The Supreme Court has imposed a fine of ₹5 lakh on a company for prolonging a salary dispute and questioning the legality of an employee’s termination through arbitration proceedings. The case involved Hyundai Autoever India, where the bench comprising Justice B.R. Gavai and Justice K.V. Viswanathan stated that the application under Section 11 of the Arbitration and Conciliation Act, 1961, was a misuse of the process.
The appellant, Mr. Dushyant Janbandhu, was appointed as an Assistant Manager by Hyundai Autoever India in March 2019. Following the COVID-19 pandemic, the company instructed employees to resume physical attendance at the workplace. Janbandhu, however, refused to comply, leading to disciplinary proceedings. He was charged with non-cooperation and contractual violations, resulting in his termination in January 2021. During this period, the company also withheld his salary, which became the basis for Janbandhu’s legal challenge.
Janbandhu filed a petition under the Payment of Wages Act, 1936, and the Industrial Disputes Act, 1947, seeking payment of his dues. In response, the company argued that the dispute should be resolved through arbitration and unilaterally appointed an arbitrator. When arbitration proceedings commenced, the appellant questioned the arbitrator’s competence. The arbitrator himself acknowledged that the tribunal’s formation was not in accordance with Section 11 of the Arbitration and Conciliation Act, 1961, and that the matter of wage payment fell under the jurisdiction of the Payment of Wages Act, 1936.
Despite this, Hyundai Autoever India approached the Madhya Pradesh High Court under Section 11(6) of the Arbitration and Conciliation Act in August 2022, seeking the appointment of an arbitrator. The High Court appointed an advocate as the arbitrator, which prompted Janbandhu to escalate the matter to the Supreme Court.
The Supreme Court overturned the High Court’s decision, stating that Janbandhu had already approached the competent authority under the Payment of Wages Act well before the termination order. The Court emphasized that the Payment of Wages Act’s jurisdiction under Section 15(2) excludes civil courts and declared the dispute non-arbitrable. The apex court criticized the company for its procedural abuse and imposed a penalty of ₹5 lakh for dragging the matter unnecessarily.
This landmark judgment underscores the judiciary’s commitment to protecting employee rights and preventing the misuse of legal procedures by employers.
