The Delhi Cloth And General Mills Ltd. vs Kushal Bhan

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

Court: supreme-court

Case Number: Not extracted

Decision Date: 10 March, 1960

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

The appeal before the Supreme Court arose on 10 March 1960 in the matter of The Delhi Cloth and General Mills Ltd. versus Kushal Bhan. The appellant was a textile manufacturing company, and the respondent, Kushal Bhan, was employed by the company in the capacity of a peon. On 24 August 1957 a bicycle belonging to Ram Chandra, who was the Head Clerk of the Folding Department, was reported stolen. The theft was promptly reported to the police. Subsequently, the bicycle was located at a railway‑station cycle stand after the respondent, acting on his own initiative, led the police to the stand and identified the stolen bicycle among a collection of fifty to sixty cycles. The company became aware of these developments in October 1957 and, on that basis, served a charge‑sheet on the respondent. The charge‑sheet alleged that the respondent had stolen the bicycle, that he had caused its recovery, and that a criminal case was pending against him. The company demanded that the respondent show cause why he should not be dismissed for misconduct. The respondent submitted his explanation on 13 October 1957, but the company found his explanation unsatisfactory and fixed 14 November 1957 for an enquiry. The respondent attended the enquiry but declared that, because the criminal case against him was still pending, he would not present any defence until the court decided the matter. He further expressed his refusal to participate in the enquiry and said he would not answer any questions put to him. When questions were addressed to him during the enquiry, he declined to answer and eventually walked out of the proceedings. Despite his withdrawal, the company completed the enquiry and concluded that the misconduct had been proved, consequently dismissing the respondent.

Following the dismissal, the company filed an application under section 33(2) of the Industrial Disputes Act, No. 14 of 1947, seeking the tribunal’s approval of the dismissal order. The application was heard by the tribunal on 6 May 1958. While the tribunal proceedings were pending, the respondent was acquitted by the criminal court on 8 April 1958 on the ground that the prosecution’s case was not free from doubt. The judgment of the criminal court was produced before the tribunal, and the tribunal declined to endorse the company’s order of dismissal. The company then applied for special leave to appeal to this Court, which gave rise to the present appeal. The principal contention of the appellant‑company is that it was not obligated to await the criminal trial’s outcome before taking disciplinary action, and that it was entitled to conduct a fair enquiry. Moreover, the company argues that the respondent’s refusal to take part in the enquiry and his subsequent departure should not prejudice the dismissal decision.

In this case, the Court observed that when an enquiry was being held, the company could only complete it and reach conclusions based on the evidence before it. Counsel for the respondent argued that the principles of natural justice required the employer to wait for the criminal trial court’s decision before taking any disciplinary action. The counsel further submitted that the employee’s refusal to take part in the disciplinary proceedings was justified because those proceedings dealt with the very same matter that was the subject of the criminal trial. The Court acknowledged that it is common for employers to stay enquiries pending the decision of criminal courts, and that such practice is generally regarded as fair. However, the Court held that the principles of natural justice do not impose an absolute duty on an employer to wait for the criminal court’s decision before acting against an employee. The Court referred to the decision in Shri Bimal Kanta Mukherjee v. Messrs. Newsman's Printing Works ((1956) L.A.C. 188), where the Labour Appellate Tribunal expressed the same view. The Court added that where a case involves grave allegations or complex questions of fact or law, it would be advisable for the employer to await the criminal court’s decision so that the employee’s defence is not prejudiced. The present case, however, was of a very simple nature, and therefore the employer could not be faulted for proceeding with the enquiry without waiting for the criminal trial outcome. Consequently, the Court found no violation of natural justice, and noted that the respondent’s decision not to participate in the enquiry did not constitute any fault on the part of the enquiry process.

The Court concluded that the tribunal had erred in refusing to grant approval under section 33(2) of the Industrial Disputes Act. It further observed that the tribunal had exceeded its jurisdiction by losing sight of the limits imposed by section 33(2). Accordingly, the appeal was allowed, confirming the Court’s order to set aside the tribunal’s decision and to grant the company approval to dismiss the respondent. The Court emphasized that the purpose of section 33(2) is to permit approval of disciplinary actions only when the employer has acted fairly and within its powers. It noted that the tribunal’s refusal to approve the dismissal, despite the employer having conducted an enquiry based on the available evidence, was inconsistent with the statutory framework. The Court therefore restored the company’s authority to dismiss the respondent, confirming that the dismissal was legally valid. In the circumstances, the Court did not order any costs against either party, finding none warranted at this stage. Accordingly, the appeal was allowed, confirming the Court’s order to set aside the tribunal’s decision and to grant the company approval to dismiss the respondent.