Stigmatic Termination of Contractual Employee Without Full-Fledged Departmental Enquiry Violates Principles of Natural Justice

The petitioner, Mahesh Yadav, was appointed as a Gram Rozgar Sahayak under the MNREGA scheme on a contractual basis at Gram Panchayat Macchalgaon.

Following a complaint regarding financial irregularities in the PM Awas Plus Yojana, specifically the alleged granting of benefits to ineligible persons, the Respondent No. 3 issued a show-cause notice based on a preliminary inquiry.

On June 20, 2023, Respondent No. 3 terminated the petitioner’s services, a decision upheld by Respondent No. 2 on May 31, 2024.

The petitioner challenged these orders under Article 226 of the Constitution, contending that the termination was stigmatic and passed without a proper departmental inquiry or adherence to the principles of natural justice.

1. Whether the termination of a contractual employee based on allegations of misconduct constitutes a stigmatic order requiring a full-fledged departmental inquiry.

2. Whether the procedure adopted by the respondents, involving a preliminary inquiry conducted behind the petitioner’s back, satisfied the principles of natural justice.

The court applied the principles of natural justice and the legal doctrine that contractual termination founded on misconduct is punitive and stigmatic, rather than a simple non-renewal.

It primarily relied on the precedent set by the Division Bench in Malkhan Singh Malviya v. State of Madhya Pradesh (Writ Appeal No. 1166 of 2017), which established that even employees not on the regular establishment are entitled to a reasonable opportunity of being heard, including the supply of adverse material and the right to cross-examine witnesses, before a stigmatic order is passed.

The Court observed that while the petitioner was a contractual employee, the foundation of his termination was an inquiry report alleging financial irregularity and misconduct.

This rendered the termination "stigmatic and punitive" in nature.

The Court found the respondents' procedure flawed because the petitioner was not provided with the complete complaint, was not given an opportunity to submit a full explanation, and was denied the right to cross-examine witnesses whose statements were used against him.

Applying the Malkhan Singh Malviya precedent, the Court reasoned that a mere show-cause notice is insufficient when the termination is based on a preliminary inquiry conducted "behind the back" of the employee.

The absence of an independent quasi-judicial approach by the inquiry officer resulted in a gross violation of natural justice.

The respondents were directed to reinstate the petitioner to the post of Gram Rozgar Sahayak immediately.

Regarding monetary relief, the Court granted 25% back wages due to the lack of specific pleadings regarding the petitioner's lack of gainful employment during the litigation period.

The court granted liberty to the respondents to conduct a fresh, full-fledged inquiry in accordance with the law within 60 days.