Contractual termination based on stigmatic allegations without prior notice or enquiry violates principles of natural justice.

The petitioner was appointed as a Traffic Manager on a contractual basis by the Bihar State Road Transport Corporation (BSRTC) in 2018. His contract was extended periodically.

While posted as Depot Superintendent at Aurangabad, he requested physical verifications of accounts due to suspected staff manipulation.

On 15.12.2023, an FIR was lodged alleging financial irregularities of ₹4,00,140/-, and the Regional Manager directed the petitioner to remain at headquarters during the enquiry.

However, via Letter No. 570 dated 19.02.2024, the respondents terminated the petitioner’s contract on the ground of "unauthorized absence" from 15.12.2023 without issuing a show-cause notice or conducting a formal enquiry.

The petitioner challenged this termination as arbitrary and stigmatic.

1. Whether the termination of a contractual employee on grounds of unauthorized absence and alleged financial irregularity, without following the principles of natural justice, is legally sustainable.

2. Whether the court can direct reinstatement in a contract of personal service if the termination is found to be stigmatic and procedurally flawed.

The court applied the principle of Natural Justice (Audi Alteram Partem), asserting that even contractual service cannot be terminated on stigmatic grounds without a hearing.

It relied on Swati Priyadarshani v. State of Madhya Pradesh (2024) 19 SCC 128, which held that termination for inefficiency must be non-stigmatic and simpliciter.

It further cited Bhola Nath v. State of Jharkhand (2026) LiveLaw (SC) 95, reinforcing that the State as a "model employer" cannot act arbitrarily or exploit unequal bargaining power.

Anuj Shukla v. State of Bihar regarding the necessity of a full-fledged departmental enquiry before passing a stigmatic order.

The court found that while the petitioner's appointment was purely contractual, the termination was not a "termination simpliciter" under the contract's notice clause but was based on specific allegations of "unauthorized absence" and financial embezzlement.

The court observed a factual contradiction: the respondents claimed the petitioner was absent, yet their own Letter No. 885 dated 15.12.2023 directed him to remain at the headquarters for an enquiry.

Because the termination order carried a stigma and was issued without a show-cause notice or an opportunity for the petitioner to defend himself, it violated Article 14 of the Constitution.

The court reasoned that the State's failure to conduct a fair enquiry before labeling the employee's conduct as unauthorized rendered the administrative action void.

The respondents were directed to reinstate the petitioner forthwith with all consequential benefits. However, the court granted the respondents liberty to issue a fresh show-cause notice, conduct a proper enquiry, and take a reasoned decision in accordance with the law.