State As Employer Must Lead By Example, Can't Demand Undertakings To Deny Lawful Benefits To Employees Violating Constitution: P&H High Court

The Punjab & Haryana High Court has held that seeking undertakings from employees—wherein they are made to forgo their lawful service benefits, is not only exploitative but also unconstitutional.

The plea was filed challenging the order of the State authorities denying service benefits to a municipal worker, on the ground that he signed an undertaking forfeiting any claim to back wages following his reinstatement, after a tedious litigation.

Observing that such exploitative undertakings are void ab initio since no employee can be forced to contract out of his statutory rights, the Court set aside the impugned order.

Justice Harpreet Singh Brar noted, "there is an inherent imbalance of power between an employer and an employee. The employer, very unambiguously, controls the source of livelihood of the employee and thereby is in a position of influence. When such employer is an instrumentality of the State itself, a unique opportunity is presented to lead as an example."

The Court added that, as such, it is vital that a fair procedure established by law, preventing arbitrary abuse of power is strictly adhered to. "Demanding undertakings that lack legal sanctity or capriciously denying benefit of the services rendered by an employee is inconsistent with the constitutional guarantees."

Arbitrary Action by Public Employers Violates Constitutional Guarantees of Fairness and Livelihood

The Court order that, while Article 14 strikes at the heart of arbitrary State action and demands that exercise of any public power be only guided by reason and equality, Article 21 safeguards the right to livelihood, which certainly includes just and non-capricious treatment.

"When a public employer acts on a whim and causes implicit economic duress to the employee, it betrays the constitutional promise of fairness, which is impermissible with arbitrariness and fair play being sworn enemies. Moreover, the overt display of fair play is integral to the idea of natural justice. A failure to abide by the same would not merely amount to an administrative misconduct but would be a direct affront to the Rule of Law," added the judge.

Court Flags Exploitative Practice of Forcing Reinstated Employees to Sign Away Rights

The judge observed that unfortunately, the practice of extracting undertakings from employees who have been reinstated after tedious litigation is rather common.

"These undertakings are exploitative as they often pertain to forgoing past service benefits including arrears of salary, increments, continuity of service and retiral benefits and are obtained by placing the employees under duress," it added.

The Court pointed that often the reinstated employees are issued fresh appointment letters, as is the case in the matter at hand, to deny them any benefits of their past service, which directly impacts their regularization, seniority and pensionary benefits and considering that livelihoods are at stake, the employees often remain silent in the face of these exploitative practices.

Justice Brar highlighted that the Court cannot allow an employer to Court cannot allow an employer to take advantage of their employees' financial circumstances to bend them to their will.

Ranjit Singh, a tubewell operator working in Municipal Council Khanna was unjustly terminated from service and after 17 years of litigation the the Insudtrial tribunal directed the council to retire him with “continuity of service”.

The council passed an order requiring Singh to submit a sworn undertaking agreeing not to claim any back wages.

Before retirement, Singh asked the authorities to include his service from July 23, 1992, to June 25, 2012, for the service benefits. But his request was denied in view of the undertaking.

After hearing the submissions, the Court noted that "visibly, the petitioner did not have a real choice and had to submit to the whimsical approach of the respondent/Council as he was struggling financially for over a decade subsequent to his abrupt and illegal termination."

As such, in view of Sections 16, 19A and 23 the Indian Contract Act, 1872, which declares any contract which has been entered into under undue influence as voidable or where the object of the said contract is against public policy, as void, the Council cannot be allowed to take shelter of the affidavit to justify denying the petitioner his legal right, especially in view of the fact that it was them who erroneously terminated his services in the year 1994, added the Court.

Furthermore, the Court pointed that the petitioner was given a fresh appointment, apparently merely to deny him any benefits of past service for reasons best known to the Council as no explanation has been put forth by it in the impugned order.

Conduct Unbecoming of Public Employer, State Must Uphold Higher Constitutional Standards

The Court observe that the conduct exhibited by the respondents is unbecoming of a public employer. "The State and its instrumentalities, being model employers, are held up to higher standards and therefore, bear an additional responsibility to ensure that their actions are not perceived as arbitrary or violative of the constitutional philosophy. "

Stating that "Court cannot condone the highly iniquitous arm-twisting tactics employed by the respondent/Council as it renders the entire exercise tainted by the vice of arbitrariness," the Court allowed the plea.

Mr. Amrindra Pratap Singh, Advocate for the petitioner.

Mr. Vikas Sonak, AAG, Punjab.

Title: Ranjit Singh v. State of Punjab and others

Citation: 2025 LiveLaw (PH) 395

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