Stigmatic termination of daily-wage employees for misconduct requires fair inquiry and natural justice.

The petitioners were engaged as daily-wage employees, including as Computer Operators, by the concerned Municipal Council and had worked continuously for several years.

A show-cause notice was issued alleging misconduct, including fraudulent transfer of ₹2,00,000 to the account of a beneficiary.

The petitioners submitted replies, after which their services were terminated by orders referring to the alleged misconduct.

In some connected matters, the Municipal Council also relied on an inquiry report and communicated with the police for registration of FIRs.

The petitioners contended that although an inquiry had been conducted, they were neither called to participate nor supplied the inquiry report or given an opportunity to respond to its findings before adverse action was taken.

The Municipal Council maintained that the petitioners had been given adequate opportunity through the show-cause notices and replies and argued that the disputes should be pursued before the Labour Court.

1. Whether termination of the petitioners’ services on allegations of misconduct, without affording them a proper inquiry, supplying the inquiry report, and giving them an opportunity to respond to its findings, violated the principles of natural justice?

2. Whether a daily-wage or temporary employee is entitled to a fair hearing where the termination order is stigmatic and founded on alleged misconduct?

3. Whether the writ petitions were maintainable despite the petitioners’ status as daily-wage employees and the respondents’ contention that disputed questions of fact required resort to the Labour Court?

4. Whether the communications seeking registration of FIRs, based on an inquiry report prepared in breach of natural justice, could be sustained?

The Court applied the principles of audi alteram partem and procedural fairness, holding that an employee facing adverse civil consequences must receive precise notice, a reasonable opportunity to defend, access to the material relied upon, and an opportunity to respond to the inquiry report.

Under the distinction between “motive” and “foundation,” a termination based on a finding of misconduct is punitive and stigmatic even where the employee is temporary or a probationer; such termination cannot be effected without a proper disciplinary inquiry.

The Court relied on Chandra Prakash Shahi v. State of U.P., (2000) 5 SCC 152; Radhey Shyam Gupta v. U.P. State Agro Industries Corpn. Ltd., (1999) 2 SCC 21; Hari Ram Maurya v. Union of India, (2006) 9 SCC 167; State of U.P. v. Saroj Kumar Sinha, (2010) 2 SCC 772; and Canara Bank v. Debasis Das, (2003) 4 SCC 557.

It also relied on Managing Director, ECIL v. B. Karunakar, (1993) 4 SCC 727, concerning the necessity of supplying the inquiry report and assessing prejudice caused by its non-supply.

The Court further followed Yatish Pandey v. Commissioner, Indore Municipal Corporation, W.P. No. 20178/2017, recognising the entitlement of a daily-wage employee to fair procedure against a stigmatic termination.

The Court found that the inquiry record did not show that the petitioners had been called to participate in the inquiry or given an opportunity to answer the allegations.

More importantly, the inquiry report containing adverse findings was not supplied to them before termination.

A mere show-cause notice and reply were insufficient because the respondents had proceeded to conduct an inquiry and rely upon its findings for imposing the adverse consequence.

Since the termination orders attributed misconduct to the petitioners, they were not termination simpliciter but stigmatic and punitive orders affecting their future employment prospects.

Consequently, the petitioners’ daily-wage status did not deprive them of the right to a fair hearing.

The alleged violation concerned the legality of the decision-making process and could be adjudicated in writ jurisdiction; it did not require the Court to resolve disputed factual issues concerning the alleged misconduct.

In the cases involving police communications, the underlying inquiry findings were likewise legally infirm because they had been reached without observance of natural justice.

The respondents were directed to reinstate the petitioners with consequential benefits, including arrears of back wages, but the petitioners were limited to 50% of the back wages.

The Municipal Council was granted liberty to conduct a fresh inquiry and pass fresh orders in accordance with law after providing proper procedural safeguards.

In W.P. No. 12237/2023, the respondents were directed to consider the effect of the inquiry committee’s apparent exoneration of the petitioner before taking any fresh action.

In W.P. Nos. 20633/2023 and 20761/2023, the communications dated 16.06.2023 seeking registration of FIRs were quashed, with liberty to the respondents to proceed afresh in accordance with law after following natural justice.