Indian Iron & Steel Co., Ltd. v Their Workmen (1957)

This is the case that fixes the limits of a Tribunal's power to interfere with a dismissal. The Tribunal is not a court of appeal over the management; it may substitute its own view only on four stated grounds — want of good faith, victimisation or unfair labour practice, basic error or violation of natural justice, and a finding that is completely baseless or perverse. Those four grounds are quoted in this branch of the law more often than almost anything else, and they are the answer to the standard question on the scope of industrial adjudication in disciplinary matters.

Two further propositions travel with it. First, a notice construed: whether a management's notice terminated services or merely declared a lock-out is a question of intention gathered from the words used, and the phrase "deemed to be discharged" read in the setting of a declared lock-out means only refusal to employ during the closure. Second, leave to a workman in police custody is a matter for the employer's discretion, and its refusal cannot be set aside unless the exercise of power is shown to be colourable or mala fide.

Four appeals by special leave arose out of labour disputes between the Indian Iron and Steel Company Limited and the Indian Standard Wagon Company Limited, Burnpur, Asansol (together, "the Company"), and some of their employees. Civil Appeals 44 and 45 arose from what was known as the case of 144 workmen; Civil Appeals 336 and 337 from the case of 74 workmen. The facts of the two sets differ and the Court dealt with them separately.

The background. The Asansol Indian Iron and Steel Workers Union was recognised by the Company, and in 1951 the Company was declared a Public Utility Service under the Act. A procedure for settling individual disputes — first the Shop-in-charge, then the Works Committee, with the Union discouraging individual approaches — was said to have been accepted at a joint meeting of the Works Committee in November 1951.

From January 1953 matters deteriorated. Workers of the Hot Mills section resorted to an illegal stoppage of work, and the next day all three shifts began a "slow down" strike. The Company wrote to the Union; the workers submitted demands not through the Union, and were told that joint petitions bypassing the Union or the Works Committee would not be accepted and that no demand could be considered until normal work resumed. The Union itself informed the Company that the workers had made no representation to it and that it did not support their activities — "It is obvious that at this stage there was a cleavage between some of the workers of the Hot Mills section and the Union."

The workers elected a committee of six; the Company refused to negotiate with it. A tripartite conference in March 1953 between the Labour Commissioner, the General Manager and the President of the Union failed, one reason being that representatives of the Hot Mills workers were not included. On 8 April 1953 the Company gave notice that workmen who did not record their willingness to do normal work would be considered no longer employed from 2 p.m. on 10 April. Some 700 workers stopped work illegally on 11 April. The Labour Minister visited Asansol without result. An Action Committee was set up; there was a strike on 27 April; the Sub-Divisional Magistrate promulgated an order under s. 144 CrPC; iron and steel were declared essential to the life of the community under the West Bengal Security Act 1950 and leave to all employees was stopped. Thirty-eight workers were discharged for alleged disobedience, and on 18 August the Action Committee gave notice of a strike from 11 September.

The three notices. On 23 August 1953 the Company declared a lock-out. The notice recited the continued go-slow and five dated illegal strikes and said that "the Management has no option but to declare a lockout of the entire works except the special shifts" in the "Hot Mills Section of the Sheet Mills with effect from Monday, the 24th August, 1953." Seven departments were to continue operating. It ended: "The services of all other workers shall be deemed to be discharged with effect from Monday, August 24th, 1953."

On 17 September 1953 a second notice lifted the lock-out from 6 a.m. on 18 September and required that "All employees on the Works rolls of the Company on the 23rd August, 1953, and who wish to report for duty, must resume work" between 6 a.m. on Friday 18 September and 10 p.m. on Saturday 19 September on their regular shift — with provision for those prevented by illness, and with liberty to any worker who had left the vicinity of the Works to resume by 24 September "provided he produces evidence-satisfactory to the Company of his absence."

On 23 September 1953 a third notice, on the Union President's request, extended the time "until Friday, the 2nd October, 1953."

Of the workmen concerned, 98 reported on 1 October, 4 on 2 October and one on 9 October. The Company did not allow them to resume. The dispute went to the Fifth Industrial Tribunal, which held that all who turned up on or before 2 October were entitled to be taken back without condition (and that one of the two later men had typhoid fever and good reason), and awarded them half basic pay, without dearness or other allowance, from 2 October 1953 to the date of actual return. Both appeals to the Labour Appellate Tribunal, Calcutta were dismissed — the Company's on merits, the workmen's as raising no substantial question of law. Both sides obtained special leave.

The Company's argument (M.C. Setalvad, Attorney-General) was that the notice of 23 August, despite its language of lock-out, really discharged the workmen from 24 August; that the notice of 17 September did not revoke that discharge but merely offered re-employment at the Company's pleasure on conditions; and that the Tribunal was wrong in law to hold that there could not be a lock-out and a discharge at the same time.

The Court rejected it, without needing to decide whether a simultaneous order of discharge and lock-out in respect of the same employees is possible under the Act.

"The question of construction is really a question of intention-to be gathered primarily from the words used in the documents"; if the words are ambiguous, surrounding circumstances may be looked into. The phrase "shall be deemed to be discharged" had to be read in the context of the declaration of a lock-out; "such an expression is neither usually employed nor apt to effectuate an intention to terminate the services of the workmen altogether." A lock-out under the Act means the "closing of a place of employment, or the suspension of work, or the refusal by an employer to continue to employ any number of persons employed by him" — so the sentence meant only that the Company refused to employ these workmen while the place of employment was closed.

The second notice "places the matter beyond any doubt": it speaks of employees on the Works rolls on 23 August who wish to report for duty and must resume work — the expressions used in the second notice "clearly show that the intention was not reemployment of discharged workmen, but resumption of work by employees who desired to resume work and whose employment had been stopped" on account of the lock-out. The third notice, extending time because "a large number of workers might have been prevented from resuming their work for reasons beyond their control", points the same way.

Read together against the prior events, the only reasonable construction was the Tribunals': employees whose employment had been refused during the lock-out were permitted to resume without conditions if they reported by a particular date, and on fulfilment of a condition if later.

The evidence points. The Attorney-General relied on the Action Committee's letter of 2 September 1953 describing the notice of 23 August as "an illegal and unconstitutional notice of discharge". The workmen relied on evidence that no formal order of discharge was recorded in the service books as the rules required, that no month's notice was given, and that continuity of service was in fact allowed for the whole period of absence. The Court declined to go into either: where the words of the notices sufficiently bring out the intention, other evidence is unnecessary. Moreover, "this Court does not sit as a regular Court of appeal over Industrial Tribunals, and does not ordinarily subject the evidence given on behalf of the parties to a fresh review and scrutiny, unless it is shown that exceptional or special circumstances exist, or that substantial and grave injustice has been done" or the case presents features of sufficient gravity.

The alternative argument — that the men reported only on 1 and 2 October and failed to produce evidence of absence satisfactory to the Company — also failed, on the evidence. The Company's witness Shri S.K. Kanwar said of the 144 men: "These men were interviewed, but they could not give satisfactory explanation for not reporting for duty within the time given. These men did not comply with the condition laid down in the notice of the 17th September, 1953. Whatever happened during the interview has been put in writing." The writing was never produced. The same witness said some workmen interviewed were taken back without any explanation of absence; another witness said the instruction from 2 October was "to take back only those who were not harmful to the running of the factory"; a third could not remember whether any of these workmen appeared before him. The Tribunal had found that the Company scrutinised how far each workman was associated with the Action Committee and its meetings, and took back some on that basis. On such conflicting evidence it was not possible to proceed on the footing that these men were refused for want of satisfactory evidence of absence; if that had been the Company's case it should have produced the writing.

One workman's candid evidence — that he did not think it proper to join immediately because most people were outside, his colleagues had not joined, and his social status restrained him — showed at most that some could have come earlier, not that the Company refused only those who failed the condition.

The Court expressly left the legality of the strike and of the lock-out undecided as unnecessary, adding that its reluctance to pronounce on the workmen's conduct before 23 August "does not signify an approval of that conduct which rightly came in for a good deal of criticism by the Industrial Tribunal."

Civil Appeal 45 (the workmen's claim to full compensation) raised "no question of principle". The Tribunal had refused compensation for the period before 2 October because the workmen had tried to coerce the Company by slow-down tactics, and allowed half wages thereafter because some were near Burnpur and might have joined earlier, some claimed to return as of right without explanation, and none had done any actual work. No error was found.

The reference concerned 74 workmen discharged or suspended. The Tribunal classified them in four categories: (1) those whose services were terminated under the Standing Orders for absence without permission for 14 consecutive days; (2) those dismissed for major misdemeanour; (3) those suspended whose cases could not be finally disposed of; and (4) those dismissed for disobedience of orders and other activities in pursuance of a concerted "go-slow" plan. It ordered reinstatement of 25 of the 74, with half basic pay to 24 of them for the period of forced unemployment. Both appeals to the Labour Appellate Tribunal were dismissed.

The seven absentees in police custody

Standing Order No. 9 provided: "Any worker who is absent for 14 consecutive days without permission will be automatically discharged. Also, any worker who is absent for 14 individual days during any period of 12 months is liable to discharge."

Seven workmen were taken into police custody on dates between 5 and 10 July 1953 and remained in custody for some time. They applied for leave while in custody; leave was refused. The Industrial Tribunal held Standing Order No. 9 was not an inflexible rule and that a mere application for leave arrested its operation — a view counsel for the workmen conceded he could not support before the Appellate Tribunal, which nevertheless held that since the men were in custody the Company was not justified in refusing leave.

The Supreme Court held the point covered by Burn and Co., Calcutta v Their Employees (1956), where an employee detained under the West Bengal Security Act had his services terminated for continued absence and the Appellate Tribunal ordered reinstatement for want of a charge and enquiry. This Court had said there: "We are unable to agree with this decision. The ground of discharge is the continued absence of the employee, and his inability to do work, and it is difficult to see what purpose would be served by a formal charge being delivered to him and what conceivable answer he could give thereto."

The same principle applied. That the arrested men could not come to work "may be unfortunate for them; but it would be unjust to hold that in such, circumstances the Company must always give leave when an application for leave is made." Where a large number are arrested by the authorities in charge of law and order by reason of their questionable activities in connection with a labour dispute, the Company's work would be paralysed if it were forced to grant leave to all of them for an indefinite period; such a principle "will not be just; nor will it restore harmony between labour and capital or ensure normal flow of production." It is immaterial whether the criminal charges are ultimately proved. "Whether in such circumstances leave should be granted or not must be left to the discretion of the employer."

The limit on that discretion. If workmen are arrested at the instance of the Company for the purpose of victimisation and to be rid of them on the ostensible pretext of continued absence, the position is different — that would be "a colourable or mala fide exercise of power under the relevant Standing Order"; but that was not the case here. Both Tribunals had misdirected themselves on the true scope and effect of the Standing Order, and their decision as to the seven workmen could not be supported.

Samar Sen: is a hotel manager a workman?

Samar Sen worked as Manager of the Burnpur hotel, and it was asked whether he was a "workman" under s. 2(s) as it then stood — a person employed in any industry to do any skilled or unskilled manual or clerical work for hire or reward, including a workman discharged during a dispute, but excluding persons in the naval, military or air service of the Government. The question was whether he did clerical work for hire or his duties were merely supervisory. Both Tribunals had concurrently found him a workman, relying on his own evidence that he had to write ledgers, file correspondence and enter the cash book. The Court saw no reason to hold the finding erroneous.

On the merits, the Company said he was dismissed after a regular and proper enquiry for unauthorised absence and insubordination. The Industrial Tribunal had found that he went on leave, applied for extension, joined on 1 August with a medical certificate of fitness and was practically within the grace period; that he was genuinely ill; that his only fault was not consulting the Company's doctor, which did not matter as he was on sanctioned leave — and that his real fault was that he was Secretary of the Action Committee, the Committee being "like a red rag to the bull". It set aside the dismissal and ordered reinstatement with half basic pay.

The finding, the Supreme Court said, "really amounts to this that Samar Sen was victimised as he was the Secretary of the Action Committee". The Attorney-General's argument that Sen's own statements before the Enquiry Committee showed he was not taking complete rest but doing "public work" "might have been urged acceptably to a Court or Tribunal of first instance; but we are not such a Court or Tribunal, and in the absence of exceptional or special circumstances or of grave injustice, we shall not be justified in interfering with what really is a finding of fact."

Abharani Debi — and the four grounds

Abharani Debi was a nurse in the Burnpur Hospital, charged with inciting a sweeper, Karu, not to attend duty on the morning of 5 September 1953. An enquiry found her guilty. The Tribunal found the charge "completely baseless" and that the enquiry report "made a mountain of a mole-hill": her comments to Karu about a pass, innocuous in themselves, had been magnified into a charge of intimidation. Significantly, the Company did not even argue her case before the Labour Appellate Tribunal.

It is here that the Court states the governing proposition:

"Undoubtedly, the management of a concern has power to direct its own internal administration and discipline; but the power is not unlimited and when a dispute arises, Industrial Tribunals have been given the power to see whether the termination of service of a workman is justified and to give appropriate relief. In cases of dismissal on misconduct, the Tribunal does not, however, act as a Court of appeal and substitute its own judgment for that of the management. It will interfere (i) when there is a want of good faith, (ii) when there is victimisation or unfair labour practice, (iii) when the management has been guilty of a basic error or violation of a principle of natural justice, and (iv) when on the materials the finding is completely baseless or perverse."

Abharani's case fell under clause (iv).

Himansu Chattoraj: suspension, s. 33, and a basic error

Chattoraj was alleged to have incited slow-down tactics from January 1953, was charge-sheeted on 28 March 1953, explained on 29 March and was suspended pending enquiry on 31 March. Evidence was taken on 3 and 4 April, but "the evidence not being of an overwhelming character against Chattoraj, the management postponed its decision pending further enquiry." His name figured in the s. 144 order of May 1953. In September 1953 the dispute, including his case, went to the Tribunal, there being a suspension order against him; an application under s. 33 was said to have been made for permission to dismiss him for activities subsequent to the charge-sheet.

Instead of dealing with that application, the Tribunal ordered his reinstatement, reasoning that the charge-sheet on which he was sought to be punished was not proved even on the Company's own version, that for his other activities there was no charge-sheet, and therefore the Company was not entitled to dismiss him — while refusing him any compensation because he had indulged in activities prejudicial to the Company, the period to be treated as leave without pay. The Appellate Tribunal dealt with him summarily, saying reinstatement was unobjectionable.

The Supreme Court found a basic error. The only formal order against him was the order of suspension, which was "certainly a valid order". The Tribunal found he had indulged in prejudicial activities, "and it is now recognised that deliberate 'slow-down' tactics and an incitement to other workmen to adopt such tactics both amount to misconduct." If the suspension order was the only subject of reference, "the Tribunal could-not order his reinstatement till the enquiry was completed." If instead the Tribunal proceeded on the footing that the Company had decided to terminate him for prejudicial and subversive activities, then on being satisfied that he was guilty of them "the proper order would have been to give the Company permission to dismiss Chattoraj. In either view, the order of his reinstatement is unjustified."

Civil Appeal 337

The Tribunal had refused reinstatement to those against whom it found the Company had good reasons for dismissal, and no error was shown. Of the two pressed, Akka Hossain had been charged with slow-down tactics and later with assaulting the Company's driver; though acquitted in the criminal proceeding, the Tribunal found termination justified. D.P. Das was absent without leave for more than 14 days from 5 July 1953 and his services were rightly terminated under the Standing Orders.

1. On construction of the notices: the expression "shall be deemed to be discharged" read in the context of the declaration of a lock-out did not terminate services; the intention was that employees whose employment had been refused during the lock-out were to resume without conditions if they reported by the stated date, and on fulfilment of a condition if later. Civil Appeals 44 and 45 dismissed, and the half-pay compensation left undisturbed.
2. On leave to workmen in custody: whether leave should be granted in such circumstances "must be left to the discretion of the employer", unless a colourable or mala fide exercise of power under the Standing Order is proved. Burn and Co. followed. The decision below as to the seven absentees was set aside.
3. On the Tribunal's powers: the powers of an Industrial Tribunal to interfere with a dismissal are not unlimited; it is not a court of appeal and does not substitute its own judgment for the management's. It will interfere on four grounds — want of good faith; victimisation or unfair labour practice; basic error or violation of a principle of natural justice; a finding completely baseless or perverse. Abharani Debi's case fell within the fourth; Samar Sen's within victimisation, and as a finding of fact was not disturbed.
4. On Chattoraj: reinstatement was vitiated by basic error; either the enquiry had to be completed, or permission to dismiss ought to have been given.
5. Result: Civil Appeals 44, 45 and 337 dismissed as without merit. Civil Appeal 336 partly allowed, the decisions below being set aside in respect of eight men — the seven absentees and Himansu Chattoraj. In all other respects the decision appealed from stood. Parties to bear their own costs.