Chennai High Court
ORDER
N.V. Balasubramanian, J.
1. The subject matter of the writ petition is an order of the first
respondent, the Deputy Commissioner of Labour (Appeals), Madras, dated
March 31, 1986 passed under Section 41(2) of the Tamil Nadu Shops and
Establishments Act, 1947 (hereinafter referred to as 'the Act')
2. The case of the petitioner as seen from the affidavit filed in
support of the petition is hereunder: The petitioner joined the
services in the second respondent-company, a public limited company, in
its factory at Mettupalayam, as a Works Manager. The petitioner was
given a responsible post in commissioning the plant for the production
of wattle extract. The petitioner tendered his resignation during the
month of October, 1968, on the ground that he was not given the
necessary facilities. However, the second respondent-company persuaded
the petitioner to withdraw his resignation and consequently, on the
withdrawal of the resignation, revised terms of service by various
office orders were issued in favour of the petitioner. Subsequently,
the petitioner was also promoted as General Works Manager of the
factory. According to the petitioner, the relationship with the
Managing Director of the second respondent-company got strained and the
Managing Director started to humiliate the petitioner by various means.
In the month of November 1982, the petitioner was informed that he
should either resign from service or his services would be terminated.
The petitioner did not resign from the service. The petitioner was
directed to go to Madras, and the petitioner was also informed that
they had proposals to appoint a new General Manager at the factory.
Since the petitioner was shifted to work in the Head Office at Madras,
he handed over the charge on November 18, 1982. When he came to Madras,
he found that he was not given even a proper seat in the Head Office
and even the transport facilities were denied to him. According to the
petitioner, he was not given any assignment and no papers were
circulated to him. The Managing Director of the Company suggested to
the petitioner to go on leave for a period of three months and
accepting the suggestion of the Managing Director, the petitioner went
on leave for three months. The petitioner joined duty again and met the
Managing Director who insisted that the petitioner should resign from
the company and the petitioner was not obliging the Managing Director
and went for reporting duty. The compliant of the petitioner is that he
was not provided any chair and table and none of the Office people was
willing to speak to him. He was in effect treated like unwelcome guest
in his own office. After January 1984, the salary was not paid to him
and he went to the Managing Director who informed that the same would
be paid once a decision regarding his future was taken. On June 29,
1984, the petitioner received a registered letter terminating the
services of the petitioner on the ground that he has been staying away
from duty since January 15, 1984 without any prior permission or prior
intimation to the management. It was also stated in the letter that the
continued, long, and unauthorised absence amounted to abandonment of
service on the petitioner's own accord and the management has lost
confidence reposed in the petitioner.
2A. The petitioner filed an appeal before the first respondent, the
Deputy Commissioner of Labour (Appeals). The petitioner challenged the
order before the first respondent on the ground that there was no
communication from the second respondent that the petitioner was
staying away from service on his own and the order of termination
passed is against the provisions of Section 41(2) of the Act. The case
of the petitioner before the first respondent was that the order of
termination was punitive in character and there was no enquiry before
the order of termination was passed and further the order was stigmatic
in character. The writ petitioner also raised an objection that the
second respondent has no right to adduce fresh evidence before the
authority and the charges levelled against the petitioner were not
proved. The second respondent contended before the authority that the
termination of the petitioner was in terms of the agreement and the
termination was for a reasonable cause. According to the second
respondent, the order of termination was not punitive in character and
it is not a stigmatic order on the character of the writ petitioner.
The second respondent contended before the authority that the
termination was not for misconduct committed by the petitioner and
hence, the question of conducting a prior enquiry before the
termination of the petitioner from service did not arise at all. The
second respondent examined two witnesses on their side and they were
also cross-examined on behalf of the writ petitioner. The authority,
after considering the evidence on record, found that the petitioner was
absenting himself from duty from January 14, 1984 and there was no
sanction order for the extended leave. The authority relied upon a
decision reported in 1983 (1) LLN 387 and held that the unauthorised
absence for over continuous spell of ten days would entitle the
employer to terminate the services of the employee. The authority,
therefore, concluded that the second respondent was legally correct in
terminating the services of the petitioner by treating the case of
voluntary abanomment by the writ petitioner himself. The authority, on
the question whether there should be an enquiry prior to the
termination of the writ petitioner on the ground that there was a 'loss
of confidence', held that it was not necessary that the allegation of
'loss of confidence' should be proved by recording satisfactory
evidence in the prior enquiry conducted for that purpose. The authority
relied upon decisions in 1975-I-LLN page 159 and 1983-I-LLN page 387
and held that the there is no justification in setting aside the order
of termination for the reason that no enquiry was conducted in this
case before issuing the order of termination.
3. Mr. K. Chandru, learned counsel for the petitioner submitted that
the view of the authority that the allegation of 'loss of confidence'
need not be proved by recording evidence in an enquiry conducted prior
to the order of termination is illegal and is not sustainable in law.
Learned counsel submitted that the order of termination stating that
there was a long continuous and unauthorised absence by the petitioner
which amounted to abandonment of his service and the statement in the
order of termination that the management has lost confidence in the
petitioner clearly show that the order cast a stigma on the petitioner
and without a prior enquiry held under the provisions of the Act, the
order of termination passed which is of a stigmatic character is not
sustainable in law. He further contended that the view of the authority
that there need not be a prior enquiry is also not correct in law. He
relied upon a decision of this Court in Mngt. B.A. Pvt. Ltd. v. A.C.
W's. Compensation II Mds. and Anr. (1988-I-LLJ- 203) and also another
decision of this Court in Spencer & Co. Ltd. Madras v. B. Vajravelu and
Anr. (1990-I-LLJ-569) and a decision of a Division Bench of this Court
in Rallis India Ltd. Mad. v. M.N. Rao and Anr. (1991-II-LLJ-505)(Mad).
4. Learned counsel for the second respondent, on the other hand, relied
on a decision of the Supreme Court in L. Michael v. Johnson Pumps India
Ltd. (1975-I-LLJ-262) and contended that in a reasonable case, where
there is 'loss of confidence', it would be high risk on the part of the
employer to put the employee on the roll and since there was 'loss of
confidence' on the part of the employee, the services of the petitioner
were terminated. According to the learned counsel for the second
respondent, it is a case of termination simpliciter and the order is
not a stigmatic order. He submitted that the termination order read as
a whole would indicate that there was no stigma attached to the
character and conduct of the employee petitioner. He also submitted
that the order in question amounted to only making a record on the part
of the employee that he failed to turn up for the employment after
January 15, 1984 without any prior permission or prior intimation to
the management. Since the petitioner failed to turn up for the
employment for nearly 5 months, the second respondent came to a bona
fide conclusion that his continued, and unauthorised absence was due to
abandonment of service by the petitioner on his own accord and it is
only in this context, the expression 'loss of confidence' was used in
the order of termination of service. He, therefore, submitted that
there was no obligation on the part of the second respondent to wait
indefinitely for the writ petitioner to turn up for work and the second
respondent was justified in terminating the services of the writ
petitioner. Hence, according to the learned counsel for the second
respondent, the second respondent has terminated the services of the
writ petitioner only on a reasonable ground and the case of the writ
petitioner would fail under the first limb of Section 41(1) of the Act,
and not under the second limb of Section 41(1) of the Act. Learned
counsel for the second respondent, therefore, contended that since the
case falls within the first limb of Section 41(1) of the Act, notice
provided for under Section 41(1) of the Act, was given and the
petitioner has also accepted the same. The counsel for the second
respondent contended that there was no necessity to conduct an enquiry
on the part of the second respondent before terminating the services of
the writ petitioner. He also submitted that whatever defeated was there
before passing the order of termination, that was cured in the appeal
before the first respondent/appellate authority. He therefore,
submitted that since it is a case of order of termination simpliciter,
and hence no enquiry was needed to be conducted and the order of
termination which was upheld by the appellate authority is perfectly
legal and justified in law.
5. Mr. Chandru, learned counsel for the petitioner in his reply
submitted that it cannot be stated that the order of termination is a
non-stigmatic order. The petitioner was a senior officer in the second
respondent-company and there was no necessity for him to sign in the
attendance register. There was nothing proceeded prior to the issue of
show-cause notice and even the allegation in the order of termination
that the petitioner had abandoned the employment is not correct as the
writ petitioner was reporting for duty even after January 15, 1984. He,
therefore, submitted that the contention that the petitioner has
abandoned the service or was unauthorisedly absent from duty would
cause a slur upon on the conduct of the petitioner and the order of
termination is stigmatic in nature. He also submitted that the
expression, 'loss of confidence' in the order of termination is clearly
stigmatic in nature, because when the writ petitioner desires to join
in a new job, he may be forced to or he may be required to disclose to
the proposed employer, or new employer the reasons for leaving the
earlier job and if the person who is offering a fresh job looks into
the order of termination of the service passed by the second
respondent, he would come to a definite conclusion that the services of
the petitioner were terminated on account of loss of confidence which
would tarnish the image of the petitioner and it will deny a chance of
getting a future job. He, therefore, submitted that this Court has the
jurisdiction to go behind the order and to find out the reasons which
impelled the second respondent to terminate the services of the
petitioner.
6. He relied upon a decision of the Supreme Court in Gujarat Steel
Tubes Ltd. v. G.S.T. Mazdoor Sabha (1980-I-LLJ-137) and submitted that
the order of termination passed in this case would fall only within the
second limb of Section 41(1) of the Act. He, therefore, submitted that
since no enquiry was conducted prior to the passing of the order of
termination, the order is illegal. He submitted that the appeltate
authority constituted under the Act has no power to conduct the enquiry
and receive fresh evidence from the management to sustain the order of
termination when there was no prior enquiry conducted before the
termination of service. It is necessary to see the provisions of
Section 41(1) of the Act. Section 41(1) of the Tamil Nadu Shops and
Establishments Act reads as under;
"No employer shall dispense with the services of a person employed
continuously for a period of not less than six months except for a
reasonable cause and without giving such person atleast one month's
notice, or wages in lieu of such notice, provided, however, that
such notice shall not be necessary where the services of such person
are dispensed with on a charge of misconduct supported by
satisfactory evidence recorded at an inquiry held for the purpose".
Section 41(1) of the Act was subject matter of consideration before
this Court in several decisions. In order to apply the provisions of
Section 41(1) of the Act, it has to be determined at the initial stage,
whether the case would fall in the first limb or the second limb of
Section 41(1) of the Act.
6A. The order of termination dated June 29, 1984 was passed by the
second respondent on the ground that the second respondent has lost the
confidence reposed in the petitioner. The question that immediately
arises is whether the 'loss of confidence' would amount to misconduct
within the scope of Section 41(1) of the Act. The question whether the
imputation of loss of confidence would amount to misconduct came up for
consideration before the Supreme Court in Chandulal v. The Management
of Pan American World Airways (1985-II-LLJ-181) and the Supreme Court
held that the want of confidence in an employee points out to an
adverse facet in the employee's character as the true meaning of the
allegation is that the employee has failed to come up to the expected
standard of conduct which has given rise to a situation involving loss
of confidence. The said decision of the Supreme Court was followed by a
decision of this Court in the case of Mngt. B.A. Pvt. Ltd. v. A.C.W.'S.
Compensation II, Mds. and Anr.(supra) wherein this Court held that the
expression, 'loss of confidence' used in the order of termination does
throw adverse imputation against the employee and the order ex facie
makes it clear that the order of termination of services was founded on
misconduct. This Court held that ex facie, the order of termination
levels a charge of imputation against the conduct and attitude of the
employee which would amount to a charge of imputation or misconduct.
The said decision (1988-I-LLJ-203) was followed by another decision of
this Court in Spencer & Co. Ltd. Madras v. B. Vajravelu and Anr.
(supra) wherein the learned Judge after following the earlier case-law
on the subject held as under:-p. 573
"... the imputation of loss of confidence amounts to imputation or
charge of misconduct and termination of services on that account
would amount to punishment inflicted by way of disciplinary action.
In the instant case, the impugned order was ex facie an order of
termination of service on the ground of misconduct. I do not find
any infirmity or illegality with the said finding which is supported
by judgments of the Supreme Court and this Court which include the
decision under the very Act."
7. High Court of Karnataka in the case of A. Ram Mohan v. Labour Court,
Bangalore and Anr. (1988-II-LLJ-179) held that where the services of an
employee were terminated on the ground of loss of confidence, it is not
a discharge simpliciter, but is in nature of penalty for misconduct and
it casts a stigma on the character and conduct of the employee. The
above decision (cited supra) clearly establishes that where the charge
is loss of confidence on the part of the employee, it would cast a
stigma on the character and conduct of the employee and the order is
really in the nature of penalty for misconduct, and hence, the
submission of the learned counsel for the second respondent that the
termination for 'loss of confidence' does not amount to stigma on the
'character or the conduct of the writ petitioner, has to be rejected.
As rightly pointed out by the learned counsel for the petitioner, if
the order of termination showing loss of confidence is produced before
a prospective new employer, the new employer on a perusal of the order
would definitely come to a conclusion that the earlier employer has
lost the confidence on the employee denying the chance of getting a new
or fresh employment. The test to determine whether the order is
stigmatic or not is the impression that an order would make in the mind
of a reasonable person perusing the order. If that test is applied to
the facts of the case, the order of termination has to be held as
stigmatic in character.
8. Nodoubt, learned counsel for the second respondent relied upon a
decision of Supreme Court in the case of L. Michael v. Johnson Pumps
India Ltd. (supra). The said decision was noticed by KM. Natarajan, J.
in Spencer & Co. Ltd. Madras case (cited supra) and the learned Judge
held that the case that arose before the Supreme Court was under
Industrial Disputes Act and the question that arose before the Supreme
Court was whether the order of discharge is one of discharge
simpliciter and no stigma whatsoever is attached. Learned Judge also
noticed that Section 41 of the Tamil Nadu Shops and Establishment Act
is differently worded and the conditions prescribed under Section 41 of
the Act are mandatory and the decision of the Supreme Court in L.
Michael's case (cited supra) has no application to the facts of this
case. In my view, it is not necessary to consider the other cases cited
by the learned counsel for the second respondent, in view of the
authoritative pronouncements of this Court in several decisions that
'loss of confidence' would amount to imputation of charge of
misconduct. Once it falls within the scope of the second limb of
Section 41(1) of the Act, it is incumbent upon the amount respondent to
hold an enquiry to prove the misconduct and then only, an order of
termination can be passed. Hence, the view of the appellate authority
that the continued absence of nearly six months would have enabled the
second respondent to draw inference that the petitioner has abandoned
the service, and the loss of confidence imposed in favour of the writ
petitioner does not amount to misconduct, cannot be sustained in law. A
decision of this Court in Rallis India Ltd. v. M.N. Rao and Anr.
(supra) makes it clear that the disclosure of cause or reason in the
order is a must, since it is only then the appellate authority could be
in a position to see whether it is a case of simpliciter discharge for
reasonable cause or for an alleged misconduct and further to see
whether a proper domestic enquiry was conducted before passing of an
order of termination on the ground of misconduct. This Court has held
that the management should disclose in the very order of termination
the cause or all the factors which made the management to come to such
a conclusion and in the absence of the disclosure in the order of
termination, there is absolutely no scope for the management to contend
that the dispensing with the services of the employee was for a
reasonable cause. This Court also held that the fact that the order of
termination does not contain any express words of stigma is not
conclusive of issue and it may be evident from the entire circumstances
preceding or attendant or a particular order on the question and for
that purpose, materials have to be examined to see whether the
misconduct is a mere motive or is very foundation of the order. The
said decision in Rallis India Ltd. case (cited) was followed by another
decision of this Court in Air France v. Dy. Commr. of Labour and Ors.
(1993-II-LLJ-614) wherein AR. Lakshmanan, J. held that the employer is
bound to disclose the reason for termination in the order of
termination itself and the failure to do so would render the order
invalid and non est. Viewed from this angle, the order of termination
makes it clear that the loss of confidence was the basis for the
termination of services of the petitioner. In other words, the
foundation of the order was loss of confidence imposed by the second
respondent in favour of the writ petitioner. Once it is held that the
loss of confidence casts stigma on the character and conduct of the
writ petitioner, the order passed without an enquiry is not sustainable
in law. The Supreme Court in D.K. Yadav v. J.M.A. Industries Ltd.
(1993-II-LLJ-696) held that where the management did not conduct any
domestic enquiry, nor it gave the appellant any opportunity to putforth
the case, the order passed for termination cannot be sustained in law.
9. The next question that arises is whether it is open to the
management to lead evidence before the appellate authority where the
services of the petitioner were terminated without any enquiry. This
Court in the case of Zenith Lamps and Electricals v. Addl. Commr.
(1970-II-LLJ-103) held that the scheme for the Tamil Nadu Shops and
Establishments Act makes it clear that where the employer did not hold
any enquiry under Section 41(1) of the Act, and record evidence, for
the purpose of establishing the misconduct, the appellate authority
cannot convert it into original authority when the original authority
has not conducted such an enquiry. This Court also held that Section
41(2) was not enacted to convert the appellate authority into a forum
where an original enquiry into the misconduct of an employee justifying
the dismissal could be conducted so as to deprive him of any right to
what he was entitled to in a common law. The above decision was
affirmed by a Division Bench of this Court in the case of Zenith Lamps
and Electricals v. Addl Commr. (1973-II-LLJ-445) wherein this Court
held that where there was no enquiry by the management, the
Commissioner cannot be called upon under Section 41(2) to hold the
trial in exercise of appellate power, take evidence and then satisfy
himself as to whether the removal was justified or not. The view has
been reiterated by Nainarsundaram, J. in the case of Management of
Bombay Ammonia (Madras) Pvt. Ltd. Madras (cited supra) where the
learned Judge held that when the services of an employee were
terminated for misconduct without holding an enquiry, the question of
substantiating the charge by taking evidence did not arise. K.M.
Natarajan, J. also has taken the same view in Spencer & Co. Ltd Madras
case (cited supra). The said view has been reiterated by a Division
Bench in Rallis India Ltd. Madras case (cited supra). In view of a long
catena of decisions holding that the appellate authority has no power
to conduct a fresh enquiry and take fresh evidence where there was no
prior inquiry, the appellate authority exceeded in its jurisdiction in
this case in taking new evidence to sustain the order of termination.
The decision of the Supreme Court in Gujarat Steel Tubes Ltd. v. G.S.T.
Mazdoor Sabha (supra) relied upon by the learned counsel for the
petitioner is relevant to the facts of the instant case, the extract of
which is hereunder:-at P 150.
"The Court will find out from other proceedings or documents
connected with the formal order of termination what the true ground
for the termination is. If thus, scrutinised, the order has a
punitive flavour in course or consequence, it is a dismissal. If it
falls short of this test, it cannot be called a punishment. To put
it slightly differently, a termination effected because the master
is satisfied of the misconduct and of the consequent desirability of
terminating the service of the delinquent servant, it is a
dismissal, even if he had the right in law to terminate with an
innocent order under the Standing Order or otherwise. Whether, in
such a case the grounds are recorded in a different proceeding from
the formal order does not detract from its nature. Nor the fact
that, after being satisfied of the guilt, the master abandons the
enquiry and proceeds to terminate. Given an alleged misconduct and a
live nexus between it and the termination of service the conclusion
is dismissal, even if full benefits as on simple termination, are
given and non-injurious terminology is used."
The decision cited supra clearly states that where there is an
imputation of loss of confidence, which would amount to misconduct, the
order of termination cannot be passed without holding an enquiry as
contemplated under Section 41(1) of the Act. Since it is a void order,
the appellate authority has no jurisdiction to conduct fresh enquiry
and take evidence to sustain the order of termination. The appellate
authority also held that the imputation of loss of confidence would not
amount to misconduct by placing reliance upon the decisions which arose
under the Industrial Disputes Act. The question whether there is
abandonment of services has to be seen in the context of the case. The
petitioner was a highly placed Officer in the second respondent-company
and it is not expected that he should sign in the attendance register
each day. So, when there was an allegation in the order of termination
that he was absenting himself from duty, which was denied by the
petitioner, there should have been a prior enquiry before the order of
termination was passed. Since the second respondent failed to conduct
an enquiry before the order of termination was passed the order is not
sustainable in law. Consequently, the order of the appellate authority
upholding the order of termination is also not valid in law. In this
view of the matter, I am inclined to allow the writ petition by
quashing the impugned order. The writ petition is allowed.
Consequently, the matter is remitted to the first respondent to
determine the amount of wages payable to the petitioner till the date
of his retirement since the petitioner has already reached the age of
superannuation. No order as to costs.
