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PETITIONER: THE CHARTERED BANK, BOMBAY

       Vs.

RESPONDENT: THE CHARTERED BANK EMPLOYEES’ UNION.

DATE OF JUDGMENT: 04/04/1960

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

CITATION:  1960 AIR  919            1960 SCR  (3) 441  CITATOR INFO :  R          1963 SC 411  (3)  R          1963 SC 601  (6)  R          1965 SC 917  (5)  APL        1965 SC1496  (5)  R          1966 SC1672  (6)  F          1972 SC1343  (11)  RF         1973 SC2634  (6)  RF         1975 SC 661  (13,15)  RF         1980 SC1896  (173)

ACT: Industrial   Dispute--Chief  Cashier  of  Bank   withdrawing guarantee  in respect of Assistant  Cashier--Termination  of service  of  Assistant  Cashier  by  Bank  without   holding enquiry--Validity  of--All India Industrial  Tribunal  (Bank Disputes) Award, 1953, paras. 521, 522(1).

HEADNOTE: The  system  of  working  in  the  cash  department  of  the appellant Bank was that there was a Chief Cashier and  there were  about thirty Assistant Cashiers under him.  The  Chief Cashier  had  to  give security for the  work  of  the  cash department; the Assistant Cashiers were employed upon  being introduced  by  the Chief Cashier who guaranteed  each  such employee.  There was long standing practice in the Bank that at the end of the day when the cash was locked up under  the supervision of the Chief Cashier, all the assistant cashiers had  to be present so that the cash could be checked  before being  locked  up.  In spite of reminders  C,  an  Assistant Cashier, had been leaving the Bank without the permission of the Chief Cashier for some time before the cash was  checked and locked up.  The Chief Cashier reported the matter to the management,  withdrew  his  guarantee in respect  of  C  and stated that unless the services of C were dispensed with his conduct  would affect the security of the  cash  department. The Bank terminated the services of C in accordance with the provisions  of  para.  522(1) of the  All  India  Industrial Tribunal  (Bank Disputes) Award, 1953, without  holding  any enquiry  against  C. The Industrial Tribunal  to  which  the dispute  was  referred  held that this was in  fact  and  in reality a case of termination of services for misconduct and

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the  Bank ought to have followed the procedure laid down  in para. 521 of the Bank Award for taking disciplinary  action, that the termination of service was illegal and improper and that  C was entitled to reinstatement with full  back  wages and other benefits : Held,  that  the  services of  the  Assistant  Cashier  were properly terminated by the Bank.  There was no doubt that an employer could not dispense with the services of a permanent employee  by  mere  notice and  claim  that  the  industrial tribunal   had   no  jurisdiction  to   inquire   into   the circumstances  of such termination.  Even in a case of  this kind the requirement of bona fides was essential and if  the termination  of  service was a colourable  exercise  of  the power  or  as  a result of victimisation  or  unfair  labour practice the tribunal had jurisdiction to interfere.   Where the  termination  of service was  capricious,  arbitrary  or unnecessarily   harsh  that  may  be  cogent   evidence   of victimisation  or  unfair labour practice.  In  the  present case the security of the 442 Bank was involved and if the Bank decided that it would  not go  into  the squabble between the Chief Cashier and  C  and would  use para. 522(1) of the Bank Award to  terminate  the services  of C it could not be said the Bank was  exercising its  power under para. 522(1) in a. colourable  manner.   It was  not  necessary that in every case where  there  was  an allegation  of misconduct the procedure under para. 521  for taking disciplinary action should be followed. Buckingham  and  Carnatic Company Ltd. v.  Workers’  of  the COmpany, 1952 L.A.C. 490, approved.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 14 of 1959. Appeal  by special leave from the Award dated  February  21, 1958, of the Central Government Industrial Tribunal,  Nagpur at Bombay, in Reference CGIT No. 12 of 1957. Sachin  Chaudhury,  S.  N. Andley,  J.  B.  Dadachanji  and, Rameshwar Nath, for the appellant. A.   S.  R. Chari and Y. Kumar, for the  respondents.  1960. April 4. The Judgment of the Court was delivered by WANCHOO,  J.-This  is  an  appeal by  special  leave  in  an industrial  matter.   The appellant is The  Chartered  Bank, Bombay  (hereinafter called the Bank).  There was a  dispute between  the Bank and its workmen regarding the  termination of  the  service, of one Colsavala (hereinafter  called  the respondent)  who was working as an assistant cashier in  the Bank.   The system of working in the cash department of  the Bank  is  that there is a chief cashier and  under  him  are about  thirty assistant cashiers.  The Chief Cashier has  to give   security  for  the  work  of  the  cash   department. Consequently  all assistant cashiers are employed  upon  the introduction  of the Chief Cashier who guarantees each  such employee.   By  virtue of this guarantee the  Chief  Cashier alone  is  unconditionally responsible to the Bank  for  any shortage  which  might occur in the cash department  and  no security  is  taken  from  the  assistant  cashiers  working therein.   In  view of this guarantee by the  Chief  Cashier there  has been a longstanding practice in the Bank that  at the  end  of the day when the cash is locked  up  under  the supervision of the Chief Cashier, all the assistant cashiers have to be present so that the cash may be checked before 443 being  locked  up.  Assistant Cashiers  therefore  can  only

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leave  the  Bank  before the locking up of  the  cash  after obtaining permission of the Chief Cashier. On  January  4,  1957, the Chief  Cashier  reported  to  the management  that  the respondent had been leaving  the  Bank without  his permission for some time past before  the  cash was  checked  and  locked  up in spite of  the  issue  of  a departmental  circular in that behalf on December 24,  1956, by  which all assistant cashiers (including the  respondent) were reminded of the longstanding practice that no assistant cashier should leave the Bank without the permission of  the Chief  Cashier before the cash was checked and  locked  tip. The  Chief  Cashier therefore stated that he was  unable  to continue  to  guarantee the respondent and that  unless  the respondent’s  service  was dispensed with his  conduct  will affect  the  security of the cash department.  As  the  Bank was- not prepared to change the system in force in the  cash department,  the  management decided to  dispense  with  the service  of  the respondent in accordance with the  mode  of termination prescribed by paragraph 522(1) of the All  India Industrial  Tribunal  (Bank Disputes) Award of  March,  1953 (hereinafter  referred to as the Bank Award).  The Bank  was also   unable  to  employ  the  respondent  in   any   other department.   It therefore informed the respondent on  March 29, 1957, that as the guarantee covering his employment  had been  withdrawn by the Chief Cashier the Bank was unable  to continue to employ him.  The notice required under paragraph 522(1)  was  given  and the amount  due  to  the  respondent including retrenchment compensation was paid to him and  his service  was terminated.  Thereupon a dispute was raised  by the  workmen  of the Bank and a reference was  made  by  the Central  Government to the Industrial Tribunal with  respect to the "alleged wrongful termination of the services of Shri N.  D.  Colsavala  by the Chartered Bank,  Bombay,  and  the relief, if any, to which he is entitled." The  case on behalf of the respondent was that he  had  been working  in the Bank since September 1, 1937,  honestly  and efficiently  as an assistant cashier in the cash  department The previous Chief Cashier who 444 was  the father of the present Chief Cashier however  became hostile to him since 1943, because he claimed his legitimate dues  for  overtime  work and leave  which  the  then  Chief Cashier was not prepared to allow.  Further the respondent’s letter  of  appointment  did  not oblige  him  to  give  any security  or  to  procure any guarantee  and  if  the  Chief Cashier had given any guarantee to the Bank, the  respondent was  not concerned with it and had even no knowledge of  it. He  was given no opportunity to contest the reasons for  the withdrawal of the guarantee by the Chief Cashier; nor was he asked  to furnish security or give a fidelity bond, even  if the   Chief  Cashier  had  withdrawn  the   guarantee.    In consequence the discharge of the respondent from service  on the ground given by the Bank was entirely illegal,  wrongful and  unjustified and he was entitled to reinstatement or  in the alternative to full compensation for loss of employment. The  case of the Bank was that it was entitled to  terminate the service of the respondent under paragraph 522(1) of  the Bank  Award  and  it was not incumbent on it  to  state  the reasons  for such termination and the reasons could  not  be inquired   into  or  examined  by  the  tribunal.   In   the alternative it was submitted that if the tribunal was of the opinion that it was open to it to inquire into the  reasons, the Bank’s case was that the respondent was not dismissed or discharged by way of punishment for any misconduct and  that the  Bank  merely  terminated his  service  under  paragraph

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522(1)  of  the  Bank  Award,  as  his  guarantee  had  been withdrawn  by  the Chief Cashier and it  was  impossible  to continue to employ him in the circumstances, the Bank being. unprepared to change its system of working which has already been  mentioned above.  It was also said that the  Bank  was not  bound to transfer the respondent to another  department and  in  any  case the  respondent’s  training,  experience, ability  or  record did not fit him for work  in  any  other department of the Bank. The  tribunal held that even though the Bank had  chosen  to follow  the procedure laid down in paragraph 522(1)  of  the Bank Award which provides for termination of employment  "in cases not involving 445 disciplinary action for misconduct, by three months’  notice or on payment of three months’ pay and allow. ances in  lieu of notice", this did not preclude it from inquiring into the reasons for the termination of service and into the legality and/or  propriety of the action taken by the bank  and  that paragraph  522(1)  did not give a free hand to the  Bank  to dispense  with the service of a permanent employee at  will. It  also  held that it was always open to  the  tribunal  to inquire into the bona fides as well as justifiability of the action taken.  It then went into the circumstances in  which the  termination  of service took place and was  of  opinion that  this was in fact and in reality a case of  termination of  service for misconduct, and that it was the duty of  the Bank to follow the procedure for taking disciplinary  action for the alleged insubordination and persistent  disobedience of  the orders of the Chief Cashier by the  respondent  with respect  to  leaving the Bank without his  prior  permission before  the cash was checked and looked up and  inasmuch  as the  Bank  failed to follow the requisite procedure  as  was laid   down  in  paragraph  521  of  the  Bank  Award,   the termination of the service of the respondent was illegal and improper and he was entitled to reinstatement with full back wages  and other benefits.  It is this order which is  being challenged before us by the Bank. The  main  contention on behalf the Bank is  that  the  view taken by the tribunal that in every case where there may  be some  misconduct  the  Bank is bound  to  take  disciplinary action under paragraph 521 of the Bank Award makes paragraph 522(1)  completely otiose and is erroneous.  Further  it  is contended  that  in the peculiar position obtaining  in  the cash  department  of  the Bank  whereby  the  Chief  Cashier guarantees all the assistant cashiers working under him, the Bank did not want to go into the squabble between the  Chief Cashier  and  the respondent and as the  Chief  Cashier  had withdrawn the guarantee of the respondent, the Bank  decided without apportioning any blame between the Chief Cashier and the  respondent  to act under paragraph 522(1) of  the  Bank Award.  It is urged that paragraph 522(1) of the Bank  Award is 57 446 particularly meant to meet situation,,; like this which  may arise in a banking concern. The first question that arises therefore is the scope of the power of the Bank to act under paragraph 522(1) of the  Bank Award, particularly in the peculiar situation prevailing  in the  cash department of the Bank.  The position in the  cash department of the banks was considered by the Bank Award  in Chapter  XXI with respect to giving of security.   In  para- graphs  417 and 418, the existing practice in various  banks is  summarised and it takes one of three forms,  namely--(i)

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every member of the staff is to give security, (ii) the head cashier  gives  a guarantee on behalf of  all  the  cashiers working  under  him, and (iii) where  the  treasurer  system prevails, the treasurer enters into a contract with the bank and  recommends  the employees for employment  in  the  cash department  and  guarantees  their  fidelity  and  they  are thereupon appointed by the bank.  The tribunal was not right in  saying that the system which was prevailing in the  Bank was peculiar to it and was not mentioned in the Bank  Award. It will be seen that the system in the Bank is of the second kind  noticed  in  the Bank Award where  the  Chief  Cashier guarantees  all  those  working  under  him.   It  is   also mentioned in the Bank Award that the Chief Cashier generally takes  security deposits from persons working under him  but that  did not appear to be the invariable rule, and  in  the Bank  the Chief Cashier does not take any security from  his subordinates.  In such a system the Bank has to depend  upon the security given by the Chief Cashier and his guarantee of the employees working under him.  It is impossible to accept that  this way of working was not known to  the  respondent. The  Bank  has  produced the  respondent’s  application  for employment and it is significant that it is addressed to the Chief Cashier and not to the management of the Bank and this bears  out the contention of the Bank that the  subordinates in the cash department are employed on the recommendation of the  Chief Cashier who gives guarantee for them.   Nor  does the  Bank’s  contention  that no one employed  in  the  cash department  leaves  without  permission  till  the  cash  is checked and locked up appears 447 improbable,  for  the  practice  seems  necessary  for   the security  of the cash department.  Therefore when  the  Bank was  faced with the report of the Chief Cashier  dated  4-1- 1957, it had to decide in the special circumstances of  this case  what  action  should be taken  on  that  report.   Two courses  were open to it: it could have  taken  disciplinary action  under  paragraph 521 of the Bank Award or  it  could have acted under paragraph 522(1).  The submission on behalf of the Bank is that it did not want to go into the  squabble between  the  Chief Cashier and the respondent  and  as  the Chief  Cashier had withdrawn his guarantee with  respect  to the  respondent  it  acted bona  fide  in  proceeding  under paragraph  522(1) and thus no question arose of  its  taking disciplinary action against the respondent. There is no doubt that an employer cannot dispense with  the services  of a permanent employee by mere notice  and  claim that the industrial tribunal has no jurisdiction to  inquire into the circumstances in which such termination of  service simpliciter   took   place.   Many  standing   orders   have provisions  similar to paragraph 522(1) of the  Bank  Award, and the scope of the power of the employer to act under such provisions  has  come  up for  consideration  before  labour tribunals  many a time.  In Buckingham and Carnatic  Company Ltd., Etc., v. Workers of the Company, etc. (1), the  Labour Appellate  Tribunal  had occasion to  consider  this  matter relating  to  discharge  by notice or  in  lieu  thereof  by payment of wages for a certain period without assigning  any reason.  It was of opinion that even in a case of this  kind the  requirement  of  bona fides is  essential  and  if  the termination of service is a colourable exercise of the power or  as a result of victimisation or unfair  labour  practice the  industrial  tribunal  would have  the  jurisdiction  to intervene  and set aside such termination.  Further it  held that  where  the  termination  of  services  is  capricious, arbitrary or unnecessarily harsh on the part of the employer

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judged  by normal standards of a reasonable man that may  be cogent evidence of victimisation or unfair labour  practice. We are of opinion that this correctly lays down the scope of the power of the tribunal to (1)  [1952] L.A.C. 490. 448 interfere where service is terminated simpliciter under  the provisions  of a contract or of standing orders or  of  some award  like  the Bank Award.  In order to  judge  this,  the tribunal  will have to go into all the  circumstances  which led  to the termination simpliciter and an  employer  cannot say  that  it  is not bound to  disclose  the  circumstances before  the tribunal.  The form of the order of  termination is not conclusive of the true nature of the order, for it is possible  that  the form may be merely a camouflage  for  an order  of dismissal for misconduct.  It is therefore  always open  to the tribunal to go behind the form and look at  the substance;  and if it comes to the conclusion, for  example, that  though  in  form  the  order  amounts  to  termination simpliciter it in reality cloaks a dismissal for  misconduct it  will  be  open to it to set it  aside  as  a  colourable exercise of the power. It  is on these principles therefore that we have  to  judge the action taken by the Bank in this case.  In the statement of  claim put in by the workmen there was no  allegation  of victimisation  or unfair labour practice.  An affidavit  was filed  by the respondent later before the tribunal in  which it  was said that the Bank had acted mala fide  in  removing him from service.  But in this affidavit nothing was said as to how the management of the Bank as distinct from the Chief Cashier  had  any  reason  to  act  mala  fide  against  the respondent.  The tribunal also has not recorded any  finding that  the action of the Bank in terminating the  service  of the  respondent was mala fide or amounted to  unfair  labour practice  or  was  a  case  of  victimisation.   It  ordered reinstatement  on  the  ground that this was  a  case  where disciplinary action must and should have been taken and that was  not  done.  In one part of the award the  tribunal  has remarked  that  if it is found that the Bank has  merely  in colourable  exercise  of  the power  made  the  order  under paragraph  522(1) of the Bank Award, the order would not  be sustainable.  But there is no finding that the action  taken in  this case was a colourable exercise of the  power  under paragraph  522(1).  It is, however, urged on behalf  of  the respondent that even though there is no such finding by  the tribunal a perusal of the entire award seems 449 to show that this was what the tribunal thought inasmuch  as it  has  said  that this was a case  in  which  disciplinary action must and should have been taken.  However, as we read the  award  of the tribunal, the impression that we  get  is that  its view was that where there is an  allegation  which may amount to misconduct against an employee of a bank,  the procedure  under paragraph 521 must always be  followed  and that  the  procedure  under paragraph 522(1)  can  never  be followed;  and  that is why the tribunal did  not  give  any finding  that  the  action  of the  Bank  was  a  colourable exercise  of  the  power under  paragraph  522(1).   But  as learned counsel for the respondents has urged before us that the action in this case is in any case a colourable exercise of the power under paragraph 522(1) we propose to look  into this aspect of the matter ourselves. It  is  true that there was some kind of allegation  by  the Chief  Cashier which may amount to misconduct in  this  case and if we were satisfied that the termination of service  of

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the respondent was due to that misconduct and that the  form of  the order was merely a cloak to avoid holding  a  proper enquiry under paragraph 521, no doubt there would have  been no  case  for interference with the order of  the  tribunal. But this is a peculiar case depending upon a peculiar system prevalent  in the cash department of the Bank.  That  system is  that  the Chief Cashier gives security  for  the  entire working  of  the  cash  department  and  is  unconditionally responsible  for  any loss that might be occasioned  to  the Bank   in  that  department.   The  appointments   in   that department  are  made  on the recommendation  of  the  Chief Cashier and he gives a guarantee about each employee and  is unconditionally  responsible  to the Bank for  any  shortage which  might occur.  It is in these circumstances  that  the Bank was faced with the report of the Chief Cashier by which for the reason given by him he withdrew the guarantee so far as  the respondent was concerned.  The security of the  cash department  was thus involved and if the Bank decided as  it seems  to have done in this case that it would not  go  into the  squabble between the Chief Cashier and  the  respondent and would use paragraph 522(1) of the 450 Bank  Award  to terminate the service of the  respondent  it cannot be said that the Bank was exercising its power  under paragraph  522(1)  in  a colourable  manner.   It  may  have honestly  come to the conclusion that in this situation,  as it was not possible for it to change its system in the  cash department, there was no option for it but to dispense  with the service of the respondent under paragraph 522(1) of  the Bank  Award without going into the rights and wrongs of  the dispute  between the Chief Cashier and the  respondent.   In the  peculiar circumstances therefore obtaining in the  cash department of the Bank it cannot in our opinion be said that the  use of the power under paragraph 522(1) by the Bank  in the  present case was a colourable exercise of  that  power. Nor  do  we think that the failure of the  Bank  to  provide alternative employment for the respondent would lead to  any such inference,, for the Bank may very well be right when it says  that it is a specialised institution  and  considering that  the respondent has been working in one department  for the  last  twenty  years he was not fit to  be  absorbed  in another  department.   In  the circumstances  of  this  case therefore  we are not prepared to hold that the  termination of  the service of the respondent was a colourable  exercise of the power under paragraph 522(1) of the Bank Award.   The mention  of the fact that the service was  being  terminated because the Chief Cashier had withdrawn the guarantee of the respondent  in the notice of. discharge will not change  the nature  of  the  termination,  for  the  reason  was   given obviously  to  avoid  the charge that  the  termination  was entirely  capricious  or arbitrary, and therefore  not  bona fide. We therefore allow the appeal and set aside the order of the tribunal   by  which  the  respondent  was  ordered  to   be reinstated with full back wages and other benefits.  In  the circumstances we pass no order as to costs. Appeal allowed. 451