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PETITIONER: SYED AZAM HUSSAINI

       Vs.

RESPONDENT: THE ANDHRA BANK LTD.

DATE OF JUDGMENT31/01/1995

BENCH: AGRAWAL, S.C. (J) BENCH: AGRAWAL, S.C. (J) MANOHAR SUJATA V. (J)

CITATION:  1995 AIR 1352            1995 SCC  Supl.  (1) 557  JT 1995 (2)    37        1995 SCALE  (1)380

ACT:

HEADNOTE:

JUDGMENT: 1. This appeal, by special leave, arises 39 out of proceedings initiated by the appellant under  Section 41 of the Andhra Pradesh Shops and Commercial Establishments Act, 1966, hereinafter referred to as ’the Act’. 2. The appellant was appointed in the clerical grade of  the respondent-bank  by  order dated March 21,  1970.  The  said appointment  was  on probation for a period  of  six  months which  could  be  extended by  teh  respondent-bank  at  its discretion. In the letter of appointment  it was stated that during  the probation period, the appellant’s services  were liable  to  be  terminated  without   assigning  any  reason whatsoever   by  one  month’s notice or  on  payment   of  a month’s pay and allowances in lieu  of notice.  In pursuance of the said letter of appointment the appellant joined  duty on  April  6, 1970.  The period of probation  which  was  to expire on October 6, 1970 was extended for a further  period of  three  months.   Before  the  expiry  of  the   extended probation  period the services of the appellant were  termi- nated by order dated January 2, 1971 which reads as under-.               "This  is  to inform Mr. Syed  Azam  Hussaini,               Probationer  in Clerical grade at  Khairatabad               (Hyderabad  branch)  that  his  services   are               hereby  terminated with effect from the  close               of business hours today.               He  will  be  paid  one  month’s  salary   and               allowances in lieu of notice." 3.   In pursuance of the said order an amount equivalent  to one month’s salary and allowances of the appellant was cred- ited  to  his Savings Account with the  respondent  bank  on January 5, 1971. 4.   Feeling  aggrieved  by  the  said  termination  of  his service  the appellant filed an appeal under Section  41  of the  Act  before the Authority, hereinafter referred  to  as ’the  Authority’.   Before  the Authority the  case  of  the

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appellant was that no defect in his work was pointed out  to him  nor did he receive any memo and that his services  were terminated  with  a  view to victimise him  because  he  had joined  the  Union  on  December  2,  1970.  respondent-bank contested  the said appeal and pleaded that the Act  had  no application  and that the conditions of the service of  bank employees  are  governed by the Sastry Award and  the  Desai Award  and further that it was not necessary to  notify  the defects  of the employee during probation was indicative  of the  fact that the employee’s work during the probation  was not  satisfactory.   The respondent-bank did  not,  however, adduce any evidence to justify that the said termination was for  a  reasonable  cause.  The Authority,  by  order  dated November  29, 1971, held that the order of  termination  was illegal  as  it was against the provisions of  the  Act  and directed reinstatement of the appellant with full back wages and  all antecedent benefits.  The Authority found that  the appellant was governed by the provisions of the Act and that the  right of the respondent-bank to terminate the  services of  the appellant was subject to Section 40 of the  Act  and that  in the present case respondent-bank has not shown  any reasonable  cause  for termination of the  services  of  the appellant and that one month’s salary in lieu of notice  was not paid with the order of termination. 5.   The  respondent-bank filed an appeal against  the  said order  of  the Authority which was dismissed by  the  Labour Court at Hyderabad, by judgment dated 40 October  30,  1972.   The Labour Court  also  held  that  no reasons  had  been assigned by the  respondent-bank  in  the order  terminating  the services of the  appellant  and  the omission on the part of the appellant to exercise the option in favour of the statutory benefits would not deprive him of the  statutory protection given under the Act.   Relying  on the decisions of this Court in The Management of the Express Newspapers  (Pvt.) Ltd., Madurai v. The Presiding  Officers, Labour  Court, Madurai & Anr., AIR 1964 SC 806,  the  Labour Court  held that the services of the appellant could not  be terminated  before  the expiry of the period  of  probation. The Labour Court further held that under the Act an employer can  terminate  the  services  of an  employee  only  for  a reasonable  cause and that reasonable cause was  wanting  in this  case.   The  Labour Court also  held  that  under  the provisions  of  Section 40 of the Act the  services  of  the employee  cannot  be terminated without  giving  either  one month’s  notice or paying wages in lieu thereof and  placing reliance  on the decision of this Court in National  Iron  & Steel  Co. Ltd. & Ors. v. The State of West Bengal  &  Anr., 1967  (2)  SCR  391,  the Labour  Court  held  that  it  was incumbent on the employer to pay to the workman the wages in lieu  of notice at the time when he was asked to go  and  he could not be asked to collect his dues afterwards. 6.   The  respondent-bank filed a writ petition (No. 705  of 1973)  in the Andhra Pradesh High Court which was  dismissed by  a  learned Single Judge by judgment dated  February  29, 1975,  on the view that Section 40 of the  Act  contemplates that  the  payment of wages in lieu of  one  month’s  notice shall  be simultaneous with the termination of the  services of  an employee.  In this context it was observed  that  the provision in Section 40 of the Act was more akin to  Section 25-F of the Industrial disputes Act and that the principle 1 down in National Iron & Steel Co.  Lid..& Ors. v. The  State of West Bengal & Anr. [supra] would apply to construction of Section 40 of the Act.  The learned Single Judge also placed reliance   on   the  decision  of  this  Court   in   Senior

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Superintendent,  R.M.S.  Cochin  & Anr. v.  K.  V  Gopinath, Sorter,  1972  (3) SCR 530, wherein rule 5  of  the  Central Civil Services (Temporary Service) Rules, 1965 was construed and  it  was held that to be effective  the  termination  of service  has  to be, simultaneous with the  payment  of  one month’s  pay  in lieu of notice.  The learned  Single  Judge distinguished  the  decision of this Court  in  Straw  board Manufacturing Co. v. Gobind, 1962 Supp. (3) SCR 618, wherein this  Court,  in  the context of  Section  33(2)(b)  of  the Industrial  Disputes Act, has held that a notion  of  split- second  timing  should  not be imported  in  the  matter  of payment  of wages and making the application  under  Section 33(2)(b)  and it should be done at once without delay.   The learned Single Judge observed that in this case the services of the appellant were terminated with effect from January 2, 1971  while  the  salary for the period of  the  notice  was deposited  to  his  credit  on  January  5,  1971  and  that undoubtedly  there was a contravention of the provisions  of Section  40 of the Act.  The learned Single Judge also  held that paragraph 522 of the Sastry Award does not prescribe  a different  procedure than that prescribed by Section  40  of the  Act even if it was assumed that the award can  override the provisions of the statute and that paragraph 522 of  the Sastry  Award  does not contemplate the termination  of  the services of a probationer with- 41 out  one  month’s notice or without immediate payment  of  a month’s  pay and allowances.  The learned Single  Judge  did not disagree with the findings recorded by the Authority and the Labour Court that the respondent-bank had failed to show any  reasonable  cause for terminating the services  of  the appellant.   After referring the decisions of this Court  in The Management of the Express Newspapers (Pvt) Ltd., Madurai [supra]; Management of Utkal Machinery Ltd. v. Workmen, Miss Shanti  Patnaik,  1966  (2) SCR 434 and  The  Management  of Brooke  Bond  India (Pvt.) Ltd. v. Y.K Gautam, AIR  1973  SC 2634,  the  learned  single Judge observed that  so  far  as industrial  and  labour  law  is  concerned  the  principles applicable to permanent employees have always been  extended to probationers. 7.The respondent-bank filed a letters patent appeal    [Writ Appeal No. 304 of 1976]  against  the said decision  of  the learned  Single Judge which was allowed by a division  bench of  the  High Court by judgment dated July  28,  1976.   The learned Judges on the Division Bench disagreed with the view of  the  learned Single Judge on the interpretation  of  the provisions  of  Section 40 of the Act regarding  payment  of wages  in  lieu  of one month’s notice  and  held  that  the principles,  applicable for construing Section 25-F  of  the Industrial  Disputes  Act  or Rule 5 of  the  Central  Civil Services (Temporary Service) Rule, 1965 could not be applied for construing Section 40 of the Act because the language of the  said provisions differs materially from the  provisions of  Section 40 of the Act.  According to the learned  Judges the provisions of Section 40 of the Act should be  construed in  the  light of the decisions on Section 33(2)(b)  of  the Industrial Disputes Act and on that view the learned  Judges held that in the instant case the services of the  appellant were terminated on January 2, 1971 which was a Saturday  and the following day was Sunday, a closed day for the Bank, and that  on 4th January directions appear to have  been  issued for  payment of salary and on January 5 the amount that  was to  be  paid to the appellant was actually credited  in  his Savings  Bank account and that this amounted to  payment  to him  and  that  the  entire  thing  was  part  of  the  same

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transaction  and,  therefore, the question of any  time  lag between the service of the order of termination of  services and payment of wages in lieu of one month’s notice could not come  in the way of both the things being considered  to  be part of the same transaction.  The learned Judges held  that the  requirement of simultaneity was complied with  in  this case.   The  learned  Judges, therefore,  ordered  that  the termination of the services was legal since the  requirement of  Section  40 of the Act was, in fact,  satisfied.   While upholding  the order of termination, the learned Judges  did not, however, upset the finding recorded by the Authority as well as by the Labour Court holding that the  respondentbank had  failed to establish a reasonable cause for  termination of the services of the appellant. 8.   Shri R.C. Pathak, the learned counsel appearing for the appellant,  has assailed the correctness of the view of  the Division  Bench  of the High Court on  the  construction  of Section   40  of  the  Act  and  has  submitted   that   the interpretation placed on the provisions of Section 40 by the learned Single Judge is the correct interpretation and  that it was incumbent on the part of the respondent-bank to  have paid one month’s wages in lieu of one month’s 42 notice  at  the time of termination of the services  of  the appellant  on January 2, 1971 and crediting the said  amount to  his  Savings  Account on January 5, 1971  could  not  be regarded as compliance with the requirement of Section 40 of the Act.  Shri Pathak has also submitted that the  Authority as  well  as  the  Labour Court  had  both  found  that  the respondent-bank had failed to establish any reasonable cause for  terminating the services of the appellant and that  the learned  Judges  of the Division Bench of  the  High  Court, without upsetting the said finding, could not have held that the  termination of the services of the appellant was  legal and  in accordance with the provisions of Section 40 of  the Act. 9.We  find  considerable  force in the  submission  of  Shri Pathak that since the Authority as well as the Labour  Court had  recorded  a finding that the  respondent-bank  had  not produced  any material to show that there was  a  reasonable cause  for  terminating the services of  the  appellant  the learned Judges of the Division Bench of the High Court could not  have held that the said termination was  legal  without upsetting the said finding recorded by the Authority as well as  the Labour Court.  In this context, it may be  mentioned that  in  Express Newspapers’case (supra) the  employee  had been  appointed on probation for six months and  before  the expiry  of the said period his services were terminated  and this Court held               "It appears clear to us that without  anything               more  an  appointment  on  probation  for  six               months   gives  the  employer  no   right   to               terminate  the service of an  employee  before               six months hAd expired except on the ground of               misconduct  or  other  sufficient  reasons  in               which  case even the services of  a  permanent               employee  could be terminated.  At the end  of               the six months period the employer can  either               confirm him or terminate his services, because               his service is found unsatisfactory." (p. 307) 10.  In Management of Utkal Machinery Ltd. v. Workmen,  Miss Shanti  Patnaik (supra), this Court examined the  matter  on the assumption that the employee was appointed on  probation and  during  the period of probation her services  could  be terminated without serving any notice and without  assigning

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any reason and has upheld the view of the Labour Court  that "  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 alleged  mis- conduct"  and  that  the management  was  not  justified  in discharging the respondent without holding a proper enquiry. In  that  case  the Court has pointed out  that  before  the Labour Court there was no evidence adduced on behalf of  the management to show that the work of the respondent  employee was unsatisfactory. 11.  This  view was reiterated in The Management  of  Brooke Bond India (Pvt.) Ltd. v. Y.K. Gautam [supra] where the ser- vices  of  an  employee  were  terminated  during  probation period. 12.  In the present case we find that Section     40 of  the Act  entitles  a  workman  to assail  the  legality  of  the termination  of  his   services if it is  made  without  any reason able cause.  The order dated January 2, 1971 did  not contain  any reason for termi nation of the services of  the appellant.  Before the Authority the appellant assailed 43 the  legality  of  the termination of his  services  on  the ground that the said termination was without any  reasonable cause and that it was done with a view to victimise him  for having  joined the union.  The case of  the  respondent-bank before the Authority was that the services of the  appellant were terminated for the reason that he was on probation  and his  work  was not satisfactory.  This was disputed  by  the appellant who asserted that during the period of his service no  body pointed out any defect in his work and that he  did not  receive  any  memo and further that he  was  ready  and willing  to  do whatever work that was allotted to  him  and worked  to  the best of his abilities.   The  Authority  has observed that these averments made by the appellant were not denied  by the respondent-bank.  Moreover,  the  respondent- bank  did  not produce any material to show  that  the  per- formance  of  the appellant was not  satisfactory.   In  the absence   of  any  material  having  been  placed   by   the respondent-bank  to show that the work of the appellant  was not  satisfactory and that his services were terminated  for that reason, the Authority as well as the Labour Court  were justified   in  recording  a  finding  that  there  was   no reasonable  cause  for  terminating  the  services  of   the appellant.  The said finding has not been upset by the  High Court.  The learned Judge of the Division Bench of the  High Court  were, therefore, not right in upholding the  legality of the termination of the services of the appellant. 13.  There is one more hurdle in the path of the respondent- bank.   It  cannot  be  disputed  that  the  appellant   had completed  240 days of service since he had joined  duty  on April 6, 1970 and his services were terminated on January 2, 1971.   The  appellant  was a "workman"  for  the  purposeof Section  2(s) of the Industrial Disputes Act, 1947 since  he was employed in the clerical grade with the  respondent-bank which is an "industry" under Section 2(j) of the  Industrial Disputes Act, 1947.  The termination of appellants  services was,  therefore,  retrenchment under Section  2(oo)  of  the Industrial  Disputes Act, 1947 and it could be done only  in accordance with the provisions contained in Section 25-F  of the  Industrial Disputes Act, 1947. In Krishna District  Co- operative  Marketing  Society  Ltd.   Vijayawada  v.  N.  V. Pumachandra  Rao  & Ors., 1987 (4) SCC 99,  this  Court  has construed  the provisions of Chapter V-A of  the  Industrial

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Disputes Act, 1947 and Sections 40 and 41 of the Act and has held that if the employees are ’workmen’ and the  management is  an ’industry’ as defined in the Industrial Disputes  Act and   the  action  taken  by  the  management   amounts   to ’retrenchment’  then  the  rights  and  liabilities  of  the parties are governed by the provisions of Chapter VA of  the Industrial Disputes Act and the said rights and  liabilities may  be adjudicated upon and enforced in proceedings  before the authorities under sub-sections (1) and (3) of Section 41 of the Act.  In that case proceedings had been initiated  in the form of appeal filed under Section 41 of the Act  before the  Authority  and it was held that since  the  orders  for termination   of  services  of  the  employee  amounted   to retrenchment  and  had been passed  without  complying  with Section  25-F of the Industrial Disputes Act, the  order  of the  Authority setting aside the said orders of  termination could be affirmed in view of Section 25-F of the  Industrial Disputes  Act.  This Court further held that it is  open  to the  authority  under  Section 41 of the  Act  to  determine whether  Section  25-F and Section 25-G  of  the  Industrial Disputes Act                              44 were  complied  with or not and to set aside the  orders  of termination  and to grant appropriate relief if it is  bound that there was non-compliance with Sections 25-F and 25-G of the Industrial Disputes Act.  Applying the said decision  to the facts of the present case it can be said that since  the appellant  was  a  workman and  the  respondent-bank  is  an industry under the Industrial Disputes Act the action  taken by  the respondent-bank in terminating the services  of  the appellant amounts to ’retrenchment’ and since the  appellant had  worked  continuously  for  more  than  240  days   such retrenchment  could  be  done  only  in  accor  dance   with provisions  of Section 25-F of the Industrial Disputes  Act, 1947.  The said provisions were admittedly not complied with because one month’s wages in lieu of notice were not paid at the  time of such retrenchment on January 2, 1971  and  were paid  subsequently on January 5, 1971.  The  termination  of the services of  the appellant cannot, therefore, be  upheld as legal and valid. 14.In  that  view  of  the matter  we  do  not  consider  it necessary to go into the question whether Section 40 of  the Act  postulates  payment of one month’s salary  in  lieu  of notice  alongwith  the  order of  termination  and  its  non payment at that time renders the termination illegal. 15.The next question which requires consideration is whether in  the facts and circumstances of the case it would be  ap- propriate to direct reinstatement of the appellant or he may be awarded compensation in lieu of back wages and reinstate- ment.   The services of the appellant were  terminated  with effect  from  January  2, 1971.  More  than  24  years  have elapsed  since then.  In the circumstances it would not  be- conducive  to the proper functioning of the  respondent-bank to direct the reinstatement of the appellant.  Having regard to  the facts and circumstances of the case, we consider  it appropriate  that  a lump sum amount may be awarded  to  the appellant  by way of compensation for reinstatement as  well as  back wages.  Keeping in view the salary that  was  being paid  to  the appellant at the time when his  services  were terminated, we arc of the opinion that a sum of Rs. 75,000/- would be an adequate amount for such compensation. 16.  The  appeal is, therefore allowed the order  passed  by the High Court upholding the legality of the termination  of the  services of the appellant is set aside but  the  orders passed by the Authority as well as the Labour Court and  the

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learned Single Judge and modified to the extent that instead of reinstatement with back wages appellant shall be paid  an amount   of   Rs.  75,000/-  by  way  of   compensation   in satisfaction  of  all  his  claims  against  respondent-bank towards  reinstatement  and back wages.   The  said  payment shall be made within a period of one months.  The payment of this amount may be spread over during the period 1971-95 for tax purposes.  No costs. 46