Employees who suppress settlement payments must return them as a condition of pursuing termination appeals.

Two employees challenged their alleged termination before the appellate authority under the Tamil Nadu Shops and Establishments Act, 1947, seeking reinstatement and related relief.

Before filing their appeals, they had received Rs. 62,21,580 and Rs. 45,13,074 respectively from the management. The management maintained that the payments followed the employees’ resignations and represented full and final settlement; the employees alleged that they had been forced out under the guise of resignation. The employees did not disclose receipt of the sums in their appeals, and acknowledged receiving them only in response to the management’s interim applications. The appellate authority declined to require repayment at the interim stage, leaving maintainability for consideration in the appeals. The management challenged that decision by writ petitions.

Whether employees who had received substantial sums from the management before filing termination appeals could be required to return those sums as a condition of pursuing the appeals

Whether the employees’ alleged suppression of their receipt of the sums justified requiring repayment before their appeals proceeded

The Court considered the appellate remedy under the Tamil Nadu Shops and Establishments Act, 1947, for an employee challenging an allegedly illegal termination.

It relied on Ramesh Chandra Sankala v. Vikram Cement, (2008) 14 SCC 588, for the equitable principle that workmen seeking to pursue claims may be required to return benefits received in circumstances where retaining them while prosecuting the claims would be inequitable.

It also considered the distinction drawn in W.P. No. 56566 of 2021 between voluntary-retirement or settlement payments, which may be required to be returned, and statutory retrenchment compensation, which an employee may retain while challenging retrenchment.

The Court found that the employees had received the sums before filing their appeals and had not disclosed that fact to the appellate authority; they admitted receipt only after the management raised it.

In the Court’s view, the substantial payments and their nondisclosure supported a presumption that the sums were received towards full and final settlement, and the employees’ subsequent claim of forced termination did not justify retaining the payments while pursuing their appeals.

It therefore distinguished the cited decision concerning statutory retrenchment compensation and applied the equitable reasoning in Ramesh Chandra Sankala to require repayment as a condition of proceeding.

Upon repayment, the employees could seek benefits, including subsistence allowance, available in the ordinary course. The appellate authority was directed to give both sides adequate opportunity and dispose of the appeals within four weeks of receiving a copy of the order. The writ petitions were disposed of without costs.