Arbitration Can Be Initiated Over Termination Of Employee Contract Containing Both Dispute Resolution & Termination Clause : Calcutta High Court

The Calcutta High Court Bench of Justice Shampa Sarkar while allowing an application for appointment of arbitrator has observed that where an employee has been terminated in terms of an employment contract which contains both Dispute Resolution clause and Termination clause, if it is not a case of termination simpliciter, then the dispute shall be referred to arbitration in terms of the dispute resolution clause. Facts The present application was for appointment of an Arbitrator on the basis of the dispute resolution clause (Clause 16) of the terms and conditions of the employment set out in Annexure 'A' of the appointment letter of the Petitioner dated February 27, 2023. The Petitioner was appointed as a Senior Manager in Audit at Grant Thornton. The terms and conditions under Annexure 'A' were forwarded to the Petitioner along with the appointment letter and the Petitioner was required to sign the same and submit the Annexure to the Employer. Accordingly, the terms and conditions under Annexure 'A' became a binding contract between the employer and the employee. The terms and conditions provided for resolution of disputes through arbitration. The seat had been selected as Kolkata and the language was 'English'. It is the Petitioner's case that on June 28, 2024, a show cause notice was issued on the basis of certain allegations levelled by another female employee. The Petitioner filed a reply. Upon enquiry, a report was submitted on October 22, 2024. The notice of termination was issued on November 22, 2024 and the ground for termination was “business reasons”. The Petitioner's specific case is that although the allegation of sexual harassment had not been established, the Petitioner had reason to believe that the termination was the outcome of the complaint lodged by another employee and not a simpliciter termination. The Petitioner called upon the employer by a notice dated January 02, 2025, to refer the dispute to arbitration. The Petitioner also nominated a learned Senior Advocate as an arbitrator. Contentions The Counsel for the Petitioner submitted that although the terms and conditions provided that an employee may be terminated without any notice and without assigning any reasons upon payment of 60 days gross salary, the termination in this case was a reaction or a counter-blast to the proceedings initiated by a co-employee. The termination had adversely affected the reputation of the Petitioner and was wrongful. Thus, the Petitioner had a right to get such dispute adjudicated by a forum agreed to by the parties, under Clause 16 of the terms and conditions of employment. The terms and conditions are in the nature of a contract between the employer and employee. The Counsel for the Respondent submitted that the Petitioner's employment was not statutorily protected. Neither Article 311 of the Constitution of India nor any other statute covered the employment. This was a case of private employment. The employer retained the right to terminate the Petitioner with or without notice and the terms of employment had been followed. The law is well-settled that, the petitioner did not have any other claim towards the employer and as long as the 60 days gross salary was paid to the petitioner in lieu of the notice, the termination was valid. Reliance was placed on a plethora of judgments including Emaar India Ltd. v. Tarun Aggarwal Projects LLP and Ors. AIR 2022 SC 4678, in support of the contentions that courts had refused to award damages for hurt feelings and anxiety to a wrongfully dismissed employee and confirmed that damages for anguish and vexations caused by breach of contract could not be awarded in an ordinary commercial contract. The Counsel for the Respondent further submitted that if the contract of employment expressly provides a termination clause and the said clause had been followed by the employer, the employee is not entitled to any other relief, apart from what the terms and conditions in the termination clause provide. Principles of administrative law or public law applicable to public employment do not apply to cases or private employment. The Counsel referred to the notice invoking arbitration in support of the contention that the claim for reinstatement and other consequential benefits are not available to the Petitioner as he was not governed by any statues which protect workmen or public servants. Lastly, the Counsel submitted that any order referring such non arbitrable dispute to arbitration would be forcing a contract of personal wages which is not permissible in law. Dragging the Respondent to an unnecessary prolonged litigation which will ultimately result in the dismissal cannot be the ethos of Section 11, ACA. The referral court is not a mere post office but can make a preliminary enquiry to satisfy itself that the disputes are ex facie arbitrable. Observations The...

Arbitration Can Be Initiated Over Termination Of Employee Contract Containing Both Dispute Resolution & Termination Clause : Calcutta High Court

Arpita Pande

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