Management Of Ritz Theatre (P) Ltd 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. 111 of 1962

Decision Date: 27 July 1962

Coram: P.B. Gajendragadkar, K.C. Das Gupta, J.R. Mudholkar

The matter before the Supreme Court of India was titled Management of Ritz Theatre (P) Ltd versus its workmen, and the judgment was pronounced on 27 July 1962. The case was reported in the 1963 volume of the All India Reporter at page 295 and also in the 1963 Supreme Court Reporter (third series) at page 461. The bench hearing the appeal consisted of Justice P. B. Gajendragadkar, Justice K. C. Das Gupta and Justice J. R. Mudholkar. The appellant, Management of Ritz Theatre (P) Ltd, is a corporate entity engaged in the exhibition of motion pictures in its theatre. The respondents, identified as Jai Jai Ram and Mohd Mia, had been employed by the appellant for many years as workmen in the theatre.

During the period of their employment the respondents were served with charge‑sheets alleging misconduct. The appellant appointed enquiry officers to investigate the allegations. At the departmental enquiry the appellant presented both oral and documentary evidence. Eleven witnesses were examined on behalf of the appellant and an equal number of witnesses were examined on behalf of the respondents. After considering all the material placed before it, the enquiry officer concluded that the charges against the two respondents were fully proved. Accordingly, the officer recommended that the services of both respondents be terminated for misconduct and also suggested that certain payments be made to them. The appellant accepted the officer’s report. Consequently, Jai Jai Ram was dismissed on 15 January 1959 and Mohd Mia was dismissed on 1 May 1959.

The dismissal of the respondents was challenged before the Delhi Administration, which referred the dispute to the Industrial Tribunal for determination of whether the respondents should be reinstated with full back wages or be awarded any other relief. During the proceedings before the Tribunal the appellant sought permission to adduce additional evidence. The Tribunal granted this request and allowed both parties to lead further evidence. After hearing the additional evidence the Tribunal held that the dismissal of Jai Jai Ram was not justified and that the findings recorded against him at the departmental enquiry were baseless. Regarding Mohd Mia, the Tribunal observed that no formal order of dismissal had been served on him; therefore, his services could not be said to have been properly terminated by an order of dismissal. On these grounds the Tribunal ordered the reinstatement of both respondents.

The appellant filed a special leave petition before this Court. After consideration, the Court held that the order of dismissal passed against Jai Jai Ram was proper and valid. In contrast, the Court found that the appellant had failed to prove that a dismissal order had been served on Mohd Mia as required by law. The Court noted that the termination of an employer‑employee relationship is not effected merely by the employer’s decision; it must be communicated to the employee, and such communication had not occurred in the case of Mohd Mia.

The Court observed that an employer may not end an employee’s service merely by deciding to do so; the decision must also be communicated to the employee. In the present case such communication had not been made to Mohd Mia, and therefore the dismissal could not be said to have been properly effected. Consequently, the appellant was ordered to pay Mohd Mia the wages he would have earned had he remained in actual employment from 1 December 1958 up to 27 July 1962, the date on which the decision was rendered. Regarding the Tribunal’s jurisdiction, the Court held that the Tribunal may interfere with the merits of a dispute only when it is satisfied that either a proper domestic enquiry was not held, or that, although the enquiry was conducted, its findings are perverse. The employer is entitled to rely on the domestic enquiry initially, and without abandoning his claim that the enquiry was proper and binding, may also seek to adduce additional evidence. By taking this step, the employer does not relinquish his contention that the enquiry was valid, and the Tribunal is not thereby empowered to examine the merits on its own. The Court warned that accepting a view whereby the Tribunal could, merely because the appellant requested permission to introduce further evidence, independently assess the merits of the dismissals would create an anomaly. It would effectively bar the employer from substantiating the dismissals through additional evidence unless he was willing to expose the matter to the Tribunal’s own merit‑finding exercise.

The Court clarified the correct legal position: when an employer elects to present evidence beyond that produced at the departmental enquiry, and the workmen are also permitted to introduce further evidence, the Tribunal must first decide the preliminary issue of whether the domestic enquiry was valid. Only if the Tribunal finds the enquiry invalid may it then proceed to examine the merits of the dismissal. The Court cited the authorities Bharat Sugar Mills Limited v Jai Singh (1961) 2 L.L.J. 644 and Anglo‑American Direct Tea Trading Co. Ltd. v Workmen of Nahortali Tea Estate (1961) 2 L.L.J. 625 in support of this approach. The judgment then set out the procedural history of the appeal, noting that it was a civil appeal filed by special leave against the award dated 9 February 1960 of the Industrial Tribunal at Delhi in ID No. 601 of 1959. Counsel for the appellant and respondents were listed, and the judgment dated 27 July 1962 was delivered by Justice Gajendragadkar. The dispute concerned the termination of services of two workmen of the Management of Ritz Theatre (Private) Ltd., which had been referred to the Industrial Tribunal by the Delhi Administration on 13 November 1959.

In this case, the dispute concerned two employees named Jai Jai Ram and Mohd Mia. The question before the Tribunal was whether these two workmen should be reinstated with full back wages and what relief, if any, they were entitled to. The appellant, Management of Ritz Theatre (Private) Ltd., was a company engaged in exhibiting cinema films at its Ritz Cinema, and both workmen had been employed by the company for several years. In August 1958 charge sheets were served on the two men. Against Jai Jai Ram four specific charges were framed: first, that on 1 August 1958, while on duty, he together with Mohd Mia inflicted beating by slaps and fist blows on another employee, Moot Krishan Nigam, at about six p.m. during the matinee show of “Nausherwan‑Adil”; second, that he misappropriated carbon paper belonging to the management; third, that on 19 August 1958, during the 6:30 p.m. show of the picture “Bhabi”, he ran Reel No 9 upside down; and fourth, that he ran over the film print of the picture “Mother India”, thereby damaging it. Against Mohd Mia three charges were framed: the first related to the same 1 August 1958 incident in which he and Jai Jai Ram together struck Moot Krishan Nigam; the second alleged that on 25 August 1958, at about three p.m. during a show, he threatened another employee, Ramesh Chandra, abused him and pushed him out of the cabin; the third alleged that on 23 August 1958, while on duty, he left his cabin without leave or permission, remained absent for half an hour, and was found taking tea in the restaurant during duty hours. The charges were investigated by an Enquiry Officer appointed by the appellant. During the enquiry the appellant produced both oral and documentary evidence, examining eleven witnesses on its side and eleven witnesses on behalf of the workmen. After examining the evidence and considering the rival contentions, the Enquiry Officer concluded that the charges against both workmen were fully established. Accordingly, the Officer recommended dismissal of both employees for misconduct and indicated that certain payments should be made to them as specified in his report. The appellant accepted the Officer’s report and, acting on the recommendation, dismissed Jai Jai Ram on 15 January 1959 and Mohd Mia on 1 May 1959. In the present dispute the respondents contended that the departmental enquiry was unfair, unjust and inequitable and therefore the terminations were not justified.

It was argued that the termination of the services of both workmen was not justified. Regarding the workman identified as Mohd Mia, the respondents advanced an additional specific claim that he had not been dismissed but had remained under suspension since 11 September 1958, and on that basis they sought his reinstatement. The appellant denied both allegations and maintained that the departmental enquiry conducted by its officer was fair and just, and that the employees had been given full opportunity to explain their position and meet the charges framed against them. Concerning Mohd Mia, the appellant asserted that after the management decided to terminate his services, the order of dismissal was actually served on him on 1 May 1959. In light of these pleadings, the Tribunal proceeded to adjudicate the dispute referred to it. When the trial commenced before the Tribunal, the appellant applied for permission to lead additional evidence, stating that further material had come to its knowledge after the enquiry and that such evidence should be permitted. The respondents replied that they should also be allowed to adduce additional evidence. Consequently, on 27 January 1960 the Tribunal ordered that, since both parties desired to lead further evidence, permission was granted, and evidence was thereafter led before the Tribunal by both the appellant and the respondents. In addition to the newly led evidence, the appellant produced before the Tribunal all the papers of the departmental enquiry, including the evidence recorded therein and the report made by the officer.

The Tribunal held that because the appellant sought permission to introduce additional evidence, it was open to the Tribunal to consider the merits of the dismissals of the two employees in light of the whole body of evidence before it. The Tribunal concluded that the dismissal of Jai Jai Ram was not justified and that the findings recorded against him at the departmental enquiry were baseless. Regarding the termination of Mohd Mia’s services, the Tribunal found that no order of dismissal had been served on him and therefore his services could not be said to have been duly terminated by a dismissal order. On these grounds, the Tribunal ordered the reinstatement of both employees and granted them additional consequential reliefs. The appellant has approached this Court by special leave to challenge that order. The first point raised by counsel for the appellant is that, in dealing with the dispute on its merits, the Tribunal exceeded its jurisdiction.

In this matter, the Court observed that the Tribunal had gone beyond the authority granted to it by dealing with the substantive merits of the dispute. The Court noted that disputes arising from employer orders terminating employees have frequently reached this Court on appeal, and that the principles governing the limits and proper scope of an Industrial Tribunal’s jurisdiction in such cases had been examined repeatedly. It was well‑settled that, where an employer serves the appropriate charge or charges on an employee and conducts a proper and fair enquiry, the employer may rely on the report submitted by the Enquiry Officer and dismiss the employee concerned. However, the Court explained that even when an enquiry has been properly held, the dismissal order may be challenged if the conclusions reached at the departmental enquiry are shown to be perverse, vindictive, mala fide, or amount to an unfair labour practice. The Court further held that, in a Tribunal hearing of such an enquiry, the Tribunal is not permitted to sit in appeal over the findings recorded at the domestic enquiry, because a proper enquiry allows the Enquiry Officer to consider the matter on its merits and arrive at his own conclusion.

The Court clarified that if it appears that the employer’s departmental enquiry was not fair—because proper charge had not been served, the employee had not been given a full opportunity to meet the charge, or grave irregularities had vitiated the process—then the Tribunal is entitled to examine the merits of the dismissal itself. The same result follows where no enquiry has been held at all. Consequently, when the Tribunal deals with a dismissal dispute and is satisfied that either no enquiry was held, the enquiry was not proper or fair, or the Enquiry Officer’s findings were perverse, the entire issue remains before the Tribunal. This position, the Court said, is firmly established. Moreover, in cases falling within this category, the employer may adduce additional evidence to demonstrate that the dismissal was justified. In such circumstances, the Tribunal must give the employer an opportunity to lead that evidence, allow the employee to meet the evidence, and decide the dispute based on the whole of the evidence presented. There can be little doubt even about this position. Mr Sastri, however, contended that…

In this case the Court noted that an intermediate category of situations may arise where the employer unquestionably bases his case on the fact that a departmental enquiry has been held, yet remains uncertain about the validity of that enquiry and consequently seeks the Tribunal’s permission to adduce further evidence to justify the dismissal. The employer contends that whenever he asks to introduce additional evidence after having produced the papers relating to the enquiry proceedings, the Tribunal should be entitled to decide the merits of the dispute itself, on the basis that the employer’s very request to present extra evidence creates an inference that he concedes the enquiry was not proper. The Tribunal appears to have adopted this view in the present proceedings, and Mr Sastri naturally seeks to support it. The Court, however, does not consider this view to be correct.

The Court explained that in enquiries of this type the first question the Tribunal must address is whether a proper enquiry was conducted. Logically, only when the Tribunal is satisfied that a proper enquiry was not held, or that a properly held enquiry produced findings that are perverse, does the Tribunal acquire jurisdiction to examine the merits of the dispute. It is quite possible, and indeed occurs in many cases, that an employer may initially rely on the enquiry and, without prejudice to his claim that the enquiry was proper and binding, may also seek to adduce additional evidence. The Court held it would be unfair to conclude that by merely taking this course the employer abandons his plea that the enquiry was proper and therefore the Tribunal should not examine the merits on its own.

If the Tribunal’s view were accepted, it would create an anomaly whereby the employer would be prevented from justifying the dismissal by presenting supplementary evidence unless he is willing to invite the Tribunal to decide the merits itself. The moment the employer asks for permission to introduce additional evidence, he would be deemed to have relinquished his position that the domestic enquiry was valid. Otherwise the Court suggested that the appropriate procedure would be to treat the issue of the enquiry’s propriety as a preliminary question: if the Tribunal decides that the enquiry was proper, no further evidence would be required; if the Tribunal decides against the employer on that preliminary issue, then permission could be granted to adduce additional evidence. The Court considered this more elaborate and cumbersome procedure unnecessary.

In this case the Court explained that if the Tribunal permits the employer to lead additional evidence, the Tribunal must first consider the preliminary issue and only proceed to deal with the merits if the preliminary issue is decided against the employer. The Court held that this approach represents the true and correct legal position. Mr Sastri argued that two earlier decisions support the view adopted by the Tribunal in the present matter and he invited the Court’s attention to the decision of this Court in Bharat Sugar Mills Ltd. v. Jai Singh. The Court stated that it does not think that decision supports Mr Sastri’s contention at all. The argument presented in that case, and quoted by the Court, was that in an enquiry before a Tribunal concerning the dismissal of an industrial employee it would not be open to the employer to adduce additional evidence and justify the dismissal on the merits apart from the enquiry. The Court in that decision, however, held that it would be open to the employer to adduce additional evidence. It observed that “where there has been a proper enquiry by the management itself, the Tribunal, it has been settled by a number of decisions of this Court, has to accept the finding arrived at in that enquiry unless it is perverse and should give the permission asked for unless it has reason to believe that the management is guilty of victimisation or has been guilty of unfair labour practice or is acting mala fide.” The Court further added that “the more fact no enquiry has been held or that the enquiry has not been properly conducted cannot absolve the Tribunal of its duty to decide whether the case that the work‑man has been guilty of the alleged misconduct has been made out. The proper way for performing this duty where there has not been a proper enquiry by the management is for the Tribunal to take evidence of both sides in respect of the alleged misconduct.” Consequently, the decision establishes the principle that even if no enquiry has been held and an industrial employee has been dismissed, when a dispute is referred to the Industrial Tribunal the failure to hold an enquiry is not necessarily fatal to the employer’s case and the employer may justify the dismissal by citing evidence before the Tribunal. This conclusion cannot, by any stretch of imagination, support Mr Sastri’s contention that once the employer leads evidence the plea based on the prior enquiry is unavailable to him and that the Tribunal is at liberty to examine the question and decide it on the merits for itself.

In the case relied upon by the petitioner, Anglo‑American Direct Tea Trading Company Limited v. Workmen of Nahortoli Tea Estate, the court described the limited nature of the department‑level enquiry conducted by the employer. During that enquiry the employer posed a series of questions to the employee, Dhaneawar, and recorded his answers. When the employer asked Dhaneawar to sign the written statement of his answers, he declined to do so. After this refusal no further enquiry was undertaken, and there was no indication that Dhaneawar had refused to participate in any additional proceedings. When the matter was later before the Industrial Tribunal, the employer attempted to justify the dismissal by introducing evidence of the earlier limited questioning. The court observed that, because the employer had introduced evidence, the Tribunal had effectively accepted that a proper managerial enquiry had not been held and that it was therefore free to determine for itself whether the dismissal of Dhaneawar was justified. The petitioner read this observation in a literal manner, arguing that it established a principle that whenever an employer offers evidence before a Tribunal, the employer must be deemed to have conceded the absence of a proper managerial enquiry and that the Tribunal may decide the dispute on its merits. The court rejected this mechanical reading, holding that the single sentence could not be isolated from its factual context. Consequently, the court found no authority for the proposition that the mere introduction of additional evidence by an employer obliges the Tribunal to treat the earlier enquiry as abandoned and to re‑examine the case afresh. On the basis of fairness and justice, the court deemed such a proposition unsound.

The court further held that the Tribunal erred in examining the evidence independently and concluding that the dismissal of Jai Jai Ram was not justified on the merits. While the Tribunal correctly noted that the findings of the departmental enquiry were baseless, that conclusion arose from its overall assessment of the evidence presented before it, a course of action that the court considered inappropriate. The award indicated that the respondents did not attempt to demonstrate that the departmental enquiry was improper or unfair, and the Tribunal had nevertheless widened the scope of its inquiry simply because the employer had introduced evidence. Although the petitioner argued that the enquiry was unfair, the record showed that a comprehensive inquiry had been conducted, with eleven witnesses examined by both parties and extensive documentary evidence considered. The enquiry officer prepared a detailed report after evaluating oral testimony, documents, and probabilities. Therefore, the court found no justification for the Tribunal’s expansion of the enquiry and reiterated that the mere introduction of employer evidence does not automatically render the original enquiry invalid or require the Tribunal to re‑determine the dispute on its own merits. The discussion of the fairness of the present enquiry was set to continue.

The Court observed that the enquiry conducted in this case was extremely detailed. Both parties had examined eleven witnesses each, and documentary evidence had also been presented. The Enquiry Officer prepared an extensive and thoughtful report after hearing the oral evidence, reviewing the documents that were highlighted to him, and examining the probabilities involved. Consequently, the Court found that, on the face of it, it would be difficult to accept the allegation that the enquiry was unfair or that the Officer’s conclusions were unfounded. The record showed that every witness called by the employer was cross‑examined by the respondents, and there was no indication that the respondents were denied any chance to challenge the employer’s evidence or to put forward their own evidence.

Mr Sastri, however, argued that shortly after the enquiry began, the Secretary of the Union to which the two workmen belonged had filed an application (Exhibit M/20 dated 30 September 1958) setting out ten separate grounds alleging irregularities in the enquiry. The Court noted that the Tribunal received no justification of these allegations from the respondents, and that the Secretary who signed the application gave testimony but admitted he had no personal knowledge of the alleged irregularities. Likewise, the workman Mohd Mia testified but did not address the allegations, and Jai Jai Ram gave no testimony before the Tribunal. Because the record contained no evidence supporting the claims made in the application, the Court concluded that this ground of attack on the propriety or fairness of the enquiry could not be sustained.

Mr Sastri further contended that the respondents were not given a fair opportunity when the Enquiry Officer sought a statement on the actual verification of carbon consumption. The Court explained that the Officer required an actual verification and directed the management to submit a mathematical computation to that effect. While this material was being prepared, the workmen failed to cooperate, and the Court found that the grievance was unsubstantiated. The record indicated that Jai Jai Ram had asked to operate the machines while the material was being collected, a request that the Officer appropriately declined. The Court held that the refusal to grant this request did not justify Jai Jai Ram’s lack of cooperation during the preparation of the calculations. Accordingly, the Court rejected the contention that the workmen were denied a proper opportunity, and concluded that the grievance that the enquiry was unfair could not be upheld.

Documents had been prepared in that regard, and the Court concluded that the Enquiry Officer was rightly entitled to criticise the employees for refusing to cooperate with the employer when the statement in question was being prepared. The submission that the employee had not been afforded a proper opportunity to take part in that process was therefore rejected. Consequently, the grievance advanced by Mr Sastri, alleging that the enquiry was unfair or otherwise improper, could not be sustained. In light of that finding, the order of dismissal adjudicated against Jai Jai Ram was affirmed.

The discussion then turned to the case of Mohd Mia. The Tribunal had determined that no order of dismissal had been served on him. The respondents had specifically pleaded this point in their statement before the Tribunal, and the appellant had expressly contested it. To support its claim that a dismissal order had been served, the appellant examined several witnesses, and the Court deemed it necessary to consider that evidence in a broad manner before deciding whether the Tribunal’s finding was supported by any proof.

The appellant produced a document identified as Exhibit M/8, which purported to be the dismissal order and to bear Mohd Mia’s signature. Mohd Mia, however, testified under oath before the Tribunal that the signature was not his and that, in fact, no dismissal order had been served upon him. He was not cross‑examined on that point. Apart from this issue, the Court found that the remaining evidence presented by the appellant to demonstrate that the dismissal order had been served was wholly inconsistent and therefore had to be rejected as unreliable.

Om Bahl, who served as the Manager of the Ritz Theatre, testified that upon receiving the purported dismissal order for Mohd Mia from the Managing Director’s head office in Delhi, he handed it to the Assistant Manager for service on the employee. He asserted that the document appeared to contain Mohd Mia’s signature, but he admitted that he had no knowledge of the actual service of the order, rendering his evidence of little assistance.

Om Parkash, the Assistant Manager, stated that he in turn gave the order to his staff for service on Mohd Mia. He openly acknowledged that Mohd Mia did not affix his signature to the order in his presence, and consequently his testimony also failed to corroborate the appellant’s claim.

The testimonies of Om Bahl and Om Parkash together demonstrate that neither of them was present at the time the order was allegedly served on Mohd Mia. By contrast, Kundan Lal, another witness, asserted that the dismissal order was handed to Mohd Mia by Om Parkash while Kundan Lal was present. In other words, the evidence offered by this witness directly conflicts with the statements of Om Bahl and Om Parkash, highlighting the inconsistencies in the appellant’s case.

The Court observed that the testimony of Kundan Lal attempted to demonstrate that the dismissal order had been handed to Mohd Mia by the Assistant Manager while Kundan Lal was present, a version that directly contradicted the statements made by Om Prakash, who denied being present at the alleged service. In a similar vein, the witness Bhagwati Prasad asserted that Om Prakash, Om Bahl and Kundan Lal were all together when the order was delivered, and he further claimed that not only the Assistant Manager but also the Manager himself were present at the time of service. Considering the contradictory nature of these testimonies, the Court found no difficulty in understanding why the tribunal concluded that the appellant had not succeeded in proving its allegation that the dismissal order had actually been served on Mohd Mia. The Court expressed regret that the appellant had pursued this plea and had attempted to substantiate it with evidence that was both inconsistent and of no value.

The remaining issue for the Court was to determine the appropriate order concerning Mohd Mia. The respondents had contended before the Tribunal that Mohd Mia had been suspended beginning on 11 September 1958 and that the suspension had continued without interruption, thereby entitling him to reinstatement. Counsel for the appellant, Mr Andley, acknowledged that the appellant could not rely on the evidence presented to prove that the dismissal order had been served on Mohd Mia. Nevertheless, he argued that, at the very least, Mohd Mia had been put on notice of his dismissal as of the reference date, and that consequently the employer‑employee relationship should be considered terminated from that date regardless of the lack of formal service. The Court rejected this contention, emphasizing that termination of employment requires not only the employer’s decision but also communication of that decision to the employee, which had not occurred even up to the date when the award was rendered. The Court further noted that, according to the statements of Mr Andley and the concession of Mr Sastri, the employer had now taken definitive steps to end Mohd Mia’s service, and that, as of that day, he was no longer an employee of the appellant.

Having established that the employment relationship had effectively ended only after the employer’s recent actions, the Court turned to the question of the monetary award to be made to Mohd Mia. Mr Andley conceded that, under model standing orders, a suspension pending an inquiry into alleged misconduct should not exceed a period of fourteen days. However, the Court noted that the appellant’s own regulations did not contain any standing orders prescribing a maximum period of suspension. Consequently, the Court had to assess the appropriate compensation payable to Mohd Mia in light of the absence of a statutory or contractual ceiling on the duration of his suspension.

Mr. Andley had therefore asked the Court to hold that the suspension imposed on Mohd Mia was reasonable for the period of the enquiry and that, until the enquiry was concluded, the employee could not claim his wages from the appellant. The Court was inclined to accept this submission in part, because, after examining the facts, it considered it to be fair to find that the order of suspension issued on 11 September 1958 was justified and could remain in effect only until 1 December 1958. Accordingly, the Court directed that, commencing on 1 December 1958 and continuing up to the present date, the appellant was required to pay Mohd Mia the wages which he would have been entitled to receive had he remained in the actual employment of the appellant and had performed his duties on a day‑to‑day basis. The effect of this direction was that the appeal succeeded in part. The Court set aside the order of reinstatement that had been passed by the Tribunal in favour of Jai Jai Ram and affirmed his dismissal. An order was also made directing the appellant to pay to Mohd Mia the wages specified in the judgment. However, the Court held that Mohd Mia was not entitled to reinstatement. No costs were awarded to either side. In sum, the appeal was allowed in part.