Loss of confidence by the employer justifies termination without inquiry; however, failure to comply with natural justice principles warrants a compensatory award.

JUDGMENT :

M. K. THAKKER, J.

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.

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 Rs.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 Rs.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 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 Rs.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.

3.4. On hearing both parties, the learned Labour Court partly allowed the Reference by directing the employer to pay a lump sum compensation of Rs.1,25,000/-. Aggrieved by the said award, both parties have approached this Court, the employer by way of Special Civil Application No. 4007 of 2025 seeking to set aside the award, and the employee by way of Special Civil Application No. 16483 of 2024 seeking enhancement of the compensation.

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 25 F of the Industrial Disputes Act, 1947, it has awarded only a meagre amount of Rs.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 amount, and therefore, the present petition deserves to be allowed by e