# MANAGEMENT UTKAL MACHINERY LTD v. WORKMEN, MISS SHANTI PATNAIK

- **Citation:** [1966] 2 S.C.R. 434
- **Court:** Supreme Court of India
- **Decided:** 1965-10-27
- **Case number:** Civil Appeal No. 581 of 1964
- **Bench:** P. B. Gajendragadkar, K. N. Wanchoo, M. Hidayatullah, V. Ramaswami, P. Satyanarayana Raju
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/management-utkal-machinery-ltd-v-workmen-miss-shanti-patnaik-3586
- **Pages:** 6

## Headnote

Industrial Dispute-Termination of Enip/oyee's
services-Power of
Tribunal to enquire into--N ecessity of enquiry before discharge on
ground of unsatisfactory work-Amount of compensation.
The respondent entered into the service of the appellants on December
9, 1961 at a monthly salary of Rs. 400.
On April 30, 1962 she was
given notice of termination of her services.
She thereupon raised
an
industrial dispute which was referred by the Government of Orissa to
an Industrial Tribunal. The respondent alleged before the Tribunal thal
the termination of her services was improper, ma/a fide and an act of
victimisation. The case of the ,appellant was that the respondent had
been appointed on probation for six months, and her work having been
found unsatisfactory •he had been discharged in terms of the contract.
The Tribunal held that the termination of the respondent's services was
ma/a fide and awarded her two years salary, namely Rs. 9,600 as compensation, fo appeal to this Court on jx,half of the management by
special leave.
HELD : (i) If the discharge of an employee has been ordered by
the management in bona fide exercise of its power, the Industrial Tribunal
will not interfe:re with it, but it is open to the Industrial Tribunal to
consider whethe:r .the order of termination is ma/a fide or whether it
amounts to victimisation of the employee or an unfair labour practice: or
is so capricious or unreasonable as could lead to the inference that it
had been passed for ulterior motives and not in bona fide exercise of
the power arising out of the contract. In such a case it is open to the
Tribunal to interfere with the order of the management and to afford
proper relief to the employee. [437 C-EJ
(ii) The respondent could not be said to have been discharged in the
terms of the contract. There was no Standing Order of the company
with regard to punishment for
misconduct.
In the
absence of any
Standing Order the unsatisfactory work of an employee may be treated
as
misconduct.
When the management discharged the respondent for
alleged unsatisfactory work it should be taken that the discharge was
tantamount to punishment for alleged misconduct. If this was so, the
management was not justified in discharging the respondent without holding proper enquiry.
Even before the Labour Court no evidence was
adduced by the management to show that the work of the
respondent
was unsatisfactory. In these circumstances the discharge of the respondent was ma/a fide and she was entitled to compensation. [437 F-H]
(iii) There were no special circumstances in the case to justify the
award of two years' salary as compensation. It was sufficie.nt to award
Rs. 4,800. [439 A]

## Text

MANAGEMENT UTKAL MACHINERY LTD.
v.
WORKMEN, MISS SHANTI PATNAIK
October 27, 1965
[P. B. GAJENDRAGADKAR, C.J., K. N. WANCHOO,
M. HIDAYATULLAH, V. RAMASWAMI AND
P. SATYANARAYANA RAJU, JJ.]
Industrial Dispute-Termination of Enip/oyee's
services-Power of
Tribunal to enquire into--N ecessity of enquiry before discharge on
ground of unsatisfactory work-Amount of compensation.
The respondent entered into the service of the appellants on December
9, 1961 at a monthly salary of Rs. 400.
On April 30, 1962 she was
given notice of termination of her services.
She thereupon raised
an
industrial dispute which was referred by the Government of Orissa to
an Industrial Tribunal. The respondent alleged before the Tribunal thal
the termination of her services was improper, ma/a fide and an act of
victimisation. The case of the ,appellant was that the respondent had
been appointed on probation for six months, and her work having been
found unsatisfactory •he had been discharged in terms of the contract.
The Tribunal held that the termination of the respondent's services was
ma/a fide and awarded her two years salary, namely Rs. 9,600 as compensation, fo appeal to this Court on jx,half of the management by
special leave.
HELD : (i) If the discharge of an employee has been ordered by
the management in bona fide exercise of its power, the Industrial Tribunal
will not interfe:re with it, but it is open to the Industrial Tribunal to
consider whethe:r .the order of termination is ma/a fide or whether it
amounts to victimisation of the employee or an unfair labour practice: or
is so capricious or unreasonable as could lead to the inference that it
had been passed for ulterior motives and not in bona fide exercise of
the power arising out of the contract. In such a case it is open to the
Tribunal to interfere with the order of the management and to afford
proper relief to the employee. [437 C-EJ
(ii) The respondent could not be said to have been discharged in the
terms of the contract. There was no Standing Order of the company
with regard to punishment for
misconduct.
In the
absence of any
Standing Order the unsatisfactory work of an employee may be treated
as
misconduct.
When the management discharged the respondent for
alleged unsatisfactory work it should be taken that the discharge was
tantamount to punishment for alleged misconduct. If this was so, the
management was not justified in discharging the respondent without holding proper enquiry.
Even before the Labour Court no evidence was
adduced by the management to show that the work of the
respondent
was unsatisfactory. In these circumstances the discharge of the respondent was ma/a fide and she was entitled to compensation. [437 F-H]
(iii) There were no special circumstances in the case to justify the
award of two years' salary as compensation. It was sufficie.nt to award
Rs. 4,800. [439 A]
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 581 of
1964.
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II
UTKAL MACHINERY LTD. v. SHANTI PATNAIK (Ramaswami, !.) 435
A
Appeal by special leave from the award dated May 24, 1963
of the Labour Court, Orissa in Industrial Dispute No. 5 of 1962.
/. N. Shroff, for the appellant.
The respondent did not appear.
I
The Judgment of the Court was delivered by
Ramaswami, J.
This appeal is brought, by special leave,
•
against the award of the Labour Court, Orissa dated May 24,
1963 in Industrial Dispute No. 5 of 1962 published in the Orissa
Gazette dated June 14, 1963.
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E
F
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The respondent-Miss Shanti Patnaik-took her degree in
Master of Arts (Political Science) in 1961. At that time, Major
General Pratap Narain was the General Manager of Utkal Machinery Ltd. (hereinafter referred to as the 'Management'). On
December 9, 1961 Major General Pratap Narain appointed the
respondent as his Secretary on a monthly salary of Rs. 400. She
was thereafter transferred to the Personnel Department of the
Company as an Assistant. It appears that Shri A. L. Sarin joined
as Personnel Officer on January 2, 1962. The respondent alleges
that on April 30, 1962 she was given notice for termination of
her service. On her representation she was informed on May 30,
1962 that the decision of the management to dispense with her
service was final. The allegation of the respondent is that taking
advantage of her subordinate official position Mr.
Sarin misbehaved with her to which she offered resistance. The respondent
asserted that the termination of her service was improper, mala fide
and an act of victimisation.
The respondent prayed that the
order of termination should be set aside and she should be reinstated with full arrears of pay. The case of the respondent was
taken up by the Utkal Machinery Mazdoor Sangha and on
December 18, 1962 the Govermnent of Orissa referred the following dispute for adjudication to the Labour Court :
"Whether the termination of services of Miss.
S.
Patnaik by the management of Messrs Utkal Machinery
Limited, Kansabahal is legal and justified ? If not, what
relief she is entitled to ?"
The case of the management before the Labour Court was
that Miss Patnaik was appointed on probation for a period of
6 months on a salary of Rs. 400 p.m. on the recommendation of
436
SUPREME
COURT
REPORTS
[1966] 2 S.C,R.
the then Chief Minister of Orissa, Shri B. Patnaik who suggested
A
t<t the management that the respondent may be put "in the staff
with a start of Rs. 350 or Rs. 400 with living accommodation".
The management alleged that the service of the respondent was
terminated during the probation period because of her unsatisfactory work and there was no question of victimisation or malafide motive in the termination of the respondent's service. The
B
management contended that it had absolute discretion to assess
the work of the respondent during the period of probation and
to terminate her services on the ground of unsatisfactory work.
The Labour Court did not accept the contention of the management and held that there was no probationary period fixed for the C
respondent and the termination of her services by the management
was mala fide, illegal and unjustified and the management should
pay to the respondent a sum of Rs. 9,600 as compensation in lieu
of her reinstatement.
The first question pressed on behalf of the appellant is D
that the Labour Court was wrong in rejecting the contention of
the management that the respondent was appointed to serve for
a period of 6 months on probation upto June 9, 1962. Learned
Counsel on behalf of the appellant pointed out that there was
an endorsement at the bottom of the application by the respondent
dated January 9, 1962 to the effect that she was appointed on a
E
salary of Rs. 400 p.m. on probation for 6 months. The endorsement is in the handwriting of Major General Pratap Narain and
both he and Vogel-another General Manager-have signed it.
The Labour Court has examined the evidence on this point and
found that no communication was sent to the respondent on the
basis of the endorsement-Ex. A-1.
The management relied F
ort a letter-Ex. G-dated January 17, 1962 alleged to have been
sent to the respondent. This letter states that the appointment was
on probation for 6 months which may be extended at the discretion
of the management and "during probationary period the services
of the respondent may be terminated without any notice and without the management being bound to assign any reasons therefor".
G
The respondent, however, denied that she received any such letter
from. the management. The Labour Court has accepted her case
and has reached the conclusion that there is no proof that the
respondent was employed by the management on probation for
a period of 6 months with effect from December 9, 1961. We are
ul)able to acC'-"Jlt the argument on behalf of the appellant that the H
finding of the Ll(bour Court on this point is not supported by
proper evidence or that the finding is vitiated by any error of Jaw.
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UTKAL MACHINERY LTD. v. SHANTI PATNAIK (Ramaswami, !.) 437
A
We shall, however, assume in favour of the appellant that the
respondent was appointed on December 9, 1961 on probation for
a period of 6 months and it was stipulated in the contract that
during the probationary period the services of the respondent could
be tenninated without notice and without assigning any reason.
In other words, the management had the contractual right to terminate the services of the respondent without assigning any reason
therefor.
But if the validity of the termination is challenged in
an industrial adjudication, it would be competent to the Industrial
Tribunal to enquire whether the order of termination has been
effected in the bona fide exercise of its power conferred by the
contract. If the discharge of the employee has been ordered by
C the management in bona fide exercise of its power, the Industrial
Tribunal will not interfere with it, but it is open to the Industrial
Tribunal to consider whether the order of termination is ma/a fide
or whether it amounts to victimisation of the employee or an
unfair labour practice or is so capricious or unreasonable as would
D
lead to the inference that it has been passed for ulterior motives
and not in bona fide exercise of the power arising out of the contract.
In such a case it is open to the Industrial Tribunal to
interfere with the order of the management and to afford proper
relief to the employee.
This view is borne out by the decision
of this Court in Assam Oil Co. Ltd. v. Its workmen(').
E
F
G
H
The argument was stressed on behalf of the appellant that there
was no dismissal of the respondent for miscounduct but she was
only discharged in terms of the contract and the order of the
management cannot be treated as an order of dismissal of the
respondent for misconduct. The Labour Court has examined the
evidence on tills aspect of the case and has reached the finding
that the order of the management discharging the respondent dated
April 30, I 962 was punitive in character and it should be taken
as a punishment for the alleged misconduct of the respondent.
The Labour Court has referred to the fact that there is no Standing Order of Utkal Machinery Ltd. with regard to punishment for
misconduct. In the absence of any Standing Order the unsatisfactory work of an employee may be treated as misconduct and
when the respondent was discharged according to the management
for unsatisfactory work it should be taken that her discharge was
tantamount to punishment for an alleged misconduct.
If this
conclusion is correct the management was not justified in discharging the respondent from service without holding a proper
enquiry.
Even before the Labour Court there was no evidence
(I) [1960] 3 S.C.R. 457.
438
SUPREME
COURT REPORTS
[1966] 2 s.c.R.
adduced on behalf of the management to show that the work of
A
the respondent was unsatisfactory. Two witnesses were examined
on behalf of the management but neither uttered a word about
it. Neither the Deputy General Manager nor the Joint General
Manager was examined in support of th<' allegation. There was
. also no document produced on behalf o~ the management to
: illustrate the unsatisfactory work of the respondent. In her stateB
ment before the Labour Court the respondent said that she was
:not told in writing till April 30, 1962 that her work was not satisfactory. Mr. Sarin was her superior officer but he never expressed
.any disapprobation of her work or told her that her work was
not satisfactory. The Labour Court accordingly found that there C
· was no proof of the alleged misconduct on the part of the respondent and there was no justification for terminating her services
and in the face of complete absence of evidence in regard to
unsatisfactory work of the respondent the discharge of the respondent from service was ma/a fide. We hold that the view taken by
.
'
the La hour Court 1s correct.
D
It was next submitted on behalf of the appellant that the
amount of compensation awarded to the respondent was exorbitant. It was pointed ont that the respondent had worked for an
actual period of less than 5 months. but she had been awarded
compensation of two years' salary. We think there is some subE
stance in this criticism. The Labour Court has relied upon the
decision of this Court in Assam Oil Co. Ltd. v. Its workmen(')
but the material facts of that case were different from those in the
present case. In that case the aggrieved employee, Miss Scott was
in the employment of the Assam Oil Co. Ltd. for about two years
before the termination of her services. It also appears that Miss F
Scott was in the service of Burmali-Shell as a lady Secretary before
she entered the service of Assam Oil Co. in October, 1954. It is
also important to notice that the amount of compensation in that
case was fixed on a concession of the
Solicitor-General who
appeared on behalf of the Assam Oil Co. In the present case, the
respondent did not give up any previous job in order to take service G ,
under the appellant.
She had worked for a period of about 5
months with the appellant. Her appointment with the appellant
also was somewhat unusual because it was made on the recommendation of Sri B. Patnaik, the then Chief Minister of Orissa.
There are no special circumstances for awarding compensation
equal to two years' salary. Having regard to these considerations H
we arc of opinion that the amount of compensation awarded by
(1) [1960] 3 S.C.R. 457.
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UTKAL MACHINERY LTD. v. SHANTI PATNAIK (Ramaswami, !.) 439
the Labour Court to the respondent should be reduced and the
respondent should be granted a sum of Rs. 4,800 as compensation.
She 5hould also be paid 6% interest from the date of order of the
Labour Court till the date of payment.
We accordingly modify the award of the Labour Court dated
May 24, 1963 and allow the appeal to this extent. · There will be
no order as to costs.
Appeal allowed in part.