Srirangam Janopakara Bank Ltd. vs S. Rangarajan and Another

Ramakrishnan, J.—This appeal is filed against the judgment of Veeraswami J., in Writ Petition No. 380 of 1960. The Petitioner S.

Rangarajan was employed under the first Respondent, the Srirangam Janopakara Bank Limited, Srirangam, as its Secretary, with effect from

October 17, 1953. On 16th May 1954, the Board of Directors, framed certain charges against him and kept him under suspension pending

enquiry. He was asked to show cause against disciplinary action, and he submitted his explanation on the 19th May, and again on the 24th May

1954. On 10th June 1954, at 12 noon, he was informed that the Board of Directors would hold an enquiry into his case at 6 p.m. Subsequently,

the Board of Directors, by a. resolution, found the Petitioner guilty, and removed him from service. The Petitioner filed an appeal against the order

to the Additional Commissioner for Workmen''s Compensation, u/s 41 (2) of the Shops and Establishments Act, 1947 (hereinafter referred to as

the Act). At the initial stage there was a controversy as to whether the Petitioner was actually present at the enquiry. The Additional Commissioner

expressed the opinion, that though the Petitioner was present at the enquiry, he was not given an opportunity to participate in the enquiry, and that,

further, the charges were not borne out by the evidence. He allowed the appeal. The Bank filed Writ Petition No. 200 of 1956, which came up

before Rajagopalan J. Rajagopalan J. quashed the order of the Additional Commissioner, and in effect the Additional Commissioner had to re-

hear the appeal and dispose it, of according to law. The Additional Commissioner, thereafter, re-heard the appeal. In the course of that re-hearing,

he took additional evidence. Thereafter, he dismissed the appeal upholding the order, removing the Petitioner from service. The Petitioner then filed

the present writ petition for quashing the order of the Additional Commissioner which came up before Veeraswami J.

He put forward three points in support : (i) the proceedings of the Board ox Directors culminating in the removal of the Petitioner violated the

principles of natural justice, (ii) no evidence was recorded at the enquiry before the Board of Directors as required by Section 41(1) of the Act,

and that the findings of the Board of Directors were, therefore, not based on evidence, and (iii) in any case, the Additional Commissioner

exceeded his jurisdiction in. taking additional evidence and disposing of the appeal on that basis. The learned Judge held that the enquiry before the

Board of Directors of the Bank was vitiated for the reason that no reasonable opportunity was given to the Petitioner, to defend himself, that two

out of the thirteen Directors who held the enquiry were biased persons in that, in regard to the allegations in some of the charges that the Petitioner

was guilty of refusing to co-operate with these two Directors when they formed a sub-committee for scrutinising the accounts and he also behaved

in a disorderly manner towards them. The statements of these two Directors were taken behind the Petitioner�s back and he was not supplied

with a copy of their statements. The learned Judge next found that at the enquiry held on 10th June, 1954, no evidence was actually recorded.

Therefore, the resolution of the Board of Directors removing the Petitioner from service did not comply with the terms of Section 41(1) of the Act,

which reads:

No employer shall dispense with the services of a person except for a reasonable cause and without giving such person at least one month''s notice

or wages in lien of such notice, provided, however, that such notice shall not be necessary where the service of such person are dispensed with on

a charge of misconduct supported by satisfactory evidence recorded at an enquiry held for the purpose.

The learned Judge quashed the order of the Board of Directors of the Bank, removing the Petitioner from service. It was pointed out to us--in

our opinion rightly--that the prayer in the writ petition was only to quash by a writ of certiorari the Additional Commissioner''s ''order, and did not

seek for the quashing of the order of the Board of Directors. In other words, the relief actually granted by the learned Judge went beyond the

scope of the relief asked for in the petition. Next the learned Judge quashed the Additional Commissioner''s order on the ground that the

Additional Commissioner had no power to record additional evidence himself. Rule 9(2) framed under the Act provides that the procedure to be

followed by the Commissioner in hearing appeals when preferred to him u/s 41(2) of the Act, shall he summary, and that he shall record briefly the

evidence adduced before him and then pass orders giving his reasons therefor. In the view of the learned Judge, Rule 9(2) went beyond the scope

of Section 49 of the Act (the section which confers rule-making power on the Government) read with Section 41(1). Therefore, the order of the

Additional Commissioner was vitiated by reason of his taking additional evidence. While disposing of the appeal, the learned Judge purported to

fellow a prior judgment of this Court by Rajagopala Ayyangar J., reported in Sri Venkateswara Bank, Ltd. Salem v. Krishnan 1960 M.W.N. 94,

and disagreed with the view expressed by Rajagopalan J. in Davey Sons v. Addl. Commr. of Workmen''s Compensation (1960) 2 M.L.J. 254.

The present appeal under the Letters Patent in filed by the Bank against the decision of Veeraswami J.

Before dealing with the last mentioned point about the power of the Additional Commissioner for ""Workmen''s Compensation to take evidence

at the stage of appeal u/s 41(2) of the Act, and whether Rule 9(2) should be deemed to be ultra vires the rule-making authority, namely, the

Government, it will be necessary to consider a few relevant points. In the first place, we are satisfied that an enquiry was held in this case by the

employer acting u/s 41(1) of the Act, though the Additional Commissioner for Workmen''s, Compensation at the earlier stage, when the matter

came up before him, took a contrary view. Rajagopalan J., when the matter came up before this Court in the prior writ petition, remanded the

appeal and one of the points directed by him to be considered, was the question about the holding of a valid enquiry. After the remand, the

Additional Commissioner took evidence as to what happened on 10th June 1954, and concluded that though evidence was not recorded to prove

the charges, an enquiry was in fact held at 6 p.m. on that date. The Board of Directors proceeded ex parte because the employee though duly

informed about the enquiry and called, did not turn up. Veeraswami J., observed that the time given to the employee to offer his explanation was

not adequate for him to prepare his defence. But this would be a different thing from a question whether an enquiry was actually held or not. The

learned Judge also observed that at the enquiry the Board of Directors used statements given earlier by two of the directors, who had formed a

sub-committee, to hold an earlier enquiry, regarding the employee''s misconduct, and that these statements were taken behind the back of the

employee. But the employee, if he had attended the enquiry in person, would have had the benefit of these statements being read out to him and,

therefore, he could not be heard to say that he was prejudiced by the enquiry. It will be also worthwhile to observe that the charges framed against

the employee were very grave in character, and that even under the first charge, which related to his failure to discharge heavy debts within the time

stipulated in the order of appointment, his appointment could have been terminated. There were other charges, for example, a charge for not

convening the monthly meeting for a long time in contravention of the provisions of the articles of association, which charge was practically

admitted by the employee, though he put forward the existence of disputes between the rival directors, in extenuation.

Veeraswami J., relied upon the judgment of Rajagopala Ayyangab J., (as he then was) in Sri Venkateswara Bank Ltd., Salem v. Krishnan 1960

M.W.N. 94 for the conclusion that Section 41(2) of the Act did not empower the appellate authority to take evidence at the stage of appeal.

Further, if Rule 9(2) should be treated as authority for the taking of such evidence, it was beyond the scope of the rule-making power of the State

Government u/s 49 of the Act. A perusal of the judgment cited, shows that in that particular case the employer did not hold any enquiry before

dismissing the employee. In such a context, Rajagopala Ayyangar J., (as he then was) observed:

It is only when at an original enquiry held by the employer, that the charges are held by him to have been proved, that the appellate authority is

directed to enquire as to whether the charge of misconduct could be taken to have been properly established. In my opinion Section 41(2) was not

intended to convert the appellate authority into a forum where an original enquiry into the misconduct of the employee justifying his dismissal could

be conducted so as practically to deprive the servant of any right beyond what he was entitled to at common law.

There is nothing in the judgment cited to show that the learned Judge intended to lay down principles which will apply to a case, where there had

been in fact an enquiry by the employer u/s 41(1) of the Act. It does not also appear from the judgment, that the learned Judge considered the

validity of Rule 9(2) of the rules in the context of the rule making power of the State Government conferred in Section 49 of the Act. Bajagopala

Ayyangar J., (as he then was) in a subsequent decision in ""Writ Petition Nos. 702 and 703 of 1959, dealt with the scope of Section 41(2) wherein

he referred to his judgment in the earlier case, and expressed himself thus:

In Writ Petition No. 376 of 1957 I took the view that there was no obligation cast upon the appellate authority functioning u/s 41(2) of the Shops

Act to enter into the merits of the misconduct charged, and its order in allowing an appeal without itself conducting an enquiry into, the misconduct

could not be said to be illegal. The other view is that it is open to the management and within the jurisdiction of the Tribunal to enquire into the

misconduct on the merits and sustain the order of dismissal passed by the employer.

After observing that the latter was the position obtained in the case before him (Writ Petitions Nos. 702 and 703 of 1959) the learned Judge

confirmed the proceedings of the Additional Commissioner in allowing the management to let in evidence before him, to establish the misconduct

so as to justify the order of dismissal of the employee passed by it. This would show that it was not in the contemplation of rajagopala Ayyangar J.,

(as he then was) to lay down either in the earlier judgment or in the later judgment cited above, that the power of the Additional Commissioner for

Workmen Compensation acting in appeal u/s 41(2) should be deemed to be so restricted as to permit him to consider only the evidence recorded

by the employer at the time of the enquiry, and debarring him from taking additional - evidence. There IK a decision of Rajagopalan J., in Davey

Sons v. Addl. Commr. of Workmen''s Compensation (1960) 2 M.L.J. 254, where the learned Judge at page 256, examined the scope of Section

41(2), and observed that neither that section nor Rule 9(2), confined the appellate authority to the evidence already recorded in the enquiry for

which Section 41(1) provided. It was an appellate jurisdiction that was conferred u/s 41(2), and the rule made it clear that the appellate authority

had jurisdiction to take such further evidence as it considered necessary. We may point out that this decision was confirmed by a Bench of this

Court consisting of Rajamannar C.J., and Venkatadri J. In our opinion, the power u/s 41(2) being defined as an appellate power, will entitle the

appellate authority to go into the merits of the case and consider the evidence in support of it. Since the power thus granted has not been made

subject to any restrictions in the matter of taking additional evidence, the appellate power will include the power to call for additional evidence in

order to enable the appellate authority to come to a decision, which would be final and binding on both the employer and the employee, as

prescribed in Section 41(3).

Rule 9(2) runs:

The procedure to be followed by the Commissioner for Workmen''s Compensation when hearing appeals preferred to him u/s 41(2) shall be

summary. He shall record briefly the evidence adduced before him and then pass orders giving has reasons therefor.

It appears to us that this rule is not intended to confer on the appellate authority, a power to take evidence de hors, Section 41(2), the rule

really lays down a rule of procedure, that the hearing of appeals shall be summary, that the evidence (if) recorded shall be brief, and that when

orders are passed, reasons should be given. There is, therefore, no reason for examining Rule 9(2) dissociated from Section 41(2), and to decide

that Rule 9(2) went far beyond the rule-making power u/s 49 on the ground that it confers power to take additional evidence on the appellate

authority.

It would also appear necessary in the interests of loc proper working of an enactment like the Madras Shops and Establishments Act, to

confer on the appellate authority the power to take evidence itself, if the circumstances of a case justify it. The common law gives the employer the

right to terminate the services of an employee in accordance with the terms of the contract between them, but Section 41(1) has provided a

restriction on this right, by making it obligatory on the employer to hold an enquiry and make a record of the evidence, before terminating the

employee''s services. It is a matter of common knowledge that many employers are not adequately equipped, to conduct an enquiry dealing with

an erring employee charged with misconduct. The employer may be illiterate : even if he is literate he might be unfamiliar with the judicial procedure

of holding an enquiry; he might be the person whom the employees had disobeyed and from that point of view the prosecutor and the judge would

be rolled into one; as a consequence, he might be considered as having a bias against the employee. But none of these circumstances by its own

force can preclude the employer from holding the enquiry and from discharging the statutory obligations placed on him. To hold otherwise, would

lead to an unworkable state of affairs, because no one else can take the place of the employer for the purpose of holding an enquiry, against an

employee in his own establishment, even if he suffers from any of the disabilities above mentioned. By making the scope of the appeal sufficiently

wide and comprehensive it will be possible for the aggrieved party to obtain redress in the appellate Court, namely, the Commissioner for

Workmen''s Compensation, who functioning in a judicial capacity, holds the balance even between the employer on the one hand and the

employee on the other. For that purpose, it may be necessary for him to take additional evidence in the interests of justice, and for the purpose of

giving an adequate and binding decision. The power of the appellate authority u/s 41(2) of the Act should be construed in the widest manner

possible,, sc as to take in also the power to take additional evidence, where the needs of the case call for it.

Several decisions cited before us at the hearing, dealt with the power of a Labour Court to whom an industrial dispute had been referred under

the provisions of the Industrial Disputes Act, and where the industrial dispute arose out of the dismissal of a workman by a domestic tribunal,

which after being taken up by the workers'' union, had come before the Labour Court or Industrial Tribunal for adjudication. The power under the

Industrial Disputes Act thus conferred on the Labour Court or the Industrial Tribunal, is different from the appellate power conferred u/s 41(2) of

the Shops and Establishments Act. The power of the Labour Court while dealing with the order of the domestic tribunal is subject to certain well-

known restrictions, which decisions have laid down. It is unnecessary to refer to those decisions here. The Labour Court has thus the power to

take evidence and decide the case itself on the merits, where the decision of the domestic Tribunal appears to be opposed to natural justice or

amounts to victimisation or is mala fide or amounts to an unfair labour practice, but there would not be relevant considerations for the purpose of

Section 41(2) of the Act.

Both before the learned Judge and also before us, an attack was made against the decision of the employer, on the ground that two of the

directors of the Board, who held the enquiry, were the same persons, who as members of a sub-committee had made a report against the

employee leading to one of the charges against him. In the view of the learned Judge the participation of these two directors in the enquiry was

likely to cause an apprehension in the employee''s mind as to whether he could have an impartial and objective enquiry and a just decision. As we

have pointed out a little earlier in this judgment, in some cases of charges made against an employee, the employer might be the person aggrieved,

and in carrying out the obligations laid down by the statute on him to hold an enquiry, he would have necessarily to combine in himself the role of a

prosecutor and a judge. To hold that in such cases the enquiry will be vitiated by reason of bias, will lead to a deadlock. Any adverse consequence

to the employee which might flow from such an enquiry, will have necessarily to be corrected, only at the appellate stage before the Commissioner

for Workmen''s Compensation, while acting u/s 41(2), with the help of additional evidence, if necessary. Further, out of the thirteen directors, who

constituted the Board which conducted the enquiry only two were thus affected and the remaining eleven had no such disqualification. In the case

which came up in appeal in Kumbalingam v. Indian Metal and Metallurgical Corporation Madras 76 L.W. 440, one of us dealt with a similar point

which, however, arose in connection with the enquiry by a domestic Tribunal under the Industrial Disputes Act. The matter went up in appeal.

Anjntanarayanan J., delivering the appellate judgment of the Bench, confirmed the view of the single judge, and stated:

Merely because the employer had personal knowledge of the charge, or if the facts relating thereto, it could not be held that he was prevented

from holding an enquiry and should necessarily delegate that function to a third party.

These observations though made in a ease under the Industrial Disputes Act will be also apposite while dealing with an enquiry u/s 41(1) of the

Madras Shops and Establishments Act.

There are two other reports of English decisions which were cited before us. Allinson v. General Council of Medical Education and

Registration (1894) 1 Q.B. 750 was a case where the General Council for Medical Education and Registration hold an enquiry into the

professional misconduct of a medical practitioner. One of the members of the Council had been a member of a Committee, which had instituted the

complaint. By reason of the fact that this particular member of the Council had taken no part in the deliberations of the Committee, it was held that

that particular member was not disqualified from taking part in the enquiry. In Frome United Breweries v. Bath Justices (1926) A.C. 586 the

question of renewal of a licence of hotel came up before the Licensing Justices of a country borough. They decided to refer the matter to the

compensation authority of the borough u/s 19 of the Licensing (Constitution) Act, 1910. They also resolved that a solicitor should be instructed to

appear before the compensation authority and oppose the renewal of the application. Three of the Justices, who sat and voted as members of the

compensation authority, had been parties to the resolution of the Licensing Justices. The compensation authority had thereafter refused to renew

the licence. The matter came up before the House of Lords. In their view, the Licensing Justices performed the judicial functions though they may

not be a Court, and that, therefore, when the same three Justices, who were members of the Licensing Board, took part also as compensation

authority, there was a clear case of bias calling for the setting aside of the order against the hotel-keeper. These cases can be clearly distinguished

on the ground that the acts in regard to which the allegations of bias was made were judicial acts and where the principle of justice being done as

well as appearing to be done would apply. They cannot be equated to an employer complying with the statutory requirements, and holding an

enquiry before dismissing an erring employee for misconduct. In Andhra Scientific Co. Lid. v. Seshagiri Rao and Anr. (1961) 2 L.L.J. 117 the

Supreme Court dealt with an enquiry before the domestic tribunal leading to the dismissal of a workman, and this led to an industrial dispute which

came up before the Labour Court. The facts there, were peculiar to that case. The enquiry in the initial stages was conducted by the general

manager of the company. Then he stepped down and he was examined as a witness, the enquiry being subsequently conducted by a person who

was active in securing proper evidence to establish the charge against the concerned workman. In such circumstances, it was held that the

domestic enquiry was vitiated by violation of principles of natural justice. This finding, made it necessary for the Labour Court to take evidence

itself and come to an independent conclusion. Hence this decision also cannot be authority for dealing with the present case.

We are, therefore, with great respect, unable to sustain the judgment of the learned Judge. We allow the appeal and dismiss the writ petition.

The rule nisi will be discharged. The Appellant will get his costs throughout.