Madras High Court
J. Nandhini vs The Deputy Commissioner Of Labour ... on 31 March, 2003
Equivalent citations: (2003)IIILLJ463MAD
Author: R. Jayasimha Babu
Bench: R. Jayasimha Babu, K. Raviraja Pandian
JUDGMENT R. Jayasimha Babu, J.
1. Section 41(1) of The Tamil Nadu Shops and Establishments Act, 1947 (the Act). That section reads as under:
"41. Notice of Dismissal --- (1) No employer shall dispense with the services of a person employed continuously for a period of not less than six months, except for a reasonable cause and without giving such person at least one month's notice or wages in lieu of such notice, provided however, that such notice shall not be necessary where the services of such person are dispensed with on a charge of misconduct supported by satisfactory evidence recorded at an enquiry held for the purpose."
2. It is the common case of the employers before us - the appellants in the writ appeal and the respondent in the writ petition that 'reasonable cause' referred to in the opening part of Section 41(1) of the Act should be construed to mean the basis of the order of termination, and that if the basis for that order is an enabling provision in the contract between the employer and the employee under which the employer may terminate the contract of employment after giving notice or paying wages in lieu of notice, the order of termination should be regarded as sufficient compliance with the requirement of Section 41(1) of the Act. The exercise of the contractual right to terminate the employment, according to them, should result in a conclusive presumption that 'cause' for the termination exists, and that such cause is 'reasonable'.
3. This argument, we are compelled to say, is an argument of desperation wholly unsupported by anything in the section or in the decisions of this Court or of Supreme Court which have dealt with that section or provisions similar thereto in other statutes.
4. The order of termination that was passed terminating the services of the respondent in the writ appeal reads thus:
"Dear Sir, As per Memorandum of Agreement dated 28th April, 1991 entered into between you and the Company we are hereby determining your services with immediate effect, i.e. from the close of office hours on 25th January, 1994. As per terms of the said agreement you shall be paid one month's basis salary in lieu of one month's notice. You will thus be on the rolls of the company upto the close of office hours on 25.01.1994.
You are requested to clear all your loans and advances and also return, any company's property in your possession to enable salary section to settle your dues."
5. The order of termination that was passed against the petitioner in the writ petition before us reads thus:
"Madam, In terms of Clause 17 of our letter JR:CVV/Staff dated October 15, 1984 addressed to you, we are hereby giving you notice that your services will not be required from the close of working hours of March 21, 1995. This letter should, therefore, be treated as three month's notice in writing from the Company's side.
You will, however, be paid salary upto and including June 20, 1995.
Your dues will be remitted to you within the next few days after adjusting loans, advances, outstandings, against you, if any."
6. In these orders no cause is set out for the termination. The terms in the contract enabling the employer to terminate the contract by giving notice is referred to and has been invoked. In effect, the employee is simply 'fired' without setting out any reason therefor.
7. Section 41(1) of the Act has two parts to it:- the first of which obligates the employer not to terminate the services of the employee who has served for not less than six months, except for a "reasonable cause" and the second part which requires such termination to be accompanied by a month's notice or wages in lieu of such notice, with the proviso that such notice is not necessary in cases of termination for proved misconduct. Proven misconduct is thus regarded as a reasonable cause for termination. In case of termination on the ground of misconduct notice need not be given. There can be causes other than misconduct, which may be 'reasonable' and justify termination. In such cases notice is mandatory.
8. This statutory provision is intended to and does limit the freedom of action that the employer may otherwise have in terms of the contract with the employee.
9. Even though the contract of employment may not stipulate that termination should be for a reasonable cause, the employer is no longer free to rely solely upon the clause permitting termination with notice. The employer is bound to state the reason in the order of termination, and it is that reason which the appellate authority is required to examine when the order of termination is appealed against.
10. The Supreme Court in the case of Sri Ganganagar Urban Co-operative Bank Ltd. vs. Prescribed Authority, dealing with a similar provision in the Rajasthan Shops and Commercial Establishments Act, 1958, viz., Section 28A, held that that Act, ".........interposes and curtails the power of the employer to terminate the services of the employee except in the manner indicated by section 28-A"
11. As long back as in the year 1950, within three years after this Act was passed, in the case of The Tata Iron and Steel Co. Ltd. vs. G.Ramakrishna Ayyar, 1950 LLJ1043, a Division Bench of this Court held that termination of employment with notice on the ground that the employer's services were no longer required was not termination for reasonable cause. The Court observed, "From the order of the company dispensing with the services of the first respondent, the only reason appearing is the non requirement of his services. The order does not state anything else. The only question therefore for the appellate authority was to determine whether that ground can be said to be reasonable cause. The authority has held that it could not be, and we agree with him." The Court held further that the reasonable cause for termination should be set out in the order of termination, and setting out the reasons - in that case, misconduct - in the pleadings before the appellate authority, would not satisfy the requirements of this Section.
12. In the case of T.C. Srinivasan vs. The Assistant Commissioner of Labour, (1990) I MLJ 326, it was held that the existence or otherwise of reasonable cause for dispensing with the services of an employee is a matter which an appellate authority must examine. Such examination would not be possible if the cause is not stated in the order and if the employer were to merely contend that giving of the notice itself would constitute a sufficient cause.
13. In the case of the Management of Air France vs. The Deputy Commissioner of Labour, (1996) II LLJ 16, the Division Bench held that, "It is mandatory on the part of the management, while dispensing with the services of a person, who has put in continuous period of service for more than six months, to assign reasonable cause for termination."
14. Learned counsel for the employers submitted that though the Act in Section 4(1)(a) provides that the Act will not apply to persons employed in positions of management, the State Government has by a notification issued under Section 5 of the Act which overrides Section 4(1)((a), (b), (d) and (e) and Section 4(2) extended the application of the Act to practically all employees other than those who are members of the Board of Directors of a Company, and that fact is relevant and material for a proper construction of Section 41(1) of the Act.
15. The object of Section 41(1) of the Act is to prevent arbitrary and unjustified termination of employment. The power of the management to dismiss an employee for misconduct is fully preserved. So is the power of the management to terminate the services of the employee if such termination is for a reasonable cause. The only requirement added thereto in case of termination for a reasonable cause is that notice should be given, the period of which should not be less than one month and in lieu of that notice wages should be given. The provision for scrutiny of the employer's action by a statutory authority is meant to serve as a check on arbitrary and unjust action on the part of the employer.
16. The application of this provision to all classes of employees, does not come in the way of the effective control of the managerial or other cadre by the employer. It serves as a reminder to all employers that they may terminate the service of the employees irrespective of their cadre only when there is a reasonable cause for the same or the employee is guilty of misconduct, and such order of termination is capable of withstanding the scrutiny that may be carried out by the statutory appellate authority.
17. Counsel for the employees brought to our notice the decisions of the apex Court in the cases of West Bengal State Electricity Board vs. Shri Desh Bandhu Ghosh, (1985) 1 LLJ 373 and Central Inland Water Transport Corporation vs. Brojo Nath Ganguly, (1986) II LLJ 171, wherein the apex Court has held that it would be violative of Article 14 for employers who can be regarded as public authorities, or employers who are in the public sector, to terminate the services of their employees by merely giving a month's notice.
18. That ratio of those decisions has been extended even to private employment by a Division Bench of this Court in the case of Sadasivam vs. Binny Ltd., (1998) I LLJ 349. Counsel states that judgment of this Court in the case of Binny Ltd., is pending in appeal before the apex Court and that a portion of that judgment has also been stayed. In this case, we are not concerned with the validity or otherwise of a clause in a contract of employment enabling the employer to terminate the services of an employee by giving notice.
19. Notwithstanding the existence of such a clause, the termination of services of such an employee can only be for a reasonable cause, as that requirement has in effect been super-added by Section 41(1) of the Act to all contracts of employment with employees covered by this Act. It is not open to any employer to contract out of that requirement as Section 41 is not subject to contract on the contrary.
20. The writ appeal is dismissed with costs. The writ petition is allowed with costs. Costs quantified in each case at Rs. 4,000/-.