http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 5  

PETITIONER: MANAGEMENT UTKAL MACHINERY LTD.

       Vs.

RESPONDENT: WORKMEN, MISS SHANTI PATNAIK

DATE OF JUDGMENT: 27/10/1965

BENCH: RAMASWAMI, V. BENCH: RAMASWAMI, V. GAJENDRAGADKAR, P.B. (CJ) WANCHOO, K.N. HIDAYATULLAH, M. SATYANARAYANARAJU, P.

CITATION:  1966 AIR 1051            1966 SCR  (2) 434  CITATOR INFO :  E          1970 SC1401  (10)  R          1973 SC2634  (3,6,8)  RF         1979 SC1022  (11)

ACT: Industrial Dispute--Termination of Employee’s services-Power of  Tribunal  to enquire into-Necessity  of  enquiry  before discharge   on  ground  of  unsatisfactory  work-Amount   of compensation.

HEADNOTE: The  respondent entered into the service of  the  appellants December 9, 1961 at a monthly salary of Rs., 400.  On  April 30,  1962  she  was  given  notice  of  termination  of  her services.  She thereupon raised an industrial dispute  which was  referred  by  the Government of  Orissa  to  Industrial Tribunal,  The respondent alleged before the  Tribunal  that the termination of her services was improper, mala fide  and an act of victimisation.  The case of the appellant was that the  respondent  had  been appointed on  Probation  for  six months,  and her work having been found  unsatisfactory  she had been -discharged in terms of the contract. the  Tribunal held  that the termination of the respondent’s services  was mala fide and awarded her two Years salary, namely Rs. 9,600 as  Compensation.  In appeal to this court on behalf of  the management by special leave. HELD : (i) If the discharge of an employee hag been  ordered by  the management in bona fide exercise of its  power,  the Industrial  Tribunal will not interfere with it, but  it  is open  to  the Industrial Tribunal to  consider  whether  the order  of termination is mala fide of whether it amounts  to victimisation  of the employee or an unfair labour  practice or  is so capricious or unreasonable as could lead  to  -the inference  that it had been passed for ulterior motives  and not  in bona fide exercise of the power arising out  of  the contract.   In  such a case it is open to  the  Tribunal  to interfere  with  the order of the management and  to  afford proper relief to the employee. [437 C-E] (ii) The   respondent  could  not  be  said  to  have   been

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 5  

discharged  in  the .terms of the contract.   There  was  no Standing Order of the company with regard to punishment  for misconduct.   In  the  absence of  any  Standing  Order  the unsatisfactory  work  of  an  employee  may  be  treated  as misconduct.  When the management discharged -the  respondent for alleged unsatisfactory work it should be taken that  the discharge   was  -tantamount  to  punishment   for   alleged misconduct.   If  this  was  so,  the  management  was   not justified  in  discharging the  respondent  without  holding Proper  enquiry.  Even before the Labour court  no  evidence was  adduced by the management to show that the work of  the respondent was. unsatisfactory.  In these circumstances  the discharge  of  the  respondent was mala  fide  and  she  was entitled to compensation. [437 F-H]  (iii)  There were no special circumstances in the  case  to justify the ,award of two Years’ salary as Compensation.  It was sufficient to award :Rs. 4,800. [439- A]

JUDGMENT: CIVIL APPELLATE- JURISDICTION.:CIVIL Appeal NO. 581 of 1964. 435 Appeal by special leave from the award dated May 24, 1963 of the  Labour  Court, Orissa in Industrial Dispute  No.  5  of 1962.- I. N. Shroff for the appellant. The respondent did not appear. The Judgment of the Court -was delivered by J.   This  appeal is brought, by special leave, against  the award  of  the, Labour Court, Orissa dated May 24,  1963  in Industrial  Dispute  No. 5 of 1962 published in  the  Orissa Gazette dated June 14, 1963. The respondent-Miss Shanti Patnaik took her degree in Master of  Arts  (Political in 1961.  At that time,  Major  General Pratap  Narain  was the General Manager of  Utkal  Machinery Ltd.  (hereinafter  referred to as  the  ’Management.’).  On December  9, 1961 Major General Pratap Narain appointed  the respondent as his Secretary on a monthly salary of Rs.  400. She   thereafter transferred to the Personnel Department  of the  ’Company As’ an Assistant.  It appears that Shri A.  L. Sarin  joined as Personnel Officer on January 2, 1962.   The respondent  alleges  that on April 30, 1962  she  was  given notice   for   termination   of   her   service.    On   her representation  she  was informed on May 30, 1962  that  the decision of the management to dispense with her service  was final.   The  allegation of the respondent  is  that  taking advantage  of her subordinate official position Mr.  ’Sarin’ misbehaved  with her to which she offered  resistance.   The respondent asserted that the termination of her service  was improper  mala  fide  and  an  act  of  victimisation.   The respondent  prayed that the order of termination should  be, set aside and she should be reinstated with full arrears -of pay.   The case of the respondent was taken up by the  Utkal Machinery  Mazdoor  Sangha  and on  December  18,  1962  the Government  of Orissa referred the following    dispute  for adjudication to the Labour Court "Whether the   termination.  of services of Miss.S.  Patnaik by    the    management   of   Messrs     Utkal    Machinery Limited,Kansabahal  is legal  and justified ? If  not,  what relief she is entitled to?" The case of the management before the Labour Court was ’that Miss  Patnaik was appointed on probation for a period  of  6 months on a salary of Rs. 400 p.m. on the recommendation of 4 36

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 5  

the  then  Chief  Minister of Orissa, Shri  B.  Patnaik  who suggested  to the management that the respondent may be  put "in the staff with a start of Rs. 350 or Rs. 400 with living accommodation.   The management alleged that the service  of the  respondent was terminated during the  probation  period because of her unsatisfactory work and there was no question of  victimisation or malafide motive in the  termination  of the respondent’s service.  ’The management contended that it had absolute discretion to assess the work of the respondent during the period of probation and to terminate her services on the ground of unsatisfactory work.  The Labour Court  did not  accept the contention of the management and  held  that there  was no probationary period fixed for  the  respondent and  the termination of her services by the  management  was mala fide, illegal and unjustified and the management should pay to the respondent a sum of Rs., 9,600 as compensation in lieu of her reinstatement. The  first  question pressed on behalf of the  appellant  is that the Labour Court was wrong in rejecting the  contention of the management that the respondent was appointed to serve for  a  period of 6 months on probation upto June  9,  1962. Learned Counsel on behalf of the appellant pointed out  that there was an endorsement at the bottom of the application by the respondent dated January 9, 1962 to the effect that  she was, appointed on a salary of Rs. 400 p.m. on probation  for 6  months.  The endorsement is in the handwriting  of  Major General Pratap Narain and both he and Vogel-another  General Manager-have  signed it.  The Labour Court has examined  the evidence  on this point and found that no communication  was sent to the respondent on the; basis of the  endorsement-Ex. A-1.  The management relied on a letter-Ex.  G dated January 17, 1962 alleged to have been sent to the respondent.   This letter  states that the appointment was on probation  for  6 months  which  may  be extended at  the  discretion  of  the management  and "during probationary period the services  of the  respondent  may be terminated without  any  notice  and with,  out the management being bound to assign any  reasons therefor.’ The respondent, however, denied that she received any  such letter from the management.  The Labour Court  has accepted her case and has reached the conclusion that  there is  no  proof  that  the  respondent  was  employed  by  the management on probation for a period of 6 months with effect from December 9, 1961.  We are unable to accept the argument on  behalf of the appellant that the finding of  the  Labour Court  on this point is not supported by proper evidence  or that the finding is vitiated by any error of law.  437 We  shall, however, assume in favour of the  appellant  that the  respondent  was  appointed  on  December  9,  1961   on probation for a period of 6 months and it was stipulated  in the  contract  that  during  the  probationary  period   the services  of  the  respondent could  be  terminated  without notice  and without assigning any reason.  In  other  words, the  management had the contractual right to  terminate  the services  of  the respondent without  assigning  any  reason therefor.   But  if  the  validity  of  the  termination  is challenged  in  an  industrial  adjudication,  it  would  be competent to the Industrial Tribunal to enquire whether  the order  of  termination has been effected in  the  bona  fide exercise  of  its power conferred by the contract.   If  the discharge   of  the  employee,  has  been  ordered  by   the management   in  bona  fide  exercise  of  its  power,   the Industrial  Tribunal will not interfere with it, but  it  is open  to  the Industrial Tribunal to  consider  whether  the order  of termination is mala fide or whether it amounts  to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 5  

victimisation  of the employee or an unfair labour  practice or  is  so capricious or unreasonable as would lead  to  the inference  that it has been passed for ulterior motives  and not  in bona fide exercise of the power arising out  of  the contract.   ’In  such a case it is open  to  the  Industrial Tribunal  to interfere with the order of the management  and to afford proper relief to the employee.  This view is borne out  by the decision of this Court in Assam Oil Co. Ltd.  v. Its workmen(1). The  argument was stressed on behalf of the  appellant  that there was no dismissal of the, respondent for misconduct but she  was  only discharged in terms of the contract  and  the order  of  the management cannot be treated as an  order  of dismissal  of  the respondent for  misconduct.   The  Labour Court  has examined the evidence on this aspect of the  case and has reached the finding that the order of the management discharging the respondent dated April 30, 1962 was punitive in character and it should be taken as a punishment for  the alleged misconduct of the respondent.  The Labour Court  has referred  to  the fact that there is no  Standing  Order  of Utkal   Machinery  Ltd.  with  regard  to   punishment   for misconduct.   In  the  absence of  any  Standing  Order  the unsatisfactory  work  of  an  employee  may  be  treated  as misconduct and when the respondent was discharged  according to the management for unsatisfactory work it should be taken that  her  discharge  was tantamount to  punishment  for  an alleged  misconduct.  if  this  conclusion  is  correct  the management  was not justified in discharging the  respondent from service without holding a proper enquiry.  Even  before the Labour Court there was no evidence (1)  [1960] 3 S.C.R. 457. 438 adduced on behalf of the management to show that the work of the  respondent  was  unsatisfactory.   Two  witnesses  were examined  on behalf of the management but neither uttered  a word  about it. Neither the Deputy General Manager  nor  the Joint  General  Manager  was  examined  in  support  of  the allegation.  There was -also no document produced on  behalf of  the management to illustrate the unsatisfactory work  of the respondent In her statement before the Labour Court  the respondent said that she was not told in writing till  April 30, 1962 that her work was not satisfactory.  Mr. Sarin  was her   superior   officer  but  he   never   expressed   any. disapprobation of her work or told her that her work was not satisfactory.  The Labour Court accordingly found that there Was  no proof of the alleged misconduct on the part  of  the respondent  and there was no justification  for  terminating her services and in face of complete absence of evidence  in regard   to  unsatisfactory  work  of  the  respondent   the discharge of the respondent from service was mala fide.   We hold that the view taken by the Labour Court is correct. It  was next submitted on behalf of the appellant  that  the amount of compensation awarded to the respondent was exorbi- tant.  It was pointed out-that the respondent had worked for an  actual  period of less than 5 months but  she  had  been awarded  compensation of two years’ salary.  We think  there is  some  substance in this criticism The Labour  Court  has relied upon the decision of this Court in Assam Oil Co, Ltd. v.  Its  workmen(1)  the material facts of  that  case  were different from those in the present case.  In that case  the aggrieved employee, Miss Scott was in the employment of  the Assam   Oil  Co.  Ltd.  for  about  two  years  before   the termination  of  her services.  It also  appears  that  Miss Scott was in the service of Burmah-Shell as a lady Secretary before  she entered the service of Assam Oil Co. in  October

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 5  

1954.  "It  is also important to notice that the  amount  of compensation in that case, Was fixed on a concession of  the Solicitor-General  who appeared on behalf of the  Assam  Oil CO.  In the present Case, the respondent did not give up any previous  job in order to take service under the  appellant. She  had  worked  for a period of about 5  months  with  the appellant.  Her appointment with the appellant was  somewhat unusual because it was made on the recommendation of Sri  B. Patnaik, the.. then Chief Minister of Orissa.  There are  no special  circumstances  for ’awarding  compensation  to  two years’ salary.  Having regard to these considerations we are of opinion that the amount of compensation awarded by (1)  [1960] 3 S.C.R. 457.  439 the.  Labour Court to the respondent should be reduced  and. the  respondent  should  be granted a sum of  Rs.  4,800  as compensation.  She should also be paid 6% interest from  the date of order of the Labour Court till the date of payment. We  -accordingly modify the award of the Labour Court  dated May  24,  1963 and allow the appeal to this  extent.   There will be no order as- to costs. Appeal allowed in part. 440