Jabalpur Electric Supply Co. v. Sambhu Prasad Srivastava & Others

LasGuptaJ. DAS GUPTA, J.-Wben under the Standing Orders of a Company the Company is empowered to take disciplinary action against axi employee by pro· ceeding in the prescribed· nianner can that'p?wer be legally delegated by .~he Company, to'• any of its officers ? That is the principal question raised in this appeal.

The appellant is 11, Company ··incorporated under the Indian Companies Act having its regis· tered office at 12, Mission Row, Ca!Ctitta. It is engaged in the generation an_d · ,distribution of electricity at Jabalpur. ' The Company's 'office at Jabalpur is in charge of a"ReBident'Engmeer. By a power of attorney given by the:appellant company on June 26, 1957, Mr. Leonard Shell Mli.c]eod, 'the Company's Resident Engineer . at ''Jab'li.lpur;"·was appointed "the company's tru~" and lawful attorney for and fu the name of the Company to db exer· _.._, cise and perform all or any of the ·acts; matters, discretions and things" set out in II clauses. The '\.19611 10th clause provided that "subject to the Standing .~- 'J obalp~r El1&11ic Orders from time to time given by the Company SuppJy-Oo ... . to appoint, dismiss, suspend or terminate the - Sambhu1Pr,asai services of any of the employees of the Company • S rivaslava at Jabalpur." On November 12, 1957, the respon-dent Sambhu Prasad Srivastava was served with ·D.as Gupta J. a. charge sheet -under the signature of Mr. Macleod in which it was alleged that he had substituted 13 coils of V,I.R. cable in the stores of the Company ·for the same quantity of cable of various makes from the local market, Sambhu Srivastava.'s reply to this charge was that when the shortage of 13 coils ca.me to his notice on the eve of ·the1 audit he remonstrated_ with his subordinates who actually ·handled these articles and that what he did ·was done in the best interest& of the Comany• and· that he never acted with :any dishonest· intention. An enquiry was then held by the Resident Engineer .. a.~d ultimately on January 16, Hl58, the Resident

Engineer issued a letter to him in these terms:-

i'With reference to charge· sheet· dated 12th November, 1957, a.nd the subsequent investigations in the case against you, please ' note' that the matter has been very carefully "'·considered; ·a.nd'in accordance with the·inter- - view :r; wbioh" · you had wi~h our Chief Engineer, ·Mr. W. ··Fawcett, on the morning of the · l'5'th January; 1958, we not hereby notify you 1"' that the Company does· . find it possible '•'to retain ... your ·services .

Therefore, you are ·hereby _discharged from the service of the Company, with imme- ,<1 diate effect. '

' Please call at the Company's office on ·~ th~ l7tli. instant, to receive final settlement

of your dues from the Company."

JHll Srivastava then applied to the Assistant Lab-J ·•t;ur our Commissioner, Jabalpur, alleging· that this

.. mi..iric order was in contravention of the provision of SU71/y Co, ' the C. P. & Berar Industrial Tribunal Settlement S 4mbl u P,.aBad

Srtvtm1aa Act ·and of the Standing Orders as the powers of

the Company under the Standing Orders to hold D<U Glf#la J. the enquiry can be exercised only by the Managing

Director. It was also alleged that the order though in from an order for discharge was really an order of dismissal and that els. 14, 18, 19 and 20 of the Standing Orders had been violated. The Company pleaded in its reply that under the power of attorney the Resident Engineer had the power to hold an enquiry and take disciplinary action against an employee and the action by him should be considered in law to amount to an action by the Company. It was pleaded that the provisions of the Standing Orders had not been violated. The Aseistant Labour Commissioner made an order on September 10, 1958, ordering reinstatement of the respondent without break in his service but without payment of back wages.

The State Industrial Court which was moved both by the Comany and by the employee held that the order of discharge was in substance an order of dismissal, and that misconduct alleged was not proved, and that in any case the Resident Engineer was not empowered to hold an enquiry and to issue an order of discharge. It refused to interfere with the order passed by the Assistant Labour Commissioner and rejected both the revi-sional applications.

Both parties then moved the Madhya Pradesh High Court for relief under Art. 226 of the Consti-tution. The High Court held that the powers. under cl.19 of the Standinef.Orders could not be dele gated to the Resident Engineer and also that th

3 S.C,R, SUPREME CORT REPORTS 4rli genera.I right reserved to the Company under ol.20 11111 of the Standing Orders was meant to be exercised J aboljtut' El•ol, by it and was not covered by the delegation under ll"HIJ c.. cl. 10 of the power of attorney. The High Court v. S•milluPr"""' seems to have thought also that the order made by 'lrilifl•f4va the Resident Engineer was not under cl. 20 of the Dar<.tJ JI Standing Orders. Accordingly, the High Court Ri refused to interfere with the order of reinstatement and dismissed the Company's application under Art. 226. It allowed the employee's application under Art. 226, being of opinion that the Assista.nt Labour Comm~ssioner had no discretion in the matter of back wages and was bound to order payment of back wages as soon as an order of reinstatement was made.

Before considering t:fie question whether the Company could delegate its power t.o take discipli· nary action against its employees it will be proper to clear the ground on the question whether the order was made under cl.19 or cl. 20 of the Standing Orders. Clause 18 of the Standing Orders mentions inter alia that theft, fraud, or dishonesty in connec-tion with the Company's business or property will be treated as misconduct. Clause 19 provides various penalties for misconduct. The substance of these provisions is : that an employee who is adjudged by the Company on examination of the employee and of facts to be guilty of misconduct is liable to be summarily dismissed without notice . or . compensation in lieu of notice or alternatively to be suspended for a period not exceeding fourteen days; that the · order of dis-missal or suspension shall be in writing over the signature of an officer duly authorised for this pur pose, and shall also briefly mention the reason on.

which it is based, and that no order for dismissal or suspension under this Standing Order shall be made unless the employee is informed in writing of

458 SUPREME COURT· REPORTS [1963) .

196B .the misconduct alleged against him and that he

'shall be given an opportunity to produce evidence Ja,~Olpur EJectrU ill his defence. Clause 20 does not deal with dismi·

·'~ ... \1, ' ssal or suspension but provides that ·~the Company San:i.bhu.Pra1atl ' has at all times a general right to discharge an emp·

loyee from service not only for proved misconduct '.ll .. qt<jr. J. • but also when the employer has lost confidence. in

'· "·the employee." ·Clause 21 provide·s for notice of

. censure to be given for certain acts or omissions. An examin.ation of these provision~ shows that i fot an order of dismissal under cl. '· 19 to be made a

•' ·special procedure is to be followed and when it is

m·ade·the employee is not entitled to any compensa· tion. Examining now the order made on Januaryl6, 1958, we find that while cl. ·20 has· not been men· · tioned it does not say that the employee,-has been · found guilty of misconduct but merely states that

"'the Company does not find it possible to . retain ·(this employee's) services" and reference is made to :the investigations in the case against him and to an interview · he h'.1.d with .. the chief Engineer; Mr. J. W. Fawcett, on the

morning of the 15th January, 1958. The only reasonable view to take of this order, in our .• opinion, is that this order was being made under cl.

20 on the ground that the employer had lost con· ;.' fidence in the employe1> and was in· fact and in law

an order of disoh<;irge as distinct from an order· of '· dismissal or suspension. It appears to us that· while ' tl1e Resident Engineer who held the enquiry may " have.been Htisfiad that an. act of misconduct for ''.whioh the employee -was liable to dismissal had · been proved he took. a merciful view , of. his

conduct in view of his previous clean record and proceeded accordingly to act under cl. 20 · of 'the · Stallding Orders instead of proceeding under cl. " · 19:· This is a case in which the employer has actecl,

fairly and even generously in terminating the.servi~ ceii of the employee under ol. 20. '

The question remains whether the Resident ' - Engineer could take action under cl. 20. The empl- ' J aialpur iJ)eGir-fi oyee's argument, which found favour with the High Supply Co. Court was that it was the Company alone which .v. ' Sambh"UPro•ai could take action under clause 20 and the Resident Sariikistlia Engireer in his capacity as the Resident Engineer .

apart from anything else, was not competent to Das Gupla J. take a.ctionunder cl. 20-For, cl. 20 enpowers the_ Company and not the Resident Engineer as such to ·discharge an employee on the ground that the em· ployer had lost confidence in him. In the present case, however, it was not the Resident Engineer in his1capaoity as the Resident Engineer that made the order of disoh:i.rge. Clearly in making the order of discharge he was acting on the.

basis of the power-of attorney exeuuted in his favour on June 26, 1957. Under cl. 10 of the · power of 'attorney he had· power "subject to the Standing Orders from. time to time given by the Company to appoint, dismiss, suspend or terminate the services of any of the employees of the Company at Jabalpur.'' The power of the Company under cl. 19 of the. Standing Orders to dismiss or suspend and its .power under. cl. 20 tq discharge.an employee are both covered by cl,10 of the power of attorney, If there be nothing in law to prevent these powers being delegated to the Reside-nt Engineer there could be no escape from the _ conclusion that the exercise of the power cl, 20 in .

the present case by the Resident Engineer amounted~, in law to an exercise of the power by the Company itself, Is there anything in law which bars such delegation? We are unable to find any. It is.obvious · and admitted that when a Company has to exercise its -powers in connection with' the management of · its business it is not all the share: holders of the, Company that have to meet to exercise the power, How thA Company will regulate its businesH is pres-, cribed in its Articles of Association. It is nobody's

460 SOPREME COURT REPORTS [1963]

1112 ' case that in the Articles of Association of the Jabal-d1!11J1Vr liJlectri.: . pur · Electric Supply Co., there is anything barring SUHZ., r.'o. . the delegation of the disciplinary powers of the

v. Company to any of its officers. · In law therefore .amblru l'rGSGd Sriva1ttJtia delegation of the functions of the Company may

properly be made having regard to the exigencies ID~a G Uf'I•. J. . . of the business aud the Articles of Association, It

cannot be reasonably disputed that where the Head Office of the Company is at Calcutta and the main business is to be carried on at J abalpur the exigen-cies of the business . do require delegation of the Company's power to take disciplinary action agai-nst its employees to a responsible official like the Resident Engineer. But whether or not the Company might have don~ without such delegation is a matter which it is unnecessary for us to enquire into. The delegation was made and neither on principle nor on authority is it possible to say that the delegation was against the provi-sions of law.

Nor can we see that the words "subject to the Standing Orders from time to time given by the Company" with which cl. 10 of the power of attor-ney opens affects the delegation. On a proper interpretation of these words their only effect is that in exercising the power to appoint, dismiss, suspend or terminate the services pf the employees at Jabalpur the delegate mmnot do anything beyond what the company itself can do under the Standing Orders. On no reasonable construction of the words can they mean that the delegate cannot exercise these powers at all, because under the Standing Orclers the Company itself is given these powers. Whether it is the power to take action under cl,19 or under cl.20 of tb.e Standing Orders the delegate can exercise these powers under cl. 10 of the power of attorney in the same way as if thP delegate was ~he. Company itself.

We therefore hold, disagreeing with the High 1962 Court, and the Courts below, that the order of dis-J abalpur liJlectr ic charge made by the Resident Engineer wa8' in 'iupply Co, exercise of the power validly delegated to him and v. Sambhu PrMcd that there has been· no breach of the Standing Sariustca Orders by such action, DtUGupta J We therefore allow the appeal, set aside the order passed by the High Court and direct that the appellant's application under Art. 226 of the Cons-titution be allowed and the order made by the Assistant Labour Commissioner dated September 10, 1958; ordering reinstatement of the respondent, Sambha Prasad Srivastava be set aside. There will be no order as to costs • Appeal allowed.

MANAGEMENT.O"B' RITZ THEATRE (P) LTD. 1912

' v. July27,

ITS WORKMEN

(P. B. GAIBNDRAGADKAR, K. C. DAS GUPTA and

· J. l{. MuDHOLKR, JJ.).

· Industrial Dispute-Termination of relation o.f master anit .J servant-Proceaure-Domestic enquir.!/-Adrlitional evidenc.e

before Tribunal-Powers of Tribunal regarding merits of case-Scope of-Procedure' of departriientril enquiry-Industrial Disputes Act, 1947 (14 of 1947).

The appellant is a company whi.-h carries on the busi-ness of exhibiting cinema films in its theatre. The respon-dents, Jai Jai Ram and Mohd. Mia, were its employees for the past many years. Charge-sheets were served on them and the charges were enquired into by the Enquiry Officers appointed by the appellant, ,i\t the enquiry, the. appellant