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Judgment
R. Banumathi, J.—Being aggrieved by allowing the Writ Petition (10.1.2011) quashing the Award in I.D. No. 385 of 2001 dated
13.8.2011 and directing reinstatement of 1st Respondent with 25% back wages, Appellant-Insurance Company has filed this appeal. Brief facts:
By the order dated 24.3.1984, 1st Respondent was appointed as Inspector on Probation w.e.f. 31.12.1983. Services of 1st Respondent as
Inspector Grade I was confirmed by the Appellant by the order dated 12.1.1985 w.e.f. 01.1.1985. Appointment of 1st Respondent was
governed by Development Staff Scheme, 1976 and also by General Insurance (Conduct, Discipline and Appeal) Rules, 1975 which deals with
service conditions of the employee working in GIC of India and its subsidiaries. According to Development Staff Scheme, 1st Respondent is
supposed to complete the target set forth for him for each year of performance and also within the permissible cost as mentioned in the Scheme. In
1991, due to his personal problems in his marital life, 1st Respondent was on leave. 1st Respondent was issued charge sheet on 01.4.1991 for his
unauthorised absence and that his business performance has been very poor, since 1985. Enquiry was conducted and Enquiry Officer gave his
findings on 16.12.1991. Based on the findings of the Enquiry Officer, 1st Respondent was issued warning to mend himself and progress in the
business. On failure on the part of 1st Respondent to achieve expected premiums for the years 1991-92 and 1992-93, 1st Respondent was issued
with notice of termination dated 10.5.1993 on the ground that he had failed to conform to the stipulated cost limit and that his services are liable for
termination. He was given 30 days notice for preparing appeal against the order. 1st Respondent has preferred appeal on 03.6.1993 to the Senior
Divisional Manager explaining the efforts taken by him to ensure business from various customers and assuring to conform to the stipulated cost
limit. 1st Respondent also preferred appeal on 09.6.1993 to the Appeals Committee explaining his stand. By the order dated 30.7.1993, the
decision taken in the order dated 10.5.1993 was confirmed by the Appeals Committee that 1st Respondent was terminated from the date of
receipt of the order i.e. 17.8.1993.
Challenging the order of termination, 1st Respondent raised Industrial Dispute in I.D. no. 12 of 1995, renumbered as I.D. No. 385 of 2001
contending that no enquiry was conducted in respect of termination order dated 10.5.1993 and termination of services of 1st Respondent on
17.8.1993 is in violation of principles of natural justice and unjustified.
Appellant Insurance Company resisted the Petition contending that 1st Respondent was governed by Development Staff Scheme, 1976 and
also by the General Insurance (Conduct, Discipline and Appeal) Rules, 1975 which deals with service conditions of the employees and that 1st
Respondent failed to achieve the expected premiums for the relevant years and failed to conform to the stipulated cost limit during 1991-92 and
1992-93. Non-performance to achieve the target and expected cost limit was admitted by the 1st Respondent himself. Appellant further averred
that the service conditions empowers the Management to terminate the service by one month notice and therefore, the decision of the Management
cannot be challenged by the 1st Respondent.
Before the Tribunal, on the side of 1st Respondent Exs. W1 to W12 were marked. On the side of Appellant, Exs. M1 to M4 were marked. No
oral evidence was adduced on both sides.
Referring to Clause 9, Schedule-A (duties and functions of 1st Respondent) attached to the appointment order, Tribunal held that 1st
Respondent has been given appointment in the Appellant Insurance Company wherein 1st Respondent agreed to conform to the stipulated cost
limit. Tribunal further held that inspite of warning, 1st Respondent has not shown progress in developing the insurance business and that 1st
Respondent was terminated from service in accordance with the terms and conditions mentioned in the appointment order. Insofar as contention of
1st Respondent that no enquiry was conducted, Tribunal held that enquiry was conducted and 1st Respondent was given sufficient opportunity to
put forth his defence and he had also taken part in the enquiry along with defence Assistant and that the Enquiry Officer found that the charges
levelled against the 1st Respondent had been proved and that there is no violation of principles of natural justice. Tribunal passed the award
holding that action of the Management in terminating the services of the 1st Respondent is justified and does not suffer from any illegality.
Challenging the award, 1st Respondent filed the Writ Petition in W.P. No. 6849 of 2002. Learned single Judge held that the order of
termination is not in consonance with the Scheme as nothing has been brought on record to show that reduction of emoluments for three
consecutive years, rather the order of termination is on the ground that 1st Respondent failed to achieve the target fixed on him for the particular
year. Writ Court further held that order of termination was passed by way of punishment without following the principles of natural justice or
conducting any enquiry into the allegations made against the 1st Respondent and that termination of services of confirmed employee without
holding enquiry is violative of Article 14 of Constitution of India. Writ Court allowed the Writ Petition and directed the Appellant Insurance
Company to reinstate the 1st Respondent with 25% back wages.
Challenging the order in W.P. No. 6849 of 2002, Mr. P. Sukumar, learned counsel for Appellant contended that learned single Judge ought to
have seen that consequent upon the 1st Respondent not achieving the target in acquiring premium as required under the Insurance Scheme, the
order of termination is justified and does not warrant further domestic enquiry, since the mandatory provision of collecting the premium has not
been complied with. Contention of Appellant is that consequent upon 1st Respondent''s failure to conform to the stipulated cost limit and only after
affording opportunity to the 1st Respondent, his services was terminated and therefore, giving one more opportunity by way of domestic enquiry
was not required. Learned counsel has drawn our attention to the report of Enquiry Officer dated 16.12.1991 and contended that in the said
enquiry, second charge was ""poor business performance of 1st Respondent, since 1985"" and that single Judge ought to have seen that in the earlier
domestic enquiry, 1st Respondent was given warning after his guilt has been proved for his absence and not achieving the target and while so, there
is no question of violation of principles of natural justice. Learned counsel would contend that the Tribunal had taken note of all the above facts and
arrived at the conclusion that the order of termination is in continuation of the earlier domestic enquiry and the Writ Court was not right in quashing
the award and ordering reinstatement with 25% back wages.
Mr. V. Ajay Khose, learned counsel for 1st Respondent submitted that the enquiry said to have been conducted by the Management was not
relating to the allegations in the termination order dated 10.5.1993 and that the said enquiry was relating to the charge memo dated 1.4.1991
regarding the alleged unauthorised absence which has got nothing to do with the allegations made in the termination order. Learned counsel would
further contend that the Management has not produced any enquiry report pertaining to the allegations made in the termination order and without
conducting enquiry, order of termination is in violation of principles of natural justice and opposed to the decision of the Constitution Bench of the
Hon''ble Supreme Court reported in 1991 (1) LLJ 395 [Delhi Transport Corporation v. D.T.C. Mazdoor Congress and others]. Learned counsel
also contended that Management cannot terminate the service of the 1st Respondent without complying the provisions of Section 25F of Industrial
Disputes Act as held by the Hon''ble Supreme Court in 1990 (2) LLJ 70 [Punjab Land Development and Reclamation Corporation Limited v.
Presiding Officer, Labour Court, Chandigarh] and 1993 (2) LLJ 696 [D.K. Yadav v. J.M.A. Industries Limited]. It was submitted that learned
single Judge has rightly quashed the award and directed reinstatement with 25% back wages.
Services of 1st Respondent was governed by Development Staff Scheme, 1976 and also by the General Insurance (Conduct, Discipline and
Appeal) Rules, 1975 which deals with service conditions of the employees working in G.I.C. of India and its subsidiaries. Appointment order of
1st Respondent clearly stipulates that employment is related to the premium collection made by him. Appointment order (24.3.1984) clearly
indicates that 1st Respondent''s duties and functions will be as per Schedule A and B, annexed to the letter of appointment on probation and
functions as may be assigned to him from time to time. Clause (l), Schedule A of service condition, annexed to the appointment order specifies that
employee must yield a general premium income of prescribed value which may be fixed by the Management from year to year"". Clause (l),
Schedule A of service condition reads as under:-
you are required to create a permanent organisation of several active agents who shall be recruited by you from time-to-time and the company
expects this organisation to yield a general premium income of atleast Rs. 75,000/1,00,000/1,25,000/- in the first year and such premium income
for the subsequent years as may be fixed for your unit by the Management from year to year. If you fail to complete the premium expected from
you in a particular year, your services will be liable to be terminated at one month''s notice or salary in lieu thereof, unless the company finds that
there are any extenuating circumstances. Management''s decision in this respect will be final and binding on you.
Apart from the above service condition, Clause 11 of the Amended Scheme for Development Staff further stipulates the following:-
Cost Control:- Every person of the Development Staff shall, after his categorisation in accordance with the provisions of this Scheme, work
with such cost as to maintain his cost ratio within the limits stipulated in sub-clause (b) of clause (17) of paragraph 3.
(2) The emoluments including basis pay of a person of the Development Staff who is operating on a cost ratio which exceeds the stipulated limits,
shall be so reduced as to keep his cost ratio within the limits stipulated in sub-clause (b) of clause (17) of paragraph 3.
(3) Where the emoluments of a person are reduced under sub-paragraph (2) for three consecutive years, the services of such person shall be liable
to be terminated.
(4) Where the emoluments, including basic pay of a person, are reduced under sub-paragraph (2) or his services are terminated under sub-
paragraph (3), such reduction or termination of service shall not be deemed to be a penalty.
Charge against the 1st Respondent is that he failed to achieve the specified target as well as failed to control the cost inspite of several
reminders and warnings given to the 1st Respondent. Services of 1st Respondent was terminated by notice for termination dated 10.5.1993 on the
ground that 1st Respondent failed to achieve the expected premiums for the relevant years and failure to conform to the stipulated cost. Notice for
termination (10.5.1993) reads as under:-
As you have failed to conform to the stipulated cost limit during the last opportunity of one year provided to you viz., 1991-92 besides for 1992-
93 year, your services are liable for termination. Accordingly, we hereby give you notice of 30 days from the date of serving of this letter
whereafter your services shall stand terminated.
We would, however, invite your attention to the sub para (vi) of para 11 of the Development Staff Amendment Scheme, wherein you have been
given an opportunity to appeal to the Appeals Committee against the termination order within the period of 30 days from the date of serving the
notice of termination. If the Company does not receive any appeal from your end, your services shall stand terminated, after 30 days from the date
of serving this notice which please note.
Contention of Appellant is that consequent upon his failure to conform to the stipulated cost during last one year of opportunity provided to the
1st Respondent for 1991-92 and also not achieving the stipulated cost from 1992-93, his services was terminated and therefore, question of giving
one more opportunity by way of domestic enquiry is not required, since the 1st Respondent was given warning and to comply his target by
improving his performance.
Case of Management is that on account of the unauthorised absence of 1st Respondent and also since his business performance has become
very poor in 1991 and two other charges were framed. In respect of charges framed in 1991, Enquiry Officer was appointed and an enquiry was
held. In the report dated 16.12.1991, referring to the evidence of Presenting Officer viz., P. Natesan, Enquiry Officer held that 1st Respondent
absented himself from duty for about 460 days from 23.11.1987 to 31.03.1991. In respect of third charge, Enquiry Officer found that 1st
Respondent''s business performance has been very poor since 1985. Referring to the final warning letter given to the 1st Respondent dated
21.6.1991, Enquiry Officer observed that ""inspite of said letter, 1st Respondent did not do any business till September 1991"". Case of
Management is that the impugned termination notice dated 10.5.1993 is continuation of the said enquiry and therefore, there is no question of
another domestic enquiry. It is the further contention that since 1st Respondent was already given a warning to achieve the target by improving his
performance and consequent upon his failure to improve the business as per the service conditions, Management had no other option except to
terminate the employment.
Notice for termination dated 10.5.1993 was issued to the 1st Respondent consequent upon his failure to conform to the stipulated cost limit
during 1991-92 and 1992-93. When it was alleged that 1st Respondent failed to conform to the stipulated cost limit during 1991-92 and 1992-
93, 1st Respondent ought to have been given a reasonable opportunity of being heard in respect thereof. Earlier, charges framed against the 1st
Respondent was that ''business performance of 1st Respondent has been poor, since 1985"". When notice for termination of services was issued in
terms of the provisions under Clause 11 of Development of Staff Amendment Scheme, opportunity ought to have been given to the 1st
Respondent.
For any misconduct alleged on the part of delinquent official, it is obligatory to inform the delinquent all the charges against him and give a
reasonable opportunity of being heard in respect thereof. According to Management, achieving the specified target and cost control is inbuilt in the
service conditions and the Scheme for Development of Staff and service conditions empower the Management to terminate the service by one
month notice and therefore, the decision of the Management cannot be challenged by the 1st Respondent. Further contention of Management is
that non-performance to achieve the target and expected cost limit are admitted by the 1st Respondent himself and in these circumstances,
procedure of issuing show cause notice and holding enquiry does not arise.
Of course, achieving specified target and maintaining cost control is inbuilt in the service conditions for Development Staff Scheme. For poor
business performance since 1985, in 1991 charges were framed against the 1st Respondent and enquiry was held. In the said enquiry, 1st
Respondent stated that due to his matrimonial problem and separation from his wife, he could not concentrate on business and explained his
difficulties and he assured of good performance in future. In the said enquiry, Enquiry Officer observed:
Charged employee assured that he will attend office regularly.
....... His integrity also seems to be good...... May be due to separation of his wife, he could not concentrate on business and also taken leave for a
longer period.
Enquiry Officer also referred to the assurance given by the 1st Respondent that he would do good business in the forthcoming years. In the earlier
enquiry, 1st Respondent only explained his difficulties in achieving the target and assured of improvement in business. Such an explanation cannot
be said to be the admission of charges justifying dispensing of domestic enquiry.
In 1965 (2) LLJ 162 (Workmen of Motipur Sugar Factory (Private) Ltd. v. Motipur Sugar Factory (Private) Ltd.), the Hon''ble Supreme
Court held as follows:-It is now well-settled that where an employer has failed to make an enquiry before dismissing or discharging a workman it is
open to him to justify the action before the tribunal by leading all relevant evidence before it. In such a case the employer would not have the
benefit which he had in cases where domestic enquiries have been held. The entire matter would be open before the tribunal which will have
jurisdiction not only to go into the limited questions open to a tribunal where domestic enquiry has been properly held See Indian Iron and Steel
Co., Ltd. and Another Vs. Their Workmen, but also to satisfy itself on the facts adduced before it by the employer whether the dismissal or
discharge was justified.
When the 1st Respondent contended that no enquiry has been held, the Management should have justified on facts that its order of dismissal
was proper. Apart from termination order and confirmation of the same, the Management has not produced any other material to show that 1st
Respondent did not maintain the cost control.
According to Appellant, service conditions clearly stipulate to achieve the expected target for the relevant years and to maintain the cost limit.
According to Appellant, when those conditions are inbuilt in the service conditions, it was not incumbent upon the Management to adduce any
further evidence before the Tribunal.
According to Appellant, in the earlier enquiry, Enquiry Officer recorded a clear finding that between 1985 1991, 1st Respondent has not
achieved the target and warning was given on 21.6.1991. In reply dated 03.6.1993 and 09.6.1993, 1st Respondent stated that because of his
personal problem and separation from his wife, he could not effectively concentrate on business. In his reply, 1st Respondent referred to the names
of various clients with whom he was in touch and assured that he would endeavour to reach the target and requested to consider his case
sympathetically. When the 1st Respondent himself admitted the charges, it has to be held that the charges against the delinquent have been proved
and that learned single Judge was not right in quashing the disciplinary proceedings and ordering reinstatement with 25% back wages.
As elaborated earlier, 1st Respondent did not achieve the target. In his reply, 1st Respondent explained the reasons and assured that he would
endeavour to reach the target. Considering the charges and other relevant circumstances, it is to be seen whether the punishment awarded is in
excess. It is fairly well settled by a catena of decisions that scope of interference in the matters of punishment is very limited.
Observing that normally punishment imposed by the disciplinary authority should not be disturbed by the High Court or a Tribunal excepting in
appropriate cases, in Director General R.P.F. and Others Vs. Ch. Sai Babu, the Hon''ble Supreme Court held as under:-
Normally, the punishment imposed by a disciplinary authority should not be disturbed by the high Court or a tribunal except in appropriate cases
that too only after reaching a conclusion that the punishment imposed is grossly or shockingly disproportionate, after examining all the relevant
factors including the nature of charges proved against, the past conduct, penalty imposed earlier, the nature of duties assigned having due regard to
their sensitiveness, exactness expected of and discipline required to be maintained, and the department/establishment in which the delinquent
person concerned works.
In (2010) 5 MLJ 514 (SC) [ADMINISTRATOR, UNION TERRITORY OF DADRA & NAGAR HAVELI V. GULABHIA M. LAD],
the Hon''ble Supreme Court held that ""while exercising power of judicial review, the High Court or a Tribunal cannot interfere with the discretion
exercised by the Disciplinary Authority and on appeal the Appellate Authority with regard to the imposition of punishment unless such discretion
suffers from illegality or material procedural irregularity or that would shock the conscience of the Court or the Tribunal"".
In Chairman cum Managing Director, Coal India Limited and Another Vs. Mukul Kumar Choudhuri and Others, the Hon''ble Supreme Court
considered the decided cases on the point of proportionality and held that award of punishment which is grossly in excess to the allegations, cannot
claim immunity and remains open for interference under limited scope of judicial review. In Paragraphs 19 and 20, the Hon''ble Supreme Court
held as follows:-
The doctrine of proportionality is, thus, well-recognised concept of judicial review in our jurisprudence. What is otherwise within the
discretionary domain and sole power of the decision-maker to quantify punishment once the charge of misconduct stands proved, such
discretionary power is exposed to judicial intervention if exercised in a manner which is out of proportion to the fault. Award of punishment which
is grossly in excess to the allegations cannot claim immunity and remains open for interference under limited scope of judicial review.
One of the tests to be applied while dealing with the question of quantum of punishment would be: would any reasonable employer have
imposed such punishment in like circumstances? Obviously, a reasonable employer is expected to take into consideration measure, magnitude and
degree of misconduct and all other relevant circumstances and exclude irrelevant matters before imposing punishment.
Considering the nature of charges and the explanation of the 1st Respondent, we are of the view that punishment of termination from service is
shockingly disproportionate. The next question falling for consideration is whether the matter should be remanded to the Disciplinary Authority for
imposing appropriate punishment.
The disciplinary proceedings were initiated as early as in 1991. The Disciplinary Authority ultimately imposed the punishment of termination
from service. Even though we have concluded that the single Judge was not correct in upsetting the entire action taken by the Disciplinary
Authority, we are of the view that there is no point in remanding the matter at this point of time for imposing punishment.
In B.C. Chaturvedi Vs. Union of India and others, , the Hon''ble Supreme Court suggested following two options in a case of this nature:-
18.. The High Court/Tribunal, while exercising the power of judicial review, cannot normally substitute its own conclusion on penalty and impose
some other penalty. If the punishment imposed by the disciplinary authority or the appellate authority shocks the conscience of the High
Court/Tribunal, it would appropriately mould the relief, either directing the disciplinary authority/appellate authority to reconsider the penalty
imposed, or to shorten the litigation, it may itself, in exceptional and rate cases, imposed appropriate punishment with cogent reasons in support
thereof.
As pointed out earlier, the punishment of termination from service imposed upon the 1st Respondent is shockingly disproportionate. Following the
ratio of the above decision and in the facts and circumstances of the case, we are of the view that the punishment of termination from service is to
be modified into one of ""stoppage of increment for a period of three years with cumulative effect"". While confirming the order of reinstatement, the
punishment is modified into one of ""stoppage of increment for a period of three years with cumulative effect"".
Back wages While quashing the award, learned single Judge directed the Appellant to reinstate the 1st Respondent with back wages of 25%.
Relief of reinstatement with back wages is not automatic and may be wholly inappropriate in a given fact situation. Even if the termination of an
employee is held to be in contravention of the prescribed procedure, award of back wages depends upon the facts and circumstances of the case.
As held by the Hon''ble Supreme Court in Rajasthan State Road Transport Corporation and Others Vs. Shyam Bihari Lal Gupta, t is for the
employee to prove that he was not gainfully employed from the date of termination. 1st Respondent was out of employment from the date of
termination dated 05.5.1993 till passing of the order in W.P. No. 6849 of 2002 (10.01.2011). Since the 1st Respondent has not adduced any
evidence to show that he was not gainfully employed during that time, he is not entitled to any back wages and resultantly, the direction of the single
Judge to the Appellant to pay 25% of back wages to the 1st Respondent is set aside. The reinstatement of the 1st Respondent shall be without any
back wages or any other monetary benefits. The interregnum period shall be taken into account only for continuity of service. In the result, the
order of reinstatement passed by the single Judge is confirmed. However, the punishment imposed upon the 1st Respondent by the Disciplinary
Authority is modified into one of ""stoppage of increment for a period of three years with cumulative effect"" and the direction of the single Judge to
pay 25% back wages to the 1st Respondent is set aside and the appeal is partly allowed. Consequently, connected M.P. is closed. No costs.