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1976 Supreme(AP) 50
Andhra Pradesh High Court
Judges : C.KONDAIAH
National Insurance Company Ltd.Hyderabad - Appellant
Versus
M.Viswanath - Respondent
Decided On : 03-23-76
An employer's termination of an employee's services in contravention of section 40 of the Andhra Pradesh Shops and Establishments Act is invalid and illegal. However, the employer may terminate the services of an employee in whom they have lost confidence, provided that the opinion of loss of confidence is bonafide and based on sufficient material.
Headnote:
INDUSTRIAL DISPUTES - TERMINATION OF SERVICE - SECTION 40 OF ANDHRA PRADESH SHOPS AND ESTABLISHMENTS ACT - REINSTATEMENT - LOSS OF CONFIDENCE - COMPENSATION.
Fact of the Case:
The petitioner company terminated the services of the respondent employee, an accountant, with effect from 2-9-1968. The Government of India referred the question of the validity and justification of his dismissal to the Industrial Tribunal. The Tribunal held that the dismissal was not justified as it was in contravention of the provisions of section 40 of the Andhra Pradesh Shops and Establishments Act. However, it held that he was not entitled to reinstatement but was awarded a compensation of Rs. 4887-50p. together with sum of rs. 425/- in lieu of reinstatement, on the ground that the petitioner-company had lost confidence in him.
Finding of the Court:
The court held that the order of termination of the respondent-employee's services is violative of section 40 of the Andhra Pradesh Shops and Establishments Act and is therefore invalid and illegal. The court further held that the employer-petitioner has, on a fair appraisal of the conduct of the respondent-employee, bonafide arrived at an honest opinion that the company would not be benefited any longer by the services of the respondent-employee as they had lost confidence in him and their opinion is based on an objective satisfacton of the facts and circumstances, but not vitiated by any mala fides nor can said to be arbitrary or whimsical.
Issues: 1. Whether the order of termination of the respondent-employee's services is violative of the provisions of section 40 of the Andhra Pradesh Shops and Establishments Act? 2. Whether on the facts and in the circumstances of the case the respondent-employee is entitled to be reinstated into service or, in the alternative, for the award of compensation.
Ratio Decidendi: 1. Section 40 of the Andhra Pradesh Shops and Establishments Act requires an employer to give one month's notice in writing or pay wages in lieu thereof and a gratuity amounting to fifteen days' average wages for each year of continuous employment, if he desires to terminate the services of an employee who has put in a continuous service of not less than six months. Any termination of the services of an employee in contravention of the provisions of section 40 is illegal unenforceable and invalid. 2. The employer's opinion that they had lost confidence in the employee is bonafide and based on sufficient material. The employee's conduct had resulted in the company losing a valuable client. The employee cannot be forced upon the employer as the choice is and must be with the employer about the confidence and satisfaction of the services of the employee and the same cannot be substituted either by the Tribunal or by the court.
Final Decision: The writ petition is allowed in part. The order of the Tribunal directing reinstatement of the respondent-employee is quashed, but the direction relating to payment of compensation and one-third of the backwages is affirmed.
( 1 ) THE petitioner-company seeks to quash the award of the Industrial tribunal, Central, Hyderabad dated 26-8-1975 in I. D. No. 8 of 1970 directing m. Viswanath, the 1st respondent herein, to be reinstated as Accountant in the company.
( 2 ) THE services of the 1st respondent, who was working as an Accountant in the petitioner-company, have been terminated by the company with effect from 2-9-1968. The Government of india referred the question of the validity and justification of his dismissal to the Industrial Tribunal, the 2nd respondent herein. The case was registered as i. D. No. 8 of 1970 wherein it was held that the dismissal was not justified as it was in contravention of the provisions of section 40 of the Andhra Pradesh Shops and Establishments Act. It was however, held that he was not entitled to reinstatement but was awarded a compensation of Rs. 4887-50p. together with sum of rs. 425/- in lieu of reinstatement, on the ground that the petitioner-company had lost confidence in him. The respondent employee filed W. P. No. 5429 of 1972 questioning the validity of the award in so far as his prayer for reinstatement is concerned. The petitioner company did not contest the correctness of the finding of the Tribunal that the order of dismissal was vitiated by the omission to issue a proper and requisite notice as contemplated by section 40 of the Andhra pradesh Shops and Establishments Act, but supported the award in so far as its decision not to reinstate the employee but only directing payment of compensation, as the company lost confidence in him. As the learned Judge thought that the approach by the Tribunal to assess and consider the entire material relevant for the issue of reinstatement or in the alternative to direct compensation to be paid, was erroneous, he set aside the award to that extent and remanded the matter to the Tribunal for deciding that aspect in accordance with law. Aggrieved by the decision of the learned single judge, the petitioner filed W. A. No. 6 of 1975, which is said to be still pending. Pursuant to the order of this court in the writ petition, the Tribunal heard and disposed of the matter and passed the impugned award on 26-8-1975 directing reinstatement and payment of one-third of back-wages. Hence this writ petition.
( 3 ) SRI B. K. Seshu, the learned counsel for the petitioner, contended that the order of reinstatement of the employee is erroneous, illegal, unjust and improper as the petitioner company has lost confidence in the employee and the opinion of the company-employer is bonafide and based on sufficient material. This claim of the petitioner is opposed by Mr. M. Panduranga Rao, the learned counsel for the respondent-employee, contending inter alia that the order of termination of his client s services is illegal and void as it is violative of section 40 of the Andhra Pradesh shops and Establishments Act, that petitioner has not established that the post held by the employee requires trust and confidence and the employee has acted in breach of such trust and confidence, that the termination of the respondent s services is also violative of section 25-F of the Industrial Disputes Act and that there is no merit in this writ petition as the Tribunal has rightly directed reinstatement of the employee.
( 4 ) UPON the respective contentions advanced by the parties, the following questions arise for decision: (1) whether on the facts and in the circumstances of the case the termination of the services of the respondent-employee by the petitioner-company is violative of the provisions of section 40 of the Andhra pradesh Shops ard Establishments Act; and (2) whether on the facts and in the circumstances of the case the respondent-employee is entitled to be reinstated into service or, in the alternative, for the award of compensation.
( 5 ) I shall first advert to the question whether the order of termination of the respondent-employee s services is violative of the provisio
