1986 JTR(SC) 507
1987 AIR(SC) 229 ; 1985 1 CLR 26 ; 1987 1 CurCC(SC) 1 ; 1987 70 FJR 65 ; 1987 54 FLR 43 ; 1986 JT 946 ; 1986 1 JT 946 ; 1987 LIC 218 ; 1987 1 LLJ 107 ; 1987 1 LLN 83 ; 1986 2 Scale 922 ; 1987 1 SCC 146 ; 1987 SCC(L&S) 25 ; 1986 4 SLR 281 ; 1987 1 SLR 792 ; 1987 1 UJ 147 ; 1986 2 UPLBEC 848 ; 1987 KHC 288
SUPREME COURT OF INDIA
P.N. Bhagwati, CJI., C.J.I., RANGANATH MISRA, J.
Civil Appeal No. 2568 of 1986, D/- 3-12-1986
Kamal Kishore Lakshman, Appellant
Versus
Management of M/s. Pan American World Airways Inc., others, Respondents.
Act Referred :INDUSTRIAL DISPUTES ACT : S.2(o)(o), Sch.2, Item.3, S.11(a), Item.6
(A) The Industrial Disputes Act provisions referred, read with the facts, govern the adjudication of alleged illegal termination and the question of stigma attaching to termination grounded on loss of confidence. Section 2(o)(o) read with Item.3 and Item.6 defines the scope of an industrial dispute and the concept of retrenchment, while Section 11(a) and Schedule 2 provide the procedural safeguards, including the requirement of a domestic enquiry before termination, which when absent may vitiate the order unless tested in adjudication. The adjudication by the Labour Court under these provisions evaluates whether termination was justified on grounds of operational efficiency and loss of confidence, and whether the consequences should be stigma or retrenchment.
(B) Loss of confidence by the employer amounts to a stigma affecting the character or reputation of the employee and, therefore, attracts a different procedural regime under the Industrial Disputes Act. Retrenchment, defined as termination otherwise than punishment, does not apply where the termination is grounded on stigma arising from proven misconduct or lack of trustworthiness. Where no formal domestic enquiry precedes the termination, the employer is entitled to offer an opportunity to explain during the adjudication, but the burden of proof and procedural fairness determine whether the termination is valid. The principles from Roble v. Green, supported by several High Courts, confirm that a finding of stigma precludes automatic reinstatement, and compensation may be considered only on humanitarian grounds.
Facts of the case:
The appellant was employed as a Cargo Mail Service Representative and was terminated on March 15, 1974. The termination was challenged as illegal and unjustified, with the appellant seeking reinstatement and back wages. The management contended that during a leave in February 1974, the appellant traveled to Hong Kong and returned on February 22, 1974, and two aluminium foot lockers received on February 19, 1974, which were not meant for New Delhi, were taken from Customs custody by a co-employee and delivered to the appellants house. The management conducted a preliminary enquiry and, on questioning the appellant and the co-employee, lost confidence in the appellants integrity, leading to termination on grounds of operational efficiency and suspected smuggling. No domestic enquiry was held, and the Labour Court assessed the evidence, concluding that the loss of confidence was justified and that the stigma attached to the termination did not convert it into retrenchment.
Findings of Court:
The Labour Court found that the managements decision was motivated by operational efficiency and that the loss of confidence was well-founded, as the appellants explanation was not acceptable and there was suspicion of involvement in customs duty evasion. The court held that the order of termination was justified under the Industrial Disputes Act despite the absence of a prior domestic enquiry, as the employer was entitled to rely on loss of confidence as a valid ground. The court distinguished the present case from Chandu Lals appeal, where the stigma was held to preclude reinstatement and warranted only compensation, and affirmed that the procedural safeguards under the Act were satisfied through adjudication.
Issues:
Whether termination of services on the ground of loss of confidence amounts to retrenchment or attracts stigma, and whether the absence of a prior domestic enquiry invalidates the termination under the Industrial Disputes Act. Whether the Labour Court was justified in upholding the termination based on the evidence of suspicious travel and customs evasion, and whether compensation is mandated in such circumstances.
Ratio Decidendi:
Loss of confidence by the employer in an employee amounts to stigma, which affects the character or reputation of the employee and precludes reinstatement. Termination grounded on such stigma is not retrenchment within the meaning of the Industrial Disputes Act and does not require a prior domestic enquiry, as the employer is entitled to offer an opportunity to explain during adjudication. Where stigma is established, the appropriate remedy is termination without reinstatement, and compensation is only a matter of humanitarian consideration, not a general rule.
Result:
The appeal is dismissed, with costs to be borne by the parties.
(A) The Industrial Disputes Act provisions referred, read with the facts, govern the adjudication of alleged illegal termination and the question of stigma attaching to termination grounded on loss of confidence. Section 2(o)(o) read with Item.3 and Item.6 defines the scope of an industrial dispute and the concept of retrenchment, while Section 11(a) and Schedule 2 provide the procedural safeguards, including the requirement of a domestic enquiry before termination, which when absent may vitiate the order unless tested in adjudication. The adjudication by the Labour Court under these provisions evaluates whether termination was justified on grounds of operational efficiency and loss of confidence, and whether the consequences should be stigma or retrenchment.
(B) Loss of confidence by the employer amounts to a stigma affecting the character or reputation of the employee and, therefore, attracts a different procedural regime under the Industrial Disputes Act. Retrenchment, defined as termination otherwise than punishment, does not apply where the termination is grounded on stigma arising from proven misconduct or lack of trustworthiness. Where no formal domestic enquiry precedes the termination, the employer is entitled to offer an opportunity to explain during the adjudication, but the burden of proof and procedural fairness determine whether the termination is valid. The principles from Roble v. Green, supported by several High Courts, confirm that a finding of stigma precludes automatic reinstatement, and compensation may be considered only on humanitarian grounds.
Facts of the case:
The appellant was employed as a Cargo Mail Service Representative and was terminated on March 15, 1974. The termination was challenged as illegal and unjustified, with the appellant seeking reinstatement and back wages. The management contended that during a leave in February 1974, the appellant traveled to Hong Kong and returned on February 22, 1974, and two aluminium foot lockers received on February 19, 1974, which were not meant for New Delhi, were taken from Customs custody by a co-employee and delivered to the appellants house. The management conducted a preliminary enquiry and, on questioning the appellant and the co-employee, lost confidence in the appellants integrity, leading to termination on grounds of operational efficiency and suspected smuggling. No domestic enquiry was held, and the Labour Court assessed the evidence, concluding that the loss of confidence was justified and that the stigma attached to the termination did not convert it into retrenchment.
Findings of Court:
The Labour Court found that the managements decision was motivated by operational efficiency and that the loss of confidence was well-founded, as the appellants explanation was not acceptable and there was suspicion of involvement in customs duty evasion. The court held that the order of termination was justified under the Industrial Disputes Act despite the absence of a prior domestic enquiry, as the employer was entitled to rely on loss of confidence as a valid ground. The court distinguished the present case from Chandu Lals appeal, where the stigma was held to preclude reinstatement and warranted only compensation, and affirmed that the procedural safeguards under the Act were satisfied through adjudication.
Issues:
Whether termination of services on the ground of loss of confidence amounts to retrenchment or attracts stigma, and whether the absence of a prior domestic enquiry invalidates the termination under the Industrial Disputes Act. Whether the Labour Court was justified in upholding the termination based on the evidence of suspicious travel and customs evasion, and whether compensation is mandated in such circumstances.
Ratio Decidendi:
Loss of confidence by the employer in an employee amounts to stigma, which affects the character or reputation of the employee and precludes reinstatement. Termination grounded on such stigma is not retrenchment within the meaning of the Industrial Disputes Act and does not require a prior domestic enquiry, as the employer is entitled to offer an opportunity to explain during adjudication. Where stigma is established, the appropriate remedy is termination without reinstatement, and compensation is only a matter of humanitarian consideration, not a general rule.
Result:
The appeal is dismissed, with costs to be borne by the parties.
Judgment
RANGANATH MISRA, J. : - This appeal by special leave assails the Award dated June 13, 1980, passed by the Presiding Officer, Labour Court, Delhi. The following question was referred for adjudication :
"Whether the termination of services of Shri Kamal Kishore Lakshman is illegal and/or unjustified; and if so, to what relief is he entitled and what directions are necessary in this respect?"
2. The appellant was employed by respondent No. 1 on regular vacancy as a Cargo Mail Service Representative at Palam Airport. His services were terminated on March 15, 1974. The appellant maintains that the termination was bad and contrary to principles of natural justice and demanded reinstatement with full back wages and other service benefits. The management resisted this claim and contended that the appellant while on leave in February 1974 had gone to Hong Kong and returned to Delhi in Flight No. PA-1 in the morning of February 22, 1974. During his absence from India, two aluminium foot lockers had been received on February 19, 1974. Those lookers were not meant for New Delhi and had been deposited with the Customs authorities and were taken from Customs custody for being despatched to proper destination in the Companys flight PA-002. These two trunks were not loaded in the flight but were taken out at the instance of Chandu Lal (co-employee) by taxi and delivered at the house of the appellant. When questioned Chandu Lal accepted these allegations. The management undertook some preliminary enquiry and when the appellant arrived in India on February 22, 1974, he too was questioned. His stand and the explanation were not acceptable to the employer and it took the stand that the management had lost confidence in the employee and termination in the circumstances was bona fide and was in accordance with the provisions for separation of employees according to conditions of service.
3. Admittedly no domestic enquiry had been held but before the Labour Court both parties led evidence. The Labour Court considered the entire evidence keeping in mind the legal position indicated by this Court in some decisions and came to the following conclusion :
"I am of the clear opinion that the action of the management of Pan-Am was promoted only by the desire to have operational efficiency and the decision to separate Kamal Kishore Lakshman was taken only because operational efficiency was endangered in continuing Lakshman in service when there were grave suspicion against Mr. Lakshman about being involved in avoidance of customs duties in respect of goods in the two aluminium foot lockers."
The Labour Court also further found that Lakshman had undertaken a trip to Bangkok and Hong Kong in suspicious circumstances and held that :
"What is indicated is that in the totality of circumstances the management lost confidence in Lakshman and his involvement in smuggling activities could not be said to be a fanciful or whimsical matter. The order had to be made for a good reason and the reference to the recent happenings in the order of termination does not cast a stigma, but only complies with the requirement of the Separation Rules."
4. The co-employee Chandu Lal for his involvement in the same incident also suffered termination of service and lost before the Labour Court. Chandu Lals Appeal (C. A. No. 10667 of 1983) was disposed of by this court on 19-4-1985 (reported in AIR 1985 SC 1128). This Court held that want of confidence in an employee did point out an adverse facet in his character and if termination was grounded on such facet of the employee, it amounted to a stigma. Such termination would therefore not amount to retrenchment. In the absence of an inquiry in an appropriate disciplinary proceeding, there could not be a valid order made terminating service. After holding that the termination was bad and accepting the employees plea that there was loss of confidence, it was concluded that the employee was not to be restored to service. The Court ordered lump sum amount to be paid by way of compensation.
5. The appellants Special Leave Petition, however, was dismissed apparently on the basis of guilty conduct and though his case and Chandu Lals case (AIR 1985 SC 1128) suffered from the defect, the appellant had the larger share of responsibility. After the judgment in Chandu Lals case was delivered a review application was filed being R. P. No. 771 of 1985. This Court by its order dated 24-7-1986 accepted the review and restored his special leave petition. Leave was granted and the appeal was directed to be heard.
6. Though new life was injected into the appellants case by the ratio of Chandu Lals decision, at the hearing learned counsel for the appellant focussed his attention to show that the foundation of the judgment of this Court in Chandu Lals appeal was based upon an untenable view. According to learned Counsel termination of service for loss of confidence amounted to retrenchment and nothing more.
7. Having heard learned Counsel, we are inclined to reiterate the view taken in Chandu Lals case (AIR 1985 SC 1128) that the plea of loss of confidence in the employee indeed casts a stigma. As was pointed out in Roble v. Green, (1985) 2 QB 315 the employee is expected to promote the employers interests in connection with which he has been employed and a necessary implication which must be engrafted on such a contract is that the servant undertook to serve his master with good faith and fidelity. This view has been accepted by several High Courts in India and meets with our approval. In the absence of a statutory definition of the word stigma, we shall refer to its meaning as available in dictionaries.
8. According to Websters New World Dictionary it is something that detracts from the character or reputation of a person, a mark, sign, etc., indicating that something is not considered normal or standard. The Legal Thesaurus by Burton gives the meaning of the word to be blemish, defect, disgrace, disrepute, imputation, mark of disgrace or shame. The Websters IIIrd New International Dictionary gives the meaning as a mark or label indicating a deviation from a norm. According to yet another Dictionary stigma is a matter for moral reproach.
9. Loss of confidence by the employer in the employee is a feature which certainly affects the character or reputation of the employee and, therefore, this Court correctly held in Chandu Lals case that allegation of loss of confidence amounted to a stigma. The ratio in Jagdish Mitters case AIR 1964 SC 449 also supports this conclusion.
10. Retrenchment as defined in S. 2(oo) of the Industrial Disputes Act and as held by this Court in several cases means termination of service for any reason whatsoever otherwise than punishment inflicted by way of disciplinary action and the other exceptions indicated therein. In the present case though no formal domestic inquiry had been held, the employer took the stand in the adjudication that termination was grounded upon loss of confidence and substantiated that allegation by leading evidence. The legal position firmly established is that if there has been no appropriate domestic enquiry or no enquiry at all before disciplinary action is taken, it is open to the employer to ask for such opportunity in the course of adjudication. In the facts of the present case, the order of separation grounded upon loss of confidence has been justified before the Labour Court and the Labour Court has come to that conclusion upon assessment of the evidence.
11. Several decisions were relied upon by appellants learned Counsel in support of his contention that the conclusion in Chandu Lars case (AIR 1985 SC 1128) that loss of confidence amounted to stigma was wrong. We have not been shown a single case other than Chandu Lals where this aspect has been directly considered. Whether termination is grounded upon stigma would not vary from case to case depending upon whether it involves a government servant or a workman. But the procedural safeguards appear to be different when termination is sought to be founded upon stigma. If disciplinary inquiry has not preceded the prejudicial order in the case of a Government servant the action would be bad while in the case of a workman the order could be justified even in the course of adjudication before the appropriate Tribunal under the Industrial Disputes Act even though no inquiry had been undertaken earlier.
12. Mr. Mohanty finally contended that since in Chandu Lals case a lump sum compensation has been awarded, a similar direction should be given in this case. Dr. Anand Prakash for the employer rightly indicated that the role played by Chandu Lal and the appellant in the wrongful act differed and the appellants responsibility appeared to be more. Perhaps it was on that footing that this Court had initially declined to interfere when the appellants leave application had come up. Yet, we suggested that a sum of Rs. 25,000/- may be paid by way of compensation on humanitarian consideration and though Dr. Anand Prakash agreed to do so, the appellant who was present in Court, was not prepared to accept the same. The question of compensation, therefore, does not arise.
13. The appeal fails and is dismissed. In the peculiar circumstances of the case we direct parties to pay their own costs.
Appeal dismissed.