The Tata Oil Mills Co., Ltd. Vs.
Workmen & ANR  INSC 38 (15 February 1963)
15/02/1963 GAJENDRAGADKAR, P.B.
CITATION: 1966 AIR 1672 1964 SCR (2) 125
R 1972 SC 136 (22) D 1991 SC 101
Industrial Dispute--Termination of service of
an employee on payment of one month's salary in lieu of notice--order of
termination purported to be discharge under R. 40 (1) of Service
Rules--Jurisdiction of the Tribunal to examine whether it amounts to a
discharge or dismissal.
Mr. Banerjee was an employee of the
appellant. His services were terminated on the ground that the appellant had
lost confidence in him and in lieu of notice he was paid one month's salary.
The union to which Mr. Banerjee belonged took up his cause and on the failure
of the parties to reach a settlement the matter was referred to the Industrial
Tribunal by the Government.
The appellant contended before the Tribunal
that the order of termination of service of Mr. Banerjee was an order of
discharge which it was competent to make under R., 40 (1) 126 of the Service
Rules. it was contended by the respondent that the termination was not a
discharge simpliciter but was in substance dismissal and that the Tribunal was
entitled to consider the propriety of the appellant's action.
The Tribunal held that it had jurisdiction to
look into the reasons behind the discharge of an employee. On the examination
of the evidence the Tribunal found that no malafides on the part of the
employer had been proved and that the termination of service did not amount to
victimisation or unfair labour practice. Even so it held that the discharge was
not justified and directed the reinstatement of Mr. Banerjee. The present appeal
is by way of special leave.
Before this Court, in addition to the above
contention the appellants contented that in the light of the evidence before
the Tribunal its finding that the discharge was not justified, was wrong.
Held, that in the matter of an order of
discharge of an employee the form of the order is not decisive. An Industrial
Tribunal has jurisdiction to examine the substance of the matter and decide
whether the termination is in fact discharge simpliciter or it amounts to
dismissal which has put on the cloak of discharge simpliciter. The test always
has to be whether the act of the employer is bona fide or whether it is a
malafide and colourable exercise of the powers conferred by the terms of
contract or by the standing orders.
Buckingham & Carnatic Co. Ltd. v. Workmen
of the Company 95 (1951) II L. L. J. 314, chartered Bank, Bombay v. Chartered
Bank Employees Union (1960) II L. L..T. 222 and U. B. Dutt & Co. (Private)
Ltd. v. Its Workmen, (1962) II L.L.J. 374, referred to.
Since the reasons given by the Tribunal in
support of its conclusion were wholly unsatisfactory its order must be set
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 322 of 1962.
Appeal by special leave from the Award dated
September 13, 1961, of the Second Labour Court, West Bengal, in Case No. VIII-C-40
M .C Setalvad, J. B. Dadachanji, O. C.
Mathur and Ravinder Narain, for the
127 C. K. Daphtary, Solicitor General of
India and Janardhan Sharma, for the respondent No. 1 1963. February 15. The
judgment of the Court was delivered by GAJENDRAGADKAR J.--Mr. R. K. Banerjee
had been employed by the appellant, the Tata Oil Mills Co. Ltd. as a Salesman
on April 3, 1956, as a probationer and he was confirmed on November 5, 1956. On
December 5, 1959, his services were terminated and he was informed that the
appellant had lost confidence in him, and so, it bad decided to discharge him.
Accordingly, in lieu of notice, he was paid a
month's salary and was told that he ceased to be the employee of the appellant
as from the date next after he received the order from the appellant. The
discharge of Mr. Banerjee was resented by the Union to which he belonged and
the Union took up his case. Since the dispute could not be settled amicably,
the Union succeeded in persuading the Government of West Bengal to refer the
dispute for adjudication to the Second Labour Court on the ground that the said
discharge was not justified. That is how the discharge of Mr. Banerjee became
an industrial dispute between the appellant and the respondents, its workmen
represented by their Union. The Labour Court which tried the dispute came to
the conclusion that the appellant had failed to justify the discharge of Mr.
Banerjee and so, it has directed the appellant to reinstate him and pay him
full emoluments from the date of his discharge up to the date of his
reinstatement. It is this order which is challenged by the appellant by its
present appeal brought to this Court by special leave.
The material facts leading to the termination
of Mr. Banerjee's services lie within a very narrow compass. in November, 1959
Mr. Banerjee was working in the Assam area and as such, had to work 128 as a
Salesman at Dhubri, Bongaigoan, Rangia and Tejpur. The appellant expected that
as its Salesman Mr. Banerjee should visit dealers in his area and carry on
intelligent and intensive propaganda to popularise the sale of the appellant's
products. The appellant has a Sales ice in Calcutta and the manager of the said
ice visits the areas within his jurisdiction to inspect the work of Salesmen.
Accordingly Mr. Gupta who was then the
manager of the Calcutta ice visited the area assigned to Mr. Banerjee, in the
last week of October. He found that Mr. Banerjee was networking satisfactorily
as a Salesman. In particular, he noticed that whereas Mr. Banerjee had reported
to the ice that the Bongaigoan Stockists had 20 boxes of dried up and deshaped
501 Special Soap which could not be distributed in the market he had in fact
not opened a single box and had not cared to satisfy himself that the soaps had
either dried up or had been deshaped. In fact, Mr. Gupta found that the boxes
were intact and he opened them and discovered that five boxes contained soap
which had dried up and had become deshaped, whereas the 15 other boxes were in
Thereupon, Mr. Gupta made a report to the
zonal Manager on November 2, 1959, adversely commenting on Mr. Banerjee's work.
The said report was in due course forwarded to the Head ice in Bombay. The Head
ice then instructed the Calcutta Sales ice by telephone to send for Mr.
Banerjee and call for his explanation. Accordingly, Mr. Banerjee was sent for
and his explanation taken; Mr. Gupta then made another report expressing his
dissatisfaction with the explanation given by Mr. Banerjee. This report was
sent on November 24, 1959. The Head ice accepted this report and on December 5,
1959, issued to Mr, Banerjee the order terminating his services. That, in
brief, is the case set out by the appellant in support of the action taken by
it against Mr. Banerjee.
129 The appellant had alleged that the
termination of Mr. Banerjee's services was not dismissal but was a discharge
simpliciter, and according to it, the discharge was justified by the terms of
contract between the appellant and Mr. Banerjee as embodied in Rule 40 (1) of
the Service Rules of -the appellant. The appellant, therefore, urged that the
Labour Court had no jurisdiction to consider the propriety of the appellant's
action in discharging Mr. Banerjee.
The respondents, on the other hand, contended
that the discharge was not discharge simpliciter but was, in substance,
dismissal, and so, it was urged that the Labour Court was entitled to consider
the propriety of the appellant's action. Basing themselves on the plea that the
discharge amounted to dismissal, the respondents pleaded that the failure of
the appellant to hold an enquiry against Mr. Banerjee introduced a serious
infirmity in the order passed against him; and they argued that the conduct of
the appellant was malafide and the dismissal of Mr. Banerjee amounted to
The Labour Court has found that according to
the terms of contract under which Mr. Banerjee was employed by the appellant,
the appellant was entitled to discharge Mr. Banerjee from its employment under
Rule 40 (1) of the Service Rules; but it held that merely because the order
served on Mr. Banerjee purported to be an order of discharge, that would not
exclude the jurisdiction of the Labour Court to examine the substance of the
matter. In fact, Mr. joshi who appeared for the appellant conceded before the
Labour Court that an adjudicating Court can look into the reasons behind the
discharge of an employee. That is why evidence was led byboth the parties
before the Labour Court. Having considered that evidence, the Labour Court has
found that the respondents' plea about the mala fides of the 130 appellant was
not proved and it held that the termination of Mr. Banerjee's services could
not be said to amount to an act of victimisation or an unfair labour practice.
Even so, it held that the discharge was not justified, and so, it,has directed
the appellant to reinstate Mr. Banerjee. It is the validity of this order that
is challenged before us by Mi. Setalvad on behalf of the appellant.
The true legal position about the Industrial
Courts jurisdiction and authority in dealing with cases of this kind is no
longer in doubt. It is true that in several cases, contract of employment or
provisions in Standing Orders authorise an industrial employer to terminate the
service, of his employees. after giving notice for one month or paying salary
for one month in lieu of notice, and normally, an employer may, in a proper
case, -be entitled to exercise the said power. But where an order of discharge
passed by an employer gives rise to an industrial dispute.
the form of the order by which the employee's
services are terminated, would not be decisive ; industrial adjudication would
be entitled to examine the substance of the matter and decide whether the termination
is in fact discharge simpliciter or it amounts to dismissal which has put on
the cloak of a discharge simpliciter. If the Industrial Court is satisfied that
the order of discharge is punitive, that it is malafide, or that it amounts to
victimisation or unfair labour practice, it is competent to the Industrial
Court to set aside the order and in a proper case, direct the reinstatement of
the employee. In some cases, the termination of the employee's services may
appear to the Industrial Court to be capricious or so unreasonably severe that
an inherence may legitimately and reasonably be drawn that in terminating the
services, the employer was not acting bonafide. The test always has to be
whether the act of the employer is bonafide or not. If the act is malafide, or
appears to be a colourable 131 exercise of the powers conferred on the employer
either by the terms of contract or by the standing orders, then notwithstanding
the form of the order, industrial adjudication would examine the substance and
would direct reinstatement in a fit case. This position was recognised by the
Labour Appellate Tribunal as early as 1951 in Buckingham and Carnatic Co. Ltd.,
v. Workers of the Company, (1), and since then, it has been consistently
followed vide Chartered Bank, Bombay, v. Chartered Bank Employee's Union (2) ,
and U. B. Dutt & Co. (Private) Ltd. v. Its Workmen (3).
In the present case, the Labour Court has
made a definite finding in favour of -the appellant that its action in
terminating the services of Mr. Banerjee was not malafide and did not amount to
victimisation. Even so, it proceeded to examine the propriety of the said
action and came to the conclusion that Mr. Banerjee's discharge from employment
did not appear to it to be justified. In coming to this conclusion, the Labour
Court has given some reasons which are clearly unsupportable. It has observed,
for instance, that the appellant has not produced any documentary evidence in
support of its allegation against the efficiency of Mr. Banerjee. This is
clearly wrong because the two reports made by Mr. Gupta in respect of Mr.
Banerjee's conduct do amount to documentary evidence which cannot be lightly
brushed aside. It has then commented on the fact that the allegations made by
Mr. Gupta against Mr. Banerjee on six counts are of a general character. This
comment again cannot be justified because Mr. Gupta stated in clear terms the
defects in Mr. Banerjee's work which had come to his notice. These defects are
specific and it is idle to refuse to give importance to this evidence merely on
the ground that no specific instances had been cited. In regard .to the
question as to whether the 20 boxes had been opened by Mr. Banerjee before he
made his report (1) (1951) 11 L.L J. 314. (2) (1960) 11 L.L.J. 221.
(3) (1962)1 L.L J. 374.
132 to the Zonal ice, the Labour Court has
observed that on this point.. there is the evidence of Mr. Banerjee against
that of Mr. Gupta and there was no particular reason to believe one in
preference to the other. Now, it is clear that such an -observation is hardly
of any help because it was necessary for the Labour Court to express its
conclusion on this point ; it might have believed either Mr. Banerjee or Mr.
Gupta, but by saying that there is no reason why one should be believed rather
than the other, the Labour Court left this part of the dispute entirely
Similarly, the Labour Court has accepted the
fact that Mr. Gupta that called for and received Mr. Banerjee's explanation and
to that extent it has rejected Mr. Banerjee' suggestion that he had not given
any explanation a all ; but even so, the Labour Court has not considered the
effect of this conclusion on the main controversy between the parties.
In our opinion, therefore, the-reasons given
by the Labour Court in support of its conclusion that the discharge of Mr. Banerjee
was not justified are wholly unsatisfactory and so, it has become necessary for
us to examine the evidence ourselves.
The first report made by Mr. Gupta expressly
states six grounds on which Mr. Banerjee's work was found to be unsatisfactory.
Mr. Gupta took the view that Mr. Banerjee was very slow in his work as a
Salesman, that he was not able to judge the capacity of the dealers and to give
them sufficient stocks in time, that he took no steps to put the products of
the appellant on prominent view in the dealers' shops, that he wag not looking
after the pasting of the posters, in fact in one place the poster was pasted
upside down, that he was not educating the stockists and dealers as he could
have done and that he was reluctant to put hard and intelligent work. It is
remarkable that when Mr. Banerjee was asked about this report in
cross-examination, he frankly stated that 133 Mr. Gupta was not unfriendly
towards him and he was really unable to say why Mr. Gupta should have made
these adverse comments against his work. In fact, the Labour Court itself has
found that the appellant was not actuated by any ulterior considerations in
discharging Mr. Banerjee. This report was made by Mr. Gupta soon after he
inspected Mc. Banerjee's work and there is no reason, whatever, why the Labour
Court should have been reluctant to accept this report.
Confining ourselves to the main complaint
against Mr. Banerjee that he had not examined even a single box before he
reported that the contents of the said boxes were not marketable, Mr. Gupta
expressly stated that he had seen the 20 boxes and found that none of them had
been opened at all.
They were intact in the company's packing
with the straps on them. Mr Gupta got them opened and found that the contents
to the extent of 5 cases were really damaged and that the remaining contents
were alright and could be marketed at the company's prices. Mr. Banerjee stated
in his evidence that he had all the cases opened and he added, as he. had to,
that the said cases were repacked for avoiding further deterioration. When he
was asked how that could be done, he agreed that the metal straps had to be
removed for opening of the boxes, but he added that he had arranged to have
them restrapped and nailed. It is clear that the strapping is done in a factory
by machines. Mr. Banerjee, however, suggested that he could manage to get the
straps put and nailed with hands. This evidence is patently unreliable.
Besides, it is significant that when he gave
his explanation to Mr. Gupta Mr. Banerjee admitted that he had opened only 5 or
6 out of the 20 boxes in question though his report suggested that he had
opened all the 20 boxes. Therefore, there can be no doubt that Mr. Gupta's statetment
is absolutely true and that Mr. Banerjee had made his report about the 134
unsatisfactory condition of the contents of the 20 boxes without as much as
opening any one of them.' That being so, it is difficult to understand how the
Labour Court could -have come to the conclusion that the order of discharge was
The learned Solicitor-General, however,
attempted to argue that there was nothing on the record to show that the 20
boxes which Mr. Gupta got opened were the same boxes in respect of which Mr.
Banerjee had made his report. We do not think that having regard to the
evidence given by Mr. Gupta and Mr. Banerjee and the explanation' offered by
the latter when he was called to Calcutta by Mr. Gupta, there is any room for
such an ingenious suggestion. Both parties knew that they were talking about
the same 20 boxes and so,, it is futile now to suggest that the 20 boxes which
Mr. Gupta examined were different from the boxes in respect of which Mr.
Banerjee had made his report. It was also suggested on behalf of the
respondents that Mr. Gupta did not admit that he had received some letters from
Mr. Banerjee in which he had complained that owing to heavy rains, conditions
were not favourable for effective work in the area entrusted to him. It is true
that when Mr. Gupta was asked about these letters, he said he did not remember
if he had received them. We do not think that the answers given by Mr. Gupta in
respect of these letters can be of any assistance to the respondents in
discrediting Mr. Gupta's evidence in any manner. On the whole, we have no
hesitation in holding that the appellant acted bonafide in discharging Mr.
Banerjee's services when it accepted Mr. Gupta's report and concurred with his
conclusions that the explanation given by Mr. Banerjee was not satisfactory.
The result is, the appeal is allowed and the
order passed by the Labour Court directing the 135 appellant to reinstate Mr.
Banerjee is set aside. In the circumstances of the case, there would be no
order as to costs.