Cooper Engineering Ltd v P.P. Mundhe (1975)

By 1975 it was settled that where the employer has held no domestic enquiry, or a defective one, the tribunal may allow him to lead evidence before it to justify the dismissal on the merits. What was not settled was the procedure: when must he ask for that opportunity, and does the tribunal have to tell him first that his enquiry has failed?

Delhi Cloth & General Mills v Ludh Budh Singh had answered that the employer must ask at the appropriate stage and, if he does not, the tribunal is under no duty to invite him suo motu. That put the employer in an impossible position: to ask for the opportunity was to concede that his enquiry might be bad; not to ask was to lose the case if it was.

Cooper Engineering resolves it by laying down a rule of procedure: the labour court must decide the validity of the domestic enquiry as a preliminary issue and pronounce that decision, and only then does the management have to elect whether to lead evidence. This is the case to cite for the preliminary-issue practice in every discharge and dismissal reference.

The workman, P.P. Mundhe, was charged under the standing orders of the company with soliciting or collecting contributions from employees within the factory premises, allegedly for the purchase of microphone and loudspeaker arrangements.

His answer to the charge was a partial admission with a crucial distinction. He denied soliciting or collecting the contribution within the factory premises, but added: "for this purpose I collect the said contribution outside the gate of the Company and this being so, such erroneous information supplied to you by someone should not be considered acceptable".

A domestic enquiry was held. Six witnesses were examined for the employer and cross-examined by the workman, and the workman was questioned both at the outset and at the end. The Enquiry Officer submitted "a very brief report" to the Works Manager holding the charges established, but gave no detailed reasons for preferring the evidence of the six witnesses to the workman's version.

The Manager then passed the order of dismissal without adverting to the evidence in the enquiry — which, the Court observed, "was particularly necessary since the Enquiry Officer had not given his reasons for his finding". During the enquiry before the Manager a further incident occurred: after answering the Manager's first question, the workman, on a second question being put, abruptly left the enquiry, disregarding the Manager's orders and the persuasion of another officer present. The dismissal order was passed the same afternoon.

On reference, the Labour Court, Kolhapur, by an award dated 31 March 1969, held the enquiry defective. It recorded that it was aware it could itself take evidence and decide the merits, but observed:

"in the instant case no evidence regarding merits is led by the opponent before this Court … It is open to the Labour Court to hold an enquiry itself. But the opponent has chosen not to lead any evidence regarding the merits of the alleged misconduct. The natural result of vitiating the enquiry would therefore be to set aside the order of dismissal and to direct the reinstatement in service of the dismissed employee with all back wages."

The company appealed by special leave. The Supreme Court proceeded "on the assumption that the domestic inquiry was rightly found by the labour court to be defective" — so the appeal turned purely on procedure.

"Whether when a domestic inquiry held by an employer is found by the labour court as violative of the principles of natural justice there is any duty cast upon that court to give an opportunity to the employer to adduce evidence afresh before it, and whether failure to do so would vitiate its award."

Two matters were treated as beyond doubt at the outset: where the employer does lead such evidence, the workman will have his opportunity to rebut it; and where the employer declines the opportunity, the labour court may make an appropriate award and "the employer will thereafter be able to make no grievance on that score".

Workmen of Motipur Sugar Factory (Private) Ltd v Motipur Sugar Factory (four Judges) — if a dismissal without enquiry had to be set aside on that ground alone, the employer would simply hold an enquiry and dismiss again, generating a second dispute, delay, and the benefit of a domestic enquiry on the second occasion. Hence "if the domestic enquiry is irregular, invalid or improper, the tribunal may give an opportunity to the employer to prove his case and in doing so the tribunal tries the merits itself" — an approach consistent with doing justice "without relying too much on technical considerations and with the object of avoiding delay".

Management of Northern Railway Cooperative Society Ltd v Industrial Tribunal, Rajasthan — illustrates the very consequence Motipur feared: after reinstatement under the award the management drew fresh proceedings, passed a fresh order of removal, and that order became the subject of another reference.

Management of Ritz Theatre (P) Ltd v Its Workmen — "In enquiries of this kind, the first question which the Tribunal has to consider is whether a proper enquiry has been held or not." Otherwise the employer "would be precluded from justifying the dismissal … unless he takes the risk of inviting the Tribunal to deal with the merits for itself, because as soon as he asks for permission to lead additional evidence, it would follow that he gives up his stand based on the holding of the domestic enquiry". The Court there foresaw the answer: "it may have to be held that in all such cases no evidence should be led on the merits unless the issue about the enquiry is tried as a preliminary issue" — a procedure it called "elaborate and somewhat cumbersome" but neither illegal nor to be rejected out of hand.

State Bank of India v R.K. Jain — "If the management defend its action solely on the basis that the domestic inquiry held by it is proper and valid and if the Tribunal holds against the management on that point, the management will fail … It is the right of the management to sustain its order by adducing also independent evidence before the Tribunal. It is a right given to the management and it is for the management to avail itself of the said opportunity." On the facts, the Bank had rested its case solely on the domestic enquiry, had never asked for the opportunity, and had not even made a grievance of it in the special leave petition; its claim was rejected on those peculiar facts.

Delhi Cloth & General Mills Co v Ludh Budh Singh — propositions (4), (5) and (6): the management may ask the tribunal to try the validity of the domestic enquiry as a preliminary issue and ask for an opportunity to adduce evidence if the finding goes against it; but it "should avail itself of the said opportunity by making a suitable request to the Tribunal before the proceedings are closed", and if it relies only on the domestic enquiry, "it is not its function to invite suo moto the employer to adduce evidence".

Workmen of Firestone Tyre & Rubber Company of India (P) Ltd v Management — propositions (4), (6), (7) and (8): even where no enquiry has been held or the enquiry is defective, the tribunal must give both sides an opportunity to adduce evidence, and the employer may adduce evidence for the first time justifying his action; the tribunal gets jurisdiction to consider such evidence only where no enquiry was held or the enquiry is found defective; "It has never been recognised that the Tribunal should straightway, without anything more, direct reinstatement of a dismissed or discharged employee, once it is found that no domestic enquiry has been held or the said enquiry is found to be defective"; and the employer "should ask for it at the appropriate stage. If such an opportunity is asked for, the Tribunal has no power to refuse."

The Court said it was "particularly concerned with proposition (8)" — and with what the appropriate stage is.

The objection to the Ludh Budh Singh rule is put as a question: is it "fair and in accordance with the principles of natural justice for the labour court to withhold its decision on a jurisdictional point at the appropriate stage and visit a party with evil consequences of a default on its part in not asking the court to give an opportunity to adduce additional evidence"?

"In our considered opinion it will be most unnatural and unpractical to expect a party to take a definite stand when a decision of a jurisdictional fact has first to be reached by the labour court prior to embarking upon an enquiry to decide the dispute on its merits."

Two further reasons are given, both drawn from the object of the Act. The reference "involves determination of the larger issue of discharge or dismissal, and not merely whether a correct procedure had been followed by the management". And if the dismissal is set aside only for defect of enquiry, "a second enquiry after reinstatement is not ruled out nor in all probability a second reference" — which defeats industrial peace, since "the dispute, being eclipsed, pro tempore, as a result of such an award, will be revived and industrial peace will again be ruptured", and defeats the object of expeditious disposal of industrial disputes (s. 15), "resulting in duplication of proceedings".

"When a case of dismissal or discharge of an employee is referred for industrial adjudication the labour court should first decide as a preliminary issue whether the domestic enquiry has violated the principles of natural justice."

The rule has four parts, and all four should be given:

1. Where there is no domestic enquiry, or the employer admits that the enquiry was defective, "there will be no difficulty". But where the matter is in controversy between the parties, that question must be decided as a preliminary issue.
2. "On that decision being pronounced it will be for the management to decide whether it will adduce any evidence before the labour court." The election therefore follows the pronouncement; the employer is not required to elect in the dark.
3. "If it chooses not to adduce any evidence, it will not be thereafter permissible in any proceeding to raise the issue." The election is final.
4. There is no justification for any party to stall the final adjudication by challenging the decision on the preliminary issue, "when the matter, if worthy, can be agitated even after the final award. It will be also legitimate for the High Court to refuse to intervene at this stage." The Court said it made these observations "in our anxiety that there is no undue delay in industrial adjudication".

The Court did not remit the case. Given the long delay already suffered, the fact that "the law laid down by this Court was not very clear at the time of the award" in casting this duty on the labour court, and the appellant's submission that it was prepared to pay the workman's entire salary to date, it held that the interests of justice would be met by converting the order of reinstatement into one of compensation equal to the workman's entire salary from the date of dismissal to the date of the decision, less what had already been paid.

The appeal was dismissed with that modification of the relief, and with no order as to costs.

In a reference concerning discharge or dismissal, where the validity of the domestic enquiry is in controversy the labour court must try and pronounce upon it as a preliminary issue; the management's right to adduce independent evidence in justification of its order is to be exercised after that pronouncement, and an election not to adduce evidence then is conclusive. A finding that the enquiry was defective does not by itself entitle the workman to reinstatement.