Labour Court Must Decide Validity of Domestic Inquiry as a Preliminary Issue Before Adjudicating Merits

The petitioner (Employer) initiated a domestic inquiry against Respondent-2 (Workman), resulting in a termination order dated 17.10.2001.

The Workman challenged this before the Labour Court, Noida. The Labour Court framed an additional issue regarding the fairness of the domestic inquiry.

However, instead of deciding the fairness as a preliminary issue, the Labour Court recorded evidence on the merits of the charges simultaneously.

In the impugned order dated 07.01.2026, the Labour Court held the inquiry was unfair due to lack of opportunity and further ruled that the charges were not proved, declaring the termination illegal without granting the Employer a subsequent opportunity to prove misconduct through fresh evidence.

1. Whether the Labour Court is required to decide the fairness of a domestic inquiry as a preliminary issue before adjudicating the merits of the dispute.

2. Whether, upon finding a domestic inquiry to be unfair or defective, the Employer must be granted an opportunity to adduce evidence before the Labour Court to justify the dismissal on merits.

Workmen of M/s Firestone Tyre & Rubber Co. of India (P) Ltd. v. Management and Delhi Cloth & General Mills Co. Ltd. v. Ludh Budh Singh establish that if an employer relies on a domestic inquiry, the Tribunal must first determine its validity. If the inquiry is found defective or if no inquiry was held, the employer has a procedural right to adduce evidence for the first time before the Tribunal to justify its action, provided such an opportunity is requested at the appropriate stage.

The Court also referenced State of Uttarakhand v. Sureshwati (2021) and its own previous ruling in M/s Dwarikesh Sugar Industries Ltd. v. Labour Court (2023) to reiterate this two-stage adjudication process.

The High Court observed that the Labour Court committed a procedural illegality by collapsing two distinct legal stages into one.

Following the principles in Firestone Tyre, the Court reasoned that the jurisdiction of a Labour Court to decide a case on merits (by reappraising evidence) only arises after it has officially declared the domestic inquiry to be unfair or non-existent.

By deciding the fairness of the inquiry and the proof of charges simultaneously, the Labour Court deprived the Employer of its legal right to lead independent evidence to prove the Workman's misconduct once the domestic report was set aside.

The Court distinguished the respondent's reliance on Shashi Export Private Limited (2018), noting that the specific Supreme Court guidelines on the two-step procedure were not fully considered in that instance, whereas the Dwarikesh Sugar decision followed a comprehensive review of settled law.

The Court partly allowed the writ petition and set aside the impugned award dated 07.01.2026 to the extent that the Petitioner-Employer was denied the opportunity to prove the charges on merits with orders to conclude proceedings within three months.