The Provincial Transport Service vs State Industrial Court

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

Court: Supreme Court of India

Case Number: Civil Appeal No. 504 of 1961

Decision Date: 21 August, 1962

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

The Supreme Court of India rendered its judgment on 21 August 1962 in the matter Provincial Transport Service versus State Industrial Court. The opinion was authored by Justice K.C. Das Gupta, with Justice P.B. Gajendragadkar also participating on the bench, and the decision is reported as 1963 AIR 114 and 1963 SCR (3) 650. The dispute arose under the Central Provinces and Berar Industrial Disputes Settlement Act, 1947, specifically section 16, which governs the dismissal of employees in industrial disputes. The appellant, Provincial Transport Service, had employed the respondent, identified only as K, as a temporary motor driver. The appointment was expressly conditioned on the understanding that, until K received confirmation of permanent status, his services could be terminated at any time without notice, compensation, or the assignment of any reason. Subsequently, the appellant served a charge sheet on K and, after conducting an enquiry, dismissed him from service. K then filed an application before the Labour Commissioner under section 16 seeking reinstatement, contending that his dismissal was illegal because it had not been preceded by a proper enquiry. The Labour Commissioner expressed doubt as to whether any enquiry had actually been held by the appellant, but on the basis of the evidence presented, found the charges proved and dismissed K’s application. On appeal, the State Industrial Court held that the Labour Commissioner lacked jurisdiction to conduct the enquiry and ordered K’s reinstatement with back wages. The appellant responded by filing a writ petition in the High Court seeking to quash the Industrial Court’s order; the High Court rejected the petition. In the writ proceedings, the appellant advanced three primary contentions: first, that the terms of K’s temporary employment permitted dismissal without an enquiry; second, that the Labour Commissioner possessed jurisdiction to hold an enquiry; and third, that the Labour Commissioner’s finding that no enquiry had been held by the appellant was perverse and warranted High Court intervention. The Supreme Court held that the finding that no enquiry had been held before K’s dismissal was indeed perverse. The Court observed that the appellant had produced before the Labour Commissioner the evidence recorded at the alleged enquiry, which comprised K’s own signed statement and the statements of two conductors. K’s explanation that he had been made to sign a blank paper was deemed unacceptable. Accordingly, the Court concluded that the Labour Commissioner’s finding amounted to a clear error of law, that the Industrial Court erred in treating itself as bound by that erroneous finding, and that the error was so manifest on the record that it was proper and reasonable for the higher court to correct it, thereby granting a writ quashing the Industrial Court’s order and restoring the Labour Commissioner’s original decision.

In this case, the Court observed that, notwithstanding the express terms of the employee’s contract, the appellant was not entitled to dismiss Kundlik Tulsiram Bhosle without first conducting an enquiry, and that even if the appellant had failed to hold such an enquiry, the Labour Commissioner retained the authority to conduct one. The appeal was placed before the Supreme Court under Civil Appeal No 504 of 1961, filed by special leave against the judgment and order dated 17 October 1959 of the Bombay High Court at Nagpur in Special Civil Application No 59 of 1959. The appellant was represented by counsel for the Attorney‑General of India and other senior advocates, while counsel for the third respondent, the employee, was also present. The judgment was delivered on 21 August 1962 by Justice Das Gupta. The appeal challenged the High Court’s rejection of an application made under Articles 226 and 227 of the Constitution that sought to set aside an order of the State Industrial Court, Nagpur, which had upheld the appellant’s dismissal of its temporary motor driver, Kundlik Tulsiram Bhosle. The employee had been appointed on 22 December 1954; his appointment letter expressly stated that until a written confirmation was issued his services could be terminated at any time without notice, compensation, or cause, and that confirmation would be considered after one year provided a suitable permanent post became vacant and his performance was satisfactory. By an order dated 19 December 1955, the appellant terminated his services effective 20 December 1955. Prior to this termination, the employee had been served with a charge sheet dated 9 November, alleging that on 14 November, while acting as bus driver, he permitted Conductor Vyankati to carry five passengers without tickets and allowed an unauthorised driver, Sheikh Akbar, to operate the bus. The employee submitted an explanation on 19 November. Management thereafter claimed that the depot manager conducted an enquiry, found the charges established, and dismissed the employee. The employee filed an application under Section 16 of the C. P. & Berar Industrial Disputes Settlement Act, 1947, before the Labour Commissioner of Madhya Pradesh, Nagpur, contending that his dismissal had not been preceded by an enquiry, that it was illegal, and praying for reinstatement. The appellant, in its written statement, asserted that a proper enquiry had been held and that the dismissal order was lawful. The Assistant Labour Commissioner, exercising the powers of the Labour Commissioner under Section 16, examined the application and expressed the opinion that there were sufficient grounds to doubt whether an enquiry had indeed been carried out by the management and, if an enquiry had taken place, whether the employee, as an accused, had been afforded the opportunity to cross‑examine the witnesses who had testified against him.

In this case the Assistant Labour Commissioner expressed doubts about whether the management had actually conducted an inquiry and, if an inquiry had been held, whether the employee, who was the accused, had been given the opportunity to cross‑examine the witnesses who had testified against him. After reviewing the material placed before him, the Assistant Labour Commissioner reached the conclusion that the employee could not be held liable for the allegation that an unauthorised person had driven the vehicle, because Sheikh Akbar, who had driven the bus, was a fully licensed driver employed by the company. However, the Commissioner found that the employee’s guilt on the separate charge of transporting five passengers without tickets was fully proved, and on that basis he dismissed the employee’s applications for relief. The dismissed employee then applied to the State Industrial Court in Nagpur. The Industrial Court held that it would not be proper to overturn the findings of the Labour Commissioner that no inquiry had been conducted by the management and that the Assistant Labour Commissioner lacked jurisdiction to hold an inquiry himself. Accordingly, the Industrial Court set aside the order of the Labour Commissioner and issued an order directing that the employee be reinstated with payment of arrears of wages. Dissatisfied with that order, the employer appealed to the High Court of Bombay, contending that both the Assistant Labour Commissioner and the State Industrial Court were wrong in concluding that no inquiry had been held by the management and that the Industrial Court was likewise incorrect in holding that the Assistant Labour Commissioner did not have jurisdiction to conduct an inquiry. The High Court ruled that it could not invoke the powers under Articles 226 and 227 of the Constitution to interfere with the Assistant Labour Commissioner’s finding that no inquiry had been held. Relying on that reasoning, the High Court also accepted the view of the Industrial Court that the Assistant Labour Commissioner possessed no jurisdiction to conduct the inquiry himself. Consequently, the High Court found no error in the Industrial Court’s decision and dismissed the employer’s application. The appellant then advanced three principal arguments. First, it asserted that, under the terms of the employee’s contract, a formal inquiry was not required before dismissal, and therefore the Industrial Court was not justified in exercising its jurisdiction under section 16 of the C. P. & Berar Industrial Disputes Settlement Act to interfere with the dismissal order. Second, the appellant argued that, assuming that law required a management‑conducted inquiry, the Assistant Labour Commissioner should have been vested with the authority to hold such an inquiry himself. Third, the appellant maintained that the Assistant Labour Commissioner’s conclusion that no inquiry had taken place was perverse, and that the High Court ought to have set aside that finding and granted relief on the basis that a proper inquiry had indeed been held. For a clear appreciation of the first contention …

In order to understand the first contention, the Court first recalled the scheme of jurisdiction created by section 16 of the C. P. & Berar Industrial Disputes Settlement Act. Section 16(1) authorised the State Government to refer a dispute concerning, among other matters, the dismissal of an employee to the Labour Commissioner. Section 16(2) then provided that, after an enquiry prescribed by law, the Labour Commissioner could determine whether the dismissal was in contravention of any provision of the Act or of the standing orders made or sanctioned under the Act, and could grant appropriate relief to the employee. The employee alleged that his dismissal violated section 31 of the Act, which requires an employer who intends to change any industrial matter listed in Schedule 2 to give fourteen days’ notice in the prescribed form to the employee’s representative. Schedule 2 lists “dismissal of any employee except in accordance with law or as provided for in the Standing Orders settled under section 30 of this Act” as an industrial matter. The appellant, however, did not have a standing order governing dismissal. The central question therefore was whether a dismissal made without an enquiry satisfied the phrase “in accordance with law.” If the dismissal was not “in accordance with law,” the Labour Commissioner would have jurisdiction to intervene; if it was, the Commissioner would have no jurisdiction to disturb the management’s order. The learned Attorney‑General argued that a dismissal carried out under ordinary contract law between master and servant should be considered “in accordance with law” and that the evolution of industrial law by the courts should not influence the interpretation. The Court was unable to see why the term “law” in the Schedule should be narrowly confined so as to exclude the body of industrial law developed by the courts.

The Court noted that a series of decisions of Industrial Tribunals, Labour Courts, Appellate Tribunals and this Court itself have consistently held that, although contract law may permit dismissal at will, industrial adjudication would set aside such dismissal and order reinstatement where the dismissal occurred without a proper and fair enquiry, where the enquiry officer’s decision was perverse, or where the management acted mala fide, engaged in unfair labour practice or victimised the employee. Even where no enquiry was held, the employer retained the opportunity to present its case before an Industrial Tribunal. The Court found that this extensive body of law was well known to those who drafted the 1947 Act and that the legislature did not intend to exclude the law as settled by the industrial courts when it used the expression “in accordance with law” in clause 3 of Schedule 2. Consequently, the term “law” was understood to include not only enacted statutory provisions but also the common law and the industrial law that had been developed through judicial decisions. The Court therefore concluded that the first contention raised by the Attorney‑General, that an enquiry was not legally required before dismissing the employee, could not be accepted.

The employer was entitled to present its case for dismissing the workman by introducing evidence before an Industrial Tribunal. The Court considered it reasonable to assume that the entire body of law developing from decisions of Industrial Tribunals, Labour Courts, Appellate Tribunals and this Court was well known to the legislators who drafted the C. P. & Berar Industrial Disputes Settlement Act of 1947. Consequently, when the phrase “in accordance with law” was employed in clause 3 of Schedule 2 of that Act, the legislators did not intend to exclude the law that had been settled by the Industrial Courts and this Court on the question of when a dismissal should be set aside and reinstatement of the dismissed workman should be ordered. The Court further observed that if the word “law” in Schedule 2 is to encompass not only statutes but also the common law, it would be difficult to argue that it should omit the body of industrial law that has been fashioned by industrial decisions. On that basis the Court was of the preliminary view that the first contention advanced by the learned Attorney‑General – that, because of the terms of the employee’s contract, the law did not require an enquiry before dismissal – could not be accepted. At the same time the Court found considerable merit in the second contention, namely that even though the management had not conducted a proper enquiry, the Labour Commissioner possessed jurisdiction to hold an enquiry himself. That argument, prima facie, provided sufficient grounds to hold that the Industrial Court erred in interfering with the order issued by the Assistant Labour Commissioner and that the High Court should have issued an appropriate writ to set aside the Industrial Court’s order. The Court was aware of the view adopted by the Bombay High Court in Prov. Transp. Services v. Assist. Lab. Commr. (1) and in Maroti v. Member, State Industrial Court (2), which held that the term “Law” in the expression “in accordance with law” in Schedule 2 does not include industrial law. After considering the foregoing reasoning, the Court, with respect, concluded that the Bombay High Court’s view was incorrect. Nevertheless, the Court considered it unnecessary to explore the issue in greater depth or to state a final definitive conclusion on those questions, because, as will be explained, the third ground raised on behalf of the appellant was sufficient to decide the case.

The third ground related to the employee’s claim that no enquiry had been conducted by the management. The management denied that allegation and asserted that an enquiry had indeed taken place. To support its claim, the management produced before the Assistant Labour Commissioner documents that purported to record the evidence gathered during the alleged enquiry. According to those documents, three individuals had been examined during the enquiry: the employee, Kundalik, and two conductors, Surewar and Vyankati. At the bottom of the record, the signatures of Kundalik and Vyankati appeared. The employee maintained that his signature had been obtained on a blank sheet of paper, which was later filled in to create the document presented to the Commissioner. The Court noted the specific citations of the reports containing these documents as (1) IX Bombay Law Reporter 72 and (2) IX Bombay Law Reporter 1422. The presence of the employee’s signature and that of Vyankati, together with the absence of the Enquiring Officer’s signature, formed part of the evidence considered in evaluating the credibility of the claimed enquiry.

In this matter the employee asserted that his signature had been obtained on a blank sheet of paper and that the document was subsequently filled in, but there was no evidence capable of convincing a reasonable fact‑finder that the management would resort to such forgery merely to dismiss an employee in Kundalik’s position. The Assistant Labour Commissioner did not express a belief in the employee’s explanation that his signature had been taken on a blank paper; nevertheless, he observed that only the signatures of Kundalik and Vyankati appeared on the record and that the signature of the officer who conducted the enquiry was absent. While it would certainly have been preferable for the enquiring officer also to have signed the paper containing the statements, the lack of his signature cannot, on its own, be taken as proof that the enquiry was never conducted. Consequently, the Assistant Labour Commissioner’s conclusion that “there are sufficient grounds to doubt whether an enquiry was really made” is, in the Court’s view, a perverse finding. It has been repeatedly emphasized by senior judges that when an appellate court encounters a decision that no competent jurist could have reached, it may presume that a misapprehension of law was responsible for the erroneous conclusion. Accordingly, the finding of the Assistant Labour Commissioner that no enquiry had taken place amounts to a clear error of law. The Industrial Court, by treating that decision as binding, committed an error so evident on the face of the record that the High Court was right to correct it. The respondent contended that, even assuming an enquiry had been held, the employee had not been afforded an opportunity to cross‑examine witnesses or to present his own evidence. However, counsel cannot raise this issue because the employee never advanced such a claim; his position, as consistently stated, was that no enquiry was conducted at all. He did not allege that the enquiry, if held, was defective due to denial of cross‑examination or of evidence, nor did he indicate that he had sought to lead evidence and was prevented from doing so. As a result, it is not permissible for him to introduce this argument for the first time before this Court. The Court therefore concluded that the High Court ought to have held that a proper enquiry had indeed been conducted against the employee and that the management’s decision to dismiss him was based on findings that the two charges against him were fully proved, leaving no basis to infer any mala‑fide conduct on the part of the management.

The Court observed that evidence presented established full proof of both charges framed against the employee, and that nothing in the record indicated management acted with dishonest intent. On that basis, the Court concluded that the appellant was legally entitled to obtain a decree setting aside the earlier decree issued by the Industrial Court. Consequently, the Court granted the appeal, annulled the judgment of the High Court, and directed that the appellant's petition filed under Arts. 226 and 227 of the Constitution be permitted. In the same order, the Court directed that the decision rendered by the State Industrial Court be vacated and that the order of the Assistant Labour Commissioner dismission of the employee's application be restored. The Court further specified that no costs would be awarded to either party in these proceedings in the matter before it. Thus, the appeal was allowed in its entirety, reflecting the Court's determination that the dismissal of the employee could not be sustained on any ground of malafide conduct by management. All directives issued in the lower orders were reversed, thereby restoring the position of the employee as if the dismissal had never been lawfully effected. The judgment thereby reinstated the employee's service and nullified any adverse consequences arising from the earlier dismissal in the public sector.