Associated Cement Co. Ltd vs The Workmen And Anr

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

Court: supreme-court

Case Number: Civil Appeal No. 636 of 1962

Decision Date: 08 May 1963

Coram: Gajendragadkar J.

Associated Cement Co. Ltd. versus The Workmen and Anr. was decided on 8 May 1963 by a Bench of the Supreme Court of India. The petition was filed by the appellant, Associated Cement Co. Ltd., against the respondents, the workmen identified as The Workmen and an additional respondent. The matter fell under the Industrial Disputes Act, 1947, specifically addressing the dismissal of workmen, the conduct of domestic enquiries, the role of eyewitness testimony, and the application of principles of natural justice. The Court noted that the dispute concerned the termination of certain employees and that the procedural correctness of the enquiry carried out by the employer was in question. The judgment examined whether the enquiry complied with the rule of evidence and the requirements of natural justice as articulated in the Act, and it considered the propriety of using officers who had personally witnessed the alleged misconduct as enquiry officers. The case was catalogued with reference to section 10(1)(d) of the Industrial Disputes Act, and it engaged the legal standards governing industrial disputes and the dismissal of workmen.

The headnote of the decision recorded that an industrial dispute had arisen regarding the dismissal of several workmen, and that the matter was referred to an industrial Tribunal for adjudication. The Tribunal examined three separate domestic enquiries conducted by the employer; one of those enquiries was carried out by officers who themselves had observed the alleged misconduct of the workmen. The respondents challenged the validity of those enquiries on the ground that they violated the principle of natural justice and were not conducted in a fair manner. The Tribunal concluded that the enquiries failed to meet the standards of natural justice. In its holding the Court articulated four distinct principles: (i) an enquiry that relies on eye‑witness officers who have personally observed the misconduct does not satisfy natural‑justice requirements, and such enquiries should be conducted by officers unlikely to bring their personal knowledge into the proceedings; (ii) in a domestic enquiry the employer must first present evidence against the workman, allow the workman to cross‑examine the witnesses, and then provide the workman an opportunity to give an explanation regarding the evidence; (iii) the rule that a witness’s statement should not be disbelieved merely because it is inconsistent with a document unless the witness is given a chance to explain the document is more than a technical evidential rule—it rests on the principle of natural justice; and (iv) evidence obtained in an enquiry against one workman cannot be admitted as proof against another workman because the latter was not present to test that evidence through cross‑examination. The judgment further recorded that the civil appellate jurisdiction involved Civil Appeal No. 636 of 1962, arising by special leave from the award dated 13 July 1960 of the Industrial Tribunal, Punjab, Patiala, in Reference No. 16 of 1957. Counsel for the appellant and respondents were listed, and the Court noted that the appeal concerned the dismissal of five workmen employed at the appellant’s Bhupendra Cement Works, Surajpur, setting the stage for the detailed discussion of procedural fairness in domestic enquiries.

In this case, the appellant was the Associated Cement Companies Ltd., operating its Bhupendra Cement Works at Surajpur. The workmen who were the subject of the dispute were: Mehnga Ram, employed as a bar bender; Janak Raj Soni, employed as a store‑clerk; Vishwa Nath Bali, employed as a painter; Daulat Singh, employed as a motor driver; and Malak Ram Khanna, employed as a turner. The respondents, who were the workmen, asserted that their dismissals were without lawful justification and they prayed for reinstatement of each of the dismissed workmen together with payment of wages for the period during which they were forced to remain unemployed. The Government of Punjab referred the controversy to the Industrial Tribunal of Punjab, located in Patiala, invoking section 10(1)(d) of the Industrial Disputes Act, 1947 (No. 14 of 1947). According to the evidence before the Tribunal, on 1 May 1952 the management of the appellant arranged a film exhibition on the club grounds at Surajpur for the entertainment of its employees. At approximately eight o’clock in the evening, while the film was in progress, a disturbance arose in the hall when a number of employees began to shout. Among those who raised shouts was the workman Malak Ram. The disorder created by the employees forced the management to cancel the film show. As a result of the alleged misconduct of Malak Ram on that date, a charge‑sheet was served upon him and a Board of Enquiry was convened to inquire into the matter. Later, on 12 August 1952 at about seven a.m., it was alleged that the workmen Mehnga Ram, Janak Raj, and Daulat Singh obstructed other employees from entering the factory after they had punched their time cards and taken their tokens. The same three workmen were also alleged to have shouted slogans that caused a stoppage of work for roughly half an hour. In response to these alleged acts, charge‑sheets were issued to each of the three workmen and a separate enquiry was conducted. On 14 October 1952 at four p.m., the workmen Mehnga Ram and Janak Raj, who had been involved in the August incident, were alleged to have assembled a group of workers in front of the main office building while proceeding to a grain‑shop. In that gathering they were said to have encouraged their co‑workers to strike and to resort to violent measures. The incident allegedly resulted in verbal abuse of certain officers of the appellant and generated noise that interfered with the normal functioning of the office. Consequently, fresh charge‑sheets were prepared against the two workmen and another enquiry was held. Subsequently, on 20 October 1952 at about seven a.m., Mehnga Ram, Janak Raj, Vishwa Nath, and Daulat Singh were alleged to have prevented other employees at the factory gate from entering the premises and from proceeding to their duties for a period of time. The same group was also alleged to have shouted hostile slogans. This episode also gave rise to charge‑sheets and a further enquiry. The record indicates that three distinct Boards of Enquiry were constituted to examine the various charge‑sheets presented against the workmen. The first enquiry concerned the incident of 1 May 1952 and was limited to Malak Ram.

In this matter three separate Boards of Enquiry were constituted. The first enquiry dealt with the incident that occurred on 1 May 1952 and it concerned only Malak Ram. The second enquiry examined the disturbance of 12 August 1952 and it involved Mehnga Ram, Janak Raj and Daulat Singh. The third enquiry considered two further incidents, one that took place on 14 October 1952 in which Mehnga Ram and Janak Raj participated, and another that occurred on 20 October 1952 in which Mehnga Ram, Janak Raj, Vishwa Nath and Daulat Singh were involved. Accordingly it was clear that Malak Ram was linked solely with the May 1 incident and that Vishwa Nath was associated with the October 20 incident. Following the findings recorded by these enquiries the employer dismissed all five workmen.

Before the Industrial Tribunal the respondents contended that none of the three enquiries had been conducted in conformity with the principles of natural justice. Consequently they argued that the dismissals based on those findings could not be regarded as lawful or valid. The employer did not attempt to defend the dismissals by presenting fresh evidence before the Tribunal; instead it relied on the records of the enquiry proceedings and asserted that the enquiries had been properly held. Moreover the employer maintained that the Tribunal lacked jurisdiction to entertain an appeal against the findings of the enquiries or the dismissal orders that flowed from them.

The Tribunal accepted the respondents’ submissions and held that all three enquiries had been contrary to natural‑justice requirements. On that basis the Tribunal concluded that the dismissals of the five workmen were unjustified. It therefore made an award directing the employer to reinstate the five workmen with continuity of service and to pay them full wages for the period from their dismissal until their reinstatement as compensation for wrongful dismissal.

The employer challenged that award before this Court by way of a special leave petition. Regarding Mehnga Ram, Janak Raj and Daulat Singh the parties subsequently reached a consent order. They agreed that the Tribunal’s award as it applied to these three workmen should be set aside and that the dismissal orders against them should be treated as simple discharges. The employer’s counsel consented to pay each of the three workmen a sum of Rs 3,500, subject to deduction of any amounts already paid under the stay order issued by this Court in the present appeal. The employer also undertook to pay any gratuity and provident‑fund benefits to which the three workmen might be entitled. The respondents’ counsel accepted these terms. In view of this settlement, this Court directed that the award concerning the three workmen be set aside and that the dismissal orders be deemed discharges, subject to the agreed monetary payments.

The Court noted that, following the parties’ agreement, the awards concerning the three workmen were to be set aside and an order reflecting that agreement was to be made, leaving only two workmen, namely Malak Ram and Vishwa Nath, for further consideration. Regarding Malak Ram, the record showed that a charge‑sheet had been served upon him on 20 May 1952, informing him that he had been identified as one of the persons who had instigated and actively participated in rowdyism and hooliganism during the cinema show held on 1 May 1952. The charge‑sheet demanded that he appear before the Manager of the Bhupendra Cement Works on 22 May 1952 at 2:30 p.m. and submit a written explanation as to why disciplinary action should not be taken against him. Malak Ram failed to appear as required, prompting the issuance of a further notice on 4 June 1952 that called upon him to show cause why disciplinary action should not be imposed, and it specifically alleged that his conduct amounted to misconduct under Standing Order No. 16, sub‑clause (1). On the following day, 5 June 1952, Malak Ram provided his explanation, in which he denied involvement in the alleged hooliganism and asserted that he had actually endeavoured to control the disturbance at the cinema show. On the same day, the Manager issued another notice stating that his explanation would not be accepted because it was not corroborated by the observations of the Manager, other witnesses, and independent witnesses, and consequently required him to meet the Manager at 10 a.m. on 11 June 1952 for an enquiry. The enquiry conducted on 11 June 1952 was attended by the Manager, the Assistant Manager and the Chief Engineer. It commenced with an extensive examination of Malak Ram, during which he was questioned about the accusations, after which four witnesses were examined and Malak Ram was asked whether he wished to cross‑examine any of them; he declined to do so. A fifth witness then gave evidence, after which Malak Ram protested his innocence and claimed the evidence against him was false. The Manager then observed that the evidence was overwhelming, and the three officers recorded a finding that, based on the enquiry, they were satisfied that Malak Ram had been one of the ring leaders who had instigated and actively participated in the rowdyism and hooliganism on the night of 1 May. Following this finding, the Manager served an order on Malak Ram on 12 June 1952, which constituted the next step in the disciplinary process.

Ram was placed on an indefinite suspension beginning on June 13, 1952, and this suspension remained in effect until a final decision could be rendered concerning his employment. In the communication that effected this indefinite suspension, the Manager informed Malak Ram that the written explanation he had submitted was inconsistent with the body of evidence that had been gathered against him, and that the explanation also conflicted with the testimony concerning the alleged maltreatment of the Assistant Manager, Mr Mohan, as well as with the observations made by the enquiry officers during their investigation. Subsequent to the issuance of this suspension order, the employer proceeded to issue a final order that terminated Ram’s employment. On the basis of these facts, the matter before this Court required an examination of whether the Tribunal was correct in concluding that the domestic enquiry had not been conducted in accord with the principles of natural justice. The Court recognized that while domestic enquiries are not required to observe the formal procedural safeguards that govern criminal trials, they nevertheless must be conducted in a fair manner, and the standards of fair play and natural justice must guide the conduct of the officer presiding over such an enquiry. The Court identified the first serious defect in the present enquiry as arising from the fact that the three officers assigned to conduct the enquiry each asserted that they had personally witnessed the alleged misconduct attributed to Malak Ram. The respondent, Mr Kolah, contended that the mere fact that the Manager and the other officers had observed the alleged act did not automatically disqualify them from presiding over the enquiry. The Court rejected this contention, holding that when an officer has personally observed the conduct that is the subject of the enquiry, it is preferable that the enquiry be assigned to another officer who does not claim to be an eyewitness to the incident in question. The Court reiterated that domestic enquiries must be carried out honestly and in good faith, with the explicit purpose of determining whether the charge framed against the employee is proved; consequently, great care must be taken to ensure that such enquiries do not become mere formalities devoid of substantive inquiry. In situations where an officer states that he has personally seen the misconduct alleged against an employee, the Court emphasized that fairness demands that the responsibility for conducting the enquiry be transferred to a different officer who is not biased by personal observation. The Court illustrated how the personal knowledge claimed by an enquiry officer can invalidate the entire proceeding, using the present enquiry as an example. It was noted that the Manager, after rejecting the written explanation offered by Malak Ram, told him that the explanation could not be accepted because it contradicted what the Manager, the Assistant Manager and the Chief Engineer had themselves observed. The Manager further asserted that the explanation was also at odds with the statements of other independent witnesses who had reported to him. The Court observed that such statements clearly demonstrate a lack of understanding of the essential requirements of a proper domestic enquiry. In determining whether the explanation provided by Malak Ram was truthful, the enquiry officer should not have introduced his own personal knowledge or that of his colleagues, nor should he have relied upon reports obtained from other witnesses. The Court expressed the view that allowing such extraneous personal knowledge to influence the enquiry would result in an unjust outcome, and it was inclined to conclude that the injustice

In this case, the Court explained that when a domestic enquiry is conducted by an officer who has personally witnessed the incident that is the subject of the enquiry, the process is likely to be compromised, a point illustrated by the statements in the Manager’s letter to the employee. Consequently, the Court considered it desirable that domestic enquiries be conducted by officers of the employer who are unlikely to bring their own personal knowledge into the proceedings that they are overseeing as enquiry officers. The Court identified another defect in the present proceedings, namely that the enquiry began with a detailed examination of the employee himself. Several of the questions posed to the employee resembled those used in a cross‑examination. The Court emphasized that, in a proper domestic enquiry, the employer must first present the evidence against the workman, allow the workman an opportunity to cross‑examine that evidence, and only thereafter ask the workman whether he wishes to give an explanation in response to the evidence presented. The Court held that it is unfair in domestic enquiries involving industrial employees to subject the employee to a rigorous cross‑examination at the very start of the enquiry, before any other evidence has been introduced. The Court further noted that, in most industrial cases, employees are often unaware of legal procedures, and therefore they should not be exposed to the risks of an early cross‑examination as occurred in the present enquiry. Accordingly, the Court was persuaded that the counsel for the petitioner was correct in asserting that the manner in which the employee was extensively cross‑examined at the outset represented an additional infirmity in the enquiry. The Court also observed that, prior to the actual hearing held on 11 June 1952, the employee had not been given notice specifying the exact date of the enquiry. While the Court recognised that a failure to inform the workman of the date alone might not, by itself, render the enquiry infirm, it stressed that fairness requires the workman to be told when the enquiry will take place so that he can prepare his defence and gather any evidence he wishes to rely upon. The Court concluded that it would be improper to summon the workman on an unspecified day without prior intimation and then commence the enquiry immediately; such a practice should ordinarily be avoided in industrial domestic enquiries. Another defect identified by the Court related to a communication dated 12 June 1952 sent by the Manager to the employee, in which the Manager asserted that the employee’s version was inconsistent with the evidence that the

In the inquiry concerning Malak Ram, the Assistant Manager identified as Mr Mohan was himself one of the officers conducting the inquiry. The officers therefore directly observed that Mr Mohan had been maltreated by Malak Ram and that this misconduct was witnessed by the officers themselves. Relying on their own observation, the officers concluded that Malak Ram was guilty of the alleged misconduct. This reliance on their personal knowledge created a reasonable impression in Malak Ram’s mind that the proceeding was merely a formality and not a genuine inquiry. Consequently, the Tribunal held that the inquiry against Malak Ram was not conducted in accordance with the principles of natural justice. The Court affirmed that this view of the Tribunal cannot be successfully challenged by the appellant. It was further observed that the appellant failed to produce any evidence before the Tribunal to justify the dismissal on its merits. Because no substantive justification was presented, the Tribunal had no alternative but to find that Malak Ram’s dismissal was unjustified. The Tribunal therefore ordered his reinstatement and directed payment of wages for the period during which he was forced to remain unemployed.

The judgment then turned to the case of Vishwa Nath. A charge‑sheet was served on him on 21 October 1952, alleging that on 20 October 1952 at about 7 a.m. he had stopped workmen from entering the factory through the gate, prevented them from performing their duties for a period of time, and had engaged in disorderly conduct by shouting hostile slogans. The charge‑sheet further alleged that this conduct amounted to misconduct under Standing Order No. 16, sub‑clause (ix). Vishwa Nath responded to the charge‑sheet on 25 October 1952, stating that he was not present at the factory gate at 7 a.m. on the date in question, that he did not shout any hostile slogans, and that he did not prevent any workmen from going to duty. An inquiry was held on the same day, conducted by the Manager and the Assistant Manager. During that inquiry Vishwa Nath was first examined, after which five witnesses gave evidence supporting the charge. Upon concluding the inquiry the officers recorded that the alleged misconduct under Standing Order No. 16, sub‑clause (ix) was proved. Subsequently Vishwa Nath applied to the officers for leave to call witnesses in his favour, and permission was granted. He examined four witnesses, and after their evidence was recorded the officers noted their conclusions on 25 November 1952. In recording those conclusions the officers set out reasons for not believing the evidence presented by Vishwa Nath’s witnesses. The first reason mentioned was that, in the original list of forty‑three witnesses…

The enquiry officers listed three separate grounds for rejecting the testimony of the witnesses called by Vishwa Nath. The first ground was that several of the persons listed by Vishwa Nath as witnesses had been absent from duty on 20 October 1952, and the officers concluded that this fact demonstrated that the accused had deliberately produced false witnesses. The second ground relied on the testimony of one of the four witnesses examined by Vishwa Nath, namely Bakhtawar Singh. The officers noted that Bakhtawar Singh was recorded as being on duty at 3 p.m. on 20 October, whereas during cross‑examination he stated that he had reported for duty between 6.45 a.m. and 7 a.m. The third ground was based on evidence obtained in a separate enquiry conducted against another workman, Daulat Singh, in which witnesses produced by Daulat Singh admitted that a gathering had taken place at the factory gate at 7 a.m. on the same day, and that Daulat Singh had addressed that gathering, whereas Vishwa Nath’s witnesses had denied any such assembly.

Each of these three reasons, as set out in the report, was identified by the Court as creating a serious infirmity in the enquiry. Regarding the first reason, the attendance register showed the alleged absence of the witnesses, but Vishwa Nath was not afforded an opportunity to explain this circumstance or to produce the witnesses to give their account. Moreover, it was not impossible that witnesses who were absent from duty could still have observed the events that occurred near the gate at 7 a.m. Consequently, the reliance of the officers on the register without giving Vishwa Nath any notice was deemed procedurally flawed. The second reason was also vulnerable to challenge because Bakhtawar Singh was not questioned about the discrepancy between the time he was shown as on duty at 3 p.m. and his own claim of arriving between 6.45 a.m. and 7 a.m. The principle that a witness should not be disbelieved on the basis of an inconsistency with a document unless he is given a chance to explain it is rooted in natural justice, not merely a technical evidentiary rule. By disbelieving Bakhtawar Singh on a point that had not been put to him, the enquiry officers acted unfairly toward Vishwa Nath. The third reason depended on evidence recorded in the enquiry against Daulat Singh. If a single joint enquiry had been held involving both Daulat Singh and Vishwa Nath, the use of that evidence might have been appropriate; however, because the two enquiries were conducted separately, relying on Daulat Singh’s evidence in Vishwa Nath’s case introduced further unfairness.

In the situation where separate enquiries had been conducted against the two workmen, the Court considered that it would be manifestly unfair to rely on the evidence obtained in the enquiry against Daulat Singh while the officers were simultaneously handling the case of Vishwa Nath. The testimony recorded in Daulat Singh’s enquiry was not taken in Vishwa Nath’s presence, and consequently Vishwa Nath was denied any opportunity to challenge that testimony through cross‑examination. Because of this denial, the Court found that the ultimate conclusion reached by the enquiry officers was tainted by an element of unfairness that affected the entire proceedings. Accordingly, the Court was satisfied that the Tribunal was correct in holding that the report prepared by the enquiry officers against Vishwa Nath could not be treated as a report resulting from a proper enquiry conducted in accordance with the principles of natural justice. On the basis of this view, the Court affirmed the order passed by the Tribunal in the matter of Vishwa Nath. The effect of that affirmation was that the award previously granted in respect of the three workmen named Mehnga Ram, Janak Raj and Daulat Singh was set aside, reflecting the compromise that had been reached between the parties before the Court, while the award made in respect of Malak Ram and Vishwa Nath was upheld. The Court ordered that no costs be awarded.