Case Note & Summary
The Supreme Court considered whether termination of an employee's service by an employer during pendency of the employee's suit, in exercise of a contractual right and absent any interim injunction or undertaking, amounts to contempt of court. The respondent was employed in Hindustan Steel Limited, of which the appellant was Chairman, under a contract that permitted termination by giving three months' notice or three months' pay in lieu without assigning cause. On 21 February 1968 the company issued a notice stating that the respondent's performance and conduct were not good and advising him to seek alternative employment, with an offer of release on payment under a bond with concessions. The respondent filed a suit on 27 May 1968 in the Court of Second Munsif, Asansol, seeking declarations that the notice and earlier disciplinary documents were illegal and void, a declaration of entitlement to promotion, a mandatory injunction for promotion, and a permanent injunction restraining the company from giving effect to the notice. He did not seek an interim injunction, and neither the appellant nor the company gave any undertaking not to terminate his service during pendency of the suit. Subsequently, the company issued a second notice terminating the respondent's service with effect from the date of service and granting three months' pay in lieu of notice. The Calcutta High Court held that the act of giving the second notice amounted to contempt of court because some of the reliefs prayed for would become infructuous and that this would obstruct or interfere with due course of justice. The appellant had tendered an unconditional apology in the High Court, which did not award punishment but directed payment of costs of Rs. 200. On appeal by special leave, the Supreme Court reversed the High Court. The Court reasoned that where a party to a suit terminates the service of the adversary party in honest exercise of contractual rights and in absence of any interim injunction or undertaking, the act does not constitute contempt. The Court noted that the combined reading of the two notices showed the appellant had terminated service in honest exercise of the company's contractual right. The circumstance that some reliefs had become infructuous did not establish contumacy because the respondent could amend the plaint. The Court distinguished cases where statutory rights were exercised bona fide and extended that principle to contractual rights. The unconditional apology did not preclude Supreme Court interference because the High Court had actually held contempt and awarded costs. The appeal was allowed, and the High Court's finding of contempt and cost order were set aside.
Headnote
A) Contempt of Court - Bona Fide Exercise of Contractual Rights - Termination of service pursuant to contract not contempt absent injunction or undertaking - Contempt of Courts Act, 1971, Sections Not mentioned - The appellant terminated respondent's service by notice in accordance with the service contract which allowed termination with three months' notice or pay in lieu without cause. The respondent had neither obtained interim injunction nor any undertaking from appellant or company. Held that the act did not constitute contempt; bona fide exercise of a contractual right is not contempt of court (Paras 653-654). B) Contempt of Court - Effect of Reliefs Becoming Infructuous - Rendering some plaint reliefs infructuous does not prove contumacy - Contempt of Courts Act, 1971, Sections Not mentioned - The circumstance that one or more of the reliefs claimed in the plaint became infructuous due to termination did not establish contumacy because the respondent was free to amend the plaint and ask for appropriate relief. Held that such circumstance alone is insufficient for contempt (Paras 653 D). C) Contempt of Court - Unconditional Apology - Apology not ground to refuse interference when High Court held contempt and awarded costs - Contempt of Courts Act, 1971, Sections Not mentioned - The appellant tendered unconditional apology in the High Court. The Supreme Court held that because the High Court had in fact held that appellant committed contempt though it did not award punishment due to apology and directed costs, the apology was not a ground to refuse interference. Held that the appeal should be allowed (Paras 654 B). D) Contempt of Court - Extension of Statutory Right Principle to Contractual Rights - Bona fide exercise of statutory right not contempt; same principle applies to contract - Contempt of Courts Act, 1971, Sections Not mentioned - The Court referred to precedents holding that bona fide exercise of statutory rights during pending proceedings is not contempt and extended that principle to rights under a contract. Held that legal rights under a contract deserve the same protection as statutory rights (Paras 653).
Issue of Consideration
Whether termination of service by employer during pendency of employee's suit, in exercise of contractual right and absent interim injunction or undertaking, constitutes contempt of court.
Final Decision
Appeal allowed; Supreme Court set aside High Court's finding of contempt and cost order; held termination of service in honest exercise of contractual right absent injunction/undertaking does not amount to contempt of court.
Law Points
- Bona fide exercise of contractual right to terminate service during pendency of suit does not amount to contempt of court absent interim injunction or undertaking
- termination rendering some reliefs infructuous does not establish contumacy
- unconditional apology not a ground to refuse interference when High Court held contempt and awarded costs
