Phulbari Tea Estate vs Its Workmen

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 205 of 1958

Decision Date: 06/05/1959

Coram: K.N. Wanchoo, Bhuvneshwar P. Sinha, P.B. Gajendragadkar

In the matter titled Phulbari Tea Estate versus Its Workmen, a judgment was delivered on 6 May 1959 by the Supreme Court of India. The opinion was authored by Justice K.N. Wanchoo and the bench consisted of Justices K.N. Wanchoo, Bhuvneshwar P. Sinha and P.B. Gajendragadkar. The petitioner was the Phulbari Tea Estate and the respondent was the group of workmen employed by the estate. The decision bears the citation 1959 AIR 1111 and appears in the 1960 volume of the Supreme Court Reports at page 32. Additional citations to this case include references such as R 1959 SC1342 (18), R 1960 SC 160 (66), C 1963 SC 375 (7), R 1963 SC1756 (2,6), D 1965 SC 155 (8), R 1965 SC1803 (11), R 1972 SC 136 (33), R 1972 SC1031 (51), E 1976 SC1760 (7,8,9,10,11), RF 1979 SC1652 (18) and D 1984 SC 273 (37). The case deals with questions of competency of an industrial dispute tribunal, the timing of raising such questions, the dismissal of workmen following an enquiry, and the application of the rule of natural justice under the Industrial Disputes Act of 1947, section 7.

The factual backdrop involved two workmen, identified as Das and another individual, who were arrested by police after the employer lodged a complaint alleging theft. The manager of Phulbari Tea Estate conducted an internal enquiry and terminated Das on the ground of gross misconduct. During that enquiry Das asserted that he had no knowledge of the alleged theft and offered no defence. The manager had previously recorded statements from several persons in the absence of Das, and those persons were present at the enquiry. Das was instructed to question those witnesses, yet he was not provided with copies of their statements nor were the statements read to him at the time of the hearing. Das responded that he would not put any questions to the witnesses. Consequently the witnesses were asked whether their earlier statements to the manager were accurate and whether they wished to amend them; they affirmed the correctness of their prior statements. Subsequently the Magistrate, after reviewing the police report, discharged Das. The dispute was then referred by the Union to an industrial tribunal. At the tribunal the employer introduced only the written statements of the witnesses and did not produce the witnesses themselves. The tribunal ruled in favour of the workmen. The employer appealed the tribunal’s decision by special leave to the Supreme Court, and for the first time raised the issue of whether the tribunal was a properly qualified and competent body under section 7 of the Industrial Disputes Act, prior to the amendment introduced by Act 36 of 1956. The Supreme Court held that the question of the tribunal’s competence under section 7 must be raised before the tribunal itself because it is a matter of investigation, and it cannot be newly raised for the first time before the Supreme Court. The Court further pronounced that the fundamental principle of natural justice in an enquiry requires that the opposing party be given a full opportunity to question witnesses after being informed of the complete substance of the evidence presented against him. The Court emphasized that the witnesses relied upon by the employer should normally be examined in the presence of the opponent and that the opponent must be informed of the material intended to be used against him and be allowed to explain it.

The Court reiterated that a party relying on a witness must ordinarily have that witness examined while the opposite side is present. The opposite side must also be put on notice of any material that the party intends to use against it and be afforded a chance to explain such material. This proposition follows the rule laid down in Union of India v. T. R. Varma, reported in the 1958 Supreme Court Reports at page 499. The Court also referred to the decision in New Prakash Transport Co. Ltd. v. New Suwvarna Transport Co. Ltd., reported in the 1957 Supreme Court Reports at page 98. The Court further held that if the employer’s enquiry suffered from a procedural defect, the defect could be cured provided that all relevant evidence, including the testimony of witnesses who had not been examined before the workman, was produced before the Tribunal. By producing such evidence, the workman would be given an opportunity to cross-examine the witnesses, and the Tribunal would be left to evaluate the evidence and decide the case on its merits. This approach was endorsed by the judgment of M/s. Sasa Musa Sugar Works (P) Ltd. v. Shobrati Khan, decided on 29 April 1959, reported in the 1957 Supreme Court Reports at page 98.

The appeal arose under civil appellate jurisdiction as Civil Appeal No. 205 of 1958, filed by special leave against the order dated 23 October 1956 of the Industrial Tribunal, Assam, in Reference No. 16 of 1956. The appellant was Phulbari Tea Estate, herein referred to as “the company”. The matter concerned the dismissal of a workman identified as B. N. Das, who was represented by the Assam Chah Karmchari Sangh, a registered trade union. The Government of Assam had, on 8 March 1956, referred the question of the legality of Das’s dismissal to the Industrial Tribunal, seeking a determination of whether the dismissal was justified and, if not, whether reinstatement with or without compensation or any other suitable relief should be granted. Das had been dismissed by the company on 12 March 1955 on the allegation that, on the night of 6-7 February 1955, he and a fellow employee named Samson had stolen two wheels complete with tyres and tubes from the company’s lorry, an act constituting gross misconduct under the Standing Orders. The incident was reported to the police, leading to the arrest of both Das and Samson. Das remained in custody until 25 February 1955, when he was released on bail. He reported for duty on 28 February, but the manager suspended him for ten days beginning 1 March. On 10 March 1955 he received a charge-sheet requiring him to show cause why he should not be dismissed for the alleged gross misconduct. He responded on 11 March, contending that the criminal case was still pending and that the question of dismissal could not be considered until the allegations were proven in court. On 12 March, the manager proceeded to hold an enquiry which culminated in Das’s dismissal, an enquiry that later became the focal point of the present appeal.

The manager conducted an enquiry on that very day and, immediately thereafter, dismissed Das. The details of what transpired at that enquiry will be examined later, as they constitute the principal issue requiring consideration in this appeal. Continuing the factual sequence, the police submitted a final report on the matter and the magistrate discharged Das on 23 March 1955. Following his discharge, the matter was taken up by the workers’ union, which eventually referred it to the Tribunal on 8 March 1956. The Tribunal held that Das’s dismissal was unjustified on two grounds: first, that the proper procedural requirements had not been complied with, and second, that there was an absence of legal evidence to support the dismissal. While the Tribunal noted that, ordinarily, Das would have been entitled to reinstatement, it expressed the view that, given the particular circumstances of this case, he should instead be granted the alternative relief of compensation. Accordingly, the Tribunal ordered that Das be paid his salary and allowances for the period from 28 February to 11 March 1955, and that he receive full pay and allowances from 12 March 1955 until the date of payment of the award. In addition, the Tribunal directed that Das be entitled to fifteen days’ wages for each completed year of service, together with all other benefits that accrued to him up to the date of final payment. This award was made on 23 October 1956, subsequently published and brought into force. Thereafter, an application for special leave to appeal was filed before this Court and was granted, thereby bringing the matter before us. On behalf of the company, two points were raised: (1) that the Tribunal was not a competent tribunal within the meaning of section 7 of the Industrial Disputes Act, No XIV of 1947, as it then stood, and (2) that the Tribunal’s award could not be sustained in law because it appeared to the company that the Tribunal had acted as an appellate body on the company’s enquiry, a function it was not authorised to perform. Regarding the first point, the reference to the Tribunal was made on 8 March 1956, which was before the commencement of the amending Act No XXXVI of 1956. At that time, section 7 of the Act prescribed that a one-member tribunal must consist of a person who either (a) was or had been a Judge of a High Court, or (b) was or had been a District Judge, or (c) was qualified for appointment as a Judge of a High Court. The company contended that Shri Hazarika, who acted as the sole member of the Tribunal in this case, did not satisfy any of those qualifications. This contention had not been raised before the Tribunal, and consequently the factual record necessary to determine Shri Hazarika’s eligibility had not been examined. At the time of the reference, Shri Hazarika held the position of Additional District and Sessions Judge in the Lower Assam Division. Assuming that he was not qualified under clause (a) above, he

The Court noted that Shri Hazarika could have satisfied the qualification prescribed in clause (b) of section 7 if he had previously served as a District Judge in another jurisdiction before being appointed as an Additional District Judge in the division under consideration. Moreover, even if he had never held the position of District Judge, he might still have met the requirement for appointment as a Judge of a High Court. The Court observed that these possibilities required factual investigation, but such investigation was not undertaken because the issue of the tribunal’s qualification had not been raised before the Tribunal. Accordingly, the Court declined to permit the company to raise this qualification issue for the first time before this Court and consequently rejected the company’s contention on that ground.

The Tribunal had based its finding that the dismissal was unjustified on two grounds: first, that the proper procedural steps had not been observed, and second, that the legal evidence presented was insufficient. The company criticised the Tribunal for treating the matter as if it were hearing an appeal from the company’s own enquiry, particularly with regard to the second ground. Nevertheless, because the Tribunal also concluded that the procedural requirements had been breached, the Court needed to examine whether that procedural finding alone justified the Tribunal’s ultimate conclusion. In order to do so, the Court set out in detail the events that occurred at the company’s enquiry held on 12 March, as recorded in the manager’s testimony and the documents he produced before the Tribunal. The evidence indicated that at the enquiry certain individuals, whose statements had earlier been recorded by the manager in Das’s absence during the company’s investigation, were present. The first question posed to Das was whether he had anything to say concerning the disappearance of two lorry wheels and tyres from the garage. Das answered that he had nothing to say and denied any knowledge of the alleged theft. He was then informed that the persons who had given evidence against him were present and that he could question them. Das replied that he would not put any questions to them. Subsequently, the witnesses were asked whether the statements they had previously given to the manager were correct and, if not, whether they wished to amend them. All the witnesses affirmed that their earlier statements were correct. No further examination of the witnesses took place in Das’s presence, and the manager’s testimony did not indicate that copies of the witnesses’ statements had been provided to Das before he was invited to question them, nor that the statements had been read out to him at the enquiry. After this limited enquiry, the manager proceeded to pass the order of dismissal.

It was established that the statements recorded by the witnesses had been presented before the Tribunal on behalf of the company, yet the witnesses themselves were not brought before the Tribunal for cross-examination, even at that stage, on behalf of Das. The issue then was whether, under those circumstances, the enquiry satisfied the requirements of natural justice. The Court referred to Union of India v. T. R. Varma (1), a case concerning the dismissal of a public servant, which examined whether an enquiry conducted under Article 311 of the Constitution complied with natural justice principles. In that decision, Justice Venkatarama Ayyar, speaking for the Court, observed at page 507 that, in a broad but not exhaustive sense, natural justice demands that a party be allowed to set out all relevant evidence on which it relies, that the opponent’s evidence be taken in the party’s presence, that the party be given an opportunity to cross-examine the opponent’s witnesses, and that no material be relied upon against a party without giving that party a chance to explain it. Applying those principles to the present enquiry held on March 12, it became immediately apparent that they had not been observed, because the witnesses on whose statements the company depended were not examined while Das was present. The Court noted that while the principles articulated in Union of India v. T. R. Varma are not exhaustive, they are nonetheless fundamental. Further guidance was taken from New Prakash Transport Co. Ltd. v. New Suwarna Transport Co. Ltd. (2), where the Court held that the rules of natural justice must be interpreted in light of the specific statutory framework governing the body, and not by any preconceived notion of what those rules ought to be. In that case, the Court stated that reading the contents of a police report aloud at a hearing satisfied natural justice because the rules did not require a copy of the report to be given to any party; the police officer who prepared the report was not subject to cross-examination, but the party concerned was informed of the material to be used against him and was permitted to explain it. The present facts, as recounted regarding the events of March 12, demonstrate that even this limited compliance was absent, for there is no evidence that copies of the witnesses’ statements were provided to Das, nor that those statements were read to him before he was asked to question the witnesses.

The Court observed that there was no evidence showing that copies of the statements of the witnesses who had given evidence against Das had been provided to him, nor that the statements made by those witnesses to the manager had been read out in extenso to Das before he was asked to question them. In these circumstances a fundamental principle of natural justice applicable to an enquiry of this kind had not been observed, and consequently the Tribunal’s finding that proper procedure had not been followed was justified and could not be challenged. The defect in the conduct of the enquiry could have been remedied had the company produced the witnesses before the Tribunal and given Das an opportunity to cross-examine them at that stage. In Messrs. Sasa Musa Sugar Works (Private) Ltd. v. Shobrati Khan (1) the Court had previously pointed out that even where an employer does not hold a full enquiry before applying under s. 33 of the Act for permission to dismiss an employee, the employer may cure the defect by producing all relevant evidence that would have been examined at the enquiry before the tribunal, allowing the tribunal to consider that evidence and decide whether permission should be granted. The same principle applies to adjudication under s. 15 of the Act; if the employer’s enquiry is defective, the defect may be rectified by producing the necessary evidence before the tribunal. However, that remedy was not employed in the present case. The only step taken by the company, as recorded in C. As. Nos. 746 & 747 of 1957 decided on 29-4-1059, was to produce before the Tribunal the statements recorded by the manager during what the Court described as an investigation. This left the matters unresolved, and Das never received an opportunity to question the witnesses after becoming fully aware of what they had alleged against him. Accordingly, the Court was of the opinion that the Tribunal’s finding that the enquiry was not proper was correct and must stand, leading to the dismissal of the appeal. The Court further clarified that the Tribunal’s order fixing the grant of compensation up to the date of payment is limited to the sum of Rs 11,125, which has already been deposited in this Court in compliance with the Court’s order of 22 April 1957, and Das is not entitled to any additional amount, as any further stay of payment arose from the Court’s own order. In view of these circumstances, the Court held that each party should bear its own costs of this proceeding, and the appeal was dismissed.