“Learned Counsel relied upon Ranchhodji Chaturji Thakore, 1996 (11) SCC 603 and Jaipal Singh, 2004 (1) SCC 121 to contend, in case, criminal proceedings are initiated at behest of employer, and employee is acquitted, he would be entitled to claim full wages for the period he was kept out of duty during pendency of criminal proceedings.

Ms. Madhavi Divan, Learned Additional Solicitor General, contended, employee is not entitled to back wages.

Ranchhodji Chaturji Thakore held, question of payment of back wages would arise only in case of termination of service, pursuant to findings recorded in a departmental enquiry. In the event of dismissal order being set aside by Court, delinquent employee would be entitled to claim back wages as he was unlawfully kept away from duty by employer. Court was of opinion, an employee against whom criminal proceedings are initiated would stand on a different footing in comparison to an employee facing a departmental inquiry. An employee involved in a crime has disabled himself from rendering his services on account of his incarceration in jail. Subsequent acquittal by an Appellate Court would not entitle him to claim back wages.

Ranchhodji Chaturji Thakore to refuse back wages to an employee was followed by this Court in Jaipal Singh. However, this Court was of opinion, if prosecution is launched at behest of department and employee is acquitted, different considerations may arise. Learned Counsel endeavored to distinguish prosecution launched by police for involvement of an employee in a criminal case and criminal proceedings initiated at behest of employer. Jaipal Singh has to be understood in a manner in which department would become liable for back wages in the event of a finding, initiation of criminal proceedings was mala fide or with vexatious intent. In all other cases, we do not see any difference between initiation of criminal proceedings by department vis-a-vis a criminal case lodged by police. For example, if an employee is involved in embezzlement of funds or is found indulging in demand and acceptance of illegal gratification, employer cannot be mulcted with full back wages on acquittal of by a Criminal Court, unless it is found prosecution is malicious.”

– Hon’ble Justice L. Nageswara Rao, Raj Narain v. Union of India, [Civil Appeal No. 3339 of 2019].

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Also see, Union of India v. Ram Bahadur Yadav, [Civil Appeal No. 9334 of 2010] decided on 26.11.2021.