1. Employment termination — Allegation of victimisation and mala fide — Dispute regarding probationary status and justification for discharge. (Para 2 , 3 )
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1965 Supreme(SC) 274
SUPREME COURT OF INDIA
P.B. GAJENDRAGADKAR, C.J.I., K.N. WANCHOO, M. HIDAYATULLAH, V. RAMASWAMI AND P. SATYANARAYANA RAJU, JJ.
The Management of Utkal Machinery Ltd., Appellant
Versus
Workman, Santi Patnaik, Respondent.
Civil Appeal No. 581 of 1964.
Advocates appaered
Mr. I. N. Shroff, Advocate, for Appellant.
Advocates:
I.M.SHROFF
I.M.SHROFF
An Industrial Tribunal can scrutinize the bona fides of a termination order even if the contract permits termination without assigning reasons. Termination for unsatisfactory work without evidence or enquiry is considered mala fide and subject to interference by the Tribunal.
Headnote:(A) Industrial Adjudication - Termination during probation - Even where a contract allows termination without assigning reasons, the Industrial Tribunal is competent to enquire whether the order was passed in bona fide exercise of power or if it was mala fide, victimisation, or an unfair labour practice. (Para 5)
(B) Termination for unsatisfactory work - In the absence of Standing Orders, unsatisfactory work may be treated as misconduct; termination for such reason without a proper enquiry or evidence of such unsatisfactory work is mala fide. (Para 6)
(C) Compensation - Quantum of compensation in cases of wrongful termination depends on the length of service and whether the employee gave up previous employment. (Para 7)
Facts of the case:
An employee was appointed and subsequently transferred to another department. Her services were terminated. The employee alleged the termination was mala fide and an act of victimisation. The management contended that the employee was on probation and was terminated due to unsatisfactory work. The Labour Court held the termination was illegal and awarded compensation.
Findings of Court:
The court upheld the finding that there was no proof of a probationary period. It further held that the management failed to provide evidence of unsatisfactory work, rendering the termination mala fide. However, the compensation awarded by the Labour Court was found to be excessive given the short duration of employment.
Issues: Whether the termination of services during a purported probationary period was bona fide or mala fide, and whether the quantum of compensation awarded was justified.
Ratio Decidendi: An Industrial Tribunal has the power to examine the bona fides of a termination order even if the contract allows termination without assigning reasons. If the termination is based on alleged unsatisfactory work (treated as misconduct) without evidence or enquiry, it is mala fide. Compensation should be proportionate to the length of service and circumstances of the employee.
Result: Appeal partly allowed.
Legal Category Hierarchy
Table of Contents
2. Whether termination during probation for unsatisfactory work was legal or constituted mala fide victimisation and unfair labour practice. (Para 3 , 4 , 6 )
3. Termination without evidence of unsatisfactory work is mala fide; Industrial Tribunals can scrutinize the bona fides of contractual termination during probation. (Para 4 , 5 , 6 )
4. Industrial Tribunals may interfere with contractual termination during probation if the order is mala fide, amounts to victimisation, or constitutes an unfair labour practice. (Para 5 )
5. Appeal partly allowed — Labour Court award modified to reduce compensation amount and provide interest. (Para 7 , 8 )
6. Can an Industrial Tribunal interfere with a contractual termination during a probationary period?
Yes. Even if a contract allows termination without assigning reasons during probation, the Industrial Tribunal can inquire whether the power was exercised bona fide. It may interfere if the termination is mala fide, amounts to victimisation, or is an unfair labour practice. (Para 5 )
7. When is a discharge for unsatisfactory work treated as a punishment for misconduct?
In the absence of Standing Orders, if an employee is discharged for unsatisfactory work without a proper enquiry or evidence of such unsatisfactory performance, the discharge may be viewed as punitive and tantamount to punishment for misconduct. (Para 6 )
8. What factors influence the determination of compensation in lieu of reinstatement?
The court considers the actual length of service, whether the employee gave up previous employment to join, and the specific circumstances of the appointment to ensure compensation is not exorbitant. (Para 7 )
Judgement
RAMASWAMI, J. : This appeal is brought, by special leave, against the award of the Labour Court, Orissa, dated May 24, 1963, in Industrial Dispute No. 5 of 1962, published in the Orissa Gazette, dated June 14, 1963.
2. The respondent - Miss Santi Patnaik - took her degree in Master of Arts (Political Science) in 1961. At that time, Major General Pratap Narain was the General Manager of Utkal Machinery Ltd. (hereinafter referred to as the Management ). On December 9, 1961, Major General Pratap Narain appointed the respondent as his Secretary on a monthly salary of Rs. 400. She was thereafter transferred to the Personnel Department of the Company as an Assistant. It appears that Shri A. L. Sarin joined as Personnel Officer on January 2, 1962. The respondent alleges that on April 30, 1962, she was given notice for termination of her service. On her representation she was informed on May 30, 1962 that the decision of the management to dispense with her service was final. The allegation of the respondent is that taking advantage of her subordinate official position Mr. Sarin misbehaved with her to which she offered resistance. The respondent asserted that the termination of her service was improper, mala fide and an act of victimisation. The respondent prayed that the order of termination should be set aside and she should be reinstated with full arrears of pay. The case of the respondent was taken up by the Utkal Machinery Mazdoor Sangha and on December 18, 1962, the Government of Orissa referred the following dispute for adjudication to the Labour Court :
"Whether the termination of services of Miss S. Patnaik by the management of Messrs Utkal Machinery Limited, Kansabahal is legal and justified? If not, what relief she is entitled to?"
3. The case of the management before the Labour Court was that Miss Patnaik was appointed on probation for a period of 6 months on a salary of Rs. 400 p.m. on the recommendation of the then Chief Minister of Orissa, Sri B. Patnaik who suggested to the management that the respondent may be put "in the staff with a start of Rs. 350 or Rs. 400 with living accommodation." The management alleged that the service of the respondent was terminated during the probation period because of her unsatisfactory work and there was no question of victimisation or mala fide motive in the termination of the respondent s service. The management contended that it had absolute discretion to assess the work of the respondent during the period of probation and to terminate her services on the ground of unsatisfactory work. The Labour Court did not accept the contention of the management and held that there was no probationary period fixed for the respondent and the termination of her services by the management was mala fide, illegal and unjustified and the management should pay to the respondent a sum of Rs. 9,600 as compensation in lien of her reinstatement.
4. The first question pressed on behalf of the appellant is that the Labour Court was wrong in rejecting the contention of the management that the respondent was appointed to serve for a period of 6 months on probation upto June 9, 1962. Learned counsel on behalf of the appellant pointed out that there was an endorsement at the bottom of the application by the respondent, dated January 9, 1962 to the effect that she was appointed on a salary of Rs. 400 p.m. on probation for 6 months. The endorsement is in the handwriting of Major General Pratap Narain and both he and Vogel-another General Manager - have signed it. The Labour Court has examined the evidence on this point and found that no communication was sent to the respondent on the basis of the endorsement - Ex. A-1. The management relied on a letter - Ex. G - dated January 17, 1962 alleged to have been sent to the respondent. This letter states that the appointment was on probation for 6 months which may be extended at the discretion of the management and "during probationary period the services of the re
