# ASSAM. OIL COMP ANY · v. ITS WORKMEN - **Citation:** [1960] 3 S.C.R. 457 - **Court:** Supreme Court of India - **Decided:** 1957-09-18 - **Case number:** Civil Appeal - No. 24 of 1959 - **Bench:** P. B. Gajendrj.Gadkar, K. C. DAs GUPTA - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/assam-oil-comp-any-v-its-workmen-1719 - **Pages:** 10 ## Headnote Industrial Dispu,te-Termination of service in accordance with contract-If can be qu.estioned before industrial tribunal-Termination on basis of misconduct of workman-If amounts to dismissalNo enquiry-,-Reinstatement if appropriate relief. One S was employed by the appellant as a secretary and one_ of.the terms of employment was that the appointment may be terminated on one month's notice on either side. The appellant was thoroughly dissatisfied with the work of S and disapproved of her conduct in joining the union. Purporting to act under the contract, the appellant terminated the services of S and gave her one month's pay in lieu of notice. No enquiry was held by the appellant before terminating the services of S. The industrial tribunal held that the termination of services amounted to a dismissal for misconduct and since no enquiry was held it was illegal and unjustified and it passed an order for the reinstatement of S. The appellant contended that as the termination was strictly in accurdance with the terms of the contract it could not be challenged before an \ndustrial tribunal, that even if no enquiry was held the order of discharge was justified as the evidence led before the tribunal established the misconduct of S and that at the highest it was a case for awarding compensation and not for reinstatement: Held, that the discharge amounted to punishment for alleged misconduct and was unjustified in the absence of a proper enquiry. Even where the discharge was in exercise of the power under the contract it was competent for. the tribunal to enquire whether the discharge had been effected in the bona fide exercise of that power. If the tribunal found that the purported exercise of the power was in fact the result of the misconduct alleged then it would be justified in dealing with the dispute ~m the basis that the order of discharge was in effect an order of dismissal. Western India Automobile Association v. Industrial Tribunal, 8omba)I, [1949] F.C.R. 321, followed .. Management of Ckandramalai Estate, Ernakulam, v. Its Workmen Das G1 .. whether in the circumstances of this case it wou e N'ew Delhi appropriate to direct an order of reinstatement ? v. The appellant company is chiefly engaged in searchIts . .Workme11 ing for and refining crude oil and it has a refinery at c· . ·d dL 1. D. b . . A A N D lh' · h · II .ffi a;en raga "a' • ig 01 m ssam. t ew e I it as a sma o ce ·· with 3 or 4 employees. Miss Scott was originally in the employment of M/s. Burmah-Shell, New Delhi, as a lady secretary. Her services were lent to the Delhi representative of the appellant company sometime in January, 1954. In September, 1954, the appellant set 1lp its own gffice at New Delhi and then offered Miss Scott direct employment on the same terms and condition& that governed her employme~t with M/s. Burmah-Shell. Miss Scott then resigned her service from M/s. Burmah-Shell and joined the appellant as a regular employee in October, 1954. Her appointment was subsequently confirmed on September 1, 1955, on terms and conditions- which were communicated to her and which she accepted. One of the terms was that the appointment in question may be terminated on one month's notice on either side. During the course of her employment Miss Scott did not give satisfaction to the appellant and on many occasions she was verbally warned to i~prove her work and not to repeat her lapses. On ;February 26, 1957, Mr. Gowan, the Delhi. representative of the • appellant, warned Miss Scott in writing about her lapses and added that he did not ,consider her work satisfactory. He told her to strive to improve her work and mend matters failing which he would have to consider whether she was suitable to continue in the appellant's employment. On February 28, 1957, the services of Miss Scott were terminated by Mr. Gowan and she was told that the faultf! pointed. out to her had not been corrected and that her performance during her service had not matched up to the standard -required. Miss Scott was given one month's pay in lieu Of notice and she accepted it. At the time when her services were terminated Miss Scott used to receive the total remuneration of Rs. 535 per month. 1960 Assam Oil Co., New Delhi v. Its Wo,.kmen Gajendf'agadkaf' J. 460 SUPREME COURT REPORTS [1960) On March 13, 1957, Miss Scott made a representation to the Conciliation Officer, New Delhi, against the termination of her services, and it is out of the proceedings taken by the Conciliation Officer on this representation that the present dispute ultimately came to be referred to the industrial tribunal for adjudication. The union of the appellant's workmen which sponsored her case alleged before the tribunal that the termination of Miss Scott's services was wrongful and illegal and she was entitled to reinstatement. It was urged on her behalf that no enquiry was held by the appellant before terminating Miss Scott's services and that made the impugned termination illegal and unjustified. A claim for bonus for the years 1955 and 1956 was also made on her behalf. The appellant resisted this claim. It was urged by the appellant that the dispute was an individual dispute and as such the reference was incompetent. It was alleged that Miss Scott was not a workman under s. 2(s) of the Industrial Disputes Act, 194 7 (hereinafter called the Act), and so the tribunal had no jurisdiction - to deal with the dispute. On the merits the appellant's case was that it had purported to terminate the services of Miss Scott in terms of the contract after paying her one month's wages in lieu of notice, and that the industrial tribunal would not be justified in interfering with such an order. The tribunal has held that Miss Scott was a workman under s. 2(s) and since the union had sponsored her cause the dispute was an industrial dispute under s. 2(k) of the Act. According to the tribunal the termination of Miss Scott's services in substance amounted to dismissal for misconduct, and since no enquiry had been held it was illegal and unjustified. On the merits the tribunal took the view that even if Miss Scott had been guilty of some negligence tbe punishment of dismissal was unduly severe. The tribunal also observed that in dismissing her Mr. Gowan was influenced by the consideration that Miss Scott had become a member of the union and that was substantially responsible for her dismissal. It is on these findings that the tribunal has passed an order of reinstatement. t .. ... 3 S.C.R. SUPREME COURT REPORTS 461 In the present appeal the learned Addition.al SoliciI960 tor-General has raised two points before us. He Assam oil Co. contends that the appellant has terminated the services v. of Miss Scott in pursuance of the terms of the contract Its Workmm and an order of discharge passed strictly according to . - the contract cannot be questioned before the ind us- Ga;endragadkar J. trial tribunal. Alternatively he argues that even if the order of discharge is found to be unjustified because no enquiry was held the whole evidence relating to the alleged misconduct of Miss Scott has been led before the tribunal and in the light of the said evidence the order of discharge should not have been interfered with and reinstatement should not have been ordered. At the. highest it may be a case for awarding compensation and no more. The other findings recorded by the tribunal against the appellant have not been challenged in the present appeal. , The wide scope of the jurisdiction of industrial tribunals is now well established. As early as 1949 it was held by the Federal Court in Western India' Automobile Association v. Industrial Tribunal, Bombay (1) that the argument based upon th.e sanctity and the validity of contracts between the employer and the employees "overlooks the fa.pt ,that when a dispute arises about the employment df/a person at the instance of a trade union or a trade union objects to the employment of a certain person, the definition of industrial dispute would cover both those cases. In each of those cases, · ' although the employer may be unwilling to do so, there will be jurisdiction in the tribunal to direct the employment or non-employment of the person by the employer. / This is the same thing as making a contract of employment when the employer is unwilling- to enter into such a ·contract with a particular person". It_ was also observed that the industrial tribunal "can direct in the case of dis:rnissal that an employer or employee shall have the relation, of employment with the other party, although one of them is unwilling to have such relation " (p. 337). In other words, the jurisdiction of the industrial tril;mnal to direct reinstatement of a discharged or dismissed employee is no longer in doubt. That being the nature a~d extent of the juris- (1) [1949] F.C.R. 321, 3~6, 511 462 SUPREME COURT REPORTS [1960] z96o diction of the industrial tribunal it is too late now to contend that the contractual power of the emrJloyer to Assam oil Co. v. discharge his employee under the terms of the conTts workmen tract cannot be questioned in any case. If the contract gives the employer the power to Gajendragadkar J. terminate the services of his employee after a month's notice or subject to some other condition it would be open to him to take recourse to the said term or condition and terminate the services of his employee ; but when the validity of such termination is challenged in industrial adjudication it would be competent to the industrial tribunal to enquire whether the impugned discharge has been effected in the bona fide exercise of the power conferred by the contract. If the discharge has been ordered by the employer in bona fide exercise of his power then the industrial tribunal may not interfere with it ; but the words used in the order of discharge and the form which it ma,y have 'taken are not conclusive in the matter and the industrial tribunal would be entitled to go behind the words and the form and decide whether the discharge is a discharge simpliciter or not. If it appears that the purported exercise of the power to terminate the services of the employee was in fact the result of the misconduct alleged against him then the tribunal will be justified in dealing with the dispute on the basis that despite its appearance to the contrary the order of discharge is in effect an order of dismissal. The exercise of the power in question to be valid must always be bona fide. If the bona fides of the said exercise of power are successfully challenged then the industrial tribuns,l would be entitled to interfere with the order in question. It is in this context that the industrial tribunal must consider whether the discharge is mala fide or whether it amounts to victimisation or an unfair labour practice, or is so capricious or unreasonable as would lead to the inference that it has been passed for ulterior motives and not in bona fide exercise of the power conferred by the contract. In some cases the employer may disapprove of the trade union activities of his employee and may purport to discharge his services under the terms of the contract. In such cases, if it appears that the real reason - ... - ... - • 3 S.C.R. SUPREME COURT REPORTS 463 and motive for discharge is the trade union activities z96o of the employee that would be a case where the indusAssam oil Co. trial tribunal can justlyhold that the discharge is unv. justified and has been niade mala fide. It may also Its workmen appear in some cases that though the order of discharge is couched in words which do not impute any Gajendrogadka» J. misconduct to the employee, in substance it is based on misconduct of which, according to the employer, the employee has been guilty ; and that would make the impugned discharge a punitive dismissal. In such a case fairplay and justice require that the employee shou.ld be given a chance to explain the allegation weighing in the mind of the employer and that would necessitate a proper enquiry. Whether or not the termination of services in a given case is the result of the bona fide exercise of the power conferred on the employer by the contract or whether in substance it is a punishment for alleged misconduct would always depend upon the facts and circumstances of each case. In this connection it is important to remember that just as the employer's right to exercise his option in terms of the contract has to be recognised so is the employee's right' to expect security of tenure to be taken into account. These principles ha_ve been consistently followed by industrial tribunals and we think rightly (Vide : Buckin'gham and Garnatic Company Ltd. v. Workers of the Company (2). Therefore we are not prepared to accede to the argument urged before us by the learned Additional Solicitor-General that whenever the employer purports to terminate the services of his employee by virtue of the power conferred on him by the terms of contract, industrial tribunals cannot question its validity, propriety or legality. , - In the present case there is no doubt that the order of discharge passed against Miss Scott proceeds on the basis that she was guilty of a misconduct. As we have already pointed out Mr. Gowan communicated to her what he thought were grave defects in her work and in the letter of discharge itself the same allegations are made against her. That being so, it must be held that the discharge in the present case i~ {a) [1952) f..A.C. ~90, • 464 SUPREME COURT REPORTS [1960] r¢o punitive. It amounts to a punishment for alieged Assam oil Co. misconduct and so the tribunal was right in holding v. that the appellant was not justified in discharging Its wo,kmen ·Miss Scott without holding a proper enquiry. It, however, appears that evidence has been led by Gajend,.gadkar J. the appellant before the tribunal in support of its case that Miss Scott was guilty of dereliction of duty on several occasions which justified her dismissal. Mr. Gowan has given evidence about the quality and standard of Miss Scott's work and he has sworn that a long series of instances of bad work and failure to carry out orders, insolence and untruthfullness had come to his notice. On one occasion the letter typed from a draft had been incorrectly typed and more than a complete paragraph had been omitted, and in addition Miss Scott told him that she had checked the letter. According to Mr. Gowan she was disobedient to him and he had occasion to warn her verbally several times in the past. It is true that Mr. Gowan has also stated that he knew that Miss Scott had become a member of the union and he thought that a person who was holding a confidential position in his office should not have become a member of the union. The evidence given by Mr. Gowan on the whole appears to be straightforward and it leads to two conclusions: (1) that Mr. Gowan was thoroughly dissatisfied with the work of Miss Scott, and (2) that he did not approve of Miss Scott's conduct in joining the union. Since the latter circumstance has at least partially weighed in the mind of Mr. Gowan in terminating the services of Miss Scott it must be held that the said termination is not justified. It would not be open to an employer to dismiss his employee solely or principally for the reason that he or she had joined a trade union. That is a fundamental right guaranteed to every citizen in this country and it would be idle for anybody to contend that the mere exercise of the said right would incur dismissal from service in private employment. Therefore we are prepared to accept the finding of the tribunal that the dismissal of Miss Scott is not justified. That raises the question as to whether reinstatement can be ordered in the present case. There is no doubt - - .. 3 S.C.R. SUPREME COURT REPORTS 465 that the normal rule is that in cases of wrongful dis- · I960 missal the dismissed employee is entitled to reinstate- ' Assam oil Co. ment; but there can be cases where it woulil not be v. expedient to follow ,,this normal rule and to direct Its Wo•kmen reinstatement. In the present case the appellant's - office is very small .an.d Miss Scott undoubtedly occu. Gajendragadkar J. pied a position of some confidence with Mr. Gowan. The warnings given by Mr. Gowan to Miss Scott from time to time clearly bring out his dissatisfaction with her work, and if Mr. Gowan has sworn that he has lost confidence in Miss Scott it would be unfair to hold that the loss of confidence is due solely or substantially because Miss Scott joined the union of the appellant's workmen. It· i.s no doubt true that the effect of the employer's plea that he has lost confidence in the dismissed employee c~nnot ordinarily be exaggerated; but in the special circumstances of this · case we are inclined to hold that it would not be fair either to the employer or to the employee to direct reinstatement. · It appears that subsequent to her dismissal and in spite of it Miss Scott found employment with Parry & Company and Nestles Products (India) Ltd., between May 19, 1958 to October 31, 1958 and December 1, 1958 to November 30, 1959, respectively. The first of the said two companies paid her Rs. 500 per month except for October when she was paid Rs. 525 and the latter company has paid her Rs. 500 per month except for November when her salary was Rs. 525 and for December and January when she was paid Rs. 15 per day. Besides she has received from the appellant Rs. 2, 700 as subsistence allowance during the pendency of. the present appeal. We are, therefore, satisfied that it· would be fair and just to direct the appellant to pay a substantial amount of compensation to her. The learned Additional Solicitor-General has agreed to pay Rs. 12,500 in addition to Rs. 2, 700 which have been already paid to her as subsistence allowance. We think that in the circumstances of this case the amount of Rs. 12,500 represents a fair amount of compensation on the payment of which the order of reinstatement passed by the tribunal should Assam oil Co. v. Its TV 0rk1nen Gajendragadkar } . April 6. 466 SUPREME COURT REPORTS [1960J be set aside. We would accordingly set aside the order of reinstatement and direct that the appellant should pay to Miss Scott Rs. 12,500 as compensation. The order in respect of bonus has n!it been challenged and is confirmed. There will be no order as to costs. Appeal partly allowed. •THE STANDARD.VACUUM REFINING CO. OF INDIA LTD. v. ITS WORKMEN AND OTHERS. (P. B. GAJENDRAGADKAR, K. N. WANCHOO and K. c. DAS GUPTA, JJ.) Industrial Dispute-Abolition of contract system of labourDispute raised by regular workmen of company-Reference to Tribunal, if competent-Industrial Dispu.tes Act, r947 (r4 of r947), SS. 2 (k), IO. A dispute was raised by the respondents, the workmen of the appeJlant company, with respect to contract labour employed by it for cleaning maintenance work at the refinery including premises and plant belonging to it. They made a demand for abolition of the contract system and for absorbing the workmen employed through the contractors into the regular service of the company. The matter was referred to the Tribunal under s. IO of the Industrial Disputes Act, 1947· The company objected to the reference on the grounds (1) that it was incompetent inasmuch as there was no dispute between it and the respondents and it was not open to them to raise a dispute with respect to the workmen of some other employer, viz., the contractor, and (2) in any case, it was for the company to decide what was the best method of carrying on its business and the Tribunal could not interfere with that function of the management. The Tribunal held that the reference was competent and on the merits it was of opinion that the work which was being done through the contractor was necessary for the company to be done daily, that doing this work through annual contracts resulted in the deprivation of security of service and other benefits, privileges, leave, etc., of the.workmen of the contractor and that therefore the contract system with respect to this work should be abolished: Held, (1) that the dispute in the present case was an industrial dispute within the meaning of s. 2(k) of the Industrial Disputes Act, 1947, as interpreted in Workmen of Dimakuchi Tea Estate v. The Management of Dimakuchi Tea Estate, [1958), \.. ..