In India is it legal for a company to set up an internal system of law and order where there shall be a chain of courts under the company and a formal code of law? Punishments shall range from denial of certain allowances to smll monetary fines. Is this legal? If yes, what are the limitations and to what extent?

I was thinking about the following system:

  1. There may be a central court with many subordinate courts in a company.
  2. One employee can file a case against another or the company's employees may be sued by customers.
  3. If a court finds a flaw it may impose a fine, send it to a higher court or order something.
  4. Higher courts decide on serious cases or cases of contempt of lower court orders.
  5. Punishment may range from reduced pay, loss of job, taking the matter to a real court, determining a code of conduct, transferring or shuffling of posts, or imposing a ban from services.
  6. The higher courts can set precedents and rule according to company law set by the CEO or any other person who is above all courts of the company meaning they are immune to prosecution.

Is this legal in India?

4 Answers 4


If you substitute the courts with line managers and HR policies, this is just a description of an internal discipline and grievance process.

  • 2
    In many large bureaucratic institutions, like the federal and state governments, the military, and universities, such systems are in place and are very court-like.
    – ohwilleke
    Nov 23, 2020 at 19:40
  • This is right. A company can create an internal division called the "Employee Conduct Court" and authorize certain managers to put on wigs and robes and make personnel decisions while banging a $2 gavel they found at Walmart. Such a division would not legally be a court, just an internal process, even though dressed up to look like a court. The "court" jurisdiction would end exactly at the point where the authority of the company's management ends. Jul 6, 2021 at 13:12
  • In most jurisdictions, companies cannot create courts. The right to do that is reserved for the state.
  • People and companies can agree (by contract) to use arbitration for issues arising from the contract. This may be a contract clause which both sides entered consciously, or part of the terms of service which the user/customer clicked without really reading it.
    That makes it difficult to envision precedent from other arbitration panels affecting other arbitration panels. The new panel has the contract to go with, and novel or unusual interpretations might be challenged in a real court.

Much, if not all, of what you describe already exists in many companies. This mostly takes place in the company's HR department, more serious matters are escalated to a board of directors, and nothing prevents the company from suing the employee in an actual court.

The sued, penalized, or terminated employee may establish that the company departed from its own precedent. However, if the doctrine of at-will employment is applicable in the jurisdiction at issue and the employment contract does not supersede the doctrine, it usually would be unavailing for the employee to allege wrongful termination unless the company's actual reason for termination contravenes public policy.

  • "Much, if not all" as you wrote.What lay in that "if not all region"?Which punishments can the company not give? Nov 22, 2020 at 13:54
  • 2
    "Which punishments can the company not give?" Those which are outlawed or contrary to public policy in that jurisdiction, such as corporal punishments, imprisonment, or disproportionate & unconscionable penalizations. Nov 22, 2020 at 14:08

The judiciary is, as a body, separate to that of companies or corporations. This is by history and by design.

What there are are arbitration, and generally to maintain their independence, they are not linked to any company or corporation. This is merely mediation in the hope that the case doesn't proceed to an expensive lawsuit for all concerned.

What companies have are internal procedures for handling complaints. Obviously, at a certain level, one can charge this as lacking any independence from the company hierarchy.

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