LPA/513/1999 1/90 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD LETTERS PATENT APPEAL No. 513 of 1999 In SPECIAL CIVIL APPLICATION No. 1026 of 1999 with CIVIL APPLICATION No.3522 of 1999 Date of Decision:21-03-2006 ============================================== GUJ.STATE ROAD TRANSPORT CORPORATION-Appellant Versus DV CHAUHAN – Respondent(s) (for full cause title, see next sheet) ============================================== Coram: The Hon'ble Shri Justice Bhawani Singh, Chief Justice The Hon'ble Shri Justice H.K.Rathod, Judge The Hon'ble Smt.Justice Abhilasha Kumari, Judge Whether approved for reporting? Yes For the Appellant(s): Shri Hardik C.Rawal,Adv. For the Respondent(s): M/s.Dr.Mukul Sinha with Prabhakar Upadhyay, Adv. Intervenors: M/s.P.H.Pathak, D.S.Vasavada, Advs. ============================================== PER: BHAWANI SINGH, CHIEF JUSTICE (C.A.V.):- 1. Shri D.V.Chauhan (respondent) was a Conductor at Bardoli Depot of Gujarat State ========================================= ================== LPA/513/1999 2/90 JUDGMENT Whether reporters of Local Papers may be allowed to see the Judgment? Yes Road Transport Corporation (“Corporation” for short). On 3.5.1990, his duty was on Surat – Mandvi road. When the bus reached between Karanj and Mandvi, checking squad of Corporation checked the bus. At this time, there were 74 passengers in the bus. It was found that he had collected Rs.14/- from two passengers and had issued used tickets worth Rs.6/- with an intention to misappropriate public money. It was also found that to two passengers who were travelling from Surat to Archena, he issued tickets worth Rs.12/- out of which, tickets worth Rs.6/- were re-used. To a passenger, who was travelling from Kim Char Rasta to Amalsadhi, after collecting the fare of Rs.4/-, he issued ticket worth Rs.6/- which was used in the earlier trip. Some other irregularities were also found during the checking. Therefore, he was found having LPA/513/1999 3/90 JUDGMENT misappropriated Rs.28/- by issuing used tickets to six passengers. There was cash balance of Rs.41-40. Consequently, he was chargesheeted on 9.5.1990 to which, he replied on 7.6.1990. Thereafter, departmental inquiry was held. He submitted reply and inquiry proceeded on 26.6.1990 and 27.6.1990. On 7.7.1990, show cause notice was issued. He filed reply to the show cause notice on 12.7.1990. Ultimately, the competent authority passed order on 30.7.1990 reducing the respondent by 16 stages, and fixing him at Rs.775/-. Industrial dispute was raised. Industrial Tribunal, by order dated 15.9.1998, reduced punishment from 16 stages to 5 stages. This order has been passed in exercise of power under Section 11A of the Industrial Disputes Act, 1947 (“the Act”). This order was LPA/513/1999 4/90 JUDGMENT challenged through Special Civil Application No.1026 of 1999 by Corporation. However, by oral order dated 11.2.1999, Special Civil Application was dismissed. The oral order reads: “Having heard learned counsel for the petitioner and looking to the nature of the case, I am not inclined to invoke extra-ordinary jurisdiction to interfere with the impugned award passed by the Tribunal. Petition is dismissed. (R.Balia, J.)“ Above quoted order in Special Civil Application No.1026 of 1999 is challenged through Letters Patent Appeal No.513 of 1999 by the Corporation. While hearing the matter, the Division Bench (Coram: R.S.Garg & Ravi R.Tripathi, JJ) passed the following order on 10.8.2005: “1. Present is a matter where the departmental authorities imposed punishment of lowering down the appellant to 16 stages below the existing pay scale, but the Industrial Tribunal interfering in the LPA/513/1999 5/90 JUDGMENT matter in exercise of its powers under section 11A of the Industrial Disputes Act, 1947 (hereinafter referred to as “the Act”) had reduced the punishment from 16 stages to 5 stages only. The learned Single Judge refused to interfere in the matter observing that looking to the nature of the case no interference was called for. 2. Mr.Hardik C.Rawal, learned counsel for the appellant placing his reliance upon a Division Bench judgement dated 29.03.2005 of this Court in Letters Patent Appeal No.1199 of 2002 submits that powers vested in the Labour Court/ Industrial Tribunal under sec.11A of the Act can be exercised only in cases which relate to discharge or dismissal of a workman and not otherwise. On the other hand Mr.Prabhakar Upadhyay, learned counsel for the workman placing his reliance upon yet another Division bench judgement of this Court in the matter of Municipal Commissioner, Baroda Vs. Sanatkumar D.Brahmbhatt, reported in 1992(1) G.L.R. 432 submits that when a reference is made to the Labour Court/ Industrial Court, then the whole issue is writ large before the said Court/ Tribunal and de hors section 11A of the Act, legality and propriety of the punishment will have to be examined by the Industrial Tribunal while adjudicating this dispute which was referred for adjudication. 3. After going through both the judgements we LPA/513/1999 6/90 JUDGMENT are of the considered opinion that there is a sharp conflict in the said two judgements. We are of the opinion that the matter deserves to be considered by a Larger Bench of this Court to bring at rest the controversy once for all. Let the matter be placed before the Honourable Chief Justice for referring the matter to a Larger Bench on the simple question that which of the judgements decides the law correctly.” 2. Before proceeding further, material facts of Vankar R.R. v. Gujarat State Road Transport Corporation, Letters Patent Appeal No.1199 of 2002 (2005(3) LLJ 239) decided by Division Bench (Coram: G.S.Singhvi & Anant S.Dave, JJ.) on 29.3.2005, referred in paragraph-2 of the order dated 10.8.2005 in L.P.A. No.513 of 1999 be stated. Shri R.R.Vankar (appellant) was conductor with the Corporation. On being checked by line checking squad on 3.10.1995, it was found that while he was on duty on Chhota-Udaipur – LPA/513/1999 7/90 JUDGMENT Kanavat route, he took money from three passengers but did not issue tickets. On receipt of report from checking squad, departmental inquiry was initiated against him. He was found guilty. Thereafter, Divisional Traffic Superintendent (City)-cum- Competent Authority issued notice proposing dismissal from service. Appellant pleaded that allegation against him was not correct. He could not collect fare from the passengers because they were in a state of intoxication. However, after considering the reply, penalty of reduction to the basic of pay-scale was imposed. This order, he challenged before the Industrial Tribunal through Gujarat Kamdar Sewa Sangathan, Vadodara. The competent authority having made reference under Section 10(1)(c) of the Act (Reference No.109 of 1999), the Industrial Court quashed the order of punishment by award dated 20.2.2001 LPA/513/1999 8/90 JUDGMENT invoking Section 11A of the Act. This order was challenged through Special Civil Application No.1081 of 2002 by the Corporation successfully. Consequently, the Award was set aside on the ground that the Industrial Court did not have jurisdiction to interfere with the punishment imposed by the disciplinary authority. The appellant challenged this order through Letters Patent Appeal No.1199 of 2002. The Division Bench found that Industrial Court invoked Section 11A of the Act for setting aside the punishment imposed by the disciplinary authority, therefore, after quoting Section 11A of the Act, recorded that: “...... A reading of the plain language of the above reproduced provision makes it clear that Labour Court, Tribunal and National Tribunal can interfere with the punishment imposed by the employer only in the cases of discharge or dismissal. The use of the expression “relating to the discharge, or dismissal of a workman” clearly shows that the Legislature intended to confer the appellant jurisdiction upon the Labour Court, Tribunal and LPA/513/1999 9/90 JUDGMENT National Tribunal only in the matters involving discharge or dismissal of a workman. To put it differently, the Labour Court etc. cannot exercise power under Section 11-A of the Act in the cases in which the employer imposes a penalty on the workman otherwise than by way of discharge or dismissal. In this view of the matter it must be held that by interfering with the punishment of reduction to the basic of his pay-scale imposed on the appellant, the Industrial Court had exceeded its jurisdiction and the learned single Judge rightly quashed the award passed by it. 6. Notwithstanding the aforementioned conclusion, we have scanned through the entire record for a purpose of finding out, whether the proceedings of inquiry are vitiated due to violation of rules of natural justice or that the punishment imposed by the employer is arbitrary. It is not in dispute that the order of punishment was preceded by issuance of charge-sheet to the appellant containing allegation that he had misappropriated the amount of fare collected from three passengers. The Enquiry Officer, after recording evidence of the parties returned the finding that the charge levelled against the appellant has been proved. Thereafter, the Disciplinary Authority issued show cause notice. The appellant filed reply. This was followed by the order of punishment. The Industrial Court did not find any infirmity in the proceedings of the enquiry. LPA/513/1999 10/90 JUDGMENT Therefore, it is not possible to hold that the enquiry held against the appellant was vitiated due to violation of rules of natural justice and, on that account, the award of the Industrial Court should be sustained. 7. We also agree with the learned single Judge that in such like matters the Labour Court/ Industrial Tribunal should be loath to interfere with the discretion exercised by the employer in the matter of imposition of punishment....” 3. Contra, in Municipal Commissioner, Baroda v. Sanatkumar D.Brahmbhatt (1992(1) GLR 432), facts were that respondent was an Octroi Clerk. Allegation against him was that he had allowed a truck to pass without collecting octroi. On account of this incident, three charges were levelled against him. In departmental inquiry, it was found that out of the three charges, first charge was mostly proved, second charge was not wholly proved but he was found to be negligent and the third LPA/513/1999 11/90 JUDGMENT charge was not proved. Ultimately, punishment of stoppage of three yearly increments with future effect was imposed by the disciplinary authority. Respondent raised an industrial dispute to the effect whether punishment of stoppage of three yearly increments should be vacated and whether the deducted amount should be refunded to the workman or not. This dispute was decided by the Industrial Tribunal which reached to conclusion that looking to the charges which were proved, punishment of stoppage of three yearly increments with future effect would be too harsh. Consequently, punishment of stoppage of one yearly increment without future effect was substituted. Examining the matter in the context of Section 11A, the Court said in paragraph-4 that: “4. The learned Advocate for the petitioner was right when he contended that on the express language of Sec.11A of the Act, such controversy LPA/513/1999 12/90 JUDGMENT could not be covered by the said provision as such provision relates to only discharge or dismissal of a workman. However, on the facts of the present case, the very dispute which is referred to the Industrial Tribunal for adjudication centres round the legality and propriety of the imposition of punishment of stoppage of three yearly increments with future effect. Once that dispute is referred for adjudication, the Industrial Tribunal in exercise of its power under Sec.11A was bound to adjudicate upon that dispute and pronounce upon it. The term `industrial dispute' is defined by Sec.2(k) to mean any dispute or difference between employers and employers or between employers and workmen. It cannot be gainsaid that there is difference or dispute between the employer and employee in connection with the punishment imposed on the workman. Therefore, de hors Sec.11A, the legality and impropriety of the punishment had to be examined by the Industrial Tribunal while adjudicating this very dispute which was referred for adjudication. Consequently, when the Industrial Tribunal considered the gravity of the punishment in the light of the charges having been held proved, it cannot be said that it was exercising jurisdiction not vested in it. In fact, it was its obligation to adjudicate this very dispute which was referred for adjudication” 4. Confronted with these two judgements, LPA/513/1999 13/90 JUDGMENT namely, Municipal Commissioner, Baroda v. Sanatkumar D.Brahmbhatt (supra) and Vankar R.R. v. Gujarat State Road Transport Corporation (supra), the Division Bench (Coram: R.S.Garg & Ravi R.Tripathi, JJ.) was of the opinion that: “.........After going through both the judgements we are of the considered opinion that there is a sharp conflict in the said two judgements. We are of the opinion that the matter deserves to be considered by a Larger Bench of this Court to bring at rest the controversy once for all. Let the matter be placed before the Honourable Chief Justice for referring the matter to a Larger Bench on the simple question that which of the judgements decides the law correctly.” 5. Therefore, this matter comes for consideration by Full Bench. 6. Shri Hardik Rawal, learned counsel for the appellant, contended that under Section 11A of the Act, the Tribunal/ National LPA/513/1999 14/90 JUDGMENT Tribunal can interfere with the punishment imposed by the employer only in cases of discharge or dismissal, therefore, where punishment imposed is other than discharge or dismissal, power under Section 11A of the Act cannot be exercised. In other words, Section 11A governs those cases which pertain to discharge or dismissal and other punishment cases would continue to be governed by old law of non interference with finding of guilt and punishment awarded by the management, not to act as an appellate Court. Dr.Mukul Sinha with Shri Prabhakar Upadhyay, learned counsel for respondent and M/s.P.H.Pathak & D.S.Vasavada, the intervenors, contend that Labour Court/ Tribunal are competent to examine cases of all kinds of punishment including those of discharge or dismissal. Incorporation of LPA/513/1999 15/90 JUDGMENT Section 11A simply separates cases of discharge or dismissal. Dispute with regard to all kinds of punishments is referable to Labour Court/ Tribunal under Section 10 of the Act. The propriety or legality of the order can be examined under the Second Schedule and the Third Schedule to the Act. Therefore, insertion of Section 11A in the Act should not make difference. Therefore, after Reference is made under Section 10 of the Act, Labour Court/ Tribunal should exercise power vested in it by law. 7. Advancing respective submissions, decisions, namely, Indian Iron & Steel Company Limited v. Their Workmen (AIR 1958 SC 130),Ananda Bazar Patrika (P) Ltd. v. Their Employees (AIR 1964 SC 339), Bengal Bhatdee Coal Co. Ltd. v. Ram Probesh Singh and others (AIR 1964 SC 486), The Workmen of LPA/513/1999 16/90 JUDGMENT M/s.Firestone Tyre and Rubber Co. of India (Pvt.) Ltd. v. The Management and Others ([1973]1 SCC 813), The East India Hotels v. Their Workmen and Others ([1974])(3) SCC 712), M.P.Electricity Board v. Jagdish Chandra Sharma ([2005]3 SCC 401), Bharat Heavy Electricals Ltd. v. M.Chandrasekhar Reddy and others ([2005]2 SCC 481), Christian Medical College Hospital Employees Union v. Christian Medical College Vellore Assn [(1987)4 SCC 691 : 1988 SCC (L&S) 53], Gujarat State Road Transport Corporation v. Prabhashanker K.Acharya (1992(2) GLH 354), Rajasthan State Road Transport Corporation v. Ram Karan Chauhan and Anr. (1995 II LLJ 452), Gujarat State Road Transport Corporation v. Vitthalbhai R.Solanki (1997 III LLJ (Supp.) 1021), Municipal Commissioner, Baroda v. Sanatkumar D.Brahmbhatt (1992(1) GLR 432),Adamji M.Badri and others v. Labour LPA/513/1999 17/90 JUDGMENT Officer and another (1981 I LLJ 367), Vankar R.R. v. Gujarat State Road Transport Corporation (2005 III LLJ 191), Babulal Nagar and others v. Shree Synthetics Ltd. and others (AIR 1984 SC 1164) and Ahmedabad New Textile Mills v. Textile Labour Association and another (1988(2) GLH 498) were brought to our notice by learned counsel for the parties. 7.1. Incorporation of Section 11A in the Act is the result of Apex Court decision in Indian Iron and Steel Company case (supra) and Recommendation No.119 of International Labour Organization concerning the worker's right to challenge his termination before a neutral body. While examining the power of Labour Court/ Tribunal, the Apex Court said in paragraph-18 that: “....Undoubtedly, the management of a concern has power to direct its own internal administration and discipline; but the power is not unlimited and when LPA/513/1999 18/90 JUDGMENT a dispute arises, Industrial Tribunals have been given the power to see whether the termination of service of a workman is justified and to give appropriate relief. In cases of dismissal on misconduct, the Tribunal does not, however act as a Court of appeal and substitute its own judgment for that of the management. It will interfere (i) when there is a want of good faith, (ii) when there is victimisation or unfair labour practice, (iii) when the management has been guilty of a basic error or violation of a principle of natural justice, and (iv) when on the materials, the finding is completely baseless or perverse....” (emphasis supplied) 7.2 In Ananda Bazar Patrika (P) Ltd. Case (supra), the Apex Court said in paragraph-8 that: “(8) The extent of the jurisdiction which a Labour Court or an Industrial Tribunal can exercise in dealing with such disputes is well settled. If the termination of an industrial employee's services has been preceded by a proper domestic enquiry which has been held in accordance with the rules of natural justice and the conclusions reached at the said enquiry are not perverse, the Tribunal is not entitled to consider the propriety or the correctness of the said conclusions. If, on the other hand, in terminating the services of the employee, the LPA/513/1999 19/90 JUDGMENT management has acted maliciously or vindictively or has been actuated by a desire to punish the employee for his trade union activities, the Tribunal would be entitled to give adequate protection to the employee by ordering his reinstatement, or directing in his favour the payment of compensation; but if the enquiry has been proper and the conduct of the management in dismissing the employee is no mala fide, then the Tribunal cannot interfere with the conclusions of the enquiry officer, or with the orders passed by the management after accepting the said conclusions.” Thereafter, the Court said in paragraph-15 that: “(15)The position, thus, is that the conclusion of the Labour Court that the enquiry was not fair and that the appellant has acted mala fide in discharging Mr.Sarkar cannot be sustained. We have repeatedly pointed out that though industrial adjudication can and must protect industrial employees from victimisation, a finding as to mala fides or victimisation should be drawn only where evidence has been led to justify it; such a finding should not be made either in a casual manner or light- heartedly. In our opinion, no material was produced before the Labour court in the present proceedings to justify its finding either that the enquiry was LPA/513/1999 20/90 JUDGMENT unfair, or that the conduct of the appellant in discharging Mr.Sarkar was mala fide.” 7.3 In Bengal Bhatdee Coal Co. Ltd. case (supra), the Court said in paragraph-6 that: “(6) Now there is no doubt that though in a case of proved misconduct, normally the imposition of a penalty may be within the discretion of the management there may be cases where the punishment of dismissal for the misconduct proved may be so unconscionable or so grossly out of proportion to the nature of offence that the tribunal may be able to draw an inference of victimisation merely from the punishment inflicted....” (See also: National Tobacco Co. Ltd. v. Fourth Industrial Tribunal – 1960-2 Lab LJ 175 : AIR 1960 Cal. 249) 7.4 Again, in The Workmen of M/s.Firestone Tyre and Rubber Co. of India (Pvt.) Ltd. case (supra), the Apex Court interpreted Section 11A of the Act quite exhaustively. Summarising the legal position preceding enactment of Section 11A, the Court said in paragraph-32 that: LPA/513/1999 21/90 JUDGMENT “32. From those decisions, the following principles broadly emerge: (1)The right to take disciplinary action and to decide upon the quantum of punishment are mainly managerial functions, but if a dispute is referred to a Tribunal, the latter has power to see if action of the employer is justified. (2)Before imposing the punishment, an employer is expected to conduct a proper enquiry in accordance with the provisions of the Standing Orders, if applicable, and principles of natural justice. The enquiry should not be an empty formality. (3) When a proper enquiry has been held by an employer, and the finding of misconduct is a plausible conclusion flowing from the evidence, adduced at the said enquiry, the Tribunal has no jurisdiction to sit in judgment over the decision of the employer as an appellate body. The interference with the decision of the employer will be justified only when the findings arrived at in the enquiry are perverse or the management is guilty of victimisation, unfair labour practice or mala fide. (4) Even if no enquiry has been held by an employer or if the enquiry held by him is found to be defective, the Tribunal in order, had to give an opportunity to the employer and employee to adduce evidence before it. It is open to the employer to adduce evidence for the first time LPA/513/1999 22/90 JUDGMENT justifying his action, and it is open to the employee to adduce evidence contra. (5) The effect of an employer not holding an enquiry is that the Tribunal would not have to consider only whether there was a prima facie case. On the other hand, the issue about the merits of the impugned order of dismissal or discharge is at large before the Tribunal and the latter, on the evidence adduced before it, has to decide for itself whether the misconduct alleged is proved. In such cases, the point about the exercise of managerial functions does not arise at all. A case of defective enquiry stands on the same footing as no enquiry. (6) The Tribunal gets jurisdiction to consider the evidence placed before it for the first time in justification of the action taken only, if no enquiry has been held or after the enquiry conducted by an employer is found to be defective. (7) It has never been recognised that the Tribunal should straightaway, without anything more, direct reinstatement of a dismissed or discharged employee, once it is found that no domestic enquiry has been held or the said enquiry is found to be defective. (8) An employer, who wants to avail himself of the opportunity of adducing evidence for the first time before the Tribunal to justify his action, should ask for it at the appropriate stage. If such an opportunity is asked for, the Tribunal has no power to refuse. The giving of an opportunity to LPA/513/1999 23/90 JUDGMENT an employer to adduce evidence for the first time before the Tribunal is in the interest of both the management and the employee and to enable the Tribunal itself to be satisfied about the alleged misconduct. (9) Once the misconduct is proved either in the enquiry conducted by an employer or by the evidence placed before a Tribunal for the first time, punishment imposed cannot be interfered with by the Tribunal except in cases where the punishment is so harsh as to suggest victimisation. (10) In a particular case, after setting aside the order of dismissal, whether a workman should be reinstated or paid compensation is, as held by this Court in The Management of Panitole Tea Estate v. The Workmen [(1971)1 SCC 742] within the judicial decision of a Labour Court or Tribunal.” Thereafter said in paragraphs-35, 36, 41 & 41-A: “35. We cannot accept the extreme contentions advanced on behalf of the workmen and the employers. We are aware that the Act is a beneficial piece of legislation enacted in the interest of employees. It is well settled that in construing the provisions of a welfare legislation, courts should adopt, what is described as a beneficent rule of LPA/513/1999 24/90 JUDGMENT construction. If two constructions are reasonably possible to be placed on the section, it follows that the construction which furthers the policy and object of the Act and is more beneficial to the employees, has to be preferred. Another principle to be borne in mind is that the Act in question which intends to improve and safeguard the service conditions of an employee, demands an interpretation liberal enough to achieve the legislative purpose. But we should not