Jabalpur Electric Supply Co. Vs.
Sambhu Prasad Srivastava & Ors  INSC 217 (27 July 1962)
27/07/1962 GUPTA, K.C. DAS
GUPTA, K.C. DAS GAJENDRAGADKAR, P.B.
CITATION: 1966 AIR 1288 1963 SCR (3) 453
Industrial Company--Delegation of
Disciplinary powers to officer--Valildity--Standing Orders cls. 19, 20.
The appellant company had its Head Office in Calcutta generated electricity for distribution at Jabalpur. By cl. 10 of the power of
attorney executed by it, it authorised its Resident Engineer at Jabalpur,
"subject to the Standing Orders from, time to time, given by the Company
to appoint, dismiss, suspend or terminate the services of any of the employees
of the Company at jabalpur". The respondent was charge-sheeted and after
enquiry discharged by the Resident Engineer. He made an application to the
Assistant Labour Commissioner who ordered his reinstatement without break in
his service by without payment of back wages. The State Industrial Court, on
revision applications by both the parties held that the Resident Engineer was
not empowered to hold the enquiry and to issue an order of discharge and
refused to interfere. Both the parties moved the High Court under Art. 226 of
the Constitution. The High Court took the view that the powers of dismissal and
suspension under cl. 19 of the Standing Orders and the general right to
discharge an employee under cl. 20 of the Standing Orders could not be, and
latter powers had not actually been, delegated to the Resident Engineer and
allowed the respondent's application with back wages.
Held, that the delegation of power by the
power of attorney was vailed in law and covered powers both under cl. 19 and
cl. 20 of the Standing Orders.
There was nothing in law, or in the Articles
of the Association of the Company that forbade such delegation and the. Company
therefore, could, delegate the powers to meet the exigencies of its business-.
The opening words of cl. 10 of the power of
attorney did not mean that the delegate could not at all exercise the powers
since under the Standing Orders the company alone 454 could do so. Their effect
is that in exercising these powers the delegate cannot do anything that the
company could not do under the Standing orders.
CIVIL APPELLATE, JURISDICTION: Civil Appeal
No. 432 of 1961.
Appeal by special leave form the judgment and
order dated May 15 1959 of the Madhya Pradesh High Court in Miscellaneous
Petition Nos. 301 of 1958 and 83 of 1959.
B. Sen and S. N. Mukerji for the Appellant.
B. R. L. Iyengar and A. G. Ratnaparkhi for
Respondent No. 1.
I. N. Shroff, for Respondents Nos. 2 and 4.
1962. July 27. The Judgment of the Court was
delivered by DAS GUPTA, J.-When under the Standing Orders of a Company the
Company is empowered to take disciplinary action against an employee by
proceeding in the prescribed manner can that power be legally delegated by the
Company to any of its officers ? That is the principal question raised in this
The appellant is Company incorporated under
the Indian Companies Act having its registered office at 12, Mission Row,
Calcutta. It is' engaged in the generation and distribution of electricity at
Jabalpur. The Company's office at Jabalpur is in charge of a Resident Engineer.
By a power of attorney given by the appellant company on June 26, 1957, Mr.
Leonard Shell Macleod, the Company's Resident Engineer at Jabalpur, was
appointed "the company's true and lawful attorney for and in the name of
the Company to do exercise and perform all or any of the acts, matters, 455
discretions and things" set out in 11 clauses. The 10 th clause provided
that "subject to the Standing Orders from time to time given by the
Company to appoint, dismiss, suspend or terminate the services of any of the
employees of the Company at Jabalpur." On November 12, 1957, the respondent
Sambhu Prasad Srivastava was served with a charge sheet under the signature of
Mr. Macleod in which it was alleged that he had substituted 13 coils of V.I.R.
cable in the stores of the Company for the same quantity of cable of various
makes from the local market, Sambhu Srivastava's reply to this charge was that
when the shortage of 13 coils came to his notice on the eve of the audit he
remonstrated with his subordinates who actually handled these articles and that
what he did was done in the best interests of the Company and that he never
acted with any dishonest intention. An enquiry was then held by the Resident
Engineer and ultimately on January 16, 1958, the Resident Engineer issued a
letter to him in these terms :"With reference to charge sheet dated 12th
November, 1957, and the subsequent investigations in the case against you,,
please note that the matter has been very carefully considered, and in
accordance with the interview which you had with our Chief Engineer, Mr. J. W.
Fawcett, on the morning of the 15th January, 1958, we ;hereby notify you that
the Company does not find it possible to.-retain your services.
Therefore, you are hereby discharged from the
service of the Company, with immediate effect.
Please call at the Company's office on the
17th instant,to receive final settlement of your dues from the Company."
456 Srivastava then applied to the Assistant Labour Commissioner, Jabalpur,
alleging that this order was in contravention of the provision of the C. P.
& Berar Industrial Tribunal Settlement Act and of the Standing Orders as
the powers of the Company under the Standing Orders to hold the enquiry can be
exercised only the Managing Director. It was also alleged that the order though
in from an order for discharge was really an order of dismissal and that cls.
14, 18 19 and 20 of the Standing Orders had been violated. The Company pleaded
in its reply that under the 'power of attorney the Resident Engineer had the
power to hold an enquiry and take disciplinary action against an employee and
the action by him should be considered in law to amount to an action by the
Company. It was pleaded that the provisions of the Standing Orders had not been
violated. The Assistant Labour Commissioner made an order on September 10,
1958, ordering-reinstatement of the respondent without break in his service but
without payment of back wages.
The State Industrial Court which was moved
both by the Company and by the employee held that the order of discharge was in
substance an order of dismissal, and that misconduct alleged was not proved,
and that in any case the Resident Engineer was not empowered to hold an enquiry
and to issue an order of discharge. It refused to interfere with the order
passed by the Assistant Labour Commissioner and rejected both the revisional
Both parties then moved the Madhya Pradesh
High Court-for relief under Art. 226 of the Constitution. The High Court held
that the powers. under cl.19 of the Standing Orders could not be delegated to
the Resident Engineer and also that th 457 general right reserved to the
Company under cl. 20 of the Standing Orders was meant to be exercised by it and
was not covered by the delegation under cl. 10 of the power of attorney. The
High Court seems to have thought also that the order made by the Resident
Engineer was not Under el. 20 of the Standing Orders. Accordingly, the High
Court refused to interfere with the order of reinstatement and dismissed the
Company's application under Art. 226. It allowed the employee's application
under Art. 226, being of opinion that the Assistant Labour Commissioner had no
discretion in the matter of back wages and was bound to order payment of back
wages as soon an order of reinstatement was made.
Before considering the question whether the
Company could delegate its power to take disciplinary action against its
employees it will be proper to clear the ground on the question whether the
order was made under cl.19 or cl. 20 of the Standing Orders. Clause 18 of the Standing
Orders mentions inter as that theft, fraud, or dishonesty in connection with
the Company's business or property will be treated as misconduct. Clause 19
provides various penalties for misconduct. The substance of these provisions
is: that an employee who is adjudged by the Company on examination of the
employee and of facts to be guilty of misconduct is liable to be summarily
dismissed without notice or compensation in lieu of notice or alternatively to
be suspended for a period not exceeding fourteen days; that the order of
dismissal or suspension shall be in writing over the signature of an officer
duly authorised for this purpose, and shall also briefly mention the reason on.
which it is based, and that no order for dismissal or suspension under this
Standing Order shall be made unless the employee is informed in writing of 458
the misconduct alleged against him and that he shall be given an opportunity to
produce evidence in his defence.
Clause 20 does not deal with dismissal or
suspension but provides that "the Company has at all times a general right
to discharge an employee from service not only for proved misconduct but also
when the employer has lost confidence in the employee." Clause 21 provides
for notice of censure to be given for certain acts or omissions.
An examination of these provisions shows that
for an order of dismissal under cl. 19 to be made a special procedure is to be
followed and when it is made the employee is not entitled to any compensation.
Examining now the order made on January 16, 1958, we find that while cl. 20 has
not been mentioned it does not say that the employee has been found guilty of
misconduct but merely states that "'the Company does not find it possible
to retain (this employee's) services" and reference is made to the
investigations in the case against him and to an interview he had with the
chief Engineer, Mr. J. W. Fawcett, on the morning of the 15th January, 1958.
The only reasonable view to take of this order, in our opinion, is that this
order was being made under cl. 20 on the ground that the employer had lost confidence
in the employee and was in fact and in law an order of discharge as distinct
from an order of dismissal or suspension. It appears to us that while the
Resident Engineer who held the enquiry may, have been satisfied that an act of
misconduct 'for which the employee was liable to dismissal had been proved he
took a merciful view of has conduct in view of his previous clean record, and
proceeded accordingly to act under cl. 20 of the Standing Orders instead of
proceeding under cl. 19. This is a case in which the employer has acted, fairly
and even generously in terminating the cases of the employee under el. 20.
459 The question remains whether the Resident
Engineer could take action under cl. 20. The employee's argument, which found
favour with the High Court was that it was the Company alone which could take
action under clause 20 and the Resident Engineer in his capacity as the
Resident Engineer apart from anything else, was not competent to take action
under el. 20-For, cl. 20 empowers the Company and not the Resident Engineer as
such to discharge an employee on the ground that the employer had lost
confidence in him, In the present case, however, it was not the Resident
Engineer in his capacity as the Resident Engineer that made the order of
discharge. Clearly in making the order of discharge he was acting on the basis
of the power of attorney executed in h0is favour on June 26, 1957. Under cl. 10
of the power of attorney he had power "subject to the Standing Orders from
time to time given by the Company to appoint, dismiss, suspend or terminate the
services of any of the employees of the Company at Jabalpur." The power of
the Company under el. 19 of the Standing Orders to dismiss or suspend and its
power under el. 20 to discharge an employee are both covered by cl.10 of the
power of attorney, If there be nothing in law to prevent these powers being
delegated to the Resident Engineer there could be no escape from the conclusion
that the exercise of the power cl. 20 in the present case by the Resident
Engineer amounted in law to an exercise of the power by the Company itself, Is
there anything in law which bars such delegation? We are unable to find any. It
is obvious. and admitted that when a Company has to exercise its powers in
connection with the management of its business it is not all the share-holders
of the Company that have to meet to exercise the power. How the Company will
regulate its business is prescribed in its Articles of Association.
It is nobody's 460 case that in the Articles
of Association of the Jabalpur Electric Supply Co., there is anything barring
the delegation of the disciplinary powers of the Company to any of its
officers. In law therefore delegation of the functions of the Company may
properly be made having regard to the exigencies. of the business and the
Articles of Association. It cannot be reasonably disputed that where the Head
Office of the Company is at Calcutta and the main business is to be carried on at
Jabalpur the exigencies of the business do require delegation of the Company's
power to take disciplinary action against its employees to a responsible
Official like the Resident Engineer, But whether or not the Company might have
done without such delegation is a matter which it is unnecessary for us to
The delegation was made and, neither on
principle nor on authority is it possible to say that the delegation was
against the provisions of law.
Nor can we see that the words 'subject to the
Standing Orders from time to time given by the Company" with which cl. 10
of the power of attorney opens affects the delegation. On a proper
interpretation of these words their only effect is that in exercising the power
to appoint, dismiss, suspend or terminate the services of the employees at Jabalpur the delegate cannot do anything beyond what the company itself can do under the
Standing Orders. On no reasonable construction of the words can they mean that
the delegate cannot exercise these powers at all, because under the Standing
Orders the Company itself is given these powers. Whether it is the power to
take action under cl.19 or under cl.20 of the Standing Orders the delegate can
exercise these powers under cl. 10 of the power of attorney in the same way as
if the delegate was the Company itself.
461 We therefore hold, disagreeing with the
High Court, and the Courts below$ that the order of discharge made by the
Resident Engineer was in exercise of the power validly delegated to him and
that there, has been no breach of the Standing Orders by such action, We
therefore allow the appeal, set aside the order passed by the High Court and
direct that the appellant's application under Art. 226 of the Constitution be
allowed and the order made by the Assistant Labour Commissioner dated September 10, 1958, ordering, reinstatement of the respondent, Sambhu Prasad Srivastava be
set aside. There will be no order as to costs.