International Labor & Employment Law Committee Newsletter

Issue: April 2013

Editor: Tim Darby | Africa and Middle East Editor: Karen Seigel | Asia and Oceania Editor: Ute Krudewagen | Canada Editor: Gilles Touchette | European Editor: Paul Callaghan | Latin America Editor: Juan Carlos Varela | Law Student Editor: Irene Lehne, Earle Mack School of Law at Drexel University

India

Suppression of Material Facts in Employment Application Can Result in Rejection of the Application by a Prospective Employer

Stuti Galiya, Khaitan & Co, Mumbai, India

"If a person withholds facts from his prospective employer about his conviction in a criminal case, he cannot as a matter of right claim the job even though he may have been pardoned or released on bond of good conduct by a court for the offence" the Bombay High Court (High Court) ruled on February 22, 2013, after hearing a writ petition filed by the prospective employee.1

In this case, the Petitioner, an applicant for employment, had challenged the decision of Bank of India (Respondent) to cancel his candidature for a clerk's position under the provisions of Section 10(1)(b)(i) of the Banking Regulations Act, 1948 on the grounds that he had concealed vital information about his conviction in a theft case. The Petitioner contended that since the criminal court had granted him the benefit of the provisions under the Probation of Offenders Act, 1958, he could not be subjected to any disqualification.

The Petitioner, along with another accused, was found guilty of stealing a motor vehicle; they had moved the motor vehicle without the owner's consent. However, the criminal court instead of punishing them, released them under the provisions of the Probation of Offenders Act, 1958 on a bond of good conduct.

The High Court dismissed the Petitioner's argument and ruled that since the Petitioner aspired to serve a bank where the service warrants the confidence of the employer, the Petitioner was under an obligation to disclose all relevant information and not to suppress material facts. The High Court ruled that the nature of employment which he intended to carry out required more transparency from him, and his conviction for an offence involving moral turpitude ought to have been disclosed. The Petitioner, however, did not disclose the facts and the Respondent learned about them only during a police verification procedure undertaken while recruiting.

In addition, the Banking Regulation Act, 1958 provisions prohibit any bank from employing a person charged with a criminal offence, the High Court noted. Hence, the Respondent was within its rights to reject the Petitioner's job application.

Further, since the Respondent had not issued any appointment letter/order, the Petitioner had no right to claim the position of clerk, the High Court noted that before issuing an appointment letter/order, every employer has the power and the right to control the appointment and entry of any person into the service. The High Court accordingly held that use of that power by the Respondent as an employer in this case was neither arbitrary nor vicious and the writ petition was denied.

1Amit Mohod versus Bank of India and another, writ petition 4702 of 2012.

For Public Sector Employees, Effect of Criminal Trials on Departmental Inquiries Continues to Depend on Fact-Based Inquiry

Ayesha Karim, Of Counsel, Singhania & Partners LLP, Delhi

The Supreme Court confirmed on 30 November 2012,1 following a line of precedent to this effect, that whether a departmental inquiry ("DI") (an employer investigation) of a public sector employee will be stayed in the face of criminal proceedings dealing with the same offence or whether the finding of the court would override the finding of the DI would be a fact-intensive inquiry depending on a number of factors,

In the case at bar, the Supreme Court allowed an appeal filed by the State and upheld the order of dismissal. The reasons for the Supreme Court's order are summarized below, and the facts of the case are provided later in the article.

  • The findings of the DI were reliable and based on the evidence of the victim and her husband and other prosecution witnesses.
  • During the criminal trial the victim and her husband turned hostile, and the prosecution did not examine the other prosecution witnesses leading to the acquittal of the accused person. In other words the acquittal was based on a lack of evidence, rather than a finding of not guilty on examination of all the evidence.
  • In the case relied upon by the defense, Capt. M. Paul Anthony v. Bharat Gold Mines,2 the accused was acquitted because the court found that the search operation allegedly conducted by the police leading to recovery of certain incriminating items from the accused had not taken place at all. The DI had relied in the search and recovery in its finding. The phrase "honourable acquittal" could be used in this case and therefore the court overturned the finding of the DI. In the present case, on the other hand, during the criminal trial, the victim and her husband being the main prosecution witnesses both turned hostile and the possibility of their being won over by the defense could not be ruled out. Further, the prosecution failed to examine other important witnesses. The acquittal could not be described as an "honourable acquittal".
  • Service rules of certain organizations provide that on registration of a criminal case, an employee can be kept under suspension, and on acquittal by the criminal court, he is to be reinstated. In such cases, the re-instatement is automatic. In the company service rules in the instant case there was no such provision, and the defendant was therefore not entitled to claim reinstatement as a matter of right.

Background on the Law

Article 311 of the Indian Constitution deals with the dismissal, removal, or reduction in rank of a person employed by the Union or State Government.3 It provides that a government servant may not be dismissed, suspended or reduced in rank, without an inquiry at which such person has been allowed a reasonable opportunity of being heard concerning the charges against him or her. It is clear from the above provisions that the holding of an inquiry is a constitutional requirement that can only be waived in exceptional circumstances. This article deals with the situation when the act which the government servant is facing a departmental inquiry is also a criminal offence, besides being an offence under the relevant service rules. In such cases, the delinquent official may face both a DI as well as a criminal case in the courts.

There are some fundamental differences between the criminal trial and a DI, the most significant being the stand of proof required to find the accused guilty. In a criminal trial, (in common law countries such as India), every accused person is presumed innocent until proved guilty and the burden of proof is upon the prosecution to prove the guilt of the accused person. Further, to secure a conviction the case against the accused must be proved "beyond reasonable doubt." In a DI, the standard of proof is less stringent, and is based on preponderance of possibilities after examining the available evidence.

Two main questions arise:

  • Can both proceedings continue in parallel?
  • What happens if the finding of the DI differs from that of the criminal court?

Based on a long line of Supreme Court judgments the following basic principles have evolved in dealing with situations where both a criminal case as well as departmental proceedings are instituted against a person.

  • If the offence is of a grave and serious nature, it may be desirable to stay the proceedings of a domestic enquiry during pendency of a criminal trial.
  • Though it may be desirable or advisable to stay the DI in a particular case, it does not violate the principles of natural justice if the DI proceeds in parallel, provided that there is no court order to stay the DI. DIs are empowered to investigate and penalize delinquent officials in order to maintain service discipline and standards of integrity. The accused employee must either be exonerated or the employer must be rid of the wrongdoer at the earliest occasion. This process should normally not be held ransom to lengthy court proceedings that may take years to finally conclude.
  • The standards of proof in each proceeding (DI and criminal proceeding) are different and it can be said that criminal trials and departmental proceedings operate in separate areas and normally the courts would not interfere with the finding of a DI. However, if facts and evidence presented before the criminal court and the DI are identical, the courts may override the finding of the DI.
  • In an acquittal in a criminal trial, there are two main possibilities namely, on examination of all the evidence the courts find the accused person innocent or else the court reaches a finding of not guilty based on a technical ground, such as witnesses turning hostile. The former is often described as an "honourable acquittal" (there is no such term found in either the criminal procedure code or the penal law, but this expression is often used in judicial pronouncements and the rule books of certain organizations). In the latter case the result can be described as an acquittal on "technical grounds".In the case of an honourable acquittal, it may be considered a good ground to set aside any contrary finding by a DI; in the other situation, the courts are less likely to interfere with the finding of the DI.
  • Therefore, while no hard and fast rule can be laid down, it can be said that the courts will judge each case on the basis of the particular facts, within the broad parameters described above.

The Supreme Court's precedents address those issues and lay down the parameters to decide whether a departmental inquiry would be stayed in the face of criminal proceedings dealing with the same offence and/or whether the finding of the court would override the finding of the departmental inquiry. However as held by the Supreme Court in the judgment discussed above, the facts of each individual case would determine the applicability of such parameters to the matter

Facts of the Case

The facts in brief were that a policeman (the "Defendant") was accused of being drunk on duty and of misbehaving with a woman at a public place. He was arrested from the spot and later suspended from service by order dated 18.7.1999. Departmental proceedings were initiated under Rule 3(b) of the Tamil Nadu Police Subordinate Service (Disciplinary and Appeal) Rules, 1955 (the 'Tamil Nadu Service Rules').

A criminal case was also registered against the Defendant under Section 509 of the Indian Penal Code and Section 4 of the Eve-Teasing Act, 1998, pursuant to which criminal case STC 613 of 2002 was instituted in the relevant court.

The DI found all the charges proved against the Defendant who was dismissed from service on April 1, 2000. Aggrieved by the finding of the DI, the Defendant filed an appeal before the Tamil Nadu Administrative Tribunal, Chennai (the "Tribunal"). During the pendency of the appeal before the Tribunal, the criminal court by judgment dated 20 November 2000 acquitted the Respondent of all the charges. The Defendant thereafter pleaded before the Tribunal, that since he had been acquitted by the court, and the matter was based on identical facts to that which led to his dismissal, the dismissal order should be set aside. The Defendant relied upon the aforementioned judgment of the Supreme Court, Capt. M. Paul Anthony v. Bharat Gold Mines Ltd. and Anr.4 In that case the Supreme Court had reinstated an employee who had been placed on suspension, on the ground that employee had been acquitted in the criminal case; and since the facts before the DI were identical to those placed before the criminal court, the findings of the criminal court would override the finding of the DI.

The Tribunal in the instant case, however, dismissed the appeal and upheld the order of dismissal, on the basis that the DI had correctly arrived at its decision and took the view that the judgement in the criminal trial could not be relied upon.

The order of the Tribunal was challenged by the Defendant before the High Court of Madras. The High Court took the view that if a criminal case and departmental proceedings against an official are based on the same set of facts and evidence and the criminal case ended in an honourable acquittal and not on technical grounds, then imposing punishment of removal of the delinquent official from service, based on the findings of domestic enquiry would not be legally sustainable. The High Court, therefore, set aside the impugned order dismissing the Defendant from service.

The State, aggrieved by the said judgment of the High Court filed an appeal by special leave through the Deputy Inspector General of Police to the Supreme Court, with the result described in this article.

1Deputy Inspector General of Police and Anr vs Samuthiram,(2013)1SCC598.

2 (1999) 3 SCC 679.

3Dismissal, removal or reduction in rank of persons employed in civil capacities under the Union or a State

  1. No person who is a member of a civil service of the Union or an all India service or a civil service of a State or holds a civil post under the Union or a State shall be dismissed or removed by a authority subordinate to that by which he was appointed
  2. No such person as aforesaid shall be dismissed or removed or reduced in rank except after an inquiry in which he has been informed of the charges against him and given a reasonable opportunity of being heard in respect of those charges Provided that where it is proposed after such inquiry, to impose upon him any such penalty, such penalty may be imposed on the basis of the evidence adduced during such inquiry and it shall not be necessary to give such person any opportunity of making representation on the penalty proposed: Provided further that this clause shall not apply
    1. where a person is dismissed or removed or reduced in rank on the ground of conduct which has led to his conviction on a criminal charge; or
    2. where the authority empowered to dismiss or remove a person or to reduce him in rank ins satisfied that for some reason, to be recorded by that authority in writing, it is not reasonably practicable to hold such inquiry; or

    3. Where the President or the Governor, as the case may be, is satisfied that in the interest of the security of the State, it is not expedient to hold such inquiry
  3. If, in respect of any such person as aforesaid, a question arises whether it is reasonably practicable to hold such inquiry as is referred to in clause (2), the decision thereon of the authority empowered to dismiss or remove such person or to reduce him in rank shall be final.

4(1999) 3 SCC 679. See discussion at n. 2.

'Hire and Fire' Policies Are Illegal, Supreme Court Rules

Ajay Singh Solanki and Vikram Shroff, Nishith Desai Associates, Mumbai/Bangalore/Delhi

The Supreme Court of India has ruled that 'hire and fire' policies are considered to be unjustifiable and arbitrary, violating Article 14 of the Constitution of India, 1950.1

In the case, a subsidiary of a government company terminated the services of its employee by giving him three months' notice, without assigning any reason whatsoever. Clause 11(a) of the employee's letter of appointment provided that his services could be terminated by the employer by giving a notice of three calendar months and without assigning any reason.

The Supreme Court held the aforesaid clause 11(a) to be unconscionable and irreconcilable with what is right or reasonable. The court further held that the 'hire and fire policy' adopted by the employer was unjustifiable, arbitrary and unenforceable.

The Apex Court ordered the employer to pay 60% of the outstanding wages due to the employee from the date of his termination to the date of his superannuation and further ordered for payment in respect of all statutory benefits such as gratuity, provident fund and pension, if any.

1Balmer Lawrie and Co. Ltd. and Ors. v. Partha Sarathi Sen Roy and Ors. [(2013) LLR 337 SC].

Clarification on Definition of 'Employee' Under Employees' Provident Fund & Miscellaneous Provisions Act Provided by Delhi High Court

Ajay Singh Solanki and Vikram Shroff, Nishith Desai Associates, Mumbai/Bangalore/Delhi

Section 2(f) of the Employees' Provident Fund & Miscellaneous Provisions Act, 1952 ("EPF Act"), which defines 'employee,' covers not only employees getting wages directly from the employer but also employees getting wages indirectly from the employer and persons working in connection with the work of an establishment, the Delhi High Court has held.1 The court has clarified that the definition of employee under the EPF Act

  • is wider than the definition of a 'worker' under Factories Act, 1948, wherein the definition is limited to the nature of work employed for manufacturing process, and
  • is wider than the definition of 'workman' under Industrial Disputes Act, 1947 wherein it includes any unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment are express or implied.

In the case, the petitioner company was in overall control of running a canteen within its premises--including payment of salary, wages, fixing the rates of eatables, payment of bonus, etc.--and also for taking disciplinary action and issuing necessary directions to the canteen employees. Though these employees were members of a cooperative society, they were not in direct employment of the petitioner company. The question was whether the petitioner company could be held liable for provident fund contributions in respect of the persons working in the canteen.

On the basis of the facts and circumstances laid before the Delhi High Court, the court held that the term 'employee' under section 2(f) of the EPF Act bears a wide meaning. The court further held that the EPF Act, being a special enactment, would prevail over the definition of the workers under the Factories Act or the workman under the Industrial Disputes Act. The definition under EPF Act not only includes persons employed for wages either directly or indirectly for the employer but also those persons working in or in connection with the work of an establishment, the court held. Hence, the petitioner company was held liable for provident fund contributions in respect of the persons working in the canteen.

1MMTC Limited v. Employees' Provident Fund Organisation [2013 LLR 347 Del.].

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