PRINCIPLE OF NO WORK NO PAY: FAIR OR BIASED? UNITED INDIA INSURANCE COMPANY LIMITED V. SIRAJ UDDIN

Author: Tejas Churra, NLSIU

Introduction

With COVID-19 looming over the country, labour laws are experiencing one of its biggest challenges yet. With the economy tanking and the lockdown affecting not only supply chains but also the sale of goods, companies are faced with severe cash crunches. In addition to this, owing to the lockdown that has been imposed all throughout the nation, several workers have been left without pay and bigger companies, in the attempt to save some money, have used this lockdown with the ‘no work no pay’ principle to help save on expense by simply not paying their employees. However, employees naturally have begun challenging these decisions, and with the cases against big corporations only increasing as life moves back towards how it was pre-lockdown, it becomes crucial to take another look at the most recent application of the ‘no work no pay’ principle to analyze the position of law. The United India Insurance Company v Siraj Uddin Khan case was a two bench Supreme Court judgement that was passed in July 2019. In this case, a thorough analysis of the ‘no work no pay’ principle was done along with its exceptions was done.

Basic Facts of the Case and An Analysis of the Background

In this case, the Respondent was transferred from the Allahabad branch of the bank that he was currently working in, to the Jaunpur Branch. However, after the Respondent left the Allahabad Branch, he did not join the Jaunpur branch on the prescribed date and instead decided to take a four-month unexplained absence. This absence was unauthorized, and no information was conveyed to the Appellants. Naturally, the Appellants were outraged by this and decided to initiate a Disciplinary enquiry against the Respondent and as a result, they issued an order to reduce the basic pay of the Respondent. Despite this order being passed in 2009, the Respondent continued to be absent from work until 2012 at which point the Appellants decided to terminate the Respondent’s employment.[1]

However, the Respondent decided to challenge this order that terminated his employment in the Allahabad High Court. He petitioned that the termination order was illegitimate as there were procedural overlaps in the disciplinary enquiry that was conducted in 2009 and the Allahabad High Court sided with the Respondent and held the termination notice as void. Since the termination of the Respondent was no longer legal, this meant that the Appellants were liable to pay the Respondent back pay for the time period of 2009-2012. As expected, the Appellants found this extremely unfair to them and refused to pay. As a result, the Respondent filed a writ petition in the Allahabad High Court directing the Appellants to pay back wages from 2009-2012 with a total of 18% interest per annum. Not satisfied by the judgment given, the Appellants moved to the Supreme Court.

The issue before the Supreme Court

  1. Does the dismissal of a termination of employment order, automatically entitle the Respondent to 4 years’ worth of back pay or does it simply mean that the Respondent is still an active employee of the company?

Previous Rules or Precedents that Were Relied Upon

  1. Airport Authority Of India and Others v Shambhu Nath Das[2]

In this case, the Supreme Court held that should a person absent their selves from work without any form or authorized leave or valid justifications; they will no longer be entitled to any form of back pay. This was an application of the principle of ‘no work, no pay’.


2. Shobha Ram Raturi v. Haryana Vidyut Prasaran Nigam Limited and Others[3]

This was another case the Supreme Court relied on to come to the decision that they did. In this case, the employee was actively restrained by the employer from working and upon the employee asking for back pay, the employer invoked his principle and refused to pay. When this case was brought before the Court, the Court realized this loophole and the potential exploitation of this principle, and hence, they decided to make a crucial exception for the same. The Courts introduced an exception to the no work no pay principle by saying that should there be a case where the employer actively prevents the employee from working, the employee will still be entitled to back pay.

Judgement

Based on the above two precedents, the Court had to determine two things to determine namely –

  1. Was the leave authorised by the employer, or is there a valid justification given by the Respondent for their absence?

  2. If the leave was unauthorised, was the Appellants actively “blocking” the Respondents from working?

If the answer to the first one is in affirmative and the second in negative, then based on the previous precedents and the ‘no-work no-pay’ principle, the Appellants would not be liable to pay for the back pay. Hence, the Supreme Court turned to the Respondent to provide proof of the same. In doing so, they shifted the burden of proof from the Appellants to the Respondent. As the Respondent was unable to provide any form of justification for their absence and the fact that Respondent was unable to provide any sort of proof that the Appellant was preventing the Respondent from working in any way shape or form, the Supreme Court held that the decision by the Allahabad High Court was to be set aside, and the Appellants need not pay the Respondents any form of back-pay.[4]

Reasons Why The Decision of The Supreme Court was A better Judgement than the One of the Allahabad High Court

Given the fact situation of the case, the researcher agrees with the decision of the Supreme Court. Looking at the jurisprudence behind the ‘no work, no pay’ principle, we see that it was formulated precisely to protect employers from circumstances like this. The only reason the exception was allowed in the Shobha Ram Raturi case, was because of the fact that the exception was in harmony with the jurisprudence of the principle. In all principles, there is a presumption of good faith or bon fide, and the act of preventing someone from working just to cut their pay under this principle is a clear act of mal fide or bad faith.[5]

However, looking at the judgement of the High Court of Allahabad, we see that this decision goes against the whole jurisprudence of the principle. Had this been the position of law, it would open a Pandora’s Box of legal problem for employers all across the nation, as it would effectively allow employees to take absences from their workplace as and when they desire which would be detrimental to companies. As a result, this would be a big blow to the Labour Laws existing in India as rather than being in balance without bias to either side, the law would rather be heavily skewed in favor of the employees. Hence, the High Court was incorrect in ignoring the previously established precedents. Fortunately, the Supreme Court did not make this same mistake and correctly upheld the appropriate position of law. Creating another exception to the principle would not be in harmony with the jurisprudence of the same and would hence weaken the labour laws in India.

Conclusion

As mentioned above, in light of the COVID-19 lockdown and the subsequent cases that will arise, taking another look at the existing status of the law was required. The Supreme Court was able to deliver a fair and just judgement that has resulted in the principle being in line with its jurisprudence and neither favoring employers nor employees. However, COVID-19 has altered life as we know it, and there is a very high chance that Courts may adopt a new exception to the principle to render it non-applicable in cases regarding COVID-19 as stated by the Bombay High Court. However, regardless of what the ruling regarding COVID-19 are, both employers and employees can rest easy knowing that should any application of this principle come up, the judiciary has maintained a fair and just approach.

[1] Chief Regional Manager, United India Insurance Company Limited v. Siraj Uddin Khan [Civil Appeal No. 5390 of 2019, decided on 11 July 2019].

[2] Airports Authority of India and Others v. Shambhu Nath Das [(2008) 11 SCC 498].

[3] Shobha Ram Raturi v. Haryana Vidyut Prasaran Nigam Limited and Others [(2016) 16 SCC 663].

[4] ibid, 1.

[5] ibid, 3.

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