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CASE NO.: Appeal (civil)  8304-8305 of 2002

PETITIONER: Bharat Heavy Electricals Ltd.                                         

RESPONDENT: M. Chandrasekhar Reddy & Ors.                                     

DATE OF JUDGMENT: 25/01/2005

BENCH: N. Santosh Hegde & S.B. Sinha  

JUDGMENT: J U D G M E N T

SANTOSH HEGDE, J.

These appeals are preferred against the common judgment of the  High Court of Judicature Andhra Pradesh at Hyderabad made in Writ  Appeal  Nos.  1864 of 2001 and 1901 of 2001 whereby the High Court  dismissed the appeals filed by the appellant herein confirming  the  order of the learned Single Judge dated 21-11-2001 made in W.P. Nos.  29150 of 1997 and 10461 of 2000.

Facts necessary for the disposal of these are as follows :-

The respondent herein was an employee working as Assistant  Grade-I in the Stores Department  of the appellants, R & D Division at  Hyderabad. He borrowed house building advance by depositing   title  deeds of his properties  as securities, creating an equitable  mortgage in  favour of the appellant. As per the terms of the said title deeds of the  property belonging to the respondent was to be in custody of the  appellant till the entire  amount of the loan  with interest  was  discharged. While the mortgage was still subsisting  and an amount of  Rs. 1,34,951/- was due from the respondent, the appellant’s officers  came to know that certain public notices were published in the local  Newspaper  calling upon the intending purchasers  to make their offers   for the purchase of the property belonging to the respondent which was  mortgaged  to the appellant by deposit of title deeds. On the appellants  coming to know of the same, its  officers approached the advocate     who on behalf of the respondent had issued the publication. Then they  came to know that the original title deeds which were supposed to be in  deposit of the company  was in his custody.  Obviously, because it was  stealthily taken away from the custody of the appellant.  Based on said  facts a departmental enquiry  was instituted  and on the reports   submitted by the Enquiry Officer holding the appellant guilty of the  misconduct charged and  taking into consideration  the seriousness of  the charge the services of the respondent were terminated.   

Being aggrieved of the said decision of the appellant, respondent  approached the Additional Labour Court challenging the said enquiry  report as well as the consequential punishment imposed on him. The  Labour Court after considering the report of the Enquiry Officer has  also examined certain witnesses  summoned by it  came to the  conclusion  the  finding given by the Enquiry Officer and also  the  confirmation of the said finding by the Disciplinary Authority was    legal and valid.  It also observed that in view of the said fact it did not  see any reason  to come to a different conclusion  from that of the  Enquiry Officer.  During the course of its order it also observed that the  most of the facts were not disputed and the documents which were  supposedly   to be in the custody of the appellant   found its way to the  possession of the respondent and by so obtaining the possession of the

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document the appellant  tried to sell the property when the mortgage   was still subsisting.  The Labour Court also recorded  the following  finding  :- "No doubt  the confidence of the employer  on  this petitioner has shaken  by this occurrence  but  no instance  of earlier mis-conduct are spelt. On  the other hand it appears he is an active  participant in  the cultural activities and for  common cause of the employees. Therefore, I  also feel the punishment of dismissal from  service is  harsh in the circumstances.  

Being aggrieved  by the said order directing  the reinstatement  of  the respondent  the appellant preferred a writ petition before the learned  Single Judge, the respondent  also being aggrieved  by the order  upholding his misconduct filed a writ petition before the High Court  challenging that part of the order.  The learned Single Judge after  hearing the parties dismissed both the writ petitions. In the course of his  orders the learned Single Judge observed :- "\005.There is any amount of spectrum of discretion  vested with the Tribunal in taking into consideration  the facts and circumstances of the case.  The decision  relied upon by the learned Counsel for the  Management  has to be taken  into consideration  basing on the facts and circumstances  of the case\005".  

On the above basis writ petitions of the appellant as well as that  of the respondent came to be dismissed.

Against  the said judgment of the learned Single Judge both the  appellant and respondent  herein preferred appeals before the Division  Bench of the High Court which dismissed the writ appeals on the  following  grounds  :- "\005In our opinion, a reading of Section 11-A  would show that the power of the Labour  Court is without limitation. The Labour Court  or the Industrial Tribunal can interfere when  the punishment  awarded is disproportionate  to the proved guilt.  Under such  circumstances, the Labour Court, in our  opinion, is bound to give and should give its  reasons in support of its decision.  No doubt,   the Labour Court, after due discussion of the  charges and the evidence adduced by both the  parties came to the conclusion that the  charges stand proved\005"

Having carefully considered the entire facts  and circumstances of the case, we do not find  any impropriety or illegality in the award of  the Labour Court as confirmed by the learned   single Judge in modifying the punishment of  dismissal from service to that of reinstatement  into service as a fresh candidate in the post  of  Assistant Grade-II.  The Labour Court, in our  opinion, had exercised  its discretionary  power under Section 11-A judiciously and has  given valid and cogent  reasons for modifying  the punishment\005."

It is against the said judgments  of the courts below  directing the  fresh appointment of the respondent  in spite  of finding  of the Labour  Court  that the conclusions arrived at by the Enquiry Officer  is correct,  the appellant is  before us in these appeals.

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 Ms. Mohini Narain, learned counsel  appearing for the appellant  contended  that the courts below was totally in error  in coming to the  conclusion  that there was absolute  discretion  on the Labour Court  under Section 11-A of the Industrial Dispute Act to alter the sentence in  spite of coming to conclusion that the enquiry conducted  by the  management  was  correct and just and the finding of guilt recorded by   the  Enquiry Officer is based on facts. She submitted the discretion   vested under Section 11 A of the Act has to be exercised  judiciously  bearing in mind the nature and gravity of the misconduct proved as also  the loss of confidence  genuinely  entertained  by the management.  In  support  of her contention she placed reliance on the judgments of this  Court  in the case of  :- (1)     Air India Corporation, Bombay  vs.  V.A. Rebellow and           Anr.  (1972 1 SCC 814),     (2) Francis Klein & Company Private Limited   vs.      Their  Workmen & Anr.  (1972 4 SCC 569),   

(3) Janata Bazaar South Kanara Central Co-operative       Wholesale Stores Limited & Ors.  vs.      Secretary, Sahakari Noukarara Sangha & Ors. (2000 7 SCC  517),  

(4) UPS RTC  vs. Mohan Lal Gupta  (2000 9 SCC 521)  and    

(5)  The Workmen of Firestone  Tyre & Rubber Co.                           vs.          The Management  & Ors. (1973 1 SCC 813).

Shri  Nageshwar Rao, learned senior counsel  appearing for the  respondent  submitted that under Section 11 A of the Act the Labour  Court was well within its jurisdiction  to interfere with the quantum  of  punishment if it came to the just conclusion that the penalty  imposed  on the  employee is disproportionate and the same shakes the court’s  conscience. He submitted in view of the fact that the respondent had  returned the entire loan amount and   the appellant-company has not  suffered any monetary loss.  The Labour Court was justified in altering  the punishment. He also submitted that though the Labour Court did  not accept  the respondent’s case that the documents in question were  given to him by the company itself, on the material on record it is seen  that on a request  made by the respondent the officers of the appellant  company had handed him over the documents  so that he can sell the  property and return  the loan  taken by him.  He also submitted that  right till the date of this misconduct  the respondent’s behaviour has  been exemplary and he has served the company honestly and  efficiently,  therefore, for this one stray act of misconduct  he ought not  to be punished  and so called loss of confidence pleaded by the  management is imaginary, therefore, he justified the Labour Court’s  exercise of  its wide jurisdiction judiciously which was upheld by the  learned Single Judge as well as by the Division Bench of the High  Court and there is absolutely no reason for this Court to interfere with  such concurrent finding.   

It is an admitted fact that the documents kept in deposit for  obtaining  a loan from the appellant company by the respondent by way  of a mortgage  did find its way  to the office of the lawyer of the  respondent and of the respondent did make an attempt  to sell the  property by calling for offers by way of  Newspaper publication.   Though the respondent pleaded that the documents were given  to him  on his request  by the management  itself, the findings  of facts  recorded by the Enquiry Officer as well as by the Labour Court was  that these documents were taken away  without the consent or  knowledge of the management. It is seen that the Labour Court itself

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from the evidence of three witnesses  examined by it came to the  conclusion  that case of the respondent  that the document was returned  by the management  was false and the signature of the three witnesses  on the letter produced by the respondent was forged. Hence, the  inference to be drawn  on this finding is that apart from removing the  documents illegally  the respondent also tried to justify the removal by  producing certain fabricated documents. Though the respondent  challenged these finding right up to the Division Bench those findings   have now become final, therefore, we will have to proceed on the basis  that  the allegation of misconduct  leveled  against the respondent  stands proved.

Question then is whether the misconduct  alleged against is so  serious or grave as to create a genuine  lack of confidence in respondent  by  the appellant.  

While considering this question of loss of confidence and the  jurisdiction of the Labour Court in  interfering  with the quantum of  punishment the learned Single Judge was of the following opinion :-  "There is any amount of spectrum of  discretion vested with the Tribunal in taking  into consideration the facts and  circumstance of the case"

        The Division Bench in appeal  concurred  with the said finding of  the learned Single Judge by observing :-

"In our opinion, a reading of Section 11A would  show that the power of the Labour Court is  without limitation".

With respect, we are unable to agree with these findings of the  High Court. In our opinion, there is no such thing as unlimited  jurisdiction  vested with any judicial or quasi judicial  forum.  An  unfettered  discretion is a sworn enemy  of the constitutional guaranty   against discrimination. An unlimited jurisdiction  leads  to  unreasonableness. No authority be it an administrative or judicial has  any power to exercise the discretion vested in it unless the same is  based on justifiable grounds supported by acceptable materials  and  reasons thereof.   

The Labour Court while exercising  its discretion recorded  that  though the confidence of the employer on the respondent is shaken still  it gave 3 reasons for exercising  its discretion, they are :- (A)     No instance of earlier misconduct  are spelt.  (B)     It appears the respondent is an active participant in the  cultural activities and for common cause of the  employees. (C)     Therefore, it felt the punishment of dismissal from  service is harsh, in the facts and circumstances of the  case.  

These extenuating circumstances  recorded by the Labour Court  is in the background  of the following proved facts :- (A)     Title deeds deposited with the appellant for  borrowing money were surreptitiously  taken  away  without the permission of the appellant  which act amounts to theft. (B)     The said documents so stolen were admitted to be  used for the purpose of  selling the property  which amounts to fraud.  (C)     The documents so taken was sought to be  justified  by a letter where the signatures are  forged amounting to forgery.

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The question the Labour Court ought to have asked itself while  exercising  its discretion under Section 11 A should have been whether  the reasons given by it that there was no earlier misconduct or that the  respondent is an active participant in cultural activities is sufficient  to  come a reasonable conclusion  that a punishment of dismissal was  harsh in the background  of the finding recorded by itself  as to the  confidence of the employer  on the respondent which according to the  Labour Court  was shaken by the misconduct.  

In our opinion with no stretch of imagination either the  extenuating circumstances recorded by the Labour Court or the exercise  of its discretion could be termed either as reasonable or judicious. In  our opinion even the learned Single Judge and the Division Bench  erroneously held  that the Labour Court  had unlimited  jurisdiction   under Section 11-A of the Act. It is because of the above erroneous  legal foundation as to the vastness of power vested with the Labour  Court. The High Court  accepted  the interference by the Labour Court  in the award of punishment. Thus, the Labour Court as well as the High  Court fell in error in granting the relief to the respondent which is  challenged in this petition.   

The learned counsel for the appellant has rightly relied upon the  decisions of this Court in support of her argument.  In Air India  Corporation  (supra)  this Court held with reference to loss of  confidence as follows :- "..Once bonafide loss of confidence is affirmed  the impugned  order must be considered to be  immune from challenge.."

In  Francis Klein & Company Prviate Ltd. (supra) this Court held :-

       " In our view when an employer loses   confidence in his employee, particularly in  respect of a person who is discharging an office  of trust and confidence, there can be no  justification for directing his reinstatement\005."

..Even this direction is not a valid direction  because if  once the Company has lost  confidence in its employee, it is idle to ask  them to employ such a person in another job.   What job can there be  in a Company which a  person can be entrusted with and which does  not entail reposing of confidence in that  person.."          

In  Janta Bazaar South Kanara (supra)  this Court held :-

"\005Once act of misappropriation  is proved, may  be for a small or large amount, there is no  question of showing uncalled for sympathy and  reinstating the employees in service.  Law on  this point is well settled\005"

"\005In case of proved misappropriation, in our  view, there is no question of considering  past  service record. It is the discretion of the  employer to consider the same  in appropriate  cases, but the Labour Court cannot substitute the  penalty imposed by the empoyer in such cases.."

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In  UPS RTC (supra) this Court held :-

"\005The employee has been found to be guilty of  misappropriation  and in such an event, if the  appellant-Corporation loses its confidence vis-‘- vis the employee, it will be neither proper nor  fair on the part of the Court to substitute the  finding and confidence of the employer with that  of its own in allowing reinstatement. The  misconduct stands proved and in such a  situation, by reason of the gravity of the offence,  the Labour Court cannot exercise its discretion  and alter the punishment\005."

With reference to Section 11-A of the Act, in the case of  The  Workment of Firestone Tyre & Rubber Company Ltd.  (supra) this  Court held :-  "\005 Once the misconduct is proved, the Tribunal  had to sustain the order of punishment unless it  was harsh indicating victimisation\005."

"\005If a proper enquiry is conducted by an  employer and a correct finding arrived at  regarding the misconduct, the Tribunal, even  though it has now power to differ from the  conclusions arrived at by the management, will  have to give every cogent reasons for not  accepting the view of the employer\005"

In  CMC Hospital Employees’ Union & Anr.  (supra) this Court  held  :-  ".. Section 11-A\005 cannot be considered as  conferring an arbitrary power on the Industrial  Tribunal or the Labour Court.  The power under  Section 11-A of the Act has to be exercised  judicially  and the Industrial Tribunal or the  Labour Court is expected to  interfere  with the  decision of a management under Section 11-A of  the Act only when it is satisfied  that the  punishment imposed by the management is  highly disproportionate to the degree of guilt of  the workman concerned.  The Industrial Tribunal  or the Labour Court has to give reasons for its  decision\005"

In our opinion all the above judgments  applies with full force  to  the facts of this case.  The Labour Court has itself come to the  conclusion the management  has lost confidence in the respondent. If  that be the case the question  of it exercising  its jurisdiction under  Section 11-A  to alter or reduce the punishment does not arise.  That apart the reasons given by the Labour Court to reduce the  penalty are reasons which are not sufficient  for the purpose of reducing  the sentence by using its discretionary power.  The fact that the  misconduct  now alleged  is the first misconduct  again is no ground to  condone the misconduct. On the facts of this case as recorded by the  Labour Court  the loss of confidence is imminent,  no finding has  been  given by the courts below including  Labour Court that either the fact  of   loss of confidence  or the quantum of punishment is so harsh as to  be vindictive  or shockingly disproportionate.  Without  such finding   based on records  interference with the award of punishment  in a  domestic inquiry is impermissible.  For the reasons stated above the appeals succeed. The impugned  orders to the extent they direct the reinstatement of the respondent is set  aside. The order of dismissal of the respondent  made by the appellant

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pursuant  to the inquiry is upheld.  Appeals allowed to the above extent.