Summary of this article
Court orders Rs 13 lakh payment to employee.
Insolvency cannot stop rightful employee compensation.
Labour court findings upheld after long legal fight.
Mr Rao joined service on October 23, 1999, as a customer service assistant in a private organisation. He was put on six-month probation and subsequently reaffirmed in service in July 2000. Rao worked well in the customer service division of the Bengaluru office for years without any serious problems.
But in 2008, his consistent job ended suddenly. Alleged misconduct occurred at the company office in Bengaluru, and Rao was blamed for it. The company management decided to institute disciplinary action against him, alleging misconduct on his part. Once the inquiry ended on August 30, 2008, the company dismissed Rao from service.
Labour Court Found The Dismissal Illegal
Aggrieved, Rao turned to the Central Government Administrative Tribunal-Cum-Labour Court by initiating a case questioning his termination. He contended that disciplinary action was not fair and that he had not been given a fair chance to defend himself.
After considering all documents, witnesses, and filings, the Industrial Tribunal passed its judgment on January 13, 2017. The Tribunal held that the disciplinary process had violated the principles of natural justice. It ruled that the company was unable to establish the misbehaviour alleged and that the whole process against Rao was partial and incomplete.
The Tribunal declared the order of termination as illegal and unwarranted. It ordered the company to reinstate Rao to the post held by him before his dismissal with continuity of service and all benefits attached thereto. It further directed the company to pay Rao 50 per cent of his arrears.
Interim Order For Rs 13 Lakh Deposit
After the Tribunal's direction, the case went to the Karnataka High Court. On April 20, 2017, the court made an interim order, asking the employer to deposit Rs 13 lakh in court pending the execution of the final judgement. The money was 50 per cent of Rao's back wages, as decreed by the Tribunal.
Rao was not entirely happy with this deal. He initiated a writ appeal to the Division Bench of the Karnataka High Court, requesting more prompt relief. In the order dated November 22, 2017, the Division Bench held that the company was liable to pay Rao 30 per cent of his last drawn salary towards sustenance till the final judgment is pronounced. It also provided for arrears from the date of the interim order. The Bench maintained the previous order of depositing the Rs 13 lakh and rejected the appeal accordingly.
Employer Declared Insolvent During Legal Process
While Rao was waiting for the final order and the disbursal of the money, a significant development altered the direction of the case. The employer company was found to be insolvent, and the process of liquidation was initiated. The Supreme Court later approved the liquidation, and the Official Liquidator acquired the company's assets.
Due to this, the initial reinstatement order could not be carried out. The business was closed, and no employee posts were available anymore. Rao then went to the Karnataka High Court once again, presenting a new petition to seek the Rs 13 lakh that the court had held years ago.
High Court Examined The Case
On September 25, 2025, the Karnataka High Court considered Rao's petition (WP No. 15526 of 2017). The court identified that the Industrial Tribunal's award dated January 13, 2017, had already directed reinstatement and 50 per cent back wages. It also observed that Rs 13 lakh had been deposited with the court pursuant to the interim order dated April 20, 2017.
The High Court affirmatively established that the company was liquidated and the Official Liquidator was dealing with its assets. Since the firm itself no longer existed, reinstating Rao was not possible. The court declared the relief of reinstatement was no longer possible as the company no longer existed as a viable unit.
The only question left was regarding the release of the Rs 13 lakh standing in for Rao's back wages.
Court Ruled The Tribunal's Award To Be Sound And Fair
The Karnataka High Court went through the Tribunal's elaborate findings. It saw that the Tribunal had scrutinised every piece of evidence and submissions prior to arriving at a conclusion that the disciplinary process initiated against Rao was vitiated. The court added that the Tribunal had rightly concluded that the company had not established Rao's alleged misconduct with regard to an illegal fuel entry.
The High Court stated that the order of the Tribunal was "well-reasoned" and "grounded on a careful analysis of fact." It observed that the Tribunal had applied sound judicial principles and had come to its conclusion on mature consideration of the material available on record.
The court also noted that there was no one who had furnished any evidence to prove that the findings of the Tribunal were perverse, unreasonable, or against the evidence. Thus, it found no justification in interfering with the order of the Tribunal.
Limited Role Of Judicial Review
The High Court indicated that under Article 226 of the Indian Constitution, judicial review in such cases is confined. The court cannot re-assess evidence or override its opinion for that of the Tribunal in case of any obvious legal or procedural mistake.
The Bench held, "With the effectiveness of limited jurisdiction of judicial review, we are of the considered opinion that the impugned award passed by the Industrial Tribunal does not call for interference." It, thus, rejected the company's writ petition and confirmed the Tribunal's 2017 award.
Insolvency Does Not Bar Worker Payments
The Karnataka High Court also ruled on how the insolvency of the company impacted Rao's case. It noted that even though the company was placed in liquidation, that fact did not alter the employee's entitlement to the amount deposited with the court prior to the onset of insolvency.
The court stated that the interim direction to pay 50 per cent of back wages had been made on April 20, 2017, much earlier than the liquidation of the company. Hence, Rao's claim for the money had already existed prior to the initiation of the insolvency process. The High Court decided that since the deposit was originally made when the company was still running, the money should now be remitted to the employee along with the interest it has accrued.
The court made it clear that Rao's case could not be drawn in comparison with other insolvency cases such as Siti Networks Vs. Rajiv Suri, in which the facts were dissimilar. The Bench ruled that, in the present case, justice required Rao to be granted the compensation without delay.
