Termination based on loss of confidence requires substantial evidence and a fair inquiry process; failure to provide either renders the dismissal unlawful.

JUDGMENT :

M. K. THAKKER, J.

1. Rule, returnable forthwith. Learned advocate Ms.Purani waives service of notice of Rule on behalf of the respondent No.1.

2. This petition is filed under Articles 226 and 227 of the Constitution of India challenging the award dated 24.04.2025 passed by the learned Presiding Officer, Labour Court, Morbi in Reference (LCR) No.12 of 2020, whereby the petitioner was directed to reinstate the respondent with continuity of service and 50% back wages. The learned Labour Court has also directed payment of penal interest at the rate of 18% per annum from the date of the award till actual realization.

3. Gist of the Case:

3.1. The respondent was initially appointed on a seasonal basis in the APMC on 06.10.1998. On 02.10.2002, the respondent was issued an authority letter on behalf of the APMC, and subsequently, on 18.03.2003, the APMC issued a performance certificate acknowledging the respondent’s engagement as a daily wager. Thereafter, on 15.04.2003, following an interview conducted by the APMC, the respondent was confirmed as an ad-hoc employee on daily wages.

3.2. Subsequently, on 10.05.2004, the respondent submitted an application seeking benefits of permanency, pursuant to which he was appointed to the post of Clerk on an ad-hoc basis on 20.06.2004. This appointment was later cancelled on 15.01.2005. After a fresh interview conducted on 01.07.2005, the respondent was appointed as a permanent Clerk in the APMC. The respondent continued to work in this capacity from 01.07.2005 up to 25.07.2018, as per the rules and regulations of the APMC.

3.3. On 26.01.2018 (Republic Day), though all employees were required to remain present unless granted leave, the respondent remained absent. The absence occurred in the backdrop of an incident dated 19.01.2018 involving alleged theft of goods belonging to traders. Upto 30.01.2018, the respondent avoided resuming duty and did not furnish any explanation in connection with the complaints received from traders. On 30.01.2018, the respondent submitted an application seeking leave for an indefinite period, citing the aforesaid incident.

3.4. On 31.01.2018, FIR being I-C.R. No.8 of 2018 was registered with Halvad Police Station, District Morbi, for the offence punishable under Section 379 of the INDIAN PENAL CODE , based on a complaint filed by a trader of APMC, namely, Jitendrabhai Ramanikbhai Patel. Subsequently, on 10.02.2018, a notice was issued to the respondent, calling upon him to furnish his explanation and remain present on 16.02.2018. The respondent failed to appear and submitted an evasive and vague reply dated 28.02.2018.

3.5. Since the respondent failed to tender a satisfactory explanation in relation to the incident of theft, the elected committee of APMC resolved that they lost confidence in the respondent, as well as honesty and integrity were found to be doubtful. Accordingly, the committee passed a resolution dismissing the services of the respondent, which was communicated vide order dated 27.02.2018.

3.6. In the context of the FIR, the In-charge Police Inspector, LCB, Morbi, submitted a report dated 20.08.2018 exonerating the respondent from the criminal charges and filing ‘C’ summary. Thereafter, the respondent made representations to the APMC seeking revocation of the dismissal order. Since no reply was received to such representations, the respondent filed a Reference before the Labour Court, Morbi, seeking quashment of the dismissal order and reinstatement to his original post with all consequential benefits.

3.7. The respondent filed a statement of claim before the learned Labour Court and produced documentary evidence in support of the case. The petitioner