Gujarat High Court
Sagar Balubhai Hirpara vs Iifl Finance Ltd on 1 August, 2025
NEUTRAL CITATION
C/SCA/16483/2024 JUDGMENT DATED: 01/08/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 16483 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 4007 of 2025
FOR APPROVAL AND SIGNATURE:
HONOURABLE MRS. JUSTICE M. K. THAKKER
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Approved for Reporting Yes No
NO
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SAGAR BALUBHAI HIRPARA
Versus
IIFL FINANCE LTD. & ANR.
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Appearance:
HARSHIT M KARATHIA(7916) for the Petitioner(s) No. 1
MS NANCY SONI FOR MR HARSHAD O JOSHI(11428) for the
Respondent(s) No. 1
NOTICE SERVED BY DS for the Respondent(s) No. 2
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CORAM:HONOURABLE MRS. JUSTICE M. K. THAKKER
Date : 01/08/2025
ORAL JUDGMENT
1. Since the issue raised in the these petitions are similar, they are being decided by a common judgment. The facts of Special Civil Application No.16483 of 2024 are taken for the purpose of adjudication.
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2. The present petition is filed challenging the award dated 19.07.2024 passed by the learned Labour Court in Reference Case No. 326 of 2023, whereby the employer has been directed to pay an amount of ₹1,25,000/- towards full and final settlement of the dispute. Special Civil Application No. 16483 of 2024 has been filed by the workman seeking enhancement of the said amount, whereas Special Civil Application No. 4007 of 2025 has been filed by the employer for setting aside the award of compensation.
3. Gist of the Case:
3.1. The employee was appointed as a Branch Manager in the Sales Department of the employer financial institution on 03.09.2018 and joined the services on 27.09.2018. The employer is a non-
banking financial company (NBFC) holding a valid license to provide loans and mortgages, including home loans, gold loans, and business loans. The employee was drawing an annual salary of ₹4,80,000/- along with other benefits such as incentives and performance bonuses.
3.2. Subsequently, an FIR being I-C.R. No. 1119101722031 of 2024 came to be registered before the Gujarat University Police Station, Ahmedabad under Sections 342 and 114 of the Page 2 of 17 Uploaded by M.M.MIRZA(HC01407) on Wed Aug 06 2025 Downloaded on : Wed Aug 06 22:53:48 IST 2025 NEUTRAL CITATION C/SCA/16483/2024 JUDGMENT DATED: 01/08/2025 undefined Indian Penal Code, at the instance of one customer, Smt. Gitaben Arvindbhai Patel. It was alleged that the employee had entered into a financial transaction with the said customer and misappropriated ₹4,50,000/-, which had been deposited by her but was not recorded in the employer's official records.The employee was arrested in connection with the said FIR and was later detained under the PASA Act. In addition, another incident involving one Mr. Jignesh Padhariya came to light, wherein it was alleged that the employee had taken gold ornaments from the said customer but, instead of depositing them with the Branch, had sold the same and retained the proceeds.
3.3. The employer issued a show-cause notice via email; however, as the employee was in custody, no response was received. Thereafter, a chargesheet dated 07.05.2022 was served upon the employee, and he was subsequently terminated from service. The termination was challenged by the employee before the learned Labour Court by filing Reference (LCR) No. 326 of 2023.
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4. Heard the learned advocate Mr.Harshit Karathia for the employee and learned advocate Ms.Nancy Soni for the employer.
5. Learned advocate Mr. Harshit Karathia submits that admittedly no departmental inquiry was initiated, nor were the principles of natural justice followed. He further submits that though the learned Labour Court has rightly held that there was a breach of Section 25F of the Industrial Disputes Act, 1947, it has awarded only a meagre amount of ₹1,25,000/- towards compensation, despite the petitioner having served for almost four years. Learned advocate Mr. Karathia submits that the learned Labour Court has committed an error in awarding such a nominal Page 4 of 17 Uploaded by M.M.MIRZA(HC01407) on Wed Aug 06 2025 Downloaded on : Wed Aug 06 22:53:48 IST 2025 NEUTRAL CITATION C/SCA/16483/2024 JUDGMENT DATED: 01/08/2025 undefined amount, and therefore, the present petition deserves to be allowed by enhancing the amount of lump-sum compensation awarded to the petitioner.
6. As against the same, learned advocate Ms. Nancy Soni appearing for the employer submits that the employee was holding the post of Branch Manager and, therefore, does not fall within the definition of "workman" under Section 2(s) of the Industrial Disputes Act, 1947. It is submitted by the learned advocate Ms.Soni that the employee was drawing an annual salary of ₹4,80,000/- and was also receiving incentives and other performance based benefits. Learned advocate Ms. Soni further submits that the employee had committed serious irregularities, which resulted in a complete loss of confidence, and in such circumstances, the learned Labour Court has erred in awarding lump-sum compensation in favour of the employee. She, therefore, submits that the impugned award deserves to be set aside and the petition filed by the employer be allowed.
7. Having considered the submissions made by the learned advocates for the respective parties and upon perusal of the reasons assigned by the learned Labour Court, it emerges that the employee was Page 5 of 17 Uploaded by M.M.MIRZA(HC01407) on Wed Aug 06 2025 Downloaded on : Wed Aug 06 22:53:48 IST 2025 NEUTRAL CITATION C/SCA/16483/2024 JUDGMENT DATED: 01/08/2025 undefined appointed to the post of Branch Manager - Gold Loan, in the Manager Grade, at the Ahmedabad Branch, and was drawing a salary of ₹4,80,000/- per annum. On referring to the statement of claim, it is stated by the employee that he was discharging duties related to client communication under the instructions of his supervisor, and therefore, he falls within the definition of "workman" under the Industrial Disputes Act.
7.1. In response, the employer filed a written statement contending that the post of Branch Manager does not fall within the definition of "workman," and thus the employee is not entitled to raise an industrial dispute. However, no evidence was adduced by the employer to rebut the employee's claim regarding the nature of duties performed by him. In that background, the learned Labour Court has rightly concluded that the employee qualifies as a "workman" as defined under Section 2(s) of the I.D. Act.
7.2. Thereafter, the learned Labour Court proceeded to examine whether the termination of the employee was legal and proper. It is an undisputed fact that the employer had issued a show cause Page 6 of 17 Uploaded by M.M.MIRZA(HC01407) on Wed Aug 06 2025 Downloaded on : Wed Aug 06 22:53:48 IST 2025 NEUTRAL CITATION C/SCA/16483/2024 JUDGMENT DATED: 01/08/2025 undefined notice to the employee seeking his explanation on the allegation of misappropriation. As the said notice remained unanswered, a chargesheet was issued and the termination order was passed. However, it emerges from the record that no domestic inquiry was conducted by the employer prior to passing the order of termination.
8. It emerges from the record that the FIR registered against the employee culminated in the filing of a chargesheet, which is presently pending adjudication before the learned Criminal Court. The allegations levelled against the employee pertain to misappropriation of funds as well as gold, which had been deposited by customers but was not accounted for by the employee. Instead, the employee allegedly misappropriated the same by encashing the gold for his personal use. It is also an admitted position that no opportunity was afforded to the employee to explain the charges, and the order of termination came to be passed solely on the ground of loss of confidence.
9. At this stage, the reference of the decision rendered by the Apex Court in the case of Sudhir Vishnu Panvalkar v. Bank of India, reported in (1997) 6 Page 7 of 17 Uploaded by M.M.MIRZA(HC01407) on Wed Aug 06 2025 Downloaded on : Wed Aug 06 22:53:48 IST 2025 NEUTRAL CITATION C/SCA/16483/2024 JUDGMENT DATED: 01/08/2025 undefined SCC 271 is required to be made. The relevant part is reproduced hereinbelow:
"6.It is an admitted position that when the appellant's services were terminated, the Bank though nationalised had not prescribed the Conduct and Disciplinary Rules or Regulations. It is in these circumstances, the general principles of natural justice held the field. Mr. Singhvi contended that the appellant being a permanent employee, his services could not have been terminated without holding a departmental enquiry. Merely because the services of the employees of the Bank were not governed by any Conduct and Disciplinary Rules or Regulations, an employee could not be put to a greater disadvantage and the disciplinary authority could be permitted to violate the principles of natural justice. The main thrust of the contention of Mr. Singhvi was that the termination order of the appellant was totally in violation of principles of natural justice and also an arbitrary action on the part of the Bank. The order of termination was thus violative of Articles 14 and 16 of the Constitution. In support of this submission, Mr. Singhvi relied upon various decisions of this court and in particular, the decisions in W.B. SEB V/s. Desh Bandhu Ghosh, central Inland Water Transport Corpn. Ltd. V/s. Brojo Nath Ganguly and Delhi Transport Page 8 of 17 Uploaded by M.M.MIRZA(HC01407) on Wed Aug 06 2025 Downloaded on : Wed Aug 06 22:53:48 IST 2025 NEUTRAL CITATION C/SCA/16483/2024 JUDGMENT DATED: 01/08/2025 undefined Corpn. V/s. D.T.C. Mazdoor Congress. We have very carefully gone through these decisions. In all these reported decisions, the rules and/or regulations relating to conduct and disciplinary matters, fell for consideration in the context of Articles 14 and 16 of the Constitution of India. As indicated earlier, the Bank had framed no rules and regulations in regard to the service conditions etc, of its employees. It is in these circumstances, we do not think it necessary to refer to these decisions in detail since they are not applicable to the facts of the present case. The division bench of the High court in its Judgement has exhaustively dealt with the various decisions of this court and the High courts and very succinctly drawn the distinction and pointed out how those decisions were not applicable to the facts of the present case. We are in complete agreement with the reasons given by the High court.
7.The only ground that survives for our consideration is as to whether the Bank was justified in terminating the services of the appellant on the ground of loss of confidence and in the facts and circumstances of the case, whether any such inquiry was necessitated. From the material placed on record before us, it is quite clear that the appellant was involved in misappropriation of the Society's funds. The proceedings initiated under Page 9 of 17 Uploaded by M.M.MIRZA(HC01407) on Wed Aug 06 2025 Downloaded on : Wed Aug 06 22:53:48 IST 2025 NEUTRAL CITATION C/SCA/16483/2024 JUDGMENT DATED: 01/08/2025 undefined Section 88 of the Act went up to the Maharashtra Cooperative tribunal and after contest by the parties, the tribunal held the appellant guilty of certain charges involving moral turpitude relating to misappropriation of the Society's funds. Mr. Singhvi, however, urged that some of these documents were not the subject-matter of proceedings before the High court and, therefore, they cannot be relied upon by the Bank in this appeal. He also urged that these documents/papers are from the proceedings before the Registrar and that they have no bearing upon the issue involved in this case. He also urged that the Bank had not produced the entire correspondence before this court for its appreciation and proper decision. Ordinarily, this plea could have been sustained but no stateable reasons could be given on behalf of the appellant nor could the correctness thereof be challenged. All these documents were filed by the Bank along with its counter-affidavit of which the copy and the documents were furnished to the appellant long time back. Although, the rejoinder was filed by the appellant but he could not dispute the correctness of all these documents. It is in these circumstances, we are of the view that these documents could be relied upon by the Bank to justify the order of termination on the ground of loss of confidence. On perusal of the material Page 10 of 17 Uploaded by M.M.MIRZA(HC01407) on Wed Aug 06 2025 Downloaded on : Wed Aug 06 22:53:48 IST 2025 NEUTRAL CITATION C/SCA/16483/2024 JUDGMENT DATED: 01/08/2025 undefined produced before us, we are of the opinion that the order of termination passed by the Bank does not suffer from any vice and the division bench of the High court was right in upholding the termination order."
10. The Apex Court in the case of The Divisional Controller, KSRTC vs. M.G.Vittal Rao, reported on (2012) 1 SCC 442 has held as under:
"25. Once the employer has lost the confidence in the employee and the bona fide loss of confidence is affirmed, the order of punishment must be considered to be immune from challenge, for the reason that discharging the office of trust and confidence requires absolute integrity, and in a case of loss of confidence, reinstatement cannot be directed. [Vide Air India Corpn. v. V.A. Rebellow [(1972) 1 SCC 814 : AIR 1972 SC 1343] , Francis Klein & Co. (P) Ltd. v. Workmen [(1972) 4 SCC 569 : AIR 1971 SC 2414] and BHEL v. M. Chandrasekhar Reddy [(2005) 2 SCC 481 : 2005 SCC (L&S) 282 : AIR 2005 SC 2769] .
26. In Kanhaiyalal Agrawal v. Gwalior Sugar Co. Ltd. [(2001) 9 SCC 609 : 2002 SCC (L&S) 257 : AIR 2001 SC 3645] this Court laid down the test for loss of confidence to find out as to whether there was bona fide loss of confidence in the employee, observing that, Page 11 of 17 Uploaded by M.M.MIRZA(HC01407) on Wed Aug 06 2025 Downloaded on : Wed Aug 06 22:53:48 IST 2025 NEUTRAL CITATION C/SCA/16483/2024 JUDGMENT DATED: 01/08/2025 undefined (SCC p. 614, para 9) (i) the workman is holding the position of trust and confidence; (ii) by abusing such position, he commits an act which results in forfeiting the same; and (iii) to continue him in service/establishment would be embarrassing and inconvenient to the employer, or would be detrimental to the discipline or security of the establishment. Loss of confidence cannot be subjective, based upon the mind of the management. Objective facts which would lead to a definite inference of apprehension in the mind of the management, regarding trustworthiness or reliability of the employee, must be alleged and proved. (See also Sudhir Vishnu Panvalkar v. Bank of India [(1997) 6 SCC 271 : 1997 SCC (L&S) 1662 : AIR 1997 SC 2249] .
27. In SBI v. Bela Bagchi [(2005) 7 SCC 435 : 2005 SCC (L&S) 940 : AIR 2005 SC 3272] this Court repelled the contention that even if by the misconduct of the employee the employer does not suffer any financial loss, he can be removed from service in a case of loss of confidence. While deciding the said case, reliance has been placed upon its earlier judgment in Disciplinary Authority-cum-Regional Manager v. Nikunja Bihari Patnaik [(1996) 9 SCC 69 : 1996 SCC (L&S) 1194] .
28. An employer is not bound to keep an employee in Page 12 of 17 Uploaded by M.M.MIRZA(HC01407) on Wed Aug 06 2025 Downloaded on : Wed Aug 06 22:53:48 IST 2025 NEUTRAL CITATION C/SCA/16483/2024 JUDGMENT DATED: 01/08/2025 undefined service with whom relations have reached the point of complete loss of confidence/faith between the two. [Vide Binny Ltd. v. Workmen [(1972) 3 SCC 806 : AIR 1972 SC 1975] , Binny Ltd. v. Workmen [(1974) 3 SCC 152 :
1973 SCC (L&S) 444 : AIR 1973 SC 1403] , Anil Kumar Chakraborty v. Saraswatipur Tea Co. Ltd. [(1982) 2 SCC 328 : 1982 SCC (L&S) 249 : AIR 1982 SC 1062] , Chandu Lal v. Pan American World Airways Inc. [(1985) 2 SCC 727 : 1985 SCC (L&S) 535 : AIR 1985 SC 1128] , Kamal Kishore Lakshman v. Pan American World Airways Inc. [(1987) 1 SCC 146 : 1987 SCC (L&S) 25 :
AIR 1987 SC 229] and Pearlite Liners (P) Ltd. v. Manorama Sirsi [(2004) 3 SCC 172 : 2004 SCC (L&S) 453 : AIR 2004 SC 1373] .
29.In Indian Airlines Ltd. v. Prabha D. Kanan [(2006) 11 SCC 67 : (2007) 1 SCC (L&S) 359 : AIR 2007 SC 548] , while dealing with the similar issue this Court held that : (SCC p. 90, para 56) "56. ...loss of confidence cannot be subjective but there must be objective facts which would lead to a definite inference of apprehension in the mind of the employer regarding trustworthiness of the employee and which must be alleged and proved."Page 13 of 17 Uploaded by M.M.MIRZA(HC01407) on Wed Aug 06 2025 Downloaded on : Wed Aug 06 22:53:48 IST 2025
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30. In case of theft, the quantum of theft is not important and what is important is the loss of confidence of employer in employee. (Vide A.P. SRTC v. Raghuda Siva Sankar Prasad [(2007) 1 SCC 222 : (2007) 1 SCC (L&S) 151 : AIR 2007 SC 152] .)
31. The instant case requires to be examined in the light of the aforesaid settled legal proposition and keeping in view that judicial review is concerned primarily with the decision-making process and not the decision itself. More so, it is a settled legal proposition that in a case of misconduct of grave nature like corruption or theft, no punishment other than the dismissal may be appropriate. (Vide Pandiyan Roadways Corpn. Ltd. [(2007) 9 SCC 755 : (2008) 1 SCC (L&S) 1084] and U.P. SRTC v. Suresh Chand Sharma [(2010) 6 SCC 555 : (2010) 2 SCC (L&S) 239] .)
32. The domestic enquiry found the delinquent employee guilty of all the charges. The enquiry report was accepted by the disciplinary authority and there is no grievance on behalf of the respondent workman that statutory provisions/principles of natural justice have not been observed while conducting the enquiry. The disciplinary authority imposed the punishment of Page 14 of 17 Uploaded by M.M.MIRZA(HC01407) on Wed Aug 06 2025 Downloaded on : Wed Aug 06 22:53:48 IST 2025 NEUTRAL CITATION C/SCA/16483/2024 JUDGMENT DATED: 01/08/2025 undefined dismissal from service which cannot be held to be disproportionate or non-commensurate to the delinquency. The Labour Court after reconsidering the whole case came to the conclusion that the enquiry has been conducted strictly in accordance with law in a fair manner and charges have rightly been proved against the delinquent employee. However, considering the difference in the standard of proof required in domestic enquiry vis-à-vis that applicable to a criminal case, the Labour Court repelled the argument of the respondent workman that once he stood acquitted he was entitled to all reliefs including reinstatement and back wages. The learned Single Judge as well as the Division Bench had simply decided the case taking into consideration the acquittal of the delinquent employee and nothing else.
33. In view of the aforesaid settled legal propositions that there is no finding by the High Court that the charges levelled in the domestic enquiry had been the same which were in the criminal trial; the witnesses had been the same; there were no additional or extra witnesses; and without considering the gravity of the charge, we are of the view that the award of the Labour Court did not warrant any interference. Be that Page 15 of 17 Uploaded by M.M.MIRZA(HC01407) on Wed Aug 06 2025 Downloaded on : Wed Aug 06 22:53:48 IST 2025 NEUTRAL CITATION C/SCA/16483/2024 JUDGMENT DATED: 01/08/2025 undefined as it may, the learned Single Judge had granted relief to the delinquent employee which was not challenged by the present appellant by filing writ appeal. Therefore, the delinquent employee is entitled to the said relief."
11. This Court has taken into consideration the FIR lodged by the customer, as well as the settlement placed on record by the learned advocate for the employee, which was arrived at between the employee and Ms. Gitaben Arvindbhai Patel. The said settlement indicates that an understanding was reached between the parties and no financial transaction remained outstanding. However, it is an undisputed fact that, notwithstanding the settlement, the FIR and the consequent chargesheet have not been quashed and set aside by any Court of law. In that background, this Court is of the considered opinion that once the employer has genuinely lost confidence in the employee, and such loss of confidence is bona fide and well founded, the order of punishment cannot be interfered with. In cases involving discharge of duties requiring utmost trust and integrity, once the employer's loss of confidence is established, reinstatement cannot be granted.
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12. Considering the fact that the employee was taken into custody for a considerable period and was also detained under the PASA Act, this Court is satisfied with the action taken by the employer in terminating the services of the employee. However, since no departmental inquiry was conducted, the lumpsum compensation awarded by the learned Labour Court is found to be just and proper.
13. Resultantly, both the petitions fail being devoid of merits and are accordingly dismissed.
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