"You can punish her for indiscipline, but at the same time you can accommodate her," a bench of Justices GS Sistani and VK Rao suggested to Additional Solicitor General Sanjay Jain, who appeared for the Centre and Navy.
Calling for a change in mind-set, the bench said the instant case was probably the only one of its kind in the armed forces and asked the Navy to consider the transgender for some other job.
"Here is an opportunity to look at it from a different perspective. It is an out of the box situation. It may be a first of its kind situation."
"Here is a person struggling with gender identity. Had she suppressed the condition and continued, it would have been dangerous. It could have been fatal. Think about it and come back," the bench said and listed the matter for further hearing on November 23.
The court said that while the person deserved to be punished for indiscipline for being absent without leave, but where there was a medical condition of this sort, it may be seen from a different perspective.
During the course of the hearing, the bench said, "the mind-set should change. In today's situation, a medical condition like this cannot be suppressed."
The court was of the view that the petitioner, who was posted on board INS Eksila at Visakhapatnam, can give up claim for the job of sailor and may accept a clerical position so that the family, comprising aged parents, the individual's wife and child, need not suffer.
ASG Jain and central government standing counsel Anil Soni, who also appeared for the Navy, told the court that the individual in question "had a chequered history of indiscipline" for being absent without leave several times.
They also told the bench that the individual had got badly infected after undergoing sex reassignment surgery and it was the Navy which treated her humanely and provided treatment and counselling to her.
The lawyers said that one seat in another branch or department of the force cannot be blocked for such an individual who also suffered from psychiatric and gender identity problems.
They further argued that since the petitioner was a female now, she cannot be employed as a sailor in the Navy as that position is not open for women.
The ASG said the simple question before the bench was whether a woman, and not a transgender, can be appointed as a sailor on a ship as the petitioner was now a female.
The petitioner had challenged the October 6 order of the Navy removing her from service.
She had claimed that she was suffering from gender identity issues since 2011 and when she told her parents, they forced her to marry a woman.
She further claimed that she was absent from service without leave several times as she suffered bouts of depression, owing to her gender identity issues.