Automatic termination of a permanent employee without hearing is invalid and can amount to retrenchment under labour law.

A certified standing order cannot validly authorise automatic termination of a permanent employee for overstaying leave without notice and an opportunity of hearing; the principles of natural justice are read into such a clause, and termination on that basis is invalid. Termination of a permanent employee in these circumstances also amounts to retrenchment under the Industrial Disputes Act, 1947, because the contractual-stipulation exception applies only to a fixed-term contract. The statutory retrenchment safeguards therefore apply, and the illegality of the termination was sustained with consequential relief.

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Issues: (i) whether a certified standing order could validly provide for automatic termination of a permanent employee's service for overstaying leave without affording an opportunity of hearing; (ii) whether the termination of such service amounted to retrenchment so as to attract the statutory protections under the Industrial Disputes Act, 1947.

Issue (i): whether a certified standing order could validly provide for automatic termination of a permanent employee's service for overstaying leave without affording an opportunity of hearing.

Analysis: Conferment of permanent status was held to carry security of tenure, and the service of such an employee could not be terminated abruptly or arbitrarily merely by invoking a standing order or contractual stipulation. A clause making service "liable to automatic termination" was treated as conferring discretion on management, and that discretion had to be exercised on objective grounds after notice and hearing. The principles of natural justice were therefore read into the clause, and a permanent employee facing action under such a provision had to be informed of the grounds and given an opportunity to explain.

Conclusion: The automatic-termination clause could not be enforced against the permanent employee without compliance with natural justice, and the termination was invalid.

Issue (ii): whether the termination of such service amounted to retrenchment so as to attract the statutory protections under the Industrial Disputes Act, 1947.

Analysis: Retrenchment was construed broadly as termination by the employer for any reason whatsoever, subject only to the statutory exceptions. The exception relating to termination under a stipulation in the contract was held to apply only where there was a fixed-term contract containing such a stipulation. Since the employee was permanent and there was no fixed-term contract, the case did not fall within that exception. Consequently, the statutory requirements governing retrenchment were attracted.

Conclusion: The termination amounted to retrenchment and the statutory safeguards were applicable.

Final Conclusion: The challenge to the award failed, and the finding of illegal termination with consequential relief was sustained.

Ratio Decidendi: A standing order or similar stipulation cannot lawfully authorise automatic termination of a permanent employee without notice and hearing, and termination of a permanent employee for any reason not covered by a statutory exception constitutes retrenchment under the Industrial Disputes Act, 1947.

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