Case at a Glance
A woman engaged in 2014 as an ‘Aaya’ at an English-medium nursery school run by the East Delhi Municipal Corporation lost her job in January 2019 after the private company funding the school under an MOU withdrew. The Labour Court held the termination illegal and ordered reinstatement with full back wages. The Delhi High Court dismissed the MCD’s writ petition, holding that the corporation paid her wages and controlled her work, so it was her employer; the absence of a sanctioned post did not change that. The deposited ₹2.24 lakh is to be released to her and the balance paid within four weeks.
Smt. Munni Devi was engaged on 12 August 2014 as a daily-wage Nursery Aaya at an English-medium nursery school in C-Block, Krishna Nagar, Delhi, at ₹10,000 a month. The school was run by the East Delhi Municipal Corporation (EDMC) under a Memorandum of Understanding of the same date with M/s. Frigorifico Allana Pvt. Ltd., which stopped releasing funds in September 2018 and terminated the MOU by letter dated 29 December 2018. Her services were ended on 16 January 2019. She raised an industrial dispute alleging termination without notice or compliance with the Industrial Disputes Act, 1947, despite more than 240 days of service in the preceding year.
By award dated 11 October 2022, the Labour Court held the termination unjustified and directed reinstatement with full back wages from 16 January 2019 and consequential benefits. EDMC having merged into the MCD in May 2022, the MCD challenged the award, arguing that she was engaged on a daily-wage basis only to run the MOU project, was not appointed to a sanctioned post or through a recruitment process, that her engagement ended with the MOU, and that by accepting three months’ earned wages of ₹28,710 during conciliation she had accepted the termination. Under an interim order, the MCD deposited ₹2,24,500, being 50% of the back wages.
The Key Question Before the Court
Was the municipal corporation the employer of a worker engaged for a school run under a sponsor’s MOU, and could her services end simply because the MOU was terminated?
Who Paid and Who Controlled
Justice Manoj Kumar Ohri examined the MOU and found that it gave EDMC exclusive control over the school’s administration and staff, including appointments and salaries, while the company only supplied equipment and had no operational control. Applying the twin tests in General Manager (OSD), Bengal Nagpur Cotton Mills, Rajnandgaon v. Bharat Lal, (2010) 12 SC CK 0059 — whether the principal employer pays the wages and whether it controls and supervises the work — the Court held both were satisfied on the engagement letter, the office order sanctioning ₹10,000 a month, and the MOU. The company’s later withdrawal did not alter the employment relationship that existed while she worked.
The Court held that the absence of a sanctioned post or a formal recruitment process did not, by itself, negate the employer-employee relationship, and that the Labour Court’s findings on 240 days of service, the failure to prove compliance with the statute and the failure to prove alternative employment were relevant. Accepting earned wages during conciliation did not mean she accepted her termination. Relying on Syed Yakoob v. K.S. Radhakrishnan, (1963) 10 SC CK 0003, the Court reiterated that under Articles 226 and 227 it does not reappreciate evidence and interferes only for jurisdictional or patent errors of law, none of which were shown.
What the Court Actually Held
- Applying the Bengal Nagpur Cotton Mills tests of payment of wages and control, EDMC (now MCD) was the employer of the Nursery Aaya.
- Not being appointed to a sanctioned post or through regular recruitment does not by itself negate an employer-employee relationship.
- Accepting earned wages during conciliation is not acceptance of termination.
- The writ petition was dismissed and the award of reinstatement with full back wages upheld; the ₹2,24,500 deposit with interest is to be released to the worker and the balance paid within four weeks.
Why This Judgment Matters
- Public bodies increasingly run schools, clinics and services under CSR or sponsor MOUs; the ruling makes clear that the body exercising control remains the employer.
- It protects low-paid workers from being dropped without statutory compliance when a project’s funding ends.
- It confirms that taking pending wages during conciliation does not waive a challenge to termination.
What Should Advocates Take Away From the Judgment?
For Workers
- If a government body pays you and supervises your work, it may be your employer even under a project or MOU.
- Completing 240 days of service in a year triggers the protections of the Industrial Disputes Act.
- Accepting your earned wages does not mean you give up your claim against termination.
For Counsel
- Use the Bengal Nagpur Cotton Mills twin tests and read the MOU closely for who controls appointments and salaries.
- For employers, a ‘no sanctioned post’ plea will not defeat an industrial dispute where control and payment are proved.
- Writ challenges to Labour Court awards are limited to jurisdictional or patent legal errors.
Key Takeaways
- Payment of wages and control decide who the employer is.
- An MOU ending does not automatically end an employee’s statutory protection.
- No sanctioned post is not a complete defence to an industrial dispute.
- Reinstatement with full back wages was upheld and the deposit released.
Frequently Asked Questions
Can a government body escape liability by saying a worker was hired under a project MOU?
Not if it paid the worker and controlled her work. The Delhi High Court held that EDMC, now the MCD, was the employer on those tests.
Does accepting pending wages mean I accepted my termination?
No. The Court held that accepting earned wages during conciliation does not show acceptance of termination.
What does the MCD have to pay?
The ₹2,24,500 already deposited, with accrued interest, goes to the worker, and the MCD must pay the balance due under the Labour Court award within four weeks of 3 November 2026.
Conclusion
The judgment looks past the label of a sponsor-funded project to the reality of employment: the corporation that engaged, paid and supervised the worker could not shed her when the sponsor walked away, without complying with labour law.
Practical takeaway: In termination disputes involving project or MOU staff, focus on who paid and who controlled the work; that answer decides who the employer is.
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