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PETITIONER: JABALPUR ELECTRIC SUPPLY CO.

       Vs.

RESPONDENT: SAMBHU PRASAD SRIVASTAVA & OTHERS

DATE OF JUDGMENT: 27/07/1962

BENCH: GUPTA, K.C. DAS BENCH: GUPTA, K.C. DAS GAJENDRAGADKAR, P.B. MUDHOLKAR, J.R.

CITATION:  1966 AIR 1288            1963 SCR  (3) 453

ACT: Industrial  Company--Delegation  of Disciplinary  powers  to officer--Valildity--Standing Orders cls. 19, 20.

HEADNOTE: The  appellant  company  had its  Head  Office  in  Calcutta generated electricity for distribution at Jabalpur.  By  cl. 10  of the power of attorney executed by it,  it  authorised its Resident Engineer at Jabalpur, "subject to the  Standing Orders from, time to time, given by the Company to  appoint, dismiss,  suspend  or terminate the services of any  of  the employees  of the Company at jabalpur".  The respondent  was charge-sheeted and after enquiry discharged by the  Resident Engineer.   He made an application to the  Assistant  Labour Commissioner who ordered his reinstatement without break  in his  service  by without payment of back wages.   The  State Industrial  Court,  on  revision applications  by  both  the parties held that the Resident Engineer was not empowered to hold  the  enquiry and to issue an order  of  discharge  and refused to interfere.  Both the parties moved the High Court under Art. 226 of the Constitution.  The High Court took the view  that the powers of dismissal and suspension under  cl. 19 of the Standing Orders and the general right to discharge an  employee under cl. 20 of the Standing Orders  could  not be,  and latter powers had not actually been,  delegated  to the   Resident   Engineer  and  allowed   the   respondent’s application with back wages. Held, that the delegation of power by the power of  attorney was  vailed in law and covered powers both under cl. 19  and cl. 20 of the Standing Orders. There  was  nothing  in  law, or  in  the  Articles  of  the Association of the Company that forbade such delegation  and the.  company therefore, could, delegate the powers to  meet the exigencies of its business-. The opening words of cl. 10 of the power of attorney did not mean that the delegate could not at all exercise the  powers since under the Standing Orders the company alone 454 could  do  so.   Their effect is that  in  exercising  these powers  the  delegate cannot do anything  that  the  company could not do under the Standing orders.

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JUDGMENT: CIVIL APPELLATE, JURISDICTION: Civil Appeal No. 432 of 1961. Appeal  by special leave form the judgment and  order  dated May   15   1959  of  the  Madhya  Pradesh  High   Court   in Miscellaneous Petition Nos. 301 of 1958 and 83 of 1959. B.   Sen and S. N. Mukerji for the Appellant. B.   R. L. Iyengar and A. G. Ratnaparkhi for Respondent  No. 1. I. N. Shroff, for Respondents Nos. 2 and 4. 1962.  July 27.  The Judgment of the Court was delivererd by DAS  GUPTA, J.-When under the Standing Orders of  a  Company the Company is empowered to take disciplinary action against an employee by proceeding in the prescribed manner can  that power  be  legally delegated by the Company to  any  of  its officers  ?  That is the principal question raised  in  this appeal. The  appellant  is  Company incorporated  under  the  Indian Companies  Act having its registered office at  12,  Mission Row,  Calcutta.   It  is’  engaged  in  the  generation  and distribution  of  electricity at  Jabalpur.   The  Company’s office at Jabalpur is in charge of a Resident Engineer.   By a  power of attorney given by the appellant company on  June 26, 1957, Mr. Leonard Shell Macleod, the Company’s  Resident Engineer at Jabalpur, was appointed "the company’s true  and lawful  attorney  for and in the name of the Company  to  do exercise and perform all or any of the acts, matters, 455 discretions  and things" set out in 11 clauses.  The  10  th clause  provided that "subject to the Standing  Orders  from time  to  time  given by the Company  to  appoint,  dismiss, suspend or terminate the services of any of the employees of the Company at Jabalpur." On November 12, 1957, the  respon- dent Sambhu Prasad Srivastava was served with a charge sheet under  the signature of Mr. Macleod in which it was  alleged that  he  had substituted 13 coils of V.I.R.  cable  in  the stores  of  the Company for the same quantity  of  cable  of various  makes  from the local market,  Sambhu  Srivastava’s reply to this charge was that when the shortage of 13  coils came  to his notice on the eve of the audit he  remonstrated with  his subordinates who actually handled  these  articles and  that what he did was done in the best interests of  the Company   and  that  he  never  acted  with  any   dishonest intention.   An  enquiry  was  then  held  by  the  Resident Engineer  and ultimately on January 16, 1958,  the  Resident Engineer issued a letter to him in these terms :-               "With  reference  to charge sheet  dated  12th               November,    1957,    and    the    subsequent               investigations  in  the  case  against   you,,               please  note  that the matter  has  been  very               carefully  considered, and in accordance  with               the  interview  which you had with  our  Chief               Engineer, Mr. J. W. Fawcett, on the morning of               the 15 th January, 1958, we ;hereby notify you               that  the  Company does not find  it  possible to.-retain yo ur services.               Therefore, you are hereby discharged from  the               service of the Company, with immediate effect.               Please  call  at the Company’s office  on  the               17th  instant,to receive final  settlement  of               your dues from the Company." 456 Srivastava   then   applied   to   the   Assistant    Labour

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Commissioner,  Jabalpur,  alleging that this  order  was  in contravention  of  the  provision  of  the  C.  P.  &  Berar Industrial  Tribunal  Settlement  Act and  of  the  Standing Orders  as  the  powers of the Company  under  the  Standing Orders  to  hold  the  enquiry can  be  exercised  only  the Managing  Director.   It  was also alleged  that  the  order though in from an order for discharge was really an order of dismissal  and  that cls. 14, 18 19 and 20 of  the  Standing Orders had been violated.  The Company pleaded in its reply that under the ’power of attorney the Resident Engineer  had the  power to hold an enquiry and take  disciplinary  action against  an  employee  and  the  action  by  him  should  be considered in law to amount to an action by the Company.  It was  pleaded that the provisions of the Standing Orders  had not  been violated.  The Assistant Labour Commissioner  made an  order on September 10, 1958,  ordering-reinstatement  of the  respondent  without break in his  service  but  without payment of back wages. The  State  Industrial  Court which was moved  both  by  the Company and by the employee held that the order of discharge was in substance an order of dismissal, and that  misconduct alleged  was not proved, and that in any case  the  Resident Engineer  was not empowered to hold an enquiry and to  issue an  order  of discharge.  It refused to interfere  with  the order  passed  by  the  Assistant  Labour  Commissioner  and rejected both the revisional applications. Both  parties then moved the Madhya Pradesh  High  Court-for relief  under Art. 226 of the Constitution.  The High  Court held  that  the powers. under cl.19 of the  Standing  Orders could  not  be delegated to the Resident Engineer  and  also that th 457 general  right reserved to the Company under cl. 20  of  the Standing Orders was meant to be exercised by it and was  not covered  by  the  delegation under cl. 10 of  the  power  of attorney.   The High Court seems to have thought  also  that the order made by the Resident Engineer was not Under el. 20 of the Standing Orders.  Accordingly, the High Court refused to  interfere with the order of reinstatement and  dismissed the  Company’s application under Art. 226.  It  allowed  the employee’s application under Art. 226, being of opinion that the  Assistant Labour Commissioner had no discretion in  the matter of back wages and was bound to order payment of  back wages as soon an order of reinstatement was made. Before  considering the question whether the  Company  could delegate  its power to take disciplinary action against  its employees  it  will  be proper to clear the  ground  on  the question whether the order was made under cl.19 or cl. 20 of the  Standing  Orders.   Clause 18 of  the  Standing  Orders mentions  inter  as  that theft,  fraud,  or  dishonesty  in connection  with the Company’s business or property will  be treated as misconduct.  Clause 19 provides various penalties for misconduct.  The substance of these provisions is:  that an employee who is adjudged by the Company on examination of the employee and of facts to  be  guilty  of  misconduct  is liable to be summarily   dismissed    without   notice    or compensation   in  lieu  of notice or  alternatively  to  be suspended for a period not exceeding fourteen days; that the order  of dismissal or suspension shall be in  writing  over the  signature of an officer duly authorised for  this  pur- pose, and shall also briefly mention the reason on. which it is  based,  and that no order for  dismissal  or  suspension under this Standing Order shall be made unless the  employee is informed in writing of 458

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the  misconduct  alleged against him and that  he  shall  be given  an  opportunity to produce evidence in  his  defence. Clause  20  does not deal with dismissal or  suspension  but provides that "the Company has at all times a general  right to  discharge an employee from service not only  for  proved misconduct but also when the employer has lost confidence in the  employee." Clause 21 provides for notice of censure  to be given for certain acts or omissions. An examination of these provisions shows that for an  order of dismissal under cl. 19 to be made a special procedure  is to  be  followed and when it is made the  employee  is  not entitled to any compensation.  Examining now the order  made on January 16, 1958, we find that while cl. 20 has not  been mentioned  it does not say that the employee has been  found guilty  of misconduct but merely states that  "’the  Company does  not  find  it possible  to  retain  (this  employee’s) services" and reference is made to the investigations in the case  against him and to an interview he had with the  chief Engineer,  Mr.  J. W. Fawcett, on the morning  of  the  15th January,  1958.   The only reasonable view to take  of  this order,  in  our opinion, is that this order was  being  made under  cl. 20 on the ground that the employer had lost  con- fidence in the employee and was in fact and in law an  order of  discharge  as  distinct from an order  of  dismissal  or suspension.   It  appears  to us  that  while  the  Resident Engineer who held the enquiry may, have been satisfied  that an  act of misconduct ’for which the employee was liable  to dismissal  had been proved he took a merciful view  of  has conduct in view of his previous clean record, and  proceeded accordingly  to  act  under cl. 20 of  the  Standing  Orders instead of proceeding under cl. 19. This is a case in  which the  employer  has  acted, fairly  and  even  generously  in terminating the cases of the employee under el. 20.  459 The  question  remains whether the Resident  Engineer  could take  action under cl. 20.  The employee’s  argument,  which found favour with the High Court was that it was the Company alone  which  could  take action under  clause  20  and  the Resident  Engineer in his capacity as the Resident  Engineer apart  from anything else, was not competent to take  action under  el. 20-For, cl. 20 empowers the Company and  not  the Resident  Engineer as such to discharge an employee  on  the ground that the employer had lost confidence in him, In  the present  case, however, it was not the Resident Engineer  in his capacity as the Resident Engineer that made the order of discharge.  Clearly in making the order of discharge he  was acting  on  the basis of the power of attorney  executed  in h0is favour    on June 26, 1957. Under cl. 10 of the power of attorney he had power "subject to the   Standing Orders from time to time given by    the  Company to  appoint,  dismiss, suspend   or terminate the services of any of the  employees of the Company at Jabalpur." The power of the Company  under el. 19 of the Standing Orders to dismiss or suspend and  its power under el. 20 to discharge an employee are both covered by  cl.10 of the power of attorney, If there be  nothing  in law to prevent these powers being delegated to the  Resident Engineer  there could be no escape from the conclusion  that the exercise of the power cl. 20 in the present case by  the Resident  Engineer  amounted in law to an  exercise  of  the power by the Company itself, Is there anything in law  which bars  such  delegation?  We are unable to find any.   It  is obvious.  and admitted that- when a Company has to  exercise its powers in connection with the management of its business it is not all the share-holders of the Company that have  to meet  to exercise the power.  How the Company will  regulate

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its  business is prescribed in its Articles of  Association. It is nobody’s 460 case  that  in the Articles of Association of  the  Jabalpur Electric   Supply  Co.,  there  is  anything   barring   the delegation of the disciplinary powers of the Company to  any of  its  officers.   In  law  therefore  delegation  of  the functions of the Company may properly be made having  regard to  the  exigencies.  of the business and  the  Articles  of Association.   It cannot be reasonably disputed  that  where the  Head Office of the Company is at Calcutta and the  main business  is to be carried on at Jabalpur the exigencies  of the business do require delegation of the Company’s power to take   disciplinary  action  against  its  employees  to   a responsible Official like the Resident Engineer, But whether or  not the Company might have done without such  delegation is a matter which it is unnecessary for us to enquire  into. The  delegation  was made and, neither on principle  nor  on authority  is  it possible to say that  the  delegation  was against the provisions of law. Nor  can  we see that the words ’subject  to  the  Standing Orders  from time to time given by the Company"  with  which cl.   10  of  the  power  of  attorney  opens  affects   the delegation.  On a proper interpretation of these words their only  effect  is that in exercising the  power  to  appoint, dismiss, suspend or terminate the services of the  employees at Jabalpur the delegate cannot do anything beyond what  the company  itself  can do under the Standing  Orders.   On  no reasonable construction of the words can they mean that  the delegate cannot exercise these powers at all, because  under the  Standing  Orders  the Company  itself  is  given  these powers.  Whether it is the power to take action under  cl.19 or  under  cl.20  of the Standing Orders  the  delegate  can exercise these powers under cl. 10 of the power of  attorney in the same way as if the delegate was the Company itself. 461 We therefore hold, disagreeing with the High Court, and  the Courts  below$  that  the order of  discharge  made  by  the Resident  Engineer  was  in exercise of  the  power  validly delegated  to him and that there, has been no breach of  the Standing Orders by such action, We therefore allow the appeal, set aside the order passed by the  High Court and direct that the appellant’s  application under Art. 226 of the Constitution be allowed and the  order made  by the Assistant Labour Commissioner  dated  September 10, 1958, ordering, reinstatement of the respondent,  Sambhu Prasad  Srivastava be set aside.  There will be no order  as to costs.                                       Appeal allowed.                   -------------