2024 INSC 966 1

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 14299 OF 2024

@ SLP (CIVIL) NO. 29929 OF 2024

@ DIARY NO. 34174 OF 2023

DUSHYANT JANBANDHU ...APPELLANT(S)

VERSUS

M/S HYUNDAI AUTOEVER INDIA PVT. LTD. …RESPONDENT(S)

J U D G M E N T

PAMIDIGHANTAM SRI NARASIMHA, J .

1. Delay condoned. Leave Granted.

2. Questioning the appointment of an arbitrator by the High Court

of Madras under Section 11(6) of the Arbitration and Conciliation

Act, 1996

1, by the order impugned before us

2, 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

3 and

1

Hereinafter referred to as the ‘Act’.

2

Order passed by the High Court of Judicature at Madras in Arb O.P. No. 31 of 2022 dated

20.12.2022.

3

Hereinafter referred to as the ‘PW Act’.

2

the Industrial Disputes Act, 1947

4. In the normal course and in

recognition of judicial restraint, as incorporated in Section 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 Section 11 of the Act is a clear abuse of the

remedial process. We have therefore allowed the appeal and

dismissed the Section 11(6) petition with cost.

3. The appellant was appointed as an Assistant Manager on

15.03.2019. Within a year, due to Covid-19 pandemic, the

appellant was asked to work from home from 22.03.2020 to

06.01.2021. 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

04.09.2020, 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.

4

Hereinafter referred to as the ‘ID Act’.

3

• 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 non-

cooperation and absenteeism. It is necessary to mention here

itself that there is no reference to Clause 19

5 of the appointment

conditions relating to violation of the non-disclosure obligation.

Ultimately, an order of termination was passed on 21.01.2021,

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 dated 4

th

Sep 2020,

Emails dated (05

th

Aug, 03

rd

Sep, 07 Sep 2020 & 07 Jan 2021)

and the charge sheet dated (26 Nov 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 & 25, your employment has been terminated with

effective from the closing hours of 06 Jan 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

5

“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.”

4

on 29.05.2021 and filed a petition under Section 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 dated 22.06.2021 issued by the respondent, 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 Section 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 01.05.2022 taking into account the decision of this Court in

Perkins Eastman Architects DPC & Anr. v. HSCC (India) Ltd.

6 and

closing the arbitral proceedings. The relevant portion is

reproduced here as follows:

6

(2020) 20 SCC 760.

5

“[…] 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 Section 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 & 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 Section 8 of

the Act seeking reference of the dispute involved in the petition

under Section 15(2) of the PW Act to arbitration. The Authority

under PW Act dismissed the said application on 03.03.2022

holding that; “In view of Section 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 dated 21.01.2021, the appellant approached the

Industrial Tribunal by filing a petition under Section 2(A) of the

ID Act and the same is pending adjudication and determination

by the Industrial Tribunal.

6

10. It is in the above referred background that the respondent

approached the High Court by filing a petition under Section 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 dated

21.01.2021. 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.

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

04.09.2020, 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 dated 25.11.2020.

13. Crucially, the termination was not based on any such allegation

as is evident from the termination order dated 21.01.2021 that we

have extracted earlier. Under these circumstances, we can

7

conclude that there is no dispute about violation of non-

disclosure obligations and Section 11(6) petition, to this extent is

non-existent.

14. Insofar as other disputes are concerned, they relate to non-

payment of wages and the legality and validity of the order of

termination dated 21.01.2021. 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 PW Act to the exclusion of civil courts and these

disputes are non-arbitrable. Section 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 section 15 which

has been presented by the plaintiff and which is pending

before the authority appointed under that section or of an

appeal under section 17; or

(b) has formed the subject of a direction under section 15 in

favour of the plaintiff; or

(c) has been adjudged, in any proceeding under section 15, not

to be owed to the plaintiff; or

(d) could have been recovered by an application under section

15.”

15. Equally, legality of the order of termination dated 21.01.2021 is

within the jurisdiction of Industrial Tribunal under Section 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

8

under these statutes were invoked much prior to the filing of

petition under Section 11(6) by the respondent. In Vidya Drolia v.

Durga Trading Corporation

7, 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 subject-

matter 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; 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 Section

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/-

when that fact situation did not arise.

7

(2021) 2 SCC 1

9

17. The Section 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 non-

disclosure 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 Section 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 lakhs

payable within a period of 3 months from today.

………………………………....J.

[PAMIDIGHANTAM SRI NARASIMHA]

………………………………....J.

[SANDEEP MEHTA]

NEW DELHI;

DECEMBER 11, 2024.