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CASE NO.:

Appeal (civil) 3299 of 2000

PETITIONER:

INDIAN RAILWAY CONSTRUCTION CO. LTD.

RESPONDENT:

AJAY KUMAR

DATE OF JUDGMENT: 27/02/2003

BENCH:

SHIVARAJ V. PATIL & ARIJIT PASAYAT

JUDGMENT:

JUDGMENT

2003(2) SCR 387

The Judgment of the Court was delivered by

ARIJIT PASAYAT, J. Bitter relationship between the employer and the

employee has resulted in a large number of litigations; unfortunately and

inevitably creating an atmosphere of distrust. In most of the cases, the

employer complains of misconduct by the employed concerned; while the

employee usually plead victimization. The present case is no exception.

Starting point of the controversy was about two decades back. The

respondent (hereinafter referred to as 'the employee') was appointed on a

probation basis in May, 1981. His appointment was on temporary basis and he

was not confirmed even after the initial period of probation. Alleging that

he assaulted a senior officer and along with others ransacked the office

creating chaotic condition, an order of dismissal was passed on 7.12.1983.

On the alleged date of incident, information was lodged with police. The

order was passed in respect of two employees, the present appellant and one

Mr. V.K. Talwar. It was pointed out in the order of dismissal that it would

not be practicable to hold an enquiry before directing dismissal. The

respondent employee, on the other hand, alleged that the order of dismissal

was the outcome of victimization. He took a stand in the writ petition

filed before the Delhi High Court that because of union activities, he had

become an eyesore of the management, and the order of dismissal without

holding an enquiry was violative of law and was at variance with the

requirements of Article 311(2) of the Constitution of India. 1950 (in short

'the Constitution').

Learned Single Judge was of the view that in a given case, enquiry can be

dispensed with; but the case at hand was not of that nature. It was further

held that the protection under Article 311(2) was available and non-

observance of the procedure vitiated the order of dismissal. The matter was

challenged in Letter Patents Appeal before the Division Bench of the Delhi

High Court by the present appellant.

It was submitted that there was no scope for judicial review of the order

dispensing with enquiry. The order of dismissal was quashed on the ground

that it was activated with male fides. Though, it was observed that the

decision whether an enquiry was to be conducted or not and could be

dispensed with was primarily that of the concerned authority; it could not

be his ipse dixit and in a given case could be judicially reviewed. In any

event, Article 311(2) had no application.

The Division Bench by the impugned judgment held that Article 311(2) was

not attracted. However, it upheld the judgment of the learned Single Judge

holding that on a limited judicial review, the order dispensing with

enquiry was not sustainable. It was noted that the appellant before it did

not argue about the sustainability of the reasons and only raised issues

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relating to scope of judicial review.

In support of the appeal, Mr. Mukul Rohtagi, learned Additional Solicitor

General appearing for the appellant submitted that the Division Bench was

not justified in upholding conclusions of the learned Single Judge about

the scope of judicial review. Both the learned Single Judge and the

Division Bench proceeded to deal with the matter as if male fides had been

established. There was no finding recorded that the incident did not take

place. On the contrary, both the learned Single Judge and the Division

Bench accepted that certain incident took place. After having held so, the

plea on the presumptuous ground that the respondent-employee was the victim

of bias and the authorities acted with male fides, cannot be sustained.

There was no specific plea relating to mala fides and even persons who

allegedly acted male fide were not impleaded in the writ petition. Except

making a vague statement that the management was activated with male fides,

there was not even a whisper as to how and why the management and who in

particular would act with mala fides. The background scenario as projected

by the respondent-employee does not in any way lead to a conclusion of

victimization. Though enquiry would not have been necessary as the employee

was on probation an order of termination simplicitor would have sufficed.

According to him, reasons which weighed with the authority dispensing with

enquiry were germane to the issue of impracticability in holding the

enquiry.

Residually, it was submitted that the employer lost confidence on the

employee for his grave acts of misconduct, which had adversely affected the

image and reputation of the employer as the incident took place in the

presence of valued customers, some of whom were foreign customers. If the

High Court felt that the dismissal was untenable in the absence of enquiry

at the most it could have directed enquiry before dismissal order was

effectuated. The dismissal order could not have, in any event, been set

aside without any such direction. These aspects have also to be considered

along with the plea relating to loss of confidence.

In response, learned counsel for the respondent, employee submitted that

the facts are tellate and the background highlighted by the respondent in

the writ petition clearly shows that management was bent upon dismissing

him for his union activities. That was sufficient to prove mala fides and

even if no particular person was impleaded, the management acted in unison

through some, of its officers for his dismissal from employment. It was

submitted that the High Court was correct in holding that the order of

dismissal was illegal.

It was submitted that though there was no assertion in the writ petition

that the alleged incident did not take place, the same was on account of

the fact that the employee was not aware of the alleged incident. In fact,

the order dispensing with enquiry surfaced much later and in the rejoinder

affidavit it was pleaded. In respect of the plea relating to loss of

confidence, it was submitted that such a stock plea cannot be permitted to

be raised, as every employer can take the plea and thereby crush the

employee's right to raise legitimate demands through unions. Finally, it

was submitted that there has been a long passage of time and it would not

be appropriate, even if it is conceded that there were some infirmities in

the order of High Court, to start the process afresh.

It would be appropriate to take not of the order dispensing with enquiry

which forms the Karnei of the dispute. The reasons recorded by the

concerned authority so far as relevant are as follows:

xxx xxx xxx

xxx

"(a) The delinquents have taken the extreme step of freely using abusive

language and assaulting Shri S.L. Gupta right in the centre of the

activities of the Corporate office of the company. With such high-handed

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and recalcitrant attitude of the delinquents, I am convinced that they can

indulge in such intimidating and violent acts against other employees when

they come forward to give evidence during the courage of the enquiry. It

will therefore be difficult to hold a proper enquiry and witnesses may not

come forward to give frank and true evidence.

(b) The holding of the enquiry will take some time and with the attitude

of the delinquents mentioned above, I am convinced, that they will continue

to indulge in such violent activities which will seriously disrupt the

functioning of the company apart from affecting the safety of the

employees.

(c) The delinquents have threatened the life of the senior officer of the

rank of a manager in scale Rs. 1500-2000 openly in the office premises

after hurling abuses. This assault appears to have been intentional and

deliberately executed. It can reasonably be inferred that the delinquents

can resort to such methods against other higher officers also in case an

enquiry is held."

Learned counsel for the appellant fairly submitted that merely because the

enquiry would have taken some time, same cannot be a ground for dispensing

with enquiry He, however, highlighted other grounds i.e. as contained in

clause (a) above. According to him, the aggressive and violent manner in

which employee were threatened leads to an irresistible conclusion that

witnesses would not have come forward to give evidence during the course of

enquiry. Such a conclusion would not be a valid ground for dispensing with

enquiry in all cases. If there is material with the concerned authority

that there is likelihood of witnesses not coming forward due to threats,

coercion, undue influence etc. certainly it would, be a germane ground for

dispensing with enquiry, and to hold that it would not be possible to hold

a fair enquiry. Except making a bald statement that charged employee can

indulge in intimidating and violent acts persons would not come forward,

there is no other material. On the basis of a presumptuous conclusion, the

concerned authority should not have dispensed with enquiry. As indicated

above, if there exists material and basis for coming to a conclusions, same

has to be specifically dealt with. If such material exists certainly it

would be a valid ground for dispensing with enquiry. That is an aspect

which relates to impracticability of holding an enquiry.

It is not in dispute that under the Indian Railway Construction Co. Ltd.

(Conduct, Discipline and Appeal) Rules, 181 (hereinafter referred to as

'the Rules') the disciplinary authority could dispense with an enquiry.

Reasons are to be recorded in writing and the authority is to be satisfied

that it is not reasonably practicable to hold an enquiry in the manner

prescribed in the rules. The Rule 30 reads as follows.

"Rule 30: Special Procedure in Certain Cases.

Notwithstanding anything contained in Rule 25 or 26 or 27, the disciplinary

authority may impose any of the penalties specified in Rule 23 in any of

the following circumstances:

(i) xxx xxx

xxx

(ii) Where the disciplinary, authority is satisfied for reason to be

recorded by it in writing that it is not reasonably practicable to hold an

enquiry in the manner provided in these rules."

It is also not in dispute that one of the penalties specified in Rule 23 is

dismissal from service.

It is fairly well settled that the power to dismiss an employee by

dispensing with an enquiry is not be exercised so as to circumvent the

prescribed rules. The satisfaction as to whether the facts exist to justify

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dispensing with enquiry has to be of the disciplinary authority. Where two

views are possible as to whether holding of an enquiry would have been

proper or not, it would not be within the domain of the Court to substitute

its view for that of the disciplinary authority as if the Court is sitting

as an appellate authority over the disciplinary authority. The

contemporaneous circumstances can be duly taken note of in arriving at a

decision whether to dispense with an enquiry or not. What the High Court

was required to do was to see whether there was any scope for judicial

review of the disciplinary authority's order dispensing with enquiry. The

focus was required to be on the impracticability or otherwise of holding

the enquiry.

One of the points that falls for determination is the scope for judicial

interference in matters of administrative decisions. Administrative action

is stated to be referable to broad area of Government activities in which

the repositories of power may exercise every class of statutory function of

executive, qusai-legislative and quasi-judicial nature. It is trite law

that exercise of power, whether legislative or administrative, will be set

aside if there is manifest error in the exercise of such power or the

exercise of the power is manifestly arbitrary See State of U.P. and Ors. v.

Renusagar Power Co. and Ors., AIR [1988] SC 1737. At one time, the

traditional view in England was that the executive was not answerable where

its action was attributable to the exercise of prerogative power. Professor

De Smith in his classical work "Judicial Review of Administrative Action"

4th Edition at pages 285-287 states the legal position in his own terse

language that the relevant principles formulated by the Courts may be

broadly summarized as follows. The authority in which a discretion is

vested can be compelled to exercise that discretion, but not to exercise it

in any particular manner. In general, a discretion must be exercised only

by the authority to which it is committed. That authority must genuinely

address itself to the matter before it; it must not act under the dictates

of another body or disable itself from exercising a discretion in each

individual case. In the purported exercise of its discretion, it must not

do what it has been forbidden to do, nor must it do what it has not been

authorized to do. It must act in good faith, must have regard to all

relevant considerations and must not be influenced by irrelevant

considerations, must not seek to promote purposes alien to the letter or to

the spirit of the legislation that gives it power to act, and must not act

arbitrarily or capriciously. These several principles can conveniently be

grouped in two main categories: (i) failure to exercise a discretion, and

(ii) excess or abuse of discretionary power. The two classes are not,

however, mutually exclusive. Thus, discretion may be improperly fettered

because irrelevant considerations have been taken into account, and where

an authority hands over its discretion to another body it acts ultra vires.

The present trend of judicial opinion is to restrict the doctrine of

immunity from judicial review to those class of cases which relate to

deployment of troupes, entering into international treaties etc. The

distinctive features of some of these recent cases signify the willingness

of the Courts to assert their power to scrutinize the factual basis upon

which discretionary powers have been exercised. One can conveniently

classify under three heads the grounds on which administrative action is

subject to control by judicial review. The first ground is 'illegality' the

second 'irrationality', and the third 'procedural impropriety'. These

principles were highlighted by Lord Diplook in Council of Civil Service

Unions, v. Minister for the Civil Service, (1984) 3 All. ER. 935, (commonly

known as CCSU Case). If the power has been exercised on a non-consideration

or non-application of mind to relevant factors, the exercise of power will

be regarded as manifestly erroneous. If a power (whether legislative or

administrative) is exercised on the basis of facts which do not exist and

which are patently erroneous, such exercise of power will stand vitiated.

(See Commissioner of Income tax v. Mahindra and Mahindra Ltd., AIR (1984)

SC 1182). The effect of several decisions on the question of jurisdiction

have been summed up by Grahame Aldows and John Alder in their book

"Applications for Judicial Review, Law and Practice" thus:

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"There is a general presumption against ousting the jurisdiction of the

Courts, so that statutory provisions which purport to exclude judicial

review are construed restrictively. There are, however, certain areas of

governmental activity, national security being the paradigm which the

Courts regard themselves as incompetent to investigate, beyond an initial

decision as to whether the government's claim is bonafide. In this kind of

non-justiciable area judicial review is not entirely excluded, but very

limited. It has also been said that powers conferred by the Royal

Prerogative are inherently unreviewable but since the speeches of the House

of Lords in council of Civil Service Unions v. Minister for the Civil

Service this is doubtful. Lords Diplock, Seaman and Roskili appeared to

agree that there is no general distinction between poweres, based upon

whether their source is statutory or Prerogative but that judicial review

can be limited by the subject matter of a particular power, in that case

national security. Many prerogative powers are in fact concerned with

sensitive, non-justiciable areas, for example, foreign, but some are

reviewable in principle, including the prerogatives relating to the civil

service where national security is not involved. Another non-justiciable

power is the Attorney General's prerogative to decide whether to institute

legal proceedings on behalf of the public interest."

(Also see Padfield v. Minister of Agriculture, Fisheries and Food, LR

(1968) AC 997).

The Court will be slow to interfere in such matters relating to

administrative functions unless decision is tainted by any vulnerability

enumerated above ; like illegality, irrationality and procedural

impropriety. Whether action falls within any of the categories has to be

established. Mere assertion in that regard would not be sufficient.

The famous case commonly known as "The Wednesbury's case" is treated as the

landmark so far as laying down various basic principles relating to

judicial review of administrative or statutory direction.

Before summarizing the substance of the principles laid down therein we

shall refer to the passage from the judgment of Lord Greene in Associated

Provincial Picture Houses v. Wednesbury Corpn., [1948] I KB 223 at p. 229.

It reads as follows:

"..........It is true that discretion must be exercised reasonably. Now

what does that mean? Lawyers familiar with the phraseology used in relation

to exercise of statutory discretions often use the word 'unreasonable' in a

rather comprehensive sense. It has frequently been used and is frequently

used as a general description of the things that must not be done. For

instance, person entrusted with a discretion must, so to speak, direct

himself properly in law. He must call his own attention to the matters

which he is bound to consider. He must exclude from his consideration

matters which are irrelevant to what he has to consider. If he does not

obey those rules, he may truly be said, and often is said, to be acting

'unreasonably, Similarly, there may be something so absurd that no sensible

person could even dream that it lay within the powers the

authority...........In another, it is taking into consideration extraneous

matters. It is unreasonable that it might almost be described as being done

in bad faith; and in fact, all these things run into one another."

Lord Greene also observed (KB p. 230 All ER p. 683)

".....it must be proved to be unreasonable in the sense that the court

considers it to be a decision that no reasonable body can come to. It is

not what the court considers unreasonable...........The effect of the

legislation is not to set up the court as an arbiter of the correctness of

one view over another." (emphasis supplied).

Therefore, to arrive at a decision on "reasonableness" the Court has to

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find out if the administrator has left out relevant factors or taken into

account irrelevant factors. The decision of the administrator must have

been within the four corners of the law, and not one which no sensible

person could have reasonably arrived at, having regard to the above

principles, and must have been a bonafide one. The decision could be one of

many choices open to the authority but it was for that authority to decide

upon the choice and not for the Court to substitute its view.

The principles of judicial review of administrative action were further

summarized in 1985 by Lord Diplock in CCSU case as illegality, procedural

impropriety and irrationality. He said more grounds could in future become

available, including the doctrine of proportionality which was a principle

followed by certain other members of the European Economic Community. Lord

Diplock observed in that a case as follows:

"..........Judicial review has I think, developed to a stage today when,

without reiterating any analysis of the steps by which the development has

come about, one can conveniently classify under three heads the grounds on

which administrative action is subject to control by judicial review. The

first ground I would call 'illegality', the second 'irrationality' and the

third 'procedural impropriety'. That is not to say that further development

on a case-by-case basis may not in course of theme add further grounds. I

have in mind particularly the possible adoption in the future of the

principle of 'proportionality' which is recognized in the administrative

law of several of our fellow members of the European Economic Community."

Lord Diplock explained "irrationality" as follows:

"By 'irrationality' I mean what can by now be succinctly referred to as

Wednesbury unreasonableness." It applies to a decision which is to

outrageous in its definance of logic or of accepted moral standards that no

sensible person who had applied his mind to the question to be decided

could have arrived at it."

In other words, to characterize a decision of the administrator as

"irrational" the Court has to hold, on material, that it is a decision "so

outrageious" as to be in total defiance of logic or moral standards.

Adoption of "proportionality" into administrative law was left for the

future.

These principles have been noted in aforesaid terms in Union of India and

Anr. v. G. Ganayutham, [1997] 7 SCC 463. In essence, the test is to see

whether there is any infirmity in the decision making process and not in

the decision itself.

Neither learned Single Judge nor the Division Bench has examined the

question as to practicability or otherwise of holding the enquiry in the

correct perspective. They have proceeded on the footing as if the order was

mala fide; even when there was no specific allegation of mala fides and

without any specific person against whom mala fides were alleged being

impleaded in the proceedings. Except making a bald statement regarding

alleged victimization and mala fides no specific details were given.

Doubtless, he who seeks to invalidate or nullify any act or order must

establish the charge of bad faith, an abuse or a misuse by the authority of

its powers. While the indirect motive or purpose, or bad faith or personal

ill-will is not to be held established except on clear proof thereof, it is

obviously difficult to establish the state of a man's mind, for that is

what the employee has to establish in this case, though this may sometimes

be done. The difficulty is not lessened when one has to establish that a

person apparently acting on the legitimate exercise of power has, in fact,

been acting malafide in the sense of pursuing an illegitimate aim. It is

not the law that mala fide in the sense of improper motive should be

established only by direct evidence. But it must be discernible from the

order impugned or must be shown from the established surrounding factors

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which preceded the order. If bad faith would vitiate the order, the same

can, in our opinion, be deduced as a reasonable and inescapable inference

from proved facts. (See S. Pratap Singh v. The State of Punjab, [1964] 4

SCR 733). It cannot be overlooked that burden of establishing mala fides is

very heavy on the person who alleges it. The allegations of mala fides are

often more easily made than proved, and the very seriousness of such

allegations demand proof of a high order of credibility. As noted by this

Court in R.P. Royappa v. State of Tamil Nadu and Anr., AIR (1974) SC 555,

Courts would be slow to draw dubious inferences from incomplete facts

placed before it by a party, particularly when the imputations are grave

and they are made against the holder of an office which has a high

responsibility in the administration.

The approach of the High Court, therefore, was not proper. But at the same

time, the reasons which weighed with the disciplinary authority to dispense

with enquiry equally do not appear to be proper.

Normally in such cases the proper course would be to direct authorities to

hold an enquiry, if they so desire. But two significant factors need to be

considered. One is long passage of time and the other alleged loss of

confidence.

While learned counsel for the respondent submitted that passage of time is

a factor which would warrant dismissal of the appeal and confirmation of

the High Court's order, learned counsel for the appellant submitted that

any undesirable employee in an establishment is like a rotten apple in the

pack of apples, and is likely to contaminate the whole pack. Even when he

was on probation, he assaulted a senior officer, created a scene of terror,

co-employees were threatened and even a lady employee was not spared. Union

activities are meant to present views of employees before the employer for

their consideration; but same is not intended to be done in a violent form.

Decency and decorum are required to be maintained. We find substance in the

plea of learned counsel for the appellant that an employee even if the

claims to be a member of the employees" union has to act with sense of

discipline and decorum. Presentation of demands relating to employees

cannot be exhibited by muscle power. It must be borne in mind that every

employee is a part of a functioning system which may collapse if its

functioning is affected improperly. For smooth functioning, every employer

depends upon a disciplined employees' force. In the name of presenting

demands they cannot hold the employer to ransom. At the same time the

employer has a duty to look into and as far as practicable, obviate the

genuine grievance of the employees. The working atmosphere should be

cordial, as that would be in the best interest of the establishment. Unless

an atmosphere of cordiality exists there is likelihood of inefficient

working and that would not be in the interest of the establishment and

would be rather destructive of common interest of both employer and

employees.

If an act or omission of an employee reflects upon his character,

reputation, integrity or devotion to duty or it an unbecoming act,

certainly the employer can take action against him. In this context,

reference may be made to the following observations of Lopes C.J. In Perce

v. Foster, (1866) 17 QBD 536, p. 542):

"If a servant conducts himself in a way inconsistent with the faithful

discharge of his duty in the service, it is misconduct which justifies

immediate dismissal. That misconduct, according to my view, need not be

misconduct in the carrying on of the service of the business. It is

sufficient if it is conduct which is prejudicial or is likely to be

prejudicial to the interests or to the reputation of the master, and the

master will be justified, not only if he discovers it at the time, but also

if he discovers it afterwards, in dismissing that servant."

This view was re-iterated by a three-Judge Bench of this Court in Union of

India and Ors. v. K.K. Dhawan, AIR (1993) SC 1478.

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Here, the alleged acts have not been disbelieved by the High Court. They

are prima facie acts of misconduct. Therefore, the employer can

legitimately raise a plea of losing confidence on the employee, warranting

his non-continuance in the employment. The time gap is another significant

factor.

Question then would be how the conflicting interests can be best balanced.

By an interim order dated 5.5.2000 the appellant was directed to reinstate

the respondent subject to interim payment of Rupees 3 lacs towards the back

wages. Direction for reinstatement does not automatically entitle an

employee to full back wages. In Hindustan Tin Works Pvt. Ltd. v. The

Employees of M/s. Hindustan Tin Works Pvt. Ltd. and Ors., [1979] 2 SCC 80,

a three-Judge Bench of this Court laid down : "In the very nature of things

there cannot be straight-jacket formula forwarding relief of back wages.

All relevant consideration will enter the verdict. More or less, it would

be a motion addressed to the discretion of the Tribunal. Full back wages

would be the normal rule and the party objecting to it must establish the

circumstances necessitating departure. At that stage the Tribunal will

exercise its discretion keeping in view all the relevant circumstances. But

the discretion must be exercised in a judicial and judicious manner. The

reason for exercising discretion must be cogent and convincing and must

appear on the face of the record. When it is said that something is to be

done within the discretion of the authority, that something is to be done

according to the rules of reason and justice, according to law and not

humour. It is not to be arbitrary, vague and fanciful but legal and regular

(see Susannah Sharp v. Wakefleld, (1891) AC 173, 179)."

In P.G.I, of Medical Education and Research, Chandigarh v. Raj Kumar,

[2001] 2 SCC 54, this Court found fault with the High Court in setting

aside the award of the Labour Court which restricted the back wages to 60%

and directing payment of full back wages. It was observed thus:

"The Labour Court being the final Court of facts came to a conclusion that

payment of 60% wages would comply with the requirement of law. The finding

of perversity or being erroneous or not in accordance with law shall have

to be recorded with reasons in order to assail the finding of the Tribunal

or the Labour Court. It is not for the High Court to go into the factual

aspects of the matter and there is an existing limitation on the High Court

to that effect."

Again at paragraph 12, this Court observed:

"Payment of back wages having a discretionary element involved in it has to

be dealt with in the facts and circumstances of each case and no straight-

jacket formula can be evolved, though, however, there is statutory sanction

to direct payment of back wages in its entirety. (See Hindustan Motors Ltd.

v. Tapan Kumar Bhattacharya and Anr., (2002) AIR SCW 3008)". In our

considered opinion, a further payment of Rupees 12 lacs towards back wages

and for giving effect to the order of dismissal on the ground of loss of

confidence would suffice. The total amount of Rupees 15 lacs shall be in

full and final settlement of all claims. The payment is to be paid within

eight weeks from today after making permissible deductions statutorily

provided" and/or adjustments, if any, to be made.

The appeal is accordingly disposed of in the above terms.