D. Seeralan vs Management of Facit Asia Lid. and Another

Nainar Sundaram, J.—The appellant was entertained into the services of the first respondent on January 21, 1974 and he was put in charge

of packing and forwarding the products of the first respondent. It is stated that his services were upgraded as Supervisor in 1976. But the fact has

emerged - and that has found acceptance at the hands of the Additional Labour Court, Madras, hereinafter referred to as the Labour Court, which

adjudicated the industrial dispute between the appellant and the first responded and the learned single judge who dealt with the writ petition direct

against the award of the Labour Court - that the appellant was a workman within the meaning of the Industrial Disputes Act, 1947, hereinafter

referred to as the Act. On July 29, 1977 the appellant was visited with a letter of termination from service. The body of the communication ran as

follows.

As per clause 4 of your letter of appointment dated July 21, 1974 your services are hereby terminated with effect from close of work on July 29,

1977. However, you will be paid salary upto July 31, 1977. We attach hereto a cheque for Rs. 896.85 being one month'' salary in lieu of notice.

You may collect other dues, if any, in due course from the Accounts Department, after surrendering the Company''s property in your possession to

the Supply Officer.

In reply to the appellant''s letter dated August 4, 1977, wherein he complained that no reasons have been assigned for termination from service, the

first respondent on August 9, 1977 wrote as follows :-

Reference is made to your letter of August 4, 1977. As it was considered that it would not be in the best interests of the Company to retain your

services as Supervisor, your services, were terminated in terms of Clause 4 of the letter of appointment given to you. Since the termination was in

exercise of a contractual right, we are advised that no enquiry was necessary. The reasons for the termination of your services will be given at the

proper time and before the proper forum should the necessity arise. In the circumstances, it is not possible to comply with your request to reinstate

you in service"".

The appellant raised an industrial dispute over his non-employment and the industrial dispute was the subject matter of adjudication by the Labour

Court in I.D. No. 11 of 1978. Two questions arose for determination before the Labour Court, which were as follows :-

Whether the petitioner was a ''workman'' within the meaning of Section 2(s) of the Industrial Disputes Act, 1947 ?

Whether the termination of services of the petitioner for alleged loss of confidence was not bona fide and whether it was only a cloak for dismissal

for misconduct of theft ?

The Labour Court answered point No. 1 holding that the appellant was doing only clerical and manual work and therefore he was a workman

within the meaning of the Industrial Disputes Act, 1947. On point No. 2 the Labour Court opined that the termination of the services of the

appellant was the result of loss of confidence on the part of the first respondent and that it is not a cloak for dismissal for misconduct of theft. As a

result, the Labour Court Passed an award dismissing the reference holding that the non-employment of the appellant was justified. The appellant

preferred W.P. No. 3513 of 1979 to this Court, challenging the award of the Labour Court. The learned single, Judge who heard and disposed of

that writ petition found no warrant for interference and as a result, the writ petition was dismissed. That is how the appellant is now before us by

way of this writ appeal directed against the order of the learned single judge.

Mr. M. G. R. Prasad, learned counsel for the appellant, would submit that though the order of termination of services of the appellant by the first

respondent was apparently innocuous, yet it was nothing short of a punitive action and this was made clear by the elaborate stand expressed by the

first respondent both before the Labour Court and before the learned single Judge. That the first respondent justified the termination of services of

the appellant on the ground that the appellant was responsible for the unauthorised removal and disposal of the products of the first respondent is

quite clear, when we advert to the stand expressed by the first respondent before the Labour Court as well as in the writ petition. Paragraphs 5 to

7 of the counter-statement of the first respondent before the Labour Court are relevant and they run as follows :-

The Management is engaged in the manufacture of calculators, adding machines and has recently commenced manufacture of typewriters. It has

distributors in several cities in India and it was found on complaints by the dealers that spare parts components manufactured by this management

were on sale in the various cities through unauthorised persons. This led to several complaints from the dealers and they informed the management

that they were the proper authorities dealing with the sale of products manufactured by the respondent management and they complained that

though there was short supply to them, strangely unauthorised persons were selling them at lower rates. This led to investigation as to how the

goods and components manufactured by this respondent management were being sold by unauthorised persons in the various cities in India and as

to how they were procured. The management strongly suspected that certain items. Parts and components manufactured by it were stealthily being

removed from its premises and passed on to be disposed of by unauthorised persons.

In an attempt to find out who the suspects or culprits were, this respondent management engaged the services of private detectives and security

agents called Messrs. Security and Detective Bureau Ltd., Who, after conducting a detailed investigation, submitted its confidential report to the

management. This investigation conducted by the said S.D.B. revealed that the petitioner was one of the suspects and reported to the management

that it was. Mr. Seeralan who was responsible for the shortages. The respondent craves leave to refer to the said report (the respondent prays that

the report be treated as a confidential document u/s 21 of the Industrial Disputes Act) at the hearing of the dispute.

Taking into account the report of the S.D.B. the management was compelled to exercise its powers given to it on the basis of the contract of

service entered into by it with the petitioner and terminated the services of the petitioner by its order dated July 29, 1977 particularly in view of the

fact that the respondent could not any longer repose confidence in Mr. Seeralan"".

Equally so, on this aspect paragraphs 13 to 16 of the counter affidavit on behalf of the first respondent in the writ petition are relevant and their

extraction is as follows :-

The allegation in para 9 are denied. The management was engaged in the manufacture of calculators, adding machines and had in 1976

launched in the manufacture of typewriters. It has distributors in several cities in India and it was found on complaints by the dealers that spare

parts components manufactured by this management were on sale in the various cities through unauthorised persons. The complaints of the dealers

were that when they were the only proper authorities dealing with the sale of products manufactured by the respondent management and that

though there was short supply to them, strangely, unauthorised persons were selling them at lower rates. This led to investigation as to how the

goods and components manufactured by this respondent management were being sold by unauthorised persons in the various cities in India and as

to how they were procured. The management strongly suspected that certain items, parts and components manufactured by it were stealthily being

removed from its premises and passed on to be disposed by unauthorised persons.

In an attempt to find out who the suspects or culprits were, this respondent management engaged the services of Messrs. Security and

Detective Bureau Ltd., Who have the expertise to conduct such investigation. The Expert Agency, after conducting a detained investigation,

submitted its confidential report to the management. This investigation conducted by the said S.D.B. revealed that the petitioner was one of the

suspects and it reported to the management that it was Mr. Seeralan, among others, who was responsible for the unauthorised removal and

disposal of its products. The firm called Security and Detective Bureau Ltd. is a reputed concern on whose Board of Directors are several eminent

persons former highly placed officials of the Tamilnadu Police, C.B.I. and such like (Vide 34 LM 35).

Taking into account the report of the S.D.B. the management was compelled to exercise its powers given to it on the basis of the contract of

service entered into by it with the petitioner and terminated the services of the petitioner by order dated July 29, 1977 particularly in view of the

fact that the respondent could not any longer repose confidence in Mr. Seeralan.

It is submitted that the contents of the report were placed before the petitioner in the Labour court and that the petitioner had thoroughly

examined the same. It is submitted that the petitioner did not dispute that theft of management''s property/products was being carried on. He also

did not dispute the bona fide of the management, nor did he dispute the fact that private detective agency had gone into the matter and submitted

their report. The services of Lingam, Munuswami and Kothandarjan who were also named as suspects by the private detective agency were

transferred from the Store Sections to other sections whether their services were utilised and where there was almost no possibility of their coming

into contact or having chances of removing the articles which were being stolen. In the case of the petitioner, he was occupying such a position and

did not permit his being transferred to any other department. In view of the report from the private detective agency the management felt that it had

ceased to repose any confidence in the petitioner any more and that it would not be in its interest to retain him in service"".

Thus, here we find a case where the first respondent acted on the basis that the appellant amongst others was responsible for the unauthorised

removal and disposal of the products of the first respondent, and he was responsible for the shortages. The stand of the first respondent as

expressed before the Labour Court and in the writ petition before the learned single Judge was unambiguous. What the first respondent did, though

ex-facie not stated to be an order of termination of services of the appellant founded on misconduct, was in fact, a clear case of action by way of

punishment, since the charge or imputation of unauthorised removal and disposal of the products of the first respondent was the foundation for

action against the appellant. If such a charge or imputation against the appellant was the basis or the condition for the termination of the services of

the appellant, certainly the action taken by the first respondent would tantamount to a punitive one, even though the verbalism of the order may not

suggest that.

Before the learned single Judge, the first respondent did not pursue the line of defence taken before the Labour Court that the appellant was not

a workman, and hence that question stands concluded. If the appellant was a workman, the Standing Orders having statutory force alone should

given, and no term of appointment could prevail over the Standing Order. This position is not being disputed before us. With regard to the powers

of the first respondent to take punitive action, there are Standing Orders - Clause No. 31, which governs such actions, and admittedly that was not

adhered to. The only justification put forth for the action taken by the first respondent against the appellant was loss of confidence, which

allegation, we find could only be in the punitive sphere. The Standing Orders as such do not specifically contemplate taking of any action on the

ground of loss of confidence. The only Standing order which could have relevance in this context is clause 26 and it speaks about termination of

services on reasonable cause. It is not the case of the first respondent that the action taken by it against the appellant was under clause 26 of the

Standing Orders. Assuming that clause 26 of the Standing Orders could be invoked, we find that it contemplates termination of services of any

permanent workman on reasonable cause by one month''s notice in writing or by payment of one month''s wages in lieu thereof. It further says that

the reasons for the termination of the services shall be recorded in writing and shall be communicated to the workman at the time of discharge.

Admittedly, these things did not take place in the instant case. Here the action taken by the first respondent against the appellant cannot fit into this

clause 26 of the Standing Orders. This obliges us to hold that punitive action has been resorted to by the first respondent against the appellant

without adhering to the relevant Standing Order, namely, Clause 31 for taking disciplinary action for misconduct and hence on this ground the

action taken by the first respondent will have to be frowned upon.

The learned single Judge while repelling the contention put forth on behalf of the appellant that the action taken against him by the first

respondent was only punitive in nature, has guided himself by thinking that the loss of confidence is a good ground for taking the action, as the first

respondent did, and since the first respondent was taking a stand that the appellant was not a workman, the Standing Orders could not apply. The

learned single Judge omitted to take note of the implications of the fact that the first respondent did not pursue its defence that the appellant was

not a workman, the implications being the Standing Orders applied without being abrogated and overridden by any term of appointment. Once it is

found that the basis for the termination of services of the appellant by the first respondent was the allegation or charge or imputation that the

appellant was responsible for the unauthorised removal and disposal of the products of the first respondent, the action could come only within the

purview of punitive one and in the absence of adherence to the Standing Orders in this behalf, that action cannot be sustained and must be set

aside. We are not able to subscribe our support to the views of the learned single Judge, which run contrary to our thinking.

Then the question is : Should we order reinstatement of the appellant into the services of the first respondent ? The impressions gathered by the first

respondent with regard to the discharge of the functions of the appellant, while he was in service, could not be stated to be a bona fide. That

impression appears to be a bona fide one. Here is a case where the first respondent seemed to have lost the confidence in the appellant''s services

to it and his honesty in the discharge of his duties. It would perpetuate the ruptured feeling between the parties, if we should order reinstatement.

There are other features which also dissuade us from ordering the normal relief of reinstatement. The appellant was stated to be of the age of 45

years at the time of termination of his services. As per the service conditions under the first respondent, he would have continued in service for

thirteen years more, the age of superannuation being 58 years. That would take us to 1990. We are now towards the end of 1989. Viewed from

this angle also, it would not be worthwhile to order reinstatement of the appellant. There is no consensus with regard to the emoluments last drawn

and would have been drawn in future by the appellant. On the side of the appellant, it is stated that he was earning not less than Rs. 1700/- per

month. In contrast, on behalf of the first respondent, it is stated that his emoluments would not have exceeded about Rs. 900/- per month. Taking

into consideration that if he has been left undisturbed, the appellant would have thirteen years more of service until he got superannuated in the

usual course and striking a via media between the two extremes, suggested by the parties with regard to emoluments and further taking note of

uncertainties and unforeseen contingencies we fix his average emoluments at Rs. 1000/- per month for this period of thirteen years. If so done, the

total emoluments for thirteen years would come to Rs. 1,56,000/-. There are also other benefits like gratuity, provident fund and bonus. Instead of

working out the figures on a hyper-technical basis, we can safely fix the benefits under these heads at Rs. 29,000/- in all. So worked out, the total

monetary benefits for the rest of the services of the applicant can be arrived at Rs. 1,85,000/-. In lieu of reinstatement, we are inclined to award

this amount as compensation to the appellant.

Accordingly, we allow this writ appeal, set aside the order of the learned single Judge in W.P. No. 3513 of 1979 (supra); and allow that writ

petition by quashing the order of the Labour Court, Madras in I.D. No. 11 of 1978, holding that the termination of services of the appellant by the

first respondent for alleged loss of confidence amounted to punitive action and since the action taken was not in conformity with the relevant clause

in the Standing Orders, it has to be set aside. We further hold and direct that the appellant in lieu of reinstatement should get only compensation at

Rs. 1,85,000/-, as indicated above from the first respondent. The first respondent is directed to pay the said amount of compensation to the

appellant within a period of three months from today. We further direct that the amount of compensation shall be spread over the period from

1977 to 1990; 1977 being the year of termination of services of the appellant and 1990 being the presumed year of retirement of the appellant on

superannuation. Since the compensation is being paid in total lump sum, we have directed the spread over. If the spread over amount in a

particular year is not taxable, no income tax shall be deducted from the amount payable for the year. We make no order as to costs in this writ

appeal.