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CASE NO.: Appeal (civil)  6269 of 2003

PETITIONER: Punjab State Civil Supplies Corp. Ltd

RESPONDENT: Sikander Singh

DATE OF JUDGMENT: 24/02/2006

BENCH: S.B. Sinha & P.P. Naolekar

JUDGMENT: J U D G M E N T WITH CIVIL APPEAL NOS. 6271 AND 6273 OF 2003

S.B. SINHA, J :

                These appeals arising out of a common judgment and order dated  6.7.2001 passed by the High Court of Punjab and Haryana at Chandigarh  were taken up for hearing together and are being disposed of by this  common judgment.   

       The Respondents herein were at all material times working as  Inspector and Field Officer/Supervisor.  They were posted at Moga.  A  physical verification of stocks was carried out from 21st June, 1985 to 26th  June, 1985;  pursuant whereto shortages of 4513 bags of wheat were said to  have been found.   

       Allegedly, Tilak Raj, defendant No. 1 deposited in two instalments  2400 bags and 210 bags of wheat. In an audit report shortages of stock of  articles were said to have been highlighted.  

       It was alleged that, thus, shortages of wheet took place due to lack of  proper supervision on the part of the Respondents.  It was furthermore  alleged that whereas the defendant No. 1 was the actual holder of the stock,  the defendant No. 2 being Senior Superintendent was negligent in making  proper supervision of the godowns.   

Departmental proceedings were initiated against both of them.  They  were dismissed from services. In the departmental proceedings, against the  defendant No.1, indisputably the appellate authority directed his  reinstatement subject to his depositing remaining 400 bags of wheat, found  to be short.  He complied with the said direction of the appellate authority.    As despite the same, he was not reinstated, a writ petition was filed by him  before the High Court wherein the High Court directed his reinstatement.   The matter came up before this Court in SLP(C) No.5609 of 1989 and by a  judgment and order dated 23.8.1989, while upholding the direction of the  High Court as regard his reinstatement the relief of backwages was denied.   

So far as the order of dismissal passed in the departmental enquiry  against the defendant No. 2 is concerned, he filed a suit which was the  subject matter of R.S.A. No. 2232 of 1998 before the High Court; the suit as  also the first appeal having been dismissed by orders dated 19.11.1992 and  23.2.1998 respectively.

The Appellant herein filed a civil suit before the Civil Judge, Moga  against the Respondents herein for recovery of the price of the quantity of  wheat which had been found to be short.

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In its plaint, the Appellant contended:

"\005The loss has been suffered by Punsup on account of  mis-appropriation and unauthorized use of stocks by the  defendant No. 1 & 2 for their own interest and benefit.   Both the defendants are therefore equally responsible to  make good the shortages and loss suffered by the  plaintiffs on this account."

       Defendant No. 1 in his written statement denied and disputed the said  allegation stating that he had been made a scapegoat.  Defendant No. 2 in his  written statement averred that defendant No. 1 being Inspector was the  custodian of the stock and took over the charge from the previous Inspector  and it was he who handed over the charge to the successor and, thus,  responsible for the stocks hold by him and as a supervisor he had nothing to  do with holding of actual stock.   

The said civil suit was dismissed as against the defendant \026  Respondent No. 2 whereas the same was allowed as against defendant \026  Respondent No. 1.  A Regular First Appeal was filed in the High Court by  the Appellant thereagainst which was marked as RFA No. 1780 of 1997.   Defendant No. 1 also filed an appeal thereagainst which was marked as 347  of 1997.  Defendant No. 2, as noticed before, also filed a second appeal,  which was marked as RFA No. 2232 of 1998.  By reason of the impugned  judgment the High Court as regard the liability of defendant No. 1 held:

"\005It has been admitted that Shri Tilak Raj defendant No.  1 after having conceded the shortage of the bags has been  directed by the Appellate Committee to deposit 2/3rd of  the said bags and that had been made the condition  precedent for reinstatement in service.  As a sequel  thereto, Tilak Raj has deposited the said bags and has  been reinstated accordingly.  PUNSUP has not been able  to address meaningful arguments for establishing the fact  that the claim is in exclusion of the said bags or is in  inclusion of the said bags.  It is also the admitted case  that Tilak Raj had joined the duty at the place of posting  on April 6, 1984 and nothing has been brought on record  as to whether the stocks etc. were in order on the date of  his posting as the reliance has been placed upon the audit  report for fixing the liability.  However, there is  divergence vis-‘-vis the physical verification which  has  been carried out and the audit report which has been  relied upon.  Thus, PUNSUP has not been able to  establish the clear cut liability against defendant No. 1.  It  shall not be fair to rely upon the audit report as the  contents thereof have not been proved by way of any  supportive evidence brought on record by PUNSUP.  It is  the settled law that liability cannot be fastened only on  the statement of account/ audit reports as it is not  discernible as to at what stage such kind of loss had been  suffered and at whose hands as nothing has been brought  on record that on the date of joining by defendant No. 1  the shortages were in existence or came into existence  thereafter."

       So far as Defendant No. 2 is concerned, it was opined:

"\005It is a separate matter that he has been held liable for  dereliction of duty vis-‘-vis supervisory control but that  too has been interpreted differently in view of the  judgments rendered by the Courts below.  Even  otherwise from the facts brought on record, the  supervisory control of defendant No. 2 came into force  w.e.f. December 21, 1984 and that prior thereto, the

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articles being in actual factual control of defendant No. 1,  the dereliction of supervisory control could not have been  attributed to defendant No. 2.  It is also the admitted case  of the parties that defendant No. 2 submitted a complaint  which is dated April 10, 1985 to the immediate superior  i.e. the District Manager and that the entire action was  started on the basis of the said complaint.  In this view of  the facts, dereliction of duty vis-‘-vis supervisory control  is not attributable to defendant No. 2."

       As regard the suit arising out of departmental proceeding against the  defendant no. 2, which was the subject matter of the Second Appeal, the  High Court held:

"\005However, the appeal filed by Sikander Singh has been  dismissed as has been dismissed from service only on  account of dereliction of duty of supervisory control.   However, the admitted case is that the control of stocks  was that of defendant No. 1 and not that of defendant No.  2.  Since I have concluded that dereliction of duty vis-‘- vis supervisory control is not attributable to defendant  No. 2, as such the order of dismissal passed against  defendant No. 2 is not sustainable."

       It was directed:

"In view of the above discussions, RFA No. 1780 of  1997 filed by PUNSUP fails and is hereby dismissed and  the RFA No. 347 of 1997 filed by Shri Tilak Raj  defendant No. 1 is allowed and the suit filed by PUNSUP  is dismissed.  RSA No. 2232 of 1998 filed by Sikander  Singh is also allowed in view of the fact that it has been  held that dereliction of duty vis-‘-vis supervisory control  is not attributable to defendant No. 2 \026 appellant in RSA  No. 2232 of 1998."

       The learned counsel appearing on behalf of the Appellant would  submit that although the Defendant Nos. 1 and 2 were the employees of the  Appellant, a civil suit was maintainable against them for recovery of money     as shortage of wheat took place due to their negligence.  So far as, defendant  No. 2 is concerned, it was submitted that although he had no direct role to  play but in view of his acts of non-feasance, he will be liable therefor as he  had a duty to supervise the godowns.   

       The Trial Court in its judgment proceeded on the basis that the  defendant No. 1 was incharge of the godown and the defendant No. 2 was to  act as a supervisor and in view of the fact that admittedly shortages were  found during physical verification of the stock in the godown, the defendant  No. 1 alone was found guilty of mis-appropriation thereof.  In support of the  said finding, reliance was placed on the audit report which was proved by  PW-1, Ashok Grover.   Apart from an inference drawn on the said audit  report, no other evidence was adduced by the appellant to show that the  defendant No.1 in fact mis-appropriated the said stocks.  On the said finding,  the trial court came to the conclusion that the Appellant was entitled to  recover a sum of Rs. 10,80,140.12 towards the price of the articles.  The  Appellant was also held to be entitled to Rs. 5,67,873.88 by way of interest  at the rate of 18% per annum.  Further interest of 18% per annum on the  principal amount was also directed to be paid.

       The High Court, on the other hand, as noticed hereinbefore, arrived at  a finding of fact that audit report could not be said to be admissible in  evidence as the contents thereof were not proved by any supportive evidence  therefor.  The High Court, further, opined that in any event, no interest was  payable on the amount of damages.  

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       The contention which has, however, been raised in these appeals, as  noticed hereinbefore, is that the Respondents are jointly and severally liable  for their acts of negligence.  

The Appellant is a ’State’ within the meaning of Article 12 of the  Constitution of India.  The terms and conditions of service by and between  the Appellants and the Respondents herein are governed by the service rules  and/or terms and conditions of contract.  If the Respondents herein had  committed misconduct they could have been and in fact were departmentally  proceeded with. In the said departmental proceedings appropriate  punishments had been imposed upon them.  So far as defendant No. 1 is  concerned, therein  his negligence had been held to have contributed to the  loss of 2/3rd of the shortages and by way of penalty, he was asked by the  appellate authority to deposit the requisite number of bags of wheat and/ or  pay the price thereof.  The said order having been complied with attained  finality.  It is binding on the appellant.  The dispute cannot, therefore, be  permitted to be reopened.   

If the Appellant herein intended to proceed further against the  defendant No. 1, it could have done so by questioning the correctness or  otherwise of the said order of the appellate authority before an appropriate  forum.  Deposit of the requisite number of bags of wheat and/or price  thereof resulted in the defendant no.’s 1 reinstatement pursuant to an order  passed by the High Court as also this Court.  For his act of misconduct, he  had also been denied backwages.  If in the departmental proceedings,  defendant No. 1 had been asked to pay a penalty by way of recovery of loss  to the extent of which he was found responsible, we are of the opinion that  no civil suit could have been maintained for the self-same cause of action.   

So far as the defendant No. 2 is concerned, no finding of fact has been  arrived at that he for any intent and purport appropriated any article to his  advantage.  In absence of such a finding, we fail to understand as to how  under the common law, he could be proceeded against by way of a civil suit  for recovery of money.  A civil suit for recovery might have been  maintainable only if he was found to have misappropriated the goods.   Admittedly he has not.  He was said to be negligent in performing his duties.  It is now well-settled that negligence simpliciter may or may not  amount to misconduct.  In Union of India and others v. J. Ahmed, [(1979) 2  SCC 286], this Court stated the law thus :

"\005The High Court has noted the definition  of misconduct in Stroud’s Judicial Dictionary  which runs as under: "Misconduct means, misconduct arising  from ill motive; acts of negligence, errors of  judgment, or innocent mistake, do not constitute  such misconduct." In industrial jurisprudence amongst others,  habitual or gross negligence constitute misconduct  but in Utkal Machinery Ltd. v. Workmen, Miss  Shanti Patnaik5 in the absence of standing orders  governing the employee’s undertaking,  unsatisfactory work was treated as misconduct in  the context of discharge being assailed as punitive.  In S. Govinda Menon v. Union of India6 the  manner in which a member of the service  discharged his quasi judicial function disclosing  abuse of power was treated as constituting  misconduct for initiating disciplinary proceedings.  A single act of omission or error of judgment  would ordinarily not constitute misconduct though  if such error or omission results in serious or  atrocious consequences the same may amount to  misconduct as was held by this Court in P.H.

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Kalyani v. Air France, Calcutta7 wherein it was  found that the two mistakes committed by the  employee while checking the load-sheets and  balance charts would involve possible accident to  the aircraft and possible loss of human life and,  therefore, the negligence in work in the context of  serious consequences was treated as misconduct. It  is, however, difficult to believe that lack of  efficiency or attainment of highest standards in  discharge of duty attached to public office would  ipso facto constitute misconduct. There may be  negligence in performance of duty and a lapse in  performance of duty or error of judgment in  evaluating the developing situation may be  negligence in discharge of duty but would not  constitute misconduct unless the consequences  directly attributable to negligence would be such  as to be irreparable or the resultant damage would  be so heavy that the degree of culpability would be  very high. An error can be indicative of negligence  and the degree of culpability may indicate the  grossness of the negligence. Carelessness can often  be productive of more harm than deliberate  wickedness or malevolence\005"

       A suit for damages would be maintainable only on the ground of  breach of the terms and conditions of the contract and when there are acts of  mal-feasance, mis-feasance and non-feasance.   

       A suit for damages for breach of contract under common law can be  decreed only when the damages are found to have occurred by reason of  such breaches on the part of the defendant.  For the said purpose, the extent  of damages suffered must be proved in terms of Section 73 of the Indian  Contract Act.   

       The Appellants have not and in law could not have filed any suit  against the Respondents herein alleging any tortious act on their part.  A suit  for damages by way of tortiuous claim is maintainable only when someone  has a duty to perform towards others under a statute or otherwise.  In this  case, we are not dealing with any case of tortious act on the part of  Respondents herein.

       The learned counsel appearing on behalf of the Appellant, however,  has placed strong reliance on Dr. H. Mukherjee v. S.K. Bhargava [(1996) 4  SCC 542].  The said decision runs counter to the submissions of the learned  counsel.  In that case a suit was filed as damages for harassment meted out  to the plaintiff.  It was contended by the Appellant that the Civil Court had  no jurisdiction to entertain the suit in view of the Administrative Tribunals  Act, 1985.  Rejecting the said contention, it was held:

"The Tribunals under the Act are thus conferred with the  exclusive jurisdiction, powers and authority exercisable  immediately before the appointed day by all courts  (except the Supreme Court) in relation to the matters set  out in clauses (a), (b) and (c) of sub-section (1) of  Section 14. The question is whether the present suit does  fall under any of the said clauses. We do not think that it  does. The suit appears to be one based on alleged tortious  acts of the defendant committed with a view to harass the  plaintiff and cause him mental pain and injury. At this  stage, it is not our province to say whether the allegations  are true or false. We have to take the plaint allegations as  they stand. We also assume for the purpose of this appeal  that such a suit does lie according to law since no  contention to the contrary has been urged before us nor

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was urged before the civil court or the High Court. This  is a pure action for damages for deliberately harassing the  plaintiff by passing several vindictive and mala fide  orders and proceedings and also by fabricating official  records. Such a suit for damages is certainly not within  the province of Section 14.

       Thus, tortious acts, being not the ones which could be subject matter  of  departmental proceedings or negligence under a contract of employment,  cannot give rise to a civil liability by way of monetary compensation to the  employer except in certain circumstances.

       We may at this juncture notice some other decisions relied upon by  the learned counsel for the Appellant.

       In Depot Manager, A.P.S.R.T. Corpn. v. N. Ramulu and Another  [(1997) 11 SCC 319], the pecuniary loss caused to the employer was ordered  to be recovered from the delinquent by way of punishment and not in a civil  suit.

       In this case, we have noticed that the losses caused by reason of  misconduct on the part of the defendant No.1 had been directed to be  recovered in the departmental proceedings and the same stood recovered.

       In Union of India and Others v. B. Dev [(1998) 7 SCC 691], this  Court upheld the plea of Union of India that in terms of the provisions of  CCS (Pension) Rules, 1972, in the event a gross misconduct or negligence  committed by the employer during the period of his service is proved, entire  amount of pension or a part thereof can be directed to be withheld.  Therein,  however, the question which arose for consideration was as to whether in   absence of any pecuniary loss, Rule 9 of the CCS (Pension) Rules could be  invoked or not.  Such a question does not arise for consideration in the  present case.

       In Official Liquidator, Supreme Bank Ltd. v. P.A. Tendolkar (Dead)  By L.Rs. [(1973) 3 SCR 364], the question which arose for consideration  was as to whether a director having regard to the provisions of Section 235  of the Companies Act, committed acts of misfeasance.  The said decision ex  facie has no application in the present case.  Therein, this Court was  concerned with a case where the director was held to be not merely  cognizant of but guilty of commission of fraud in the conduct of the business  of a company even though no specific act of dishonesty was proved against  him personally.  The duties of a Managing Director are provided for in the  Companies Act as also Articles of Association of the Company.  He, thus,  holds a position of trust vis-‘-vis the shareholders of the company.  In that  case all the directors were found to have committed acts of fraud.  The court  took recourse to the provisions of Section 45H of the Companies Act  wherein special provisions for assessing damages against delinquent  directors have been laid down.  

       Reliance has also been placed on M.S. Grewal and Another v. Deep  Chand Sood and Others[(2001) 8 SCC 151] wherein in a case where several  school children died of drowning due to negligence on the part of the  teachers; this Court, having regard to the provisions of the Fatal Accidents  Act, 1855, opined that the school is vicariously liable for the acts of  negligence of the teachers.

       In Jay Laxmi Salt Works (P) Ltd. v. State of Gujarat [(1994) 4 SCC  1], this Court again was considering a case under tortious law held that ’tort’  dictionarily means "breach of duty leading to damage".          Negligence has  further been defined to mean ’failure to do statutory duty or otherwise giving  rise to damage’.

       Negligence in the performance of a duty under a contract of

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employment may give rise to a disciplinary proceeding but as at present  advised, in a case of this nature, we are of the opinion that the same would  not give rise to a cause of action for recovery of money for the goods lost as    in  the disciplinary proceeding itself recovery of money from the delinquent  can be directed by way of punishment.

       In Jay Laxmi Salt Works (supra), this Court observed:

"\005In Dunlop v. Woollahra Municipal Council14 it was  held that without malice the claim for misfeasance could  not be accepted. Non-feasance on the other hand is  omission to discharge duty. But the omission to give rise  to action in torts must be impressed with some  characteristic, namely, malice or bad faith. The  expressions ’malfeasance’, ’misfeasance’ and ’non- feasance’ would, therefore, apply in those limited cases  where the State or its officers are liable not only for  breach of care and duty but it must be activated (sic  actuated) with malice or bad faith. The defective  planning in construction of a bundh, therefore, may be  negligence, mistake, omission but to say that it can only  be either malfeasance, misfeasance and non-feasance is  not correct\005"

       In Poonam Verma v. Ashwin Patel and Others [(1996) 4 SCC 332],  this Court was concerned with negligence of medical practitioners giving  rise to a cause of action under the provisions of Consumer Protection Act.

       We are, therefore, of the opinion that in view of the findings arrived at  by the High Court, the suit filed by the Appellant herein being not  maintainable have rightly been dismissed.

       So far as the second appeal preferred by the Defendant No. 2 being  RSA No. 2232 of 1998 is concerned, it appears, that no substantial question  of law had been framed by the High Court as was mandatorily required to be  done in terms of Section 100 of the Code of Civil Procedure.  We have  noticed hereinbefore that the Defendant No. 2 filed a suit questioning the  order imposing punishment of removal or dismissal from his service.  The  said suit was dismissed.  The appeal preferred by the Defendant No. 2 was  also dismissed.  In the second appeal, indisputably, the High Court was  obligated to formulate a substantial question of law.  The High Court  proceeded to allow the appeal preferred by the Defendant No. 2 only on the  premise that the dereliction of duty vis-a-vis supervisory control is not  attributable to him.  The effect of the judgment in the civil suits filed by the  Corporation would require consideration in the light of the findings arrived  at in the disciplinary proceedings.

       The High Court failed to consider that the question of negligence in a  departmental proceedings and a suit for recovery of money must be viewed  differently.  In a disciplinary proceeding, the provisions of the Evidence Act  are not applicable unlike in a civil suit.  In the suit filed by the Defendant  No.2, the only question which arose for consideration was different from the  issues which arose in the civil suit of the Corporation.  The scope and ambit  of the suit filed by the Respondent No. 2 herein questioning the order of  dismissal from services was limited.

       The civil court could interfere with the said order in the event, inter  alia, it was found that the order of dismissal by way of punishment has been  imposed in violation of the procedures laid down in the statutory rules or in  violation of the principles of natural justice or suffered from illegalities or  procedural irregularities were committed by the enquiry officer or the  disciplinary authority in holding the departmental proceedings.  In view of  the fact that the suit of the Defendant No. 2 was dismissed and the appeal  preferred thereagainst had also been dismissed, it was obligatory on the part  of the High Court to formulate a substantial question of law.  Without

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formulating such substantial question of law in a case of this nature the High  Court could not have set aside the concurrent findings of two courts.

       R.V.E. Venkatachala Gounder v. Arulmigu Viswesaraswami & V.P.  Temple and Another [(2003) 8 SCC 752] whereupon reliance has been  placed by the learned counsel for the Respondent, has no application in the  instant case.  Therein, this Court although held that a substantial question of  law was required to be framed but in view of the fact that on merit it was  found that no substantial question of law arose for consideration refused to  remit the matter back holding:

"The offshoot of the above discussion is that no question  of law much less a substantial question of law arose in  the case worth being gone into by the High Court in  exercise of its second appellate jurisdiction under Section  100 CPC. The High Court was bound by the findings of  fact arrived at by the two courts below and should not  have entered into the exercise of reappreciating and  evaluating the evidence. The findings of facts arrived at  by the courts below did not suffer from any perversity.  There was no non-reading or misreading of the evidence.  A high degree of preponderance of probability proving  title to the suit property was raised in favour of the  appellant and the courts below rightly concluded the  burden of proof raised on the plaintiff having been  discharged while the onus shifting on the defendant  remaining undischarged\005"

       For the reasons aforementioned, the impugned judgment cannot be  sustained.  It is set aside accordingly and the matter is remitted to the High  Court for consideration of the matter afresh in accordance with law.

       For the reasons aforementioned, Civil Appeal Nos. 6271 and 6273 of  2003 are dismissed and Civil Appeal No. 6269 of 2003 is allowed. No costs.