2001 JTR(SC) 179
2001 2 AWC 1291 ; 2001 2 CLR 25 ; 2001 89 FLR 332 ; 2002 1 JCR(SC) 427 ; 2001 2 JLJR(SC) 72 ; 2001 3 JT 530 ; 2001 1 LLJ 1341 ; 2001 2 LLN 851 ; 2001 3 PLJR(SC) 195 ; 2001 2 RSJ 247 ; 2001 10 SCC 83 ; 2002 SCC(L&S) 732 ; 2001 3 SCT 128 ; 2001 6 SLR 570 ; 2001 KHC 1212 ; 2001 4 Supreme 215
2001(4) Supreme 215
SUPREME COURT OF INDIA
G.B. Pattanaik & B.N. Agrawal, J J.
A.P. State Federation of Coop. Spinning Mills Ltd. & Anr. -Appellants
versus
P.V. Swaminathan -Respondent
Civil Appeal No. 5037 of 1997
Decided on 31-1-2001
IMPORTANT POINT
Court can look into the attending circumstances i.e. circumstances prior to issue of order of termination to find out whether it was penal in nature.
Act
Referred
:CONSTITUTION OF INDIA : Art.226, Art.136
SERVICE LAW : .
(A) The challenged order of termination of services passes through the matrix of Article 226 read with Service Law principles governing the relationship between a statutory cooperative body and its employees, while Article 136 is engaged only insofar as the High Courts exercise of extraordinary jurisdiction under Article 226 is itself subject to scrutiny on appeal; the impugned order, though facially innocuous, is examined by the subordinate courts under the doctrine of legitimate expectation and procedural fairness under the Service Law, requiring the employer to disclose the true and contemporaneous motive for termination, and any inference of arbitrariness or penalty is to be evaluated against the backdrop of the counter-affidavit and the surrounding factual matrix, with the ultimate test being whether the stated reason for termination is genuine and not a disguised penalty imposed without due process.
(B) An order of termination of employment, even of a temporary or tenure employee, is ordinarily not a fit for judicial interference per se; however, where the employer alleges inefficiency as the basis, the court is duty-bound to examine the attendant circumstances, including the reasons communicated or implied in the counter-affidavit, to determine whether the real foundation of the order was inefficiency or misconduct; if the court finds that the order was in reality a penalty for alleged misconduct without affording the employee a reasonable opportunity to meet the charges, it is vitiated as being penal in nature and violative of principles of natural justice; further, the burden lies on the employer to show that the order was genuinely for inefficiency and not a disguised punishment, and the payment of salary in lieu of notice does not cure a defect going to the root of the procedure.
Facts of the case:
The respondent was appointed as General Manager (Finance) for a period of three years by a society functioning as a State within Article 12, with the term expiring on 6.8.1994; services were terminated on 10.6.1993 on the basis of a letter from the Commissioner for Handlooms and Textiles indicating misconduct; the respondent challenged the termination before the High Court of Andhra Pradesh under Article 226, the Single Judge dismissed the petition at the admission stage, but the Division Bench allowed the appeal, holding that the order was penal because the true motive was misconduct without affording the respondent an opportunity to meet the charges; this appeal followed.
Findings of Court:
The Division Bench was justified in treating the order as penal because the employers counter-affidavit revealed that the real and proximate cause was the letter of the Commissioner indicating misconduct, and the procedure adopted was devoid of any opportunity for the respondent to address the charges; the impugned order suffers from infirmity on the ground of arbitrariness and penalty, attracting the stricter scrutiny under the Service Law; however, the remedy of mandamus for reinstatement is not available after the expiry of the term, though the respondent is entitled to pecuniary benefits for the balance period.
Issues:
Whether an order of termination passed by a State entity without affording the employee an opportunity to meet the charges can be characterized as penal and therefore invalid; whether the High Court can and must examine the true and contemporaneous motive for termination when a plea of inefficiency or arbitrariness is raised; whether the doctrine of legitimate expectation and principles of natural justice apply to a statutory cooperative body functioning as a State for service matters; and whether termination after the expiry of the term of appointment precludes reinstatement but does not bar recovery of proportional benefits.
Ratio Decidendi:
Where an employer invokes inefficiency or misconduct as the basis for termination, the onus is on the employer to demonstrate that the stated reason was the genuine and sole foundation of the order, and if the court finds that the order was in reality a penalty imposed without procedure or opportunity of hearing, it must invalidate the order as penal irrespective of its innocuous face, and the employee is entitled to the benefits earned during the unexpired term less any amounts already paid, even where reinstatement is not feasible due to the expiration of the term of appointment.
Result:
The appeal is disposed of, the order of termination is set aside as penal, no reinstatement is ordered due to expiration of the term, but the respondent is entitled to recover the balance of his monetary benefits for the unexpired period after deducting the three months salary paid in lieu of notice, with the direction to make such payment within three months.
(A) The challenged order of termination of services passes through the matrix of Article 226 read with Service Law principles governing the relationship between a statutory cooperative body and its employees, while Article 136 is engaged only insofar as the High Courts exercise of extraordinary jurisdiction under Article 226 is itself subject to scrutiny on appeal; the impugned order, though facially innocuous, is examined by the subordinate courts under the doctrine of legitimate expectation and procedural fairness under the Service Law, requiring the employer to disclose the true and contemporaneous motive for termination, and any inference of arbitrariness or penalty is to be evaluated against the backdrop of the counter-affidavit and the surrounding factual matrix, with the ultimate test being whether the stated reason for termination is genuine and not a disguised penalty imposed without due process.
(B) An order of termination of employment, even of a temporary or tenure employee, is ordinarily not a fit for judicial interference per se; however, where the employer alleges inefficiency as the basis, the court is duty-bound to examine the attendant circumstances, including the reasons communicated or implied in the counter-affidavit, to determine whether the real foundation of the order was inefficiency or misconduct; if the court finds that the order was in reality a penalty for alleged misconduct without affording the employee a reasonable opportunity to meet the charges, it is vitiated as being penal in nature and violative of principles of natural justice; further, the burden lies on the employer to show that the order was genuinely for inefficiency and not a disguised punishment, and the payment of salary in lieu of notice does not cure a defect going to the root of the procedure.
Facts of the case:
The respondent was appointed as General Manager (Finance) for a period of three years by a society functioning as a State within Article 12, with the term expiring on 6.8.1994; services were terminated on 10.6.1993 on the basis of a letter from the Commissioner for Handlooms and Textiles indicating misconduct; the respondent challenged the termination before the High Court of Andhra Pradesh under Article 226, the Single Judge dismissed the petition at the admission stage, but the Division Bench allowed the appeal, holding that the order was penal because the true motive was misconduct without affording the respondent an opportunity to meet the charges; this appeal followed.
Findings of Court:
The Division Bench was justified in treating the order as penal because the employers counter-affidavit revealed that the real and proximate cause was the letter of the Commissioner indicating misconduct, and the procedure adopted was devoid of any opportunity for the respondent to address the charges; the impugned order suffers from infirmity on the ground of arbitrariness and penalty, attracting the stricter scrutiny under the Service Law; however, the remedy of mandamus for reinstatement is not available after the expiry of the term, though the respondent is entitled to pecuniary benefits for the balance period.
Issues:
Whether an order of termination passed by a State entity without affording the employee an opportunity to meet the charges can be characterized as penal and therefore invalid; whether the High Court can and must examine the true and contemporaneous motive for termination when a plea of inefficiency or arbitrariness is raised; whether the doctrine of legitimate expectation and principles of natural justice apply to a statutory cooperative body functioning as a State for service matters; and whether termination after the expiry of the term of appointment precludes reinstatement but does not bar recovery of proportional benefits.
Ratio Decidendi:
Where an employer invokes inefficiency or misconduct as the basis for termination, the onus is on the employer to demonstrate that the stated reason was the genuine and sole foundation of the order, and if the court finds that the order was in reality a penalty imposed without procedure or opportunity of hearing, it must invalidate the order as penal irrespective of its innocuous face, and the employee is entitled to the benefits earned during the unexpired term less any amounts already paid, even where reinstatement is not feasible due to the expiration of the term of appointment.
Result:
The appeal is disposed of, the order of termination is set aside as penal, no reinstatement is ordered due to expiration of the term, but the respondent is entitled to recover the balance of his monetary benefits for the unexpired period after deducting the three months salary paid in lieu of notice, with the direction to make such payment within three months.
ORDER
The respondent had been appointed as General Manager (Finance) under Andhra Pradesh State Federation Cooperative Spinning Mills Ltd. for a period of 3 years with effect from 6.8.1991. While he was continuing as such, his services stood terminated on 10.6.1993. He, therefore, approached the High Court of Andhra Pradesh by filing a writ petition under Article 226 of the Constitution. The learned Single Judge dismissed the writ petition at the admission stage itself, though after hearing the employer. The learned Single Judge came to the conclusion that the order of termination being innocuous, it cannot be held to be penal in nature and termination of service is in accordance with the contract of service, since 3 months salary in lieu of 3 months notice had been paid. The respondent then approached the Division Bench. The Division Bench of Andhra Pradesh High Court allowed the appeal by the impugned judgment in Writ Appeal No. 1071 of 1993. The Division Bench came to the conclusion that a writ would lie against the Andhra Pradesh State Federation of Cooperative Spinning Mills Ltd. as it would be a State within the meaning of Article 12 of the Constitution. It also held that the impugned order, though on the face of it, appears to be innocuous, but if the attendant circumstances leading to the order of termination are examined, more particularly, the stand taken in the counter-affidavit, the conclusion is irresistible that the order is penal in nature, and since the penalty has been imposed without following any procedure and without affording any opportunity to the delinquent to meet any charges, the said order cannot be sustained. It is this order of the Division Bench which is the subject matter of challenge in this appeal.
2. Mr. K. Ram Kumar, learned counsel appearing for the appellants did not seriously press the question of non-maintainability of an application under Article 226 of the Constitution against the appellant in view of the several bye-laws and regulations of the appellant society. He, however, seriously challenged the conclusion of the Division Bench that the order of termination was penal in nature on the ground that the order being innocuous, the statements made by the appellants, who was the opposite party in the counter-affidavit, could not have formed the basis of conclusion of the High Court to the effect that the order of termination is penal in nature. In support of this contention, the learned Counsel places reliance on the decisions of this Court in State of U.P. v. Kaushal Kishore Shukla1, Indra Kumar Chopra v. Pradeshik Co-op. Dairy Federation Ltd.2, State of U.P. v. Krishna Kumar Sharma3, Sudhir Vishnu Panvalkar v. Bank of India4. According to the learned counsel for the appellants, since the respondent, who was the petitioner before the High Court, had urged in the writ petition that the order of termination is arbitrary and not supported by any reason, the bank was duty bound to indicate the reasons which were really the motive for the order of termination and could not have been held to be the foundation for the order of termination. The learned counsel for the respondent on the other hand, contended that a bare look on the assertions made in paragraphs 13 and 14 of the counter-affidavit would indicate what really prompted the authorities to pass the impugned order and as such the conclusion is unassailable.
3. The legal position is fairly well settled that an order of termination of a temporary employee or probationer or even a tenure employee, simplicitor without casting any stigma may not be interfered with by court. But the court is not debarred from looking to the attendant circumstances, namely, the circumstances prior to the issuance of order of termination to find out whether the alleged inefficiency really was the motive for the order of termination or formed the foundation for the same order. If the court comes to a conclusion that the order was, in fact, the motive, then obviously the order would not be interfered with, but if the court comes to a conclusion that the so called inefficiency was the real foundation for passing of order of termination, then obviously such an order would be held to be penal in nature and must be interfered with since the appropriate procedure has not been followed. The decision of this Court relied upon by Mr. K. Ram Kumar also stipulates that if an allegation of arbitrariness is made in assailing an order of termination, it will be open for the employer to indicate how and what was the motive for passing the order of termination, and it is in that sense in the counter-affidavit it can be indicated that the unsuitability of the person was the reason for which the employer acted in accordance with the terms of employment and it never wanted to punish the employee. But on examining the assertions made in paragraphs 13 and 14 of the counter-affidavit, in the present case it would be difficult, for us to hold that in the case in hand, the employer appellant really terminated the services in accordance with the terms of the employment and not by way of imposing the penalty in question.
4. In fact, the letter of the Commissioner for Handlooms and Director of Handlooms and Textiles dated 19.5.93 was the foundation of the employer to terminate the services and as such the Division Bench of the Andhra Pradesh High Court was justified in holding that the order of termination is based on misconduct, though on the face of it, it is innocuous in nature. We therefore, do not find any infirmity with the said conclusion of the Division Bench of the Andhra Pradesh High Court requiring our interference.
5. The period of appointment of the respondent being for a period of 3 years, it stood expired on 6.8.1994. The order of termination was passed on 10.6.93. Notwithstanding the conclusion that the order of termination is vitiated, the respondent cannot seek enforcement of reinstatement by way of a mandamus but all the same he would be entitled to all his benefits flowing from the terms of appointment for the period 10.6.1993 to 6.8.1994. The appellant-Federation is therefore directed to pay the necessary pecuniary benefits flowing from this direction of ours to the respondent within a period of 3 months from today after deducting the wages for 3 months which had been paid to him while passing the order of termination in lieu of notice. The appeal is disposed of accordingly.
Appeal disposed of accordingly.
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