A company can delegate its power to take disciplinary action against its employees to its officers, provided that the delegation is made in accordance with the company's Articles of Association and the Standing Orders.

Headnote:
{'KEYWORD': 'DELEGATION OF POWER', 'SUBJECT': 'DISCIPLINARY ACTION AGAINST EMPLOYEES', 'ACT SECTION LIST': 'STANDING ORDERS OF THE COMPANY', 'SUMMARY': "The court held that a company can delegate its power to take disciplinary action against its employees to its officers, provided that the delegation is made in accordance with the company's Articles of Association and the Standing Orders. The court also held that the delegation of power does not mean that the delegate can exercise the powers beyond what the company itself can do under the Standing Orders."}
Fact of the Case:

The appellant company, Jabalpur Electric Supply Co., delegated its power to take disciplinary action against its employees to its Resident Engineer, Mr. Leonard Shell Macleod, through a power of attorney. The respondent, Sambhu Prasad Srivastava, an employee of the company, was served with a charge sheet alleging misconduct and was subsequently discharged from service by the Resident Engineer. The respondent challenged the order of discharge, contending that the Resident Engineer did not have the authority to take disciplinary action against him.
Finding of the Court:

The court held that the delegation of power to the Resident Engineer was valid and that the order of discharge was made in exercise of the power validly delegated to him. The court also held that there was no breach of the Standing Orders by such action.
Issues: 1. Whether a company can delegate its power to take disciplinary action against its employees to its officers? 2. Whether the delegation of power to the Resident Engineer was valid? 3. Whether the order of discharge was made in exercise of the power validly delegated to the Resident Engineer?
Ratio Decidendi: 1. A company can delegate its power to take disciplinary action against its employees to its officers, provided that the delegation is made in accordance with the company's Articles of Association and the Standing Orders. 2. The delegation of power to the Resident Engineer was valid as it was made in accordance with the company's Articles of Association and the Standing Orders. 3. The order of discharge was made in exercise of the power validly delegated to the Resident Engineer.
Final Decision: The court allowed the appeal, set aside the order passed by the High Court, and directed that the appellant's application under Art. 226 of the Constitution be allowed and the order made by the Assistant Labour Commissioner dated September 10, 1958, ordering reinstatement of the respondent, Sambhu Prasad Srivastava be set aside.

Judgement

DAS GUPTA, J. : When under the Standing Orders of a Company the Company is empowered to take disciplinary action against an employee by proceeding in the prescribed manner can that power be legally delegated by the Company to any of its officers? That is the principal question raised in this appeal.

2. The appellant is a Company incorporated under the India Companies Act having its registered office at 12, Mission Row, Calcutta. It is engaged in the generation and distribution of electricity at Jabalpur. The Company s office at Jabalpur is in charge of a Resident Engineer. By a power of attorney given by the appellant company on June 26, 1957, Mr. Leonard Shell Macleod, the Company s Resident Engineer at Jabalpur, was appointed "the company s true and lawful attorney for and in the name of the Company to do exercise and perform all or any of the acts, matters, discretions and things" set out in 11 clauses. The 10th clause provided that "subject to the Standing Orders from time to time given by the Company to appoint, dismiss, suspend or terminate the services of any of the employees of the Company at Jabalpur." On November 12, 1957, the respondent Sambhu Prasad Srivastava was served with a charge sheet under the signature of Mr. Macleod in which it was alleged that he had substituted 13 coils of V. I. R. cable in the stores of the Company for the same quantity of cable of various makes from the local market. Sambhu Srivastava s reply to this charge was that when the shortage of 13 coils came to his notice on the eye of the audit he remonstrated with his subordinates who actually handled these articles and that what he did was done in the best interests of the Company and that he never acted with any dishonest intention. An enquiry was then held by the Resident Engineer and ultimately on January 16, 1958, the Resident Engineer issued a letter to him in these terms :

"With reference to charge sheet dated 12th November, 1957, and the subsequent investigations in the case against you, please note that the manner has been very carefully considered, and in accordance with the interview which you had with our Chief Engineer, Mr. J. W. Fawcett, on the morning of the 15th January, 1958, we hereby notify you that the Company does not find it possible to retain your services.

Therefore, you are hereby discharged from the service of the Company, with immediate effect.

Please call at the Company s office on the 17th instant, to receive final settlement of your dues from the Company."

3. Srivastava then applied to the Assistant Labour Commissioner, Jabalpur, alleging that this order was in contravention of the provisions of the C. P. and Berar Industrial Tribunal Settlement Act and of the Standing Orders as the powers of the Company under the Standing Orders to hold the enquiry can be exercised only by the Managing Director. It was also alleged that the order though in form an order for discharge was really an order of dismissal and that Cls. 14, 18, 19 and 20 of the Standing Orders had been violated. The Company pleaded in its reply that under the power of attorney the Resident Engineer had the power to hold an enquiry and take disciplinary action against an employee and the action by him should be considered in law to amount to an action by the Company. It was pleaded that the provisions of the Standing Orders had not been violated. The Assistant Labour Commissioner made an order on September 10, 1958, ordering reinstatement of the respondent without break in his service but without payment of back wages.

4. The State industrial Court which was moved both by the Company and by the employee held that the order of discharge was in substance an order of dismissal, and that misconduct alleged was not proved, and that in any case the Resident Engineer was not empowered to hold an enquiry and to issue an order of discharge. It refused to interfere with the order passed by the Assistant Labour Commissioner and rejected both the revisional app

Click Here to Read the rest of this document