State Bank Of India vs Nanak Chand Jain

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

Court: Supreme Court of India

Case Number: Civil Appeal No.126 of 1963

Decision Date: 02/12/1963

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

In the matter titled State Bank of India versus Nanak Chand Jain, the Supreme Court of India rendered its judgment on 2 December 1963. The case was heard by a bench consisting of Justice K. C. Das Gupta, Justice P. B. Gajendragadkar, and Justice K. N. Wanchoo. The petitioner was the State Bank of India and the respondent was Nanak Chand Jain. The judgment was recorded in the 1965 edition of the All India Reporter at page 122 and also reported in the 1964 edition of the Supreme Court Reporter, volume 5, page 621. The dispute involved the application of the Industrial Disputes Act, 1947, particularly the requirement under section 33(2) to pay one month’s wages in lieu of notice of termination, and the relevance of paragraph 521(2)(c) of the Sastry Award, which allowed payment of three months’ wages and allowances in lieu of notice. The headnote of the judgment explained that the respondent, who had been an employee of the bank, was acquitted of a charge of misappropriation of the bank’s money. Nevertheless, an internal enquiry by the bank concluded that the respondent was guilty of carelessness, leading to a decision to terminate his service. Upon termination, the bank paid the respondent three months’ salary and allowances as stipulated in the Sastry Award. Because an industrial dispute was pending between the bank and its employees, the bank sought approval of its action from the Labour Tribunal under section 33(2) of the Industrial Disputes Act. The Tribunal held that the payment made under paragraph 521(2)(c) did not satisfy the requirement of a separate payment of one month’s wages under the proviso to section 33(2). On appeal, the Supreme Court held that payment for a longer period includes payment for a shorter period, and therefore, where three months’ pay and allowances were paid in accordance with the Sastry Award, no additional payment of one month’s wages was required under the proviso of section 33(2).

The Court’s judgment was recorded as Civil Appeal No. 126 of 1963, arising by special leave from an order dated 3 April 1962 of the Central Government Labour Court at Delhi in O.P. No. 15 of 1961. The appellant was represented by senior counsel, while the respondent was represented by counsel designated for the respondent. The Court noted that the respondent, Nanak Chand Jain, had been employed as a money‑tester in the cash department of the Agra Branch of the Imperial Bank of India. On 20 December 1952, it was discovered that a packet containing ten pieces of one‑hundred‑rupee notes, which had been shroffed by another bank employee and handed over to the respondent, was missing. In connection with this incident, the respondent and four other bank employees were prosecuted. The trial before the Sessions Court concluded with the acquittal of all the accused, the respondent receiving the benefit of doubt. Subsequently, on 10 December 1954, the bank served a charge‑sheet on the respondent alleging carelessness and dereliction of duty. An enquiry was then conducted, and the Enquiry Officer found the charge against the respondent to be established. Based on the enquiry report, the bank decided to terminate the respondent’s services effective 16 May 1955, providing three months’ pay and allowances as compensation. The respondent was given an additional hearing concerning the nature of the proposed punishment, after which his services were terminated as of the close of business on 16 May 1955.

The Bank held an enquiry into the respondent’s alleged neglect of duty, and the Enquiry Officer concluded that the charge against him was established. After reviewing the officer’s report, the Bank resolved to end the respondent’s employment effective 16 May 1955, providing him with three months’ salary and allowances in lieu of notice. The respondent was subsequently afforded an additional hearing to discuss the specific nature of the contemplated punishment, and his service was formally terminated at the close of business on 16 May 1955.

The respondent challenged the legality of those enquiry proceedings on the ground that he had not been afforded an adequate opportunity to be represented by a union official of his choosing. The Labour Appellate Tribunal later held that the employee possessed an unrestricted right to select his representative for a departmental enquiry. Accordingly, the Bank withdrew the termination order and conducted a fresh enquiry on 21 and 22 November 1956. In that second enquiry the Enquiry Officer again found the charges against the respondent to be proved. After considering this second report and after giving the respondent a chance to show cause why the proposed penalty of termination with payment of three months’ salary in lieu of notice should not be imposed, the Bank, in November 1960, decided once more to terminate his service, this time relying on paragraph 521(2)(c) of the Sastry Award.

At the time of this decision an industrial dispute between the Bank and its employees was pending before the National Industrial Tribunal. Consequently, on 21 November 1960 the Bank filed an application with that Tribunal under section 33(2) of the Industrial Disputes Act seeking approval for its termination of the respondent’s service. Prior to filing the application, the Bank had sent the respondent a letter dated 4 November 1960 informing him of its decision to terminate his employment and enclosing a payment order of Rs 450.71, representing his pay and allowances for three months. The National Industrial Tribunal transferred the Bank’s application to the Central Government Labour Court in Delhi for consideration.

The respondent opposed the application, arguing, among other points, that he had not received a one‑month wage as required by the proviso to section 33(2), and therefore the application should be dismissed. He also filed an application under section 33A of the Industrial Disputes Act before the Central Government Labour Court, alleging that the Bank had violated the provisions of section 33 by failing to pay the one‑month wage mandated by the proviso. The Bank contested this filing, maintaining that the application was not maintainable and that its actions were lawful and justified. The Bank further asserted that no breach of section 33(2) had occurred because it had paid the respondent three months’ salary and allowances, thereby satisfying the statutory requirement. The Labour Court subsequently addressed these submissions.

The Court held that the payment of three months’ salary pursuant to paragraph 521(2)(c) of the Sastry Award did not constitute compliance with the requirement of payment of one month’s wages that is prescribed in the proviso to section 33(2). Accordingly, the Court found the application filed under section 33A to be maintainable and scheduled that application for a further hearing on the remaining issues on a later date. When the application filed by the Bank under section 33(2)(b) of the Industrial Disputes Act came up for hearing before the Labour Court, the Presiding Officer, Mr Vyas, said that he was bound by the decision of his predecessor, Mr Krishnamurty, in the section 33A application, which had held that there was a breach of the requirement to pay one month’s wages under the proviso. Consequently, Mr Vyas rejected the Bank’s application seeking approval to terminate the respondent’s services. The Bank has challenged that order by filing the present appeal by way of special leave. The sole question for consideration is whether, when three months’ salary has been paid in accordance with paragraph 521(2)(c) of the Sastry Award, it can be said that the requirement of payment of one month’s salary under the proviso to section 33(2) has been satisfied. Counsel for the Bank argued that it is unreasonable to assume that the three months’ salary already paid does not include the one month’s wages required by the proviso. Counsel for the respondent, on the other hand, contended that the payment of three months’ pay and allowances provided in paragraph 521(2)(c) serves a purpose different from that of the one month’s wages required by the proviso. To support this position, the counsel referred to the language of the provision, which states that the employer “shall be liable only for termination of service with three months’ pay and allowances in lieu of notice.” According to the counsel, the phrase “in lieu of notice” distinguishes the character of the payment contemplated in paragraph 521(2)(c) from the payment required by the proviso to section 33(2), and it is clearly not intended as a substitute for notice. The Court observed that the expression “in lieu of notice” in paragraph 521(2)(c) does not carry the significance attributed to it by the counsel. The Court did not think that the Sastry Award intended that an employee’s services could be terminated by giving three months’ notice without paying three months’ pay and allowances. Although the words “in lieu of notice” are used, the Court found it clear that three months’ pay and allowances must be paid in every case of termination of service. The Court further noted that the purpose of this provision appears to be the same as the purpose of the proviso, namely, to provide the employee with some monetary assistance. The object in making this provision appears therefore to be the same as in the

In its reasoning, the Court explained that the purpose of the proviso was to provide the employee with some monetary assistance. Accordingly, the Court found it difficult to accept any argument that the three months’ pay and allowances payable under paragraph 521(2)(c) should be considered separate from the payment for a shorter period that was prescribed in the proviso to section 33(2). The Court held that a payment made for a longer period necessarily included the payment that would have been required for a shorter period. Consequently, where the employer had already paid three months’ pay and allowances as required by paragraph 521(2)(c), the Court determined that no additional payment of one month’s wages under the proviso to section 33(2) was necessary. On this basis, the Court concluded that the Labour Court had erred in dismissing the Bank’s application under section 33(2) on the ground that the requirement of paying one month’s wages had not been fulfilled. The Court therefore allowed the appeal, set aside the order of the Labour Court, and directed that the application under section 33(2)(b) be decided on its merits. The Court made no order as to costs and recorded that the appeal was allowed.