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PETITIONER:

WORKMEN OF HINDUSTAN STEEL LTD AND ANR

Vs.

RESPONDENT:

HINDUSTAN STEEL LTD. AND ORS.

DATE OF JUDGMENT12/12/1984

BENCH:

DESAI, D.A.

BENCH:

DESAI, D.A.

KHALID, V. (J)

CITATION:

1985 AIR 251 1985 SCR (2) 428

1984 SCC Supl. 554 1984 SCALE (2)927

CITATOR INFO :

RF 1985 SC 722 (4)

R 1986 SC1571 (58,67)

E&F 1991 SC 101 (5,20,88,174,195,223,239,263,2

ACT:

Industrial Disputes Act 1947 Schedule 2 Item No. 3

and Schedule 2 Item 6.

Public Scctor Undertaking-Standing Order No. 32-

General Manager empowered to dismiss workman without holding

an enquiry if 'inexpedient or against the interests of

security to continue to employ the workman-Such Standing

Order whether violative of the principles of natural

justice-Dismissal of employee without holding domestic

enquiry under the Standing Order Whether valid, legal and

permissible.

Constitution of India 1950 Article 311(Z) provisos (b)

and (c).

Power of dismiss civil servant without holding

inquiry-When arises- Introduction of safeguard-That

authority must specify reasons why not reasonable

practicable to holding inquiry.

Practice and Procedure-Labour disputes-Adjudication

of-Dismissal of employee-Decision of employer to dispense

with domestic enquiry questioned- Deputy of employer to

satisfy the court that holding of enquiry would be counter

productive or cause irreparable and irreversible damage.

HEADNOTE:

Standing Order 31 of the 1st Respondent/Public Sector

Undertaking prescribed a detailed procedure for dealing with

cases of misconduct; and for imposing major penalty, the

employer had to draw up a chargesheet and give an

opportunity to the delinquent workman to make his

representation within 7 days. If the allegations were

controverted, an enquiry had to be held by an officer to be

nominated by the management and in such an enquiry

reasonable opportunity of explaining and defending the

alleged misconduct had to be given to the workman.

Suspension of the delinquent workman pending enquiry was

also permitted. At the end of the enquiry, if the charges

were held proved, and it was provisionally decided to impose

a major penalty, tho delinquent workman bad to be afforded a

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further reasonable opportunity to represent why the penalty

should not be imposed on him.

Standing Order 32 provided for a special procedure in

case of a workman was convicted for a criminal offence in a

court of law or where the General Manager was satisfied for

reasons to be recorded in writing that it was inexpedient or

against the interests of security to continue to employ the

workmen', viz., the workman could be removed or dismissed

from service without following the procedure laid down in

Standing Order No. 31.

429

The appellant an Assistant in the 1st Respondent-

undertaking was A removed from service on the ground that it

was no longer expedient to employ him. The management

dispensed with the departmental enquiry, after looking into

the secret report of one of their officers that the

appellant had misbehaved with the wife of an employee and

that a complaint in respect thereof had been lodged with the

police.

In the reference to the Industrial Tribunal, the

Tribunal held that as the employer dispensed with the

disciplinary enquiry in exercise of the power conferred by

Standing Order 32, it could not be said that the dismissal

from service was not justified, and that if there were

allegations of misconduct, the employer was quite competent

to pass an order of removal from service without holding any

enquiry any in view of the provisions contained in Standing

Order 32, and rejected the reference.

Allowing the appeal, by the employee to this Court,

^

HELD: 1. The reasons for dispensing with the enquiry

do not spell out what was the nature of the misconduct

alleged to have been committed by the appellant and what

prompted the General Manager to dispense with the enquiry.

[437D]

2. As there was no justification for dispensing with

the enquiry, imposition of penaly of dismissal without the

disciplinary enquiry as contemplated by Standing Order 31 is

illegal and invalid. [437F]

3 The respondent shall recall and cancel the order

dated August 24, 1970 removing the appellant from service

and reinstate him and on the same day the appellant shall

tender resignation of his post which shall be accepted by

the respondent. The respondent shall pay as and by way of

back wages and future wages, a sum of Rs. l.5 lakhs to the

appellant within 2 months which shall be spread over from

year to year commencing from the date of removal from

service. The appellant shall be entitled to relief under

Section 89 of the Income-tax Act, 1961 for which he shall

make the necessary application to the appropriate authority.

who would consider granting of relief. [438C-D;F] F

4. Where an order casts a stigma or affects

livelihood, before making the order, principles of natural

justice in a reasonable opportunity to present one s case

and controvert the adverse evidence must have full play.

Even he Constitution which permits dispensing with the

inquiry under Article 311 (2) a safeguard is introduced that

the concerned authority must specify reasons for its

decision why it was not reasonably practicable to hold the

inquiry. [435 A-B]

5. (i) Standing Order 32, nowhere obligates the

General Manager to record reasons for dispensing with the

inquiry as prescribed by Standing Order 31. On the contrary,

the language of Standing Order 32 enjoins a duty upon the

General Manager to record reasons for his satisfaction why

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it was inexpedient ar against the interest of the security

of the State to continue to employ the workman. Ressons for

dispensing with the enquiry an reasons for not continuing to

employ the workman stand, wholly apart from each other.

[435C-D]

430

(ii) A Standing Order which confers such arbitrary.

uncanalised and drastic power to dismiss an employee by

merely stating that it is inexpedient or against the

interest of security to continue to employ the workman is

violative of the basis c requirement of natural justice, as

tho General Manger can impose penalty of such a drastic

nature as to affect the livelihood and put a stigma on the

character of the workman without recording reasons why

disciplinary enquiry is dispensed with and, what was the

misconduct 13 alleged against the employee. [435D-E]

6 When the decision of the employer to dispense with

the enquiry is questioned, the employer must be in a

position to satisfy the Court that holding of the enquiry

will be either counter-productive or may cause such

irreparable and irreversible damage which in the facts and

circumstances of the case need not be suffered- This minimum

requirement cannot and should not be dispensed with. [436B-

C]

L. Michael and Anr. v. M/s. Johnston Pumps India Ltd

[1975] 3 SCR 489, referred to.

7. It is time for the 1st respondent-public sector

undertaking to recast Standing Order 32, and to bring it in

tune with the philosophy of the Constitution failing which

the vires of the said standing Order would have to be

examined in an appropriate proceeding. [438D]

JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1 1 37

of 1981 .

From the Award dated 22nd December, 1978 of the 9th

Industrial Tribunal, West Bengal in Industrial Case No. X-

7/74 (G.O. No. 8231-IR-IR-IOL-3 (K)/73.

R.K. Garg, P.K. Chakravarti and A K. Ganguli for

the Appellants.

G.B. Pai, S. Chatterjee, Altaf Ahmed and A K Panda for

the Respondents.

The Judgment of the Court was delivered by

DESAI, J. In exercise of the power conferred by Sec.

10 of the Industrial Disputes Act, 1947, the Government of

the State of West Bengal as an appropriate Government

referred the following dispute to the Ninth Industrial

Tribunal, West Bengal for adjudication. The reference reads

as under:

"Whether the termination of services of Shri Manas

Kumar Mukherjee is justified ? To what relief, if any is he

entitled ?"

Hindustan Steel Ltd. ('Employer' for short)

dismissed Manas Kumar Mukherjee('Workman' for short)

without holding any inquiry

431

and without giving any opportunity to the workman to

question or A correct the allegation of misconduct levelled

against him and in violation of principles of natural

justice. The employer tried to sustain its action by

invoking its powers under Standing Order 32 of the certified

Standing Orders of the Hindustan Steel Ltd. S.O. 32 reads as

under: B

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"32. Special Procedure in certain cases.

Where a workman has been convicted for a criminal

offence in a Court of Law or where to General Manager

is satisfied, for reasons to be recorded in writing,

that it is inexpedient or against the interests of

security to continue to employ the workman, the workman

may be removed or dismissed from service without

following the procedure laid down in Standing Order

31."

S.O. 31 prescribed detailed procedure for dealing with

cases of misconduct. Briefly stated, the procedure

prescribed in S.O. 31 for imposing major penalty is that the

employer has to draw up a charge-sheet and give an

opportunity to the delinquent workman to make his

representation within seven days. If the allegations are

controverted, an enquiry has to be held by an officer to be

nominated by the management and in such an enquiry

reasonable opportunity of explaining and defending the

alleged misconduct must be given to the workman. The

delinquent workman may also be given the assistance of a

fellow employee. The procedure also permits suspension of

the delinquent workman pending enquiry. At the end of the

enquiry. if the charges are held proved, and it is

provisionally decided to impose major penalty, the

delinquent workman has to be afforded a further resalable

opportunity to represent why the penalty should not be

imposed on him. According to the employer it can dispense

with such an enquiry in exercise of the power conferred by

S.O. 32. The scope and ambit of S.O. 32, will be presently

examined.

The Tribunal held that as the employer dispensed with

the disciplinary enquiry in exercise of the power conferred

by S.O. 32, it cannot be said that dismissal from service

was not justified. The Tribunal observed that even if there

were allegations of misconduct, the employer was quite

competent to pass an order of removal from service without

holding any enquiry in view of the provision con-

432

tained in S.O. 32- The Tribunal concluded that the employer

accused the workman of committing misconduct and proceeded

to pass the order of removal from service without holding

any enquiry into the allegations of misconduct, it cannot be

said to be a colorable exercise of power and the workman

would not be entitled to any relief. The Tribunal

accordingly rejected the reference. Hence this appeal by

special leave.

The only question that must engage our attention is

what is the scope and ambit of S.O 32. It has already been

extracted. Upon its true construction the standing Order

does not provide that for reasons to be recorded in writing,

an enquiry into misconduct can be dispensed with. S.O. 32

clearly confers power upon the General Manager that on his

being satisfied that it is inexpedient or against the

interest of security to continue to employ the workman, then

for reasons to be recorded in writing the workman may be

removed or dismissed from service without following the

procedure laid down in Standing Order 31. This archaic

standing order reminiscent of the days of hire and fire is

relied upon by a public sector undertaking to sustain an

utterly unsustainable order and to justify an action taken

in violation of the principles of natural justice, an action

which has the- effect of denying livelihood and casting a

stigma. One can appreciate-that in a given situation, and

enquiry into misconduct may be counter-productive.

Constitution itself contemplates such a situation when it

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enumerates siltations in which a punishment of dismissal,

removal or reduction in rank can be imposed without holding

a disciplinary enquiry. Let it be extracted:

"311. Dismissal, removal or reduction in rank of

persons employed in civil capacities under the Union or a

State-

( 1) ... ... ... ... ... ... ... ... ... ... ...

(2) No such person as aforesaid/shall be

dismissed or removed or reduced in rank except after an

inquiry in which he has been informed of the charges

against him and given a reasonable opportunity of being

heard in respect of those charges:

... ... ... ... ... ... ... ... ...

... ... ... ... ... ... ... ... ...

433

Provided further that this clause shall not

apply- A

(a) where a person is dismissed or removed or reduced

in rank on the ground ' of conduct which has led to his

conviction on a criminal charge: or

(b) where the authority empowered to dismiss or

remove a person or to reduce him in rank is satisfied

that for some reason, to be recorded by that authority

in writing, it is not reasonably practicable to hold

such inquiry; or

(c) where the President or the Governor as the case

may be, is satisfied that in the interest of the

security of the State it is not expedient to hold such

inquiry."

A bare perusal of the situations and contingencies in

which a disciplinary enquiry affording a reasonable

opportunity of being heard before imposing the enumerated

penalty can be dispensed with will clearly show that the

power is not given to dismiss remove or reduce in rank the

delinquent worker but the power conferred by the afore-

mentioned provision is to dispense with an enquiry before

imposing major penalty. Sub-art- (3) of Art- 311 provides

that 'if, in respect of any such person as aforesaid, a

question arises whether- it is reasonably practicable to

hold such inquiry as is referred to in clause (2). the

decision thereon of the authority empowered to dismiss or

remove such person or to reduce him in rank shall be final.'

Now the three situations contemplated by the provision arc

such that holding of an enquiry would be counter-productive.

Where the penalty of dismissal, removal or reduction in rank

is to be imposed on the ground of a conduct which has led

to his conviction on a criminal charge, obviously, the

enquiry will be superfluous or a repeat performance because

a judicial tribunal has held the charges proved. But where

the authority empowered to impose the penalty is satisfied

for reasons to be recorded by it in writing to dispense with

an enquiry, the reasons so recorded must ex-facie show that

it was not reasonably practicable to hold a disciplinary

enquiry. Similarly, where in the interest of the security of

the State, the President or the Governor, as the case may

be, is satisfied that it is not expedient to hold such

enquiry, the same can be dispensed with. In the last

mentioned situation, the highest executive of the country,

the President and the highest executive of State the

Governor alone is entitled to dispense with the inquiry, if

it is satisfied that in the interest of the security of the

State, it is not

434

expedient to hold such enquiry Dispensing with the enquiry

in the first and third situation does not present a

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difficulty because in the first situation there is a

conviction by a criminal court and in the third situation,

the highest executive in the Centre and the State is

empowered to dispense with the enquiry. It is in the second

fact situation that one must evaluate the width of

discretionary power to dispense with enquiry. The appointing

authority is invested with power to dispense with enquiry.

And in case of persons belonging to Class IV services, the

appointing authority may be some-one in the lower

administrative hierarchy and such an officer is invested

with such draconian powers. Where such a power is conferred,

on an authority entitled to impose penalty of dismissal or

removal or reduction in rank, before it can dispense with

the inquiry, it must be satisfied for reasons to be recorded

in writing that it is not reasonably practicable to hold

such an enquiry. Power to dispense with enquiry is conferred

for a purpose and to effectuate the purpose power can be

exercised. But power is hedged in with a condition of

setting down reasons in writing why power is exercised.

Obviously therefore the reasons which would permit exercise

of power must be such as would clearly spell out that the

inquiry if held would be counter-productive. The duty to

specify by reasons the satisfaction for holding that the

inquiry was not reasonably practicable cannot be dispensed

with. The reasons must be germane to the issue and would be

subject to a limited-judicial review. Undoubtedly Sub-art.

(3) of Art. 311 provides that the decision of the authority

in this behalf is final. This only mean that the Court

cannot inquire into adequacy or sufficiency of reasons. But

if the reasons ex-facie are not germane to the issue namely

of dispensing with enquiry the Court in a petition for a

writ of certiorari can always examine reasons ex-facie and

if they are not germane to the issue record a finding that

the pre-requisite for exercise of power having not been

satisfied, the exercise of power was bad or Without

jurisdiction. If the court is satisfied that the reasons

which prompted the concerned authority to record a finding

that it was not reasonably practicable to hold the enquiry,

obviously the satisfaction would be a veneer to dispense

with the inquiry and the court may reject the same. What is

obligatory is to specify the reasons for the satisfaction of

the authority that it was not reasonably practicable to hold

such an inquiry. Once the reasons are specified and are

certainly subject to limited judicial review as in a writ

for certiorari, the court would examine whether the reasons

were germane to the issue or was merely a cloak, device or a

pretence to dispense with the inquiry

435

and to impose the penalty. Let it not be forgotten what is

laid down A by a catena of decisions that where an order

casts a stigma or affects livelihood before making the

order, principles of natural justice namely a reasonable

opportunity to present one's case and controvert the adverse

evidence must have full play Thus even where the

Constitution permits dispensing with the inquiry, a

safeguard is introduced that the concerned authority must

specify reasons for its decision why it was not reasonably

practicable to hold the inquiry.

Turning to S.O 32, it nowhere obligates the General

Manager to record reasons for dispensing with the inquiry as

prescribed by S.O. 31. On the contrary, the language of S O.

32 enjoins a duty upon the General Manager to record reasons

for his satisfaction why it was inexpedient or against the

interest of the security of the State to continue to employ

the workman. Reasons for dispensing with the inquiry and

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reasons for not continuing to employ the workman stand

wholly apart from each other. A Standing Order which confers

such arbitrary, uncanalised and drastic power to dismiss an

employee by merely stating that it is inexpedient or against

the interest of the security to continue to employ the

workman are violative of the basic requirement of natural

justice inasmuch as that the General Manager can impose

penalty of such a drastic nature as to affect the livelihood

and put a stigma on the character of the workman without

recording reasons why disciplinary inquiry is dispensed with

and what was the misconduct alleged against the employee. It

is time for such a public sector undertaking as Hindustan

Steel Ltd to recast S.O. 32 and to bring it in tune with the

philosophy of the Constitution failing which it being other

authority and therefore a State under Art. 12 in an

appropriate proceeding, the vires of S O. 32 will have to be

examined. It is not necessary to do so in the present case

because even on the terms of S.O. 32, the order made by the

General Manager is unsustainable.

The view we are taking gets some support from a

decision of this Court. In a slightly different situation,

this Court in L. Michael & Anr. v. M/s Johnston Pumps India

Ltd ll) observed that discharge simplicitor on the ground of

loss of confidence when questioned before a court of law on

the ground that it was a colorable exercise of power or it

is a mala fide action, the employer must disclose that he

has acted in good faith and for good and objective reasons.

Mere ipse dixit of the employer in such a situation is of no

significance. Where a disciplinary enquiry is dispensed with

on the specious plea that it was not reasonable practicable

to hold one and a penalty

(1) [1975] 3 S.C.R.489.

436

of dismissal or removal from service is imposed, if the same

is challenged on the ground that it was a colorable exercise

of power or mala fide action, the same situation would

emerge and the employer must satisfy the Court the good and

objective reasons showing both proof of misconduct and valid

and objective reasons for dispensing with the enquiry. In

our opinion, when the decision of the employer to dispense

with enquiry is questioned, the employer must be in a

position to satisfy the Court that holding, of the enquiry

will be either counter-productive or may cause such

ireparable and irreversible damage which in the facts and

circumstances of the case need not be suffered. This minimum

requirement cannot and should not be dispensed with to

control wide discretionary power and to guard against the

drastic power to inflict such a heavy punishment as denial

of livelihood and casting a stigma without giving the

slightest opportunity to the employee to controvert the

allegation and even without letting him know what is his

misconduct.

Turning to the facts of the case, a bare perusal of

the impugned order is both instructive and provides ample

material for pointing out how the drastic power can be

arbitrarily exercised without keeping in view the

prerequisite to be satisfied for exercise of the power. The

order reads as under:

" HINDUSTAN STEEL LIMITED

DURGAPUR STEEL PLANT

Ref. No. Order/PF/MN 1215

24th August, 1970

O R D E R

Having considered the matter fully, I am

satisfied that it is no longer expedient to employ Shri

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Manas Mukharjee, Assistant, Order Department, Durgapur

Steel Plant any further.

It is therefore ordered that Shri Manas Mukherjee

be removed from the service of the Company with effect

from 24. 8. 1970.

He is allowed/three months' salary which he may

collect from the cash section of the Finance Department

by 26.8.1970.

Sd/

Maj. ,Gon.

Director Ineharge.

437

The expression 'no longer expedient' as used in the

order A clearly spells out the fact that some enquiry was

started. What prompted the General Manager to close the

enquiry, one cannot gather from the order- But our attention

was invited to Ann. R-2 which according to the respondents

specifies the reasons recorded in writing for dispensing

with the enquiry. Briefly, in Ann. R-2, it is stated that

the authority concerned has looked into the secret . report

sent to him by Shri P S- Rao Naidu, Planning & Progress

Officer, Order Deptt. and the comments of DGM thereon. He

has also stated that he has looked into- the report received

from Sr. AO (E) and the copy of the complaint lodged by Smt.

Gita Majumdar, wife of an employee in the plant with the

police. These recitals have been considered sufficient to

dispense with tho enquiry. If Smt. Gita Majurndat did file

a report with the police making accusation against the

appellant, she would have to be examined in the criminal

case. She could have been more conveniently called before

the enquiry officer, and the secret reports remain secret.

The reason for dispensing with the enquiry do not spell out

what was the nature of the misconduct alleged to have been

committed by the appellant and what prompted the General

Manager to dispense with tho enquiry. It is difficult to

hold that the recitals of the order spell out some objective

reasons and the reasons were germane to the question of

dispensing with the enquiry - Frankly speaking, we are not

satisfied in this case that for valid, objective and

relevant reasons, the enquiry was dispensed with.

An attempt was made to urge that some annexures to the

counter-affidavit would show certain complaints received

against; the appellant. We decline to look into them as they

were not given to the appellant in the course of enquiry to

meet or explain the same. We consider them irrelevant at

this stage,

Once we hold that there was DO justification for

dispensing with the enquiry, imposition of penalty of

dismissal without disciplinary enquiry as contemplated by S-

O 31 would be illegal and invalid.

Two options are thereupon open to us. One would be to

permit the General Manager, if he is so minded to hold the

disciplinary enquiry and come to his own decision and the

second would be to remit the matter to the Labour Court to

permit the respondent-employer if it is entitled in law to

substantiate the charges of misconduct before the Tribunal.

The order removing the appellant from service was

passed way back on August 24, 1970. More than 14 years have

rolled by. H

438

In such a situation, to start the whole thing de nevo would

neither be of any help to the appellant nor would be

conducive to the maintenance of discipline in the plant.

Undoubtedly, once a workman is removed from service a stigma

attaches to him, and if the order is held to be not in

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consonance with the provisions of the relevant standing

orders at any rate, the stigma has to be removed

Having given the matter our anxious consideration, we

dispose of the appeal as under

The respondent shall recall and cancel the order

dated August 24, 1970 removing the appellant from service

and reinstate him and on the same day the appellant shall

tender resignation of his post which shall be accepted by

the respondent. The respondent shall pay as and by way of

back wages and future wages, a sum of Rs. 1,50,000 to the

appellant within 2 months from today to be spread over from

year to year commencing from the date of removal from

service. We give one more opportunity to the respondent to

recast its Standing Order 32 within a period of two weeks to

be brought at best in conformity with the second proviso to

sub-art. (2) of Art. 311 failing which its validity will be

re-examined by this Court.

The amount of Rs. 1, 50,000 directed to be paid to the

appellant by the respondent comprises backwages, and all

other allowances admissible to him from year to year from

1970 upto the end of 1984. The amount shall be spread over

from year to year. If because of the lump sum payment as

directed herein the respondent is required to deduct Income-

tax as enjoined by Sec. 192 of the y Income-tax Act, 1961,

the appellant shall be entitled to relief under Sec. 89 of

the Income Tax Act, 1961. For this purpose, the appellant

shall make an application as required by Sec. 89 read with

Rule 21A to the appropriate authority, who would consider

granting of relief to the appellant under Sec. 89 of the

Income-tax Act. The proceeding in this behalf shall be

disposed of within a period of six months. The appeal is

disposed of in these terms with no order as to cost.

N.V.K. Appeal allowed.

439