JUDGMENT [ENTITY], J.
1. Special [CASE NUMBER].
This is an application by the Municipal Corporation of Greater Bombay and the General Manager of the Bombay Electric Supply and Transport Undertaking of the Bombay Municipal Corporation, requesting this Court to issue a writ in the nature of certiorari or other writ, direction or order under [SECTION] of the [ACT] or an order or direction in exercise of its powers of superintendence under [SECTION] of the [ACT] against the Labour Appellate Tribunal, calling for the records of the case relating to an order dated 13-11-1956 in [CASE NUMBER] and to set aside and quash the decision and order of the Labour Appellate Tribunal.
2. The facts which give rise to this application are these: The second respondent was an employee of the Bombay Municipal Corporation. On 16-8-1955 the B.E/ S.T. Undertaking received a report from one [ENTITY], Sub-Inspector of Police, Bhoiwada Police Station, that the second respondent was seen coming hurriedly out of Chaniar Baug Lane, opposite Parel railway workshop, and that he and another person were attempting to throw stones at the Undertaking's bus at about 3-50 a.m. that the second respondent and his companion on seeing a bus picked up two big stones from a heap of stones on the road and were poised to throw the stones at the vehicle when the Sub-Inspector Inspector rushed towards them; that thereupon the second respondent and his companion dropped the stones and pretended to make an appearance that they were not engaged in doing anything unlawful, that the Sub-Inspector stopped them, and questioned them with a view to ascertain what they were doing, and that the second respondent and his companion gave their names and informed the Sub-Inspector that they were employees of the [ENTITY], and they apologised for their conduct. Sub-Inspector [ENTITY] arrested them and after making inquiries charge-sheeted them. At the trial the second respondent and his companion were acquitted of the charge by the Presidency Magistrate. In the meanwhile after receiving the report from Sub-Inspector [ENTITY] the Management of the Undertaking issued a show cause notice' to the second respondent. That notice set out the report made by Sub-Inspector [ENTITY] and called upon the second respondent to show cause why in view of his behaviour prejudicial to the working of the Undertaking, the services of the second respondent should not be terminated. A detailed written explanation was filed by the second respondent, and it was submitted by him that he had been arrested on mere suspicion. He contended that action was taken against him because of his 'trade union activities'. The Transportation Engineer of the Undertaking held an inquiry and observed that there wag no reason why Sub-inspector [ENTITY], should have made a false report against the second respondent and that no ground had been made out which justified him in disbelieving the report of Sub-Inspector [ENTITY]. The Transportation Engineer also observed that the 'behaviour' of the second respondent at the material time and place was prejudicial and that he had lost confidence in the second respondent. Having regard to the circumstance that the second- respondent had been on previous occasions suspended for wilful disobedience and in subordination to his superiors and having regard to the conduct charged against him the Transportation Engineer held that the second respondent was not a fit person to be retained on the Undertaking's establishment and directed that the services of the second respondent do stand determined with effect from 1-10-1955. Against the order an appeal was preferred to the General Manager. The General Manager agreed with the findings of the Transportation Engineer and accepted the view that the case was a fit one for terminating the services of the second respondent in view of his Prejudicial behaviour. .
3. An application was submitted to the Labour Court Bombay under Sections 42(4) and 78(1) A(a) (i) and (iii) of the [ACT]. praying for an order that the action taken by the Undertaking "of discharge" against the second respondent was illegal and improper and for reliefs of reinstatement and compensation. Before the Labour Court evidence was led by both the parties, and that Court held that there was material before the Transportation Engineer and the General Manager to create reasonable suspicion against the second respondent. The Labour Court also observed that throwing stones and 'similar subversive activities were getting rampant and strict action even on reasonable suspicion' could be taken by the Undertaking. The Court also held that the action taken against the second respondent' was justified by standing Order No. 26 and that action was not taken with a view to victimise the second respondent for his 'trade union activities'. In the view of the Labour Court the order discharging the second respondent from service could not be held to be improper, but the Undertaking was liable in the circumstances of the case to pay to the second respondent retrenchment compensation at the rate prescribed by [SECTION], [ACT]. It may be observed that the order of the Labour Court was somewhat inconsistent. Having observed that the order was passed under Standing Order No. 26 the Labour Court committed an error in characterising the order as one of discharge.
4. Against the order passed by the Labour Court an appeal was preferred to the Industrial Court by the second respondent and his companion who had simultaneously preferred an application before the Labour Court challenging the order passed against him. The Industrial Court held that the order of the Undertaking was bona fide and was passed after giving the respondent and his companion full opportunity of showing cause why action should not be taken, and was not passed with any ulterior motive, and that it was not arbitrary or harsh and the action taken under the order did not amount to any unfair labour practice. The Industrial Court was of the view that the General Manager and the inquiry officers having held that the conduct of the second respondent was Prejudicial to the interest of the Undertaking ah order directing reinstatement of the second respondent could not be passed. The Industrial Tribunal observed:
"As the view taken by the inquiry officers that the appellants (the second respondent and his companion) were guilty of the prejudicial behaviour complained of is reasonable, the order terminating the services of the appellants (the second respondent and his companion) under Standing Order No. 26 was not improper and ought not to be interfered with."
In arriving at that conclusion the industrial Court observed that it could not agree with the view of the Labour Court that the second respondent and his companion may not have assembled with the intention of throwing stones at the Undertaking's vehicles. In any event, the Industrial Court observed that the 'behaviour of' the second respondent and his companion was 'prejudicial to the Undertaking'. The Industrial Court also considered the argument advanced on behalf of the second respondent that the termination of the service of the second respondent after giving one month's notice was ineffective having regard to the judgment of his Court in Hospital Mazdoor Sabha v. Bombay State, [SECTION]. The Industrial Court observed that the case had no application to cases of termination of employment and applied only to those cases where there had been retrenchment from service of surplus staff, and that in refusing to order reinstatement the Labour Judge was within his right and the exercise of that discretion could not be interfered with by the Appellate Court. On the view so expressed the Industrial Court confirmed the order passed by the Labour Court.
5. Against that order an appeal was preferred to the Labour Appellate Tribunal at Bombay. In appeal the Labour Appellate Tribunal addressed itself to only one question, whether the order passed by the Undertaking amounted to imposing punishment upon the employee, and observed: "There can be no doubt, upon the facts, that this is a case where a punishment has been imposed upon a workman". The Tribunal then proceeded to observe:
"Punishment by discharge is recognised by Standing [SECTION], [SECTION], [SECTION]. Under Standing Order No. 23, a chargesheet setting out clearly the circumstances appearing against the persons to be proceeded against, followed by an inquiry in which full opportunity was given to such persons to defend themselves, was necessary", It also observed that the only evidence against the second respondent and his companion consisted of a report from a Police Inspector about something of which he himself had no direct knowledge and it was difficult in the circumstances to hold that the unsupported report of the Inspector proved the misconduct of the second respondent and his companion. The Tribunal concluded by observing that they were unable to accept the reasoning of the Industrial Court that the evidence of the Sub-Inspector was not necessary as action was being taken under Standing [SECTION]. In the view of the Tribunal punishment was being imposed upon the second respondent and his companion for misconduct and the Management could not be permitted to avoid the necessity of an inquiry under Standing [SECTION] by purporting to act under Standing [SECTION]. On that view the Labour Appellate Tribunal reversed the order passed by the Industrial Court and the Labour Court and directed that the second respondent be reinstated with effect from the date of his discharge. Against that order this application has been filed under [SECTION] and [SECTION] of the [ACT].
6. Before I deal with the contentions which have been advanced in support of the application. I may briefly refer to certain Provisions of the [ACT], and the Standing Orders framed thereunder. Under [SECTION] of the Act every employer is required to submit for approval to the Commissioner of Labour in the prescribed manner draft standing orders regulating the relations between him and his employees with regard to industrial matters set out in [SECTION]: and [SECTION] to the Act refers among other items to termination of employment including notice to be given by employer and employee, and punishment including warning, censure, fine, suspension or dismissal for misconduct, suspension Bending inquiry into alleged misconduct and the acts or omissions which constitute misconduct. Provision is made in [SECTION] for inquiry by the Commissioner of Labour and the ultimate settlement of the standing orders. [SECTION] provides for an appeal against an order of the Commissioner of Labour settling the standing orders and a review is permitted under [SECTION]. By [SECTION] the standing orders so settled cannot be altered for a period of one year from the date on which they came into operation. By [SECTION] the standing orders are determinative of the relations between the employer and the employee in regard to all industrial matters specified in [SECTION]. Pursuant to authority reserved under [SECTION], [ACT], the [ENTITY] has framed certain Standing Orders. There is no dispute that these Standing Orders were duly framed and have been sanctioned by the Commissioner of Labour and were at the relevant date in operation. Standing [SECTION] sets out the acts or omissions by an employee which amount to misconduct. Standing [SECTION] provides for punishment which may be inflicted for misconduct of which an employee may be found guilty. Standing [SECTION] states that an employee charged with misconduct of a nature which is likely to lead to the imposition of penalties mentioned in (e) to (h) or suspension for a period exceeding seven days under Standing [SECTION], shall be given a charge-sheet in writing clearly setting forth the circumstances appearing against him and requiring: explanation and the date and time at which the case will be heard. It also sets out the procedure to be followed by the Enquiry officer. Standing [SECTION] sets out the procedure for termination of service with the Undertaking. That termination has to be by notice in writing to the employee concerned setting out the reasons for termination of employment, except in certain cases specified therein. Termination of service is contemplated to take place at the instance either of the employer or the employee.
7. It is clear from these provisions that the Act and the Standing Orders have made a distinction between dismissal or discharge from services which may be ordered by the employer for misconduct of the employes and termination Of the contract of employment, which may be effected by the employer or the employee. Before an order of discharge or dismissal is passed the employee must be given opportunity of showing cause and of submitting his explanation at a formal enquiry. Provision is also made for an appeal against the order of the enquiry officer. But mere termination of service is not dismissal or discharge from service, and that termination can take place by notice in the manner prescribed by Standing [SECTION].
8. Under the common law governing the relations of employers and employees, an employer is entitled to terminate the services of his employee at any time subject to customary notice unless under a binding contract security of tenure of service is granted. An employer cannot normally be compelled to retain an employee whom he does not desire to retain in his employment. Certain statutory provisions have, however, been made which have considerably altered the common law rule governing the relations of an employer and employee. By [SECTION] of the [ACT], every person, who is a member of a defence service or of a civil service or the Union or of an all India service or holds any cost connected with defence or any civil post under the Union, holds office during the pleasure of the President, and every person who is a member of a Civil service of a State or holds any civil post under a State holds office during the pleasure of the Governor of the State, but by [SECTION] a person who is a member of a Civil service of the Union or All-India service or a civil service of a State or holds a civil post under the Union or a State cannot be dismissed or removed or reduced in rank until he has been given a reasonable opportunity of showing cause against the action proposed to be taken in regard to him. To this extent the authority of the State to take action against the employee or to remove him from service has been restricted. The right of an employer in an industry to dismiss or discharge an employee has also been restricted by the Standing Orders framed under the [ACT]. Under the Standing Orders framed by the [ENTITY] undertaking it is expressly provided that for imposing the penalty of dismissal or discharge from service an inquiry under Standing [SECTION] is obligatory. But no such provision has been made for termination of the contract of service of an employee of the Undertaking when action is taken under Standing [SECTION]. It is evident that in the Standing Orders a distinction has been made between dismissal for misconduct or discharge for misconduct and termination of employment. In [PRECEDENT]. their Lordships of the Supreme Court pointed out that a compulsory retirement under the [ACT] did not amount to dismissal or removal within the meaning of [SECTION] of the [ACT] and therefore did not fall within the provisions of the said article. It was observed that dismissal or removal was a punishment and involved loss of benefit already earned. The officer, dismissed or removed, did not get pension which he has earned. On compulsory retirement the officer is entitled to the pension that he has earned and there is no diminution of the accrued benefit. Removal, like dismissal, no doubt tarings about a termination of service but every termination of service does not amount to dismissal or removal. They also pointed out that the order of removal against an employee must be founded and justified on some ground personal to the officer and it involves the levelling of some imputation or charge against the officer which may conceivably be controverted or explained by the officer; but in the case of compulsory retirement there is no such element of charge or imputation and for compulsory retirement only two requirements were provided by the rules that the officer had completed twenty-live years' service and that it is in the public interest to dispense with his further services, in the present case the Undertaking terminated the services of the second respondent for behaviour prejudicial to the interest of the Undertaking. No order dismissing the second respondent from service or discharging him from service was passed. It is true that the form of the order terminating employment is not always decisive of the true nature of the order. If an order in form terminating employment is passed merely to camouflage an order dismissing or discharging from employment, the Labour Court may be entitled to come to the conclusion, having regard to the circumstances in which the order was passed, that the requisite formalities not having been followed the order was unlawful and cannot be given effect to. But the Labour Court has held that the order complained of was passed bona fide under Standing [SECTION] terminating the employment of the second respondent, and with that order the Industrial Court has agreed.
9. The Labour Appellate Tribunal under the provisions of [SECTION] [ACT], is entitled to entertain an appeal from any award or decision of an industrial Tribunal if the appeal involves a substantial, question of law and in respect of certain other matters. Evidently the jurisdiction which is conferred by [SECTION] upon the Labour Appellate Tribunal under [SECTION] is a restricted jurisdiction. Mr. [ENTITY] on behalf of the petitioners has urged that the Labour Appellate Tribunal has in disagreeing with the findings of fact of the Industrial Court exercised jurisdiction which is not vested in it by law. It was urged that when the Labour Court and the Industrial Court held that the order passed against the second respondent was an order determining his employment under Standing [SECTION] it was not open to the Appellate Tribunal to come to a conclusion "upon the facts that the case was one where a punishment had been imposed upon workman." The Undertaking did not purport to impose any punishment upon the second respondent. They purported to pass an order determining the employment under Standing [SECTION] and the Labour Court and the Industrial Court held that by the impugned order the contract of employment of the second respondent was determined and no punishment was imposed. The conclusion of the Industrial Court that the order was one of determining employment, was binding upon the Labour Appellate Tribunal and that Tribunal was not entitled to reappreciate the facts and hold that the order must be deemed to have been passed under Standing [SECTION] and that the failure to deliver a charge-sheet setting out the circumstances appearing against the second respondent and the failure to hold an inquiry contemplated by Standing [SECTION] vitiated the proceedings Of the Enquiry officer. The Labour Appellate Tribunal has held that the order passed against the second respondent was an order of discharge and that order of discharge could not be sustained on the evidence which was placed before the Enquiry officer, especially having regard to the fact that the Police Sub-Inspector was not examined before the Inquiry officer and that the second respondent was acquitted in the case filed against him. In the view of the Labour Appellate Tribunal the undertaking could not be permitted to avoid the necessity of an inquiry under Standing [SECTION] by purporting to act under Standing [SECTION]. The Labour Appellate Tribunal appears to have, held that the order passed by the Undertaking was under Standing [SECTION] and it was not an order passed under Standing [SECTION]. In so holding, in our view, the Labour Appellate Tribunal overstepped the limits of its Jurisdiction which are defined by [SECTION], [ACT], and has assumed jurisdiction which was not vested in it by law. The Tribunal had to accept the findings of fact. The Labour Appellate Tribunal having arrogated to itself jurisdiction which it did not possess, the order passed by it is liable to be set aside.
10. It was urged by Mr. [ENTITY] for the second respondent that the contention that the Labour Appellate Tribunal had arrogated to itself jurisdiction which it did not possess was not advanced before the Tribunal, and relying upon the judgment of this Court reported in [PRECEDENT], Counsel urged that it was not open to the petitioners in this application to raise that contention. We are unable to accept the contention. The parties before the Labour Appellate Tribunal may be expected to assume that the. Tribunal is conscious of the limits of its jurisdiction, and will not overstep those limits. Whether the Tribunal does transgress the limits of its jurisdiction can only be ascertained after the judgment is delivered by the Tribunal and not before. It may appear a little presumptuous on the part of a litigant to remind a, judicial Tribunal that restrictions have been placed upon its authority by the Legislature & that it would be wrong for the Tribunal to transgress those limits. The principle of the case to which our attention has been invited has, in our judgment, no bearing whatever on this case. That was a case in which the State Government of Bombay had entertained an appeal against the order of the State Transport Authority when by Statute the order was declared final and conclusive. At the hearing before the State Government no objection about jurisdiction was raised and the party affected by the ultimate order took the chance of obtaining a favourable decision. After the Government decided the matter an application, was filed in this Court for an order under [SECTION] of the [ACT] and this Court held that the jurisdiction of an inferior Tribunal can be challenged on a petition for a writ under [SECTION] of the [ACT], before the High Court only if the objection as to the jurisdiction was taken before that Tribunal. In that case there was complete want of jurisdiction in the Government which purported to hear an appeal against the order of the State Transport Authority but no objection in that behalf was taken, at the hearing of the appeal. In the present case the Labour Appellate Tribunal was invested with jurisdiction to hear appeals, but in the exercise of its jurisdiction its Powers were restricted. In our judgment by failing to remind the Tribunal of what the Tribunal must always be conscious it cannot be said that the petitioners have disabled themselves from making a grievance in this application that the tribunal has entertained an appeal in a case which did not raise a substantial question of law.
11. It was also urged by Mr. [ENTITY] that the Labour Appellate Tribunal considered only one contention and did not consider the other contentions which were raised in the appeal and the second respondent should therefore be permitted, even if this Court holds that the Tribunal was in error in setting aside the judgment of the Industrial Court on grounds on which it has purported to do to be heard in this application as if it is an appeal on the contentions raised by the second respondent before the Labour Appellate Tribunal. We have no jurisdiction to hear this application as if it was an appeal. If the second respondent is so advised he may request the Labour Appellate Tribunal to hear his appeal against the order passed by the Industrial Tribunal on the other questions raised by him. We express no opinion on the question whether such an application may lie to the Labour Appellate Tribunal especially having regard to the provisions of the [ACT].
12. Mr. [ENTITY] also contended that the order passed by the Labour Court and the Industrial Court holding that the order determining the service was valid cannot be sustained because no provision was made for payment of retrenchment compensation to the second respondent at the time of the passing of the order and in support of that contention Mr [ENTITY] relied upon the provisions of [SECTION], [ACT] and a judgment of this Court reported in [SECTION]. It was urged that payment of retrenchment compensation under [SECTION] to an employee before determining his employment was a condition precedent and if no retrenchment compensation was paid the order determining the employment must be regarded as ineffective, and in support of that contention the Hospital Mazdoor sabha case (A) was relied upon. It Is true that in that case It was held that failure to comply with the condition with regard to the payment of compensation to an employee at the time of his retrenchment gives to the employee the right to challenge his retrenchment and to contend that his services were not legally and effectively terminated. It was observed in that case that the definition of the expression 'retrenchment' in [SECTION], [ACT], meant termination by the employer of the services of a workman for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action. In so holding the Court followed the judgment of this Court in [ENTITY] v. Barsi Light Rly Co. Ltd. (D) in which it was observed that the word 'retrenchment' had the widest import, and whatever the reason for the termination may be, it constitutes retrenchment as defined by the [ACT]. If these were the only judgments of this Court which had a bearing on the meaning of the expression 'retrenchment' we would have been bound to hold that the determination of employment of the second respondent even for behaviour prejudicial to the business of the [ENTITY] must be regarded as retrenchment within the meaning of [SECTION], [ACT] and failure to pay retrenchment compensation to the second respondent before termination of his employment by the Undertaking rendered the order ineffective. But the judgments of this Court in [ENTITY]'s case (D) and. Hospital Mazdoor Sabha's case (A) do not hold the field. [ENTITY]'s case (D) was taken in appeal to the Supreme Court (See (S) [PRECEDENT]. Their Lordships have definitely rejected the view taken by this Court that the expression 'retrenchment' defined in [SECTION] had a wider connotation. Their Lordships have observed (at page 132 of ATR):
"We hold, contrary to the view expressed by the Bombay High Court, that retrenchment as defined in [SECTION] and as used in [SECTION] has not wider meaning than the ordinary accepted connotation of the word: it means the discharge of surplus labour or staff by the employer for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action, and it has no application where the services of all workmen have been terminated by the employer on a real and bona fide closure of business as in the case of Shri Dinesh Mills Ltd., or where the services of all workmen have been terminated by the employer on the business or undertaking being taken over by another employer in circumstances like those of the Railway Company."
It is clear from these observations that in their Lordships' view the expression 'retrenchment' meant discharge of surplus labour or staff and did not mean termination of the contract of employment for other causes. The judgment of this Court, in Hospital Mazdoor Sabha's case (A), on which strong reliance was placed by Mr. [ENTITY], must therefore be regarded as overruled to that extent. The termination of employment of the second respondent by the Undertaking for reasons already set out cannot be regarded as retrenchment having regard to the test laid down by the Supreme Court; and if there was no retrenchment it cannot be said that failure to comply with the condition of payment of compensation at the time of termination of employment affects the validity or legality thereof.
(The rest of the judgment in this case is not material to this report. Then their Lordships dealt shortly with [CASE NUMBER], the facts whereof were identically same.)
13. Rule made absolute.