Management of Murgugan Mills Ltd vs Industrial Tribunal Madras And Anotmr

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

Court: supreme-court

Case Number: Civil Appeal No. 1036 of 1963

Decision Date: 11 November, 1964

Coram: K.N. Wanchoo, P.B. Gajendragadkar, M. Hidayatullah

In this case the Supreme Court recorded that the matter concerned a dispute between the management of Murgugan Mills Limited and its workmen that was still pending when the services of the respondent, who was employed by the mill, were terminated without any stated reason. The respondent subsequently lodged a petition before the Industrial Tribunal of Madras invoking section 33‑A of the Industrial Disputes Act, 1947, on the ground that the termination had been carried out without the prior approval of the Tribunal as mandated by the proviso to section 33(2)(b). The management, appearing as the appellant, defended the termination by asserting that clause 17(a) of the company’s Standing Orders authorized termination by giving fourteen days’ notice, that the respondent’s alleged deliberate slowing of work did not amount to misconduct, and consequently that the provisions of section 33(2)(b) together with its proviso were inapplicable. The Tribunal, after examining these submissions, concluded that because the termination was effected under clause 17(a) of the Standing Orders, the appropriate statutory provision was section 33(2)(a). Nevertheless, the Tribunal held that the proviso attached to section 33(2)(b) also extended to section 33(2)(a), and therefore, since the required approval of the Tribunal had not been obtained, the petition filed under section 33‑A was maintainable. On the merits, the Tribunal assessed the evidence presented, found that the allegation that the respondent had intentionally reduced his work speed was not substantiated, and consequently ordered that the respondent be reinstated to his former position. The appellant then approached the Madras High Court by filing a writ petition. The High Court ruled that the proviso was limited to clause (b) and did not apply to clause (a); it further held that the action taken against the respondent amounted to a punishment, thereby falling within clause (b) to which the proviso did apply, and consequently affirmed that the Tribunal possessed jurisdiction to entertain the application and to pass a substantive order.

Upon appeal to the Supreme Court, the respondent contended that because the Tribunal had classified the case under section 33(2)(a), the Tribunal lacked jurisdiction since the proviso was not applicable to that subsection. The Supreme Court observed that although the Tribunal had erred in its view that the proviso extended to section 33(2)(a), there was no sufficient ground to set aside the Tribunal’s order. The Court noted that the respondent’s argument rested on a claimed violation of clause (b) and its proviso, and that this argument, if accepted, would have conferred jurisdiction upon the Tribunal even in the absence of a domestic enquiry to consider the evidence and determine that the respondent was not guilty of dereliction of duty, thereby justifying an order of reinstatement.

The Court examined the request that the Tribunal should evaluate the evidence, determine that the respondent was not guilty of any dereliction of duty, and consequently order his reinstatement, as indicated in the record at paragraphs 153 A‑C. The Court observed that the form employed for terminating the respondent’s services was not determinative; rather, the Tribunal possessed authority to investigate the reasons that led to the termination, relying on precedents such as Chartered Bank v. Chartered Bank Employees Union, [1960] 3 S.C.R. 441 and Management of U. B. Dutt & Co. v. Workmen of U. B. Dutt & Co., [1962] Supp. 2 S.C.R. 822. The matter came before the Supreme Court on a civil appeal, identified as Civil Appeal No. 1036 of 1963, filed by special leave against the judgment and order dated 8 November 1960 of the Madras High Court in Writ Appeal No. 146 of 1960. The appellant, a textile mill, was represented by counsel, while the respondent, designated as No. 2, was also represented. Justice Wanchoo delivered the judgment. The factual background revealed that the appellant, a textile manufacturing concern, had employed Rangarathinam Pillai as an accountant for more than thirteen years. On 11 September 1958, the appellant issued a notice under clause 17(a) of its Standing Orders terminating the respondent’s employment effective 24 September 1958, without providing any reasons in the termination order. The respondent objected to his dismissal, asserting that he possessed a spotless service record and had not engaged in any conduct justifying dismissal. He further claimed that no show‑cause notice had been issued, no explanation solicited, and no enquiry conducted before the termination order was issued. Additionally, he alleged victimisation on account of his trade‑union activities, noting his membership in the Executive of the Coimbatore District Textile Mill Staff Union. When his protest failed to achieve relief, the respondent filed an application under Section 33‑A of the Industrial Disputes Act, No. 14 of 1947, contending that an industrial dispute was then pending between the appellant and its workmen. His principal argument was that the termination order had been issued without the approval of the industrial tribunal, contrary to Section 33(2)(b) of the Act, which mandates that during the pendency of any proceeding concerning an industrial dispute, an employer may dismiss or otherwise punish a workman for misconduct unrelated to the dispute only after the workman has received wages for one month and the employer has obtained prior approval from the appropriate authority. The appellant, before the Tribunal, maintained that the respondent’s services were terminated pursuant to clause (a) of the Standing Orders, which permits management to terminate a worker’s services by giving fourteen days’ notice. The appellant further asserted that the termination was not predicated on any misconduct nor was it intended as a punitive measure, thereby arguing that Section 33(2)(b) was inapplicable and that tribunal approval was unnecessary. The appellant also stated that the reason for termination was the respondent’s alleged deliberate slowing of work in the months preceding his dismissal, a conduct allegedly linked to his earlier request for a pay increase that had been refused. Moreover, the appellant noted that the balance‑sheet for the year 1957 had not been prepared until August 1958, and that upon discovering the respondent’s purported deliberate slowdown, the appellant terminated his services in accordance with the Standing Orders. The Tribunal, having considered these submissions, took the view that because the termination was effected under clause 17(a) of the Standing Orders, the matter was not …

The appellant argued that the provisions contained in clause 17(a) of the Standing Orders empowered management to terminate a worker’s services by giving fourteen days’ notice. It contended that the termination of the respondent’s services was not based on any misconduct and was not intended as a punishment; consequently, subsection 33(2)(b) of the Industrial Disputes Act did not apply and it was therefore unnecessary to seek the approval of the industrial tribunal. The appellant further asserted that the respondent had deliberately reduced his work pace for several months preceding the date of termination. According to the appellant, this deliberate slowness resulted from the respondent’s earlier request for a pay increase, which the appellant had refused. In addition, the appellant indicated that the balance‑sheet for the financial year 1957 had not been prepared until August 1958, and that when the appellant discovered the respondent’s alleged deliberate slowness, the appellant terminated his services in accordance with the Standing Orders.

The tribunal observed that the termination was effected under clause 17(a) of the Standing Orders and, therefore, did not fall within the situation described in subsection 33(2)(b) of the Act, which deals with discharge or punishment for misconduct unconnected with the dispute. However, the tribunal held that the case was covered by subsection 33(2)(a). The tribunal further held that the proviso attached to subsection 33(2) was applicable not only to cases falling under clause (b) but also to those falling under clause (a). Because the appellant had not complied with the requirements of the proviso, the tribunal concluded that the termination of the respondent’s services contravened the statutory provision and that the application filed under section 33‑A of the Act was maintainable. Since evidence had been adduced by both parties on the merits of the termination, the tribunal examined the substantive issues. It noted that even under the Standing Orders the employer could dismiss a worker only for a proper reason, and that the particular standing order required reasons for termination to be recorded and communicated to the workman upon his request. Accordingly, the tribunal examined whether the appellant possessed a proper reason for terminating the respondent.

The tribunal reached the conclusion that the appellant’s explanation—that the respondent had deliberately slowed his work because his request for a pay rise had been refused—was not substantiated. Concerning the delay in preparing the balance‑sheet for the year 1957, the tribunal accepted the respondent’s account that the postponement was caused by the appellant’s desire to defer publication of the balance‑sheet until the freshly issued shares had been taken up by the public. The appellant feared that disclosure of the loss for the year 1957 before the share subscription was completed might provoke an adverse response from the public. Consequently, the tribunal held that the delay in finalising the accounts could not be attributed to any insolvency or dereliction of duty on the part of the respondent.

The tribunal held that the delay in finalising the accounts could not be attributed to any lack of solvency or to any dereliction of duty on the part of the respondent. Consequently, the tribunal permitted the application filed under section 33‑A and ordered that the respondent be reinstated in his former position and be paid the wages that had accrued during the period of his wrongful termination. Following this order, the appellant instituted a writ petition in the High Court, which was heard by a learned Single Judge. That Judge did not resolve the precise issue of whether the proviso to section 33(2) applied solely to clause (b) and not to clause (a). He observed that the action taken against the respondent was framed as a punishment for alleged negligence and therefore fell clearly within the ambit of clause (b) of section 33(2), a provision to which the proviso unquestionably applied. On that basis, he concluded that the industrial tribunal possessed jurisdiction to entertain the application under section 33‑A in the present circumstances. The Judge further held that, because the tribunal had examined the merits of the case and had found that the allegation of dereliction of duty against the respondent was unsupported, the writ petition could not succeed. The appellant appealed this decision to a Division Bench, which affirmed the Single Judge’s order. An application for leave to appeal to this Court was subsequently denied, but the appellant later obtained special leave from this Court, bringing the matter before the Supreme Court for consideration.

The Court then examined the broader question of an employer’s right to terminate a workman’s services under a standing order, specifically clause 17(a) in the present case, which effectively permits an employer to “hire and fire” at will and thereby undermines the security of service that industrial adjudication seeks to protect. Earlier decisions of the Labour Appellate Tribunal, such as Buchkingham & Carnatic Co. Ltd. v. Workers of the Company (1952) L.A.C. 490, Chartered Bank v. Chartered Bank Employees Union [1960] 3 S.C.R. 441, and Management of U. B. Dutt & Co. v. Workmen of U. B. Dutt & Co. (1962) Supp. 2 S.C.R. 822, were cited to illustrate that the Tribunal had endorsed the principle that even in circumstances similar to the present case, the employer must act in good faith. The Court noted that if a termination is a colourable exercise of power, or is motivated by victimisation or an unfair labour practice, the industrial tribunal has authority to intervene and set aside the termination. Moreover, the Court emphasized that the formal wording of an order terminating employment is not decisive; the tribunal may look behind the order to ascertain the true reasons that prompted it and decide independently whether the termination was a genuine exercise of authority or was, instead, a façade for improper motives such as victimisation or an unfair labour practice.

The tribunal was entitled to examine the reasons behind the termination of the respondent’s services that had been effected under clause 17 (a) of the Standing Orders. The form of the termination order alone was not decisive, and the tribunal correctly investigated the underlying motives because the Standing Orders also permit an employee to demand an explanation for such termination. The appellant asserted before the tribunal that the respondent had been dismissed because he had deliberately adopted a go‑slow technique and had been negligent in performing his duties. Accordingly, the appellant claimed that the dismissal was based on alleged dereliction of duty and go‑slow, which it characterized as misconduct deserving punishment. The Court observed that treating the dismissal as punishment for misconduct and ordering termination under clause 17 (a) in those circumstances amounted to a colourable use of the power conferred by the Standing Orders. Consequently, the tribunal was justified in looking beyond the face of the order to decide whether the termination could be legally sustained. Evidence was produced before the tribunal to support the appellant’s allegation that the respondent had indeed committed dereliction of duty and had engaged in a go‑slow. After evaluating that evidence, the tribunal concluded that the appellant had failed to prove either dereliction of duty or go‑slow on the part of the respondent. In view of that finding, the tribunal classified the case under clause (b) of Section 33 (2) of the Industrial Disputes Act because the respondent’s services were withdrawn during the pendency of a dispute by imposing a discharge for alleged misconduct. Since the dismissal was effected without complying with the proviso attached to clause (b), the tribunal correctly set aside the termination. The appellant then argued that the tribunal had mistakenly held that the proviso also applied to clause (a) of Section 33 (2) and therefore erred in entertaining an application under Section 33‑A and ordering reinstatement. The Court noted that a plain reading of Section 33 (2) shows that the proviso is limited to clause (b) and does not extend to clause (a), so the tribunal’s view on that point was erroneous. However, the Court agreed with the High Court that this error did not affect the outcome because the respondent’s contention that clause (b) of Section 33 (2) had been violated was the basis of the tribunal’s jurisdiction. The appellant had satisfied that jurisdiction by producing evidence, which the tribunal examined and found insufficient to establish the appellant’s case. The High Court had correctly pointed out that the matter fell squarely within clause (b), to which the proviso undeniably applies, and that non‑compliance with the proviso rendered the dismissal unlawful. Because the proviso was not observed, the tribunal was authorized to entertain the application under Section 33‑A, to examine the merits of the misconduct charge, and to determine that the charge was not proved. Accordingly, the order issued by the tribunal, and subsequently affirmed by the High Court, remained substantially correct notwithstanding the tribunal’s mistaken view of the proviso’s scope.

The Court observed that the allegation that the respondent was guilty of dereliction of duty and of go‑slow conduct had not been proven on the basis of the material placed before the tribunal. In view of this finding, the Court held that, although the tribunal had erred in construing the proviso to section 33 (2) as applicable to clause (a) of that provision, there was no justification for the Court to disturb the tribunal’s order. The Court further noted that the High Court had correctly pointed out that the present matter fell squarely within the ambit of section 33 (2) (b), a clause to which the proviso unquestionably applies. Because the proviso had not been complied with, the application made under section 33‑A was legally permissible for the tribunal to consider, and the tribunal indeed entertained that application. The tribunal then examined the substantive merits of the charge and concluded that the charge could not be substantiated. Consequently, the Court affirmed that, despite the tribunal’s mistake of law in extending the proviso to clause (a), the order issued by the tribunal and subsequently upheld by the High Court was substantively correct. Accordingly, the appeal was dismissed, and the Court ordered that the costs of the proceedings be borne by the appellant. The order of dismissal was therefore affirmed, and the case was closed.