In a recent ruling, the Supreme Court of India has quashed the appointment of an arbitrator in a dispute between Hyundai AutoEver India Pvt. Ltd. and its former employee, a decision that also included imposing a ₹5 lakh penalty on the employee for abusing the legal process.
The case, Dushyant Janabandhu v. Hyundai AutoEver Pvt Ltd, arose from a series of events starting with the termination of an assistant manager by Hyundai on January 21, 2021. The employee had allegedly faced termination due to absenteeism and non-cooperation, but no charges of confidentiality breach were cited, as required under Clause 19 of the employment agreement.
Subsequent to his termination, the employee sought redressal through statutory channels under the Payment of Wages Act (PW Act) and the Industrial Disputes Act (ID Act), seeking unpaid wages and challenging the termination. Meanwhile, Hyundai AutoEver, a subsidiary of the global Hyundai Motor Group, initiated arbitration proceedings, unilaterally appointing an arbitrator. However, the arbitrator refrained from proceeding, citing a lack of jurisdiction over the dispute.
Hyundai then turned to the Madras High Court, invoking Section 11(6) of the Arbitration and Conciliation Act, 1996 to seek the appointment of an arbitrator. The High Court, finding the existence of an arbitration clause, ordered the appointment. However, the employee contested this decision before the Supreme Court.
The Supreme Court, while analyzing the case, ruled that the dispute fell within the purview of statutory adjudication and was not suitable for arbitration. The bench, comprising Justices PS Narasimha and Sandeep Mehta, emphasized that matters under the PW Act and ID Act are beyond the jurisdiction of civil courts and cannot be arbitrated. "The jurisdiction of the Authority under the PW Act and the Industrial Tribunal under the ID Act is to the exclusion of civil courts and is not arbitrable," the Court stated, referencing principles from the landmark Vidya Drolia v. Durga Trading Corporation case.
In its observation, the Court criticized Hyundai's belated attempt to invoke Clause 19 of the employment agreement to seek compensation of ₹14.02 lakh. The Court dismissed this as an afterthought, noting, "There is no basis for invoking Clause 19 when that fact situation did not arise."
The apex court, therefore, set aside the order of the Madras High Court, granting relief to the employee. The Court further directed Hyundai to pay costs of ₹5 lakh to the employee, specifying, "The appellant will also be entitled to cost quantified at ₹5 lakhs payable within 3 months from today."
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