State Bank of India v R.K. Jain (1971)

The case answers two questions that come up in almost every dismissal dispute.

First, what makes a domestic enquiry unfair? Normally a workman must bring his own witnesses. Here the Court held that refusing to call two of his witnesses, in the special circumstances of the case, was a denial of natural justice, and the discharge fell with the enquiry.

Second, when must the employer lead evidence before the Tribunal if the enquiry fails? Some High Courts had said the Tribunal must first decide whether the enquiry was valid and then give the employer a chance to lead evidence. The Supreme Court rejected that two-stage approach. The Tribunal holds one composite inquiry; it is the employer's right to lead evidence, but it must choose to use that right. An employer that stands only on its domestic enquiry, and loses on that, loses the case.

R.K. Jain was a Money Tester at the Ambala City Branch of the State Bank of India. On 26 July 1960 he supervised a remittance of unissuable notes to the Reserve Bank of India, Ludhiana, for destruction. The Reserve Bank officials found Rs. 100 short in a packet of Rs. 10 notes bearing a label with his initials. The Bank's case was that, while claiming to unstitch the packet, he tore off the label to avoid liability. He said the label tore accidentally and that the Reserve Bank staff were hostile to him.

He was charge-sheeted. A first enquiry was held by B.P. Tiwari. Jain called two cashiers of the Bank from other branches, Pooran Singh and Sanjhi Ram, as defence witnesses at his own expense. The Reserve Bank officers who gave evidence against him refused to be cross-examined. The Bank later treated this enquiry as improper and ordered a fresh enquiry by B.D. Sharma, over the protests of the workman's union.

In the second enquiry Jain asked for the two cashiers to be summoned. The Inquiry Officer told him to produce them himself, at his own expense. Jain said he had already paid once and the fresh enquiry was not his fault; he asked in the alternative that their earlier evidence be treated as evidence. Both requests were refused. The Bank paid for its own officers and the Reserve Bank officers to attend. Jain was found guilty and discharged under para. 521(10)(c) of the Sastry Award.

The Central Government referred the dispute to the Industrial Tribunal, Chandigarh. By its award of 7 April 1967 the Tribunal held that Jain had been denied a reasonable opportunity to lead his defence, set aside the discharge, and ordered reinstatement with full back wages. The Bank appealed by special leave.

1. Could the Tribunal set aside the discharge without any finding of mala fides or victimisation, on the ground that the enquiry violated natural justice?
2. Could the discharge be supported under the last part of para. 521(10)(c) of the Sastry Award, which allows discharge where the evidence is insufficient but the bank does not think it expedient to keep the employee?
3. Once the Tribunal found the enquiry vitiated, was it bound to give the Bank an opportunity to lead evidence to justify the discharge?

The appeal was dismissed with costs and the Tribunal's award was confirmed.

Issue 1: natural justice in the domestic enquiry

Interference by a Tribunal is not limited to mala fides and victimisation. The Court held that "The order terminating the, services of the workman can also be set aside when there has been a violation of the principles of natural justice, in the conduct of the inquiry which led to the passing of the order of termination." It also noted that para. 521(10)(a) of the Sastry Award itself substantially contains the principles of natural justice, including the right to cross-examine and to lead defence evidence.

The Bank relied on Tata Oil Mills Co v Its Workmen: an Inquiry Officer cannot compel witnesses, and it is the workman's duty to produce his own. The Court accepted the general rule but held the facts took this case outside it: "Though, normally it may be the duty of the workman to have his witnesses produced before the Inquiry Officer, in the particular circumstances of this case the position is entirely different."

The reasons were that the first enquiry was abandoned not through any fault of the workman but because of the Reserve Bank witnesses' refusal to be cross-examined, and that the second enquiry was held at the management's own instance. So "the workman, in our opinion, should not be punished by making him to incur the expenses over again". The Bank paid for its own witnesses but refused "what in our view, was a reasonable and modest request made by the first respondent to have the two Cashiers summoned for giving evidence on his side." What the cashiers would have said did not matter; their evidence was never made available. The Court concluded that "the Tribunal was justified in holding that there has been a violation of the principles of natural _justice in the conduct of the domestic inquiry and that the workman was not afforded a reasonable opportunity to place his defence before the Inquiry Officer."

The Court drew a line: refusing to call the three Bank officers may have been justified, because an Inquiry Officer has discretion to decide whether evidence is relevant.

Issue 2: the Sastry Award

This argument was rejected. The Bank had never relied on it before the Tribunal or in its special leave petition, and it had no substance. The show-cause notice and the discharge order were both based on the finding that the charges were proved; the Bank never proceeded on the basis that the evidence was insufficient but it did not think it expedient to retain him.

Issue 3: the employer's right to lead evidence

The Court relied on Workmen of Motipur Sugar Factory v Motipur Sugar Factory, quoting its statement that "A defective enquiry in our opinion stands on the same footing as no enquiry and in either case the tribunal would have jurisdiction to go into the facts and the employer would have to satisfy the tribunal that on facts the order of dismissal or discharge was proper."

It then explained what the Tribunal is actually deciding. The dispute referred "is not whether the domestic inquiry has been conducted properly or not by the management, but the larger question whether the order of termination, dismissal or the order imposing punishment on the workman concerned is justified." Therefore "the inquiry that is conducted by the Tribunal is a composite inquiry regarding the order which is under challenge."

The consequence for the employer: "If the management defends 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." But if it also leads evidence, the Tribunal may decide in its favour even after finding the enquiry invalid. "It is essentially a matter for the management to decide about the stand 'that it proposes to take before the Tribunal."

On the conflict among High Courts, the Court preferred the Orissa High Court (no obligation on the Tribunal to announce its view of the enquiry first) over the Madhya Pradesh and Delhi High Courts (a two-stage inquiry). On preliminary issues it said: "In our opinion, no hard and fast rule can be laid down under what circumstance an issue is to be decided as a preliminary issue."

On the facts, the Bank's written statement relied only on the domestic enquiry, and its only witnesses were the Inquiry Officer and the officer who passed the order. "No such opportunity was asked for by the appellant nor even availed of. If such an opportunity was, asked for, but refused by the Tribunal, the position would be entirely different." The third contention failed.

(1) A Tribunal may set aside a termination based on a domestic enquiry that violates natural justice, even without mala fides or victimisation. Although a workman must normally produce his own witnesses, refusing to summon them may deny him a reasonable opportunity where the circumstances make it unfair to put the cost on him, as where an earlier enquiry was abandoned through no fault of his. (2) The Tribunal's inquiry into a termination is a single composite inquiry. The employer has the right to justify the order by leading evidence before the Tribunal, but must ask for and use that opportunity; the Tribunal is not bound to decide the validity of the enquiry first and then invite evidence. An employer that relies only on its domestic enquiry fails if the enquiry fails.

• Direct question: What are the powers of an Industrial Tribunal where the domestic enquiry is found defective? Use the Motipur statement (defective enquiry equals no enquiry), then R.K. Jain's composite-inquiry holding and its rejection of the two-stage approach.
• Direct question: Explain the principles of natural justice in a domestic enquiry. Use the cashiers point: the general rule from Tata Oil Mills and why it gave way on these facts.
• Problem question: an employer defends a dismissal only on its enquiry, loses on that point, and then argues on appeal that the Tribunal should have invited evidence. Apply R.K. Jain: the employer made its choice; it never asked, so it cannot complain.
• Link: read with Cooper Engineering Ltd v P.P. Mundhe (1975) and Rajendra Jha v Presiding Officer (1984) in Unit 7 on when and how the employer asks to lead evidence.