Hindustan Steels Ltd., Rourkela Vs. A.
K. Roy & Ors  INSC 341 (18 December 1969)
18/12/1969 SHELAT, J.M.
CITATION: 1970 AIR 1401 1970 SCR (3) 343 1969
SCC (3) 513
CITATOR INFO :
R 1971 SC2171 (3,4,6) RF 1972 SC1975 (15) RF
1973 SC2650 (13) RF 1978 SC1428 (18) R 1981 SC1253 (17) F 1983 SC 454 (15) R
1985 SC 617 (3) D 1985 SC1128 (9) R 1990 SC1054 (21)
Industrial Tribunal -Discretion-Termination
of service for reasons of security-Tribunal ordering reinstatement-Duty of
Tribunal to exercise discretion properly-Constitution of India Article 226-High
Court's duty to interfere in cases of improper exercise of discretion.
The first respondent was appointed in 1958 as
a skilled workman by the appellant Company. He had executed a bond to serve the
Company for five years in consideration of the Company having borne the
expenses of his training. In accordance with the practice of the Company a
verification report about him was called for as was done in the case of other
workmen also. On a report from the Police the Security Officer recommended that
it was not desirable to retain the respondent in the company's service any
The respondent at the time was working as a
fitter in the blast furnace of the works. In December 1960 he was served with
an order by which his service was terminated. The Industrial Tribunal, on a
reference of the dispute, rejected the Union's allegation as to victimisation
or unfair labour practice. Nevertheless it held that it was improper on the
part of the Company not to have disclosed the report to the respondent, that
the order of termination was in fact punitive in nature and considering the
action taken as disproportionate the order was illegal and unjustified. The
Tribunal therefore directed reinstatement with full back wages. On a petition
for a Writ of Certiorari the High Court upheld the Tribunal's order. It also
held that the case was not one of those exceptions to the general rule of
reinstatement and the Tribunal having exercised its discretion it could not
interfere with the Tribunal's order.
The appeal to this Court was limited only to
the question whether the relief to the first respondent should have been
reinstatement or compensation.
HELD : (1) In the circumstances of the case
the Tribunal was not justified in directing reinstatement and the High Court
erred in refusing to interfere with the order of the Tribunal merely on the
ground that it could not do so as it was a case where the Tribunal had
exercised its Discretion.
The Tribunal has the discretion to award
compensation instead of reinstatement if the circumstances of a Particular case
are unusual or exceptional so as to make reinstatement inexpedient or improper.
The Tribunal has to exercise its discretion judicially and in accordance with
the well recognised principles in that regard and has to examine carefully the
circumstances of each case and decide whether such a case is one of those
exceptions to the general rule. If the Tribunal were to exercise down by this
Court it would be a case either of no exercise of discretion or of one not
legally exercised. In either case the High Court in exercise of its
jurisdiction can interfere and cannot be content by simply saying, that since
the Tribunal has exercised its discretion, it will not examine the
circumstances of the case to ascertain whether or not such exercise 344 was
properly and in accordance with settled principles made.
If the High Court were to do so, it would be
a refusal on its part to exercise jurisdiction. [351 B-E] In the present case
the termination of service was not on account of victimisation or unfair labour
practice. It is clear that the Company terminated the service of the workman
only because it felt that it was not desirable for reason of security to
continue the workman in its service. Therefore what was relevant at the stage
when the Tribunal came to decide what relief the workman was entitled to was
the question whether the management genuinely apprehended as a result of the
report that it would be risky to retain the workman in the company's service.
If, on an examination, of the circumstances of the case the Tribunal came to
the conclusion that the apprehensions of the employer were genuine and the
employer truly felt that it was hazardous or prejudicial to the interests of
the industry to retain the workman in his service on grounds of security the
case would be properly one where , compensation would meet the ends of justice.
The present case is one such. The Tribunal exercised its discretion
mechanically without weighing, the circumstances of the case and the refusal by
the High Court to interfere was equally mechanical and amounted to refusal to
exercise jurisdiction. [351 F; 352 A-GI Western India' Automobile Association
v. Industrial Tribunal  F.C.R. 321, 348; United Commercial Bank Ltd. v.
U.P. Bank Employees Union, [19521 2 L.L.J. 577; Punjab National Bank Ltd. v.
Workmen,  2 L.L.J. 669; Assam Oil Co.
Ltd. v. Workmen,  3 S.C.R. 457; Working
of Charottar Gramodhar Sahakari Mandali Ltd. v. Charottar Gramodhar Sahakari
Mandali Ltd., C.A. 382 of 1966, dec. on August 14, 1967; Deomur Dulung Tea
Estate v. Workmen, C.A. 516 of 1966, dec. on October 26, 1967; and Ruby General
Ltd. v. P.P. Chopra, C.A. 1735 of 1969, dec.
on September 12, 1969, -referred to.
(ii)In the circumstances of the case it would
be proper for this Court to determine the amount of compensation.
Compensation for a period of two years at the
rate of Rs. 160 per month, that being the last salary drawn by the concerned
workman would meet the ends of justice. [353 DI Assam Oil Co. Ltd. v. Workmen,
[19601 3 S.C.R. 457 and Utkal Machinery Ltd. v. Workmen,  2 S.C.R. 434,
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 2127 of 1969.
Appeal by special leave from the judgment and
order dated January 27, 1969 of the Orissa High Court in O.J.C. No. 280 of
H.R. Gokhale, Govind Das and G. S.
Chatterjee, for the appellant.
R.K. Garg, S. C. Agarwala, and Sumitra
Chakravarty for respondent No. 1.
The Judgment of the Court was delivered by
Shelat, J. Respondent 1 was, in 1955, admitted as a trade apprentice by the
appellant-company in' its works, the company 345 agreeing to bear the cost of
his training as such apprentice, which it did for a period of 3 years. On
completion of his training, he was appointed in September 1958 as a skilled
workman, i.e., as a fitter. The letter of appointment under which he was
engaged contained a clause which required him to execute a bond to serve the
company for five years at least. The object of that clause evidently was to
ensure that he served the company at least for five years in consideration of
the company having borne the expenses of his training.
The evidence produced before the Industrial
Tribunal shows that the practice of the company, set up at the instance of the
Government of India and the Company's Board of Directors, was to have a
confidential inquiry made to verify the antecedents of its employees. 'Such
verification not being practicable at the time of the appointment of each
employee, it used to be done after a workman was appointed.
The object of such verification was to
ascertain whether it was desirable or not in the interests of the company to
continue the service of the employee in respect of whom such verification was
made. The inquiry was made through the police. On receipt of a verification
report from the police, the Senior Security Officer of the company would make
his recommendation and the company would terminate the service of an employee
where it was considered desirable in the company's interests not to continue
such an employee in service after giving 3 months' notice or salary for that
period in lieu thereof.
Throughout the period of his service
commencing from September' 1958 no action was ever taken against respondent 1
although he had at one time joined a strike in the company';
works and although he was an active member
and the secretary of the workmen's union. A criminal case in relation to the
said strike was filed against him but had been subsequently withdrawn. Prima
facie, the fact that no action was taken against him indicated that the company
did not consider his active participation in the union activities objectionable
so as to warrant any interference on its part.
In accordance with the practice of the
company, however, a verification report about him was called for as was done in
the case of other workmen also. On such a report from the police, the Senior
Security Officer recommended that it was not desirable to retain him in the
company's service any longer. Respondent I at the time was working as a fitter
in the blast furnace of the works. On December 9, 1960 he was served with an
order by which his service was terminated and was informed that he would be
entitled to 3 months' pay in lieu of a notice for that period.
346 On the union of which, as -aforesaid, he
was the secretary, having raised a dispute, alleging that the termination of
his service was the result of victimisation and unfair labour practice,, the
dispute was referred by the Government of Orissa to the Industrial Tribunal.
After inquairy, the Tribunal rejected the union's allegation as to
victimisation or unfair labour practice on account of any union -activities
carried -on by respondent 1. Nevertheless, the Tribunal held that it was
improper on the part of the company not to have disclosed the said report to
respondent 1 and not to have given him an opportunity to contest its contents
and vindicate himself. The Tribunal held that though the said order was in form
one of termination of service, it was in fact punitive in nature and
considering the action taken against respondent I as disproportionate further
held that it was a case of victimisation, that consequently the, order was
illegal and unjustified and directed reinstatement with full 'back wages.
The company filed a writ petition in the High
Court for quashing the said order. Before the High Court the company urged (a)
that the termination of the service of respondent 1 was in bona fide exercise
of the employer's right to do so, (b) that it did so only because of the said
adverse report and (c) that even if it was held that the said order was not
legal or justified, the proper relief to be granted to the respondent in the
circumstances of. the case was compensation and not reinstatement, which meant
imposition of a workman against whom there was an adverse report and whom the
company did not consider it desirable to retain in its service. The High Court
rejected these contentions and held that the Tribunal was right in holding that
the termination of service of respondent I was not in bona fide exercise of the
power of the employer to terminate an employee's service, that it was punitive
in character and was, therefore, not legal or justified. The High Court also
held that ordinarily the relief against an illegal termination of service was
reinstatement though in some cases it may be considered inexpedient to do so,
in which event a suitable compensation would be the proper relief. Lastly, it
held that the present case was not one of those exceptions to the general rule
of reinstatement and the Tribunal having exercised its discretion it could not
interfere with the Tribunal's order.
The company thereupon applied for special
leave from this Court. Though it was granted, it was limited only to the
question whether the relief to respondent I should have been reinstatement or
compensation. It is, therefore, not possible for us to go into the question
whether the Tribunal and the High Court were right in their conclusion that the
termination of the service of respondent I was not in bona fide exercise of the
company's right to order discharge simpliciter or whether the order was
punitive in 347 nature and therefore was not legal in the absence of any
domestic inquiry having been held. Besides, this appeal is one against the High
Court's order refusing certiorari under its writ jurisdiction and not a direct
appeal under Art. 136 of the Constitution against the Tribunal's order. These
considerations will have to be kept in mind while we are considering this
Counsel for the appellant-company argued that
even though he could not challenge, in view of the limited special leave
granted to the company, the finding that the impugned order was not termination
simpliciter in bona fide exercise of the employer's right to terminate the
service of -an employee, he was entitled to agitate the question whether or not
the High Court, on the facts of this case, should have interfered and ordered
compensation in place of reinstatement, particularly because : (a) the
concerned employee was posted in the blast furnace, -a crucial part of the
company's works, in respect of which the company could not hazard any risk, (b)
the Tribunal had given a clear and firm finding against the case that the
workman had been victimised on account of his union activities, and (c) the
Tribunal and the High Court had both set aside the company's order only because
of their finding that it was punitive in nature and that the punishment was so
disproportionate, that it amounted to victimisation. The proper order, counsel
submitted,) was to award compensation instead of imposing the service of an
employee whom the company considered risky to retain in its service. Mr. Garg,
on the other hand, argued that the company's action involved an important
principle, in that, an employer cannot be allowed to terminate the services of
his employees on police reports which are not disclosed to the workmen or
before the Tribunal, and therefore, are not open to the workmen to challenge.
Such a course, he argued, would enable an employer to put an end to the service
of a workman not because he is in fact a danger to the establishment but is
merely a member of a party or an association whose views and policies such an
employer does not like. In such a case, he submitted, the termination of
service would be in violation of the constitutional right of association of an
individual and would be clearly unjustified, -and therefore, it would not be a
case for departure from the ordinary consequence flowing from an illegal order
of termination of service.
There can be no doubt that the right of an
employer to discharge or dismiss -an employee is no longer absolute as it is
subjected to severe restrictions. In cases of both termination of service and
dismissal, industrial adjudication is competent to grant relief, in the former
case on the ground that the exercise of power was mala fide or colourable and
in the latter case if it amounts to victimisation or unfair labour practice or
is in violation 348 of the principles of natural justice or is, otherwise not
legal or justified.' In such cases, a tribunal can award by way of relief to
the concerned employee either reinstatement or compensation. In the earlier
stages the question whether one or the other of the two reliefs should be
granted was held to be a matter of discretion for the tribunal. (see Western
India Automobile Association v. Industrial Tribunal('), United Commercial Bank
Ltd. v. U.P. Bank Employees Union('). The view then was that to lay down a
general rule of reinstatement being the remedy in such cases would itself
fetter the discretion of the tribunal which has to act in the interests of
industrial harmony . and peace and that it might well be that in some cases
imposition of the service of a workman on an unwilling employer might not be
conducive to such harmony and peace. Later on, however, the earlier flexibility
appears to have been abandoned -and it was ruled that although no hard and fast
rule could be laid down and the Tribunal would have to consider each case on
its own merits and attempt to reconcile the conflicting interests of the
employer and the employee, the employee being entitled to security of service
and protection Against wrongful dismissal, the normal rule in such cases should
be reinstatement. (sea Punjab National Bank Ltd. v. Workmen(').
This conclusion was adhered to, in some of
the subsequent decisions. But in the case of Punjab National Bank Ltd.(')
itself, as also in other subsequent cases, the rule was qualified to mean that
in unusual or exceptional cases where it is not expedient to grant the normal
relief of reinstatement, the proper relief would be compensation and that that
would meet the ends of justice. The problem confronting industrial adjudication
is to promote its two objectives, the security of employment and protection
against wrongful discharge or dismissal on the one hand and industrial peace
and harmony on the other, both leading ultimately to the goal of maximum
As exceptions to the general rule of
reinstatement, there have been cases where reinstatement has not been
considered as either desirable or expedient. These were the cases where there
ad en strained relations between the employer and the employee, where the post
held by the aggrieved employee had been one of trust and confidence-or where
though dismissal or discharge was unsustainable owing to some infirmity in the
impugned order, the employee was found to have been guilty of an activity
subversive of prejudicial to the interests of the industry. These cases are to
be found in Assam Oil Co. Ltd. v. Workmen (4 ) Workmen of Charottar Gramodhar
Sahakari Mandali Ltd. v. Charottar Gramo(1) [19491 F.C.R. 321, 348.
(2) (19521 2 L.L.J. 577.
(3)  2 L.L.J. 669.
(4)  3 S.C.R. 457.
349 dhar Sahakari Mandali Ltd.('), Doomur
Dulung Tea Estate v. Workmen (2 ) and Ruby General Insurance.Co. Ltd. v. P. P.
Chopra(3). These are, however, illustrative cases where an exception was made
to the general rule. No hard and fast rule as to which circumstances would in a
given case constitute, an exception to the general rule can possibly be laid
down as: the Tribunal in each case, keeping the objectives of industrial adjudication
in mind, must in a spirit of fairness and justice confront the question whether
the circumstances of the case require that an exception should be made and
compensation would meet the ends of justice.
In the present case the facts are fairly clear.
As aforesaid, the concerned workman Was trained for a period of 3 years at the
cost of the company. On completion of his training the company engaged him as a
skilled worker. He worked as such from September 1958 to December 1960. At the
time of the termination of his service, he was working as a fitter in the blast
furnace, a vital part of the company's works, where both efficiency and trust
would matter. Even though he was said to have joined an illegal strike and a
criminal case had been filed against him, no steps, even departmentally, were
taken against him. Prima facie, therefore, this was not -a case where, the
employer could be said to be anxious to wantonly or unreasonably terminate his
service. Even though he was an active member and the secretary of the union,
the Tribunal found that the termination of his service was not due to
victimisation or any unfair labour practice. There can also be no dispute that
the company ordered the termination of his service only because of the, adverse
report of the police against him.
The report was called for 'by the company in
accordance with its practice of verifying the workman's antecedents. The
evidence was that such verification was made in the case of all workmen after
they were engaged and that such verification was not made before appointing
them as it was not practicable to do so. The practice was adopted at the
instance of the Government and in accordance with the directions to that effect
of the Board of Directors. The letter of the Deputy Inspector General of Police
communicating the report made on the investigation by the police was produced
but neither the report nor the source of information on which it was based nor
the name of the person who conducted the investigation was disclosed either to
the workman or the, Tribunal. The ground urged for such nondisclosure was that
the report was confidential and if disclosed it would not be possible for the
company to have such investigations in future. The reason appears to be that if
the person conduct(1) C.A. 382 of 1966, dec. on August 14, 1967.
(2) C.A. 516 of 1966 dec. on October 26,
(3) C.A. 1735 of 1969,dec. on September 12,
350 ing such investigation were produced for
cross-examination by the workman or if his report were to be disclosed, the
name or names of the informants would come out with the result that no
informant in future would readily come forward to give information about other
workmen. Even in criminal cases -an investigating officer is not compelled to
disclose the name of his informant.
But the Tribunal appears to have been
impressed by the company's refusal to disclose the report although it was
clearly a confidential report. The Tribunal thought that such a report might
have been made by a person who was not a responsible police officer or that it
might be based on mere rumour or hearsay evidence and might not be of a very
convincing nature. The High Court went one step further and observed that it
might be "as contended by opposite-party No. I that the report is based
entirely on the trade union activities of the opposite-party in which case the
-discharge would itself be improper." This observation was not warranted
in view of the Tribunal's clear finding that this was not a case of
victimisation or unfair labour practice on account of the union activities of
The High Court further was of the view that
"even if the Management terminated the services of Sri A. K. Ray, simply
on the ground that it received an adverse report against him, the order of such
termination of services in the circumstances cannot be treated as legal or
justified." It also observed that "it was not admitted by the
opposite party that there was any -adverse police report against him." But
the management had examined P. B. Kanungo, the Senior Personnel Officer, who
had categorically testified that the management had received such an adverse
report -and on the basis of that report the company's Security Officer had
recommended the termination of service of the workman,.
There was no cross-examination on this part
of his evidence.
The High Court, therefore, was not entitled
to proceed on the basis as if the fact of such adverse report was any longer in
doubt. Indeed, the grievance was 'not relating to the factum of such report,
but its non-disclosure and the Tribunal in consequence not being able to weigh
its veracity. The fact of the Management having received the police report
which was adverse was no more in dispute; nor the fact that the company's
Security Officer on the strength of that report had recommended that it was not
desirable to retain the workman in service. The termination of his service was
by no means singular in any way, for, the evidence was that verification of
antecedents of all workmen used to be similarly made and whenever the report
was adverse an order of discharge used to be made.
Since the special leave granted to the
company is limited only to the question of the kind of, relief that the
Tribunal ought to have given, we are not in a position to go into the question
whether the termination of service was legal or justified. We have, therefore,
351 to proceed on the footing that the Tribunal's conclusion that it was not
legal was right.
The question, however, still is whether the
Tribunal was, in the circumstances of the case, justified in directing
reinstatement. It is true that some of the decisions of this Court have laid
down that where the discharge or dismissal of a workman is not legal or
justified, the relief which would ordinarily follow would be reinstatement. The
Tribunal however, has the discretion to award compensation instead of
reinstatement if the circumstances of a particular case are unusual or
exceptional so as to make reinstatement inexpedient or improper. The Tribunal
has, therefore, to exercise its discretion Judicially and in accordance with
well recognised principles in that regard and has to examine carefully the
circumstances of each case and decide whether such a case is one of those
exceptions to the general rule. If the Tribunal were to exercise its discretion
in disregard of such circumstances or the principles laid down by this Court it
would be a case either of no exercise of discretion or of one riot legally
exercised. In either case the High Court in exercise of its writ jurisdiction
can interfere and cannot be content by simply saying that since the Tribunal
has exercised its discretion it will not examine the circumstances of the case
to ascertain whether or not such exercise was properly and in accordance with
the well-settled principles made. If the High Court were to do so, it would be
'a refusal on its part to exercise jurisdiction.
In the present case, there could be no
dispute that the company, in accordance with its practice, called for a
verification report about the concerned workman. The report was made by the
police after investigation and on that being adverse, the company's security
officer recommended to the company that it was not in the interests of the
company to retain the workman's services. There can be no doubt that the
company terminated the service of the workman only because it felt that it was
not desirable for reasons of security, to continue the workman in its service.
This is clear from the fact that it was otherwise not interested in terminating
the workman's service and had in fact insisted that the workman should bind
himself to serve it at least for five years. The termination of service was not
on account of victimisation or unfair labour practice as was clearly found by
the Tribunal. It is, therefore -abundantly clear that the company passed the
impugned order of termination of service ' on account of the said adverse
report, the recommendation of its own security officer and on being satisfied
that it would not be in the company's interests to continue him in its service.
The Tribunal no doubt felt that it was not
established -whether the investigation and the report following it were
properly done 352 and made, that the company ought to have disclosed it to the
workman and given him an opportunity to vindicate himself and that the
non-disclosure of the report made the termination illegal and unjustified. That
may or may not be right. But what was relevant, at the stage when the Tribunal
came to decide what relief the workman was entitled to,, was the question
whether the management genuinely apprehended as a result of. the report that it
would be risky to retain the workman in thecompany's service. They may have
gone wrong in the manner of terminating the workman's service -as held by the Tribunal.
But, if the management truly believed that it was not possible to retain the
workman in the company's service on grounds of security and consequently could
not place confidence in him any longer, that present case would be one of those
exceptional cases where the general rule as to reinstatement could not properly
be applied. Thus of courier does not mean that in every case where the employer
says that he has lost confidence in the workman, and therefore, has terminated
his service that reinstatement cannot be granted and the Tribunal has to award
compensation. On the other hand, it on an examination of all the circumstances
of the case, the Tribunal comes to the conclusion that the apprehensions of the
employer were genuine and the employer truly felt that it was hazardous or
prejudicial to the interests of the industry to retain the workman in his
service on grounds of security, the case would be properly one where
compensation would meet the ends of justice.
On a consideration of all the circumstances,
the present case, in our view, was one such case. The Tribunal exercised its
discretion mechanically without weighing the circumstances of the case. That
was no exercise of discretion -at all. There is ample authority to the effect
that if a statutory tribunal exercises its discretion on the basis of
irrelevant considerations or without regard to relevant considerations,
certiorari may properly issue to quash its order. [See S.A. de Smith, Judicial
Review of Administrative Action, (2nd ed.) 324-325]. One such relevant
consideration, the disregard of which would render its order amenable to
interference, would be the wellsettled principles laid down in decisions
binding on the tribunal to whom the discretion is entrusted. The refusal by the
High Court to interfere was equally mechanical and amounted to refusal to
exercise, its jurisdiction. Its order, therefore, becomes liable to
There is, therefore, no difficulty in holding
that the order of reinstatement passed by the Tribunal was liable to be quashed
and that the High Court erred in refusing to interfere with it merely . on the
ground that it could not do so as it was a case where the Tribunal had
exercised its discretion. The question next is', having held that the order of
reinstatement was not a proper order, in that, 353 it was not in consonance
with the decided cases, do we simply quash the order of the Tribunal and that
of the High Court and leave the concerned workman to pursue his further remedy
? The other alternative would be to remand the case to the, Tribunal to pass a
suitable order. In either case, in view of this judgment, no other order except
that of compensation can be obtained by him. If the case is remanded and the
Tribunal on such remand passes an order of compensation and fixes the amount,
such a course would mean further proceedings and a I possible appeal. That
would mean prolonging the dispute, which would hardly be fair to or conducive
to the interests of the parties. In these circumstances we decided that it would
be more proper that we ourselves should determine the amount of compensation
which would meet the ends of justice. Having come to that conclusion, we heard
counsel for both the parties. After doing so and taking into consideration all
the facts -and circumstances of the present case we have come to the conclusion
in the light also of the decisions of this Court such as Assam Oil Co. v. Its
Workmen('), Utkal Machinery Ltd. v. Workmen(') and the recent case of Ruby
General Insurance Co. Ltd. v. P. P. Chopra(3) that compensation', for a period
of two years at the rate of Rs. 160/per month, that being the last salary drawn
by the concerned workman, would meet, the ends of justice.
We accordingly allow the appeal, quash the
order of the Tribunal and the High Court and instead direct the appellant
company to pay to the 1st respondent Rs. 3840 as and by way of compensation.
There will be no order of costs.
R.K.P.S. Appeal allowed.
(1)  3 S.C.R. 457.
(2)  2 S.C.R. 434.
(3) C.A. 1735 of 1969 decided on September