http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 13  

PETITIONER: STATE BANK OF INDIA

       Vs.

RESPONDENT: WORKMEN OF STATE BANK OF INDIA AND ANR.

DATE OF JUDGMENT24/08/1990

BENCH: SAWANT, P.B. BENCH: SAWANT, P.B. RAMASWAMY, K.

CITATION:  1990 AIR 2034            1990 SCR  Supl. (1)  11  1991 SCC  (1)  13        JT 1990 (3)   589  1990 SCALE  (2)428

ACT:     Industrial  Disputes  Act,  1947:  Sections  2(00)   and 25F--Bank clerk--Charged with misconduct--Issued notice  and enquiry  held-Para 521(10)(a) Shastri  Award--Discharged  on payment  of  one month’s pay in lieu  of  notice--Held  dis- charge--Punitive  in character-Not amounting  to  ’retrench- ment’.     All   India  Tribunal  (Bank  Disputes)   Award--Shastri Award-Paragraphs  521(5)(c) and 521  (10)(c)--Punitive  dis- charge      and      discharge      simpliciter--Distinction between--Predominant  object of the Award-- To  protect  em- ployees.

HEADNOTE:     The  appellant  Bank instituted a  departmental  inquiry against one of its employees, a clerk in one of its  branch- es.  The  departmental  inquiry was held for  four  acts  of misconduct  and the inquiry officer came to  the  conclusion that two of the charges were fully proved, while one  charge was  proved to a limited extent, and the fourth  charge  was not  established. On the basis of the report of the  inquiry officer,  the  competent authority decided  to  dismiss  the employee  from  service, and issued a notice  to  him  under paragraph 521(10)(a) of the Award of the All India Industri- al Tribunal popularly known as the Shastri Award,  requiring him  to show-cause as to why the said punishment should  not be  imposed on him. He was also given a hearing as  required by the said provision, and thereafter an order was passed to the  effect:  that  the established  charges  viz.  uttering indecent words, threatening the agent, and failure to do the work allotted are quite serious and would warrant dismissal, though  he may not be dismissed, in view of the  extenuating circumstances,  but  that at the same time it would  not  be desirable  to retain him in the Bank’s service, and that  as such,  "he be discharged on payment of one month’s  pay  and allowances in lieu of notice. In terms of para 521(10)(c) of the  Shastri  Award this would not  amount  to  disciplinary action."     An  industrial dispute was raised by the first  respond- ent-Uuion,  and  it was referred to the  Central  Government Labour  Court, for adjudication and by its award the  Labour

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 13  

Court upheld the order of dismissal. 12     The first respondent-Union preferred a writ petition  to the High Court and raised several contentions, but the  High Court confined its decision only to one point, viz.  whether the termination of the service was retrenchment, and whether it was made in accordance with the provisions of Section 25F of the Industrial Disputes Act, 1947; held that the termina- tion  of the service of the second respondent was  retrench- ment  within the meaning of section 2(00), and was  made  in breach  of the statutory provision contained in Section  25F in  as much as no retrenchment compensation was paid to  the employee,  and set aside, the order of termination of  serv- ice.     In  the appeal by the Bank to this Court,  the  question for  consideration was: whether the order of termination  of service  served  on the employee, amounts to  punishment  or not. Allowing the appeal, this Court,     HELD: 1. It is not possible to sustain the view taken by the High Court since it proceeds on too literal an interpre- tation  of  the  provisions  of  paragraphs  521(5)(e)   and 521(10)(c) of the Award and ignoring their context. [17B]     2.  The  termination of service of the employee  in  the instant case under paragraph 521(10)(c) of the Award is as a result of the disciplinary proceedings, and is punitive.  It is,  therefore,  not "retrenchment" within  the  meaning  of Section  2(00) of the Industrial Disputes Act, 1947.  Hence, there  was no question of complying with the  provisions  of Section 25F of the Act. The decision of the High Court  has, therefore, to be set aside. [25G-H; 26A]     3. It is clear from the context in which sub-clause  (e) of  sub-para (5) occurs that the entire expression,  namely, "have his misconduct condoned and he merely discharged"  has nothing  but penal implications, and the  measure  mentioned therein is a sequal to the disciplinary action taken for one of  the gross misconducts mentioned in sub-para (4).  It  is not possible to arrive at any other conclusion on a  reading of  the  sub-paragraph as a whole. The discharge  spoken  of there  is nothing but a punishment for a  gross  misconduct. This  is so not only because it is enumerated as one of  the punishments along with others but also because firstly there is  a provision of simple discharge elsewhere  in  paragraph 522 of the Award. and when the Award intended to provide for it,  it  has done so in sub-paras (2)(c),  (2)(d)  and  (3). [20G-H; 21A-B] 13     4. Sub-paras (9) and (10) of paragraph 521 lay down  the procedure  for  taking disciplinary action as  well  as  for awarding  punishment following such action.  Sub-paras  (9), 10(a),  10(b) would indicate that discharge under  sub-paras (2)(c), (3), (5) and (10)(c) is also a punishment, for  when the  employee is discharged under the said provisions  after the inquiry, under the provisions of sub-paras (9) and (10), there is no provision made for treating either the whole  or part  of the period of suspension during the inquiry, as  on duty. [21D & G-H]     5. In view of the fact that sub-clause (a) requires that a  hearing should be given to the employee against the  pro- posed punishment, the authority is enjoined under sub-clause (c) to take into account the gravity of the mis-conduct, the previous record of the employee and any other aggravating or extenuating circumstances that may exist and may be  brought on record "while awarding punishment by way of  disciplinary action". The sub-clause then provides for discharge with  or

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 13  

without  notice  or on payment of a month’s pay  and  allow- ances, in lieu of notice. The punishment of discharge is  to be  awarded in two circumstances. The first circumstance  is when  there are sufficiently extenuating  circumstances  but the  mis-conduct  is of a "gross" type. The  second  circum- stance is when the charge is such that the Bank does not for some  reason or other think it expedient to retain  the  em- ployee  any longer in service but the evidence  is  insuffi- cient to prove the charge. [22D-E]     6.  Read  with sub-para (5)(e), the provisions  of  sub- clause  (c)  of sub-para (10) become more clear  that  if  a mis-conduct  is  not  of a "gross" type, it  may  be  merely condoned  without  any  further action. But when  it  is  of "gross" type, the authority has no option but to condone and to  proceed to discharge the employee. The expressions  used both  in sub-para (5)(e) and sub-para 10(c) in that  respect are  identical. Similar is the action contemplated  for  the second  circumstance referred to in sub-para  10(c),  namely when the charge though unsustainable for want of evidence is such that it is considered inexpedient to retain the employ- ee in service. [23D-E]     7.  Since in the context, such a discharge is by way  of punishment,  the  relevant provisions give  a  discretionary power to the authority to convert, what would otherwise be a dismissal into a mere discharge. This is for the benefit  of the employee. It protects him from the banefull consequences of  dismissal. At the same time, it relieves the  management of the burden of retaining him in service when it has become inexpedient  to do so. Thus the provision of such  discharge works to the advantage of both. At the same time, it  cannot be gainsaid that the said 14 discharge  is  as a result of the  disciplinary  proceeding. Although  in  form it may not, and in the  peculiar  circum- stances,  it  is  intended that it should not  look  like  a disciplinary action, it cannot be denied that it flows  from and  is  a result of the disciplinary proceedings.  To  make clear,  however,  that  the action, though  spawned  by  the disciplinary proceedings should not prejudice the  employee, the last sentence viz: "Discharge in such cases shall not be deemed to amount to disciplinary action", has been added  by way of abundant precaution. [23F-H; 24A]     8. That this is not a discharge simpliciter or a  simple termination  of  service becomes clear when it  is  compared both  with the provisions of para 522(1), and with those  of sub-paras  (2)(c), (2)(d) and (3) of paragraph  521  itself. The  distinction between discharge contemplated under  para- graph 521(10)(c) and discharge simpliciter or simple  termi- nation  of  employment under the other provisions  is  clear enough. This will also show that the two belong to different categories and are not the same. While the former is intend- ed  to be punitive, the latter is not. As is  further  clear from the provisions of paragraphs 521(2)(c), (2)(d) and (3), the discharge contemplated there, as against simple termina- tion,  is in proceedings under "sub-paragraphs (9) and  (10) infra  relating  to discharge". In other words, it is  as  a result of a disciplinary proceeding. [24B; 25C-D]     9. To construe the discharge under paragraphs  521(5)(e) and 521(10)(c) as a simple discharge not flowing from disci- plinary  proceedings will deprive an employee of a  valuable advantage, viz. that of challenging the legality and propri- ety  of the disciplinary action taken against him,  whatever the  form  of the order, by showing that he was  either  not guilty of any misconduct or that the misconduct was not of a "gross" type or that the punishment meted out to him by  way

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 13  

of discharge was not warranted in the circumstances etc.  It is  not,  therefore, in the interests of  the  employees  to construe  the  provisions as the High Court  has  done.  The predominant object of the Award is to protect the  interests of the employees. [25E-F]     10. Remanding the matter to the High Court for  deciding the  other contentions raised in the writ petition,  is  not advisable for various reasons. The misconducts complained of against  the employee are of 1966. He was charge-sheeted  in January 1968 and removed from service on April 9, 1970.  The Court  proceedings have been pending for more than about  23 years.  In  the meanwhile, the respondent No. 2  who  was  a clerk on the date he was charge-sheeted, has become a lawyer and has been practicing as such. Further, the  mis-conducts, which are held 15 proved  by the Labour Court are of "gross" type  within  the meaning  of paragraph 521(4) of the Award. The Labour  Court is  the  final  fact finding forum.  The  High  Court  while setting  aside  the order of the Labour  Court  has  granted reinstatement in service and back wages and pursuant to  the said  order, the employee has already received an amount  of Rs.93,000. The effect of decision would be to set aside  not only  the order of reinstatement but also of the  back-wages which would require the employee to refund the said  amount. Even  though the employee was prepared to refund the  amount and  to contest the petition on other grounds,  at  present, the  employee is in his fifties. Taking  into  consideration all these facts the interests of justice would be served  if the  order of the High Court is set aside and the  order  of the Labour Court is restored without requiring the  employee to refund the amount he has already received. [26E-G; 27C-E]

JUDGMENT:     CIVIL  APPELLATE JURISDICTION: Civil Appeal No. 4381  of 1990.     From  the  Judgment  and Order dated  23.8.1989  of  the Bombay High Court in W.P. No. 494 of 1982.     Ashok  H. Desai, Solicitor General, Shishir  Sharma  and P.H. Parekh for the Appellant.     Vinod Bobde, S.V. Deshpande and P.S. Sadavartey for  the Respondents. The Judgment of the Court was delivered by     SAWANT, J. Special leave granted. The appeal is set down for hearing by consent of both the parties.     2. This appeal involves a question of interpretation  of paragraphs 521(5)(e) and 521(10)(c) of the Award of the  All India Industrial Tribunal (Bank Disputes) which is popularly known as the Shastri Award, (hereinafter referred to as  the Award)  and is important for the entire banking industry  in the country covered by the Award.     3. In order to appreciate the significance of the  ques- tion,  it is necessary to narrate the facts leading to  this appeal. The employee concerned was working as a clerk in the Gadchiroli  branch of the appellant State Bank of  India  at the  relevant time. A departmental inquiry was held  against him for four acts of misconduct and the 16 inquiry  officer  came  to the conclusion that  two  of  the charges  were fully proved while one charge was proved to  a limited extent and the fourth charge was not established. On the  basis of the report of the inquiry officer, the  compe- tent  authority tentatively decided to dismiss the  employee

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 13  

from service, and issued a notice to him under paragraph  52 1(10)(a)  of  the Award, to show cause as to  why  the  said punishment  should  not  be imposed on  him.  The  competent authority  also gave him a hearing as required by  the  said provision, and thereafter passed an order, the operative and relevant part of which is as follows: "Looking  at  the entire case I find  that  the  established charges, viz., uttering indecent word, threatening the Agent and  failure  to  do the work  allotted  are  quite  serious charges  and would warrant dismissal. However, the  employee has  had  the benefit of a very tenacious defence  from  the date of the issue of the show cause notice for dismissal and various arguments have been raised with a view to evade  the punishment  which would normally follow out of the  serious- ness of the offences. Taking note of them, even though I  do not  quite  find them tenable, as indicated in  my  detailed observations  thereon, and of the extenuating  circumstances (most  important of which is the comparatively young age  of the employee) I have decided not to impose the punishment of dismissal.  At  the same time I am of the  opinion  that  it would  not  be  desirable to retain Shri  Sadavarte  in  the Bank’s service and accordingly I order that he be discharged on  payment  of one month’s pay and allowances  in  lieu  of notice.  In  terms of para 521(10)(c) of the  Sastry  Award, this would not amount to disciplinary action."     4.  An  industrial  dispute  was  raised  by  the  first respondent  Union, and in due course it was referred to  the Central Govt. Labour Court, Bombay for adjudication. By  its award of March 2, 1981, the Labour Court held that the order of dismissal of the petitioner was proper. Against the  said decision,  the  respondent-Union preferred a  writ  petition before the High Court raising several contentions. The  High Court confined its decision only to one point, viz., whether the termination of the service was retrenchment, and if  so, whether  it  was made in accordance with the  provisions  of Section 25F of the Industrial Disputes Act, 1947  (hereinaf- ter referred to as the Act). The Court held that the  termi- nation  of  the services was retrenchment and  was  made  in breach of the said provisions in as much as no retrenchment 17 compensation  was paid to the employee. The  termination  of the services was, therefore, set aside.     5.  It is not possible to sustain the view taken by  the High  Court since it proceeds on too literal an  interpreta- tion  of  the  provisions of  paragraphs  521(5)(e)  and  52 1(10)(c)  of  the Award and ignoring their context.  We  may first  refer to the provisions with regard  to  retrenchment under the Act. Section 2(00) of the Act defines retrenchment as follows:           "Retrenchment"  means the termination by  the  em- ployer of the service of a workman for any reason  whatsoev- er,  otherwise  than  as a punishment inflicted  by  way  of disciplinary action, but does not include-- (a) voluntary retirement of the workman; or "Compensation in cases of retrenchment".     6. As pointed out above, paragraph 521 is in Section 111 which  contains the only other paragraph, namely,  paragraph 520.  That  paragraph is a prologue to Section  III  and  to paragraph  521,  which both deal with procedure  for  taking disciplinary action. Para 520 reads as follows:           "Under the subject of disciplinary action we  deal with  dismissal, suspension, warning or censure,  fine,  the making of adverse remarks and the stoppage of an increment." It is, therefore, clear both from the heading of Section 111 as well as from the contents of para 520 that the provisions

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 13  

of  para 521 deal with nothing but disciplinary  action  and tile procedure for taking such action.     7.  Paragraph  521  which is a  self-contained  code  of disciplinary  action  and of the procedure  for  taking  it, begins with the following statement:          "A  person  against  whom  disciplinary  action  is proposed  or  likely to be taken should, in  the  first  in- stance, be informed of the particulars of the charge against him; he should have a proper opportunity to give his  expla- nation as to such particulars. Final orders should be passed after due 18 consideration  of all the relevant facts and  circumstances. With this object in view we give the following directions: .......... It  classifies delinquencies into three categories,  namely, (i)  offences (ii) gross-misconduct and (iii)  minor-miscon- duct and prescribes procedure to deal with each of them.     Sub-paragraph  (1)  to (3) deal with the  cases  of  of- fences. Sub-para (1) defines offence to mean any act involv- ing  moral turpitude and for which an employee is liable  to conviction  and sentence under the provisions of  law.  Sub- para 2(a) states that when in the opinion of the management, the  employee has committed an offence and he is not  prose- cuted by the prosecuting agency, the bank may take steps  to prosecute him or get him prosecuted. The bank is also empow- ered  to  suspend the employee in such  circumstances.  Sub- paragraph  2(b) states that if the employee is convicted  in such  prosecution, he may either be dismissed or  "be  given any  lesser  form of punishment as mentioned in  sub-para  5 below".  However,  if he is acquitted with  or  without  the benefit  of  doubt, sub-para 2(c) lays  down  two  different procedures  to meet the two situations. It states that  even if an employee is given a clean acquittal, it is open to the management  to proceed against him under the provisions  set out  in sub-paras (9) and (10) "relating to discharges".  It may be mentioned here that the provisions with regard to the discharges  in sub-paras (9) and (10) referred to here,  are contained  only  in sub-para 10(c) and they come  into  play only when the management decides under sub-para (9) to  take a  disciplinary  action and the action is  taken  after  the procedure  for  the same as laid down in  sub-para  (10)  is followed. But with that, we may deal with a little later.     In  cases of clean acquittal and a departmental  inquiry held thereafter, the management is given yet another option. Instead  of the discharge as provided under sub-para  10(c), the  management may only terminate the services of  the  em- ployee  with  three months’ pay and allowances  in  lieu  of notice,  if  it comes to the decision not  to  continue  the employee  in service. In such cases, he shall be  deemed  to have been on duty during the entire period of suspension, if any,  and  therefore shall be entitled to the full  pay  and allowances minus the subsistence allowances he had drawn and also  to all other privileges for the period of  suspension. Such  simple  termination  of service is  not  provided  for either  in  sub-para  (5) or in sub-para (10).  Thus  it  is obvious  from  sub-paragraph 2(c) that when  a  departmental inquiry is held or 19 when disciplinary action is taken in case of a clean acquit- tal. two options are given to the management, namely. (i) to discharge  the  employee under sub-paragraph 10(c)  with  or without  notice  or  on payment of only a  month’s  pay  and allowances, in lieu of notice but without the benefit of the suspension being converted into a period of duty or (ii)  to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 13  

terminate  the  services with three months’ pay  and  allow- ances,  in lieu of notice and also with the further  benefit of  converting  the period of suspension into  a  period  of duty.  However,  when the acquittal is with the  benefit  of doubt  and the management does not proceed to discharge  the employee  under  sub-para 10(c) but wants to resort  to  the second  option  of  the termination of  service  with  three months’ pay and allowances in lieu of notice, it is left  to the  discretion of the management to pay the  employee  such portion of the pay and allowances for the period of  suspen- sion  as  the  management may deem proper,  and  unless  the management so directs, the period of suspension is not to be treated as the period spent on duty. It should, however.  be remembered that the course of action open to the  management under sub-paragraph 2(c) is in the alternative to and not in negation  of the other modes of punishment, namely, to  dis- miss etc. the employee. What is, however, necessary to  note is the distinction between an action of discharge  following the  disciplinary proceedings under sub-paras (9)  and  (10) and  that  of simple termination of service  under  sub-para 2(c).  The same distinction is also maintained  in  sub-para 2(d).     Sub-para  (3) throws yet more light on the  subject.  It states that where an employee is guilty of an offence but he is  not put on trial within a year of the commission of  the offence,  the  management  may deal with him as  if  he  had committed  an act of "gross misconduct", or  "minor  miscon- duct"  as  the case may be. The employee may not be  put  on trial within an year, either because the prosecuting author- ity refuses to do so, or because it comes to the  conclusion that  there is no case for prosecution. Hence  although  the management  is  empowered to proceed  against  the  employee under  the  provisions  set out in sub-paras  (9)  and  (lO) relating  to  discharge, he has to be given the  benefit  of being   treated  on  duty  for  the  period  he  was   under suspension,  if any, and he is entitled to all  the  further benefits  accruing  on  that account.  In  the  departmental inquiry  following such non-prosecution, the management  may also  come to the decision not to continue the  employee  in service.  In  that case instead of proceeding  against  him. under the provisions relating to discharge in sub-paras  (9) and  (10),  the  management is empowered  to  terminate  his services  with three months’ pay and allowances in  lieu  of notice as provided in sub-para 20 (2).  Thus sub-paragraph (3) like sub-para (2) also makes  a distinction  between discharge under  sub-paragraph  (10)(c) and a mere termination of service with three months’ pay and allowances, in lieu of notice. It is the latter action which amounts  to  the  simple discharge and for  it,  a  separate provision  is made in paragraph 522 in Section IV.  We  will refer to that provision at a later stage. What is necessary, to  bear in mind at this stage is the distinction  made  be- tween  the  discharge under sub-paragraph  (10)  and  simple termination of service in sub-paras 2(c), 2(d) and (3).     8. Sub-para (4) of paragraph 52 1 defines "gross miscon- duct"  and  sub-para (5) prescribes  punishment  for  "gross misconduct".  Sub-para  (6) defines "Minor  misconduct"  and sub-para  (7)  prescribes punishment  for  such  misconduct. Sub-para  (8) then states the manner in which the record  is to be kept when action is taken under sub-paras (3), (5)  or (7) which deal with the punishment for "gross misconduct" or "minor misconduct" as the case may be.     Sub-para  (5) as stated above, follows on the  heels  of the  enumeration of gross misconducts in sub-para  (4),  and

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 13  

reads as follows: "(5) An employee found guilty of gross misconduct may: (a) be dismissed without notice, or (b) be warned or censured, or have an adverse remark entered against him, or (c) be fined, or (d) have his increment stopped, or (e) have his misconduct condoned and be merely discharged". It should be clear from the context in which sub-clause  (e) of  subparagraph  (5)  occurs that  the  entire  expression, namely,  "have  his misconduct condoned and be  merely  dis- charged" has nothing but penal implications, and the measure mentioned  therein  is a sequel to the  disciplinary  action taken for one of the gross misconducts mentioned in sub-para (4). It is not possible to arrive at any other conclusion on a  reading  of the sub-paragraph as a whole.  The  discharge spoken  of  there is nothing-but a punishment  for  a  gross miscon- 21 duct. This is so not only because it is enumerated as one of the  punishments along with others but also because  firstly there is a provision of simple discharge elsewhere in  para- graph  522  of the Award, as pointed earlier, and  when  the Award  intended  to provide for it, it has done so  in  sub- paras (2)(c), (2)(d) and (3). If it was intended to  provide for a discharge simpliciter there, which was not meant to be penal,  there  was no need to enumerate it in  sub-para  (5) which  specifically  enumerates  punishments  for  acts   of gross-misconduct. Secondly, nothing prevented the authors of the  Award  in stating in the said sub-clause (e)  that  the discharge simpliciter was in terms of paragraph 522. We have pointed  out  earlier the distinction made by the  Award  in sub-paragraphs (2)(c), (2)(d) and (3) between the  discharge following  proceedings  under  paras (9) and  (10)  and  the simple  termination of service or discharge  simpliciter  as contemplated by paragraph 522.     9.  Sub-paragraphs  (9) and (10) of paragraphs  521  lay down the procedure for taking disciplinary action as well as for awarding punishment following such action. Sub-para  (9) says  that when it is decided to take a disciplinary  action against an employee, such decision shall be communicated  to him  within three days thereof. Sub-Para (10)(a)  then  lays down  the  procedure  to be followed  while  conducting  the disciplinary  proceedings. It also enjoins upon the  manage- ment  to  give  the employee a hearing with  regard  to  the nature of the proposed punishment. The latter provision  has also bearing on the construction of sub-clause (c)  thereof. We will advert to it instantly.     Sub-clause  (b)  of  sub-para (10) gives  power  to  the management  to  suspend the employee  pending  inquiry.  Its other  provisions  also throw light on the  construction  of sub-clause (c) thereof. These provisions state that although the  employee  is suspended during the inquiry,  if  on  the conclusion  of the inquiry it is decided to take  no  action whatsoever  against him, he shall be deemed to have been  on duty  throughout the period of suspension and would  accord- ingly, be entitled to the full wages and allowances and  all other privileges for the said period. On the other hand  "if some  punishment other than dismissal" is inflicted,  it  is left to the discretion of the management to treat either the whole or a part of the period of suspension as on duty  with the right to corresponding portion of the wages, allowances, etc.  These provisions would indicate that  discharge  under sub-paras (2)(c), (3), (5) and (10)(c) is also a punishment, for  when the employee is discharged under the  said  provi-

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 13  

sions  after inquiry, under the provisions of sub-paras  (9) and (10), there is no provision made for treating either the whole  or  part of the period of suspension during  the  in- quiry, as on duty. 22     Then  follows the provision of sub-clause (c)  which  is crucial  for our purpose. The said sub-clause reads as  fol- lows:          "In  awarding  punishment by  way  of  disciplinary action  the authority concerned shall take into account  the gravity  of the misconduct, the previous record, if any,  of the  employee and any other aggravating or extenuating  cir- cumstances  that may exist. Where  sufficiently  extenuating circumstances  exist the misconduct may be condoned  and  in case such misconduct is of the "gross" type he may be merely discharged,  with  or  without notice or  on  payment  of  a month’s  pay  and allowances, in lieu of notice.  Such  dis- charge  may also be given where the evidence is found to  be insufficient  to sustain the charge and where the bank  does not, for some reason or other, think it expedient to  retain the employee in question any longer in service. Discharge in such  cases  shall not be deemed to amount  to  disciplinary action."     In view of the fact that sub clause (a) requires that  a hearing should be given to the employee against the proposed punishment,  the authority is enjoined under sub-clause  (c) to  take  into account the gravity of the  mis-conduct,  the previous record of the employee and any other aggravating or extenuating circumstances that may exist and may be  brought on record "while awarding punishment by way of  disciplinary action". The sub-clause then provides for discharge with  or without  notice  or on payment of a month’s pay  and  allow- ances, in lieu of notice. The punishment of discharge is  to be  awarded in two circumstances. The first circumstance  is when  there are sufficiently extenuating  circumstances  but the  misconduct is of a "gross" type. In other words,  where the misconduct is not of a "gross" type and there are exten- uating circumstances, the misconduct may merely be  condoned without  the authority proceeding to inflict the  punishment of  discharge. That is made clear by stating  thus--"and  in case  such misconduct is of the gross type he may be  merely discharged"  etc. The second circumstance in which  the  au- thority is given power to inflict such discharge is when the charge  is  such that the Bank does not for some  reason  or other  think it expedient to retain the employee any  longer in  service  but the evidence is insufficient to  prove  the charge. Read in the context, therefore, the discharge  given under  sub-clause (c) can hardly be doubted as being a  pun- ishment. However, as was sought to be contended on behalf of the respondent-Union and certainly with some force, the last sentence of the said clause is couched in 23 a language which is calculated to create considerable  doubt and  confusion with regard to the true nature of the  action of discharge spoken of there. The said sentence states in so many  words that the discharge effected under both the  cir- cumstances shall not be "deemed" to amount to  "disciplinary action".  Read in isolation, the said sentence does  purport to  convey that the discharge is not by way of a  punishment and on that score we may not find any fault with the reason- ing of the High Court. But as stated at the very outset,  we have to read this sentence also in its proper context and in the light of the other provisions of the Award.     As pointed out earlier, one of the two circumstances  in which  such discharge is to be effected is when the  miscon-

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 13  

duct is of a "gross" type and even if there are  extenuating circumstances.  It is to provide a punishment precisely  for misconducts  of  gross type that a provision for  such  dis- charge is made in sub-clause (e) of sub-para (5) to which we have  already made a reference. Read with the said  sub-para (5)(e), the provision of the present sub-clause (c) of  sub- para  (10) becomes more clear. If a misconduct is not  of  a "gross" type, it may be merely condoned without any  further action. But when it is of "gross" type, the authority has no option  but to condone and to proceed to discharge  the  em- ployee.  The  expressions  used both in  sub-para  5(e)  and sub-para 10(c) in that respect are identical. Similar is the action contemplated for the second circumstances referred to in sub-para 10(c), namely, when the charge though unsustain- able  for  want of evidence is such that  it  is  considered inexpedient to retain the employee in service.     10. If our reading of the provisions is correct, then it needs  no elaborate explanation as to why the punishment  of discharge both in sub-para 5(e) and 10(c) has been worded as it  is and why further it became necessary to add  the  last sentence  to  sub-para 10(c). Since in the context,  such  a discharge  is by way of punishment, the relevant  provisions give a discretionary power to the authority to convert, what would  otherwise be a dismissal into a mere discharge.  This is for the benefit of the employee. It protects him from the baneful  consequences  of dismissal. At the  same  time,  it relieves  the management of the burden of retaining  him  in service  when it has become inexpedient to do so.  Thus  the provision of such discharge works to the advantage of  both. At  the same time, it cannot be gainsaid that the said  dis- charge  is as a result of the disciplinary  proceeding.  Al- though in form it may not, and for the reasons stated  above in the peculiar circumstances, it is intended that it should not  look  like a disciplinary action, it cannot  be  denied that  it  flows  from and is a result  of  the  disciplinary proceed- 24 ings.  To  make  clear. however,  that  the  action,  though spawned by the disciplinary proceedings should not prejudice the  employee, the last sentence in question has been  added by way of an abundant precaution.     11. That this is not a discharge simpliciter or a simple termination  of  service becomes clear when it  is  compared both with the provisions of paragraph 522(1), and with those of sub-paras (2)(c), (2)(d) and (3) of paragraph 521 itself. Paragraph  522  as stated earlier is in section  IV  and  is entitled  "procedure for termination of employment" as  dis- tinct from the title of section III, namely, "procedure  for taking  disciplinary action" in which paragraph 521  occurs. Paragraph  522 begins by saying "We now proceed to the  sub- ject  of  termination of employment. We give  the  following directions:   ..........  "Thereafter in  sub-paragraph  (1) thereof,  it speaks of a simple termination of service of  a permanent employee and in sub-paragraph (4), talks of  simi- lar discharge simpliciter of employees other than  permanent employees.  But what is important to note is that  the  dis- charge simpliciter or simple termination of service which is provided for here, has two distinguishing features. Firstly, it  is effected in cases not involving  disciplinary  action for mis-conduct and secondly, it is to be effected by giving three months’ notice or of payment of three months’ pay  and allowances  in  lieu  of notice, in the  case  of  permanent employees and by giving one month’s notice or on payment  of one month’s pay and allowances, in lieu of notice in case of probationers. There is some apparent conflict in the  provi-

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 13  

sions  of sub-clause (1) and sub-clause (4) with  regard  to the  period  of notice in case of an employee other  than  a permanent  employee.  It  is, however,  immaterial  for  our purpose. There are yet other conditions imposed by  sub-para (6) of paragraph 522 when the termination of the service  of the  employees  is  on account of the closing  down  of  the establishment or when retrenchment of more than 5  employees is to be effected. But those conditions again do not  oblit- erate  the  distinction  between  discharge  simpliciter  or simple  termination of service other than as a result  of  a disciplinary  proceeding, and discharge effected under  sub- paras  5(e)  and 10(c) as a result of such  proceedings.  As stated  earlier,  the termination of employment  other  than discharge  provided  for in sub-paras 2(c), 2(d)  and  3  of paragraph  521  also requires three months’ pay  and  allow- ances,  in lieu of notice as do the provisions of  paragraph 522(1). But unlike the provisions of paragraph 522(1)  which require three months’ notice or payment of three months’ pay and  allowances only in case of permanent employees and  one month’s notice or one month’s pay and allowances, in lieu of notice in case of employees other than per- 25 manent  employees,  the relevant  provisions  of  paragraphs 521(2)(c)  and 521(3) require, a notice of three months’  or pay  and allowances for three months’ in lieu of notice,  in respect of all employees. Further, what is equally important to  note is that whereas para 522(1) and 521(2)(c)  and  (3) relating  to  simple  termination of  service,  require  the requisite notice to be given or the payment of salary allow- ances in lieu thereof. the provisions of discharge contained in  the sub-paras (2)(c) and (3) and (10)(c) of para 521  do not  in all cases require notice or pay and  allowances,  in lieu of notice. The discharge may also be affected under the said provisions without any notice or pay and allowances  in lieu  of  it.  Thus the distinction  between  the  discharge contemplated  under paragraph 521(10)(c) and discharge  sim- pliciter or simple termination of employment under the other provisions is clear enough. This will also show that the two belong  to different categories and are not the same.  While the former is intended to be punitive. the latter is not. As is   further  clear  from  the  provisions   of   paragraphs 521(2)(c). (2)(d) and (3). the discharge contemplated there. as  against  simple  termination. is  in  proceedings  under "sub-paragraphs  (9) and (10) infra relating to  discharge". In other words. it is as a result of a disciplinary proceed- ing.     12.  Apart  from it, we find that to construe  the  dis- charge under 521(5)(e) and 521(10)(c) as a simple  discharge not  flowing from disciplinary proceedings will  deprive  an employee of a valuable advantage. viz.. that of  challenging the legality and propriety of the disciplinary action  taken against him. whatever the form of the order, by showing that he  was  either  not guilty of any misconduct  or  that  the misconduct was not of a "gross" type or that the  punishment meted  out to him by way of discharge was not  warranted  in the  circumstances etc. It is not. therefore. in the  inter- ests of the employees to construe the provisions as the High Court  has done. The predominant object of the Award  is  to protect the interests of the employees.     It is for all these reasons that we are unable to accept the  very able arguments advanced by Mr. Bobde on behalf  of the  respondent Union to support the reasoning of  the  High Court.     13.  The result to our aforesaid discussion is that  the termination  of service of the employee in the present  case

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 13  

under  paragraph 521(10)(c) of the Award is as a  result  of the disciplinary proceedings and is punitive. It is,  there- fore. not "retrenchment" within the meaning of Section 2(00) of  the Act. Hence, there was no question of complying  with the provisions of Section 25F of the Act. The decision 26 of the High Court has. therefore to be set aside.     14.  In view of the interpretation placed by us  on  the provisions of paragraph 521(5)(e) and 521(10)(c), there is a queer  situation in which both the appellant--Bank  and  the respondent--Union  would find themselves. The Bank has  been supporting  the interpretation which we have placed and  the respondent-Union has been opposing it. but both not  looking beyond  their  immediate interest involved  in  the  present case, which is qua an individual employee. We are happy that the  Bank  has canvassed the view that it has done  in  this case.  For that view is calculated to benefit the  employees at large and in the long run though, it may be to its advan- tage  and to the disadvantage of the individual employee  in this  case. The respondent-Union, however, by  pressing  the proposition to the contrary, was supporting a view which was not in the interests of the employee at all. Though,  there- fore, it may be a loser in the present case, it should thank itself that the interpretation is not in accordance with the submissions made on its behalf.     15. This leaves us with the question of the relief to be granted  in the present case. Shri Bobde. submitted that  if we  are not to accept the interpretation placed by the  High Court  on the provisions in question, we should  remand  the matter to the High Court for deciding the other  contentions raised  in the writ petition, since the court had  not  gone into the same and had allowed the petition only on the basis of  its interpretation of the said provisions. We find  that this course is not advisable in the present case for various reasons. The mis-conducts complained of against the employee are  of 1966. He was chargesheeted in January 1968  and  re- moved  from service on April 9, 1970. The  Court-proceedings have been pending since then till today, i.e., for more than about  23 years now. In the meanwhile, we are informed  that the  appellant  who was a clerk on the date he  was  charge- sheeted,  has  become a lawyer and has  been  practicing  as such. We, further, find that the mis-conducts which are held proved  by the Labour Court are of "gross" type  within  the meaning  of paragraph 521(4) of the Award. The Labour  Court is  the  final fact-finding forum.  Further.  while  setting aside  the  order of the Labour Court, the  High  Court  has granted re-instatement in service and back wages as follows: (i)  50 per cent of the back wages from 9.4.70 to  24.11.75, (which is the date of the reference for adjudication to  the Labour  Court) on the ground that the damages for the  delay in making should be shared by both the parties equally,  and (ii) full back wages 27 from  25.11.75  till 31.5.79 on the ground that  though  the employee  started his practice as a lawyer in June 1978,  he was  not  well-settled in practice for the first  year,  and (iii) no back wages for the period from 1.6.79 till the date of his re-instatement which is the date of the High  Court’s judgment. i.e., August 23, 1989.     Shri Desai. the learned Solicitor General appearing  for the  Bank  wanted  to produce before us a  letter  from  the Maharashtra State Electricity Board to show that in fact the employee  was in gainful employment with the said Board  for about six years. Although we have not taken the said  letter on  record, there is no denial of such employment  from  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 13  

side of the employee. We are further informed that  pursuant to  the  order of the High Court, the employee  has  already received an amount of Rs.93,000. The effect of our  decision would  be to set aside not only the order of  re-instatement but also of the back wages which would require the  employee to  refund  the said amount of Rs.93,000.  Of  course,  Shri Bobde  stated that the employee was prepared to  refund  the said amount and to contest the petition on other grounds. At present. the employee is in his fifties. Taking into consid- eration  all  the facts, we are of the view  that  it  would serve the interests of justice if we set aside the order  of the High Court and restore that of the Labour Court  without requiring  the  employee to refund the amount which  he  has already received.     16. The appeal is allowed. accordingly. There will be no order as to costs. N. V. K.                                   Appeal allowed. 28