Arbitration Can Be Initiated Over Termination Of Employee Contract Containing Both Dispute Resolution & Termination Clause : Calcutta High Court

Facts

The present application was for appointment of an Arbitrator on the basis of the dispute resolution clause (Clause 16) of the terms and conditions of the employment set out in Annexure 'A' of the appointment letter of the Petitioner dated February 27, 2023.

The Petitioner was appointed as a Senior Manager in Audit at Grant Thornton. The terms and conditions under Annexure 'A' were forwarded to the Petitioner along with the appointment letter and the Petitioner was required to sign the same and submit the Annexure to the Employer. Accordingly, the terms and conditions under Annexure 'A' became a binding contract between the employer and the employee. The terms and conditions provided for resolution of disputes through arbitration. The seat had been selected as Kolkata and the language was 'English'.

It is the Petitioner's case that on June 28, 2024, a show cause notice was issued on the basis of certain allegations levelled by another female employee. The Petitioner filed a reply. Upon enquiry, a report was submitted on October 22, 2024. The notice of termination was issued on November 22, 2024 and the ground for termination was “business reasons”.

The Petitioner's specific case is that although the allegation of sexual harassment had not been established, the Petitioner had reason to believe that the termination was the outcome of the complaint lodged by another employee and not a simpliciter termination. The Petitioner called upon the employer by a notice dated January 02, 2025, to refer the dispute to arbitration. The Petitioner also nominated a learned Senior Advocate as an arbitrator.

Contentions

The Counsel for the Petitioner submitted that although the terms and conditions provided that an employee may be terminated without any notice and without assigning any reasons upon payment of 60 days gross salary, the termination in this case was a reaction or a counter-blast to the proceedings initiated by a co-employee. The termination had adversely affected the reputation of the Petitioner and was wrongful. Thus, the Petitioner had a right to get such dispute adjudicated by a forum agreed to by the parties, under Clause 16 of the terms and conditions of employment. The terms and conditions are in the nature of a contract between the employer and employee.

The Counsel for the Respondent submitted that the Petitioner's employment was not statutorily protected. Neither Article 311 of the Constitution of India nor any other statute covered the employment. This was a case of private employment. The employer retained the right to terminate the Petitioner with or without notice and the terms of employment had been

followed. The law is well-settled that, the petitioner did not have any other claim towards the employer and as long as the 60 days gross salary was paid to the petitioner in lieu of the notice, the termination was valid.

Reliance was placed on a plethora of judgments including Emaar India Ltd. v. Tarun Aggarwal Projects LLP and Ors. AIR 2022 SC 4678, in support of the contentions that courts had refused to award damages for hurt feelings and anxiety to a wrongfully dismissed employee and confirmed that damages for anguish and vexations caused by breach of contract could not be awarded in an ordinary commercial contract.

The Counsel for the Respondent further submitted that if the contract of employment expressly provides a termination clause and the said clause had been followed by the employer, the employee is not entitled to any other relief, apart from what the terms and conditions in the termination clause provide. Principles of administrative law or public law applicable to public employment do not apply to cases or private employment. The Counsel referred to the notice invoking arbitration in support of the contention that the claim for reinstatement and other consequential benefits are not available to the Petitioner as he was not governed by any statues which protect workmen or public servants.

Lastly, the Counsel submitted that any order referring such non arbitrable dispute to arbitration would be forcing a contract of personal wages which is not permissible in law. Dragging the Respondent to an unnecessary prolonged litigation which will ultimately result in the dismissal cannot be the ethos of Section 11, ACA. The referral court is not a mere post office but can make a preliminary enquiry to satisfy itself that the disputes are ex facie arbitrable.

Observations

The Court observed that after considering the rival contentions of the parties, the Court was of the prima facie opinion that the case is to be governed by the terms and conditions of employment which contained a Dispute Resolution Clause. The parties had bound themselves by the said clause. Thus, the adjudication of the dispute shall be done by the Arbitrator. The Petitioner had made it clear that the termination was a fall out of the enquiry in respect of a complaint of sexual harassment. The recommendation of the enquiry committee also suggested that the employer was given the option to take steps.

The Court observed that the ground showed for termination was other "business reasons”. This in the view of the Court was not termination simpliciter as urged by the Counsel for the Respondent. The letter of termination contained a lot of compliances to be maintained by the Petitioner for a considerable period, even after termination.

The Court further held that it is a settled position of law that an arbitrator can rule on his own jurisdiction, which includes arbitrability of the claim made by the Petitioner. For the referral Court, the prima facie existence of the arbitration clause is sufficient to appoint an arbitrator and in this case the dispute is alive.

The Court concluded that in view of the existence of an arbitration clause, and this case not being a case of termination simpliciter which would be covered by the termination clause of the contract, the dispute should be referred to a sole arbitrator. The Court left it open to the Respondent to challenge the jurisdiction of the arbitrator and arbitrability of the dispute at appropriate stage in the arbitration proceedings.

Accordingly, the Court appointed Mr. Aritra Basu, learned Advocate as the sole arbitrator to arbitrate upon the dispute between the parties.

Case Title – Sreepad Bhiwaniwala v. Grant Thornton US Knowledge and Capability Center India Pvt. Ltd.

Case No. – AP No. 62 of 2025

Appearance-

For Petitioner – Mr. Satadeep Bhattacharyya, Adv.; Ms. Sriparna Mitra, Adv.; Mr. Sayan Banerjee, Adv.; Ms. Sayani Gupta, Adv.

For Respondent – Mr. Suhail Sehgal, Adv.

Date – 30.06.2025

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