Employee's Admission of Misappropriation Justifies Dismissal: High Court Upholds Labour Court Award.


02 April 2025 Industrial Law >> Business & Commercial Law  

The Madras High Court has upheld an award of the Additional Labour Court, Coimbatore, dismissing a writ petition filed by a former Senior Clerk/Cashier of a Primary Agricultural Co-operative Credit Society challenging his dismissal for misappropriation of funds. The High Court affirmed that the employee's own admissions of misconduct justified the punishment of dismissal, even in light of subsequent repayment and a surcharge order.

The petitioner, who had been employed with the respondent Society since 1991 and held the post of Senior Clerk/Cashier from 2001, was dismissed from service on December 5, 2007, following a disciplinary enquiry. The dismissal was based on charges of misappropriation of customer funds. The employee had admitted to the charges in his explanations submitted during the enquiry and in his reply to the second show cause notice, wherein he pleaded guilty, apologized, and acknowledged his liability for the loss of interest sustained by the Society, amounting to Rs. 1,96,856/-.


 

 

Aggrieved by his dismissal, the petitioner raised an industrial dispute, which eventually led to a claim statement before the Labour Court in Coimbatore (I.D. No. 123 of 2010). Before the Labour Court, the workman did not contest the validity of the domestic enquiry but argued against the proportionality of the punishment and the quantum of back wages.

The Labour Court, after considering the documentary evidence, particularly the employee's admissions of misappropriation, ruled that the serious misconduct and the resultant loss of confidence in the employee by the Management justified the dismissal. The Labour Court explicitly stated that there was no room for sympathy or leniency in such cases of financial impropriety, citing the Supreme Court's judgment in Diwan Singh v. Life Insurance Corporation of India, which held that dismissal is the appropriate punishment in cases involving corruption, regardless of the amount misappropriated.

Challenging the Labour Court's award, the petitioner filed a writ petition before the Madras High Court. Counsel for the petitioner argued, relying on Supreme Court judgments such as The Workmen of M/s. Firestone Tyre and Rubber Co. of India v. The Management & Others and Mavji C. Lakum v. Central Bank of India, that the Labour Court has the power under Section 11A of the Industrial Disputes Act to re-appreciate evidence and examine the proportionality of punishment even after a valid enquiry. It was contended that the Labour Court should have found the findings of the enquiry perverse and the punishment disproportionate, especially considering the subsequent repayment of the misappropriated amount and the surcharge order.

The petitioner's counsel also cited Central Bank of India Ltd. v. Prakash Chand Jain and Kuldeep Singh v. Commissioner of Police & Others to argue that judicial interference is warranted when domestic enquiry findings are based on no evidence or are perverse. Additionally, reliance was placed on Radhey Shyam Gupta v. U.P. State Agro Industries Corporation Ltd. & Another regarding the proof of document contents and on a recent Supreme Court judgment in General Manager, Personnel, Syndicate Bank & Others v. B.S.N. Prasad concerning proportionality of punishment in light of mitigating factors like long service and admission of error.

However, the Madras High Court rejected these arguments, stating that the crucial factor in the present case was the petitioner's unequivocal admission of misconduct. The Court held that the subsequent repayment of the loss and the surcharge order did not negate the seriousness of the initial act of misappropriation or the loss of confidence suffered by the Management. The High Court concurred with the Labour Court's assessment that the punishment of dismissal was justified in light of the admitted serious misconduct and that no leniency could be extended in such circumstances.

Consequently, the High Court found no merit in the writ petition and dismissed it, upholding the award of the Labour Court. The Court also refrained from imposing any costs.

This judgment underscores the principle that an employee's admission of serious financial misconduct, such as misappropriation of funds, can be a valid and sufficient ground for dismissal, and that subsequent remedial actions may not necessarily mitigate the severity of the initial transgression, particularly when it leads to a loss of trust in the employee.


Section 11A, Industrial Disputes Act - 1947  

Industrial Disputes Act, 1947