K. T. Chandy Vs. Mansa Ram Zade 
INSC 237 (11 December 1973)
CITATION: 1974 AIR 642 1974 SCR (2) 650 1974
SCC (1) 414
Contempt of Court-Suit by employee against
employer- Dismissal of employee in exercise of right to terminate as per
contract of service-When does not amount to contempt.
The respondent was employed in a company. The
contract of service Provided for, the termination of service by giving three
months notice or three months pay ,in lieu thereof without assigning any cause.
The company gave him a notice that it was found that his performance and
conduct have not been good and that he had not proved useful to the company.
He was therefore advised to try for
He was informed that he would be released
from the company at his request on payment by him of the amount under a bond
executed by him with some concession. The respondent thereupon filed a suit
claiming various reliefs. He, did not ask for an interim injunction restraining
the appellant and the company from terminating his service during the pendency
of the suit, nor did the appellant and the company give any such undertaking.
The company gave the respondent notice terminating his service with effect from
the date of the service of the notice and granted him three months' pay.
The High Court hold that the act of giving
the second notice amounted to con. tempt of court because, as a result of the
termination some of the reliefs Prayed for would become infructuous and that
would amount to obstruction or interference with due course of justice.
Allowing the appeal to this Court,
HELD Where a party to a suit terminates the
service of the adversary party in the honest exercise of his rights under the
contract of service and in the absence of any interim injunction or
undertaking,, the act would not constitute contempt of court. [653 B-C] (a) A
combined reading of the two notices shows that the appellant had terminated the
service in the honest exercise of the right vested in the company by the
contract of service. The order did not threaten the respondent to withdraw the
whole or part of the suit. [653 C] (b)The circumstance that one or more of the
reliefs claimed in the plaint had become infructuous on account of the
termination would not establish contumacy, because the respondent was free
amend his plaint and ask for an appropriate relief. [653 D] (c) The fact that
the appellant had tendered an unconditional apology in the High Court is not a
ground for this Court refusing to interfere, because, (i) the High Court had in
fact held that appellant has committed contempt though it did not award
punishment because of the apology and(ii)the High Court had directed the
appellant to pay cost to the respondent. [654 B] Taka Qim Goakar v. R. V.
Shakla,  3 S.C.R. 422, fang Bahadur Singh v. Baij Nath rewari,  1
S.C.R. 13 Cand Malojirao Shitole v. C. G. Matkar, A.I.R 1953 M. B. 245,
Pratap ginirh v. Gurbaksh Sinqh,  Supp.
2 S.C.R. 838, and Govind Sahl v. State of U. P.  1 S.C.R. 176,
CRIMINAL APPELLATE JURISDICTION: Criminal
Appeal No. 129 of 1970.
Appeal by Special leave from-the Judgment and
order dated the 24th July, 1969 of the Calcutta High Court in Criminal Misc. Case
No. 179 of 1969.
D. -Mukherjee, and DN. Mukherjee, for the
S.B. Wad, for the respondent.
The Judgment of the Court was delivered by
DWIVEDI, J. Seemingly it is a small case. It has not hit the headlines in the
news-media. Nor it has gripped the public mind. The pecuniary stake is trivial.
A tiny sum of Rs. 200/- is payable as costs by the appellant. However, this
case brings in to the flash-point an issue of great consequence to liberty of
contract: Where to draw the dividing line between the area of contempt of court
and the are of opration of contractual rights.
The appellant is the Chairman of the
Hindustan Steel Limited (hereinafter referred to as the Company). The
respondent was employed in the Company on a contract of service. The contract
provided for termination of his service by giving three months' notice or three
months' pay in lieu thereof and without assigning any cause. On February 21,
1968, the Company gave him this notice : "It is found that your
performance and conduct in this plant have not been good and that you have not
proved useful for the Company. You are hereby advised to note this position and
also to try for alternative employment elsewhere. You may be released from this
company at your request on payment of the amount required under the bond
executed by you on pro-rota basis as a very special case taking into account
the period of service that may be rendered by you at the time of release.
in other words, if you choose to leave the
service of the company before expiry of bond period, you will be required to
pay the company a sum not exceeding Rs. 20,000/- reduced by the amount
calculated on pro-rota basis in respect of the service you may render after
completion of your training." Soon thereafter he rushed to the Court. On
May 27, 1968 he instituted a suit in the Court of the Second Munsif, Asansol.
The material reliefs claimed in the plaint are:
(1) a declaration that the notice dated
February 21, 1968 is illegal, bad, mala fide, without jurisdiction, void and
inoperative and is not binding on the plaintiff;
(2) a declaration that the charge sheet dated
July 1, 1966, confidential character report, dated April 27, 1967, are ultra
vires, unenforceable, illegal, unsustainable, mala fide and opposed to rules
and natural justice and are not binding on the plaintiff;
(3) a declaration that the plaintiff is
entitled to promotion to the next higher grade, namely, foreman, from October
652 (4) a mandatory injunction directing the
defendant to promote the plaintiff to the grade of foreman; and (5) a permanent
injunction restraining the defendant from giving effect to the notice dated
February 21, 1968.
He did not ask the Munsif to grant an interim
injunction restraining the appellant and the Company from terminating his service
during pendency of his suit. So no such interim injunction was operating at the
relevant time. Nor did the appellant and the Company give an undertaking to
refrain from terminating his service during pendency of the suit.
Forgetting the suit for a moment, there was
no impediment in their way of terminating his service according to the
contract. And on February 26, 1968, the Company gave him this notice;
"(T)he services of the ( respondent) are hereby terminated with effect
from the date of service of this order on him and payment of three months' pay
in lieu of notice in terms of clause (vi) of his appointment letter...... dated
January 29, 1962." The Calcutta High Court (R.N. Dutt and B. Banerji JJ.).
has held that the act of giving this notice amounts to, contempt of court. The
learned Judges said: "It seems that he (plaintiff) was more or less
non-suited. ..There is no doubt that since his services have been terminated,
some of the reliefs which were prayed for in the suit could become infructuous.
On these considerations, we think that the action of the Chairman in
terminating the services of the (plaintiff) .... does amount to obstruction or
interference with due course of justice in the petitioner's suit before the
Munsif .... and- so it amounts to contempt of the said court." When asked,
counsel for the respondent could not cite any decision holding a Muslim
husband's act of divorcing his wife during pendency of her suit for future
maintenance as contempt of court. The divorce completely aborts her suit.
It is true that the law of contempt of court
is essential for keeping the administration of justice pure and undefiled. It
is also well to remember that our society is also interested in the fulfillment
of a man's expectations under a contract. To that end we have a law of contract
in our country. Assigning an unlimited and undefined area to either of them
would unduly curtail the area of the other.
Each should have a viable area so that '
justice may hold high her head and contract is not cribbed and cramped. But
what is the yardstick to measure their area of operation.
It has been held that 'initiation in good
faith' of a departmental' enquiry under the Customs Act by the Custom
authorities on the basis of facts which are the subject of a criminal prosecution
under that Act against the appellant would not amount to contempt as the
authorities' are acting bona fide and discharging their statutory duties.'
(Ruka Ram G. Geokar v. R. N. Shukla.1 see also Jang Bahadur Singh v.
Baij Nath Tewari).2 In another case it was
held that the issue of a notification under the Abolition of Jagirs Act for
resumption of Jagirs during pendency of a jagirdar's writ petition for
restraining such resumption-is not contempt, because the Government was acting
bona fide in the exercise of its statutory rights. (See (1)  3 S.C.R.
(2)  1 S.C.R.. 134..
653 Malojirao Shitole v. C. G. Matkar)(1)
These cases establish that bona fide exercise of a statutory right by a party
to a proceeding is not contempt in the absence of an interim injunction against
or undertaking by that party. There appears to be so sound' reason why this
principle should not extend to the exercise of rights under a contract.
The rights of a party under a contract are
his legal rights.
In our view bonafide or honest exercise of a
right under a contract should be the yardstick for allocating their respective
area to contempt and it gives to each its proper sphere. So where a party to a
suit,, as here,. terminates the service of the adversary party in the honest
exercise of his rights under the contract of service and in the absence of any
interim injunction or undertaking, his act would not constitute contempt of
court. We are satisfied from a combined reading of the two notices relating to
termination of service that the appellant had terminated the service of the
respondent in the honest exercise of the right vested in the Company by the
contract of service. So he has not committed contempt of the Munsif's Court.
The order terminating his service does not
threaten the respondent to withdraw the whole or part of his suit. The mere
circumstance that one or more of the reliefs claimed in the plaint have become
infructuous on account of the termination order would not establish contumacy.
The respondent is free to amend his plaint and ask for a relief against the
Counsel for the respondent has relied on
Pratap Singh V. Gurbakah Singh(4) and Gobind Sahai v. State of U.P.(5) These
cases are clearly distinguishable on facts. In the first case a Government
employee had instituted a suit as well as a writ petition against the
Government in respect of his service conditions. Thereupon the appropriate
authority started a departmental proceeding against the employee. The charge
sheet stated that he had gone to a court of law before exhausting all his
departmental remedies and that his action was contrary to official propriety
and subversive of good discipline. This charge was framed on the strength of a
circular letter issued by the Chief Secretary of the Government on June 25,
1953. It emphasised that "any attempt by a Government servant to seek a
decision on such issues in a court of law without first exhausting the normal
official channels of redress could only be regarded as contrary to official
propriety and subversive of good discipline and could well justify the
initiation of disciplinary action against him. This Court held that the
authorities have committed contempt of court. In the second case while the
respondent's suit challenging the election of his opponent to a committee of a
political party was pending, the appellant letters expelling him from the party
on the strength of an earlier resolution of the party which barred reference of
such disputes to a law court and provided for summary removal of any member who
initiated a suit. This Court held that the action of expulsion amounted to
contempt of court. It 'should be observed that in both cases the complainant
had a right to institute a legal proceeding in a law court for redress of his
This legal right (1) A.I.R. 1953 MB 245.
(2)  Supp. 2 SCR 838.
(3)  1 SCR. 176.
654 could be taken away only by a valid law.
But there was no such law in operation. So neither the officers of the
Government nor the political party had a legal right to take any action for
punishing the /suitor for his mere 'act of instituting a legal proceeding in a
law court. In our case the- appellant had a right under the contract to
terminate, the service of the respondent.
Counsel for the respondent has submitted-that
as the appellant had tendered an unconditional apology. in the High Court, we
should not interfere with the High Court's order.
We are unable to appreciate the submission.
Apology goes to sentence and may be accepted only upon a finding that contempt
has been committed. The High Court has in fact held that the appellant has
committed contempt. But it has accepted his apology and refrained from awarding
any punishment. Moreover, the appellant has been directed to pay Rs. 200/as costs
to the respondent. So the appellant is entitled to have the order of the High
Court set aside.
We allow the appeal and set aside the order
of the High Court.