judgement:
Appeal No. 742 of 1963.
Appeal from the judgment and order dated July 4, 5, 1961 of the Bombay High Court (Nagpur Bench) at Nagpur in Special Civil Application No. 150 of 1961.
section V. Gupte, Additional Solicitor General, G. B. Pai, and R. H. Dhebar, for the appellants.
The respondent did not appear.
April 3, 1964.
The Judgment of the Court was delivered by DAS GUPTA, J.
A short point arises for consideration in this appeal.
But to understand how the point arises it is neces sary to embark on a somewhat lengthy statement of facts.
Three Road Transport Corporations established under the Road Transport Corporation Act, 1950 were operating in the States of Bombay, Madhya Pradesh and Hyderabad in 1956 when the was enacted.
These three corporations were known as the Bombay State Road Transport Corporation, the Provincial Transport Service and the State Transport Marathewada respectively.
As a result of the reorganisation of the States under the the former State of Bombay lost certain of its territories to the newly formed State of Mysore and some areas to the State of Rajasthan.
On the other hand, the State of Bombay gained the Marathewada from the State of Hyderabad and the Vidharbha area from the State of Madhva Pradesh and certain other areas from the then existing State of Saurashtra and the State of Kutch.
To meet the situation arising from these territorial changes, Parliament passed the Road Transport Corporation Amendment Act, 1956, thus amending the Road Transport Corporation Act, 1950.
Section 47 A which was introduced by the amending Act provides for the reconstitution, reorganisation and dissolution of the Corporations established under section 3 of the Act.
On December 31, 1956 an order was made by the Central Government under the provisions of this section approving a scheme for reorganisation submitted by the Government of Bombay.
By this scheme those areas in which the Bombay State Road Transport Corporation had been operating but were transferred under the State Reorganisation Act to the States of Mysore and Rajasthan were excluded from the area of the operation of the Bombay State Road Transport Corporation.
This came into force from the 1st January, 1957.
Another consequence of the was that the two commercial undertakings which were known as 641 the Provincial Transport Services, and the State Transport, Marathewada, became the commercial undertakings of the State of Bombay.
Further, territorial changes occurred in the State of Bombay in the year 1960.
By the Bombay Reorgani sation Act, No. II of 1960, the State of Bombay was again divided; part of what was in the former State, was formed into a new State by the name of the State of Gujarat, while the remaining area was named, the State of Maharashtra.
In consequence of this some other areas were excluded by an order under section 47 A of the Act from the area of operation of the Bombay State Road Transport Corporation.
The situation then was the State Transport, Marathewada, was operating in the Maharashtra area, the Provincial Transport Service was operating in the Vidharbha area while in the rest of the Maharashtra State the Bombay State Transport Corporation was operating.
It was when things stood like this that the Central Government made an order on the 27th May, 1961 under section 47 A of the Amending Act.
By this order it approved a scheme for the reorganisation of the Bombay State Road Transport Corporation and amalgamation with it of the two other transport undertakings of the State Government, viz., the Provincial Transport Services, and the State Transport, Marathewada.
After the reorganisation the Corporation was to be known as the Maharashtra State Road Transport Corporation.
Clause 9(1) of this Order provided for the abolition of all the posts in the two undertakings, the Provincial Transport Services, and the State Transport Marathewada, and for discharge of all persons holding such posts from service.
There was a provision, however, giving such people option either of taking terminal benefits such as compensation, pension, or gratuity to which they may be entitled under the rules applicable to them or of continuing as from the 1st July 1961 in the service of the Maharashtra State Road Transport Corporation.
Sub clause 2 of cl. 9 provided that every person who as a result of the exercise of such option is continued in the service of the Maharashtra State Transport Corporation shall be entitled to be employed by that Corporation on the same terms and conditions, including pay as were applicable to him immediately before the appointed day and to count his service under the previous corporations for all purposes.
Subclause 3 of cl. 9 was in these words: "Nothing in sub paragraph )2) shall be deemed to affect the right of the Maharashtra State Road Transport Corporation, subject to the provisions of section 77 of the Bombay Reorganisation Act, 1960 (11 of 1960) to determine or vary after the appointed day, the conditions of service of any person who is continued in the service of the Corporation".
L/P D)ISCI 21 642 "Provided that the conditions of service ap plicable immediately before the appointed day, to any such person shall not be varied to his disadvantage.
except with the previous approval of the Central Government".
Notices terminating the services of the employees employed by the Provincial Transport Services (operating in Vidharbha) were issued.
On 12th June 1961 an application was made under article 226 and article 227 of the Constitution by two former,, employees of the Provincial Transport Services and the Union of the workmen of that concern challenging the validity of the order of reorganisation made on the 27th May. 1961 and the notices of termination of service served on the employees.
The following reliefs were prayed for: (a) that the notices of termination be quashed; (b) that the amalgamation of the Provincial Transport Services with the Bombay State Road Transport Corporation as directed under section 47 A be not carried out, and (c) that "a writ of mandamus be also issued to respondents 1 to 3 directing them to carry out the obligations under s.25 F and other provisions of retrenchment of the , and other provisions of law before taking any action as required by law and also by paragraph 9 of the order even assuming that the amalgamation order is legal and proper.
" Three contentions were raised in support of these prayers.
It was first urged that the order made on the 27th May violated the provisions of s.47 A of the Act and was therefore bad in law, The second contention was that the proviso to sub cl.3 of cl.9 of the order contravenes the provisions of s.77 of the Bombay Reorganisation Act.
Lastly, it was contended that the action taken by the Government in abolishing the posts and issuing notices of termination of services of the employees was bad firstly because it contravened s.25F (b) and (c) of the and secondly, because it contravened the provisions of s.31 of the C.P. and Berar Industrial Disputes Settlement Act, 1947.
The High Court rejected the first contention that the Government Order violated s.47 A of the Act.
It also rejected the petitioner 's contention that the action taken by the Government was bad because of contravention of s.25F (b) and (c) of the .
The High Court was however of opinion that the proviso to sub cl. 3 of cl. 9 of the order was bad in law, being in conflict with s.77 of the Bombay Reorganisation Act, but it held that the proviso was severable and its illegality did not affect the working of the scheme.
The High Court also accepted the petitioner 's contention that the action taken by the Government in issuing notices of termination of services on abolition of posts did not comply with the provisions of s.31 of the C.P. and Berar Industrial Disputes 643 Settlement Act and was accordingly invalid.
In the result, the High Court quashed the Government resolution for abolition of posts and the notices of termination that were issued in consequence thereof.
It also ordered the issue of a direction, directing the Maharashtra State Road Transport Corporation "not to take any action under the proviso to sub paragraph (3) of paragraph 9 of the Order relating to varying the conditions of services to the disadvantage of any of the employees who were employees of the first respondent immediately before the appointed day, i.e., 1st July 1961.
" Against these orders of the High Court, the State of Mahrashtra, the Maharashtra State Road Transport Corporation and the Motor Transport Controller, Maharashtra, have appealed.
At the hearing of the appeal nobody appeared before us on behalf of the petitioners in the High Court.
The correctness of the High Court 's decision that the order of the 27th May, 1961 did not violate section 47 A of the Act was not challenged before us.
Nor was the High Court 's decision that the Government 's action in abolishing posts and terminating services of employees was not bad because of contravention of section 25F(b) and (c) of the .
questioned before us.
We have, therefore, not examined the correctness or otherwise of these conclusions and shall dispose of the appeal on the basis that the decision on these points are correct.
The first contention urged in support of the appeal is that the High Court was wrong in thinking that in ordering the abolition of posts and terminating the services of employees in those posts the Government had contravened the provisions of section 31 of the C. P. and Berar Industrial Disputes Set tlement Act.
That section is in these words: "31.
(1) If an employer intends to effect a change in any standing orders settled under section 30 or in respect of any industrial matter mentioned in Schedule 11, he shall give fourteen days ' notice of such intention in the prescribed form to the representative of employees.
(2) The employer shall send a copy of the notice to the Labour Commissioner, Labour Officer and to such other person as may be prescribed and shall also affix a copy of the notice at a conspicuous place on the premises where the employees affected by the proposed change are employed and at such other places as may be specially directed by the Labour Commissioner in any case.
(3) On receipt of such notice the representative of employees concerned shall negotiate with the employers".
L/P(1))ISCI 21(a). 644 Schedule II of this Act mentions a number of matters, +he first of which is "Reduction intended to be of permanent or semi permanent character in the number of persons employed or to be employed not due to force majeure".
The argument that prevailed in the High Court was that abolition of all posts amounted to permanent reduction within the meaning of this Item in Schedule 11.
If that be correct it would necessarily follow that the Government had to observe the procedure prescribed in section 31.
Admittedly, that was not done.
The short question, therefore, is whether the abolition of all posts of an establishment amount to reduction of posts.
In our opinion, the word reduction can only be used when something is left after reduction.
To speak of abolition as a reduction of the whole thing does not sound sensible or reasonable.
We ,ire unable to agree with the High Court that the term reduction in the number of persons employed or to be employed" as mentioned in Item 1 of Schedule 11 covers abolition of all posts.
In our opinion, the Government Order in abolishing the posts and terminating the services of the employees did not amount to a change within the meaning of section 31 of the C. P. and Berar Industrial Disputes Settlement Act.
The Government was, therefore, not required to follow the procedure mentioned in section 31.
This brings us to the question about the validity of the proviso to sub cl. 3 of cl. 9 of the Order.
As already indicated the workmen 's contention was that the proviso contravened the provisions of section 77 of the Bombay Reorganisation Act.
That section contained a provision that on transfer or reemployment of any workman in consequence of reconstitution.
reorganisation, amalgamation or dissolution by any body corporate, cooperative society or any commercial undertaking or industrial undertaking the terms and conditions of service applicable to the workman after such transfer or reemployment shall not be less favourable to the workman than those applicable to him immediately before the transfer of reemployment.
It was apparently apprehended by the workmen that though sub cl. 3 of cl. 9 of the Order did state definitely that the right of the Maharashtra State Road Transport Corporation to determine or vary the conditions of service of any person who is continued in the service of the corporation was subject to the provisions of s.77 of the Bombay Reorganisation Act, advantage might be taken of the proviso to the sub clause, which seems at least at first sight to suggest that with the approval of the Central Government the conditions of service of a work man might be varied to his disadvantage notwithstanding the provisions of section 77 of the Bombay Reorganisation Act.
We are informed, however, that there has been no such variation.
The petition itself did not contain any specific assertion that there had been any 645 variation to the disadvantage of any workman.
Only an ap prehension that there might be a change in future was expressed.
In the counter affidavit the Government stated that the Order passed in the notices issued clearly gave a guarantee that the conditions of service will not be changed.
If there was any reason to think that there had been any change in any conditions of service or that in the immediate future there was any likelihood of any such change being made on the strength of the impugned proviso it would have been necessary for us to examine the question about the validity of this proviso.
As however no change appears to have been made and it does not appear that there was any apprehension of any change being made in the immediate future, we have thought it desirable to leave this question open particularly in view of the fact that the workmen were not represented before us in this appeal.
We have, therefore, not heard full arguments on this question from the learned Counsel for the appellant.
The decision of the High Court that the proviso is bad is therefore, set aside and the question is left open for decision if and when it becomes really necessary to do so.
In view of our decision that the High Court erred in thinking that section 31 of the C. P. and Berar Industrial Disputes Settlement Act had to be applied the High Court 's order quashing the abolition of posts and the notices of termination cannot be sustained.
We accordingly allow the appeal, set aside the order of the High Court quashing the Government resolution of the 29th May, 1961 directing the abolition of posts and also its order quashing the notices of termination.
As we have set aside the High Court 's decision as regards the validity of the proviso to sub cl. 3 of cl. 9 of the Order and left the matter open, the High Court 's direction that no action should be taken under the proviso is also set aside.
There will be no order as to costs.
Appeal allowed.

summary/full:
As a result of the passing of the , Vidharbha area which was in the State of Madhya Pradesh became part of the State of Bombay and when the State of Bombay was divided under the Bombay Reorganisation Act, 1950, the said area remained in the State of Maharashtra.
Before 1956.
the Bombay State Road Transport Corporation and Provincial Services established under the , were operating in the States of Bombay and Madhya Pradesh respectively.
To meet the situation arising from these territorial changes, Parliament made amendments to the , by which, inter alia section 47 A was introduced providing for the reconstitution, reorganisation and dissolution of the corporations established under the Act.
On May, 27, 1961, the Central Government made an Order under section 47 A of the Act, inter alia, approving a scheme for the reorganisation of the Bombay State Road Transport Corp oration and amalgamating with it the Provincial Transport Services which had, under the Reorganisation Act, 1956, become a commercial undertaking of the State of Bombay and which had been operating in the Vidharba area.
Clause 9(1) of this provided for the abolition of all the posts in the Provincial Transport Services and for discharge of all persons holding such posts for service but giving such people an option of continuing in the service of the Maharashtra State Road Transport Corporation.
Notice ter minating the services of the persons employed by the Provincial Transport Services (operating in Vidharba) were issued.
Thereupon, two former employees of the Provincial Transport Services and the Union of the workmen of that concern made an application before the High Court of Bombay under articles 226 and 227 of the Constitution of India, challenging the validity, inter alia, of the notices of termination of service served on the employees on the ground that the action taken by the Government in abolishing the posts and issuing notices of termination of services of the employees was bad as it contravened, inter alia, the pro visions of section 31 of the Central Provinces and Berar Industrial Disputes Settlement Act, 1947.
Held: Abolition of all posts of an establishment did not amount to reduction of posts within the meaning of Item 1 of the Schedule II of the Central Provinces and Berar Industrial Disputes Settlement Act, 1947; and the Government order abolishing the posts and terminating the services of the employees.
640 did not amount to a change within the meaning of section 31 of the Act.
The Government was, therefore, not required to follow the procedure mentioned in section 31.


judgement:
Appeal No. 51.7 of 1963.
Appeal by special leave from the Award dated September 28, 1960 of the Industrial Tribunal, Ernakulam, in Industrial Dispute No. 81 of 1958.
G. B. Pai, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for the appellant.
P. Govinda Menon, M. section K. Iyengar and M. R. K. Pillai, for respondent No. 1.
March 31, 1964.
The Judgment of the Court was delivered by GAJENDRAGADKAR, C. J.
This appeal by special leave raises a short question about the validity of the order passed by the Industrial Tribunal, Ernakulam, directing the appellant, the Tata Oil Mills Co. Ltd., to reinstate its workman K. K. Raghavan whom it had dismissed with effect from the 14th of November, 1955.
The appellant is a public limited concern engaged in the industry of soaps and toilet articles.
It owns three factories in addition to 12 sales offices.
One of these factories is located at Tatapuram, Ernakulam, in the State of Kerala.
Mr. Raghavan was working with the appellant at its factory at Tatapuram.
It was reported to the appellant that on the 12th November, 1955, Mr. Raghavan and another employee of the appellant, Mr. Mathews by name, waylaid Mr. C. A. Augustine, the Chargeman of the 557 Soap Plant of the company 's factory at Tatapuram while he was returning home after his duty in the second shift and assaulted him.
That is why charge sheets were issued against both Messrs Raghavan and Mathews on the 14th November, 1955.
Pursuant to the service of the charge sheets, two officers were appointed by the appellant to hold an enquiry, but the respondent Union represented to the appellant that justice would not be done to Raghavan and Mathews unless somebody outside Tatapuram was invited to hold the enquiry.
Thereupon, the General Manager of the appellant appointed Mr. Y. D. Joshi, who is a Law Officer of the appellant in the Head Office, to hold the enquiry.
Mr. Joshi held the enquiry from the 27th to 30th December, 1955, and subsequently, he made his report to the General Manager of the appellant on the 7th January, 1956.
At that time, an industrial dispute was pending between the appellant and its employees, and so, the appellant applied to the Industrial Tribunal for approval of the dismissal of Messrs Raghavan and Mathews.
The Tribunal approved of the dismissal of Raghavan, but did not accord its approval of the dismissal of Mathews.
Acting in pursuance of the approval accorded by the Tribunal, the appellant dismissed Raghavan with effect from the 14th November, 1955.
Not satisfied with the order of dismissal, the respondent raised an industrial dispute in regard to the propriety and validity of the said dismissal of Raghavan and that has become the subject matter of the present reference which was ordered on the 3rd of December, 1958.
It is on this reference that the Industrial tribunal has held that the appellant was not justified in dismissing Raghavan, and so, has ordered his reinstatement.
This is the order which has given rise to the present appeal by special leave.
The first point which calls for our decision in this appeal is whether the Tribunal was right in holding that the facts proved against Raghavan did not attract the provisions of Standing Order 22(viii) of the Certified Standing Orders of the appellant.
The said standing order provides that without prejudice to the general meaning of the term "misconduct", it shall be deemed to mean and include, inter alia, drunkenness, fighting, riotous or disorderly or indecent behaviour within or without the factory.
It is common ground that the alleged assault took place outside the factory, and, in fact, at a considerable distance from it.
The Tribunal has held that the assault in question can be treated as a purely private matter between Raghavan and Augustine with which the appellant was not concerned and as a result of which standing order 22(viii) cannot be invoked against Raghavan.
Mr. Menon who has appeared for the respondent before us, has 558 contended that in construing standing orders of this charac ter, we must take care to see that disputes of a purely private or individual type are not brought within their scope.
He argues that on many occasions, individual employees may have to deal with private disputes and sometimes, as a result of these private disputes, assault may be committed.
Such an assault may attract the relevant provisions of the Indian Penal Code, but it does not fall under standing order 22(viii).
In our opinion, this contention is well founded.
It would, we think, be unreasonable to include within standing order 22(viii) any riotous behaviour without the factory which was the result of purely private and individual dispute and in course of which tempers of both the contestants became hot.
In order that standing order 22(viii) may be attracted, the appellant should be able to show that the disorderly or riotous behaviour had some rational connection with the employment of the assailant and the victim.
In the present case, however, it is quite clear that the assault committed by Raghavan on Augustine was not a purely private or individual matter.
What the occasion for this assault was and what motive actuated it, have been consider ed by the domestic Tribunal and the findings of the domestic Tribunal 'on these points must be accepted in the present proceedings, unless they are shown to be based on no evi dence or are otherwise perverse.
Now, when we look at the report of the Enquiry Officer, it is clear that on the evidence given by Mr. M. M. Augustine and K. T. Joseph it appeared that the assault was committed by Raghavan on C. A. Augustine, because he was in favour of the introduction of the Incentive Bonus Scheme.
It appears that the introduction of this incentive bonus scheme was approved by one set of workmen and was 'opposed by another, with the result that the two rival unions belonging to these two sets respectively were arrayed against each other on that question.
The evidence of the two witnesses to whom we have just referred clearly shows that when Raghavan assaulted C. A. Augustine, he expressly stated that Augustine was a black leg (Karinkali) who was interested in increased production in the company with a view to obtain bonus , and the report further shows that the Enquiry Officer believed this evidence and came to the conclusion that the assault was motivated by this hostility between Raghavan and C. A. Augustine.
In fact, the charge framed clearly suggested that the assault was made, for that motive.
It was alleged in the charge that Augustine was assaulted to terrorise the workmen who had been responsible for giving increased production under the incentives bonus scheme.
According to the charge, such acts were highly subversive of discipline.
The Enquiry Officer has held that in the light of the evidence given by M. M. Augustine and 559 K. T. Joseph, the charge as framed had been proved.
This finding clearly means that the assault was not the result of a purely individual 'or private quarrel between the assailant and his victim, but it was referable to the difference of opinion between the two in regard to the introduction of the incentive bonus scheme on which the two unions were sharply divided.
Therefore, if Raghavan assaulted Augustine solely for the reason that Augustine was supporting the plea for more production, that cannot be said to be outside the purview of standing order 22(viii).
The next point which needs to be considered arises out of a plea which has been strenuously urged before us by Mr. Menon that the Tribunal was justified in holding that the Enquiry Officer did not conduct the enquiry in accordance with the principles of natural justice, and so, the Tribunal was entitled to go into the evidence itself and decide whether, Raghavan 's dismissal was justified or not.
The legal position in this matter is not in doubt.
If it appears that the domestic enquiry was not conducted in accordance with the principles of the natural justice and a reasonable opportunity was not, for instance, given to Raghavan to lead evidence in support of his defence, that would be a valid ground on which the Tribunal can discard the finding of the domestic enquiry and consider the matter on the merits uninfluenced by the said finding.
Unfortunately for the respondent, however, on the material on record it is very difficult to sustain the finding of the Tribunal that the Enquiry Officer did not conduct the enquiry in accordance with the principles of natural justice.
The whole of this contention is based on the fact that Raghavan wanted to examine two witnesses, Messrs M. P. Menon and Chalakudi.
It appears that Raghavan told the Enquiry Officer that he wanted to examine these two wit nesses and he requested him to invite the said two witnesses to give evidence.
The Enquiry Officer told Raghavan that it was really not a part of his duty to call the said two witnesses and that Raghavan should in fact have kept them ready himself.
Even so, in order to assist Raghavan, the Enquiry Officer wrote letters to the two witnesses.
Mr. Menon replied expressing his inability to be present before the Enquiry Officer, and the Enquiry Officer communicated this reply to Raghavan, so that for Raghavan 's failure to examine Menon no blame can be attributed to the enquiry officer at all.
In regard to Chalakudi, it appears that he sent one letter addressed to the Enquiry Officer and it reached him on the 31st December, 1955, the day on which he was leaving for Bombay.
This letter was not signed, and so, the Enquiry Officer took no action on it and gave no time to Chalakudi to appear three or four days later as had been 560 suggested in that unsigned letter.
The Tribunal thought that this attitude on the part of the Enquiry Officer was unsympathetic and that introduced an element of Unfairness in the enquiry itself.
We are unable to appreciate how such a conclusion can follow on facts which are admitted.
We do not think the Enquiry Officer was called upon to accept an unsigned letter and act upon it.
Besides, the Enquiry Officer had gone to Ernakulam from Bombay for holding this enquiry, because the respondent Union itself wanted that the enquiry should be held by some other officer outside the local station and it was known that the Bombay Officer would go back as soon as the enquiry was over.
In such a case, if Raghavan did not take steps to produce his witnesses before the Enquiry Officer, how can it be said that the Enquiry Officer did not conduct the enquiry in accordance with the principles 'of natural justice? Mr. Menon has suggested that the Enquiry Officer should have taken steps to get the witnesses M. P. Menon and Chalakudi brought before him for giving evidence.
This suggestion is clearly untenable.
In a domestic enquiry, the officer holding the enquiry can take no valid or effective steps to compel the attendance of any witness; just as the appellant produced its witnesses before the officer, Raghavan should have taken steps to produce his witnesses.
His witness Menon probably took the view that it was beneath his dignity to appear in a domestic enquiry, and Chalakudi was content to send an unsigned letter and that too so as to reach the Enquiry Officer on the day when he was leaving Ernakulam for Bombay.
It would be unreasonable to suggest that in a domestic enquiry, it is the right 'of the charge sheeted employee to ask for as many adjournments as he likes.
It is true that if it appears that by refusing to adjourn the hearing at the instance of the charge sheeted workman, the Enquiry Officer failed to give the said workman a reasonable opportunity to lead evidence, that may, in a proper case, be considered, to introduce an element of infirmity in the enquiry; but in the circumstances of this case, we do not think it would be possible to draw such an inference.
The record shows that the Enquiry Officer went out of his way to assist Raghavan; and if the witnesses did not turn up to give evidence in time, it was not his fault.
We must accordingly hold that the Tribunal was in error in coming to the conclusion that the enquiry suffered from the infirmity that it was conducted contrary to the principles of natural justice.
Let us then consider whether the dismissal of Raghavan is actuated by malafides, or amounts to victimisation.
In regard to the plea of victimisation, the Tribunal has definitely found against the respondent.
"I do not for a moment believe", says the Tribunal, "that the management foisted a 561 case against the ex worker.
Regarding the allegation of victimisation, there is no sufficient evidence in the case that the management 'or its Manager Mr. John was motivated with victimisation or unfair labour practice".
This finding is quite clearly in favour of the appellant.
The Tribunal, however, thought that because the Enquiry Officer did not give an adjournment to Raghavan to examine his witnesses, that introduced an element of malafides.
It has also observed that since the case against Raghavan did not fall within the purview of standing order 22(viii) and yet, the appellant framed a charge against Raghavan under that standing order, that introduced another element of malafides.
It is on these grounds that the conclusion as to malafides recorded by the Tribunal seems to rest.
In regard to the first ground, we have already held that the Tribunal was not justified in blaming the Enquiry Officer for not adjourning the case beyond 31st December, 1955.
In regard to the second ground, we are surprised that the Tri bunal should have taken the view that since in its opinion, standing order 22(viii) did not apply to the facts of this case, the framing of the charge under the said standing 'order and the finding of the domestic Tribunal in favour of the appellant on that ground showed malafides.
It seems to us that the Tribunal has completely overlooked an elementary principle of judicial approach that even if a judge or Tribunal may reach an erroneous conclusion either of fact or of law, the mere error of the conclusion does not make the conclusion malafiedes.
Besides, as we have just indicated, on the merits we are satisfied that the Tribunal was in error in holding that standing order 22(viii) did not apply.
Therefore, the finding of the Tribunal that the dismissal of Raghavan was malafide, cannot possibly be sustained.
There is one more point which has been press Id before us by Mr. Menon.
In Phulbari Tea Estate vs Its Workmen,(1) this Court has held that even if a domestic enquiry is found to be defective, the employer may seek to justify the dismissal of his employee by leading evidence before the Tribunal to which an industrial dispute arising out of the impugned dismissal has been referred for adjudication.
Mr. Menon contends that by parity of reasoning, in cases where the em ployee is unable to lead his evidence before the domestic Tribunal for no fault of his own, a similar opportunity should be given to him to prove his case in proceedings before the Industrial Tribunal.
In our opinion, this contention is not well founded.
The decision in the case of Phulbari Tea Estate (supra) proceeds on the basis which is of basic importance in industrial adjudication that findings properly recorded in (1) [1960] 1 S.C.R. 32. 562 domestic enquiries which are conducted fairly, cannot be re examined by Industrial adjudication unless the said findings are either perverse, or are not supported by any evidence, or some other valid reason 'of that character.
In such a case, the fact that the finding is not accepted by the Industrial Tribunal would not necessarily preclude the employee from justifying the dismissal of his employee on the merits, provided, of course, he leads evidence before the Industrial Tribunal and persuades the Tribunal to accept his case.
That, however, is very different from a case like the present.
In the case before us, the enquiry has been fair, the Enquiry Officer gave Raghavan ample opportunity to lead his evidence.
If at reasonable opportunity had been denied to the employee, that would have made the enquiry itself bad and then, the employer would have been required to prove his case before the Industrial Tribunal, and in dealing with the dispute, the Industrial Tribunal would have been justified in completely ignoring in the findings of the domestic enquiry.
But if the enquiry has been fairly conducted, it means that all reasonable opportunity has been given to the employee to prove his case by leading evidence.
In such a case, how can the court hold that merely because the witnesses did not appear to give evidence in support of the employee 's case, he should be allowed to lead such evidence before the Industrial Tribunal.
If this plea is upheld, no domestic enquiry would be effective and in every case, the matter would have to be tried afresh by the Industrial Tribunal.
Therefore, we are not prepared to accede to Mr. Menon 's argument that the Tribunal was justified in considering the merits of the dispute for itself in the present reference proceedings.
Since the enquiry has been fairly conducted, and the findings recorded therein are based on evidence which is believed, there would be no justification for the Industrial Tribunal to consider the same facts for itself.
Findings properly recorded at such enquiries are binding on the parties, unless, of course, it is known that the said findings are perverse, or are not based on any evidence.
There is yet another point which remains to be considered.
The Industrial Tribunal appears to have taken the view that since criminal proceedings had been started against Raghavan, the domestic enquiry should have been stayed pending the final disposal of the said criminal proceedings.
As this Court has held in the Delhi Cloth and General Mills Ltd. vs Kushal Bhan,(1) it is desirable that if the incident giving rise to a charge framed against a workman in a domes tic enquiry is being tried in a criminal court, the employer, should stay the domestic enquiry pending the final disposal of the criminal case.
It would be particularly appropriate to (1) ; 563 adopt such a course where the charge against the workman is of a grave character, because in such a case, it would be unfair to compel the workman to disclose the defence which he may take before the criminal court.
But to say that domestic enquiries may be stayed pending criminal trial is very different from saying that if an employer proceeds with the domestic enquiry in spite of the fact that the criminal trial is pending, the enquiry for that reason alone is vitiated and the conclusion reached in such an enquiry is either bad in law or malafide.
In fairness, we ought to add that Mr. Menon did not seek to justify this extreme position.
Therefore, we must hold that the Industrial Tribunal was in error when it characterised the result of the domestic enquiry as malafide partly because the enquiry was not stayed pending the criminal proceedings against Raghavan.
We accordingly hold that the domestic enquiry in this case was properly held and fairly conducted and the conclusions of fact reached by the Enquiry Officer are based on evidence which he accepted as true.
That being so, it was not open to the Industrial Tribunal to reconsider the same questions of fact and come to a contrary conclusion.
The result is, the appeal is allowed.
The order passed by the Industrial Tribunal is set aside and the reference made to it is answered in favour of the appellant.
Before we part with this appeal, we ought to add that Mr. Pai for the appellant has fairly offered to pay ex gratia Rs. 1,000/ to Raghavan in addition to the amount which has already been paid to him by the appellant in pursuance of the order of this Court granting stay to the appellant pending the final disposal of the present appeal.
There would be no order as to costs.
Appeal allowed.

dataset_name: IN-Abs

summary/full:
On a report that R and M, both employees of the appellant waylaid A, another employee and assaulted him outside the factory, the appellant held an enquiry and sought approval for the dismissal of R and M from the Industrial Tribunal, before which an industrial dispute was pending.
The Tribunal approved the dismissal of R but not that of M. Thereupon R was dismissed.
The respondent raised an industrial dispute in regard to the propriety and validity of the said dismissal.
On reference of this dispute, the Industrial Tribunal held that the assault could be treated as a private matter between R and A with which the appellant was not concerned and as a result Standing Order 22(viii) could not be invoked against R, and it ordered the reinstatement of R. On appeal by special leave: Held: (i) that It would be unreasonable to, include within Standing Order 22(viii) any riotous behaviour without the factory which was the result of purely private and individual dispute and in course of which tempers of both the contestants become hot.
In order that standing order 22(viii) may be attracted, the appellant should be able to show that the disorderly or riotous behaviour had some rational connection with the employment of the assailant and the victim.
(ii) In the present case the assault by R on A was not a purely private or individual matter but was referable to the difference of opinion between the two in regard to the introduction of incentive bonus scheme and that cannot be said to be outside the purview of standing order 22(viii).
(iii) The Tribunal was in error in coming, to the conclusion that the enquiry suffered from the infirmity that it was conducted contrary to the principles of natural justice.
It is true that if it appears that by refusing to adjourn.
the hearing at the instance of charge sheeted workmen, the Enquiry Officer failed to give the said workmen a reasonable opportunity to lead evidence, that may in a proper case, be considered to introduce an element of infirmity in the enquiry; but in the circumstances of this case, it would not be possible to draw such an inference.
(iv) The finding of the Tribunal that the dismissal was malafic, cannot possibly be sustained.
The Tribunal has completely overlooked an elementary principle of judicial approach that even if a judge or Tribunal may reach an erroneous conclusion either of fact or of law, the mere error of the conclusion does not make the conclusion malafide.
556 (v) Since the domestic enquiry had been fairly conducted, and the findings recorded therein were based on Evidence which was believed, there was no justification for the Industrial Tribunal to consider the same facts for itself.
Findings properly recorded at such enquiries are binding on parties, unless, of course, it is shown that such findings are perverse or are not based on any evidence.
Phulbari Tea Estate vs Its Workmen, [1960] 1 S.C.R. 32, referred to.
(vi) The Industrial Tribunal was in error when it charac terised the result of the domestic enquiry as malafide partly because the enquiry was not stayed pending criminal proceedings against R.
It is desirable that if the incident giving rise to a charge framed against a workman in a domestic enquiry is being tried in a criminal court, the employer should stay the domestic enquiry pending the final disposal of the criminal case.
It would be particularly appropriate to adopt such a course when the charge is of a grave character because it would be unfair to compel the workman to disclose the, defence which he may take before the criminal court.
But to say that domestic enquiries may be stayed pending criminal trial is very different from saying that if an employer proceeds with the domestic enquiry inspite of the fact that the criminal trial is pending, the enquiry for that reason alone is vitiated and the conclusion arrived at in such, an enquiry is either bad in law or malafide.
Delhi Cloth & General Mills Ltd. vs Kishan Bhan ; , referred to.


judgement:
ion No. 200 of 1963.
Petition under article 32 of the Constitution of India for the enforcement of the fundamental rights.
K. P. Bhandari and R. Gopalakrishnan, for the petitioner.
and R. N. achthey, for the respondents.
April 1, 1964.
The Judgment of the Court was delivered by GAJENDRAGADKAR, C. J.
This petition which has been filed by the petitioner section Gurdev Singh Sidhu under Art 32 of the Constitution, challenges the validity of article 9(1) of the Pepsu Services Regulations, Volume 1, as amended by the Governor of Punjab by the notification issued by him on the 19th January, 1960 in exercise of the powers conferred on him by the proviso to article 309 of the Constitution and all other powers enabling him in that behalf.
The petitioner 's contention is that the said article contravenes the constitutional right guaranteed to the persons employed in civil capacities either under the Union or the State, by article 311.
The petitioner was appointed as Assistant Superintendent of Police in the erstwhile Patiala State by His Highness Maharaja Adhiraj of Patiala on the 4th of February, 1942.
The conditions of his service were governed by the Patiala State Service Regulations which had been issued by the Ruler of Patiala State who was at the relevant time the sovereign legislature of the State.
Later, the petitioner was confirmed in the rank on the occurrence of a regular vacancy after he had undergone practical district training courses in the Punjab in 1947.
On the formation of Patiala and East Punjab States Union on the 20th August, 1948, the petitioner was integrated in Pepsu Police Service.
In due course, he was promoted to officiate as Superintendent of Police in February, 1950 by His Highness the Rajpramukh of the erstwhile State of Pepsu.
589 On the 25th March, 1963, respondent No. 2 section Gurdial Singh, Inspector General of Police & Joint Secretary to the Government of Punjab, issued a notice against the petitioner purporting to act under the second proviso to article 9.1 of the Pepsu Services Regulations to show cause why he should not be compulsorily retired.
The petitioner alleges that the second proviso to article 9.1 under which the said notice has been issued against him, is invalid, and so, he has moved this Court under article 32 for quashing the said notice on the ground that the article on which it is based is itself ultra vires and inoperative.
Respondent No. 1, the State of Punjab, and respondent No. 2 have by their counter affidavit denied the petitioner 's contention that the impugned article 9.1 is constitutionally invalid and they have resisted his claim for quashing the notice issued by respondent No. 2 against the petitioner.
That is how the only point which arises for our decision in the present petition is whether the impugned article is shown to be constitutionally invalid.
Before dealing with this point, it is necessary to read the said article: "The following shall be added after the first proviso to clause (1) of article 9.1 of the said regulations: (ii) "Provided further that Government retains an absolute right to retire any Government servant after he has completed ten years qualifying service without giving any reason and no claim to special compensation on this account will be entertained.
This right will not be exercised except when it is in public interest to dispense with the further services of a Government servant such as on account of inefficiency, dishonesty, corruption or infamous conduct.
Thus the rule is intended for use: (a) against a Government servant whose efficiency is impaired but against whom it is not desirable to make formal charges of inefficiency or who has ceased to be fully efficient, (i.e. when a Government servant 's value is clearly incommensurate with the pay which he draws), but not to such a degree as to warrant his retirement on a compassionate allowance.
It is not the intention to use the proviso as a financial weapon, that is to say the proviso should be used only in the case of Government servants who are considered unfit for retention on personal as opposed to financial grounds; 590 (b) in cases where reputation for corruption, dishonesty or infamous conduct is clearly established even though no specific instance is likely to be proved under the Punjab Civil Services Punishment and Appeal Rules) Appendix 24 of Volume 1, Part 11 or the Public Servants (Inquiries Act XXXVII of 1850).
The word 'Government ' used in this proviso should be given a reasonable opportunity to show causethe power of removing the Government servant concerned from service under the Civil Services (Punishment and Appeal) 'Rules".
(iii) Provided further that Government servant should be given a reasonable opportunity to show cause against the proposed action under the rule.
No Gazetted Government servants shall, however, be retired without 'the approval of the Council of Ministers.
In all cases of compulsory retirement of gazetted Government servants belonging to the State Services, the Public Service Commission shall be consulted.
In the case of non gazetted Government servants the Heads of Departments should effect such retirement with the previous approval of the state Government".
This article clearly shows that the absolute right retained by respondent No. 1 to deal with public servants can be used against them if it appears to respondent No. 1 that the said public servants suffer from inefficiency, dishonesty, cor ruption, or infamous conduct.
It is also clear that one of the reasons for making the amendment in the Pepsu Services Regulations was to use the power thereby conferred on res pondent No. 1 in case where reputation for corruption, dis honesty or infamous conduct may be established to the satis faction of respondent No. 1 even though no specific instance is likely to be proved under the Punjab Civil Services (Punishment and Appeal) Rules.
This power was likewise intended for use in cases where the incompetence of the Government servant may not be of such an extent as to warrant his retirement on a compassionate allowance.
The only safeguard provided by the amended article is that it was not contemplated to use the power conferred by it on financial grounds.
Grounds on which the said power was intended to be used were all grounds personal to the Government servant against whora the said power was exercised.
Bhandari for the petitioner contedns that the point raised by the petitoner in this petition is, in substance, concluded by a recent decision of this Court in Moti Ram Deka, 591 etc.
vs The General Manager, North East Frontier Railway,(1) etc.
His argument is that the trend of the majority, judgment in that case clearly indicates that the impugned Rule is inconsistent with article 311(2) of the Constitution, and as such, must be struck down as being invalid.
It is, therefore, necessary to examine briefly the effect of the said judgment.
In that case, this, Court was called upon to consider the validity of Rules 148(3) and 149(3) of the Railway Rules.
These Rules authorised the termination of services of the railway employees concerned by serving them with a notice for the requisite period or paying them their salary for the said period in lieu of notice.
Dealing with the question about the validity of the said Rules, the majority judgment observed that a person who substantively holds a permanent post has right to continue in service subject to two exceptions.
The first exception was in relation to the rule of superannuation, and the second was in regard to the rule as to compulsory retirement.
The majority judgment accepted the position that a rule fixing the age of superannuation which is applicable to all Government servants falling in a particular category was perfectly constitutional because it applies uniformly to the public servants who fall within its scope and it is based ,on general considerations like life expectation, mental capacity of the civil servants having regard to the climatic condilions under which they work and the nature of the work they do.
They are not fixed on any ad hoc basis and do not involve the exercise of any discretion.
The second exception was ,affirmed by the majority judgment with the reservation that rules of compulsory retirement would be valid if having fixed a proper age of superannuation, they permit the compulsory retirement of the public servant, provided he has put in a minimum period of service; and while affirming this rule, an express reservation was made that in case a rule of compulsory retirement permitted the authority to retire a permanent servant at a very early stage of his career, the question as to whether such a rule would be valid may have to be considered on a proper occasion.
In other words, the acceptance of the ,doctrine that rules for compulsory retirement were valid and constituted an exception to the general rule that the termination of the services of a permanent servant means his removal within the meaning of article 311(2), was not absolute but qualified.
At this stage, it is necessary to explain why this, reser vation was made in the majority judgment.
The question which fell to be decided in the case of Moti Ram Deka(1) bad no reference to the rule of compulsory retirement; but the argument in support of the validity of the rule proceeded (1) ; 592 on the basis that the previous decisions of this Court in which the validity of the relevant rules of compulsory retirement had been upheld logically supported the contention that the impugned Rules 148(3) and 149(3) were also valid, and this argument made it necessary for this Court to examine the said decisions and to decide whether the observations made in the course of those decisions supported the contention that Rules 148(3) and 149(3) were valid.
Let us briefly refer to some of these decisions.
In Shyam Lal, vs The State of U.P. and the Union of India(1) the article which was examined was 465 A of the Civil Service Regulations.
Note 1 to the said article gave the Government an absolute right to retire any officer after he has completed 25 years of service without giving any reasons, and provided that no claim to special compensation can be entertained from the public servant who has been compulsorily retired under it; this article was held to be valid.
In the State of Bombay vs Saubhag Chand M. Deshi,(2) the rule which was considered was 165 A of the Bombay Civil Services Rules as amended by the Saurashtra Government.
This rule gave the Government a similar right to retire a Government servant after he has completed 25 years of qualifying service or 50 years of age, and it permitted the Government to ask the Government servant to retire compul sorily without giving any reason and without giving him the right to claim special compensation.
The rule further made it clear that the right conferred by it will not be exercised except when it is in the public interest to dispense with the further services of a Government servant such as on account of inefficiency or dishonesty.
This rule was also upheld.
Reverting then to the argument which was urged in support of the validity of the Railway Rules challenged in the case of Moli Ram Deka(3) the position taken by the learned Additional Solicitor General was that in upholding the impugned rules, the earlier decisions had substantially pro ceeded on the basis that the premature termination of the services of a permanent Government servant would not in every case amount to his removal within the meaning of article 311(2) of the Constitution, and that is how it became necessary to refer to the said decisions which dealt with the question of compulsory retirement, though the problem of compulsory retirement did not fall for the decision of the Court in Moti Ram Deka 's(3) case.
The approach adopted by the majority decision in Moti Ram Deka 's(3) case indicates that the Court was not prepared (1) [1955] 1.S.C.R. 26 (2) ; (3) ; 593 to examine the question as to whether the relevant Rules in respect of compulsory retirement which had been upheld were valid or not.
The trend of the majority judgment shows that logically, it would be consistent to hold that the premature termination of the services of a permanent Government servant would not amount to hi; , removal under article 311(2) only where such termination is the result of the fixation of a general rule of superannuation.
In all other cases where a permanent Government servant is asked to retire compulsorily whether on account of his incompetence, inefficiency, or dishonesty, it may, logically, be open to be suggested that such compulsory retirement is removal within article 311(2).
But since 1953, when the case of Satish Chandra Anand vs The Union of India(1) was decided by this Court there appeared to be a consistent course of decisions which had upheld the validity of the rules in regard to compulsory retirement.
No doubt, the case of Satish Chandra Anand was one where a person had been employed by the Government of India on a five year contract in the Re ,settlement and Employment Directorate of the Ministry of Labour; but some observations were made in that judgment and similar observations were made in subsequent decisions dealing with the question of compulsory retirement.
The majority judgment in Moti Rai Deka 's(2) case took the view that it would be inappropriate and inexpedient to reopen an issue which was covered by several prior reported decisions of the Court.
Besides, the point covered by the said decisions did not directly arise in the case of Moti Ram Deka.
Even so, the majority judgment took the precaution of adding a note of caution that if a rule of compulsory retirement purported to give authority to the Government to terminate the services of a permanent public servant at a very early stage of his career, the question about the validity of such a rule may have to be examined.
That is how in accepting the view that a rule of compulsory retirement can be treated as valid and as constituting an exception to the general rule that the termination of the services of a permanent public servant would amount to his removal under article 311(2), this Court added a rider and made it perfectly clear that if the minimum period of service which was prescribed by the relevant rules upheld by the earlier decisions was 25 years, it could not be unreasonably reduced in that behalf.
In other words, the majority judgment indicates that what influenced the decision was the fact that a fairly large number of years had been prescribed by the rule of compulsory retirement as constituting the minimum period of service after which alone the said rule could be invoked.
Therefore, it seems to us that Mr. Bhandari is right when he contends that the present (1) ; (2) ; 594 article which reduces the minimum period of service to 10 years, is open to challenge in the light of the majority decision pronounced in the case of Moti Ram Deka(1).
In this connection, it is hardly necessary to emphasise that for the efficient administration of the State, it is abso lutely essential that permanent public servants should enjoy a sense of security of tenure.
The safeguard which article 311(2) affords to permanent public servants is no more than this that in case it is intended to dismiss, remove or reduce them in rank, a reasonable opportunity should be given to them of ,showing cause against the action proposed to be taken in regard to them.
A claim for security to tenure does not mean security of tenure for dishonest, corrupt, or inefficient public servants.
The claim merely insists that before they are removed, the permanent public servants should be given an opportunity to meet the charge on which they are sought to be removed.
Therefore, it seems that only two exceptions can be treated as valid in dealing with the scope and effect of the protection afforded by article 311(2).
If a permanent public servant is asked to retire on the ground that he has reached the age of superannuation which has been reasonably fixed, article 31](2) does not apply, because such retirement is neither dismissal nor removal of the public servant.
If a permanent public servant is compulsorily retired under the rules which prescribe the normal age of superannuation and provide for a reasonably long period of qualified service after which alone compulsory retirement can be ordered, that again may not amount to dismissal or removal under article 31](2) mainly because that is the effect of a long series of decisions of this Court.
But where while reserving the power to the State to compulsorily retire a permanent public servant, a rule is framed prescribing a proper age of superannuation, and another rule is added giving the power to the State to compulsorily retire a permanent public servant at the end of 10 years of his service, that cannot, we think, be treated as falling outside article 311(2).
The termination of the service of a permanent public servant under such a rule, though called compulsory retirement, is, in substance, re moval under article 311(2).
It is because it was apprehended that rules of compulsory retirement may purport to reduce the prescribed minimum period of service beyond which compulsory retirement can be forced against a public servant that the majority judgment in the case of Moti Ram Deka(1) clearly indicated that if. such a situation arose, the validity of the rule may have to be examined, and in doing so, the impugned rule may not be permitted to seek the protection of the earlier decisions of this Court in which the minimum (1) ; 595 qualifying period of service was prescribed as high as 25 years, or the age of the public servant at 50 years.
We are, therefore, satisfied that Mr. Bhandari is right in contending that the effect of the majority decision in the case of Moti Ram Deka(1) clearly is that the impugned article 9.1 contravenes Article 311(2) of the Constitution and must be struck( down as invalid.
The result is, the petition succeeds and article 9.1 as amended by the Governor of Punjab by a notification issued on the 19th January, 1960, is struck down as invalid.
In consequence, the notice issued by respondent No. 2 against the petitioner on the 25th March, 1963 must be cancelled.
Before we part with this petition we ought to add that the respondents did not urge before us that the writ petition was not competent under article 32 and that the proper remedy available to the petitioner was a petition under article 226 of the Constitution to the Punjab High Court; that is presum ably, because the respondents were anxious to have a decision from this Court on the question about the validity of the impugned article in the Regulations in question.
We would, therefore, make it clear that our decision in the present writ petition should not be taken to mean that we have held that a petition like the present is competent under article 32 of the Constitution.
In the circumstances of this case, the petitioner is entitl ed to his costs from respondents 1 and 2.
Petition allowed.

summary/full:
The petitioner was appointed as Assistant Superintendent of Police in 1942 in the former Patiala State.
In 1948 on the formation of Patiala and East Punjab States he was integrated in Pepsu Police Service.
He was promoted to officiate as Superintendent of Police in 1950 by the Rajpramukh of Pepsu.
On March 25, 1963, respondent No. 2, the Inspector General of Police and Joint Secretary to the Government of Punjab, issued a notice upon the petitioner under the second proviso to article 9.1 of the Pepsu Services Regulation as amended by the Governor by his notification dated January 19, 1960, to show cause why he should not be compulsorily retired.
The petitioner moved this Court under article 32 of the Constitution for quashing the said notice on the ground that the said proviso was ultra vires and inoperative by reason of contravention of article 311(2) of the Constitution and relied on the decision of Frontier Railway; , The said proviso was as follows, " * * * that Government retains an absolute right to retire any Government servant after he has completed ten years qualifying service without giving any reason and to claim to special compensation on this account will be entertained.
This right will not be exercised except when it is in public interest to dispense with the further services of a Government servant such as on account of inefficiency, dishonesty, corruption or infamous conduct * * *".
Held: Article 9.1 of 'the Pepsu Services Regulation in prescribing a minimum period of ten years of service for the purpose of compulsory retirement contravened article 311(2) of the Constitution and must be struck down.
The only two valid exceptions to the protection afforded by article 311(2) were, (1) where a permanent public servant was asked to retire on the ground that he had reached the age of superannuation which was reasonably fixed; (2) that he was compulsorily retired under the Rules which prescribed the normal age of superannuation and provided a reasonably long period of qualified service after which along compulsory retirement could be valid.
The first would not amount to dismissal or removal from service within the meaning of article 311(2) and the second would be justified by the view taken by this Court in a long series of decisions.
588 It is not permissible for a State while reserving to itself the power of compulsory retirement by framing a rule pres cribing a proper age of superannuation to frame another giving it the power to compulsorily retire a permanent public servant at the end of ten Years of his service, for that rule cannot fall outside article 311(2) of the Constitution.
Moti Ram Deka etc.
vs General Manager, North East Frontier Railway etc.
; , applied Shyam Lal vs State of U.P. and Union of India, ; and State of Bombay vs Saubhag Chand M. Doshi, [1958] S.C.R. 571, referred to.
This decision should not be taken to mean that a petition like the present one was competent under article 32 of the Con stitution.


judgement:
Appeals Nos. 721 and 791 of 1963.
Appeals by certificate and special leave from the judgment and order dated February 16, 1962 of the Madras High Court in Writ Appeals Nos. 16 and 15 ,of 1959 respectively.
V. P. Ran an and R. Ganapathy Iyer, for the appellant in C.A. No. 721 of 1963).
G. B. Pai, J. B. Dadachanji, 0.
C. Mathur and Ravinder Narain, for the appellant (in C.A. No. 791/63).
T. section Venkataraman, for the respondent No. 2 (in both the appeals).
April 6, 1964.
The Judgment of the Court was delivered by WANCHOO, J.
These two appeals by special leave raise a common question and will be decided together.
The appel lants are proprietors of two bidi concerns.
A reference was made by the Government of Madras of dispute between the appellants and their workmen with respect to three matters.
In the present appeals however we are concerned with only one matter, namely, whether reduction of annas two in the wages of workers employed under the agents of the appellants was justified and to what relief the workers were entitled.
The contention of the appellants before the tribunal was that the workers in question were not their workmen and therefore there being no relation of employers and employees between them and the workmen, the reference itself was in competent and there could be no industrial dispute between them and the workmen concerned, their case being that the workmen concerned were the workmen of independent con tractors.
It was found by the tribunal on the basis of evi dence led before it by both parties that the modus operandi with respect to manufacture of bidis in the appellants ' con cerns was that contractors took leaves and tobacco from the appellants and employed workmen for manufacturing bidis.
After bidis were manufactured, the contractors took them back from the workmen and delivered them to the appellants.
648 The workmen took the leaves home and cut them there; however the process of actual rolling by filling the leaves with tobacco took place in what were called contractors ' factories.
The contractors kept no attendance register for the workmen.
There was also no condition that they should come and go at fixed hours.
Nor were the workmen bound to come for work every day; sometimes the workmen informed the contractors if they wanted to be absent and sometimes they did not.
The contractors however said that they could take no action if the workmen absented them, selves even without leave.
The payment was made to the workmen at piece rates.
After the bidis were delivered to the appellants payment was made therefor.
The system was that the appellants fixed the price of tobacco and leaves supplied to the contractors who took them to the places where work of rolling was done and gave them to the workmen.
Next day, the manufactured bidis were taken by the contractors to the appellants who paid a certain price for the manufactured bidis after deducting therefrom the cost of the tobacco and the leaves already fixed.
The balance was paid to the contractors who in their turn paid to the workmen, who rolled bidis, their wages.
Whatever remained after paying the workmen would be the contractors ' commission for the work done.
It may also be mentioned that there were written agreements on the same pattern between the appellants and the contractors in that behalf, though no ,such agreement has been printed in the paper books.
as if there was a sale of leaves and tobacco by the appellants to contractors and after the bidis were rolled there was a resale of the bidis to the appellants by the contractors.
The; tribunal however held that it was clear that there was no sale either of the raw materials or of the finished products, for, according to the agreement, if bidis were not rolled, raw materials had to be returned to the appellants and the contractors were forbidden from selling the raw materials to any one else.
Further after the bidis were manufactured they could only be delivered to the appellants who supplied raw materials and not to any one else.
Further price of raw materials fixed by the appellant, as well as the price of the finished products always remained the same and never fluctuated according to market rates.
The tribunal therefore concluded that there was no sale of raw materials followed by resale of the finished products and this system was evolved in order to avoid regulations under the Factories Act.
The tribunal also found that the contractors generally got only annas two per thousand bidis for their trouble.
The tribunal 649 also referred to a clause in the agreement that the appellants would have no concern with the workers who rolled bidis for whom only the contractors would be responsible.
But it was of the view that these provisiors were deliberately put into the agreement by the appellants to escape such statutory duties and obligations, as may lie on them under the Factories Act or under the Madras Shops and Establishments Act.
Finally on a review of the entire evidence, the tribunal found that this system of manufacture of bidis through the so called contractors was a mere camouflage devised by the appellants.
The tribunal also found that the contractors were indigent persons and served no particular duties and discharged no special functions.
Raw materials were supplied by the appellants to be manufactured into finished products by the workmen and the contractors had no other function except to take the raw materials to the workmen and gather the manufactured material.
It therefore held that the so called contractors were not independent contractors and were mere employees or were functioning as branch managers of various factories, their remuneration being dependent upon the work turned out.
It therefore came to the conclusion that the bidi workers were the employees of the appellants and not of the so called contractors who were themselves nothing more than employees or branch managers of the appellants.
It finally held that reduction in the wages by two annas per thousand bidis was not justified and the workmen were entitled to the old rates.
It therefore ordered the reduction in wages to be restored.
Thereupon the appellants filed two writ petitions in the High Court, their contention being that the tribunal was wrong in holding that the contractors and the workmen em ployed by the contractors were the workmen of the appel lants.
It seems that a sample agreement was produced before the High Court, which provided inter alia for the following terms: (1) That the proprietor should supply the tobacco and the bidi leaves; (2) that the intermediary should engage premises of his own and obtain the requisite license to carry on the work of having the bidis rolled there; (3) that at no time should more than nine bidi rollers work in the premises of that intermediary; (4) that the intermediary should meet all the incidental charges for rolling the bidis including the cost of thread and the remuneration paid to the bidi rollers; 650 (5) that for every unit of 1,000 bidis rolled and delivered by the intermediary to the proprietor, the latter should pay the stipulated amount, after deducting the cost of the tobacco and the bidi leaves supplied by the proprietor; (6) that the intermediary should not enter into similar engagement with any other industrial concern;, (7) that the price of the raw materials and price to be paid for every unit of 1,000 bidis rolled and delivered were to be fixed at the discretion of the proprietor.
Besides these conditions, the contract also provided that it was liable to termination on breach of any of the conditions, and that the proprietors had no connection with and that they assumed no responsibility for the bidi workers who had to look to the intermediary for what was payable to them for rolling the bidis.
The learned Single Judge on a review of the terms of the contract and the evidence on record held that neither the bidi roller nor the intermediary was an employee of the appellants.
In consequence there could be no industrial dispute within the meaning of section 2 (k) of the Industrial Disputes Act between the appellants and the bidi rollers.
The petitions were therefore allowed and the award of the tribunal was set aside.
Thereupon there were two appeals by the workmen.
The appeal court on a consideration of the terms of the contract and the findings of the tribunal came to the conclusion that the so called contractors were really the agents of the appel lants and that there was no utter lack of control by the appellants on the bidi workers who actually rolled the bidi.
The appeal court also found that the intermediaries were im pecunious and according to the evidence could hardly afford to have factories of their own.
It also found that the evi dence revealed that the appellants took the real hand in settling all matters relating to the workers, and the intermediary was a mere cipher and the real control over the workers was that of the appellants.
The appeal court therefore held that the appellants were the real employers of the workmen and the so called intermediaries or so called independent contractors who were in some cases ex employees, were no more than agents of the appellants.
In this view of the matter the appeal court held that the conclusion reached by the tribunal that the intermediaries were merely branch managers 651 appointed by the management and the relationship of employer and employees subsisted between the appellants and bidi rollers was correct.
The appeals were therefore allowed, and the order of the tribunal was restored.
The appellants have come before us on certificates granted by the High Court.
The question whether relationship of master and servant subsists between an employer and employee has been the subject of consideration by this Court in a number of cases.
In Dharangadhara Chemical Works Limited vs State of Saurashtra(1) it was held that the question whether a person was a workman depended on whether he had been employed by the employer and the relationship of employer and employee or master and servant subsisted between them.
It was well settled that a prima facie test of such relationship was the existence of the right in the employer not merely to direct what work was to be done but also to control the manner in which it was to be done, the nature or extent of such con trol varying in different industries and being by its very nature incapable of being precisely defined.
The correct approach therefore was to consider whether, having regard to the nature of the work there was due control and supervision by the employer.
It was further held that the question whether the relation between the parties was one as between an employer and employee or master and servant was a pure question of fact, depending upon the circumstances of each case.
In that case, the dispute was whether certain agarias who were a class of professional labourers, were workmen or independent contractors.
The facts found in that case were that the agarias worked themselves with members of their families and were free to engage extra labour on their own account.
No hours of work were prescribed.
No muster rolls were maintained; nor were working hours controlled by the master.
There were no rules as regards leave or holidays and the agarias were free to go out of the factory after making arrangements for the manufacture of salt.
Even so, though certain features which were usually to be found in a contract of service were absent, the tribunal held that on the whole the status of agarias was that of workmen and not that of independent contractors, particularly as supervision and control was exercised by the master extending to all stages ,of manufacture from beginning to end.
This Court upheld the view of the tribunal on a review of the facts found in that case.
The next case to which reference has been made is Shri Chintaman Rao vs The State of Madhya Pradesh(2).
(1) ; (2) ; 652 That was a case of bidi manufacture, and the question that arose for determination was whether certain persons known as sattedars and those who worked under the sattedars were workmen or not.
It was found that the sattedars undertook to supply bidis by manufacturing them in their own factories or by entrusting the work to third parties at a price to be paid by the management after delivery and approval.
Refer ence was made to the principles laid down in Dharangadhara Chemical Works Limited 's case(1) to determine whether the persons employed were workmen or not, and it was found that the sattedars were not under the control of the factory management and could manufacture the bidis wherever they pleased.
It was therefore held that the coolies were neither employed by the management directly nor by the management through the sattedars.
A special feature of that case was that none of the workmen under the sattedars worked in factories.
The bidis could be manufactured anywhere and there was no obligation on the sattedars to work in the fac tory of the management.
The sattedars were even entitled to distribute tobacco to the workers for making bidis in the workers ' respective homes.
It was in these circumstances that this Court held that the sattedars were independent contractors and the workers employed by them were not the workers of the management.
Then we come to the case of Shri Birdhichand Sharma vs First Civil Judge Nagpur(2).
That was also a case of bidi manufacture.
The facts found were that the workmen who rolled the bidis had to work at the factory and were not at liberty to work at their houses; their attendance was noted in the factory and they had to work within the factory hours, though they were not bound to work for the entire period and could come and go away when they liked; but if they came after midday they were not supplied with tobacco and thus not allowed to work even though the factory closed at 7 p.m.
Further they could be removed from service if absent for eight days.
Payment was made on piece rates according to the amount of work done, and the bidis which did not come upto the proper standard could be rejected.
On these facts it was held that the workers were workmen under the Factories Act and were not independent contractors.
This Court pointed out that the nature and extent of control varied in different industries and could not by its very nature be precisely defined.
When the operation was of a simple nature and did not require supervision all the time, control could be exercised at the end of day by the method of rejecting bidis which did not come upto proper standard, (1)[1957] S.C.R. 152.
(2)[1961] 3 S.C.R. 161.
653 such supervision by the employer was sufficient to make the workers, employees of the employer and not independent contractors.
The nature of the control required to make a person a servant of the master would depend upon the facts of each case.
The next case is Shankar Balaji Waje vs State of Maha rashtra(1).
That was also a bidi manufacturing case.
On the facts of that case the majority held that decision in Shri Birdhichand Shama 's case(2) was distinguishable and the appellant was not a worker within the meaning of the Fac tories Act.
It may be noted however that that case also followed the line of decisions of this Court since the decision in the case Dharangadhara Chemical Works Limited(3) as to the criteria for coming to the conclusion whether a person was an employee or an independent contractor.
The last case to which reference has been made is again a bidi manufacturing case, namely, Bhikusa Yamasa Kashtriya (P) Limited vs Union of India(4).
In that case the main question raised was about the constitutionality of section 85 of the Factories Act and the notification issued by the State of Maharashtra thereunder.
The Constitutionality of section 85 and the notification made thereunder was upheld.
The question there involved was about the application of section 79 of the, Factories Act with reference to leave and the difficulty felt in Shankar Balaji Waje 's case(1) as to how leave could be calculated in the circumstances was explained with reference% to the decision in Shri Birdhichand Sharma 's case(2).
It is in the light of these decisions that we have to decide whether the workmen who work under the so called independent contractors in these cases are the workmen of the appel lants.
It has been found by the tribunal and this view has been confirmed by the appeal court that so called independent contractors were mere agents or branch managers of the appellants.
We see no reason to disagree with this view taken by the tribunal and confirmed by the appeal court on the facts of these cases.
We are not unmindful in this connection of the view taken by the learned Single Judge when he held that on the agreements and the facts found the so called intermediaries were independent contractors.
We are however of opinion that the view taken by the appeal court in this connection is the right one.
As the appeal court has rightly pointed out the (1)[1957] S.C.R. 152.
(2) ; (3) (1962) Supp 1.
I S.C.R. 249.
(4) ; 654 so called independent contractors were indigent persons who were in all respects under the control of the appellants.
There is in our opinion little doubt that this system has been evolved to avoid regulations under the Factories Act.
Further there is also no doubt from whatever terms of agreement are available on the record that the so called independent contractors have really no independence at all.
As the appeal court has pointed out they are impecunious persons who could hardly afford to have factories of their own.
Some of them are even ex employees of the appellants.
The contract is practically one sided in that the proprietor can at his choice supply the raw materials or refuse to do so, the so called contractor having no right to insist upon the supply of raw materials to him.
The so called independent contractor is even bound not to employ more than nine persons in his so called factory.
The sale of raw materials to the so called independent contractor and resale by him of the manufactured bidis is also a mere camouflage, the nature of which is apparent from the fact that the so called contractor never paid for the materials.
All that happens is that when the manufactured bidis are delivered by him to the appellants, amounts due for the socalled sale of raw materials is deducted from the so called price fixed for the bidis.
In effect all that happened is that the so called independent contractor is supplied with tobacco and leaves and is paid certain amount , for the wages of the workers employed and for his own trouble.
We can therefore see no difficulty in holding that the so called contractor is merely an employee or an agent of the appellants as held by the appeal court and as such employee or agent he employs workers to roll bidis on behalf of the appellants.
The work is distributed between a number of : so called independent contractors who are told not to employ more than nine persons at one place to avoid regulations under the Factories Act.
We are not however concerned with that aspect of the matter in the present appeals.
But there can be no doubt that the workers employed by the so called contractors are really the workmen of the appellants who are employed through their agents or servants whom they choose to call independent contractors.
It is however urged that there is no control by even the agent over the bidi workers.
Now the evidence shows that the bidi workers are permitted to take the leaves homes in order to cut them so that they might be in proper shape and size for next day 's work; but the real work of filling the leaves with tobacco (i.e. rolling the bidis) can only be done in the so called factory of the so called independent contractor.
No tobacco is ever given to the workers to be taken home to be rolled into bidis as and when they liked.
They have to 655 attend the so called factory of the so called independent contractor to do the real work of rolling bidis.
As was pointed out by this Court in Shri Birdhichand Sharma 's case(1) the work is of such a simple nature that supervision all the time is not required.
In Birdhichand Sharma 's case(1) supervision was made through a system of rejecting the defective bidis, at the end of day.
In the present cases we have not got the full terms of the agreement and it is therefore not possible to say that there was no kind of supervision or control over the workers and that the so called independent contractors had to accept all kinds of bidis whether made upto standard 'or not.
It is hardly likely that the so called independent contractor will accept bidis which are not upto the standard; for that is usually the system which prevails; in this trade as wilt be apparent from the facts of the many bidi manufacturing cases to which we have referred.
We are therefore not prepared to hold in the absence of any evidence one way or the other that there is no supervision whatsoever of the work done by the workers.
In the circumstances we are of opinion that the relationship of master and servant between the appellants and the workmen employed by the ;so called independent contractors is established.
As the appeal court has ' pointed out whenever there was a dispute in connection with the manufacture of bidis the workers looked to the appel lants for redress.
In one of the cases the manager of one of the appellants sent a letter to the labour officer that the factory was agreeable to increase the wages of the workers from, Rs. 1/14/ to Rs. 2/ per thousand bidis.
In the other case also a similar letter was addressed showing that whenever there was increase or decrease in wages of the workers who, work under the so called independent contractors the real decision was taken by the appellants.
This conduct on the part of the appellants is clearly inconsistent with their plea that the workers are not their employees and there is no privity between them and the said workers.
We are therefore of opinion that on the facts found in these cases the appeal court was right in holding that the conclusion reached by the tribunal that the intermediaries were merely branch managers appointed by the management and the relationship of employers and employees subsisted between the appellants and the bidi rollers is correct.
In this view the appeals fail and are hereby dismissed with costs one set of hearing costs.
Appeal dismissed (1)[1961] 3 S.C.R. 161.

summary/full:
On a reference of industrial disputes between the appel lants, the proprietors of bidi concerns, and their workmen, the appellants contended before the Industrial Tribunal that the workers in question were not their workmen, but were the workmen of independent contractors.
The Tribunal found on the basis of evidence led, that the modus operandi was that contractors took leaves and tobacco from the appellant and ' employed workmen for manufacturing bidis.
After bidis were manufactured, the contractors took them back from the work men and delivered them to the appellants.
The workmen took the leaves home and cut them there; however the process of actual rolling by filling the leaves with tobacco took place in what was called contractors ' factories.
The contractors kept no attendance register for the workmen, there was no condition for their coming and going at fixed: hours, nor were they bound to come for work every day; sometimes they informed the contractors if they wanted to be absent and some times they did not.
The contractors said that they could take no action if the workmen absented themselves even without leave.
The payment was made to the workmen at piece rates after the bidis were delivered to the appellants.
The system was that the appellant paid a certain sum for the manufactured bidis, after deduct ing therefrom the cost of tobacco and the leaves already fixed, to the contractors who in their turn paid to the workmen, who rolled bidis, their wages.
Whatever remained after paying the workmen would be contractors ' commission for the work done, The Tribunal held that there was no sale either of the raw materials or of the finished products, for, according to the agreement, if the bidis were not rolled, raw materials had to, he returned to the appellants and the contractors were forbidden from selling the raw materials to anyone else.
Further the manufactured bidis could only be delivered to the appellants who supplied the raw materials.
Further price of raw materials and finished products fixed by the appellants always remained the same and never fluctuated according to market rate.
The Tribunal concluded that the bidi workers were the employees of the appellants and not of the so called contractors who were themselves nothing more then employees or branch managers of the appellants.
Thereupon, the appellants filed writ petitions in the High Court, which held that neither the bidi roller nor the intermediary was an employee of the appellants and allowed the writ petitions.
On appeal by the workmen the appeal court allowed the appeal and restored the order and conclusion of the Tribunal.
On appeal by certi ficate: Held: On the facts found the appeal court 'was right in holding that the conclusion reached by the Tribunal that the intermediaries were merely branch managers appointed ' by the 647 management and the relationship of employers and employees subsisted between the appellants and the bidi rollers was correct.
Dharangadhara Chemical Works Ltd., vs State of Saurashtra, ; , Shri Chintsman Rao vs State of Madhya Pradesh, ; , Shri Birdhichand Sharma vs First Civil Judge Nagpur; , , Shankar Balaji Waje vs State of Maharashtra, [1962] Supp. 1 S.C.R. 249 and Bikusu Yamasa Kashtriya (P) Ltd. vs Union of India, ; , discussed.