Supreme Court Rules on Redundancy and Severance Pay in Employment Dispute

The case of Manju Saxena vs. Union of India & HSBC Bank is a significant ruling addressing employment termination, redundancy, and severance pay in private sector banking. The dispute revolved around whether the termination of the appellant, due to redundancy, was legally justified and whether she was entitled to additional severance compensation. The Supreme Court examined the provisions of the Industrial Disputes Act, 1947, in light of the appellant’s claim that she was a ‘workman’ under the Act.

The case went through multiple legal stages, including the Central Government Industrial Tribunal (CGIT), the Delhi High Court, and ultimately the Supreme Court.

Background of the Case

The appellant, Manju Saxena, was employed by HSBC Bank as a ‘Lady Confidential Secretary’ in 1986 and was later promoted to ‘Senior Confidential Secretary.’ However, in May 2005, her post became redundant after the officer to whom she was attached left the bank. The bank offered her four alternative positions:

• Business Development Officer
• Customer Service Officer
• Clearing Officer
• Banking Services Officer

These positions were within the same pay scale, but the appellant refused them, citing lack of experience or the temporary nature of the roles.

As a result, HSBC Bank terminated her employment on 01.10.2005, offering her six months’ compensation in lieu of notice as per her employment contract. The bank also paid additional severance compensation equivalent to 15 days’ salary for every completed year of service, amounting to Rs. 8,17,071.

Legal Proceedings

The appellant initiated an industrial dispute before the Regional Labour Commissioner, seeking a higher severance package. During conciliation, the appellant demanded a severance of Rs. 69,99,600, while the bank offered Rs. 32,79,600. Since no settlement was reached, the matter was referred to the Central Government Industrial Tribunal (CGIT).

The CGIT ruled in favor of the appellant, directing HSBC Bank to reinstate her with full terminal benefits. The bank challenged this ruling in the Delhi High Court, arguing that the appellant was not a ‘workman’ under the Industrial Disputes Act. The High Court remanded the case to CGIT for fresh consideration. In 2015, CGIT reaffirmed its decision, holding that the appellant was a workman and entitled to reinstatement with full back wages.

The bank then challenged the CGIT decision again before a single bench of the Delhi High Court. The High Court set aside the CGIT’s order, ruling that the appellant had abandoned her job by refusing alternative roles. The appellant then filed a Letters Patent Appeal (LPA) before a Division Bench of the Delhi High Court, which upheld the ruling.

Finally, the appellant approached the Supreme Court.

Arguments by the Appellant

The appellant, appearing in person, made the following submissions:

• She was entitled to a severance package of Rs. 69.99 lakh, equivalent to her last drawn salary of Rs. 58,330 per month for 10 years (120 months).
• She had been in continuous service for over 20 years and should receive full benefits as per the Industrial Disputes Act.
• Her housing loan, taken during employment, should be waived.
• The tax deducted at source (TDS) from her compensation was illegal, and she was entitled to a refund.

Arguments by HSBC Bank

The bank, represented by senior counsel, countered:

• The appellant’s role had become redundant, and she was offered alternative positions with the same pay scale, which she declined.
• Her severance package was calculated as per Section 25F of the Industrial Disputes Act, which mandates compensation of 15 days’ salary per year of service.
• She was not entitled to additional compensation since she had already received Rs. 1,07,73,736 under various heads.
• Her refusal to accept alternative positions constituted ‘job abandonment.’

Supreme Court’s Ruling

The Supreme Court, comprising Justices Abhay Manohar Sapre and Indu Malhotra, upheld the decision of the Delhi High Court and dismissed the appellant’s claims.

The Court made the following observations:

• The appellant had abandoned her job by refusing alternative employment offered by the bank.
• Since she did not seek reinstatement but only demanded additional compensation, she had no claim under the Industrial Disputes Act.
• The bank had complied with Section 25F of the Industrial Disputes Act by providing notice pay and severance compensation.
• As per Gurmail Singh v. State of Punjab (1991) and Pramod Jha v. State of Bihar (2003), compliance with Section 25F(c) (government notification of retrenchment) was not mandatory.
• The appellant had already received over Rs. 1 crore under various heads, including back wages, gratuity, and interim compensation.

The Supreme Court concluded: “The impugned Judgment of the Division Bench dated 14.07.2017 is modified to the extent that all amounts received by the appellant shall be treated as final settlement of her claims.”

Key Takeaways from the Judgment

• Voluntary abandonment: If an employee refuses alternative employment, it can be considered abandonment.
• Severance pay: Compensation must align with statutory provisions, and excessive demands will not be entertained.
• Legal limits on reinstatement: Seeking additional compensation rather than reinstatement weakens an industrial dispute claim.
• Employer compliance: Adhering to retrenchment provisions protects employers from further liability.

Conclusion

The Supreme Court’s ruling in this case sets an important precedent on redundancy, severance pay, and job abandonment. The judgment clarifies that an employer’s obligation is limited to statutory severance payments and reasonable alternative employment offers. If an employee refuses such offers, they cannot later claim wrongful termination.

This decision serves as a guiding principle for employment disputes in the private banking sector and beyond, ensuring that redundancy is handled fairly while preventing excessive financial claims against employers.

Petitioner Name: Manju Saxena.
Respondent Name: Union of India & HSBC Bank.
Judgment By: Justice Abhay Manohar Sapre, Justice Indu Malhotra.
Place Of Incident: Delhi.
Judgment Date: 03-12-2018.

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