Case Note & Summary
The appellant, Dushyant Janbandhu, was employed as an Assistant Manager by M/S Hyundai AutoEver India Pvt. Ltd. from 15 March 2019. During the COVID-19 pandemic, he was asked to work from home but later directed to resume physical attendance. Upon his refusal, a show cause notice was issued, followed by an inquiry and a charge memo. Ultimately, his employment was terminated on 21 January 2021. The termination order cited violations of clauses 11, 12(V), 17, 24, and 25 of the employment terms but did not mention clause 19 (non-disclosure obligation). Meanwhile, the appellant had not been paid his salary, so he issued a legal notice on 29 May 2021 and filed a petition under Section 15(2) of the Payment of Wages Act, 1936 before the competent authority. In response, the respondent issued a notice alleging that disputes must be settled through arbitration and unilaterally appointed an arbitrator. The appellant challenged the arbitrator's jurisdiction under Section 16 of the Arbitration and Conciliation Act, 1996, and the arbitrator, relying on Perkins Eastman Architects DPC & Anr. v. HSCC (India) Ltd., closed the proceedings. The respondent then moved an application under Section 8 of the Act before the Payment of Wages Authority, which dismissed it, holding that the arbitration agreement could not override the PW Act. Separately, the appellant also approached the Industrial Tribunal under Section 2(A) of the Industrial Disputes Act, 1947, challenging the termination. In August 2022, the respondent filed a petition under Section 11(6) of the Act before the Madras High Court seeking appointment of an arbitrator, alleging disputes over non-payment of wages, termination, and for the first time, violation of clause 19 (non-disclosure). The High Court appointed an arbitrator. The Supreme Court allowed the appeal, holding that the Section 11(6) petition was an abuse of process. The disputes over wages and termination were already pending before statutory authorities and were non-arbitrable under the PW Act and ID Act. The alleged violation of clause 19 was an afterthought and non-existent. The Court set aside the High Court's order and dismissed the Section 11(6) petition with costs of Rs. 25,000.
Headnote
A) Arbitration and Conciliation Act, 1996 - Section 11(6) - Abuse of Process - Appointment of Arbitrator - Disputes relating to non-payment of wages and termination of employment are governed by the Payment of Wages Act, 1936 and the Industrial Disputes Act, 1947, which provide for exclusive statutory remedies. Filing a Section 11(6) petition after the employee had already invoked those remedies constitutes an abuse of process. The Supreme Court set aside the High Court's order appointing an arbitrator and dismissed the petition with costs. (Paras 2, 14-18) B) Arbitration and Conciliation Act, 1996 - Section 11(6) - Subject-Matter Arbitrability - Non-Arbitrable Disputes - Applying the fourfold test from Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1, disputes that are expressly or by necessary implication non-arbitrable under mandatory statutes cannot be referred to arbitration. The Payment of Wages Act, 1936 (Section 22) bars civil suits for wage recovery, and the Industrial Disputes Act, 1947 (Section 2A) provides for adjudication of termination disputes by Industrial Tribunals, making such disputes non-arbitrable. (Paras 14-15) C) Arbitration and Conciliation Act, 1996 - Section 11(6) - Non-Existent Dispute - Afterthought Allegation - The respondent's claim regarding violation of a non-disclosure clause (Clause 19) was not mentioned in the show cause notice, inquiry report, charge memo, or termination order. It was raised for the first time in the Section 11(6) petition and was held to be an afterthought and non-existent. (Paras 5, 12-13, 17)
Issue of Consideration
Whether the High Court was justified in appointing an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 when the disputes relate to non-payment of wages and termination of employment, which are governed by special statutes and are non-arbitrable.
Final Decision
The Supreme Court allowed the appeal, set aside the High Court's order dated 20.12.2022, and dismissed the Section 11(6) petition filed by the respondent with costs of Rs. 25,000 to be paid to the appellant.
Law Points
- Non-arbitrability of disputes under Payment of Wages Act
- 1936 and Industrial Disputes Act
- 1947
- Abuse of process under Section 11(6) of Arbitration and Conciliation Act
- 1996
- Subject-matter arbitrability test from Vidya Drolia v. Durga Trading Corporation
