Canara Banking Corporation Ltd vs U. Vittal

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

Court: Supreme Court of India

Case Number: Civil Appeal Nos. 755 of 1962

Decision Date: 22 April, 1963

Coram: Das Gupta J.

In this case the Supreme Court of India heard an appeal dated 22 April 1963 involving Canara Banking Corporation Ltd as the petitioner and U. Vittal as the respondent. The appeal arose under the Industrial Disputes Act of 1947, specifically invoking section 33A, which deals with the transfer of a bank employee who does not belong to the subordinate staff. The respondent, who was a clerk, had been transferred from one posting to another and contended that the transfer order was made in bad faith and constituted victimisation for his legitimate trade‑union activities. He sought the cancellation of the transfer order. The Labour Court had previously held that the transfer violated the Sastry Award, which, according to that award, prohibited a clerk such as the respondent from being transferred outside the state or language area of his service without his consent. The appellant, Canara Banking Corporation, appealed to this Court by way of special leave, arguing that the Sastry Award did not impose an absolute prohibition on the transfer of employees who are not part of the subordinate staff. The appellant further submitted that the bank’s order was made in good faith and therefore did not contravene the award. The Court examined the distinction drawn by the Sastry Award between subordinate staff and other workmen. While the award imposed an absolute ban on transferring subordinate staff outside their language area, it did not impose a similar absolute ban on other categories of workmen. The award merely instructed that, “as far as possible,” such transfers should be avoided, leaving the bank with discretion to transfer employees like the respondent when it served the best interests of the bank. Accordingly, the Court held that the bank could decide how to allocate its manpower, provided that transfers were avoided if they could be done without sacrificing the bank’s interests.

The appeal was instituted as Civil Appeal No. 755 of 1962 and was taken on special leave from the order dated 5 March 1962 of the Labour Court (Central) in Ahmedabad, which had been hearing Complaint No. 153 of 1961, referenced as No. 1 of 1960. Counsel for the appellant were N. V. Phadke, S. N. Andley, Rameshwar Nath and P. L. Vohra, while counsel for the respondent was M. K. Ramamurthi. The judgment was delivered by Justice Das Gupta. The Court noted that the appeal concerned an application under section 33A filed by the respondent before the Labour Court, challenging a transfer order issued by the banking company, which operates numerous branches throughout southern India. The respondent’s employment with the bank began on 14 June 1951, and after his confirmation in September 1952 he was first posted at Udipi, subsequently transferred to Trichur, and later, after his representation, to the Mandvi Branch in Bombay in July 1956. On 20 May 1961 the bank issued another transfer order posting him back to Trichur, and on 26 August 1961 the respondent filed an application under section 33A seeking cancellation of that order and permission to remain at Bombay. He alleged that the transfer was made mala fide and as an act of victimisation for his lawful trade‑union activities, and that it was intended to deprive him of his lawful dues. The application was initially presented before the National Industrial Tribunal in Bombay, where a related industrial dispute between the bank and its workmen was pending, and the tribunal subsequently referred the matter to the Labour Court in Ahmedabad for determination.

In this case, the respondent had joined the appellant bank on 14 June 1951 and after his confirmation in September 1952 he was posted at Udipi. Subsequently he was transferred to Trichur, but following a representation he was transferred to the Mandvi Branch in Bombay in July 1956. On 20 May 1961 the bank issued another transfer order, posting the respondent back to Trichur. The respondent filed an application under section 33A of the Industrial Disputes Act on 26 August 1961, seeking cancellation of the May 20 transfer order and requesting to remain at Bombay. In the application he alleged that the transfer order was made mala fide and constituted victimisation for his legitimate trade‑union activities, and further that the transfer was intended to deprive him of his lawful dues. The application was presented before the National Industrial Tribunal in Bombay, where a dispute between the bank and its workmen was already pending. The tribunal transferred the matter to the Labour Court at Ahmedabad for resolution. Before the Labour Court the bank argued that there was no violation of section 33 because the respondent’s service conditions were not altered, and that the transfer was done bona fide in view of ordinary business considerations and exigencies. The bank also contended that the transfer did not contravene the Sastry Award, which governs the transfer of bank employees. The Labour Court examined the Sastry Award and held that its provisions restrict the bank’s right to transfer a clerk such as the respondent outside the state or language area in which he was serving unless he gave consent. Since no consent had been obtained, the Court concluded that the respondent’s conditions of service had been altered contrary to the standing order contained in the Sastry Award. The Court then considered whether the award allowed the bank to transfer clerks outside the state or language area when it was in the bank’s business interest, and whether the bank had demonstrated that no other alternative existed. The Court found that the bank had not established that such a transfer was unavoidable. The allegation that the transfer was intended to victimise the respondent for his union activities was rejected. Nonetheless, the Court was of the opinion that the transfer materially altered the respondent’s service conditions in a manner not compliant with the Sastry Award. Accordingly, the Court directed the bank to cancel the May 20 transfer order and to re‑transfer the respondent to the Mandvi Branch in Bombay. The bank has now appealed against this direction.

In this case the Court examined the specific direction that formed part of the Sastry Award on the question of transferring employees. The direction was expressed in the following terms: the Bank should, as a general policy, limit transfers to the minimum that is consistent with the needs of banking operations and efficiency. With respect to members of the subordinate establishment, the direction required that ordinarily no transfers should be made, and if any transfer were to occur it must not extend beyond the language area of the person being transferred. The direction further stated that, even for workmen who are not members of the subordinate staff, the Bank should, as far as possible, avoid transferring an employee outside the State or the language area in which that employee has been serving, and that such a transfer could be made only with the employee’s consent. It was not contested that these directions bound the appellant‑Bank and that they constituted “standing orders” within the meaning of section 33(2) of the Industrial Disputes Act. The Court also accepted that the contemplated transfer would amount to a material alteration of the respondent’s conditions of service.

The appellant‑Bank raised two principal contentions in support of its appeal. The first contention was that the Labour Court had erred in holding that the Sastry Award direction absolutely prohibited the Bank from transferring workmen who were not part of the subordinate staff outside the State or the language area without the employee’s consent. The Bank argued that, properly construed, the direction merely required the Bank to avoid such transfers as far as possible and did not forbid the Bank from effecting a transfer when it was genuinely necessary for the Bank’s interests. The second contention was that, if the Bank could demonstrate that the transfer was made in the genuine interests of its business and that the Bank acted bona fide, then the direction in the Sastry Award should not be considered to have been violated.

The Court observed that the Sastry Award indeed drew a clear distinction between workmen belonging to the subordinate staff and those who were not. For members of the subordinate staff, the language of the direction was unequivocal: “if there are any transfers at all, they should not be beyond the language area of the person so transferred.” The Court noted that the award did not qualify this rule with the phrase “as far as possible”; instead, it imposed an absolute prohibition on transferring subordinate staff beyond their language area. By contrast, when the award dealt with workmen who were not part of the subordinate staff, it employed markedly different wording, prefacing the restriction with “as far as possible” and adding the condition that a transfer could be made “except, of course, with his consent.” This difference indicated that the prohibition for the latter class of workmen was not absolute but contingent upon business necessity and the possibility of obtaining consent.

The Court observed that the award contained a direction stating that “there should be no transfer outside the State or the language area in which he is serving except of course, with his consent,” and that this wording was qualified by the expression “as far as possible.” The Court held that it was impossible to treat this direction as an absolute prohibition if the qualifying words “as far as possible” were ignored. It explained that those words were deliberately inserted so that the banks could consider the necessities of their business when deciding whether a transfer of a workman who was not part of the subordinate staff could be avoided. The direction therefore required that such a transfer should be avoided wherever feasible, but it did not forbid it entirely.

The Court further expressed that it was satisfied that the Labour Court had erred in holding that transfers outside the State or the language area could be made only with the employee’s consent. According to the Court, the clause meant that a transfer could be carried out with consent, and in the absence of consent the bank should avoid the transfer as far as possible. This led the Court to consider whether, in the present case, the appellant had contravened the award by transferring the respondent outside Maharashtra, the State in which he had been serving, and also outside the language area in which he had been serving. The Court reminded that a bank operating branches throughout the country must allocate its overall manpower among those branches in accordance with the needs of each branch and the bank’s business interests. To achieve optimal results, it sometimes became necessary to move workmen from one branch to another, and the best interests of the bank could, at times, require a transfer outside the State or language area where a particular workman had previously been employed.

The Court concluded that the Sastry Award had not impaired the bank’s right to distribute its non‑subordinate staff to its greatest advantage, even if such distribution involved transfers outside the State or language area of a particular workman, provided that the bank avoided such transfers when it could do so without harming its business. The Court emphasized that the bank’s management was in the best position to judge how to allocate its manpower and to determine whether a specific transfer could be avoided. It noted that industrial tribunals could not possess all the material relevant to such decisions, and even if they could, they were not suited to make determinations of this nature. Consequently, the Court held that, as a rule, industrial adjudication should accept the bank’s submission that a challenged transfer was made only because it was unavoidable, with the sole exception being cases where there was reason to believe that the management’s motive was malicious, such as victimisation, an unfair labour practice, or any other ulterior purpose unrelated to the bank’s business interests.

In this case the Court observed that a transfer could be challenged only when there was reason to believe that the bank’s management had acted in bad faith, for example by victimising the employee, committing an unfair labour practice or pursuing some ulterior motive that was unrelated to the legitimate business interests of the bank. The Court noted that the Labour Court had examined the respondent’s challenge to the bona fides of the management and had rejected that challenge. The Labour Court had held that no evidence was placed before it to support the complainant’s allegation that the transfer was made because he had joined the Union or that the management had pursued a special policy towards Union work‑men. The Court found nothing that would justify interfering with the Labour Court’s finding that those allegations remained unproved. The Court also recorded that, while the Labour Court had remarked that the transfer appeared “very unfair” to the employee and that the effect of the transfer would be harsh on him, such a comment did not constitute a finding of an unfair labour practice. Accordingly the Court concluded that the Labour Court was not justified in deciding that the respondent’s transfer to Trichur could have been avoided without causing any injury to the bank’s interests. On this basis the Court held that the Labour Court had erred in concluding that the transfer was not made in accordance with the standing orders on transfers contained in the Sastry Award. The Court therefore allowed the appeal, set aside the order of the Labour Court and dismissed the respondent’s application under section 33A. No order as to costs was made, and the appeal was allowed.