Dear Mr.Sankaranamasivayam,
The succinct answer to your query is an emphatic " NO " for the simple reason that we are living in the 21st century and not in the Victorian Era to hire and fire people at one's sweet will. As we are all aware, organizational politics is dirtier than the general politics and while the gullible employees fall an easy prey to it, at times it takes the heavy toll of the most shrewd and schematic employees too. Keeping this aside, I think that the presence of an exit clause in the contract of employment facilitating one month's mutual notice for terminating the contract has prompted your present question.
Sorry, friend, any contract with such terms opposed to public policy is void u/s 23 of the Indian Contracts Act,1872. In the case of Central Inland Water Transport Corporation Ltd v Brojo Nath and Others ( AIR 1986 SC 1571), one of the clauses in the contract of employment provided that the employer could terminate the services of a permanent employee by giving him 3 months notice or 3 months salary in lieu thereof. Accordingly, Brojo Nath and others were terminated instantly by giving them the notice accompanied by cheques for 3 months salary. On appeal, the hon'ble Supreme Court held that Rule 9 of the Service, Discipline and Appeal Rules,1979 of the Corporation empowering such a clause in the service agreement between persons having gross inequality of bargaining power was wholly unreasonable and against public policy and was therefore void u/s 23 of the Indian Contracts Act,1872.
The next question that would arise automatically would be what "Public Policy " is. In Ratan Chand Hirachand v Askan Nawab Jung ( AIR 1976 AP 112 ), explaining the scope of " Public Policy" and the role of judges Justice C.Reddy of the Andrapradesh High Court observed:
" The twin touchstone of Public Policy are advancement of public good and prevention of public mischief and these questions have to be decided by the judges not as men of legal learning but as experienced and enlightened members of the community representing the highest commom factor of public sentiment and intelligence."
Endorsing the above view the Supreme Court added that going by the prevailing social values an agreement having tendency to injure public welfare is opposed to public policy.
Therefore, the dismissal of an employee without any reasonable cause and just on the basis of an exit clause in the contract of employment that is opposed to public policy will be unjust and illegal.