Gujarat High Court
Torrent Power Ltd & vs Chelabhai Nathabhai Luhar & 2 on 10 January, 2017
Author: G.R.Udhwani
Bench: G.R.Udhwani
C/SCA/10126/2014 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 10126 of 2014
With
SPECIAL CIVIL APPLICATION NO. 9583 of 2014
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE G.R.UDHWANI
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1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of
the judgment ?
4 Whether this case involves a substantial question of
law as to the interpretation of the Constitution of
India or any order made thereunder ?
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TORRENT POWER LTD & 1....Petitioner(s)
Versus
CHELABHAI NATHABHAI LUHAR & 2....Respondent(s)
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Appearance:
SCA NO. 10126 OF 2014:
MR. KUNAN NAIK, ADVOCATE WITH MR. UTSAV PARIKH, ADVOCATE FOR
M/S TRIVEDI & GUPTA, ADVOCATE for the Petitioner(s) No. 1 - 2
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MR. GUNVANT SHAH, ADVOCATE for the Respondent(s) No. 1
MR PARITOSH CALLA, ADVOCATE for the Respondent(s) No. 2
RULE SERVED for the Respondent(s) No. 3
SCA NO. 9583 OF 2014:
MR. GUNVANT SHAH, ADVOCATE, for the petitioner
MR. BIPIN BHATT, ASSISTANT GOVERNMENT PLEADER, for respondent
No. 1
MR. KUNAN NAIK, ADVOCATE WITH MR. UTSAV PARIKH, ADVOCATE FOR
M/S TRIVEDI & GUPTA, ADVOCATE for respondent No. 2
MR. PARITOSH CALLA, ADVOCATE, for respondent No. 4
RULE SERVED for respondent No. 3
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CORAM: HONOURABLE MR.JUSTICE G.R.UDHWANI
Date : 10/01/2017, 11/1/2017 & 12.1.2017
ORAL JUDGMENT
1. These petitions arise under the provisions of the Bombay Industrial Relations Act ("the Act" for short). While Special Civil Application No. 10126 of 2014 is preferred by the employer to challenge the award dated 29.3.2014 passed by the Industrial Court, Ahmedabad, in Appeal No. 16 of 2011 arising out of T. Application No. 190 of 2003 passed by the Labour Court, Ahmedabad, whereby refusal of reinstatement by the Labour Court was reversed and reinstatement of the workman was ordered and compensation in a sum of Rs. 1 lakh ordered by the Labour Court in lieu of reinstatement was ordered as backwages from 18.10.2003. There were two appeals preferred by the Management and the workman Page 2 of 49 HC-NIC Page 2 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT respectively being appeals No. 16 of 2011 and 18 of 2011. The appeal filed by the Management being Appeal (I.C.) No. 16 of 2011 came to be dismissed. Consequently, the employer questions the judgement and award dated 18.2.2011 as modified in appeal No. 16 of 2011. The workman has prayed for full backwages which have been denied to him in the two adjudications aforestated.
2. The workman was employed as Plant Technician with Torrent Power Limited. He was discharged from service by order dated 18.10.2003. Immediately, a dispute was raised by him by issuing approach letter to the employer on 19.11.2003 which was rejected on 8.12.2003. T. Application No. 190 of 2003 was, therefore, filed before the Labour Court, Ahmedabad, on 16.12.2003. Eventually, the award as indicated in paragraph No. 1 above came to be passed both in the original and in the appellate proceedings.
3. The background in which the workman was discharged from service is briefly stated thus:
3.1 On 4.10.2003, the workman along with one Y.D. Brahmbhatt, attended the complaint at the premises of one M/s. Denifine Line, one of the consumers of the employer. On 6.10.2003 one Mr. Jivanlal Patel, Meter Inspector of the employer visited the factory premises of the said consumer for meter reading. He seems to have noticed the fault in Maximum Demand Indicator Meter as it was not showing the correct reading. The said fault came to be allotted to Mr. Kaloliya and Mr. N.K. Patel on 7.10.2003.
3.2 On 10.10.2003, on receipt of the complaint once again regarding burnt CT Bank from the aforestated consumer, Mr. S.K. Raval, Mr. M.G. Solanki and Mr. R.G. Deliwala were Page 3 of 49 HC-NIC Page 3 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT deputed to investigate the reasons for the fault which had occurred according to the employer within a short period. They found and reported improper installation of CT Bank by Mr. Luhar, the workman concerned in these petitions and one Mr. Brahmbhatt. It was reported that the installation was not as per the required technical norms. When Mr. Deliwala enquired into the cause for such improper installation, the consumer is said to have revealed that said Mr. Brahmbhatt and the workman herein had settled for the illegal gratification on their visit on 4.10.2003 as a consideration to conceal overload supply of electricity from the employer. This incident was reported by Mr. Deliwala to Mr. Ansari, Assistant Manager in Low Tension Maximum Demand Section of Bulk Sales Department and accordingly Mr. Ansari further reported the same to Mr. Hirnank Majmudhar, General Manager (P & A) on 17.10.2003 who in turn visited the factory premises on the same day along with Mr. Ansari and Mr. Deliwala and requested the consumer to lodge a formal complaint as the misconduct of the workman was of serious nature affecting the business of the employer. Eventually, complaint was lodged by Mr. Ketan Shah, Manager of the consumer with the employer Company narrating the whole incident of the misconduct of the workman herein and said Mr. Brahmbhatt. Consequently, the workman and said Mr. Brahmbhatt were discharged. 3.3 It may be noted here that according to the employer, both the above employees were discharged simpliciter, without holding enquiry, pleading the loss of confidence in them. It is stated by the employer that the workman herein has not been prejudiced by the impugned discharge as he would be entitled to all the terminal benefits and no stigma is attached to his career.Page 4 of 49
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4. Before the Labour Court, the workmen agitated the case placing heavy reliance upon the Settlement dated 17.12.1991 arrived at in application No. 896 of 1991 which had sought permanency and extension of various benefits. Therein a settlement was arrived at whereby observation of clause (3) of the settlement as also the provisions of the Standing Orders and clause (3) of the Settlement were ensured in case of necessity of termination of employment of workmen. The workmen contended that the order of discharge dated 18.10.2003 in absence of retrenchment compensation was illegal and that by continuing the junior workman, the legal provisions were breached.
4.1 In response to the notice issued by the Labour Court, the Management, inter alia, pleaded the loss of confidence in the workman as the reason for discharge and standing Order No. 21 was cited as the source for such discharge in its written statement Exh. 6. The facts indicated in paragraphs No. 3.1 to 3.3 above were also elaborated in the written statement. It was reiterated that the discharge having not been effected as a consequence of misconduct but for loss of confidence, without prejudicing the career of the workman, it was a discharge simpliciter. Alternative plea seeking an opportunity to establish the misconduct of the workman in the event of the Labour Court finding the discharge as not the simpliciter discharge was also advanced in the written statement which was noted by the Labour Court.
5. The learned counsel for the employer has taken this court through the findings of the Labour Court to indicate that the plea of the Management that the workman was guilty of misconduct was accepted on the basis of evidence adduced before the said court. He also invited the attention of this court Page 5 of 49 HC-NIC Page 5 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT to the factors weighing with the Labour Court in passing the impugned judgement and award, namely, that the discharge in absence of notice and departmental enquiry was bad in law; that being the termination simpliciter, compensation ought to have been paid to the workman.
5.1 The learned counsel for the employer also referred to the appellate court's order to point out that the appellate court, after having perused the impugned order of discharge and clauses No. 21 and 22 of the Standing Orders as also section 25F of the Industrial Disputes Act ("the Act" for short), misconceived the legal position that in absence of inquiry into the conduct of the workman, termination simpliciter would attract section 25F of the Act, while ignoring altogether clause 21 of the Standing Orders which empowered the employer to effect discharge simpliciter for the reasons to be recorded in writing and to be disclosed to the workman on demand; which reasons, though not demanded by the workman, were made available during the proceedings before the courts below. It was argued that while exercising the authority under clause 21 of the Standing Orders termination simpliciter for loss of confidence was effected upon the workman and once the material with the employer justifying the termination under clause 21 of the Standing Orders was available, such termination was immune of challenge in view of the settled legal position emerging from the following judicial pronouncements:
1. K.C. Sharma v. Delhi Stock Exchange & others (2005) 4 SCC 4
2. Sudhir Vishnu Panvalkar v. Bank of India (1997) 6 SCC 271)
3. Divisional Controller, Karnataka State Road Page 6 of 49 HC-NIC Page 6 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT Transport Corporation v. M.G. Vittal Rao (2012) 1 SCC 442
4. Air-India Corporation, Bombay v. V.A. Rebellow and another (1972) 1 SCC 814)
5. Somnath Sahu v. The State of Orissa and others 1969(3) SCC 384 5.2 The learned counsel would contend that without prejudice to the authority of the employer under clause 21 of the Standing Orders, misconduct of the workman was successfully established by cogent evidence which was accepted by the Labour Court; however, it recorded an erroneous finding that in absence of inquiry into the conduct of the workman before termination simpliciter, termination would attract section 25F of the Act. It was argued that while concurring with such erroneous finding of the Labour Court, the appellate court fell into further error by discarding the evidence establishing misconduct by applying strict principles of Evidence Act which principles could not have been applied in view of the decision in U.P. State Road Transport Corporation v. Suresh Chand Sharma (2010) 6 SCC 555.
5.3 It was contended that the finding that no plea seeking permission to justify misconduct by evidence was raised in the written statement was perverse to the record inasmuch as such an averment was made in the written statement. It was further argued that it was a legal misconception on the part of the courts below to find that in absence of separate application seeking permission to justify misconduct by adducing evidence, the employer was precluded from adducing evidence. The learned counsel while relying upon below mentioned judicial pronouncements would Page 7 of 49 HC-NIC Page 7 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT contend that right of an employee to justify misconduct by evidence at any stage of the proceeding has been acknowledged and reiterated time and again.
1. Workmen of the Motipur Sugar Factory Private Ltd.
v. The Motipur Sugar Factory AIR 1965 SC 1803
2. Delhi Cloth and General Mills Co. v. Ludh Budh Singh (1972) 1 SCC 595
3. Bharat Forge Co. Ltd. v. A.B. Zodge and another (1996) 4 SCC 374 5.4 Lastly, in response to a query raised by this court, the learned counsel would contend that it was erroneous for the courts below to apply section 25F of the Act in absence of the fact situation of its applicability i.e. rendition of the workman as surplus workman. In support of the said submission, the learned counsel invited attention of this court to Kamleshkumar Rajanikant Mehta v. Central Government Industiral Tribunal No. 1 & Anr. (1979 SCC OnLine Bom. 144)
6. Per contra, the learned counsel for the workman would contend that loss of confidence itself amounts to misconduct and before condemning the workman for such misconduct it was obligatory for the employer to give an opportunity to the workman in a fullfledged inquiry. It was contended that in absence of such opportunity before termination of the employment, the termination was vitiated and could not have been justified by the employer by evidence for the first time before the Labour Court. That there was inherent flaw as above in the order of termination and the appellate court having not sustained the termination of the workman, full backwages ought to have been awarded. It was contended that even if the impugned order of termination was Page 8 of 49 HC-NIC Page 8 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT to be termed as the order simpliciter, it having been rendered in breach of section 25F of the Act entitled the workman to the full backwages and not a mere sum of Rs. 1 Lakh in lumpsum as awarded by the appellate court. The learned counsel for the workman in support of his above submissions placed reliance upon the below mentioned judicial pronouncements:
1. State of U.P. v. Charan Singh (2015 II CLR 150)
2. Jasmer Singh v. State of Haryana and another (2015 AIR SCW 869)
3. Govindbhai Punambhai Vaghela C/o. Jitendra K. Ved v. Chief Manager and Ors. (2015(3) GLR 1972)
4. Baroda Central Co-operative Bank Ltd. and Another v. Khodabhai Smabhai Baria (2003-I-LLJ 175) 6.1 The learned counsel further submitted that so far as the misconduct is concerned, the appellate court rightly found the want of convincing evidence in support of such misconduct and both the courts below were right in not sustaining the order of discharge for want of observance of the principle of natural justice.
7. From the factual matrix referred to hereinabove, it is clear that the question which arose for consideration before the court below was: Whether termination of the respondent workman was in breach of settlement dated 17.12.1991 arrived at in application No. 896 of 1991 and whether his termination amounted to retrenchment under section 25F of the Act entitling the workman to notice and compensation under the said provision or was it a case of loss of confidence enabling the employer to fall back on clause 21 of the Standing Orders for effecting the termination simpliciter while dispensing with the inquiry as provided in clause 23 read with clause 22 of the Standing Orders.Page 9 of 49
HC-NIC Page 9 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT 7.1 It was nobody's case that the misconduct of the workman was the basis for termination. However, misconduct of the workman was sought to be established by evidence as a justification for loss of confidence. The courts below, however, treated the plea of misconduct as a principal plea while ignoring the principal plea of loss of confidence advanced by the employer.
8. In the above backdrop of facts and circumstances, it is required to be appreciated whether termination of service of the workman was in breach of settlement aforestated or was it a case of loss of confidence enabling the employer to invoke clause 21 of Standing Orders while dispensing with the inquiry into the conduct of the workman as contemplated in clause 23 read with clause 22 of the Standing Orders.
8.1 Apropos the case of workman in relation to breach of settlement, this court finds no substantial and serious arguments having been advanced before the courts below and the learned counsel for the respondent workman has also not advanced any such arguments before this court, neither has he pointed out such arguments being advanced before the courts below. Thus, it appears that the case of breach of settlement was not pursued seriously.
8.2 Before dealing with the aspect of loss of confidence, the principle governing private employments as distinguished from public employments which enjoy protection under Article 311 of the Constitution may be borne-in-mind at this stage. The case of the workman or the Management would strictly be governed either under the Rules, Regulations or Standing Orders or some other contractual or legal source. The act of an employee for which the employer may contemplate termination of service may or may not amount to misconduct.
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Even if it amounts to misconduct, the employer may choose the procedure from amongst multiple procedures at its disposal to deal with the employee. Once such source is shown to exist, it is not for the courts to suggest to the employer the alternative not resorted to by the employer. Even if the employer has in its file valid reasons to chargesheet the employee for misconduct, it may opt to get rid of him by termination simpliciter if such power is available to it. This court finds no argument on behalf of the workman in the proceedings in the lower courts questioning the authority invested in the Management to effect simplicter termination by virtue of clause No. 21 of the Standing Orders. Thus, the fact that such power is available with the Management was not in serious dispute even in the proceedings before the courts below. Clause No. 21 of the Standing Orders clearly contemplates termination of the workman simpliciter on observing the procedure contemplated therein. It also obliges the employer to record reasons justifying such action and it also obliges revealing of such reasons to the employee on demand. No such reasons were concededly asked for by the workman.
9. Reverting to the aspect of loss of confidence, it seems that certain acts discussed in para 3.1 to 3.3 led the Management to lose confidence in the workman; the reasons wherefor were revealed later on in the proceedings before the Labour Court by the employer. The reason which weighed with the Management to get rid of the workman was the demand/acceptance of illegal gratification by him from the consumer of the employer. Such an act is defined as act of misconduct under the Standing Orders clause No. 22. It, however, refrained from taking action for misconduct and Page 11 of 49 HC-NIC Page 11 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT instead discharged him for loss of confidence. The question, therefore, is was it permissible for the Management to do so? It will be relevant to notice the legal position as in this regard emerging from several judicial pronouncements relied upon at the Bar:
9.1. In Divisional Controller, Karnataka State Road Transport Corporation v. M.G. Vittal Rao (2012) 1 SCC 442, the Supreme Court ruled thus:
LOSS OF CONFIDENCE "25. Once the employer has lost the confidence in the employee and the bona fide loss of confidence is affirmed, the order of punishment must be considered to be immune from challenge, for the reason that discharging the office of trust and confidence requires absolute integrity, and in a case of loss of confidence, reinstatement cannot be directed. (Vide: Air India Corporation Bombay v. V.A. Ravellow, AIR 1972 SC 1343; Francis Kalein & Co. Pvt. Ltd. v. Their Workmen, AIR 1971 SC 2414; and Bharat Heavy Electricals Ltd. v.
M. Chandrashekhar Reddy & Ors., AIR 2005 SC 2769).
(Italics supplied)
26. In Kanhaiyalal Agrawal & Ors. v. Factory Manager, Gwaliar Sugar Co. Ltd., AIR 2001 SC 3645, this Court laid down the test for loss of confidence to find out as to whether there was bona fide loss of confidence in the employee, observing that, (i) the workman is holding the position of trust and confidence; (ii) by abusing such position, he commits act which results in forfeiting the same; and (iii) to continue him in Page 12 of 49 HC-NIC Page 12 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT service/establishment would be embarrassing and inconvenient to the employer, or would be detrimental to the discipline or security of the establishment. Loss of confidence cannot be subjective, based upon the mind of the management. Objective facts which would lead to a definite inference of apprehension in the mind of the management, regarding trustworthiness or reliability of the employee, must be alleged and proved. (See also: Sudhir Vishnu Panvalkar v. Bank of India, AIR 1997 SC 2249).
27. In State Bank of India & Anr. v. Bela Bagchi & Ors., AIR 2005 SC 3272, this Court repelled the contention that even if by the misconduct of the employee the employer does not suffer any financial loss, he can be removed from service in a case of loss of confidence.
While deciding the said case, reliance has been placed upon its earlier 1 judgment in Disciplinary Authority- cum-Regional Manager v. Nikunja Bihari Patnaik, (1996) 9 SCC 69. )
28. An employer is not bound to keep an employee in service with whom relations have reached the point of complete loss of confidence/faith between the two. (Vide: Binny Ltd. v. Their Workmen & Anr., AIR 1972 SC 1975; The Binny Ltd. v. Their Workmen, AIR 1973 SC 1403; Anil Kumar Chakraborty & Anr. v. M/s.
Saraswatipur Tea Company Ltd. & Ors., AIR 1982 SC 1062; Chandu Lal v. The Management of M/s. Pan American World Airways Inc., AIR 1985 SC 1128; Kamal Kishore Lakshman v. Management of M/s. Pan American World Airways Inc. & Ors., AIR 1987 SC 229;
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and M/s. Pearlite Liners Pvt. Ltd. v. Manorama Sirsi, AIR 2004 SC 1373).
29. In Indian Airlines Ltd. v. Prabha D. Kanan, AIR 2007 SC 548, while dealing with the similar issue this Court held that: (SCC p. 90, para 56):
`56. ........loss of confidence cannot be subjective but there must be objective facts which would lead to a definite inference of apprehension in the mind of the employer regarding trustworthiness of the employee and which must be alleged and proved.'
30. In case of theft, the quantum of theft is not important and what is important is the loss of confidence of employer in employee. (Vide: A.P. SRTC v. Raghuda Shiva Sankar Prasad, AIR 2007 SC 152)."
9.2. In Sudhir Vishnu Panvalkar v. Bank of India (1997) (supra) a Bank employee was allegedly involved in misappropriation of the funds of a Co-operative Housing Society and in an inquiry held under the relevant provisions of the Co-operative Societies Act, liability to refund the misappropriated amount was fixed upon the employee. He was also subjected to the prosecution for the said act and was eventually acquitted by the High Court. Meanwhile, his services came to be terminated not by way of a penalty but by order simpliciter. On demand of the reasons, it was disclosed to the employee that the termination was effected for loss of confidence. No departmental inquiry was held. In the context of the above facts, it was ruled in paragraph No. 5 thus:
".............. It also needs to be emphasised that the appellant was grade III officer in the Bank who was required to deal with the customers and, therefore, if Page 14 of 49 HC-NIC Page 14 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT the Bank thought it fit to terminate the services of the appellant on the ground of loss of confidence, Such an action could not be said to be unwise or malafide action........."
9.2.1 It seems from paragraph No.6 of the judgement that at the time of termination of the services of the employee the bank had not framed any Disciplinary Rules and the court proceeded to address question in paragraph No. 7 as to whether the bank was justified in terminating the services of the employee on the ground of loss of confidence and in the facts and circumstances of the case whether any such enquiry was necessitated. The material in relation to inquiry under the concerned Co-operative Societies Act was placed on the record of the case before the Supreme Court on perusal of which it was opined that the order of termination passed by the bank does not suffer from any vice and the Division Bench of the High Court was right in upholding the termination order. Thus, it was a case of termination of service for loss of confidence without departmental inquiry and the material relied upon was in relation to the inquiry held under the provisions of the Co- operative Societies Act whereby monetary liability as indicated above was fixed upon the employee, to justify the loss of confidence.
9.3. In Air-India Corporation, Bombay v. V.A. Rebellow and another (1972) 1 SCC 814, the question which fell for consideration, inter alia, was whether the termination of the employee concerned was in contravention of section 33(1)
(a) and (b) of the Industrial Disputes Act or whether it was termination simpliciter under the relevant Regulation 48. In the said context, the case was considered in paragraph Nos. 13 to 16 thus:
Page 15 of 49HC-NIC Page 15 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT "13. Shri Menon on behalf of the complainant, however, contended that ignoring the form and language of the impugned order and looking at the real substance of the matter it is clear as disclosed by the appellant in the further written statement that the complainant's services were terminated because of a suspicion about his private conduct and behaviour with Air Hostesses whose names were considered not proper to be disclosed. This, said the counsel, makes out an allegation of misconduct which induced the appellant to terminate the complainant's services and the case, therefore, clearly falls within the mischief of s. 33. The impugned order, he added, is a colourable exercise of the power under Regulation 48, the real object of the appellant being essentially to punish the complainant for misconduct.
14. No doubt, the position of the industrial workman is different from that of a Government servant because an industrial employer cannot "hire and fire" his Workmen on the basis of an unfettered right under the contract of employment, that right now being subject to industrial adjudication : and there is also on the other hand no provision of the Constitution like Arts. 310 and 311 requiring consideration in the case of industrial workmen. We are here only concerned with the question whether the impugned action of termination of the complainant's services is for misconduct as contemplated by s. 3 3 (II) (b) or s. 3 3 (2) (b). While considering this question it is open to the complainant to urge that reliance on Regulation 48 is not bona fide, it being a colourable exercise of the Page 16 of 49 HC-NIC Page 16 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT right conferred by that regulation. He has in fact raised this argument and it is this aspect which concerns us in this case. Let us now scrutinies the present record for examining the position from this aspect.'
15. Now, the true position, as it appears to be clear from the record of this case, is that the complainant's services were terminated under Regulation 48 by paying his salary for 30 days in lieu of notice. The order does not suggest any misconduct on the part of the complainant and indeed it is not possible to hold this order to be based on any conceivable misconduct. The form of this order is no doubt not decisive and attending circumstances are open for consideration, though motive for the order, if not mala fide, is not open to question. The further written statement which the appellant was directed to file and which was filed without prejudice discloses the fact that the appellant had lost confidence in the complainant and this loss of confidence was due to a grave suspicion regarding the complainant's private conduct and behaviour with Air- Hostesses employed by the appellant.
16. Regulation 48 which has been set out earlier as its plain language shows does not lay down or contemplate any defined essential pre-requisite for invoking its operation. Action under this Regulation can be validly taken by the employer at his sweet will without assigning any reason. He is not bound to disclose why he- does not want to continue in service the employee concerned. It may be conceded that an employer must always have some reason for Page 17 of 49 HC-NIC Page 17 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT terminating the services of his employee. Such reasons apart from misconduct may, inter, alia, be want of full satisfaction with his overall suitability in the job assigned to the employee concerned. The fact that the employer is not fully satisfied with the overall result of the performance of his duties by his employee does not necessarily imply misconduct on his part. The only thing that remains to be seen is if in this case the impugned order is mala fide. The record merely discloses, that the appellant had suspicion about the complainant's suitability for the job in which he was employed and this led to loss of confidence in him with the result that his services were terminated under Regulation 48. In our view, loss of confidence in such circumstances cannot be considered to be mala fide.
We are unable to conceive of any rational challenge to the bona fides of the employer in making the impugned order in the above back- ground. The complainant, it may be remembered had to deal with Air-Hostesses in the performance of his duties and if the appellant was not fully satisfied beyond suspicion about his general conduct and behaviour while dealing with them it cannot be said that loss of confidence was not bona fide. Once bona fide loss of confidence in affirmed the impugned order must be considered to be immune from challenge. The opinion formed by the employer about the suitability of his employee, for the job assigned to him even though erroneous, if bona fide, is in our opinion final and not subject to review by the industrial adjudication. Such opinion may legitimately induce the employer to terminate the Page 18 of 49 HC-NIC Page 18 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT employee's services; but such termination can on no rational grounds be considered to be for misconduct and must, therefore be held to be permissible and immune from challenge." (emphasis supplied) 9.4. In Somnath Sahu v. The State of Orissa and others (1969) 3 SCC 384, services of an employee were terminated in the light of the order couched thus:
"Your services are hereby terminated with effect from March 11, 1960 on the following grounds:
In a Conference held in writer's Office on the afternoon of March 10, 1960 in which our Personnel Manager Mr. P.K. Krishna Pillai, Production Manager, Mr. S.S. Narayan, Personnel Superintendent Mr. S. Misra, yourself and the writer were present, you have stated:
1. That you have no confidence in the fair dealings of the Company.
2. That you would be looking for another job elsewhere and that you are only continuing your services with the Company till you secure another job.
3. That you have stated in the presence of the above mentioned Officers of the Company and the writer that you have no interest in the Company and further that you will not be showing any general interest in your work, and
4. That you will not be extending co-operation to, the Personnel Superintendent who is your immediate Superior Officer.
You will also recall that in the past you had taken up an attitude of non-co-operation with your Page 19 of 49 HC-NIC Page 19 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT Departmental Head and that the writer had to advise you on several occasions to change your attitude and to improve your performance.
On the above grounds we have completely lost confidence in you and, therefore, it is not in the interest of the Company to keep you in our service in the responsible position of Welfare Officer.
You will please vacate the Company quarter which you are presently occupying and collect your dues including one month's notice pay which the company is pleased to give ex gratia though under the terms of contract you are not entitled to it."
9.4.1 The question as to whether order of dismissal was illegal because of non-holding of the inquiry against the employee for alleged misconduct fell for consideration of the court and the order of dismissal was noticed to be founded on the contract which permitted termination of services simpliciter without assigning any reason. In the said context, it was held in paragraph No. 5 thus:
"It is clear from this letter that respondent No. 4 had a contractual right to terminate the service of the appellant without assigning any reason by giving one months' notice or one months' salary in lieu of notice. Upon a reading of the letter dated March 11, 1960 we are of opinion that the removal of the appellant was effected in accordance with the terms of the contract. It is true that in the first part of the letter respondent No. 4 has said that the appellant had refused to disclose the names of the members of the Supervisory Staff taking part in the union activities and the Page 20 of 49 HC-NIC Page 20 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT appellant had not extended cooperation to the Personnel Superintendent who was his immediate superior officer. For these reasons respondent No. 4 thought that the appellant failed in his duty of obedience to superior officers and was also not showing loyalty to the management. But no finding of misconduct was recorded by respondent No. 4 and the order of removal dated March 11, 1960 was really tantamount to a simple order of discharge under the terms of the contract. There is no element of punitive action in the order of respondent No. 4 dated March 11, 1960. In form and substance it is no more than an order of discharge effected under the terms of contract and it cannot in law be regarded as an order of dismissal because respondent No. 4 was actuated by the motive that the appellant did not deserve to be continued in service for alleged misconduct. We are, therefore, of opinion that respondent No. 4 was not required to issue notice to the appellant or to make an enquiry and there was no violation of principle of natural justice."
9.5. In The Workmen of Sudder Office, Cinnamara v. Management of Sudder Office and another (1972) 4 SCC 746, the management claimed to have lost confidence in its employee for he having diverted certain lorries of the Company containing its goods to the destination of his choice with an intention to misappropriate the said goods. The matter was formally enquired into and the employee was clamped with charge of misconduct but eventually the order of termination was passed simpliciter in terms of the Standing Page 21 of 49 HC-NIC Page 21 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT Orders informing the employee his entitlement to one month's pay in lieu of notice and wages due to him etc. On the matter being contested by the Union on behalf of the employee, loss of confidence was cited as a reason for the above action. A plea came to be advanced that in absence of proof of such allegation, termination was not simpliciter but by way of punishment. The said plea found favour with the Labour Court but eventually the High Court discarded such reasoning. In above contextual facts, the Supreme Court after noticing the Standing Orders which permitted the Management to effect termination simpliciter as also after considering if the termination of service is a colourable exercise of powers vested in the Management or is as a result of victimization, the Industrial Tribunal would have jurisdiction to interfere and set aside such termination, held on the facts of the case thus:
"25. We will now proceed to consider whether the order of termination in the case before us is one of simpliciter under the provisions of the Standing Orders or whether it is really an order of dismissal for misconduct. We will be emphasising in due course that even the Labour Court which held in favour of the workman has not recorded any finding that the action of the management in terminating the services of the workman was mala fide or amounted to unfair labour practice or was a case of victimisation. Though prima facie it may appear that the management in this case was charging the workman in respect of a matter which may be a misconduct under the Standing Orders, ultimately we are satisfied that the management has passed the order of termination Page 22 of 49 HC-NIC Page 22 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT simpliciter and the order does not amount to one of dismissal as and by way of punishment.
26. It is no doubt true that a charge-sheet was given to the workman wherein it was stated that if the allegations therein are proved, they will constitute an offence under the Standing Orders. But it must be noted that the said letter itself called upon the workman to explain why he should not be dismissed or otherwise punished. The workman gave his explanation by his letter dated March 22, 1960. Though some sort of investigation has been made by the management, which is loosely called the inquiry, the actual order passed on April 19, 1960 clearly shows that the management has not chosen to dismiss the workman on the ground that he is guilty of one or other of the misconduct enumerated in Clause 10 of the Standing Orders. On the other hand, the order clearly shows that in view of the conduct of the workman, the management has lost confidence in him and that it considers it unsafe to retain him in his present position of trust and responsibility. At this stage it may be mentioned that even according to the union in its written statement it is stated that the workman is entrusted with stores of the value of six lakhs of rupees and this has also been referred to by the Labour Court. The order finally says that in the interest of the company, it has been decided to terminate the services of the workman under Clause 9 of the Standing Orders in force. It is rather significant to note that the management did not place the Page 23 of 49 HC-NIC Page 23 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT workman under suspension as it is entitled to under Sub-clause (e) of Clause 9. Such an action would have been taken if the management was really inquiring into an allegation of misconduct as enumerated in Clause 10. It has also to be noted that the order dated April 19, 1960 clearly informs the workman that he is entitled to one month's pay in lieu of notice and also the provident fund contributions made by him as well as by the employer together with interest. The same order further gives particulars of the full pay and allowances and other earned leave allowances which are also payable to the workman. If it is really a case of dismissal of an employee for misconduct, he would not be entitled to payment of the various items referred to in the order dated April 20,1960, particularly one month's pay in lieu of notice, the employer's contribution to the provident fund as well as the earned leave salary amount. The fact that the management paid all those amounts clearly shows that the action taken by the management cannot be said to be one by way of dismissal and that it is a case of termination of service simpliciter.
27. Dr. Agarwala referred us to the various averments made by the management in its written statement before the Labour Court that action has been taken against the workman on the basis of the findings arrived at in the inquiry conducted by the management. No doubt there are some averments to that effect, but the sum and substance of the stand taken by the management is that the investigation or Page 24 of 49 HC-NIC Page 24 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT inquiry that was conducted by it related to the circumstances under which the pulleys were removed from the engineering godown. It was not conducting any inquiry as it is normally understood when disciplinary proceedings are intended to be taken against a workman for misconduct. On the other hand from the very beginning in the order of termination it has stated that it has lost its confidence in the workman. In the letter to the union, the management has stated that it has lost confidence in the workman. Again in the written statement dated March 20, 1962, before the Labour Court, the management has categorically stated that the termination of the services of the workman was because the management lost its confidence and trust in the workman.
28. It was the stand taken by the management that it has lost confidence in the workman and that action was taken under Clause 9 of the Standing Orders by terminating the services simpliciter. That was challenged by the union that the order has been so worded as to camouflage the real intention of the management, namely to dismiss the employee for misconduct. The Labour Court, no doubt, held that the action must have been taken under Clause 10(a)(2) of the Standing Orders for misconduct which resulted in the passing of the order under the cloak of Clause 9 of the Standing Orders, and that Clause 9 has been invoked only as a camouflage. If this finding of the Labour Court was supported by the union and the Page 25 of 49 HC-NIC Page 25 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT workman before the High Court, and accepted by the High Court, the position would have been entirely different. On the other hand, before the High Court, the counsel for the workman quite clearly conceded that he is not placing reliance on the finding of the Labour Court that Clause 9 has been invoked only as a camouflage.
29. Added to this there is the other crucial circumstance, namely, the Labour Court not having accepted the plea of the union that the management was prompted by mala fides, victimisation and unfair labour practice, when it passed the order of termination. Therefore, before the High Court all the other surrounding circumstances, namely, camouflage, victimisation, unfair labour practice and mala fides had to be eschewed from consideration. Then the question was a very simple one whether the order is one of dismissal for misconduct or one by way of termination of the services simpliciter on the basis of the contractual obligation contained in Clause 9 of the Standing Orders. The High Court having due regard to the various circumstances, referred to by us earlier, has come to the conclusion that the order is not one by way of dismissal but only an order of termination simpliciter on the ground that the management had lost confidence and trust in the workman. No doubt the Standing Orders does not say that the services of a workman can be terminated when the employer loses its trust and confidence, but absence of such a provision, in our opinion, is inconsequential. There is Page 26 of 49 HC-NIC Page 26 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT no controversy that the workman Bhola Nath Thakur was the head clerk at the relevant time in the company's engineering godown and he was responsible for the maintenance of stores belonging to the company of the value of about six lakhs of rupees. This has been accepted by the union itself and if that is so, the workman was holding a very responsible post where integrity and honesty are quite essential. The management could have, no doubt, taken disciplinary action against the workman concerned, according to law. But it has not done so in this case. On the other hand, when the circumstances showed that the company can no longer place its trust and confidence in the workman, the management terminated his services by making available to him all amounts that he will be entitled to in case of termination simpliciter under Clause 9 of the Standing Orders. The entire basis of the Labour Court's award for holding that the order is one of dismissal is its view that the management has invoked Clause 9 to camouflage its action. When that approach has been given up on behalf of the workman before the High Court, the reasoning of the Labour Court falls to the ground and the High Court has acted within its jurisdiction under Article 226 when it set aside the order of the Labour Court especially when there has been no finding of victimisation, unfair labour practice or mala fides recorded against the management. To conclude,, we are satisfied that the High Court was justified in setting aside the order of the Labour Court."Page 27 of 49
HC-NIC Page 27 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT (emphasis supplied 9.6. In L. Michael & Anr vs M/s. Johnson Pumps India Ltd [AIR 1975 SC 661] paragraphs No. 22 reads thus:
"22. Before we conclude we would like to add that an employer who believes or suspects that his employee, particularly one holding a position of confidence, has betrayed that confidence, can, if the conditions and terms of the employment permit, terminate his employment and discharge him without any stigma attaching to the discharge. But such belief or suspicion of the employer should not be a mere whim or fancy. It should be bona fide and reasonable. It must rest on some tangible basis and the power has to be exercised by the employer objectively, in good faith, which means honestly with due care and' prudence. If the exercise of such power is challenged on the ground of being colourable or mala fide or an act of victimisation or unfair labour practice, the employer must disclose to the Court the grounds of his impugned action so that the same may be tested judicially..............."
9.6.1 In the said case, the Apex Court went on to reiterate in para 14 and 19 the well settled principal that the Court would examine whether innocuous looking order is a camouflage for a punitive one. In the facts of the case, as indicated above, the workman did not plead the camouflage at all in either of the Courts below. Paragraphs No.14 and 19 read thus:
"14. In Murugan Mills Case [(supra) Wanchoo J (as he then was),] speaking for the Court made the following Page 28 of 49 HC-NIC Page 28 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT observations :
"The right of the employer to terminate the services of his workman under a Standing Orders like cl.17(a) in the present case, which amounts to a claim 'to hire and fire' an employee as the employer pleases and thus completely negatives security of service which has been secured to industrial employees through industrial adjudication, came up for consideration before the Labour Appellate Tribunal in Buckingham & Carnatic Co. Ltd v. Workers of the Company (1952 L.A.C. 490). The matter then came up before this Court also in Chartered Bank v. Chartered Bank Employees Union (1960 3 SCR 441 and the Management of U. B. Dutt & Co. v. Workmen of U. B. Dutt & Co. (1962 Supp. 2 SCR 822) wherein the view taken by the Labour Appellate Tribunal was approved and it was held that even in a case like the present the requirement of bona fides was essential and if the termination of service was a colourable exercise of the power or as a result of victimisation or unfair labour practice the industrial tribunal would have the jurisdiction to intervene and set aside such termination. The form of the order in such a case is not conclusive and the tribunal can go behind the order to find the reasons which led to the order and then consider for itself whether the termination was a colourable exercise of unfair labour practice. If it came to the conclusion that the termination was a colourable exercise of the power or was a result of victimisation or unfair labour practice, it would have the jurisdiction to intervene and set aside such termination."Page 29 of 49
HC-NIC Page 29 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT In that case the form of the order had no foul trace, but before the Tribunal dereliction of duty and go-slow tactics were disclosed as the inarticulate reasons. This Court ruled:
"This clearly amounted to punishment for misconduct and therefore to pass an order under cl.17(a) of the Standing Orders in such circumstances was clearly a colourable exercise of the power to terminate the services of a workman under the provisions of the Standing Orders."
***
19. The above study of the. chain of rulings brings out the futility of the contention that subsequent to Murugan Mill's Case (supra) colourable exercise of power has lost validity and loss of confidence has gained ground. The law is. simply this : The Tribunal has the power land, indeed, the duty to X-ray the order and discover its true nature, if the object and effect, it the attendant circumstances and the ulterior purpose be to dismiss the employee because he is an evil to be eliminated. But if the management, to cover up the inability to establish by an enquiry, illegitimately but ingeniously passes an innocent-looking order of termination simpliciter, such action is bad and is liable to be set aside. Loss of confidence is no new Armour for the management; otherwise security of tenure, ensured by the new industrial Jurisprudence and authenticated by a catena of cases of this Court, can be subverted by this neo-formula. Loss of confidence in the Law will be the consequence of the Loss of Page 30 of 49 HC-NIC Page 30 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT Confidence doctrine. In the light of what we have indicated, it is clear that loss of confidence is often a subjective feeling or individual reaction to an objective set facts and motivations. The Court is concerned with the latter and not with the former, although circumstances may exist which justify a genuine exercise of the power of simple termination. In a reasonable case of a confidential or responsible post being misused or a sensitive or strategic position being abused, it may be a high risk to keep the employee, once suspicion has started and a disciplinary enquiry cannot be forced on the master. There, a termination simpliciter may be bow fide, not colourable, and loss of confidence may be evidentiary of good faith of the employer."
(emphasis supplied)
10. The principle of law which emerges from the above cited judicial pronouncements can be summarized thus:
10.1. Once the employer has lost the confidence in the employee and the bona fide loss of confidence is affirmed, the order of discharge must be considered to be immune from challenge, for the reason that discharging the office of trust and confidence requires absolute integrity, and in such a case of loss of confidence, reinstatement cannot be directed. 10.2. The test to find out as to whether there was bona fide loss of confidence in the employee is thus:
(i) Whether the workman is holding the position of trust and confidence; (ii) by abusing such position, he commits act which results in forfeiting the same; and (iii) to continue Page 31 of 49 HC-NIC Page 31 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT him in service/establishment would be embarrassing and inconvenient to the employer, or would be detrimental to the discipline or security of the establishment.
10.3 Loss of confidence cannot be subjective but must rest on objective tangible facts leading to a definite apprehension in the mind of the management, regarding trustworthiness or reliability of the employee. An employer who believes or suspects that his employee, particularly one holding a position of confidence, has betrayed that confidence, can, if the conditions and terms of the employment permit, terminate his employment and discharge him without any stigma attaching to the discharge. But such belief or suspicion of the employer should not be a mere whim or fancy. It should be bona fide and reasonable. It must rest on some tangible basis and the power has to be exercised by the employer objectively, in good faith, which means honestly with due care and' prudence.
10.4. Expressing dissatisfaction with the overall result of the performance of duties by employee does not necessarily imply misconduct on the part of the employee and thus it would be permissible to dispense with the service of the employee in private employment subject to the terms and conditions by expressing the dissatisfaction with the performance of the private employee. The opinion formed by the employer about the suitability of his employee, for the job assigned to him even though erroneous, if bona fide, is final and not subject to review by the industrial adjudication.
10.5 Thus, if the facts constituting misconduct resulting in loss of confidence form the record of the employer, the Page 32 of 49 HC-NIC Page 32 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT employer in its discretion may invoke the power to discharge simpliciter for loss of confidence while dispensing with inquiry into the conduct of the workman.
11. Keeping in view the above principles if the facts of the case in relation to loss of confidence are appreciated, it would appear that in the instant case, the management did not hold the departmental inquiry into the conduct of the workman. It rather opted to invoke Standing Orders-21 to terminate the services of the workman simpliciter. In the impugned order of termination, though it was sounded that the workman had misused the position and power resulting into loss of confidence, the order was not founded on the misconduct, but it was indicated to him that it was not in the interest of the company or consumer to retain him in services of the company. It was felt that retaining the workman in the company would be against the interest of the organization as a whole in the light of the post he was holding which demanded confidence of the management. With that the workman was relieved and offered a cheque in the sum of Rs.7600/- on account of one month's notice salary and he was also informed that final settlement will be made in due course. 11.1. In the light of settled legal position above referred, mere statement in the order of termination pointing out to the workman the facts leading to the loss of confidence I.e. misuse of the position and trust by him would not constitute an order which very clearly sounds to be an order simpliciter, as the order founded on misconduct. The departmental inquiry in such a case was not necessary. The courts below seem to have been swayed away by misconception of law that on mere Page 33 of 49 HC-NIC Page 33 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT allegation of facts which may constitute misconduct; departmental inquiry was necessitated and that without departmental inquiry, the order of termination simpliciter on loss of confidence was not a valid order.
11.2. The courts below seem to have failed to notice the authority of the management envisaged in clause-21 of the Standing Orders to effect termination simpliciter. Once the material justifying loss of confidence was available on the file of the employer its bona fide for losing of confidence could not have been doubted and if the employer had more than one procedure under the Standing Orders to resort to for dealing with such employee, there was no justification for the courts below to confine the authority of the employer to holding of the inquiry. Both the judicial authorities below failed to notice that the material justifying the loss of confidence was available with the employer and that it was permissible for him to report to one of the two fold powers to deal with the employee in such a situation i.e. (i) by terminating him simpliciter and (ii) by proceeding against him in a departmental inquiry to punish him.
11.3. The material in the form of the complaint of the consumer and his statement that illegal gratification was asked for by the workman, in the opinion of this Court was sufficient enough for the management to perceive the loss of confidence in the workman. No management would retain the association with the employee facing such serious complaint. If under such circumstances, it decides to terminate the services of the workman simpliciter, it's action cannot be said to be vitiated. Still, however, the evidence justifying the misconduct of the employee leading to loss of confidence in the workman was adduced, without any reservation from any quarters. It may be Page 34 of 49 HC-NIC Page 34 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT noted that the finding of the appellate Court that no plea seeking permission to adduce the evidence to justify the loss of confidence was advanced in the written statement is a perverse finding; inasmuch as this Court finds such application seeking a permission in the written statement itself. As indicated above, the material in the nature of complaint against the workman demanding illegal gratification was available with the employer. Such availability was never questioned by the workman. Demand of illegal gratification by the workman to the prejudice of the employer's interest would, undoubtedly, lead to loss of confidence by the employer in the employee justifying dispensing with his service. Furthermore, it was misconception of law to say that for the said purpose, a separate application ought to have been made by the management. While no such specific provision is pointed out by the learned Counsel for the workman, the procedure for giving an opportunity to justify the termination or any penalty imposed by employer on the workman, has emerged not from the specific provision under the labour laws, but by judicial pronouncements noted in paragraph 5.3 above. 11.4. It is clear from the above judicial pronouncements that it would be permissible for the employer to justify its action; punitive or otherwise by leading evidence for the first time before the Labour Court at any stage before the conclusion of the matter. None of the authorities require a separate written permission for the purpose. It will be thus sufficient for the employer to plead and urge for such permission. In the instant case, not only the employer pleaded and urged for such permission, but in fact, adduced evidence; documentary as well as oral, without any objection from any quarters and it is only at the final pronouncement that the Page 35 of 49 HC-NIC Page 35 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT Courts below held that in absence of separate application and in absence of the averments in the written statement, the evidence adduced was not worth consideration. In the opinion of this Court, such technical approach by the Courts below cannot be countenanced.
11.5. The Labour Court on perusal of the oral and documentary evidence adduced in support of the claim of loss of confidence by the employer, was convinced that the misconduct was established. It, however, discarded the evidence only on the grounds afore-stated and the appellate Court discarded it with the findings that the evidence adduced was not in accordance with the procedure laid under the Evidence Act. This approach was contrary to the settled law by judicial pronouncements noted in paragraph 5.2 above. 11.5.1. Thus, it is a settled legal position that the procedure laid down under the Evidence Act, may not strictly apply to the proceedings under the Labour Laws and it will be justified for the Court to draw inference on preponderance of probabilities on the facts brought to its notice and that exactly was done by the Labour Court. Pertinently, the workman did not even challenge the factual aspects narrated by witnesses in the oral testimony; nor did he question the documents adduced in evidence before the Labour Court. Thus, the factual story constituting the loss of confidence was not at all disputed by the workman.
12. It is noticed that the Labour Court and the appellate Court were swayed away by a misconception that a discharge simpliciter is necessarily retrenchment. After recording reasons for impeaching the order of discharge, a presumption came to be raised that the discharge simpliciter amounted to retrenchment and that in absence of observations of Section Page 36 of 49 HC-NIC Page 36 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT 25-F of the ID Act, the order of discharge was not sustainable. 12.1. Retrenchment within the meaning of Section 25-F is one of the species of the discharge simpliciter. Section 25-F of the ID Act confines the protection to retrenched workman only. With the exceptions enumerated in clauses (a), (b), (bb) and
(c), the retrenchment as is defined under Section 2(oo) means termination of the service of a workman for any reason whatsoever otherwise than as punishment. The expression "for any reason whatsoever" used in Section 2(oo) of the Act may cast an impression as if all non-penal terminations except those specifically excluded from the definition as above would amount to retrenchment. The definition in Section 2(oo) read with Section 25F, 25G and 25H of the ID Act makes it clear that the retrenchment would mean non-penal termination by the reasons of the workman being rendered surplus. The legal position in this regard is exhaustively explained In Kamleshkumar Rajanikant Mehta v. Central Government Industrial Tribunal No.1, & Anr. (supra) wherein in paragraphs no. 12 to 22 and 28 it is observed thus:
"12. This brings us to the main bone of contention between the parties. On behalf of the petitioner, it was urged by Mr. Udeshi that termination of the petitioner's service on the ground of loss of confidence would be retrenchment under S. 2(oo) of the Industrial Disputes Act and since the Bank had failed to pay the retrenchment compensation in breach of S. 25F(b) of the Act, the petitioner was entitled to reinstatement with continuity of service, full back wages and other benefits.
13. On the other hand, Mr. Damania, the learned counsel appearing on behalf of the Bank, urged that termination Page 37 of 49 HC-NIC Page 37 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT of service on account of loss of confidence does not, and cannot, amount to retrenchment within the meaning of S. 2(oo) of the Act, with the result that the provisions of S. 25F(b) are not attracted.
14. In order to appreciate these rival contentions urged before us, it would be pertinent to analyse the definition of "retrenchment". "Retrenchment" is defined in the Oxford English Dictionary as the act of cutting down, off, or out; curtailment limitation, reduction; the act of excising, deleting, or omitting; the act of economising or cutting down expenditure. It would, however, be trite to say that where an enactment itself provides the meaning, it is from the four corners of the enactment itself that the meaning must be gathered. For that, we turn to S. 2(oo) where "retrenchment" is defined. Section 2(oo) reads as under :
"'retrenchment' means the termination by the employer of the service of a workman for any reason whatsoever otherwise than as a punishment inflicted by way of disciplinary action, but does not include, -
(a) voluntary retirement of the workmen, or
(b) retirement of the workmen on reaching the age of superannuation if the contract of employment between the employer and the workman concerned contains a stipulation in that behalf, or
(c) termination of the service of a workman on the ground of continued ill-health;"
In this petition, we are not concerned with sub-clauses
(a) to (c). An analysis of this definition in so far as the Page 38 of 49 HC-NIC Page 38 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT present controversy is concerned, reveals 4 essential ingredients, namely, (1) there must be a termination of the service of a workman, (2) the termination must be by the employer, (3) for any reason whatsoever, and (4) otherwise than as by way of punishment inflicted by way of disciplinary action. It is the 3rd ingredient that needs dissection and which has given rise to the controversy between the parties before us. What is the meaning of "for any reason whatsoever" ? On behalf of the petitioner, it was urged that these words are so tremendously wide, so as to include within their scope and ambit any conceivable reason for terminating the services of the workman, including loss of confidence. What we have, therefore, to determine is whether the words "for any reason whatsoever" in S. 2(oo) are so wide in their scope and admit so as to include all sins of commission and omission, with the result that even if the service of a worker is terminated, say, for insubordination, inefficiency or loss of confidence, would the same amount to retrenchment ?
15. We are unable to give the words "for any reason whatsoever" in S. 2(oo), the utterly wide scope and ambit that Mr. Udeshi invites us to do. The essential and basic element of "retrenchment" is surplus age. In other words, when an employer in an existing and running concern or industry, finds that he has staff or labour which is in excess of the number required and hence is surplus, the services of such as are in excess can be terminated and such termination would be retrenchment. The termination of service of workers due to closure of the Page 39 of 49 HC-NIC Page 39 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT business or industry cannot be described as retrenchment. Surplus age in a running business or industry is the very basis of retrenchment. When can an employer be faced with the problem of surplus age, i.e. having surplus staff or labour ? The answer is obvious. He may want to cut down on expenditure, he may want to introduce new about-saving devices, are but two illustrations. Such is the motivation for pruning the labour or staff found to be in excess. In that event, the employer can tell his workers, "Amongst you all, A, B and C are in surplus. I, therefore, do not require you. I terminate your services. Take your compensation under S. 25F, and go." That is the concept of retrenchment. It is merely the discharge of surplus staff or labour in a running or continuing business or industry, for certain reasons illustrated above. If the termination is for any other reason, say, for loss of confidence, it is not retrenchment. Thus the expression "for any reason whatsoever" in S. 2(oo), even though seemingly wide, must necessarily draw within its ambit, not any sin of commission and omission on the part of the workman but the concept that the termination of the surplus workers' service is due to reasons such as economy, nationalisation in industry, intailation or improvement of new labour-saving machinery or device, standardisation or improvement of plant or technique and the like. It is in conjunction with such reasons that the words "any reason whatsoever"
must be read and construed. Thus, even without resorting to the dictionary meaning of "retrenchment", the same meaning can be extracted from S. 2(oo) itself. As observed by the Supreme Court in Hariprasad's case, Page 40 of 49 HC-NIC Page 40 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT referred to hereinafter, in using the expression "for any reason whatsoever" in S. 2(oo), what the Legislature tells the employer is that it does not matter why he is discharging the surplus workers or staff; if the other requirements of the definition are fulfilled, then it is retrenchment.
16. The leading authority for this proposition is the case of Hariprasad v. A. D. Divalkar, A.I.R. 1957 S.C. 121, where the determination of the words "for any reason whatsoever" came up for consideration before a Bench of 5 Judges of the Supreme Court. At page 127 of the report, it was observed as under :
"........ We agree that the adoption of the ordinary meaning gives to the expression 'for any reason whatsofever'a somewhat narrower scope; one may say that it gets a colour from the context in which the expression occurs; but we do not agree that it amounts to importing new words in the definition. What after all is the meaning of the expression 'for any reason whatso ever' ? When a portion of the staff or labour force is discharged as surplusage in a running or continuing business, the termination of service which follows may be due to a variety of reasons; e.g., for economy, rationalisation in industry, installation of a new labour saving machinery, etc. The Legislature in causing the expression 'for any reason whatsoever' says in effect : 'It does not matter why you are discharging the rusplus; if the other requirements of the definition are fulfilled, then it is retrenchment.' In the absence of any compelling words to indicate that the intention was even to include a Page 41 of 49 HC-NIC Page 41 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT bona fide closure of the whole business, it would, we think, be divorcing the expression altogether from its context to give it such a wide meaning as is contended for by learned counsel for the respondents. What is being defined is retrenchment, and that is the context of the definition. It is true that an artificial definition may include a meaning different from or in excess of the ordinary acceptation of the word which is the subject of definition; but there must then be compelling words to show that such a meaning different from or in excess of the ordinary meaning is intended. Where within the framework of the ordinary acceptation of the word, every single requirement of the definition clause is fulfilled, it would be wrong to take the definition as destroying the essential meaning of the word defined."
At page 128 of the Report, it was further observed asunder :
"... We do not, however, think that sub-els. (a), (b) and (c) are conclusive of the question before us; they, no doubt, apply to a running or continuing business only, but whether inserted by way of abundant caution or on account of excessive anxiety for clarity, they merely exclude certain categories of termination of service from the ambit termination of service from the ambit of the definition. They do not necessarily show what is to be included within the definition".
We have reproduced the above observations of the Supreme Court in Hariprasad's case at some length because what emerges in bold relief from the decision in that case is that the words 'for any reason whatsoever' Page 42 of 49 HC-NIC Page 42 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT are not so very wide as to include termination of service on the ground, say, of insubordination or inefficiency or loss of confidence. What emerges from Hariprasad's case is that the expression "for any reason whatsoever" must necessarily be read in conjunction with reasons like, economy, rationalisation in industry, installation of a new labour - saving-machinery, etc. Thus, on the ratio laid down by the Supreme Court in Hariprasad's case, it would be a mistake to hold that loss of confidence could be included in the expression 'for any reason whatsoever' and hence termination of service on that score would amount to retrenchment. Hariprasad's case also brings to the forefront that bona fide closure of business cannot be described as retrenchment. Hariprasad's case also brings to the forefront that the criterion in order to attract the provisions of S. 2(oo) is surplusage in a continuing or running industry, as is highlighted by the following observation at page 132 of the Report :
"...... On our interpretation, in no case is there any retrenchment, unless there is discharge of surplus labour of staff in a continuing or running industry."
17. Coming nearer home, the scope, ambit and meaning of the words "for any reason whatsoever" in S. 2(oo) came up for consideration before a Full Bench of this Court in National Garage v. Gonsalves (J), [1962-I L.L.J. 56] Following the decision of the Supreme Court in Hariprasad's case, it was held by the Full Bench of this Court that retrenchment within the meaning of the Industrial Disputes Act means discharge of surplus labour or staff in a continuing or running industry, but, if the Page 43 of 49 HC-NIC Page 43 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT termination of service is due to any other reason, it will not constitute retrenchment.
18. In Workmen v. Bangalore W. C. & S. Mills Co., , emphasising the criterion of superfluity or surplusage, it was held that the service cannot be said to be terminated unless it was capable of being continued and that if it was not capable of being continued, that is not a termination of the service. It was further held that where the workmen were discharged on the ground of ill-health, it is because they were unfit to discharge the service which they had undertaken to render and not because they had become surplus, with the result that those workmen could not be said to have been retrenched within the meaning of the Act.
19. At this stage, it would be pertinent to look to the scheme of the Act to ascertain whether the word "retrenchment" connotes surplusage and whether it is distinct from a case of ordinary termination or a case of termination for insubordination, inefficiency or loss of confidence or some other reason. In this connection, reference can first be made to S. 2A of the Act. Section 2A reads as under :
Where any employer discharges, dismisses, retrenches or otherwise terminates the services of an individual work man, any dispute or difference between that workman and his employer connected with, or arising out of, such discharge, dismissal, retrenchment or termination shall be deemed to he an industrial dispute ..."
A plain reading of S. 2A gives a clear and unfailing indication that the Legislature itself had no intention of Page 44 of 49 HC-NIC Page 44 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT confusing or identifying retrenchment with other forms of termination of service and that in order to bring the case of an individual worker within the four corners of retrenchment, recourse can only be had to the definition of that word contained in S. 2(oo).
20. Section 25G provides for the procedure for retrenchment, and which can be summarised by the phraseology "last come, first go." Such a procedure would have been inconceivable if termination of service in a case other than surplusage, viz. say, for loss of confidence, was intended by the Legislature to be categorised as retrenchment. This section also brings to the forefront that the centrifugal force revolving round the terminology 'retrenchment' is excess or surplusage or superfluity. It is thus in such a case is laid down the procedure that the last person to join must be the first to go. Section 25H makes this even clearer. That section provides for re-employment of retrenched workmen and states that where any workmen are retrenched and the employer proposes to take into his employ any person, he shall, in the prescribed manner, give an opportunity to the retrenched workmen to offer themselves for re- employment and such retrenched workmen shall have preference over other persons. This section, therefore, casts an obligation and makes it mandatory on the employer not only to take back a retrenched worker but also to give preference to such workman over others. It would be anomalous to the point of absurdity and would result in a horrifying situation if an employer, who terminates the service of his workman for the loss of Page 45 of 49 HC-NIC Page 45 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT confidence or inefficiency or insubordination and the like, is to be expected, may, to be compelled to re-employ that very worker in the same industry or business and that too in preference to other workmen whose services are not terminated either for loss of confidence, inefficiency, insubordination and the like. Taking Mr. Udeshi's contention to its logical conclusion, it would be ludicrous to expect an employer to terminate the service of an employee for lack of confidence and yet be compelled to employ the same worker in the same industry, despite the lack of confidence for which his services had earlier been terminated. The result would be utter chaos where industry and business would grind to a halt.
21. Chapter VB contains special provisions relating to lay- off, retrenchment and closure in certain establishments. This is a special chapter, the provisions whereof come into force when a certain contingency arises, namely, lay- off, retrenchment and closure. That this chapter should apply to retrenchment is also an indication that the concept of "retrenchment" as defined by S. 2(oo), was not intended by the Legislature to be resorted to in wild abandonment and indiscrimination, to each and every form of termination, but only as a special category not applicable to each and every form of termination of service. Item No. 10 of the Fourth Schedule, which provides for conditions of service for change of which notice is to be given, provides for "rationalisation, standardisation or improvement of plant or technique which is likely to lead to retrenchment of workmen." Rule Page 46 of 49 HC-NIC Page 46 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT 81 of the Industrial Disputes (Bombay) Rules, 1957, provides for the maintenance of seniority list of workmen and states that the employer shall prepare a list of all workmen in the particular category from which retrenchment is contemplated, arranged according to the seniority of their service in that category and cause a copy thereof to be pasted on a Notice Board in conspicuous place in the premises of the industrial establishment at least seven days before the actual date of retrenchment. Form XXIV-A-I of Form of Notice to be given by an employer under clause (c) of sub-s. (1) S. 25N of the Industrial Disputes Act, provides that the employer must state that he proposes to retrench the particular workmen and he has to give a reply against each item mentioned in the annexure. Item 18 of that annexure to which the employer must give his reply is :
"Anticipated savings due to the proposed retrenchment."
22. Thus Item No. 10, Rule 81 and Form XXIV-A-I are yet further indications that it was not, and could never have been, the intention of the Legislature to make retrenchment synonymous with termination on grounds like less of confidence, insubordination or inefficiency. The entire scheme of the Act emphasises this in abundant measure.
28. We summarise that the criterion for retrenchment is superfluity or surplusage of labour or staff in a running business caused by any reason whatsoever, such as, economy, rationalisation in industry, installation of new labour-saving machinery or devices standardisation or improvement of plant or technique and the like.
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Surplusage or superfluity is the fulcrum round which the concept of retrenchment must turn. In a line, if there is no superfluity, there can be no retrenchment."
13. This Court with respect records its agreement with the observations made in case of Kamlesh Kumar (supra) and it is held that the essential and basic element for invoking section 25F of the Act is surplus staff and it is the discharge of surplus staff or labour in a running or continuing business or industry that the action of the employer would amount to retrenchment and the expression retrenchment would not comprehend other forms of termination; be it simpliciter or punitive.
14. In view of the above discussion, this Court is unable to accept the submissions made by learned Counsel for the workman. However, even if the contention raised by the learned counsel for the workman that once the breach of Section 25-F is recorded, reinstatement with back wages is a rule is considered; the legal position that reinstatement and back wages is not automatic on mere finding of the breach of Section 25-F of the ID Act is well settled. Reinstatement or grant of backwages would depend on facts and circumstance of each case. In the instant case, termination was effected under clause 21 of the Standing Orders and not section 25F of the Act. If this court was to come to the conclusion that the termination was illegal, the natural consequences that would have followed, were reinstatement in service. However, for backwages hoards of considerations like gainful employment of the workman in the meanwhile, financial condition of the employer and similar other factors having nexus with Page 48 of 49 HC-NIC Page 48 of 49 Created On Sat Aug 12 06:07:29 IST 2017 C/SCA/10126/2014 JUDGMENT entitlement or disentitlement to backwages were relevant. However, in the facts of this case, since this court is inclined to quash and set aside the impugned judgement and award, it is unecessary to elaborate on the issue of reinstatement and backwages except as what is indicated hereinabove.
15. In view of the above discussion, SCA preferred by Management, being SCA No.10126 of 2014 deserves to be allowed and the judgment and award impugned therein are quashed and set aside and the termination of the workman effected simpliciter is upheld. SCA preferred by the workman being SCA No.9583 of 2014 is dismissed.
(G.R.UDHWANI, J.) (pkn/sompura) Page 49 of 49 HC-NIC Page 49 of 49 Created On Sat Aug 12 06:07:29 IST 2017