Introduction:

In C. Chitambaram v. Directorate of Transport, the Calcutta High Court in its judgment dated June 16, 2025, set aside a labour court’s order denying reinstatement to a bus driver despite admitting his termination was illegal. The case was heard by Justice Raja Basu Chowdhury, who held that where an employee’s termination violates principles of natural justice, reinstatement is the appropriate remedy, not mere compensation for mental harassment. The dispute arose after C. Chitambaram, a daily-rated bus driver with the Directorate of Transport since 2008, was arrested in 2014 on allegations of pilfering 20 liters of HSD oil. While the employer treated this arrest and FIR as serious misconduct and terminated him retrospectively, Chitambaram was acquitted in 2018. He demanded reinstatement, but the employer refused, leading to conciliation proceedings that failed, and the matter was referred to the labour court, which agreed the termination was illegal but inexplicably awarded only compensation. Chitambaram challenged this outcome by writ petition, arguing he was entitled to reinstatement given the clear violation of Sections 25B and 25F of the Industrial Disputes Act, 1947 (“ID Act”) and the procedural unfairness he suffered.

Arguments of Both Sides:

Counsel for Chitambaram, Mr. Gopala Binnu Kumar, argued that the labour court rightly found the termination illegal but erred fundamentally by denying reinstatement, which must follow automatically from a violation of Section 25F. He cited Ramani Mohan Industries Pvt. Ltd. v. Second Industrial Tribunal to show that reinstatement is the natural consequence of illegal retrenchment under the ID Act, and Surendra Kumar Verma v. Central Government Industrial Tribunal to argue that exceptions to reinstatement—such as loss of trust or business closure—were inapplicable. He emphasized that despite Chitambaram’s years of continuous service, the employer never conducted a proper departmental enquiry after his arrest or his eventual acquittal. Rather, the employer based the termination solely on the FIR without giving him any chance to cross-examine witnesses or lead evidence, violating the principles of natural justice. The counsel highlighted procedural lapses, including the recording of key witness statements in Chitambaram’s absence, absence of a proper show-cause opportunity, and absence of any enquiry proceedings. He asserted that denying reinstatement ignored not only legal precedent but also basic fairness, especially since Chitambaram was acquitted of the criminal charges. In contrast, the Directorate of Transport, represented by Mr. Tulsi Lall, restricted their arguments to jurisdiction, contending the labour court exceeded its mandate. They argued that the appropriate government’s reference confined the labour court to the narrow question of whether reinstatement should follow the acquittal, not whether the termination was itself legal. By holding the termination illegal, the labour court acted beyond the scope of the reference, the Directorate contended. Relying on Municipal Corporation of Delhi v. Sandeep Yadav, they argued that a labour court cannot decide matters outside the exact terms of reference, lest it exceed its jurisdiction, and that the labour court should have simply ruled on reinstatement post-acquittal without addressing the underlying legality of termination. They further contended that Chitambaram’s acquittal was insufficient to warrant reinstatement since his conduct had already eroded trust, and the employer was entitled to terminate him without necessarily reopening an internal inquiry.

Court’s Judgement:

The Calcutta High Court systematically rejected the employer’s jurisdictional challenge. Justice Raja Basu Chowdhury held that while a reference defines the scope of a labour court’s inquiry, it cannot be interpreted so narrowly as to render the referral question meaningless. The Court reasoned that when the referral question concerns reinstatement, assessing reinstatement necessarily requires examining whether the termination was legal or illegal. Determining the legitimacy of the termination is integral to deciding if reinstatement is justified; otherwise, any reinstatement question would become an academic exercise, since it is impossible to order reinstatement without deciding whether the employee was wrongly terminated in the first place. The High Court noted that the employer’s decision to terminate Chitambaram solely on the basis of an FIR, without conducting an internal enquiry or giving him a fair chance to defend himself, violated settled principles of natural justice. The Court observed multiple procedural irregularities, including denying Chitambaram an opportunity to cross-examine key witnesses, not allowing him to present his own evidence, and issuing a termination order retrospectively based on untested allegations. The employer’s decision to treat arrest as conclusive proof of misconduct, without following due process, was manifestly unjust. The High Court cited the Supreme Court’s decisions in Deepali Gundu Surwase v. Kranti Junior Adhyapak Mahavidyalaya, where it was ruled that reinstatement should ordinarily follow a termination found to be illegal or violative of natural justice, and that compensation alone is insufficient unless special circumstances—like closure of establishment or misconduct of extraordinary severity—justify denial of reinstatement. The Court noted no such exceptional circumstances existed here: Chitambaram’s acquittal removed the basis for the termination, and his unbroken service from 2008 until his arrest demonstrated satisfactory conduct. The High Court emphasized that a mere FIR cannot be treated as determinative of guilt; until a domestic enquiry is held with due process, reliance on a criminal case alone cannot justify termination. The Court found the labour court’s refusal to grant reinstatement irrational since it had already ruled the termination illegal. However, the High Court declined to grant back wages, holding that since Chitambaram had not worked during the intervening years, he was not entitled to salary for that period. Nonetheless, it declared he was entitled to reinstatement with continuity of service, pension benefits, and other consequential benefits excluding back wages. The High Court concluded that an award of compensation for mental harassment was no substitute for actual reinstatement, and a remedy under the ID Act must be effective rather than illusory. It set aside the labour court’s order and directed the Directorate of Transport to reinstate Chitambaram in service within two months of the date of the judgment, recognizing his right to resume employment after being unjustly deprived of his livelihood due to procedural lapses and disregard for natural justice.