Andhra Scientific Co. Ltd. vs A. Seshagiri Rao And Anr.

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

Court: Supreme Court of India

Case Number: Not extracted

Decision Date: 13 December, 1960

Coram: P.B. Gajendragadkar, K.N. Wanchoo, K.C. Das Gupta

In the matter titled Andhra Scientific Co. Ltd. versus A. Seshagiri Rao and another, decided on 13 December 1960, the Supreme Court of India delivered a judgment authored by Justice K.C. Das Gupta, with the bench consisting of Justices P.B. Gajendragadkar, K.N. Wanchoo and K.C. Das Gupta. The case originated on an appeal made by special leave against an order of the High Court of Andhra Pradesh that had refused to exercise its constitutional power under Article 226 to interfere with an award rendered by the Labour Court at Guntur, Andhra Pradesh. The award concerned an industrial dispute that had been referred to the Labour Court pursuant to section 10(1)(c) of the Industrial Disputes Act. The order of reference expressed the dispute in the following terms: “Whether the suspension of Shri A. Seshagiri Rao from 28 April 1956 and his subsequent dismissal from 16 March 1957 is justified? If so, to what relief is he entitled?” Shri A. Seshagiri Rao had been employed by the appellant, Andhra Scientific Co., since 1927 and had continued in service after the company was converted into a public limited company. From 1927 to 1930 he served as the Office Manager of the Madras Branch, and in 1930 he was transferred to the Head Office at Masulipatam where he was appointed Manager of the General Stores Department. He remained in charge of that department from 1930 until 25 April 1956, when he was transferred to the Quotations Department. Three days after the transfer, on 28 April 1956, he was placed under suspension by an order of the Director, Shri K. Ramanatha Babu, and on that same day a charge‑sheet containing numerous allegations grouped under eight heads was served upon him. The first charge alleged that his handling of the stores had been consistently reckless, inefficient and unsatisfactory, citing three specific instances labelled (a), (b) and (c). The third charge complained that his day‑to‑day handling of the stores was very careless, enumerating instances under headings A, B, C, D and E. The eighth charge comprised four sub‑heads. Shri Seshagiri Rao denied every allegation, but an enquiry that began on 3 September 1956 and concluded on 16 March 1957 found him guilty of the charges and ordered his dismissal. The Labour Court subsequently rejected a preliminary objection raised by the company that Rao did not qualify as a “workman” within the meaning of the Industrial Disputes Act. The Court further held that the enquiry had been tainted by a breach of natural‑justice principles because the General Manager who presided over the initial stage of the enquiry later testified as a witness, thereby compromising the impartiality of the proceeding; likewise, Shri Ramanatha, who was acting on behalf of the company, presided over the later stage of the enquiry and rendered the final decision. After examining the evidence presented, the Labour Court held that, apart from charges numbered one and eight, the remaining charges had not been established.

The Labour Court, after examining the evidence, held that the allegations identified as charges la and 8 had been proved only in part, and that the mere delay in addressing those allegations did not reach the level of prejudice that would justify the employee’s dismissal. Accordingly, the Court declared that the dismissal previously imposed on the employee was not justified, although it recognized that the employee’s conduct warranted some form of disciplinary sanction. To address this, the Court sentenced the employee to a suspension from service for a period of one year, commencing on 16 March 1957, and characterised this suspension as a proper and adequate punishment for the proven aspects of the case. Furthermore, the Court directed that the employee be reinstated to his former position, with a salary fixed at Rs 250 per month, effective from 16 March 1958 until the date of his actual reinstatement. The Court also ordered that, during the pendency of the departmental inquiry, the employee be paid a subsistence allowance amounting to half of his regular wages, covering the interval from 28 April 1956 up to 16 March 1957. The final award was issued on 11 March 1958.

On 28 April 1958, the appellant company filed an application before the High Court of Andhra Pradesh under Article 226 of the Constitution, seeking a writ of certiorari or any other appropriate relief to set aside the Labour Court’s award. The petition raised three specific grounds. First, the company contended that Shri Seshagiri Rao, being employed in a managerial and administrative capacity, did not qualify as a “work‑man” within the meaning of the Industrial Disputes Act, and therefore the Labour Court’s decision was erroneous in its characterization. Second, the company argued that the Labour Court had been wrong to hold that the inquiry was tainted by a breach of natural‑justice principles. Third, the company asserted that, even assuming that charges la and 8 were at least partially proved, the Labour Court had no authority to replace the dismissal with a punitive suspension and to order reinstatement. The High Court concurred with the Labour Court that Shri Seshagiri Rao was a “work‑man” and that the enquiry was indeed vitiated by a violation of natural‑justice rules. Regarding the issue of partial proof, the High Court held that the expression “partially proved” was not recognised in law and consequently deemed that charges la and 8 were not proved at all. In view of this conclusion, the High Court found no basis to interfere with the Labour Court’s order and dismissed the company’s application under Article 226. The correctness of the High Court’s findings on all three grounds was subsequently challenged before the Supreme Court. In its consideration of whether Shri Seshagiri Rao qualified as a “work‑man,” the High Court examined the duties assigned to him as Stores Manager, as set out in the office order dated 31 December 1949, and also evaluated the oral evidence presented. The High Court concluded that, even if the functions of a Stores Manager involved some degree of initiative, command, and control, they were essentially supervisory in nature, and therefore the employee fell within the definition of a work‑man under Section 2(s) of the Industrial Disputes Act.

In this case the Court observed that, according to the office order dated 31 December 1949, the first respondent was responsible for the maintenance of the general stores, for packing and despatching stock, for keeping stock accounts and exercising effective control over those accounts, and for handling stock requisitions. Because those duties were supervisory in nature and because, on the material date, the first respondent earned a salary not exceeding Rs 500, the Court concluded that he fell within the definition of “workman” contained in the first limb of proviso IV to section 2(s) of the Industrial Disputes Act. The Court further noted that the question of what functions the employee actually performed was a factual issue. It held that the High Court was correct in stating that, once the Labour Court had examined the evidence and decided that the employee’s functions placed him within the meaning of “workman” under the Act, the High Court could not interfere under article 226 except where the record showed a clear error. Although the High Court reviewed the evidence itself, it found that the most accurate description of the functions performed by Shri Seshagiri Rao was set out in exhibit A‑10 as “maintenance of general stores, packing and despatching, stock‑accounts and effective check over them, stock requisitions.” The Court also recorded that, according to the testimony of the General Manager, Shri Seshagiri Rao could not make appointments in his department, could not suspend or dismiss any subordinate, could not grant leave without the General Manager’s sanction, was not consulted when retrenchments occurred in the Stores Department, and never imposed any fine on any employee. Moreover, the staff regulations and various memoranda issued by the Company had removed from the Stores Manager’s role all elements of control or command. Even assuming that some initiative, command or control might have existed, the Court reiterated that the functions were essentially supervisory. The Attorney‑General could not identify any defect in this finding, and therefore the contention that the High Court erred in refusing to disturb the Labour Court’s conclusion that Shri Seshagiri Rao was a “workman” at the relevant time could not succeed. The Court also rejected the argument that the High Court should have held the management‑conducted inquiry to be void for breaching natural‑justice rules. It explained that the purpose of procedural rules, described as rules of natural justice, is to ensure fairness. In examining the actual conduct of the inquiry, the Court noted that the General Manager himself opened the inquiry and examined five witnesses before Ramanatha Babu assumed responsibility for the enquiry and subsequently examined the General Manager as a witness. Ramanatha Babu explained that he had not initially decided who should be called as witnesses, that he had wanted the General Manager to testify later, and that, after reviewing the evidence, he decided the General Manager should be deposed. The Court found this shift—where the person who began the inquiry later became a witness—to be incongruous, and it emphasized that Ramanatha Babu, who was effectively leading the prosecution and gathering evidence to prove the charges, had taken over the enquiry, raising serious concerns about the fairness of the procedure.

After five witnesses had been examined, the inquiry was taken over by Ramanatha Babu, who then proceeded to examine the General Manager as a witness. Ramanatha Babu was forthright in explaining the reasons for this apparently irregular procedure. In his testimony he stated, “I did not decide at the start of the inquiry who should be called as witnesses. The General Manager appeared as a witness at the beginning of the inquiry. I wanted the General Manager to be called as a witness toward the end, so I assumed charge of the inquiry myself. At the outset I was unaware that the General Manager ought to be a witness. Only later did I decide that he should be examined as a witness. While reviewing the evidence and perusing the records I concluded that the General Manager should depose as a witness.” This explanation highlights the incongruity of a person who initially presided over the inquiry later taking the witness‑box position. More seriously, the facts show that Ramanatha Babu, who was clearly responsible for presenting the prosecution and for gathering the evidence needed to support the charges, assumed control of the inquiry and ultimately rendered the decision in the case. The learned Attorney‑General correctly observed that the final decision was not rendered by the General Manager; consequently the situation differs in form from the precedent in State of Uttar Pradesh v. Muhammad Nooh, where the District Superintendent of Police both presided over the inquiry and, after being examined as a witness, delivered the decision in an inquiry against a police constable. Substantively, however, the distinction is minimal. In the present facts the General Manager and Ramanatha Babu functioned practically as a single entity expressed through two bodies: initially the General Manager acted as the adjudicator, then withdrew to become a witness, and subsequently Ramanatha Babu assumed the role of adjudicator. An additional relevant fact is that the individual who delivered the ultimate decision had actively been involved in collecting the evidence, with the expressed intention of securing a finding against the workman. Considering these circumstances, the manner in which the inquiry was conducted cannot be said to have ensured the fairness mandated by the rules of natural justice. Accordingly, the High Court’s conclusion that a proper enquiry had not been held is affirmed, and the Labour Court was rightly justified in examining the evidence to determine whether the workman was guilty of any of the charges. This leads to the principal contention raised on appeal: that once the Labour Court had found two of the alleged charges proved, it possessed no jurisdiction to assess whether the management’s dismissal order was excessive. Established jurisprudence holds that when the management’s finding of the accused’s guilt on the alleged misconduct remains undisturbed, Industrial Tribunals ordinarily do not interfere with the punishment imposed.

The Tribunal was clearly able, and indeed required, to examine what penalty should be imposed when the acts for which the workman was finally found guilty did not amount to misconduct under the employer’s Standing Orders. The Labour Court determined that all charges except la and 8 were not proved, and that charges la and 8 were only partially proved. Charge la alleged that the items in the stores were never arranged properly and were never labelled; charge 8 related to the improper arrangement of articles kept in the Stores Department. The managing agents, after finding the stores to be in a confused state, conducted an inspection in September 1955 and, at the request of the Stores Manager Shri Seshagiri Rao, gave him until 17 October 1955 to arrange the items and affix labels. The work was not completed even though the deadline was extended on more than one occasion. Consequently, the Labour Court concluded that charges la and 8 had been established. The Court qualified its finding by stating that the charges were only partially established because, although the arrangement and labeling work was not finished, the major portion of it had been completed. We do not think the High Court was correct in treating these two charges as “not proved at all.” Assuming that charges la and 8 are proved, it is essential to note that the acts described in them do not constitute misconduct under the Industrial Employment Standing Orders Rule. Rule 19, in clauses (a) to (n), lists the acts or omissions that amount to misconduct. The learned Attorney General attempted to place the acts alleged in charges la and 8 within Clause (a) or Clause (1) of Rule 19. Clause (a) defines wilful insubordination or disobedience of any lawful or reasonable order of a superior as misconduct. No allegation of wilful insubordination or disobedience was made; only negligence was alleged. The acts for which the workman was found guilty therefore do not amount to wilful insubordination. Clause (1) characterises habitual negligence as misconduct, but habit requires negligence on several occasions sufficient to show a regular pattern. The negligence in this case concerned a single matter – the proper arrangement and labeling of stores – and was alleged to have occurred on one occasion, even though it persisted over several months, which does not satisfy the requirement of habitual negligence.

The Court observed that the negligence attributed to the workman arose from a single incident concerning the arrangement and labeling of stores. Although the negligent conduct extended over several months, the Court held that the mere passage of time does not transform it into habitual negligence. Habitual negligence, according to the Court, requires proof of repeated negligent acts on multiple occasions, demonstrating a settled pattern of behavior. Because the record showed only one distinct act, the Court concluded that the statutory definition of habitual negligence could not be satisfied. Consequently, even if the two charges, identified as charges la and 8, were presumed proven, the workman could not be said to have committed misconduct under the applicable rule. The dismissal order issued by the employer was predicated on a finding of misconduct, and the Court found that basis to be legally untenable. Accordingly, the Court directed that the dismissal order could not be allowed to remain in force and that the Labour Court must reassess what, if any, disciplinary sanction should be imposed. The Court emphasized that the Labour Court possessed the authority to determine an appropriate penalty after re‑examining the factual matrix without the constraint of a misconduct label.

The Court then expressed its view that the High Court had correctly declined to set aside the order of the Labour Court which had modified the punishment originally imposed by management. However, the Court disagreed with the High Court’s ancillary conclusion that the two charges, la and 8, should be treated as unproved altogether. The present judgment maintained that the High Court’s refusal to interfere was proper, even though its reasoning on the evidential status of the charges was not adopted. In light of these findings, the Court concluded that there was no basis to entertain the appeal challenging the Labour Court’s revised discipline. Accordingly, the Court ordered that the appeal be dismissed and that the costs of these proceedings be awarded against the appellant. The cost award reflected the principle that a party who unsuccessfully challenges a settled order should bear the expenses incurred by the respondents. By dismissing the appeal, the Court affirmed the procedural propriety of allowing the Labour Court to determine the appropriate consequence for the workman’s conduct, once the finding of misconduct was set aside.