Karnataka High Court
K. Kamalanathan vs H.M.T. Ltd. And Ors. on 26 August, 2003
Equivalent citations: ILR2003KAR4030, 2004(1)KARLJ395, (2004)ILLJ936KANT, 2004 LAB IC 966, 2004 AIR - KANT. H. C. R. 83, (2004) 1 CURLR 835, (2004) 1 KANT LJ 395, (2004) 1 LABLJ 936, (2003) 99 FACLR 949, (2004) 2 LAB LN 311, (2003) 8 SERVLR 142, (2004) 104 FJR 1107, (2004) 3 SCT 560, (2004) 1 KCCR 423
Author: H.L. Dattu
Bench: H.L. Dattu
ORDERS) ACT, 1946 - H.M.T. CONDUCT, DISCIPLINE AND APPEAL RULES - KARNATAKA CO-OPERATIVE SOCIETIES ACT - MISCONDUCT - OMISSIONS AND COMMISSIONS - Committed by petitioner as a Member /Director/ vice President of a Co-operative Society would come within the meaning of expression "misconduct" under the provisions of the conduct, discipline and appeal rules - Held - The Karnataka Co-operative Societies Act provides that if for any reason a member of a Society commits any act or acts in a manner contrary to the provisions of the Act, appropriate proceedings can be taken against the office bearer by proceeding under the provisions of the Act. For an offence committed under the provisions of the Karnataka Co-operative Societies Act, the respondent company could not have invoked the provisions of the Conduct, Discipline and Appeal rules and thereafter, could have dismissed the petitioner from service. The respondent-company has no control over the affairs of the society. (Paras 20,23) (B) DISMISSAL - Whether respondents justified in imposinga major penalty of dismissal of the petitioner from services of the respondent - company for the alleged acts of misconduct in exercise of this powers under conduct rules of the company. Held - The employee appointed by the society to discharge the functions of the society are not the employees of the respondent company. The management of the society is by the directors, elected from among the members of the society. If an employee or office bearer of a society commits any acts of misappropriation of societies funds, the provisions of Karnataka Co-operative Societies Act provides innumerable remedies, including to initiate sur-charge proceedings under 69 of the Act or to raise dispute under Section 70 of the Act for recovery of pecuniary loss caused to the society. Therefore, an alleged omission as an office bearer of the Co-operative Society, the Disciplinary Authority of the respondent company could not have initiated any proceedings much less domestic enquiry proceedings against the petitioner and thereafter, could not have dismissed the petitioner from service. Such initiation of enquiry and dismissal from service is bad in law and has to be set aside. Writ Petition allowed. ORDER Dattu, J.
1. Petitioner is an employee of the respondent - the Hindustan Machine Tools ('HMT' for short). At the relevant point of time, he was working as a Junior Accounts Officer.
2. The employees of the respondent - Company, have formed a cooperative society by name "Hindustan Machine Tools (HMT) Watch Factory Cooperative Society Limited" ('the Society' for short).
The said society is registered under the provisions of the Karnataka Cooperative Societies Act. Apart from others, one of the objects of the Society is to promote the economic interest of its members in accordance with cooperative principles. Initially the society had nearly 2,500 members and now it appears, it has been reduced to 1,500 members.
3. Petitioner became a member of the society some time in theyear 1980. In the elections held for the office of the Directors of the society some time in the year 1996, petitioner had contested and got himself elected as a Director of the society. It is stated in the petition that because of his popularity, he also got himself elected as the Vice President of the society.
4. For the welfare of the members of the society, the office bearers of the society had passed a resolution resolving to supply Autoglo and Cilx gas lighters to the members of the Society under easy installments through MSIL Home Maker Hire Purchase Scheme. Pursuant to the resolution so made, the committee of management of the society had approached the Vega Marketing Company for supply of Autoglo and Clix gas lighters to its members under Hire Purchase Scheme, since there was acute shortage of power in the year 1997. The society also had passed a resolution authorising petitioner and one Sri Ramakrishna to negotiate with Vega Marketing Company for supply of lamps to its members on easy installments basis. It appears, there was an understanding between the society and Vega Marketing Company to pay service charges to the society at 3.5% on the total amount of the purchase made by the society. It appears, some time in the last week of April, 1997, a sum of Rs. 13,354 as service charges was received by the petitioner and one Sri. Satya Narayana who was also one of the directors of the society. It is stated in the petition that the said amount could not be deposited by the petitioner and the other director because of some bickering between the petitioner and the Secretary of the society.
5. Nearly for a period of 8 months, the society had not takenany action either against the petitioner or against the other director who had received a sum of Rs. 13,354/- from Vega Marketing Company. On 6.12.1997, the Secretary of the society had addressed a letter to the Assistant Manager of the respondent - Company and in that, he had stated, that the Vega Marketing Company had supplied Autoglo and Clix gas lighters to the members of the society in easy installments through MSIL Home Maker Hire Purchase Scheme. The total amount of transaction was approximately Rs. 5.00 lakhs and as per the agreed terms M/s. Vega Marketing Company had to pay a sum of Rs. 13,354/- at the rate of 3.5% towards the service charges and normally it is paid through cheques / Drafts. It is also stated in that letter, that on an enquiry he is informed that the petitioner and other director have received the said amount by way of cash. According to the Secretary of the society, this act of the petitioner in receiving the cash and remitting the same only 14.12.1997 vide receipt No. 2186 would amount to serious misconduct.
6. Based on the aforesaid correspondence, the DisciplinaryAuthority of the respondent - Company had issued a charge sheet dated 4.12.1997 to the petitioner. In that, he had alleged certain acts of misconduct said to have been committed by the petitioner as a Director/Vice President of HMT Co-operative Society. According to the Disciplinary Authority, the petitioner had unauthorisedly collected Rs. 13,354/- from M/s. Vega Marketing Company in April 1997 and retained the money in his personal custody without any justifiable reasons, and thereby had obtained gain for himself and caused loss to the Society and that action of the petitioner has tarnished the image of the Company. In view of the above, according to the Disciplinary Authority, petitioner had committed the following acts of misconduct under Conduct, Discipline and Appeal Rules of the Company. The charges are :
CHARGE. I.... Committing fraud or dishonesty under clause 23.1.4.
CHARGE. II.... Indulging in corrupt practices under clause 23.1.16 CHARGE. III.... Not maintaining absolute integrity and devotion to duty and conducting in a manner not conducive to the best interest of the Company and indulging in and act which in unbecoming under Clause 22(a) read with Clause 23.1.1.
7. In the charge memo itself, the Disciplinary Authority had calledupon the charge sheeted employee to offer his explanation, if any, as to why disciplinary action should not be taken against him for the above acts misconduct as provided under the Conduct, Discipline and Appeal Rules of the Company.
8. Petitioner had filed his reply dated 26.02.1998. In that hehad brought to the notice of the Disciplinary Authority that the acts of omissions and commissions alleged against him would not come within the Conduct Rules of the respondent - Company. The substance of the petitioner's case in his reply was that only under the provisions of the Karnataka Co-operative Societies Act, an enquiry can be held in respect of the acts allegedly done by him as the Director of the Co-operative Society and the Disciplinary Authority of the respondent - Company cannot conduct any disciplinary enquiry against him in respect of the said allegations. Therefore, he had requested the Disciplinary Authority to drop the contemplated domestic enquiry proceedings against him. The Disciplinary Authority of the respondent - Company not being satisfied with the explanation offered by the petitioner had appointed an Enquiry Officer to enquire into the charges alleged in the charge memo dated 14.2.1998. After holding an enquiry, the Enquiry Officer was of the view that the petitioner is guilty of the charges alleged in the charge memo.
9. After receipt of the report and findings of the Enquiry Officer, the General Manager, who is the Disciplinary Authority of the Respondent - Company had issued a second show cause notice dated 3.4.1999, directing the petitioner to offer his explanation, if any to the report, findings and conclusion of the Enquiry Officer. After receipt of the second show cause notice, petitioner had submitted his explanation to the Disciplinary Authority by his letter dated 1.5.1999.
10. The Disciplinary Authority not being satisfied with theexplanation so offered by the delinquent employee, by his order dated 6.5.1999 has dismissed the petitioner from the services of the respondent - Company.
11. Aggrieved by the said order, petitioner had filed an appeal before the Appellate Authority as provided under the Rules of the respondent - Company. The Appellate Authority, as usual, has passed an Order dated 8.7.1999 in rejecting the appeal and confirming the order passed by the Disciplinary Authority. It is the Correctness or otherwise of these orders is questioned by the petitioner in these proceedings, being aggrieved by the same.
12. Sri. Devendrappa, learned Counsel appearing for thepetitioner would submit, that, for certain acts of omission and commission said to have been committed by the petitioner as the Director and Vice President of a Co-operative society, the Disciplinary Authority of the respondent - Company could not have initiated any proceedings much less domestic enquiry proceedings and further, based on the report of the Enquiry Officer, the Disciplinary Authority could not have imposed any punishment much less a punishment of dismissal from service. Therefore, it is stated that the order passed by the Disciplinary Authority and confirmed by the Appellate Authority requires to be annulled by this Court. The learned Counsel relies on the observations made by the Apex Court in the case of M/s. GLAXO LABORATORIES (I) LTD., vs. PRESIDING OFFICER, MEERUT, and the observations made by a learned Single Judge of this Court in the case of INDIAN EXPRESS MADURAI LTD., vs PRESIDING OFFICER, 2.
13. Per contra, Sri Samuel, learned Counsel appearing for therespondent - Company would submit, that petitioner is an employee of the respondent - Company and therefore eligible to become member of the HMT Watch Factory Co-operative Society Limited. Therefore any misconduct committed by him either as a member or office bearer of the Society would tarnish the image of the Company and therefore, the Disciplinary Authority of the respondent-Company was not only justified in initiating domestic enquiry proceedings against the petitioner for the alleged acts of misconduct committed by the petitioner as an office bearer of the Co-operative Society and also in imposing a major penalty of dismissal from service. Secondly it is contended that the petitioner as an office bearer of the respondent - Co-operative Society could not have, firstly, collected the service charges from the suppliers by name M/s. Vega Marketing Company and thereafter could not have retained that amount for a period of 8 months. Therefore, according to the learned Counsel, the acts alleged against the petitioner would come under clauses 23.1.4. 23.1.16 and 23.1.1. of the Rules. Therefore, the learned Counsel would submit that the Disciplinary Authority was justified in dismissing the petitioner from the services of the respondent - Company.
14. The issues that requires to be considered and decided bythis Court are:
"I. WHETHER the omission and commission said to have been committed by the petitioner as a Member/Director/Vice President of a Co-operative Society would come within the meaning of expression "misconduct" under the provisions of the Conduct, Discipline and Appeal Rules of the respondent-Company?
II. WHETHER the respondents are justified in imposing a majorpenalty of dismissal of the petitioner from services of the respondent - company for the alleged acts of misconduct in exercise of their powers under Conduct Rules of the Company?"
To appreciate these issues, firstly the applications of the Rules of the respondent - Company requires to be noticed.
15. Clause 2 of the Rules reads as under:
" These shall apply to all employees of the Company including those on contract service, but excluding those who are covered by the Standing Orders framed under the Industrial Employment (Standing Orders) Act, 1946 as amended from time to time."
A reading of the above provision would clearly demonstrate that the Rules are made applicable to all the employees of the company including those employees who are working on contract service but excluding those who are covered under the Standing Orders of the company.
Clause 3.9 defines the meaning of the expression `EMPLOYEE' to mean any person employed in the company other than the persons engaged on causal basis and those who are governed by the Standing Orders framed under the industrial Employment (Standing Orders) Act 1946 as amended from time to time.
Clause 23 of the Rules provide for Discipline and Appeal Regulations and Disciplinary Action Procedure. The scheme of the disciplinary rules, apart from generality of the term misconduct, enumerates various acts of omission and commission which shall be treated as misconduct.
Clause 23.1.4. provides for fraud, theft, bribery, dishonesty or acting under outside influence in connection with the business or property of the company or of the property entrusted to the company or to another employee.
Clause 23.1.16 provides for collection of any money without the permission of the competent authority within the premises of the company except as sanctioned by any law of the land for the time being in force or rules of the company.
Clause 23.1.1 provides for breach of any of the provision of the conduct rules.
Clause 22 provides for General Conduct. Clause 22 (a) says that every employee at all times maintain absolute, integrity and devotion to duty and conduct himself in a manner conducive to the best interest of the company and shall not do any act which is unbecoming of him or is prejudicial to the interest of the company.
16. The charges alleged against the petitioner in the chargememo is that, he has committed fraud or dishonesty (Clause 23.1.4), indulged in corrupt practical (Clause 23.1.6) and lastly not maintained absolute integrity and devotion to duty, conducted himself which is unbecoming of the employee which would come under Clause 22(a) read with Clause 23.1.1. and thereby has tarnished the image of the company.
17. The question now would be, is it open to the employer tofish out some conduct as misconduct and punish the workman even though the alleged misconduct would not be comprehended in any of the enumerated misconducts.
18. The normal approach in law to the construction of theStanding Order or Conduct Rules is that, it would apply to the conduct of the workman/employee in discharge of their duties and during hours of their work. The employer has the authority to regulate the conduct of its employee with in its business premises and certain circumstances outside its premises also, if the conduct of the employee is such, that it would directly effects the interest of the Company in carrying on its business and manufacturing activities. Secondly, the misconduct prescribed under the Standing Orders to attract penalty should have causal connection with the place of work as well as the time at which it is committed which would ordinarily be within the establishment and during duty hours. Even where the Standing Orders is couched in a language which seeks to extend its operation beyond the establishment, it would be none the less be necessary to establish casual connection between the misconduct and the employment. This casual connection must be real and substantial, immediate and proximate and not remote or tenuous as observed by the Apex Court.
19. Keeping these aspects in view, let me once again go back to fact situation in the instant case. Facts are simple. The Disciplinary Authority of the respondent - Company in exercise of his powers under Conduct, Discipline and Appeal Rule of the Company has dismissed the petitioner from the services of the Company in respect of certain alleged acts of misconduct committed by the petitioners, not as an employee of the Company but as Vice-President/Director of the HMT Co-operative Society on which respondent - company has no control whatsoever. The petitioner has challenged the order passed by the Disciplinary Authority primarily on the ground that the Disciplinary Authority of the respondent - Company could not have initiated any disciplinary proceedings against him for the alleged acts of misconduct said to have been committed by him as a Director of Co-operative Society.
20. The petitioner is a member of a co-operative societyregistered under the provisions of Karnataka Co-operative Societies Act. He also happens to be the office bearer of the society. The employees of the respondent Company are eligible to become its members. However, the respondent - Company has no control over the affairs of the Society. The employees appointed by the Society to discharge the functions of the Society are not the employees of the respondent Company. The management of the society is by the directors, elected from among the members of the Society. If an employee or office bearer of a society commits any acts of misappropriation of societies funds, the provisions of Karnataka Cooperative Societies Act provides innumerable remedies, including to initiate sur-charge proceedings under Section 69 of the Act or to raise dispute under Section 70 of the Act for recovery of pecuniary loss caused to the Society. Therefore, in my view for an alleged omission as an office bearer of a Co-operative Society, the Disciplinary Authority of the respondent company could not have initiated any proceedings much less domestic enquiry proceedings against the petitioner. The matter would have been different, if the respondent - Company had any control over the affairs and management of the Society.
21. Sri Samuel, learned Counsel for the respondent companyhowever submits that since petitioner is an employee of the respondent company as envisaged under Rule 3.9 of Conduct Rules and therefore, misconduct alleged is covered under Rule 22 thereof. Rule 22 of the Conduct Rules inter alia requires that every employee shall at all times maintain absolute integrity and is forbidden from doing anything which is unbecoming of an employee of the company. These provisions are wide enough to include not only acts done by an employee of the respondent company in discharge of his official duties but also acts done outside his employment. The arguments advanced seems to be attractive but a deeper consideration of the matter, in my view, it has no merit whatsoever. This submission of the learned Counsel would have been available to him if the cooperative society in which petitioner is a Director is under the control of respondent company. The test in my view is whether the employee is conducting himself in a way inconsistent with the faithful discharge of his obligation undertaken by him either expressly or impliedly in accepting the service. The inconsistency may arise on account of any act of the servant either in the course of his employment or outside it, which injures or has the tendency to injure his employers' business or interests or reputation. At this stage, it may be useful to notice the observations made by the Apex Court in the case of S. GOVINDA MENON vs UNION OF INDIA, 1967 SC 1274 wherein it is observed that it is not necessary that the alleged act or omission which forms the basis of the disciplinary proceedings should have been committed in the discharge of his duties, as a servant of the Government. In other words, if the act or omission is such as to reflect on the reputation of the officer for his integrity or good faith or devotion to duty, there is no reason why disciplinary proceedings should not be taken against him for that act or omission even though the act or omission relates to an activity in regard to which there is no actual master and servant relationship. The test is whether the act or omission has reasonable connection with the nature and conditions of his service or whether the act or omission has cast a reflection upon the reputation of the member of service for integrity or devotion to duty as a public servant.
(emphasis supplied by me)
22. In the present case, petitioner is an employee of therespondent company and at the same time he is also elected Director and Vice-President of a co-operative society, which consists mainly the employee working in the respondent-company. The society had resolved to purchase Auto Glo and Clix Gas lighters to its members in installments through MSIL Home Maker Hire Purchaser Scheme. There was also an understanding between the society and the supplier that for the purchase that they would be making, the society would be eligible for service charge at the rate of 3.5%. That amount is collected by the petitioner and another Director and the same is deposited but not immediately after such receipt. It is not in dispute nor it can be disputed that the petitioner was authorised by the society to collect the service charged from the supplier, if not by way of cash, atleast by way of cheque/draft. The amount collected by the petitioner by way of service charge is not immediately deposited to the account of the society. It may amount to temporary misappropriation of the funds of the society. But the question would be has it tarnished the image of the company. The disciplinary authority in his charge memo dated 14.2.1998, except saying the action of the petitioner has "tarnished the image of the company" would not say anything more.
23. Even otherwise also, in my considered opinion the KarnatakaCooperative Societies Act provides that if for any reason a member of a society commits any act or acts in a manner contrary to the provisions of the Act, appropriate proceedings can be taken against the office bearers by proceeding under the provisions of the Act. For an offence committed under the provisions of the Karnataka Cooperative Societies Act, in my opinion, the respondent - company could not have invoked the provision of the Conduct, Discipline and Appeal Rules and thereafter, could not have dismissed the petitioner from service. This position has been explained by the Apex Court in the case of A.N. KALRA vs PROJECT AND EQUIPMENT CORPORATION OF INDIA LIMITED4 and in the case of M/s. GLAXO LABORATORIES (I) LTD. vs PRESIDING OFFICER, MEERUT. In KALRA's case, it was noticed by the Apex Court that the relevant Rule contained provisions providing for condition for grant of advance etc and consequence of failure to keep to the time schedule. Thus it was held that the Rules for granting that advance themselves having provided the breach of conditions, it would be idle to go in search for any other consequence by initiating disciplinary action for violation of such terms and conditions unless the Rules specifically incorporated a provision to the effect that the breach of House Building Advance Rules would by itself constitute a misconduct. Therefore much discussion on this aspect of the matter may not be required for the purpose of disposal of the case.
24. Inview of the above, the following;
ORDER I. Writ Petition is allowed. Rule made absolute.
II. The order passed by the Appellate Authority dated 8.7.1999in confirming the order passed by the Disciplinary Authority dated 6.5.1999 is quashed.
III. A direction is issued to the respondent - Company to reinstatethe petitioner into service as expeditiously as possible at any rate within two months from the date of receipt of a copy of this Court's order.
IV. It is further declared that the petitioner is entitled to all theservice and monetary benefits from the date of dismissal till the date of reinstatement into service.
V. In the facts and circumstances of the case, parties are directed to bear their own costs. Ordered accordingly.