solid ground for contesting such a preposterous claim

Ranju

Dear Friends,

I my opinion, the Company can terminate an employee without assigning any reasons, if the Appointment letter, states the same. This clasue is not one sided, and even the employee has got similar rights.

But in normal course of law, Company do incorporate the termination by paying notice pay, in lieu of notice, which is effective both ways. Thereofre challenge to this casue is ineffective as much as it imparts equality to the employee to do so. 

Thanks and Regards,

Ashish. 

Dear Ranju,

Sorry to say but i am not agree with the views of my friend Ashish. it is the way of writing in the memorandum based on the bye-laws or rules of the company. but if we take the views of Ashish for the purpose of discussion only, then it is very easy for any company to terminate any employee without assigning any reasons. that will bring monarchy.

binod

Dear Mr. Mishra,

What we fail to understand, that the termination clause is two sided. It gives the employee the chance to terminate his service with the Company without giving any reason. Therefore if such power is also given to the employee, where is the question of monarchy?

Secondly these type of clauses, are incorporated in Appointment letters of Managerial Cadre, and hence the same is out of the preview of the Industrial Disputes Act.

Each and every Company nowadays give Notice pay in lieu of Notice, and hence the provisions of the Shops and Establishment Act, as pertaining to Notice pay is complied with.

Ashish

Dear Mr. Ashish,

With regard to your observation that the termination clause is two sided, I wish to draw your attention to para 105 of the Apex Court's decision in the case of Central Inland Water Transport Corporation V/s Brojo Nath Ganguly (AIR 1986 SC 1571) where the apex court has felt that a mutuality clause between the employer and the employee has -

"the same mutuality as in a contract between the lion and the lamb that both will be free to roam about in the jungle and each will be at liberty to devour the other. When one considers the unequal position of the Corporation and its employees, the argument of mutuality becomes laughable."

Amardeep

Dear Mr. Amardeep.

I would like to draw your attention to paragragh 114 and 115 of the said Judgment, which has been referred by you.

The Court has not held that such clauses are violative of Article 14 of the Constiution of India, and the order of the Calcutta High Court has been modified to that extent:

The said paragraph are reproduced as under:

114: "The Calcutta High Court was, therefore, right in quashing the impugned orders dated February 26, 1983, terminating the services of the contesting Respondents and directing the Corporation to reinstate them and to pay them all arrears of salary. The High Court was, however, not right in declaring Clause (i) of Rule 9 in its entirety as ultra vires Article 14 of the Constitution and in striking down as being void the whole of that clause. What the Calcutta High Court overlooked was that Rule 9 also confers upon a permanent employee the right to resign from the service of the Corporation. By entering into a contract of employment a person does not sign a bond of slavery and a permanent employee can not be deprived of his right to resign. A resignation by an employee would, however, normally require to be accepted by the employer in order to be effective. It can be that in certain circumstances an employer would be justified in refusing to accept the employee's resignation as, for instance, when an employee wants to leave in the middle of a work which is urgent or important and for the completion of which his presence and participation are necessary...." The Corporation ought to make suitable provisions in that behalf in the said Rules. Therefore, while the judgment of the High Court requires to be confirmed, the declaration given by it requires to be suitably modified.

115. In the result, both these Appeals fail and are dismissed but the order passed by the Calcutta High Court is modified by substituting for the declaration given by it a declaration that Clause (1) of Rule 9 of the "Service, Discipline & Appeal Rules - 1979" of the Central Inland Water Transport Corporation Limited is void under Section  23 of the Indian Contract Act, 1872, as being opposed to public policy and is also ultra vires Article 14 of the Constitution to the extent that it confers upon the Corporation the right to terminate the employment of a permanent employee by giving him three months' notice in writing or by paying him the equivalent of three months' basic pay and dearness allowance in lieu of such notice. "

I hope so that the judgment fortifies my view point that equality prevails when both the employer and employee are given the same terms of termination.

But i take this oppurtunity to thank you as you have immensly helped in increasing my knowledge base through the citation provided by you.

Thanks,

Ashish

Dear Mr. Ashish,

Good to have your views on this judgment. However allow me to differ on the conclusion drawn from it. The court has infact held the corporation's power to terminate under clause (1) of  Rule 9 as ultra vires Article 14. I am highlighting the portion that attracted my attention in para 115 of the judgment -

"115. In the result, both these Appeals fail and are dismissed but the order passed by the Calcutta High Court is modified by substituting for the declaration given by it , a declaration that Clause (1) of Rule 9 of the "Service, Discipline & Appeal Rules - 1979" of the Central Inland Water Transport Corporation Limited is void under Section  23 of the Indian Contract Act, 1872, as being opposed to public policy and is also ultra vires Article 14 of the Constitution to the extent that it confers upon the Corporation the right to terminate the employment of a permanent employee by giving him three months' notice in writing or by paying him the equivalent of three months' basic pay and dearness allowance in lieu of such notice. "

Regards,

Amardeep

Dear Mr. Amardeep,

I beg to differ again on the same, as the original findings of the Calcutta High Court has been modified to the extent that "it confers upon the Corporation the right to terminate the employment of a permanent employee by giving him three months' notice in writing or by paying him the equivalent of three months' basic pay and dearness allowance in lieu of such notice". Hence the findlings of the Calcutta High Court that "a declaration that Clause (1) of Rule 9 of the "Service, Discipline & Appeal Rules - 1979" of the Central Inland Water Transport Corporation Limited is void under Section  23 of the Indian Contract Act, 1872, as being opposed to public policy and is also ultra vires Article 14 of the Constitution" , has been set aside by the Hon'ble Supreme Court.

Thanks,

Ashish

Dear Mr. Ashish,

First and foremost I have not expressed any opinion on the employees right to terminate the contract of employment. I have expressed my opinion only on the employer's right to terminate the contract of employment. Since you had opined that the termination clause is two sided, I wanted to draw your attention to the fact that there can be clauses which are two sided but which do not bring the contracting parties at par. My views find support from the Apex Court's judgment referred above by us wherein the court has held that the clause enabling the employer to terminate the contract of employment by 3 months notice or salary etc. in lieu thereof to be ultra vires Article 14. The judgment is clear and unambiguous to that extent. It seems that your contention is with regard to the employee's right to terminate employment.

Regards

Amardeep