ARBITRATION PROCEEDINGS FOR WAGES DISPUTE – POSSIBLE?

[Mr. M. GOVINDARAJAN]

In DUSHYANT JANBANDHU VERSUS M/S HYUNDAI AUTOEVER INDIA PVT. LTD. - 2024 (12) TMI 663 - SUPREME COURT, the appellant, in this case, was appointed as Assistant Manager on 15.03.2019.  During the COVID period he was asked to work from home from 22.03.2020 to 06.01.2021.  The appellant complied with the orders of his office.  However, he was instructed to resume duty physically during August 2020.  This instruction was not complied with by the appellant.  Therefore, a show cause notice was issued to the appellant by the administration on 04.09.2020.  The administration also ordered for an inquiry against the appellant.

The inquiry was conducted and the inquiry report was submitted.  The inquiry report contains the following-

• There has been prima facie evidence against the appellant for his purposeful absenteeism to work and its impact on Company’s business and Customer relations.
• A detailed charge sheet may be issued for his absenteeism and refer the matter to Disciplinary Committee to take final decision.
• The appellant shall attend the office till the finalization of the case.
• If he is having access from remote, those days should be recorded separately by his HOS.
• Further action may be taken by the administration based on the outcome of the enquiry of the Disciplinary Committee.

A charge sheet was issued to the appellant based on the inquiry report on 25.11.2020 for violating certain contractual clauses.  An order of termination was passed on 21.01.2021. 

During the pendency of disciplinary proceedings salary was not paid to the appellant.  The appellant issued a notice to his employer for the payment of wages on 29.05.2021.  Besides, the appellant filed an application before the Authority under Payment of Wages Act for the payment of his wages during the period of disciplinary proceedings. 

But the employer issued a notice to the appellant informing that the disputes must be settled by means of arbitration on 29.06.2021.  The employer also appointed an arbitrator.   The arbitrator commenced the arbitral proceedings.  the appellant filed an application under Section 16 of the Arbitration and Conciliation Act, 1996 calling upon the arbitrator to rule on his competence.  The arbitration considered the application filed by the appellant and closed the arbitration proceedings vide its order dated 01.05.2022.  In his order the Arbitrator held that 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.  the constitution of this Arbitral Tribunal is not in accordance with or in consonance with the provisions of Section 11 of the Arbitration and Conciliation Act as amended, 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.

After the decision of the above said, the employer filed an application before the Authority for Payment of Wages Act under Section 8 of the Payment of Wages Act.   The employer sought for reference to the dispute to arbitration.  The Authority under the Payment of Wages Act dismissed the application on 03.03.2022.  The Authority held that arbitration agreement cannot stand in the way of the claimant in respect of illegally deducted wages under Payment of Wages Act.

In the meanwhile, the appellant filed a petition before the Industrial Tribunal under Sectio 2(A) of the Industrial Disputes Act challenging his dismissal order.  The said application is still pending.   The employer filed a petition before the High Court under Section 11(6) of the Arbitration and Conciliation Act, 1996 seeking appointment of an arbitrator.  For the first time the employer 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.  The High Court appointed an Advocate as arbitrator.

The appellant filed the present appeal before the High Court challenging the impugned order passed by the High Court, appointing an arbitrator.  The High Court observed that the employer did not make allegations against the appellant that he contravened the non-disclosure obligations under Clause 19 of the appointment order in any of the notices issued to the appellant or in the approach for appointment of arbitrator or in the charge memo issued to the appellant.  Further the termination was not based on any such allegation as is evident from the termination order dated 21.01.2021.  The High Court held that there is no dispute about violation of nondisclosure obligations and Section 11(6) petition, to this extent is non-existent.

In regard to the disputes of non-payment of wages and the legality of the termination order of the appellant, the High Court observed that the appellant approached the

Authority under the PW Act much before the order of termination and the said authority would exercise jurisdiction under Section 15(2) of the Payment of Wages Act to the exclusion of civil courts and these disputes are non-arbitrable.  The appellant approached the authority under the Payment of Wages Act much before the invocation of the provisions of Arbitration and Conciliation Act, 1996 by the employer.

The High Court observed that the petition filed by the employer invoking section 11(6) of the Arbitration and Conciliation Act is an abuse of process and intended to threaten the appellant for having approached the statutory authorities under the Payment of Wages Act and the Industrial Disputes Act.  There is no basis for invoking clause 19 of the agreement and demanding compensation of Rs. 14,02,822/- when that fact situation did not arise.

The High Court further observed that the Section 11(6) of the Arbitration and Conciliation Act, 1996 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.

The High Court allowed the appeal filed by the appellant and set-aside the judgment and the order passed by the High Court and dismiss the petition under Section 11(6) filed by the employer under the Arbitration and Conciliation Act.