“Stigmatic Termination of Contractual Employees Requires Prior Inquiry”: New Principle from the Chhattisgarh High Court

The recent Judgment in Yaad Das Sahu v. State of Chhattisgarh (WPS No. 8212 of 2023) delivered by the High Court of Chhattisgarh on January 3, 2025, establishes a critical principle regarding the termination of contractual employees, specifically when the cessation of service could be considered “stigmatic.” The petitioner, Mr. Yaad Das Sahu, was working as a Gram Rojgar Sahayak (“GRS”) under the Mahatma Gandhi National Rural Employment Guarantee Scheme (“MGNREGA”). His services were terminated through an impugned order that cited multiple allegations against him, including non-compliance with instructions and alleged misconduct.

The key issue that arose in this case was whether a contractual employee can be terminated in a manner that amounts to a stigma without being afforded due process and a proper inquiry. The petitioner challenged his termination on grounds of violation of the principles of natural justice, highlighting that no proper inquiry was conducted and he was not given an opportunity to be heard.

The respondents (State authorities and relevant departmental officers) maintained that the appointment was purely contractual in nature, allowing the employer to terminate service after giving one month’s notice. They insisted that the impugned order was not stigmatic and that the petitioner was repeatedly informed of his obligations and provided notices.

Hon’ble Shri Justice Amitendra Kishore Prasad of the Chhattisgarh High Court quashed the termination order dated June 23, 2023. The Court held that although the employment is contractual, if the termination order contains stigmatic elements—i.e., serious allegations that could hamper the employee’s reputation and future career—the employer must conduct a departmental inquiry and afford the employee a fair opportunity to be heard. The Court found several indicators that the termination was indeed stigmatic, such as references to alleged misconduct, non-compliance with targets, and complaints from a local MLA and Sarpanchs.

By quashing the order, the Court directed that the petitioner be reinstated with all consequential benefits. However, the Court granted liberty to the authorities to initiate a proper inquiry if they decide to pursue the allegations further.

One of the key Supreme Court authorities relied upon by the High Court was Swati Priyadarshini vs. State of Madhya Pradesh and Others (2024 SCC OnLine SC 2139). In that case, the Supreme Court emphasized that even contractual employees cannot be removed on grounds that amount to a punitive or stigmatic dismissal without a proper inquiry. Additionally, reference was made to Parshotam Lal Dhingra v. Union Of India (1957 SCC OnLine SC 5), where it was laid down that if the termination carries “evil consequences”—such as loss of pay or a permanent blemish on the employee’s record—due process must be observed.

The High Court further cited a decision of its Co-ordinate Bench in Digambar Chandrakar v. State of Chhattisgarh (WPS No. 4969/2015), reaffirming that a stigmatic or punitive order necessitates an inquiry consistent with the employee’s right to defend themselves against accusations.

The Court noted that contractual employees usually do not enjoy the same range of rights as permanent government servants. However, once the grounds for removing them become punitive—for instance, referencing misconduct, disobedience, or other allegations that could tarnish future employment opportunities—the employer must ensure that fair procedures are followed.

In this case, the Court deemed the order “stigmatic” because the termination letter specified serious allegations, such as:

• The petitioner’s alleged failure to comply with directives to provide 100 days of employment under MGNREGA.
• Complaints from the local MLA and Sarpanchs questioning his character.
• References to partial investigations that did not conclusively place blame on the petitioner.

According to the Court, when a termination is based on such allegations, the principle of natural justice requires that the employee be:

1. Informed of the specific charges.
2. Given relevant documentation or evidence against them.
3. Afforded a proper opportunity to respond and present a defense.

The Court also underlined that a simplistic reliance on the contractual clause allowing termination with one month’s notice does not override the fundamental tenets of fair play if the removal carries a stigma.

This Judgment has significant repercussions for both government and private employment contexts where workers are hired on short-term or fixed-term contracts. It highlights that even if an appointment is not permanent, allegations that could damage an employee’s professional record cannot be summarily invoked to terminate the contract without a thorough inquiry.

Moving forward, public authorities in Chhattisgarh and other jurisdictions will likely be more cautious in terminating contractual staff on grounds that imply dishonesty or professional inadequacy. They will have to:

• Hold a departmental inquiry or, at minimum, a sufficiently robust fact-finding process where the employee can be heard.
• Ensure that the termination order does not inadvertently carry a stigmatic element without following due process.
• Document the steps taken to provide transparency and fairness in the termination process, thereby minimizing disputes that reach the courts.

“Contractual Employment” typically means an employee is hired for a fixed term with predefined conditions, often with lesser procedural protections compared to permanent government employees. However, this Judgment clarifies that if the termination is based on any sort of misconduct, inefficiency, or wrongdoing that tarnishes the employee’s reputation, the employer must follow proper procedures akin to a regular disciplinary process.

“Stigmatic Termination” refers to a situation where the reasons for ending someone’s employment carry a serious unfavorable label (e.g., dishonesty, misconduct, or moral turpitude). Such labeling can “stigmatize” the individual, harming their prospects for future employment. Stigmatic termination stands in contrast to a “simple termination,” which does not mention misconduct or wrongdoing and merely ends the contractual relationship based on its terms.

“Principles of Natural Justice” are fundamental legal rules designed to ensure fairness, including the right to be heard (audi alteram partem) and the right to have a decision made by an unbiased authority (nemo iudex in causa sua). Even in contractual relationships, these principles may apply when reputational harm is at stake.

The Judgment in Yaad Das Sahu v. State of Chhattisgarh emphasizes that when a public authority terminates a contract based on allegations that might damage the employee’s standing and career, such an order becomes stigmatic in nature. In these circumstances, compliance with due process, including a fair inquiry and ample opportunity to respond, is indispensable. This ruling protects the interests of contractual employees who might otherwise be left with limited remedies against improper or arbitrary terminations. In the broader legal context, the Court’s stance fortifies the principle that an employee cannot be dismissed on grounds of misconduct—whether contractual or permanent—without being given a fair chance to defend themselves.