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PETITIONER: ASSAM OIL COMPANY

       Vs.

RESPONDENT: ITS WORKMEN

DATE OF JUDGMENT: 04/04/1960

BENCH: GAJENDRAGADKAR, P.B. BENCH: GAJENDRAGADKAR, P.B. GUPTA, K.C. DAS

CITATION:  1960 AIR 1264            1960 SCR  (3) 457  CITATOR INFO :  R          1963 SC 411  (3)  D          1966 SC1051  (5,7)  RF         1967 SC1182  (15)  E          1970 SC1401  (10,81)  R          1971 SC2171  (6)  R          1973 SC2634  (6,8)  RF         1980 SC1896  (127)  R          1982 SC1062  (4)

ACT:        Industrial Dispute-Termination of service in accordance with        contract-If  can be questioned before  industrial  tribunal-        Termination on basis of misconduct of workman-If amounts  to        dismissal No enquiry-Reinstatement if appropriate relief.

HEADNOTE: One  S was employed by the appellant as a secretary and  one of  the terms of employment was that the appointment may  be terminated on one month’s notice on either side.  The appel- lant was thoroughly dissatisfied with the work of S and dis- approved of her conduct in joining the union.  Purporting to act  under  the  contract,  the  appellant  terminated   the services  of  S  and gave her one month’s  pay  in  lieu  of notice.   No  enquiry  was  held  by  the  appellant  before terminating the services of S. The industrial tribunal  held that the termination of services amounted to a dismissal for misconduct and since no enquiry was held it was illegal  and unjustified and it passed an order for the reinstatement  of S.  The  appellant  contended that as  the  termination  was strictly  in  accordance with the terms of the  contract  it could not be challenged before an industrial tribunal,  that even  if  no  enquiry was held the order  of  discharge  was justified   as   the  evidence  led  before   the   tribunal established  the misconduct of S and that at the highest  it was   a   case  for  awarding  compensation  and   not   for reinstatement: Held, that the discharge amounted to punishment for  alleged misconduct  and was unjustified in the absence of  a  proper enquiry.   Even where the discharge was in exercise  of  the power  under the contract it was competent for the  tribunal to  enquire whether the discharge had been effected  in  the bona  fide  exercise of that power.  If the  tribunal  found

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that  the  purported exercise of the power was in  fact  the result of the misconduct alleged then it would be  justified in  dealing with the dispute on the basis that the order  of discharge was in effect an order of dismissal. Western India Automobile Association v. Industrial Tribunal, Bombay, [1949] F.C.R. 321, followed. 458 Held, further, that in the circumstances of the present case compensation  and  not  reinstatement  was  the  appropriate relief  that should have been awarded.  The normal rule  was that  in cases of wrongful dismissal the dismissed  employee was entitled to reinstatement but there could be cases where it would not be expedient to follow the normal rule.  In the present  case the appellant’s office was a small one  and  S occupied  a position of some confidence.  The appellant  was dissatisfied  with the work of S and had lost confidence  in her.   In  such a case it would not be fair  either  to  the employer or the employee to direct reinstatement.

JUDGMENT:        CIVIL APPELLATE JURISDICTION: Civil Appeal No. 24 of 1959.        Appeal  by special leave from the Award dated September  18,        1957,  of the Industrial Tribunal, Delhi, in 1. D. No. 3  of        1957.        H.   N. Sanyal, Additional Solicitor-General of India, Vidya        Sagar and B. N. Ghosh, for the appellant.        Frank Anthony and Janardan Sharma, for the respondents.        1960.  April 4. The Judgment of the Court was delivered by        GAJENDRAGADKAR, J.-This appeal by special leave arises  from        an  industrial  dispute  between the  appellant,  Assam  Oil        Company Ltd., and the respondent, its workmen.  The  dispute        was  in  regard to the termination of services  of  Miss  P.        Scott,   one  of  the  employees  of  the  appellant.    The        respondent alleged that the said termination of Miss Scott’s        services was illegal and that was one of the points referred        to the Industrial Tribunal, New Delhi, for its adjudication.        The other point of dispute between the parties was in regard        to  the quantum and conditions of the payment of  bonus  for        the year 1955-56 to the appellant’s workmen.  The industrial        tribunal has directed the appellant to reinstate Miss  Scott        and  to  pay  her all the back wages from the  date  of  her        dismissal until the date of her reinstatement.  It has  also        ordered  that  Miss Scott should be paid bonus for  the  two        years in question as specified in the award.  The  direction        for the payment of bonus is not challenged by the appellant;        but  the  validity  of the order  asking  the  appellant  to        reinstate  Miss Scott and to pay her the whole of  the  back        wages  during the relevant period is questioned  before  us,        and so the main point which calls for        459        our  decision  is  whether the appellant  was  justified  in        terminating the services of Miss Scott, and if not,  whether        in the circumstances of this case it would be appropriate to        direct an order of reinstatement ?        The  appellant company is chiefly engaged in  searching  for        and  refining crude oil and it has a refinery at  Digboi  in        Assam.   At  New  Delhi it has a small office with  3  or  4        employees.   Miss Scott was originally in the employment  of        M/s.   Burmah-Shell,  New Delhi, as a lady  secretary.   Her        services  were  lent  to the  Delhi  representative  of  the        appellant company sometime in January, 1954.  In  September,        1954,  the appellant set up its own office at New Delhi  and        then offered Miss Scott direct employment on the same  terms

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      and  conditions  that  governed her  employment  -with  M/s.        Burmah-Shell.   Miss  Scott then resigned her  service  from        M/s.   Burmah-Shell  and joined the appellant as  a  regular        employee in October, 1954.  Her appointment was subsequently        confirmed  on  September 1, 1955, on  terms  and  conditions        which were communicated to her and which she accepted.   One        of  the  terms was that the appointment in question  may  be        terminated on one month’s notice on either side.        During the course of her employment Miss Scott did not  give        satisfaction to the appellant and on many occasions she  was        verbally  warned to improve her work and not to  repeat  her        lapses.   On  February  26,  1957,  Mr.  Gowan,  the   Delhi        representative  of  the  appellant,  warned  Miss  Scott  in        writing about her lapses and added that he did not  consider        her work satisfactory.  He told her to strive to improve her        work  and  mend  matters  failing which  he  would  have  to        consider  whether  she  was  suitable  to  continue  in  the        appellant’s employment.  On February 28, 1957, the  services        of Miss Scott were terminated by Mr. Gowan and she was  told        that  the faults pointed out to her had not  been  corrected        and that her performance during her service had not  matched        up  to  the  standard required.  Miss Scott  was  given  one        month’s  pay in lieu of notice and she accepted it.  At  the        time  when her services were terminated Miss Scott  used  to        receive the total remuneration of Rs. 535 per month.        460        On  March 13, 1957, Miss Scott made a representation to  the        Conciliation Officer, New Delhi, against the termination  of        her  services, and it is out of the proceeding.-,  taken  by        the  Conciliation  Officer on this representation  that  the        present  dispute  ultimately  came to  be  referred  to  the        industrial  tribunal  for adjudication.  The  union  of  the        appellant’s workmen which sponsored her case alleged  before        the  tribunal that the termination of Miss Scott’s  services        was   wrongful   and  illegal  and  she  was   entitled   to        reinstatement.   It was urged on her behalf that no  enquiry        was  held by the appellant before terminating  Miss  Scott’s        services and that made the impugned termination illegal  and        unjustified.  A claim for bonus for the years 1955 and  1956        was also made on her behalf.        The  appellant  resisted this claim.  It was  urged  by  the        appellant that the dispute was an individual dispute and  as        such  the  reference was incompetent.  It was  alleged  that        Miss Scott was not a workman under s. 2(s) of the Industrial        Disputes Act, 1947 (hereinafter called the Act), and so  the        tribunal  had no jurisdiction to deal with the dispute.   On        the merits the appellants case was that it had purported  to        terminate  the  services  of  Miss Scott  in  terms  of  the        contract  after  paying  her one month’s wages  in  lieu  of        notice,  and  that  the industrial  tribunal  would  not  be        justified in interfering with such an order.        The tribunal has held that Miss Scott was a workman under s.        2(s) and since the union had sponsored her cause the dispute        was  an  industrial  dispute  under  s.  2(k)  of  the  Act.        According  to the tribunal the termination of  Miss  Scott’s        services in substance amounted to dismissal for  misconduct,        and  since  no,  enquiry had been held it  was  illegal  and        unjustified.  On the merits the tribunal took the view  that        even  if Miss Scott had been guilty of some  negligence  the        punishment  of  dismissal was unduly severe.   The  tribunal        also   observed  that  in  dismissing  her  Mr.  Gowan   was        influenced by the consideration that Miss Scott had become a        member  of the union and that was substantially  responsible        for  her  dismissal.   It  is on  these  findings  that  the        tribunal has passed an order of reinstatement.

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      461        In  the  present appeal the  learned  Additional  Solicitor-        General  has raised two points before us.  He contends  that        the  appellant has terminated the services of Miss Scott  in        pursuance  of  the  terms of the contract and  an  order  of        discharge  passed strictly according to the contract  cannot        be questioned before the industrial tribunal.  Alternatively        he argues that even if the order of discharge is found to be        unjustified  because no enquiry was held the whole  evidence        relating  to the alleged misconduct of Miss Scott  has  been        led  before  the  tribunal  and in the  light  of  the  said        evidence  the  order  of  discharge  should  not  have  been        interfered  with  and  reinstatement should  not  have  been        ordered.  At the highest it may be a case for awarding  com-        pensation  and no more.  The other findings recorded by  the        tribunal  against the appellant have not been challenged  in        the present appeal.        The  wide scope of the jurisdiction of industrial  tribunals        is  now well established.  As early as 1949 it was  held  by        the Federal Court in Western India Automobile Association v.        Industrial Tribunal, Bombay (1) that the argument based upon        the  sanctity  and  the validity of  contracts  between  the        employer and the employees it overlooks the fact that when a        dispute  arises  about  the employment of a  person  at  the        instance  of a trade union or a trade union objects  to  the        employment of a certain person, the definition of industrial        dispute  would  cover both those cases.  In  each  of  those        cases,  although  the employer may be unwilling  to  do  so,        there  will  be jurisdiction in the tribunal to  direct  the        employment or non-employment of the person by the  employer.        This  is the same thing as making a contract  of  employment        when the employer is unwilling to enter into such a contract        with  a particular person ". It was also observed  that  the        industrial  tribunal " can direct in the case  of  dismissal        that  an  employer or employee shall have  the  relation  of        employment  with  the other party, although one of  them  is        unwilling to have such relation " (p. 337).  In other words,        the  jurisdiction  of  the  industrial  tribunal  to  direct        reinstatement  of a discharged or dismissed employee  is  no        longer  in doubt.  That being the nature and extent  of  the        juris-        (1)  [1949] F.C.R. 321, 336,        59        462        diction  of  the industrial tribunal it is too late  now  to        contend  that  the  contractual power  of  the  employer  to        discharge  his  employee  under the terms  of  the  contract        cannot be questioned in any case.        If  the contract gives the employer the power  to  terminate        the  services  of  his employee after a  month’s  notice  or        subject  to some other condition it would be open to him  to        take  recourse to the said term or condition  and  terminate        the services of his employee ; but when the validity of such        termination  is  challenged in  industrial  adjudication  it        would  be  competent to the industrial tribunal  to  enquire        whether the impugned discharge has been effected in the bona        fide  exercise of the power conferred by the  contract.   If        the discharge has been ordered by the employer in bona  fide        exercise  of his power then the industrial tribunal may  not        interfere  with  it;  but the words used  in  the  order  of        discharge  and  the  form which it may have  taken  are  not        conclusive  in the matter and the industrial tribunal  would        be  entitled to go behind the words and the form and  decide        whether the discharge is a discharge simpliciter or not.  If        it  appears  that  the purported exercise of  the  power  to

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      terminate  the  services  of the employee was  in  fact  the        result  of  the  misconduct alleged  against  him  then  the        tribunal  will be justified in dealing with the  dispute  on        the  basis that despite its appearance to the  contrary  the        order of discharge is in effect an order of dismissal.   The        exercise of the power in question to be valid must always be        bonafide.   If the bona fides of the said exercise of  power        are  successfully  challenged then the  industrial  tribunal        would  be entitled to interfere with the order in  question.        It  is  in this context that the  industrial  tribunal  must        consider  whether the discharge is mala fide or  whether  it        amounts to victimisation 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 conferred by the  contract.   In        some  cases the employer may disapprove of the  trade  union        activities of his employee and may purport to discharge  his        services under the terms of the contract.  In such cases, if        it appears that the real reason        463        and  motive for discharge is the trade union  activities  of        the  employee  that  would be a case  where  the  industrial        tribunal  can justly hold that the discharge is  unjustified        and  has  been made mala fide.  It may also appear  in  some        cases that though the order of discharge is couched in words        which  do  not  impute any misconduct to  the  employee,  in        substance  it is based on misconduct of which, according  to        the  employer, the employee has been guilty; and that  would        make the impugned discharge a punitive dismissal.  In such a        case  fairplay and justice require that the employee  should        be given a chance to explain the allegation weighing in  the        mind  of  the employer and that would necessitate  a  proper        enquiry.   Whether or not the termination of services  in  a        given  case is the result of the bona fide exercise  of  the        power  conferred on the employer by the contract or  whether        in substance it is a punishment for alleged misconduct would        always  depend  upon the facts and  circumstances  of  each.        case.   In this connection it is important to remember  that        just as the employer’s right to exercise his option in terms        of  the contract has to be recognised so is  the  employee’s        right to expect security of tenure to be taken into account.        These,   principles  have  been  consistently  followed   by        industrial tribunals and we think rightly (Vide:  Buckingham        and  Carnatic  Company Ltd. v. Workers of the  Company  (2).        Therefore  we  are not prepared to accede  to  the  argument        urged before us by the learned Additional  Solicitor-General        that  whenever  the  employer  purports  to  terminate   the        services of his employee by virtue of the power conferred on        him  by the terms of contract, industrial  tribunals  cannot        question its validity, propriety or legality.        In  the  present case there is no doubt that  the  order  of        discharge  passed against Miss Scott proceeds on  the  basis        that  she  was guilty of a misconduct.  As we  have  already        pointed  out Mr. Gowan communicated to her what  he  thought        were  grave  defects  in  her work  and  in  the  letter  of        discharge itself the same allegations are made against  her.        That  being  so, it must be held that the discharge  in  the        present case is        (2)  [1952) L.A.C. 490.        464        punitive.  It amounts to a punishment for alleged misconduct        and so the tribunal was right in holding that the  appellant        was not justified in discharging Miss Scott without  holding        a proper enquiry.        It,  however,  appears  that evidence has been  led  by  the

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      appellant  before the tribunal in support of its  case  that        Miss  Scott  was guilty of dereliction of  duty  on  several        occasions  which  justified her dismissal.   Mr.  Gowan  has        given  evidence  about  the quality  and  standard  of  Miss        Scott’s  work  and  he  has sworn  that  a  long  series  of        instances  of  bad  work and failure to  carry  out  orders,        insolence  and untruthfullness had come to his  notice.   On        one  occasion  the  letter  typed  from  a  draft  had  been        incorrectly  typed  and more than a complete  paragraph  had        been  omitted, and in addition Miss Scott told him that  she        had  checked  the letter.  According to Mr.  Gowan  she  was        disobedient to him and he had occasion to warn her  verbally        several  times in the past.  It is true that Mr.  Gowan  has        also stated that he knew that Miss Scott had become a member        of the union and he thought that a person who was holding  a        confidential position in his office should not have become a        member of the union.  The evidence given by Mr. Gowan on the        whole appears to be straightforward and it leads to two con-        clusions:  (1)  that Mr. Gowan was  thoroughly  dissatisfied        with the work of Miss Scott, and (2) that he did not approve        of  Miss  Scott’s conduct in joining the union.   Since  the        latter  circumstance has at least partially weighed  in  the        mind of Mr. Gowan in terminating the services of Miss  Scott        it must be held that the said termination is not  justified.        It would not be open to an employer to dismiss his  employee        solely  or  principally for the reason that he  or  she  had        joined   a  trade  union.   That  is  a  fundamental   right        guaranteed to every citizen in this country and it would  be        idle  for anybody to contend that the mere exercise  of  the        said  right  would incur dismissal from service  in  private        employment.  Therefore we are prepared to accept the finding        of  the  tribunal that the dismissal of Miss  Scott  is  not        justified.        That raises the question as to whether reinstatement can  be        ordered in the present case.  There is no doubt        465        that the normal rule is that in cases of wrongful  dismissal        the  dismissed employee is entitled to reinstatement  ;  but        there can be cases where it would not be expedient to follow        this  normal  rule  and to  direct  reinstatement.   In  the        present  case the appellant’s office is very small and  Miss        Scott  undoubtedly  occupied a position of  some  confidence        with  Mr.  Gowan. The warnings given by Mr.  Gowan  to  Miss        Scott   from   time   to  time   clearly   bring   out   his        dissatisfaction  with her work, and if Mr. Gowan  has  sworn        that he has lost confidence in Miss Scott it would be unfair        to  hold  that  the  loss of confidence  is  due  solely  or        substantially  because  Miss Scott joined the union  of  the        appellant’s workmen.  It is no doubt true that the effect of        the  employer’s  plea  that he has lost  confidence  in  the        dismissed employee cannot ordinarily be exaggerated; but  in        the  special circumstances of this case we are  inclined  to        hold that it would not be fair either to the employer or  to        the employee to direct reinstatement.        It appears that subsequent to her dismissal and in spite  of        it  Miss  Scott found employment with Parry  &  Company  and        Nestles  Products  (India)  Ltd., between May  19,  1958  to        October 31, 1958 and December 1, 1958 to November 30,  1959,        respectively.  The first of the said two companies paid  her        Rs.  500 per month except for October when she was paid  Rs.        525  and the latter company has paid her Rs. 500  per  month        except  for  November when her salary was Rs.  525  and  for        December  and  January  when she was paid Rs.  15  per  day.        Besides  she  has received from the appellant Rs.  2,700  as        subsistence  allowance  during the pendency of  the  present

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      appeal.  We are, therefore, satisfied that it would be  fair        and just to direct the appellant to pay a substantial amount        of  compensation to her.  The learned Additional  Solicitor-        General  has  agreed to pay Rs. 12,500 in  addition  to  Rs.        2,700  which  have been already paid to her  as  subsistence        allowance.  We think that in the circumstances of this  case        the  amount  of  Rs.  12,500 represents  a  fair  amount  of        compensation   on  the  payment  of  which  the   order   of        reinstatement passed by the tribunal should        466        be  set aside.  We would accordingly set aside the order  of        reinstatement  and direct that the appellant should  pay  to        Miss Scott Rs. 12,500 as compensation.  The order in respect        of  bonus has not been challenged and is  confirmed.   There        will be no order as to costs.                            Appeal partly allowed.