Stigmatic termination for misconduct requires a formal disciplinary inquiry even for contractual employees.

The petitioner was appointed as a Gram Rojgar Sahayak on August 24, 2011.

In October 2015, a show-cause notice was issued alleging that MNREGA funds were not transferred to beneficiaries.

Following a preliminary enquiry, his services were terminated on August 15, 2016, on grounds of financial irregularities and fraud under the Kapildhara Well Scheme.

Simultaneously, an FIR (Crime No. 224/2014) was registered against him under Sections 420, 467, 468, and 471 of the IPC.

The petitioner’s first appeal to the Collector and second appeal to the Commissioner were dismissed in 2017 and 2019, respectively.

The petitioner challenged these orders on the ground that no formal disciplinary enquiry was conducted prior to his removal.

Whether the services of a contractual employee can be terminated on grounds of severe financial irregularities and criminal charges without conducting a full-fledged disciplinary enquiry.

Whether the termination order was a "termination simpliciter" or a punitive dismissal carrying a stigma.

The court primarily applied the Principles of Natural Justice, asserting that even for contractual employees, a formal enquiry is mandatory if termination is founded on misconduct.

It relied on Sandeep Kumar v. GB Pant Institute of Engineering & Technology (2024), which held that termination without enquiry is unjustified and violates natural justice.

The court further cited Malkhan Singh Malviya v. State of M.P. (2018), establishing that preliminary enquiries conducted behind an employee's back cannot form the foundation of a stigmatic termination.

Finally, it applied the "real test" from Parshotam Lal Dhingra v. Union of India (1957) to determine if an order is punitive by looking for penal consequences or the casting of an indelible stigma.

The court observed that while the petitioner was a contractual employee, the allegations of fraud and financial corruption were "inherently stigmatic".

Consequently, the termination transcended "termination simpliciter" and became a punitive dismissal.

The court found that the respondents relied solely on preliminary reports and internal communications prepared without the petitioner’s participation.

No evidence was recorded in his presence, and he was denied the opportunity to cross-examine witnesses or substantiate his defense that funds had been transferred.

The court rejected the respondents' reliance on Section 92 of the M.P. Panchayat Raj Adhiniyam, 1993, clarifying that summary recovery proceedings cannot substitute mandatory disciplinary procedures for stigmatic removal.

The appellate authorities were found to have mechanically affirmed the illegal order without addressing the lack of a full-fledged enquiry.

The respondents were directed to reinstate the petitioner forthwith.

However, the court denied back wages because the petitioner failed to plead that he was not gainfully employed during the termination period.

The court granted the respondents liberty to initiate a fresh, full-fledged departmental enquiry in accordance with the law and principles of natural justice.