The Madhya Pradesh High Court has ruled that the Life Insurance Corporation (LIC) can demote employees to the minimum pay scale as punishment under its staff regulations. This clarifies the scope of disciplinary action available to the company, resolving a previous interpretation that limited demotions to one pay grade below the existing one.
The court rejected the argument that ‘lower’ grade in the regulations excludes the ‘minimum’ grade. It reasoned that the regulation makers could have explicitly excluded the minimum if they intended so, but their use of broad language suggests the penalty encompasses the entire pay scale.
This decision aligns with previous rulings on similar regulations in other organisations. The court cited a case involving a bank where ‘lower stage’ in the pay scale was interpreted to include the lowest stage.
The judgment overturns a single-judge bench ruling that favoured the employee in this case. The employee’s pay had been reduced to the minimum after disciplinary proceedings, but the lower court found this action unauthorised under the existing regulations.
The new interpretation strengthens LIC’s disciplinary authority, allowing it to impose more severe penalties for serious misconduct. However, the court emphasised that such decisions must be made within the framework of due process and fair disciplinary procedures.