Karnataka High Court ordered the payment of Rs. 13 lakh plus interest to an employee for the illegal termination by the company, which has become insolvent as per report published in The Economic Times.
The employee had worked for a company for many years. He was terminated from his position under circumstances he challenged as wrongful termination. The Labour Court found the disciplinary inquiry conducted by the company illegal. The Company could not prove the charges, and the court awarded compensation of Rs. 13 lakh for the wrongful termination.
The company challenged the award of the Labour Court in the High Court.
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By the time the award was made, the company had entered insolvency proceedings, raising questions whether the employee could actually recover the money. The High Court noted that the right to the award had crystallised when the labour court made its decision, and that insolvency of the employer did not extinguish that right.
The Karnataka High Court thus directed that the sum of Rs. 13 lakh be released to the ex-employee, emphasising that the insolvency process would not impede enforcement of a valid award made in his favour.
The Judgment reaffirms that employee rights in respect of wrongful termination and compensation hold even when the employer is insolvent.It also underscores the importance of prompt adjudication by labour courts so that awards become enforceable before further deterioration of the employer’s financial position.
It also reaffirms the importance of full legal compliance by the employer before termination of a confirmed employee. The disciplinary inquiry, which has become highly technical, should be conducted in such a way that provides a fair opportunity to the employee to submit his defence and principles of natural justice are followed in letter and spirit.
The judgment also sends a message to both employers and workers that wrongful termination is not a matter to be taken lightly, and liability can survive employer insolvency.
