Acceptance and Encasement of Salary in Lieu of Notice Period Precludes Challenge to Termination of Service.

The Appellant, appointed as a Manager (I) by the Respondent Bank via an appointment letter dated 29.10.2007, was promoted to Area Manager on 07.05.2009.

On 07.07.2009, he received a termination letter dated 05.06.2009, terminating his services effective as of the letter's date.

The Bank provided a cheque for Rs. 99,634, representing 90 days' gross salary in lieu of the notice period, which the Appellant encashed.

The Appellant filed a suit for recovery of Rs. 70,00,000 for loss of future salary and mental agony, alleging the termination was arbitrary and lacked assigned reasons.

The Trial Court partially decreed the suit with Rs. 35,000 as salary for June 2009 (since the termination was communicated in July) but dismissed claims for damages and reinstatement.

The Appellant challenged this partial dismissal.

Whether, in terms of the appointment letter dated 29.10.2007, it was obligatory for the Bank to assign reasons before terminating the Appellant's services?

Whether the termination was illegal and arbitrary given the Appellant was a confirmed employee?

Whether the Appellant is entitled to compensation for mental agony and financial loss after encashing the cheque provided in lieu of the notice period?

The court primarily applied the law of contract governing private employment and Section 96 of the Code of Civil Procedure, 1908 regarding first appeals.

It relied on the principle of "Accord and Satisfaction" or waiver, noting that contractual termination clauses providing for salary in lieu of notice are valid under Indian contract law.

The court emphasized that in private contracts of service, terms regarding termination by notice are binding, and the acceptance of benefits under such terms precludes a challenge to the validity of the termination.

The Court examined the Appointment Letter (Ex. PW1/A), which explicitly allowed the Bank to terminate a confirmed employee by providing 90 days' notice or equivalent salary.

The Court reasoned that because the Appellant encashed the cheque for Rs. 99,634 (the 90 days' pay), he effectively accepted the termination in accordance with his contract.

By this act of encashment, the Court held he was left with no legal ground to subsequently challenge the termination as arbitrary or seek damages.

Regarding the delayed communication, the Court upheld the Trial Court’s finding that since the Appellant worked through June 2009 and only received the notice on 07.07.2009, he was entitled to one month’s salary for work performed, but this procedural delay did not render the entire termination void or entitle him to reinstatement.

It held that the termination was valid as it followed the contractual provision of providing salary in lieu of notice, and the Appellant’s act of encashing said cheque disentitled him from seeking further relief.

The holding confirmed the decree for Rs. 35,000 plus 6% interest for the month of June 2009 but denied all claims for reinstatement and damages.

All pending applications were dismissed.