Holding

Disputes concerning non‑payment of wages and the validity of a termination order are non‑arbitrable as they fall within the exclusive jurisdiction of the statutory authorities under the Payment of Wages Act and the Industrial Disputes Act, rendering the Section 11(6) petition an abuse of process.

Summary

The appellant, an assistant manager, was terminated by the respondent employer alleging absenteeism, after a show‑cause notice and disciplinary inquiry. The appellant filed a petition under Section 15(2) of the Payment of Wages Act for unpaid wages and later approached the Industrial Tribunal under Section 2(A) of the Industrial Disputes Act challenging the termination. The respondent then filed a petition under Section 11(6) of the Arbitration and Conciliation Act seeking appointment of an arbitrator, claiming the disputes were arbitrable and also alleging a breach of a non‑disclosure clause. The Supreme Court held that the matters of wage recovery and the validity of the termination are within the exclusive jurisdiction of the statutory authorities and are non‑arbitrable, and that the alleged breach of the non‑disclosure clause was never raised in the disciplinary proceedings. Consequently, the petition under Section 11(6) was deemed an abuse of process and was dismissed, and the High Court’s order appointing an arbitrator was set aside. The appeal was allowed and costs were awarded to the appellant.

Issues considered

Whether disputes relating to non‑payment of wages under the Payment of Wages Act are arbitrable.
Whether the legality and validity of the termination order are arbitrable or fall within the jurisdiction of the Industrial Tribunal.
Whether the alleged breach of the non‑disclosure clause (clause 19) forms a separate arbitrable dispute.
Whether the petition under Section 11(6) of the Arbitration and Conciliation Act is an abuse of process.

Legislation cited

Arbitration and Conciliation Act, 1996s. 11(6), s. 16, s. 5, s. 8
Industrial Disputes Act, 1947s. 2(A)
Payment of Wages Act, 1936s. 15(2), s. 22, s. 23

Subjects

Non-payment of wagesTermination orderArbitrabilityPayment of Wages ActIndustrial TribunalSection 11(6) petitionAbuse of processStatutory jurisdiction

Judgment

[2024] 12 S.C.R. 492 : 2024 INSC 966

Dushyant Janbandhu
v.
M/s Hyundai Autoever India Pvt. Ltd.
(Civil Appeal No. 14299 of 2024)
11 December 2024
[Pamidighantam Sri Narasimha* and Sandeep Mehta, JJ.]

Issue for Consideration
High Court allowing the petition filed by the respondent under
Section 11(6) under the Arbitration and Conciliation Act, 1996
appointed an arbitrator. Whether the disputes relating to non-
payment of wages and the legality and validity of the termination
order were arbitrable.

Headnotes†
Payment of Wages Act, 1936 – ss.15(2), 22 – Industrial Disputes
Act, 1947 – s.2(A) – Disputes relating to non-payment of wages
and the legality and validity of the termination order, if arbitrable:
Held: No – Disputes related to non-payment of wages and legality
and propriety of termination which are non-arbitrable and the
appellant approached the statutory authorities under the PW Act and
the ID Act much prior to the filing of petition under Section 11(6) by
the respondent and thus, the disputes were anyway pending before
the statutory authorities which would exercise their jurisdiction to the
exclusion of civil courts – Further, the alleged violation of clause 19
of the appointment order relating to non-disclosure obligation was
only an afterthought as it was not raised in the show cause notice,
inquiry report, chargesheet and termination order and as such
is non-existent – Section 11(6) petition filed by the respondent
was an abuse of process intended to threaten the appellant for
having approached the statutory authorities under the PW Act
and the ID Act – Judgment of High Court set aside – Petition filed
by the respondent under Section 11(6) under the Arbitration and
Conciliation Act dismissed with cost – Arbitration and Conciliation
Act, 1996. [Paras 17, 12, 14, 18]

Case Law Cited
Vidya Drolia v. Durga Trading Corporation [2020] 11 SCR 1001 :
(2021) 2 SCC 1 – relied on.
* Author
[2024] 12 S.C.R. 493

Dushyant Janbandhu v. M/s Hyundai Autoever India Pvt. Ltd.

Perkins Eastman Architects DPC & Anr. v. HSCC (India) Ltd.
[2019] 17 SCR 275 : (2020) 20 SCC 760 – referred to.

List of Acts
Payment of Wages Act, 1936; Industrial Disputes Act, 1947;
Arbitration and Conciliation Act, 1996.

List of Keywords
Non-payment of wages; Termination order; Legality and validity
of the termination order; Disputes whether arbitrable; Disputes
non-arbitrable; Authority under the Payment of Wages Act, 1936;
Industrial Court; Charge memo; Non-cooperation; Absenteeism;
Disciplinary action; Jurisdiction to the exclusion of the civil courts;
Arbitration agreement; Arbitrator unilaterally appointed; Petition
under Section 11(6) of the Arbitration and Conciliation Act, 1996;
Alleged violation of non-disclosure obligation; Appointment order;
Bar of Suits; Statutory authorities; Abuse of process; Show cause
notice; Inquiry report, Chargesheet; Compensation.

Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 14299 of 2024
From the Judgment and Order dated 20.12.2022 of the High Court
of Judicature at Madras in Arb O.P No. 31 of 2022

Appearances for Parties
Anurag Ojha, Kamlesh K Mishra, Dipak Raj, Advs. for the Appellant.
Ms. Jaikriti S. Jadeja, Shivang Goel, Ishaan Aggarwal, Advs. for
the Respondent.

Judgment / Order of the Supreme Court

Judgment

Pamidighantam Sri Narasimha, J.

1. Delay condoned. Leave Granted.
2. Questioning the appointment of an arbitrator by the High Court
of Madras under Section 11(6) of the Arbitration and Conciliation
494 [2024] 12 S.C.R.

Digital Supreme Court Reports

Act, 1996,1 by the order impugned before us,2 the appellant has
filed this appeal on the ground that the dispute with the respondent-
employer, M/S Hyundai AutoEver India Pvt. Ltd. is governed by
statute under the Payment of Wages Act, 19363 and the Industrial
Disputes Act, 1947.4 In the normal course and in recognition of
judicial restraint, as incorporated in Section 5 of the Act, we would
have asked the appellant to raise these objections before the Arbitral
Tribunal itself. However, as the following narration of facts speaks for
itself, we have found that the application under Section 11 of the Act
is a clear abuse of the remedial process. We have therefore allowed
the appeal and dismissed the Section 11(6) petition with cost.
3. The appellant was appointed as an Assistant Manager on 15.03.2019.
Within a year, due to Covid-19 pandemic, the appellant was asked
to work from home from 22.03.2020 to 06.01.2021. However, the
respondent called upon the appellant to resume physical attendance
of office from August 2020. As the appellant refused to comply, a
show cause notice was issued on 04.09.2020, followed by an inquiry,
report of which is in the following terms;
“Conclusion
• There has been prima facie evidence against Dushyant
for his purposeful absenteeism to work and its impact
on Company’s business and Customer relations.
• Possibility of too due to his absenteeism. A detailed
Charge sheet can be issued to Mr. Dushyant and refer
to Disciplinary committee to take final decision.
• Till the final decision, he should attend office regularly
as per the roster.
• If he is having access from remote, those days should
be recorded separately by his HOS.
• Based on the final decision of the disciplinary committee
further action can be taken.”

1 Hereinafter referred to as the ‘Act’.
2 Order passed by the High Court of Judicature at Madras in Arb O.P. No. 31 of 2022 dated 20.12.2022.
3 Hereinafter referred to as the ‘PW Act’.
4 Hereinafter referred to as the ‘ID Act’.
[2024] 12 S.C.R. 495

Dushyant Janbandhu v. M/s Hyundai Autoever India Pvt. Ltd.

4. The inquiry led to issuance of a charge memo on 25.11.2020
for violating certain contractual clauses and these related to
non-cooperation and absenteeism. It is necessary to mention here
itself that there is no reference to Clause 195 of the appointment
conditions relating to violation of the non-disclosure obligation.
Ultimately, an order of termination was passed on 21.01.2021, the
relevant portion of the said order of termination is important for our
consideration and it is extracted hereinbelow for ready reference.
“Please refer our Show Cause Notices dated 4th Sep 2020,
Emails dated (05th Aug, 03rd Sep, 07 Sep 2020 & 07 Jan
2021) and the charge sheet dated (26 Nov 2020). You
have continued to remain absent at work premises without
authorisation and also you did not present yourself for our
enquiry meetings called for as per our disciplinary Policy.
Considering all the above, as per your agreed employment
terms Clause 11, 12(V), 17, 24 & 25, your employment
has been terminated with effective from the closing hours
of 06 Jan 2021. […]”
5. It is evident from the above that there is no allegation whatsoever
that the appellant has violated clause 19 of the appointment order
leading to the order of termination.
6. During the pendency of disciplinary action, as the appellant was
not paid his salary, he issued a legal notice for payment of wages
on 29.05.2021 and filed a petition under Section 15(2) of the PW
Act before the authority under the PW Act. As a counterblast, the
respondent issued a notice alleging that the disputes must be
settled through arbitration and proceeded to unilaterally appoint an
arbitrator. We may mention here itself that even in the said reply
notice dated 22.06.2021 issued by the respondent, there is no
specific allegation of violation of the non-disclosure obligations by
the appellant herein. The claim for arbitration naturally related to
stoppage of payment of wages, which according to the appellant
was within the jurisdiction of the Authority under the PW Act as per
its statutory provisions.

5 “You will not give out to any one, by word of mouth or otherwise, particulars of HAEI’s business or an
administrative or organizational matter of a confidential nature which may be your privilege to know by
virtue of you being HAEI’’s employee.”
496 [2024] 12 S.C.R.

Digital Supreme Court Reports

7. Before we deal with the facts relating to the proceedings before the
Authority under the PW Act, it is necessary to mention that as the
unilaterally appointed arbitrator commenced the arbitral proceedings,
the appellant filed an application under Section 16 of the Act calling
upon the arbitrator to rule on his competence. It is interesting to note
that the arbitrator himself passed an order on 01.05.2022 taking into
account the decision of this Court in Perkins Eastman Architects DPC
& Anr. v. HSCC (India) Ltd.6 and closing the arbitral proceedings.
The relevant portion is reproduced here as follows:
“[…] In the present case, as detailed herein above, the
appointment of the undersigned as the Arbitrator and the
Constitution of the Arbitral Tribunal thereof are without
the consent or the participation of the Respondent. Once
the jurisdiction of this Arbitral Tribunal has been put into
question on that ground, this Tribunal ceases to have
the power or authority to proceed with the matter in any
manner.
I therefore have no hesitation in holding that the constitution
of this Arbitral Tribunal is not in accordance with or in
consonance with the provisions of Section 11 of the
Arbitration and Conciliation Act as amended, particularly
in the light of the ratio set out by the Hon’ble Supreme
Court in Perkins Eastman Architects DPC & another V/s
HSCC (India) Ltd.
In the light of the same, the arbitral proceedings between
the parties above-named before this Tribunal is closed
forthwith with liberty being granted to both the parties to
work out their respective remedies in accordance with law.”
8. Returning to the proceedings commenced before the Authority, we
note that the respondent moved an application under Section 8 of
the Act seeking reference of the dispute involved in the petition
under Section 15(2) of the PW Act to arbitration. The Authority under
PW Act dismissed the said application on 03.03.2022 holding that;
“In view of Section 23 of the Payment of Wages Act, arbitration
agreement cannot stand in the way of the claimant in respect of
illegally deducted wages under Payment of Wages Act.”

6 [2019] 17 SCR 275 : (2020) 20 SCC 760
[2024] 12 S.C.R. 497

Dushyant Janbandhu v. M/s Hyundai Autoever India Pvt. Ltd.

9. There is yet another development. Questioning the order of termination
dated 21.01.2021, the appellant approached the Industrial Tribunal
by filing a petition under Section 2(A) of the ID Act and the same is
pending adjudication and determination by the Industrial Tribunal.
10. It is in the above referred background that the respondent approached
the High Court by filing a petition under Section 11(6) of the Act in
August 2022 seeking appointment of an arbitrator. The disputes
between the appellant and the respondent, as indicated in the
arbitration petition relate to non-payment of wages and also the
legality and validity of termination order dated 21.01.2021. Over
and above these disputes, for the first time the respondent sought
to give a new angle to the dispute by stating that the appellant has
also violated the non-disclosure obligations under clause 19 of the
appointment order.
11. In the order impugned before us, the High Court has proceeded to
note an arbitration agreement and therefore, appointed an advocate
as the arbitrator.
12. The issue relating to violation of the non-disclosure obligation under
clause 19 is only an afterthought. This was evidently not the ground
when the respondent issued the show cause notice on 04.09.2020,
nor was it a part of the inquiry report, the relevant portion of which
we have extracted in the para 3 above. This is also not a part of the
charge memo dated 25.11.2020.
13. Crucially, the termination was not based on any such allegation as
is evident from the termination order dated 21.01.2021 that we have
extracted earlier. Under these circumstances, we can conclude that
there is no dispute about violation of non-disclosure obligations and
Section 11(6) petition, to this extent is non-existent.
14. Insofar as other disputes are concerned, they relate to non-payment
of wages and the legality and validity of the order of termination
dated 21.01.2021. The appellant approached the Authority under the
PW Act much before the order of termination and the said authority
would exercise jurisdiction under Section 15(2) of the PW Act to
the exclusion of civil courts and these disputes are non-arbitrable.
Section 22 of the PW Act reads as under:
“22. Bar of Suits.—No Court shall entertain any suit for
the recovery of wages or of any deduction from wages in
so far as the sum so claimed—
498 [2024] 12 S.C.R.

Digital Supreme Court Reports

(a) forms the subject of an application under section 15
which has been presented by the plaintiff and which is
pending before the authority appointed under that section
or of an appeal under section 17; or
(b) has formed the subject of a direction under section 15
in favour of the plaintiff; or
(c) has been adjudged, in any proceeding under section 15,
not to be owed to the plaintiff; or
(d) could have been recovered by an application under
section 15.”
15. Equally, legality of the order of termination dated 21.01.2021 is
within the jurisdiction of Industrial Tribunal under Section 2(A) of
the ID Act and it is important to mention that the jurisdiction of
the Industrial Court is also to the exclusion of the civil courts and
is not arbitrable. It is also important to note that remedies under
these statutes were invoked much prior to the filing of petition
under Section 11(6) by the respondent. In Vidya Drolia v. Durga
Trading Corporation,7 the principle of subject-matter arbitrability is
enunciated as follows:
“76. In view of the above discussion, we would like to
propound a fourfold test for determining when the subject-
matter of a dispute in an arbitration agreement is not
arbitrable:
76.1 (1) When cause of action and subject-matter of the
dispute relates to actions in rem, that do not pertain to
subordinate rights in personam that arise from rights in rem.
76.2 (2) When cause of action and subject-matter of the
dispute affects third-party rights; have erga omnes effect;
require centralised adjudication, and mutual adjudication
would not be appropriate and enforceable.
76.3 (3) When cause of action and subject-matter of the
dispute relates to inalienable sovereign and public interest
functions of the State and hence mutual adjudication would
be unenforceable.

7 [2020] 11 SCR 1001 : (2021) 2 SCC 1
[2024] 12 S.C.R. 499

Dushyant Janbandhu v. M/s Hyundai Autoever India Pvt. Ltd.

76.4 (4) When the subject-matter of the dispute is
expressly or by necessary implication non-arbitrable as
per mandatory statute(s).”
(emphasis supplied)
16. Having considered the factual background in which the Section 11(6)
petition has been filed, we are of the opinion that it is an abuse of
process. It was clearly intended to threaten the appellant for having
approached the statutory authorities under the PW Act and the ID
Act. There is no basis for invoking clause 19 of the agreement and
demanding compensation of Rs. 14,02,822/- when that fact situation
did not arise.
17. The Section 11(6) petition has two facets. The first relates to disputes
that were anyway pending before the statutory authorities, and
they related to non-payment of wages and legality and propriety of
termination which are non-arbitrable. The second facet relates to the
alleged violation of clause 19 relating to non-disclosure obligation,
which was not raised in the show cause notice, inquiry report,
chargesheet and termination order and as such is non-existent.
18. In view of the above, we allow the Civil Appeal and set-aside the
judgment and the order passed by the High Court and dismiss
the petition under Section 11(6) filed by the respondent under the
Arbitration and Conciliation Act.
19. The appellant will also be entitled to cost quantified at Rs. 5 lakhs
payable within a period of 3 months from today.

Result of the case: Civil Appeal allowed.

†
Headnotes prepared by: Divya Pandey