Case Note & Summary
The appeal before the Supreme Court arose out of an industrial dispute concerning the termination of services of Miss Shanti Patnaik by the management of Utkal Machinery Ltd. The respondent, who held a Master of Arts degree in Political Science, was appointed on December 9, 1961, as secretary to the General Manager of the company on a monthly salary of Rs. 400 and was later transferred to the Personnel Department as an Assistant. She alleged that her superior officer, Shri A. L. Sarin, misbehaved with her and, when she resisted, her services were terminated on April 30, 1962. She raised an industrial dispute contending that the termination was improper, mala fide, and an act of victimisation, and prayed for reinstatement with full arrears of pay. The Government of Orissa referred the dispute to the Labour Court, which, by its award dated May 24, 1963, held that there was no probationary period fixed for the respondent and that the termination of her services was mala fide, illegal, and unjustified, awarding her Rs. 9,600 as compensation in lieu of reinstatement. The management appealed by special leave to the Supreme Court. The management contended that the respondent was appointed on probation for six months and that her services were terminated during the probation period because of unsatisfactory work, relying on an endorsement on her application and a letter alleged to have been sent to her. The Labour Court rejected this contention, finding that no communication of probation was sent to the respondent and that she had denied receipt of the letter. The Supreme Court, while not disturbing that finding, proceeded to assume in favour of the appellant that the respondent was on probation and that the contract allowed termination without reasons. The Court then examined the scope of Industrial Tribunal's power and held that even where a contract permits termination without assigning reasons, the Tribunal can enquire whether the power was exercised bona fide; if the order of termination is mala fide, amounts to victimisation or unfair labour practice, or is capricious or unreasonable, the Tribunal can interfere and grant relief to the employee. The Court noted that there was no Standing Order of the company regarding punishment for misconduct, and in the absence of such Standing Order, unsatisfactory work could be treated as misconduct. The discharge of the respondent for alleged unsatisfactory work therefore amounted to punishment for misconduct, which required a proper domestic enquiry. The Court found that no evidence of unsatisfactory work was adduced before the Labour Court; neither the Deputy General Manager nor the Joint General Manager was examined, and no document was produced to show unsatisfactory work. The respondent had stated that she was never told in writing or orally that her work was unsatisfactory. Accordingly, the Supreme Court held that the discharge was mala fide and the Labour Court's view was correct. On the quantum of compensation, the Supreme Court found merit in the appellant's argument that two years' salary was excessive. The Court distinguished the earlier decision in Assam Oil Co. Ltd. v. Its Workmen, where an employee had about two years of service and had given up a previous job, and the compensation was fixed on a concession. In the present case, the respondent had worked for less than five months, had not given up any previous job, and her appointment was somewhat unusual because it was made on the recommendation of the then Chief Minister of Orissa. The Court held that there were no special circumstances justifying two years' salary and reduced the compensation to Rs. 4,800, with 6% interest from the date of the Labour Court order until payment. The appeal was allowed in part, the Labour Court award was modified accordingly, and no order as to costs was made.
Headnote
A) Labour Law - Probationer - Termination During Probation - Industrial Disputes Act, 1947 - Even if an employee is appointed on probation and the contract permits termination without assigning reasons, an Industrial Tribunal can examine whether the termination was effected in bona fide exercise of the contractual power; if the termination is mala fide, amounts to victimisation or unfair labour practice, or is so capricious or unreasonable as to indicate ulterior motives, the Tribunal can interfere and grant appropriate relief to the employee (Paras 437 C-E). B) Labour Law - Misconduct and Enquiry - Discharge for Unsatisfactory Work Without Standing Orders - Industrial Disputes Act, 1947 - In the absence of any Standing Order of the company, unsatisfactory work may be treated as misconduct; when the management discharged the respondent for alleged unsatisfactory work, the discharge was tantamount to punishment for alleged misconduct, and the management was not justified in discharging the respondent without holding a proper enquiry; no evidence of unsatisfactory work was adduced before the Labour Court, so the discharge was held to be mala fide and illegal (Paras 437 F-H). C) Labour Law - Compensation - Quantum of Compensation - Industrial Disputes Act, 1947 - The Labour Court awarded two years' salary (Rs. 9,600) as compensation in lieu of reinstatement, but the Supreme Court reduced the compensation to Rs. 4,800 plus 6% interest from the date of the Labour Court order till payment, holding that there were no special circumstances to justify two years' salary; the respondent had worked for less than five months and did not give up any previous job, and her appointment was somewhat unusual as it was made on the recommendation of the then Chief Minister of Orissa (Paras 439 A).
Issue of Consideration
Whether the Labour Court erred in rejecting the management's contention that the respondent was appointed on probation for six months; whether the termination of the respondent's services was in bona fide exercise of contractual power or was mala fide and punitive; whether the quantum of compensation awarded by the Labour Court was excessive.
Final Decision
The Supreme Court allowed the appeal in part. It upheld the finding that the termination of the respondent's services was mala fide and illegal, but modified the Labour Court award by reducing the compensation from Rs. 9,600 to Rs. 4,800, payable with 6% interest from the date of the Labour Court order until payment. No order as to costs.
Law Points
- Industrial Tribunal can enquire into bona fides of contractual termination
- discharge for unsatisfactory work without standing orders amounts to punishment for misconduct requiring proper enquiry
- absence of evidence of unsatisfactory work makes discharge mala fide
- compensation must be reasonable and not excessive
