Khardah Co. Ltd vs Their Workmen on 2 May, 1963

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

Court: Supreme Court of India

Case Number: Civil Appeal No. 705 of 1962

Decision Date: 2 May 1963

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

In this case the Supreme Court of India examined an appeal by Khardah Co. Ltd against its workmen concerning a dismissal that had taken place on 2 May 1963. The bench was composed of P B Gajendragadkar, K N Wanchoo and K C Das Gupta. The petitioner was Khardah Co. Ltd and the respondents were their workmen. The judgment was delivered on 2 May 1963 and is reported as 1964 AIR 719 and 1964 SCR (3) 506, with citator references R 1969 SC 983 (9) and R 1973 SC 1227 (21). The matter involved an industrial dispute arising from the dismissal of a workman after a domestic enquiry that had been conducted by the company’s manager. The manager failed to record any findings, took part of the evidence while the workman was absent, and concluded that the workman was guilty of misconduct under Rule 14 (c) (i) and (viii) of the Standing Orders. The Industrial Tribunal held that the dismissal was unjustified and ordered the reinstatement of the employee. The workman was also the organising secretary of the union, and the union contended that the dismissal was made mala fide with the purpose of victimising him for his trade‑union activities. The central issue was whether the strike that the workman was alleged to have instigated was in fact caused by him or was a spontaneous reaction to the treatment of another workman who had been sick and fainted on the day the strike began. The appellant asserted that the latter workman was not present on that day, a claim that was contradicted by the record. The Industrial Tribunal, without attaching importance to the manager’s domestic enquiry, examined the merits of the dispute itself and found in favour of the respondents, concluding that the management’s dismissal based on the manager’s report was neither fair nor honest. The appellant relied on the decision of this Court in Indian Iron & Steel Co. Ltd. v. Their Workmen and argued that the Industrial Tribunal erred in interfering with the management’s decision. The Court held that the Industrial Tribunal was correct in discarding the domestic enquiry. Although this Court has consistently refrained from interfering with conclusions of domestic enquiries in industrial matters unless one of the four tests laid down in Indian Iron & Steel Co. Ltd. v. Their Workmen is satisfied, the essential basis of that approach is that a domestic enquiry must be conducted fairly and properly in conformity with the principles of natural justice. Normally the evidence on which the charges are sought to be proved must be led in the presence of the workman, and the procedure of recording statements of witnesses ex parte and thereafter producing the witnesses for cross‑examination, unless there are compelling reasons, must

The Court observed that departmental enquiries conducted under Article 311 of the Constitution differed fundamentally from industrial enquiries because the former rarely involved questions of motive, whereas the latter often required an examination of whether the employee acted in good faith or bad faith. The principles laid down in Indian Iron & Steel Co. Ltd. v. Their Workmen, (1958) 1 L.L.J. 260, were explained and the Court also referred to the authorities State of Mysore v. S.S. Makapur, [1963] 2 S.C.R. 943; M/s. Ke.8oram Cotton Mills Ltd. v. Gangadhar, [1961] Vol. 2 S.C.R. 809; and Union Territory of Tripura v. Gopal Chander Dutta Choudhri, [1963] Supp. I S.C.R. 266. The Court held that the Manager’s failure to record any findings after holding the enquiry constituted a serious infirmity in the enquiry process. It emphasized that it was not the role of the Court to revisit the evidence in order to determine whether the dismissal was justified. Rather, the duty of the enquiry officer in an industrial enquiry was to record his conclusions in a clear and precise manner and to give a brief statement of the reasons for those conclusions, so that the Industrial Tribunal could assess whether the conclusions were fundamentally erroneous or perverse. The Court further noted that, as a matter of normal procedure, the Industrial Tribunal should not permit one party to lead evidence in the absence of the other party, nor should it admit evidence after the case had been fully argued unless both parties consented. However, the Court stated that merely calling for the authenticated record to verify whether the workman was the Organising Secretary did not constitute a breach of that procedural rule.

The judgment was rendered in the civil appellate jurisdiction in Civil Appeal No. 705 of 1962, which was filed by special leave against the award dated 19 September 1961 of the Fourth Industrial Tribunal, West Bengal, in Case No. VIII‑42 of 1961. The appellant, Khardah Co. Ltd., was represented by counsel appointed for the Government, while the respondents, the workmen, were represented by their counsel. The appeal was heard on 2 May 1963, and the judgment was delivered by Justice Gajendragadkar. The appeal arose out of an industrial dispute concerning the dismissal of the appellant’s employee, Samiran Jadav. The workmen contended that the dismissal was unjustified, whereas the appellant maintained that the dismissal had been proper and lawful. The dispute, which had been referred to the Fourth Industrial Tribunal, West Bengal, concerned whether the dismissal was justified and what relief, if any, the workman was entitled to. The Tribunal had held that the dismissal was unjustified and had directed the appellant to reinstate the employee to his former position within a month of the award’s publication, treating the period from dismissal to reinstatement as leave without pay to be counted towards his length of service. The appellant challenged this award before this Court.

In the factual matrix presented, the dismissal of Mr. Jadav was alleged to have been carried out in bad faith with the intention of victimising him because of his activities in the trade union. The record shows that Mr. Jadav occupied the position of Organising Secretary of the Union and, having supported the Union’s demands with great vigor, the appellant’s management purportedly sought to remove him from service. The chronicle indicates that Mr. Jadav had been employed as a weaver for several years and that his appointment was confirmed effective 12 April 1954. On 19 September 1960 he commenced a week’s leave and, upon his return on 26 September 1960, the management assigned him to operate a twill‑producing machine, although his regular posting had been on a plain loom. Because he was not familiar with the more complex twill machine, he requested that he be allowed to resume his ordinary duties on a plain loom; this request was rejected. Consequently, being unaccustomed to the twill apparatus, Mr. Jadav suffered an accident on 27 September 1960 and was granted medical leave for a week, which concluded on Saturday, 1 October 1960. When duty resumed on 3 October 1960, he again asked the management to permit him to work on a plain loom. After his request was again denied, he informed the management that he would operate the twill machine during the second shift, which began at one p.m. On the same day another employee, Mahboob, who was ill and had been on leave, requested additional leave; the request was refused and Mahboob fell unconscious while attempting to operate his machine. As a result, approximately seven hundred weavers employed by the appellant halted work, and the weaving section was unable to restart production at one p.m. The management responded by declaring a lock‑out on 5 October 1960, which persisted until 29 October 1960. Also on 3 October 1960, the management served a charge‑sheet on Mr. Jadav, alleging that he had willfully disobeyed a lawful and reasonable order from his superior and had acted in a manner subversive of discipline. The charge alleged that he had moved within the weaving department and incited the workers there to strike, thereby committing misconduct under Rule 14(c)(i) and (viii) of the Standing Orders. Mr. Jadav was required to submit his explanation within twenty‑four hours of receiving the charge‑sheet. After he furnished his explanation, an enquiry was convened. At the outset of the enquiry, Mr. Jadav was present, but subsequently he ceased to participate in the proceedings. The appellant asserted that Mr. Jadav deliberately chose not to take part, whereas the respondents contended that the enquiry was conducted in an unfair manner, rendering his participation impossible. The enquiry was conducted by the Manager himself. Upon conclusion of the enquiry, the Manager found Mr. Jadav guilty of the charge and effected his dismissal on 21 November 1960. The respondents maintained that the dismissal was purely vindictive and lacked any justifiable basis.

In the respondent’s case, it was stated that Jadav performed work in the weaving department on both plain looms and on looms that produced twill fabric. When he resumed his duties on 3 October 1960, the departmental overseer, Mr Jha, directed Jadav to attend to his own loom, but Jadav refused to obey that order. The appellant further alleged that Jadav moved within the weaving department and incited the other workers to stop working. According to the appellant, a proper enquiry had been conducted against Jadav and, as a result of that enquiry, he was dismissed for misconduct under Rule 14(c)(i) and (viii) of the Company’s Standing Orders. With respect to the incident involving Mahboob, the appellant asserted that Mahboob was absent on 3 October 1960, and therefore there was no question of Mahboob operating any machine on that day. In other words, the appellant contended that the Union’s claim that the strike was spontaneous because Mahboob had fainted was false and that, in substance, the strike was the result of Jadav’s instigation. The parties led oral evidence before the Tribunal, and the appellant relied heavily on the record of the enquiry itself. The Tribunal found that the management had deliberately concealed the fact that Mahboob had reported to the mill on 3 October, had applied for an extension of leave, and had been refused that extension. Consequently, the Tribunal concluded that the strike could not have been instigated by Jadav. The Tribunal also observed that after the enquiry was held, the Manager who conducted it had not recorded any finding, and it appeared that the conclusions on which the management acted in dismissing Jadav were of such a nature that “no person acting fairly and honestly could have reached them.” Moreover, the Tribunal noted that Jadav was not accustomed to working on a twill loom, and therefore his request to be allowed to work on a plain loom was not unreasonable. On these grounds, the Tribunal held that a serious charge had been unjustly framed against Jadav, indicating a lack of good faith and vindictiveness on the part of the management. Based on these findings, the Tribunal answered in favour of the respondents and ordered that Jadav be reinstated. On behalf of the appellant, the learned Solicitor General vigorously argued before the Court that the appellant had conducted a proper domestic enquiry and dismissed Jadav because the enquiry had established the charges against him. He further contended that this Court’s decisions clearly state that an Industrial Tribunal will not interfere with a management’s dismissal of an employee after an enquiry unless it is shown that the management acted in bad faith, committed victimisation, engaged in unfair labour practices, made a basic error, violated principles of natural justice, or reached a finding that was wholly baseless or perverse, citing the relevant authority.

In that decision, the Court observed that an appellate tribunal would not interfere with a domestic enquiry unless one of the four conditions identified in Indian Iron & Steel Company Ltd. v. Their Workmen (1) was met. Those conditions are that the employer was guilty of a basic error, a violation of a principle of natural justice, that the finding is wholly unfounded or perverse. The Court reiterated that it has consistently refrained from disturbing the conclusions reached by the enquiry officer who conducts a domestic enquiry against an industrial employee, except when any of the four tests described in Indian Iron & Steel Company Ltd. (1) is satisfied. The prevailing view held by the Court is that, when the enquiry is fairly held and results in a finding that the charge against the employee is proved, the Industrial Tribunal should not sit in appeal over that finding and should not intrude upon the employer’s right to dismiss a workman who has been found guilty of misconduct.

The Court explained that this position rests on the principle that a management‑initiated enquiry before a domestic tribunal must be conducted fairly and justly, and that the principles of natural justice must be observed when informing the workman of the charge. Normally, the evidence needed to prove the charge must be led at the enquiry in the presence of the workman himself. The Court noted that, in departmental enquiries of public servants, it has held in State of Mysore v. S. S. Makapur (2) that if a witness’s deposition is recorded by the enquiry officer in the absence of the public servant, and a copy is provided to him together with an opportunity to cross‑examine the witness after the witness generally affirms the truth of his prior statement, the requirements of natural justice are met. However, the Court cautioned, as it had emphasized in M/s Kesoram Cotton Mills Ltd. v. Gangadhar (1), that such observations must be applied carefully to domestic enquiries of industrial employees. In those cases, it is preferable that every witness whose testimony supports the employer’s charge be examined while the workman is present.

Recording evidence in the workman’s presence serves important purposes. The witness knows that he is testifying against a specific individual who is before him, which makes him more careful in his statements. Moreover, when evidence is recorded in the presence of the accused, there is no opportunity to persuade the witness to give convenient statements, and the accused finds it easier to cross‑examine the witness. Consequently, the Court expressed disapproval of the practice of recording witness statements ex parte and then producing the witnesses before the employee for cross‑examination, even if the witnesses later confirm that their earlier statements accurately reflect what they said.

In this case the Court observed that allowing the employee to be cross‑examined only after he had received statements that had previously been recorded, while the witnesses subsequently made a general declaration that those earlier statements accurately reflected their testimony, was unacceptable. The Court held that, except where a compelling reason existed, the usual procedure required that every piece of evidence be taken in the presence of the workman who was charged with misconduct. The Court further explained that, unlike inquiries conducted against public servants—which are governed by Article 311 of the Constitution—industrial inquiries commonly involve a consideration of whether the employer acted in good faith or with malice. The Court noted that, as reported in the decision cited as (1) [1964] Vol. 2 S.C.R. 809, if it could be shown that an employer was motivated by a desire to victimise a worker because of his trade‑union activities, such motive could render the dismissal order infirm. By contrast, the motive of the disciplining authority is generally irrelevant in inquiries involving public servants, as discussed in Union Territory of Tripura v. Gopal Chandra Dutta Choudhuri (1). Consequently, the Court stressed that industrial inquiries must be conducted with stringent adherence to the principles of natural justice and must not be reduced to a mere formality.

The Court then turned to the facts of the present matter, noting that after the enquiry was concluded, the Manager who had presided over it had failed to record any findings. Because of this omission, the Court could not ascertain what considerations had weighed on the Manager’s mind or how he had evaluated the evidence presented. The Solicitor‑General argued that there was little need to record findings or to prepare a formal report because the Manager himself possessed the authority to dismiss the employee. The Court rejected this argument, emphasizing that the purpose of conducting an enquiry is to enable the enquiry officer to determine the merits of the dispute. It would therefore be inappropriate to assume that, once evidence had been recorded, the employer’s only subsequent act should be to issue a dismissal order that implicitly signified acceptance of the charges. The Court explained that an Industrial Tribunal, when reviewing such disputes, is entitled to examine whether the enquiry officer’s conclusion was perverse or whether a fundamental error existed in his approach.

Because the Manager’s written conclusions were unavailable, the Court held that it was impossible to assess whether the enquiry officer’s reasoning was sound or his conclusions were unreasonable. The Court therefore concluded that the Manager’s failure to document any findings after the enquiry represented a serious flaw in the enquiry process itself. While the Solicitor‑General suggested that the Court could examine the evidence independently and decide on the validity of the dismissal, the Court refused to adopt that course, reaffirming that a proper enquiry must culminate in a clear statement of findings and reasons, especially where dismissal is contemplated.

The Court held that it would not examine whether the dismissal of Jadav was justified, and it declined to adopt the approach suggested by the learned Solicitor‑General of deciding the matter on the basis of the employer’s evidence alone. The Court explained that when industrial adjudication places significance on domestic enquiries and the conclusions drawn from them, the enquiry must be followed by a written statement that sets out the enquiry officer’s findings. While the officer need not produce an extensive or elaborate report, the Court emphasized that because the officer’s findings are likely to lead to dismissal, the officer is required to record his conclusions clearly and precisely and to indicate briefly the reasons for reaching those conclusions. Without such a written record, the Industrial Tribunal would find it difficult to determine whether the officer’s approach was fundamentally erroneous or his conclusions were perverse. The Court further observed that accepting the Solicitor‑General’s argument would seriously diminish the value of domestic enquiries. Accordingly, the Court insisted that a proper enquiry must be conducted and that nothing should occur during the enquiry or after its conclusion and before the dismissal order is issued, lest the enquiry be regarded as an empty formality. Consequently, the Court was satisfied that the Industrial Tribunal was correct in giving no weight to the enquiry conducted by the Manager when evaluating the merits of the dispute based on the evidence presented before it.

The Court noted that it is well settled that if an enquiry is found to be unfair, the employer may present evidence before the Tribunal to justify his action, and the question of whether the employee’s dismissal is justified remains open for the Tribunal to consider on the merits, without deference to the management’s view. Conversely, when an enquiry is fair and the management’s conduct is not mala fide or vindictive, the Tribunal does not re‑examine the findings as if it were hearing an appeal of the enquiry officer’s conclusions. In the present case, the Tribunal concluded that Jadav’s dismissal was not made in good faith and was motivated by a desire to victimise him for his trade‑union activities. The Court described this factual conclusion as not perverse and therefore not subject to challenge by the appellant. Finally, the Court referred to the central issue between the parties, namely whether the strike of 3 October 1960 was a spontaneous occurrence or had been instigated by Jadav, before concluding its decision on the appeal.

The respondents argued that the manner in which the management treated Mahboob had provoked the strike and that seven hundred weavers walked out of work of their own accord. In contrast, the appellant contended that Mahboob was not present at the mill on the date in question, and therefore the allegation that his request for leave was refused and that he was forced to work was wholly false; according to the appellant, the strike had actually been initiated by Jadav. On this issue the Tribunal issued a categorical finding against the appellant. In reaching that finding the Tribunal relied upon the official minutes of the Emergency Works Committee meeting that was held on 3 October 1960 at 3 p.m., with the Manager presiding. The minutes record that when an enquiry was made into the cause of the strike, the Committee was told that Mahboob, who had previously been on leave, had applied to extend his leave. After the period of his extended leave expired, Mahboob reported for work on 3 October and pleaded that he remained ill and needed further leave, but “nobody paid any heed to his prayer,” suggesting that he was required to resume his duties. The minutes also state that the Labour Officer informed the Committee that Mahboob had produced a certificate of fitness dated 22 September 1960 and, after discussion, the Committee unanimously resolved to refer his case to the mill’s Medical Officer, whose recommendation would determine whether leave should be granted. Consequently, the minutes clearly demonstrate that Mahboob was present at the mill on 3 October, that he requested additional leave, and that his request was denied. The Tribunal further noted that these minutes were signed by the joint Secretary representing the employer and the joint Secretary representing the employees, and that their authenticity could not be impeached. In light of these documented statements, the Tribunal was obliged to consider the appellant’s plea before it.

The specific plea advanced by the appellant before the Tribunal was that Mahboob was absent from the mill on 3 October, and therefore he could not have been working on any machine that day. This plea implied that Mahboob was not at the mill, a claim the Tribunal found to be unequivocally false. The learned Solicitor‑General invited the Court to examine this plea together with a statement made by one of the witnesses at the domestic enquiry. That witness testified that Mahboob and the witness had approached the Labour Officer to seek an extension of Mahboob’s leave and that the Labour Officer had granted the extension. Such testimony would indicate that Mahboob had been given leave on the morning of 3 October. However, as the Tribunal had already observed, the Labour Officer himself had informed the Works Committee members at 3 p.m. on the same day that leave had not been granted to Mahboob because he had produced a fitness certificate dated 22 September, and the Committee had resolved to refer his case to the Mill’s Medical Officer for a recommendation before any action could be taken. Thus, there

In this case, the Court observed that even if the appellant’s pleading were interpreted in the most generous manner and considered together with the statement of a witness at the domestic enquiry, the Industrial Tribunal was correct in finding that the appellant’s assertion was completely false and that Mahboob had not been granted leave on 3 October. Consequently, the Tribunal’s conclusion that the management’s refusal to grant leave to Mahboob had aggravated the workmen could not be said to be erroneous, nor could its propriety be successfully challenged before this Court. The incident involving Mahboob formed the principal background to the strike, and the appellant’s anxiety lay in demonstrating that Mahboob was not present on that date. When the Tribunal determined that the appellant’s version of events was untrue, it naturally altered the overall character of the charge‑sheet that the appellant had prepared against Jadav. For this reason, the Tribunal concluded that the appellant’s decision to dismiss Jadav reflected a lack of good faith and appeared to be motivated by an intention to victimise Jadav for his trade‑union activities.

The learned Solicitor‑General pointed out that the Tribunal had permitted the respondents to request the trade‑union register after the arguments had already been heard. The record showed that both parties had appeared before the Tribunal on 19 January 1961, when arguments were heard and the award was reserved. After that hearing, the Union filed an application asking that the trade‑union record be produced, and the Tribunal ordered that the record be called for. The Solicitor‑General complained that allowing additional evidence after the arguments had been concluded was improper. The Court, however, found no merit in that complaint because the sole purpose of calling for the record was to establish that Jadav was the Organising Secretary of the Union, a fact that the appellant had apparently disputed during the proceedings. The Union therefore sought the Registrar’s record to demonstrate that the appellant’s claim was unfounded. In this circumstance, the Tribunal’s decision to obtain the record in order to verify that Jadav held the position of Organising Secretary did not give rise to any serious grievance on the part of the appellant.

The Court acknowledged that, in industrial matters, a Tribunal should not permit one party to introduce evidence in the absence of the other and should not admit evidence after the case has been fully argued unless both parties consent. In the present case, however, the Tribunal’s action was limited to sending for an authenticated record to determine whether Jadav was indeed the Organising Secretary of the Union. Accordingly, the Court held that the appeal failed, dismissed it, and ordered the appellant to pay costs.

The Court observed that the Tribunal’s sole action consisted of directing the production of an authenticated record to determine whether Jadav held the position of Organising Secretary of the Union. No additional evidentiary steps or procedural modifications were undertaken by the Tribunal beyond this request for the specific document. Having considered that the purpose of the order was simply to verify a factual claim, the Court found no basis for overturning the Tribunal’s decision. Consequently, the appeal was deemed unsuccessful and was ordered to be dismissed, with the appellant required to bear the costs of the proceedings. The final order therefore affirmed the dismissal of the appeal and imposed the costs against the party challenging the Tribunal’s determination. The Court further emphasized that the Tribunal had acted within its jurisdiction by seeking only the authenticated record, and that such a step did not prejudice either party. Since the authenticity of the document was the sole issue required to resolve the dispute, no additional hearing or evidentiary submissions were deemed necessary. Accordingly, the dismissal with costs reflects the Court’s view that the appellant’s challenge lacked merit in light of the limited inquiry conducted. The order thereby concluded the proceedings, affirming the Union’s position and leaving no further relief to be granted to the appellant.