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PETITIONER: K. T. CHANDY

       Vs.

RESPONDENT: MANSA RAM ZADE

DATE OF JUDGMENT11/12/1973

BENCH: DWIVEDI, S.N. BENCH: DWIVEDI, S.N. CHANDRACHUD, Y.V.

CITATION:  1974 AIR  642            1974 SCR  (2) 650  1974 SCC  (1) 414

ACT: Contempt   of  Court-Suit  by  employee  against   employer- Dismissal  of employee in exercise of right to terminate  as per contract of service-When does not amount to contempt.

HEADNOTE: The  respondent was employed in a company.  The contract  of service  Provided for, the termination of service by  giving three  months  notice or three months pay ,in  lieu  thereof without assigning any cause.  The company  gave him a notice that it was found that his performance and conduct have  not been good and that he had not proved useful to the  company. He was therefore advised to try for alternative  employment. He  was informed that he would be released from the  company at his request on payment by him of the amount under a  bond executed  by  him  with  some  concession.  The   respondent thereupon filed a suit claiming various reliefs. He, did not ask for an interim injunction restraining the appellant  and the company from terminating his service during the pendency of the suit, nor did the appellant and the company give  any such  undertaking.  The company gave the  respondent  notice terminating  his  service with effect from the date  of  the service of the notice and granted him three months’ pay. The High Court hold that the act of giving the second notice amounted to con. tempt of court because, as a result of  the termination  some  of the reliefs Prayed  for  would  become infructuous   and  that  would  amount  to  obstruction   or interference with due course of justice. Allowing the appeal to this Court, HELD  Where a party to a suit terminates the service of  the adversary  party in the honest exercise of his rights  under the  contract of service and in the absence of  any  interim injunction  or  undertaking,, the act would  not  constitute contempt of court. [653 B-C] (a)  A  combined reading of the two notices shows  that  the appellant had terminated the service in the honest  exercise of  the  right  vested in the company  by  the  contract  of service.   The  order  did not threaten  the  respondent  to withdraw the whole or part of the suit. [653 C] (b)The circumstance that one or more of the reliefs  claimed in the plaint had become infructuous   on  account  of   the termination  would  not  establish  contumacy,  because  the

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respondent  was  free  amend  his  plaint  and  ask  for  an appropriate relief. [653 D] (c)  The   fact   that  the  appellant   had   tendered   an unconditional apology in the High Court is not a ground  for this  Court  refusing to interfere, because,  (i)  the  High Court had in fact held that appellant has committed contempt though  it did not award punishment because of  the  apology and(ii)the  High  Court had directed the  appellant  to  pay cost to the respondent. [654 B] Taka Qim Goakar v. R. V.  Shakla, [1968] 3 S.C.R. 422,  fang Bahadur  Singh v. Baij Nath rewari, [1969] 1 S.C.R. 13  Cand Malojirao  Shitole  v. C. G. Matkar, A.I.R 1953 M.  B.  245, referred to. Pratap ginirh v. Gurbaksh Sinqh, [1962] Supp. 2 S.C.R.  838, and Govind Sahl v.  State  of  U. P. [1969]  1  S.C.R.  176, distinguished. 651

JUDGMENT: CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. 129 of 1970. Appeal  by Special leave from-the Judgment and  order  dated the  24th July, 1969 of the Calcutta High Court in  Criminal Misc.  Case No. 179 of 1969. D.   -Mukherjee,  and  DN.  Mukherjee,  for  the  appellant. S.B. Wad, for the respondent. The Judgment of the Court was delivered by DWIVEDI,  J. Seemingly it is a small case.  It has  not  hit the  headlines  in the news-media.  Nor it has  gripped  the public mind.  The pecuniary stake is trivial.  A tiny sum of Rs.  200/- is payable as costs by the  appellant.   However, this  case  brings in to the flash-point an issue  of  great consequence  to  liberty  of contract:  Where  to  draw  the dividing line between the area of contempt of court and  the are of opration of contractual rights. The appellant is the Chairman of the Hindustan Steel Limited (hereinafter  referred to as the Company).   The  respondent was  employed in the Company on a contract of service.   The contract  provided for termination of his service by  giving three  months’ notice or three months’ pay in  lieu  thereof and without assigning any cause.  On February 21, 1968,  the Company  gave  him  this notice : "It  is  found  that  your performance and conduct in this plant have not been good and that  you have not proved useful for the Company.   You  are hereby  advised  to note this position and also to  try  for alternative employment elsewhere.  You may be released  from this  company  at  your request on  payment  of  the  amount required under the bond executed by you on pro-rota basis as a  very  special  case taking into  account  the  period  of service that may be rendered by you at the time of  release. in  other words, if you choose to leave the service  of  the company  before expiry of bond period, you will be  required to pay the company a sum not exceeding Rs. 20,000/-  reduced by the amount calculated on pro-rota basis in respect of the service you may render after completion of your training." Soon thereafter he rushed to the Court.  On May 27, 1968  he instituted  a  suit  in  the Court  of  the  Second  Munsif, Asansol.  The material reliefs claimed in the plaint are:               (1)   a  declaration  that  the  notice  dated               February 21, 1968 is illegal, bad, mala  fide,               without jurisdiction, void and inoperative and               is not binding on the plaintiff;               (2)   a  declaration  that  the  charge  sheet

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             dated  July  1, 1966,  confidential  character               report, dated April 27, 1967, are ultra vires,               unenforceable,  illegal,  unsustainable,  mala               fide and opposed to rules and natural  justice               and are not binding on the plaintiff;               (3)   a  declaration  that  the  plaintiff  is               entitled  to  promotion  to  the  next  higher               grade, namely, foreman, from October 10, 1966;               652               (4)   a  mandatory  injunction  directing  the               defendant  to  promote the  plaintiff  to  the               grade of foreman; and               (5)   a  permanent injunction restraining  the               defendant  from  giving effect to  the  notice               dated February 21, 1968. He  did  not ask the Munsif to grant an  interim  injunction restraining  the appellant and the Company from  terminating his service during pendency of his suit.  So no such interim injunction was operating at the relevant time.  Nor did  the appellant  and  the Company give an undertaking  to  refrain from  terminating his service during pendency of  the  suit. Forgetting the suit for a moment, there was no impediment in their  way  of  terminating his  service  according  to  the contract.   And on February 26, 1968, the Company  gave  him this notice; "(T)he services of the ( respondent) are hereby terminated  with  effect from the date of  service  of  this order  on  him and payment of three months’ pay in  lieu  of notice   in  terms  of  clause  (vi)  of   his   appointment letter...... dated January 29, 1962." The Calcutta High Court (R.N. Dutt and B. Banerji JJ.).  has held that the act of giving this notice amounts to, contempt of  court.   The  learned Judges said:  "It  seems  that  he (plaintiff) was more or less non-suited. ..There is no doubt that since his services have been terminated, some of  the reliefs  which  were  prayed for in the  suit  could  become infructuous.   On  these considerations, we think  that  the action  of the Chairman in terminating the services  of  the (plaintiff) .... does amount to obstruction or  interference with  due course of justice in the petitioner’s suit  before the  Munsif .... and- so it amounts to contempt of the  said court." When  asked, counsel for the respondent could not  cite  any decision  holding  a Muslim husband’s act of  divorcing  his wife  during pendency of her suit for future maintenance  as contempt of court.  The divorce completely aborts her  suit. It  is true that the law of contempt of court  is  essential for   keeping  the  administration  of  justice   pure   and undefiled.  It is also well to remember that our society  is also  interested in the fulfillment of a man’s  expectations under a contract.  To that end we have a law of contract  in our  country.  Assigning an unlimited and undefined area  to either  of them would unduly curtail the area of the  other. Each  should have a viable area so that ’ justice  may  hold high her head and contract is not cribbed and cramped.   But what is the yardstick to measure their area of operation. It  has  been  held that ’initiation in  good  faith’  of  a departmental’  enquiry under the Customs Act by  the  Custom authorities on the basis of facts which are the subject of a criminal  prosecution under that Act against  the  appellant would not amount to contempt as the authorities’ are  acting bona fide and discharging their statutory duties.’ (Ruka Ram G.  Geokar v. R. N. Shukla.1 see also Jang Bahadur Singh  v. Baij  Nath  Tewari).2 In another case it was held  that  the issue  of a notification under the Abolition of  Jagirs  Act for  resumption  of Jagirs during pendency of  a  jagirdar’s

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writ   petition  for  restraining  such  resumption-is   not contempt, because the Government was acting bona fide in the exercise of its statutory rights. (See (1) [1968] 3 S.C.R. 422. (2) [1969] 1 S.C.R.. 134.. 653 Malojirao Shitole v. C. G. Matkar)(1) These cases  establish that bona fide exercise of a statutory right by a party to a proceeding  is  not contempt in the absence  of  an  interim injunction  against  or undertaking by  that  party.   There appears to be so sound’ reason why this principle should not extend   to  the  exercise  of  rights  under  a   contract. The rights of a party under a contract are his legal rights. In  our view bonafide or honest exercise of a right under  a contract  should  be  the  yardstick  for  allocating  their respective area to contempt and it gives to each its  proper sphere.   So where a party to a suit,, as here,.  terminates the service of the adversary party in the honest exercise of his rights under the contract of service and in the  absence of any interim injunction or undertaking, his act would  not constitute  contempt  of  court.  We are  satisfied  from  a combined reading of the two notices relating to  termination of service that the appellant had terminated the service of the respondent in the honest exercise of the right vested in the  Company  by  the contract of service.  So  he  has  not committed contempt of the Munsif’s Court. The  order  terminating his service does  not  threaten  the respondent  to withdraw the whole or part of his suit.   The mere circumstance that one or more of the reliefs claimed in the  plaint  have  become  infructuous  on  account  of  the termination  order  would  not  establish  contumacy.    The respondent is free to amend his plaint and ask for a  relief against the termination order. Counsel  for  the respondent has relied on Pratap  Singh  V. Gurbakah Singh(4) and Gobind Sahai v. State of U.P.(5) These cases  are clearly distinguishable on facts.  In  the  first case a Government employee had instituted a suit as well  as a  writ  petition against the Government in respect  of  his service  conditions.   Thereupon the  appropriate  authority started a departmental proceeding against the employee.  The charge  sheet  stated  that he had gone to a  court  of  law before exhausting all his departmental remedies and that his action was contrary to official propriety and subversive  of good discipline.  This charge was framed on the strength  of a  circular  letter  issued by the Chief  Secretary  of  the Government  on  June  25, 1953.   It  emphasised  that  "any attempt  by a Government servant to seek a decision on  such issues in a court of law without first exhausting the normal official  channels  of  redress could only  be  regarded  as contrary  to  official  propriety  and  subversive  of  good discipline   and  could  well  justify  the  initiation   of disciplinary  action against him.  This Court held that  the authorities have committed contempt of court.  In the second case while the respondent’s suit challenging the election of his  opponent  to  a  committee of  a  political  party  was pending, the appellant letters expelling him from the  party on the strength of an earlier resolution of the party  which barred  reference  of  such  disputes to  a  law  court  and provided  for summary removal of any member who initiated  a suit.  This Court held that the action of expulsion amounted to  contempt of court.  It ’should be observed that in  both cases  the  complainant  had a right to  institute  a  legal proceeding  in  a law court for redress  of  his  grievance. This legal right (1)  A.I.R. 1953 MB 245.

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(2) [1962] Supp. 2 SCR 838. (3) [1969] 1 SCR. 176. 654 could  be taken away only by a valid law.  But there was  no such  law  in  operation.  So neither the  officers  of  the Government nor the political party had a legal right to take any  action for punishing the /suitor for his mere  ’act  of instituting a legal proceeding in a law court.  In our  case the- appellant had a right under the contract to  terminate, the service of the respondent. Counsel  for  the  respondent  has  submitted-that  as   the appellant had tendered an unconditional apology. in the High Court, we should not interfere with the High Court’s  order. We are unable to appreciate the submission.  Apology goes to sentence  and  may  be accepted only  upon  a  finding  that contempt  has  been committed.  The High Court has  in  fact held that the appellant has committed contempt.  But it  has accepted  his  apology  and  refrained  from  awarding   any punishment.   Moreover, the appellant has been  directed  to pay  Rs. 200/as costs to the respondent.  So the  appellant is entitled to have the order of the High Court set aside. We  allow  the appeal and set aside the order  of  the  High Court. V.P.S. Appeal allowed. A02SCI/74-2500-28-5-75-GIPP. 655