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PETITIONER: WASIM BEG

       Vs.

RESPONDENT: STATE OF UTTAR PRADESH & ORS.

DATE OF JUDGMENT:       05/03/1998

BENCH: SUJATA V. MANOHAR, D.P. WADHWA.

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T Mrs. Sujata V. Manohar, J.      Leave Granted.      The appellant was appointed as Assistant Manager in the respondent-U.P.  State  Leather  Development  and  Marketing Corporation on 22.11.1974.      On 10th of January, 1978 the appellant was selected and appointed  as   Divisional  Manager   in   the   respondent- Corporation. The  letter of  appointment which is dated 10th of January, 1978 states as follows :-      "...........      His   appointment    will   be   on      probation for  a period of one year      which  can   be  extended   at  the      discretion    of    the    Managing      Director. His  services are  liable      to be  terminated  on  one  month’s      notice or  salary in  lieu thereof.      He will  be governed by the Service      Rules of the Corporation........."      The appellant  continued to  work as Divisional Manager of the  respondent-Corporation till 21st of April, 1981 when he  was   re-designated  as   Works  Manager.  He  continued thereafter in the said post. In April 1983 he was allowed to cross the Efficiency Bar.      It is  the contention  of the respondent that initially the work of the appellant was good but subsequently his work and performance  deteriorated  as  a  result  of  which  the Corporation had  to suffer  losses. The  appellant was given several warnings but his performance did not improve. At the meeting  of  the  Board  of  Directors  of  the  respondent- Corporation held  on  8th  of  February,  1985,  the  entire service record  of the appellant together with the report of the Managing  Director was  placed before  the Board.  After perusing the report and the service record of the appellant, the Board  took a  decision to terminate the services of the appellant. This  decision was  confirmed at the next meeting of the Board of Directors held on 31st of March, 1985.      Thereupon, an  order dated  31st  of  March,  1985  was issued terminating  the services of the appellant. The order

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stated that the appellant was discharged from the service of the Corporation  with immediate  effect and  that in lieu of three months’  notice he  will be paid three months pay. The pay for  three months  was deposited  in the  account of the appellant by the respondents.      From 31st of March, 1985 the appellant absented himself from work  and his  whereabouts were not known. As the order of termination  could not  be served  on him, ultimately the respondent-Corporation published  a  notice  dated  12th  of April, 1985  in Hindi  newspaper ’Amar Ujala’ published from Agra to  the effect  that the  services of the appellant had been terminated  as per Board’s Resolution No, 57.19 and the registered order  dated 31.3.1985  and that in lieu of three months’ notice  three months’  pay had been deposited in the appellant’s personal savings account.      The appellant  filed a  writ petition against the order of termination  in the  High Court of Allahabad on  18th the April, 1985  being Writ  Petition No.  5464 of 1985. In this writ petition the High Court granted on 19th of April, 1985, an interim  stay of the order of termination. However, since the appellant did not join service after the stay order, the High Court  vacated the  stay order on 6th of November, 1985 observing that  the appellant  would  be  entitled  to  full salary in case he succeeds.      The writ  petition has been ultimately dismissed by the High Court  by its  impugned order dated 29.4.1997. The High Court has upheld the order of termination on the ground that the appellant  was a  probationer on the date of termination of his  services n 31st of March, 1985. Hence termination by three months’ notice was a valid termination.      The Service  Rules which  were in  force at the time of the appellant’s appointment as Divisional Manager were Model Service Rules  for State  Enterprises which  were adopted by the respondent-Corporation  by a   resolution  dated 30th of July, 1976.  The relevant  Rule relating  to appointment  on probation was as follows :-      "Any employee  regularly  appointed      for the  first time  or promoted to      any   post in the corporation shall      be placed on probation for a period      of  one   year  from  the  date  of      joining the new post.      The performance  of the employee in      the new post will be watched during      the   probation and  the appointing      authority will  issue a certificate      of having  satisfactorily completed      the probation  at the  end  of  the      period.  The  appointing  authority      has   discretion    to   appointing      authority has  discretion to extend      the  period  of  probation  without      assigning any reason therefore."      The relevant  Rule  relating  to  confirmation  was  as follows :-      "Confirmation:      An employee  directly appointed  or      promoted  to   any  post   in   the      Corporation shall be deemed to have      become a confirmed employee in that      grade  after  he  has  successfully      completed the period of probation.      A   confirmed   employee   may   be      discharged from  the service of the      corporation under the orders of the

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    competent authority on three months      notice or by giving 3 months salary      in  lieu   thereof.  The  competent      authority for purposes of this Rule      will be  the next higher level than      the appointing  authority for  that      category  of  post.  The  competent      authority     on      getting     a      recommendation from  the appointing      authority for  the discharge  of  a      confirmed  employee   with  reasons      therefore, may  give an opportunity      to  the   employee  concerned   for      explaining himself before coming to      a decision.      This provision  in the Rules should      obviously    be    sparingly    and      discreetly used  only top  weed out      inefficient employees  who is spite      of  a   number  of   warnings   and      admonition have  failed to  correct      themselves or  employees who are in      the  opinion   of  the   Board   of      Directors or the Managing Directors      as the case may be not suitable for      continued   employment    of    the      Corporation. The discharge shall be      only  on   grounds   of   continued      inefficiency    or     dishonestly,      serious  dereliction   of  duty  or      moral turpitude  and is  not to  be      considered as  a  punishment  under      the                    disciplinary      proceedings............"      A confirmed  employee could  be  discharged  by  giving three months’  notice or  by giving  three months  salary in lieu thereof  under the  circumstances set  out in  the Rule relating  to  confirmation.  However,  in  the  case  of  he discharge of  an employee during the period of probation the notice required  is 30  days of  notice in  writing or a sum equal to  30 days’  substantive pay plus dearness allowance. The discharge  of a confirmed employed is permissible on the grounds set out in the said Rule after hearing the employee.      With effect  from 1st  of January, 1981, the U.P. State Leather  Development   and  Marketing   Corporation  Limited General Rules  came into force replacing the earlier Service Rules. Under  the new  Rules of  1981 also  there were Rules which provided  for probation and confirmation. The relevant Rule relating to appointment on probation was as follows :-      "Any employee  regularly  appointed      for the  first time  or promoted to      any post  in the  Corporation shall      be placed on probation for a period      of  one   year  from  the  date  of      joining   the    new   post.    The      performance of  the employee in the      new post will be watched during the      probation   and    the   appointing      authority will  issue a certificate      of having  satisfactorily completed      the probation  at the  end  of  the      period.  The  appointing  authority      has discretion to extend the period      of probation  for two years without      assigning  any   reason   therefor.

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    After the  expiry of  three  years’      probationary period if the employee      is not  confirmed, he  will have  a      right to  represent his case to the      Board  whose   decision  shall   be      final."      Discharge during  the period  of probation as under the earlier Rules  was by 30 days notice in writing or sum equal to one  month’s substantive pay plus dearness allowance. The Rule relating  to confirmation  under  these  Rules  was  as follows :-      "An employee  directly appointed or      promoted  to   any  post   in   the      Corporation shall be deemed to have      become a confirmed employee in that      grade  after  he  has  successfully      completed the period of probation.      A   confirmed   employee   may   be      discharged from  the service of the      Corporation under the orders of the      competent   authority    on   three      months’  notice   or  by  giving  3      months salary  in lieu thereof. The      competent authority for purposes of      this Rule    will  be  next  higher      level than the appointing authority      for  that  category  of  post.  The      competent authority  of  getting  a      recommendation from  the appointing      authority for  the discharge  of  a      confirmed  employee   with  reasons      thereof, may give an opportunity to      the    employee    concerned    for      explaining himself before coming to      a decision.      This provision  in the  Rule should      obviously    be    sparingly    and      discreetly used  only to  weed  out      inefficient employees  who in spite      of  a   number  of   warnings   and      admonition have  failed to  correct      themselves or  employees who are in      the  opinion   of  the   Board   of      Directors    or     the    Managing      Directors, as  the case may be, not      suitable for  continued  employment      of the Corporation.      The  discharge  shall  be  only  on      grounds of  continued  inefficiency      or dishonesty,  serious dereliction      of duty  or conviction  by a  court      involving moral  turpitude  and  is      not be  considered as  a punishment      under the disciplinary proceedings.      ........................"      The appellant  was appointed on probation as Divisional Manager on  10.1.1978. The  letter of  appointment mentioned that his  probation was  for a period of one year. under the earlier Service Rules then in force, the respondents had the discretion  to   extend  the  period  of  probation  without assigning any  reason therefor.  But there was no such order extending the  period of  probation of he appellant. A s per the Rule relating to probation, the appointing authority was required to  issue tot  he appellant a certificate of having satisfactorily  completed   probation  at  the  end  of  the

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probationary period.  No such  certificate has  been issued. The Rule  relating to  Confirmation states that the employee shall be  deemed to have become  confirmed employee after he has successfully  completed the  period  of  probation.  The deemed confirmation  depends on  satisfactory completion  of probation. The  High Court  has taken the view that since no certificate has been issued by the respondents at the end of one year about the appellant having satisfactorily completed his period  of probation,  he remained  on probation  for  a period of  seven years  till 1985  when  his  services  were terminated by the order of 31st of March, 1985.      We find  from the affidavit in reply which was filed by the respondents  in the writ petition before the High Court, that the  respondents    have  nowhere  contended  that  the appellant was on probation or that his order of discharge is on the  basis that he was a probationer. On the contrary, in paragraph 8 of the affidavit of Shri N.D. Singhal, Assistant Secretary of  the respondent-Corporation,  which  was  filed before the  High Court, it is stated that an employee of the Corporation first  placed on probation and before the expiry of the  probationary period  no notice  or pay  in  lieu  of notice is  required to be given (sic.). This (i.e. notice or pay in lieu of notice) is required to be given only when the services of the employee concerned are confirmed.      In the  said affidavit  the respondent-Corporation  has also reproduced  extracts from  the report  submitted by the Managing Director  in the  meeting of the Board of Directors held on 8th of April, 1985. The Managing Director has stated in the report, inter alia, as follows :-      "Shri Wasim Beg who had joined this      Corporation of 24.11.1974 as Asstt.      Manager and  was  promoted  to  the      post of  Divisional Manager  in the      scale of  pay Rs. 800-1450 (revised      Rs.  1350-3100)  per  month  w.e.f.      10.1.79 on  a regular basis. He was      put   in    charge    on    regular      basis..................."      The  date   10.1.1979,  as  the  date  from  which  the appellant worked on regular basis, is significant because it shows the  end of  the probationary  period of one year from the date  of hi  appointment on  10.1.1978. The  respondent- Corporation,   therefore, did  not contend  before the  High Court,  however,   has  held   that  the   appellant  was  a probationer on  the basis of the Service Rule which was then in force.      Whether an  employee at the end of  probationary period automatically gets  confirmation in  the post  or whether an order of confirmation or any specific act on the part of the employer confirming  the employee  is necessary, will depend upon the  provisions in  the relevant Service Rules relating to probation and confirmation. There are broadly two sets of authorities of  this Court  dealing with  this question.  In those cases  where the Rules provide for a maximum period of probation beyond  which probation  cannot be  extended, this Court had  held that  at the end of the maximum probationary period there  will be  deemed confirmation  of the  employee unless Rules  provide to  the contrary.  This is the line of cases starting  with State  of Punjab  v. Dharam Singh (1968 [3] SCR  1), M.K.  Agarwal v.  Gurgaon Gramin  Bank  &  Ors. (1987) Supp. SCC 643), Om Prakash Maurya v. U.P. Cooperative Sugar Factories  Federation, Lucknow  & Ors. (1986 Supp. SCC 95), State  of Gujarat  v. Akhilesh  C. Bhargav & Ors. (1987 [4] SCC 482).      However, even when the Rules prescribe a maximum period

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of probation,  if there  is a further provision in the Rules for  continuation  of  such  probation  beyond  the  maximum period, the  courts have  made an  exception and  said  that there will  be no  deemed confirmation in such cases and the probation period  will be  deemed to  be extended.  In  this category of  cases we  can place  Samsher Singh  v. State of Punjab & Anr. (1974 [2] SCC 831) which was the decision of a Bench of  seven judges  where the principle of probation not going beyond  the maximum period fixed was reiterated but on the basis  of the  Rules which  were before  the Court, this Court said  that the  probation  was  deemed  to  have  been extended. A  similar view was taken in the case of Municipal Corporation, Raipur v. Ashok Kumar Misra (1991 [3] SCC 325). In Satya  Narayan Athya  v. High  Court of  Madhya Pradesh & Anr. (1996  [1] SCC 560), although the Rules prescribed that the probationary  period should not exceed two years, and an order of  confirmation was  also necessary,  the termination order was  issued within  the extended  period of probation. Hence the termination was upheld.      The other line of cases deals with Rules where there is no maximum  period prescribed for probation and either there is a Rule providing for extension of probation or there is a Rule which  requires a  specific act,  on the  part  of  the employer (either  by issuing an order of confirmation or any similar act)  which would  result  in  confirmation  of  the employee. In  these cases  unless there  is such an order of confirmation, the  period of  probation would  continue  and there would  be no  deemed confirmation  at the  end of  the prescribed probationary  period. In  this line  of cases one can put  Sukhbans Singh  v. State  of Punjab  (1963 [1]  SCR 416), State of Uttar Pradesh v. Akbar Ali Khan (1966 [3] SCR 821), Shri  Kedar Nath  Bahl v.  The State  of Punjab & Ors. (1974 [3]  SCC 21), Dhanjibhai Ramjibhai v. State of Gujarat (1985 [2]  SCC 5) and Tarsem Lal Verma v. Union of India and Ors. (1997  [9] SCC  243), Municipal  Corporation, Raipur v. Ashok Kumar  Misra (supra)  and State  of Punjab  v.  Baldev Singh Khosla  (1996 [9]  SCC 190).  In the  recent  case  of Dayaram Dayal  v. State  of M.P. and Anr. (AIR 1997 SC 3269) (to which  one of  us was a party) all these cases have been analysed and  it has  been held that where the Rules provide that the  period of probation cannot  be extended beyond the maximum period  there will  be a  deemed confirmation at the end of  the maximum  probationary  period  unless  there  is anything to the contrary in the Rules.      In the present case under the Service Rules in force at the time  when the  appellant was  appointed  on  probation, there was  no time-limit on the period up to which probation can be  extended. The  appointing authority  was required to issue a  certificate of  the appellant having satisfactorily completed the period of probation. The provision relating to deemed  confirmation   would  come   into  effect   on   his satisfactorily  completing  probationary  period.  From  the affidavit  filed   by  the  respondent-Corporation  as  also looking to  the report  which was  submitted by the Managing Director to  the Board of Directors on 8.2.1985, it is clear that the  appellant was  considered by  the  respondents  as having satisfactorily  completed his  period of probation on 9.1.1979, an  d he was considered as a regular employee form 10.1.1979. In  the affidavit  of the  respondent-Corporation before the  High Court  also it  has been very fairly stated that the services of the appellant were satisfactory for the first few  years and  his work  was   very good. It was only thereafter that  serious problems  arose regarding  his work and the  corporation suffered losses on that account. It is, therefore, not  possible to hold that the appellant remained

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a probationer till his discharge.      The respondents,  however, contend that the services of the appellant  have been  terminated validly  in  accordance with the  provisions relating  to discharge of employees. On 31.3.1985 when  the appellant was discharged the new Service Rules framed  by the  respondent-Corporation were  in  force which have  been set  out hereinabove.  Under those  Service Rules a confirmed employee can be discharged form service on three months’  notice or  giving  three  months’  notice  or giving three  months’ salary in lieu thereof. In the present case, the  fact that  such three  months’  notice  or  three months’ salary  in lieu  thereof was  given to the appellant would also  indicate that  he was  treated  as  a  confirmed employee. As  a probationer he would have been entitled only to 30  days’ notice.  The  relevant  Service  Rule  set  out earlier further  provides that  discharge in  the case  of a confirmed  employee   should  be  only  on  the  grounds  of continued inefficiency or dishonesty, serious dereliction of duty or conviction by a court. It should be used to weed out inefficient employees who, in spite of a number of warnings, have failed  to correct themselves or employees who are not, in  the   opinion  of  the  Board,  suitable  for  continued employment. The   report  of the Managing Director which was placed before  the Board  of Directors  gives cogent reasons for his  discharge. His  conduct in  connection with several contracts has  been set  out in detail in the report and the loss occasioned  thereby to  the respondent-Corporation  has also been  set out  in detail.  It was  on the basis of this report that  the Board of Directors decided to terminate the services of  the appellant.  The  appellant  had  also  been earlier warned by the Managing Director. Therefore, there is no breach of this part of the Rule relating to discharge.      However, there  is an  important safeguard in this Rule relating to discharge of a confirmed employee. The competent authority under  the Rule is required to give an opportunity to the  employee concerned  for  explaining  himself  before coming to  a decision  regarding  his  discharge.  The  Rule provides  that   the  competent   authority  on   getting  a recommendation  from   the  appointing   authority  for  the discharge of  a confirmed employee with reasons thereof, may give an opportunity to the employee concerned for explaining himself before  coming to a decision. Although the word used is ’may’,  in the  context it has to be construed as ’shall’ so that  the principles of natural justice are complied with when the  principles of  natural justice  are complied  with when the  competent authority  considers the  question    of discharge of  an employee  for reasons  which are set out in the Rule. Even if one assumes that the earlier service Rules apply to  the appellant,  the earlier service Rules are also similar and  they also  require that  the employee should be heard before  taking a  decision  on  the  discharge  of  an employee. This  was not  done in  the present  case although very serious allegations were levelled against the appellant in the  report of the Managing Director, and the appellant’s conduct in  respect  of  a  number  of  contracts  had  been seriously questioned  in the  report.  Apart  from  anything else,  when   the  Rules   specifically  require   that   an opportunity of  explaining himself  should be  given to  the employee, the  denial  of  such  opportunity  is  a  serious violation of  the principles of natural justice and vitiates the decision.  The order  of termination,  therefore, cannot be sustained looking to the relevant Rules, and applying the e principles of natural justice when the employee and is not a  probationer.   The  impugned  order  of  termination  is, therefore, set aside.

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    We are  informed that  the  appellant  would  otherwise retire on  superannuation  in  June  1998.  The  respondent- Corporation has  also stated that the financial condition of the Corporation  is very  poor as  it has  already  incurred accumulated   losses of  Rs.669-65 lakhs  against the  total paid-up capital  of Rs.  573.94 lakhs. The activities of the Corporation have  been partially  closed down  by Government Order  dated  20.1.1994  and  the  Corporation  has  already resorted to the process of retrenchment of a large number of employees.  Looking  to  all  the  facts  and  circumstances monetary  compensation   to  the   appellant  for   wrongful termination  would  serve  the  ends  of  justice.  In  this connection, the respondent- Corporation has pointed out that on 19th  of April, 1985, within a forthright of the order of termination, the  appellant moved the High Court obtained an ad interim  order of  stay of  the impugned  order.  Despite obtaining a  stay of  the impugned  order, the appellant did not work in the respondent-Corporation. The respondents have stated in  their affidavit  before the  High Court that even when the appellant came for work after the order of stay, he did not  do  any  work.  He  tried  to  influence  the  bulk customers of  the respondent-Corporation  and insisted  that they  break   their  dealings   with  the  Corporation.  The respondents alleged  t hat  the appellant  tried his best to create a situation in which the respondent-Corporation would be compelled  to accept  him or  suffer   huge  losses.  The appellant was  in a  senior managerial  position.  The  High Court, relying  upon this  affidavit of  the   respondent as also after  noting that  the appellant  had not  joined  the respondent-Corporation after  obtaining the  order of  stay, vacated the  order of  stay on 6.11.1985. The order vacating stay states, inter Ala, as follows :-      "It has  been alleged  in paragraph      11 of  the  counter-affidavit  that      the petitioner  did not  attend the      office soon after the passing of he      termination  order  dated  31st  of      March,    1985.    No    re-joinder      affidavit has  been  filed.  Taking      all  the  facts  and  circumstances      stated in the counter-affidavit, we      are of  opinion  that  the  present      case is  not fit  for granting  any      injunction. In the event of success      of   the    writ   petition,    the      petitioner  will   be  entitled  to      salary for  the period his services      remain terminated.  We  reject  the      application and  the interim  order      of stay  dated 19.4.1985 is vacated      ."      The appellant  has thus  not worked  in the respondent- Corporation since  the date  of his  termination. His salary upto to  October, 1985  has been  paid to him as directed by the High  Court. The record which is before us does not show what the  appellant has earned from October, 1985 upto date. But looking  to the  fact that  he has  not worked  with the respondent-Corporation  and   that  they  stay  order  which enabled him  to work in the Corporation had to be vacated on account of  the appellant’s  conduct which shows that he was not desirous of working in the respondent’s organisation, in the  totality  of  circumstances  of  the  present  case,  a monetary compesation  of Rs.  2 lakhs  would be  adequate to compensate the  appellant. The  respondents are,  therefore, directed to  pay to  the appellant  the sum  of  Rs.2  lakhs

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within a period of three months from today.      The appeal is accordingly allowed with costs.