The Andhra Pradesh High Court has ruled that even outsourced employees, engaged through intermediary agencies but working under the direct control and supervision of the employer, cannot be terminated on stigmatic grounds without a fair enquiry. This judgment reaffirms and clarifies the law, upholding existing precedent, and holds strong binding value for subordinate courts, particularly in the public employment sector.
Summary
| Category | Data |
|---|---|
| Case Name | WP/19377/2023 of M.V.Ashok Kumar Reddy, Vs State of Andhra Pradesh |
| CNR | APHC010382202023 |
| Date of Registration | 01-08-2023 |
| Decision Date | 28-10-2025 |
| Disposal Nature | ALLOWED NO COSTS |
| Judgment Author | Hon’ble Sri Justice Nyapathy Vijay |
| Court | High Court of Andhra Pradesh |
| Bench | Single Judge |
| Precedent Value | Binding on subordinate courts in Andhra Pradesh; persuasive for other High Courts |
| Overrules / Affirms | Affirms earlier Division Bench and Supreme Court precedent |
| Type of Law | Service Law / Employment Law (Outsourcing and Natural Justice) |
| Questions of Law |
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| Ratio Decidendi |
The Court held that, although engaged through outsourcing agencies, the petitioner worked under the direct and continual supervision and control of the main employer, indicating a master-servant relationship. Therefore, termination on stigmatic grounds, without any opportunity to explain or defend against allegations, violates the principles of natural justice and is unsustainable—even for an outsourcing employee. The Court relied on precedents and statutory principles recognising that any action prejudicial to employment rights, especially where allegations are made, mandates adherence to due process. The impugned termination order was set aside, restoring the petitioner with liberty to conduct a fair enquiry if so desired. |
| Judgments Relied Upon |
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| Logic / Jurisprudence / Authorities Relied Upon by the Court |
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| Facts as Summarised by the Court |
The petitioner, a B.Tech (EEE) graduate, was appointed as a Technical Assistant (Electrical) in a government body through outsourcing, but his continued posting despite agency changes showed real supervisory control lay with the main employer. His services were terminated following a news report about a power outage at a government hospital. The petitioner argued the termination was arbitrary, that similar lapses were previously reported, and no response had been received to earlier intimations about infrastructure issues. The employer contended absence of a master-servant relationship and denied parity with regular employees. |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | All subordinate courts in Andhra Pradesh |
| Persuasive For | Other High Courts, especially in service/outsourcing disputes; Supreme Court in similar contexts |
| Follows |
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What’s New / What Lawyers Should Note
- Reiterates and clarifies that outsourced employees, engaged through agencies but working under the employer’s direct supervision, are entitled to an enquiry before being dismissed on stigmatic grounds.
- Applies multifactor control/integration tests to pierce the outsourcing-construct and ascertain real master-servant relationships.
- Cites and applies recent Supreme Court and Division Bench precedent in the context of outsourcing arrangements in public sector bodies.
- Lawyers can cite this ruling to demand natural justice protections even for workers engaged through third-party contracts where functional control is demonstrated.
Summary of Legal Reasoning
- The Court first identified the real employer-employee relationship by applying the Supreme Court’s multifactor test from Sushilaben Indravadam Gandhi v. New India Assurance Co. Ltd. (2021), considering control, supervision, continuity, and the fact that the outsourcing agency changed but the petitioner’s post remained constant.
- The Court found that these facts established a master-servant relationship between the petitioner and the main respondent-corporation, not merely with the outsourcing agencies.
- The Court noted that the termination was based on an adverse incident (power outage) and thus stigmatic in nature, requiring conformance with principles of natural justice.
- Relying on the Division Bench decision of The State of A.P v. K. Madhu Phani (2018), the Court ruled that even an outsourcing employee cannot be dismissed on such grounds without enquiry.
- The Court observed that the petitioner was not given an opportunity to furnish an explanation or defend against the allegations.
- The termination was thus held to be arbitrary and unfair, violating Articles 14 and 21 regarding equality and procedural fairness.
Arguments by the Parties
Petitioner
- Worked continuously under direct supervision and control of the respondent-corporation, despite changes in outsourcing agencies.
- Performed duties similar to regular employees; sought parity in service benefits.
- Termination was abrupt, without cause or opportunity to explain.
- Blame for the power outage was scapegoating; earlier warnings of infrastructure issues were unheeded.
Respondent
- Denied existence of employer-employee relationship; asserted petitioner was engaged only through outsourcing agency.
- Claimed no direct administrative control over the petitioner.
- Grounded termination in an adverse event (electrical failure), as cited by hospital superintendent and reported in the press.
- Disputed parity in duties, producing a tabular comparison between regular and outsourced employees in the counter-affidavit.
Factual Background
The petitioner, a qualified electrical engineer, was engaged as a Technical Assistant (Electrical) at a government hospital through an outsourcing agency. Despite several changes in contracting agencies, the petitioner’s service at the hospital under the main respondent corporation continued since 2009. Following a media report about an unplanned power outage at the hospital, the respondent corporation terminated the petitioner’s service by way of a memo, without notice or enquiry. The petitioner challenged the termination as arbitrary and discriminatory under Articles 14, 19, and 21 of the Constitution.
Statutory Analysis
- The Court acted under Article 226 of the Constitution, examining arbitrariness and compliance with principles of natural justice for dismissal of contract/outsourced employees.
- Relied on constitutional guarantees of equality and due process (Articles 14, 21).
- Drew upon authoritative precedent regarding minimum standards of fairness and the consequences of a finding of direct control, irrespective of contractual outsourcing.
Dissenting / Concurring Opinion Summary
No dissenting or concurring opinions are recorded in the judgment.
Procedural Innovations
None specifically recorded in the judgment; the Court followed established procedure regarding writs challenging termination in public employment contexts.
Alert Indicators
- Precedent Followed – The judgment affirms and clarifies existing precedent regarding outsourced employees’ entitlement to natural justice before stigmatic termination.