The services of En. Sukumaran Vanugopal ("the Claimant") with Innoprise Corporation Sdn. Bhd. ("the Company") incorporated by Yayasan Sabah ("YS") under the corporatisation of commercial operations of Yayasan Sabah (Ex : CL-2), was terminated with effect from 16 December 1989, by a letter signed by Datuk Dr. Jeffrey G. Kitingan Executive Chairman of the Company, stating the Claimant's services were no longer required and as such his contract of employment due to expire on 16 December 1989 will not be renewed.

The letter in question dated 18 December 1989 (Ex: CL-8 Enc: 7) states:

After due consideration, the Management has decided that your services is no longer required. In exercise of the discretion vested in me as Managing Director of the Company under Clause 17 of Your Letter of Appointment dated 25 November 1986, I hereby inform you that your present contract contained in the said Letter of Appointment with the Yayasan Sabah Group of wholly Owned Subsidiary Companies will not be renewed upon its expiration on 16 December 1989.

Yours faithfully, Yayasan Sabah Group of Wholly Owned Subsidiary Companies.

(signed) ............................................... (Datuk Dr. Jeffrey G. Kitingan) (He was the Managing Director/Executive Chairman of YS and Executive Chairman of Innoprise Corporation Sdn. Bhd.)

The Claimant's last drawn salary was RM7,375 per month inclusive of allowances (CO-17) on the salary scale shown in CO-16. In addition the Claimant was also entitled to gratuity.

Truth of The Matter

The truth of the matter why the Claimant's services were no longer required, not disclosed in the letter of termination, is that the Company had found a Sabahan to do the Claimant's job, although the Claimant had rendered exemplary and conscientious service for nine years.

Narrative

The Claimant first obtained employment as Senior Group Investment Officer (Utility) on a three year contract, commencing on 17 December 1980. The Claimant had two successive three year renewals of his contract of employment.

Employers' Freedom of Contract Restricted by Claims of Social Justice

Each of the three above contracts of employment carried a clause that the Managing Director shall at his absolute discretion vary or modify any of the Terms and Conditions of Service from time to time as he deems fit and further that the renewal of the Claimant's contract will be at the absolute discretion of the Managing Director. This absolute discretion appears with respect to place the Claimant at the absolute mercy of the Managing Director.

This Court must restate a basic principle of industrial law that such an absolute discretion vested in the Managing Director cannot be exercised arbitrarily, capriciously or in a manner that will amount to victimisation of a workman or an unfair labour practice. An employer's freedom of contract must yield to the higher claims of social justice.

The Federal Court of Malaysia in the case of Dr. A. Dutt v. Assunta Hospital [1981] 1 MLJ cited the judgement of His Lordship Gajendragadkhar J. in R. B. Diwan Badri Dass v. Industrial Tribunal Punjab, Patiala & Ors. AIR 1963 SC, where it was said that:

Similarly the right to dismiss an employee is also controlled subject to well-recognised limits in order to guarantee security of tenure to (industrial) employees.. ...

The judgement of Gajendragadkhar, J. also cited a passage from the judgement of Mukhearjea, J in Bharat Bank Ltd. Delhi v. Employees of Bharat Bank AIR 1950where it was stated that: