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Chaganlal Prahladrai Singhania v. Maharashtra State Co-Operative Marketing Federation, Ltd.
Factual and Procedural Background
The petitioner was appointed as a senior grader on a salary of Rs. 600 per month by the respondent on 19 November 1970. He was arrested by police at Malshiras on 15 March 1973 and was chargesheeted in Criminal Case No. 70 of 1974 for alleged misappropriation. The petitioner was released from jail pending trial on 25 August 1973. When he attempted to resume duties the respondent informed him that his services stood terminated with effect from 26 August 1973. The termination order did not state reasons, and no notice or inquiry preceded the termination.
The petitioner was acquitted by the Judicial Magistrate, Malshiras, on 18 May 1977. He wrote to the respondent seeking reinstatement (letters dated 25 July 1977 and 6 August 1977) but received no redress. After an unsuccessful conciliation process, the Deputy Commissioner of Labour, Bombay, referred the dispute to the Labour Court. The petitioner claimed reinstatement with full back-wages from 16 August 1973.
The respondent resisted the reference, asserting (inter alia) that the petitioner had been appointed for a seasonal job and his services were not required after August 1973, and that the employer had lost confidence in the petitioner by reason of his arrest. The Labour Court, after evidence, found the petitioner was not a seasonal worker, that termination was effected solely because of the arrest without notice or inquiry, and that the employer's loss-of-confidence plea was unproven. Nevertheless, the Labour Court denied reinstatement and back-wages, accepting the employer's contention that there was "ample material" to justify loss of confidence and concluding the workman had not tried to secure other employment.
The Labour Court's order dated 31 July 1981 (Reference (IDA) No. 689 of 1979) was challenged before the court in this opinion (Pendse, J.). At the hearing, initial counsel for the respondent withdrew and no substitute appeared; the petition proceeded.
Legal Issues Presented
- Whether the termination of the petitioner without notice or enquiry, apparently on account of his arrest, was valid.
- Whether an employer may rely on a generalized claim of "loss of confidence" arising from a police charge/arrest (later resulting in acquittal) to deny reinstatement.
- Whether the petitioner was entitled to reinstatement with continuity of service and back-wages from 16 August 1973 until reinstatement.
- Which party bears the burden to prove that the workman was gainfully employed during the interregnum when back-wages are claimed.
Arguments of the Parties
Petitioner's Arguments (as advanced by learned counsel Sri Purandare)
- The Labour Court's final order cannot be sustained because the petitioner was dismissed without any notice or inquiry.
- An employer cannot validly terminate employment on the speculative ground of loss of confidence unless there is substantial material to show a reasonable employer would lose confidence.
- The only material relied upon by the employer was the petitioner's arrest; that loses relevance upon the petitioner's acquittal by the Judicial Magistrate.
- The Labour Court erred in denying back-wages; the burden is on the employer to prove that the workman was gainfully employed during the interregnum, and no such evidence was produced by the employer.
Respondent's Arguments
- The petitioner had been appointed for a specific seasonal job and his services were not required after August 1973.
- The employer had lost confidence in the petitioner in view of his arrest by the police.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The court reviewed the Labour Court's findings and reasoning. The Labour Court had correctly found that:
- The petitioner was not a seasonal worker;
- The petitioner was removed from service solely because of his arrest by the police; and
- The removal was effected without any notice or inquiry.
However, the Labour Court also held—contradictorily—that there was "ample material" to justify the employer's claim of loss of confidence and accordingly denied reinstatement and back-wages. Pendse, J. analyzed these conclusions and rejected the Labour Court's approach for the following reasons (as stated in the opinion):
- It is impermissible to terminate a workman on a speculative ground of loss of confidence without following any procedure or producing substantial material such that a reasonable employer would lose confidence.
- The only material offered by the employer was the arrest by the police. That fact ceased to have relevance once the Judicial Magistrate acquitted the petitioner of misappropriation.
- After acquittal, the employer cannot continue to assert that the petitioner was guilty of misappropriation or rely on the arrest to justify dismissal.
- Regarding back-wages, the established approach (as described in the opinion) is that the general rule favors awarding back-wages when an order of removal is set aside unless the employer proves that the workman was gainfully employed during the interregnum. The employer did not discharge that burden in this case.
On these bases the court concluded that the Labour Court erred in denying reinstatement and back-wages, and that the termination could not be sustained.
Holding and Implications
Holding: The court set aside the impugned Labour Court order dated 31 July 1981 and allowed the reference. The termination order was set aside; the workman was reinstated with continuity of service in the post from which he was removed with effect from 16 August 1973; and the workman was awarded back-wages from 16 August 1973 until the date of reinstatement. The employer was ordered to pay the back-wages within one month from the date of the judgment and to pay costs.
Implications:
- Direct effect: The petitioner is reinstated with continuity of service from 16 August 1973 and is entitled to back-wages covering the period until reinstatement; the employer must pay those sums within one month and also pay costs.
- Principled guidance in this opinion: An employer cannot rely on an arrest (later resulting in acquittal) as a basis for summary termination without notice or inquiry; claims of "loss of confidence" require substantial material and procedure; and the employer bears the evidentiary burden to show the employee was gainfully employed during the interregnum if back-wages are to be denied. The opinion contains no statement that it is creating a novel legal precedent beyond applying these principles to the facts of the case.
Pendse, J.:— The petitioner was appointed as a senior grader on salary of Rs. 600 per month by the respondent on 19 November, 1970. The petitioner was arrested on 15 March, 1973, by police authorities at Malshiras, and was chargesheeted in Criminal Case No. 70 of 1974 for misappropriation of certain amount. The petitioner was released from jail pending trial on 25 August, 1973. When the petitioner went to resume his duties, the respondent informed him that his services stand terminated with effect from 26 August, 1973. The order of termination does not set out any reason for termination, nor any notice was given or enquiry held before issuing order of termination. It seems that the services of the petitioner were terminated solely because the petitioner was arrested by police.
2. The Judicial Magistrate, Malshiras, acquitted the petitioner of the charge of misappropriation on 18 May, 1977. The petitioner thereafter addressed letter, dated 25 July, 1977 and 6 August, 1977, requesting the respondent to reinstate him in service. The requests were not heeded and the petitioner approached the Conciliation Officer. The Conciliation Officer forwarded failure report and thereupon Deputy Commissioner of Labour, Bombay, made reference to the Labour Court. The petitioner claimed that his services should be reinstated with full back-wages with effect from 16 August, 1973.
3. The reference was resisted by the respondent, inter alia, claiming that the petitioner was appointed for a specific job of a seasonal nature and the service of the petitioner were not required after August 1973. It was also claimed that the respondent had lost confidence in the petitioner in view of the arrest of the petitioner by police.
4. The Labour Court, after recording evidence, by the impugned order, dated 31 July, 1981, came to the conclusion that the claim of the respondent that the petitioner was a seasonal worker is not correct, The Labour Court also held that the petitioner was removed from service only because the police bad arrested him and the removal was without following any procedure or without serving any notice upon the petitioner. The Labour Court was also not impressed by the claim of the respondent that the employer had lost confidence in the workman. The Labour Court very rightly held that after the petitioner was acquitted of the charge of misappropriation, it is not permissible for the employer to claim that the petitioner was indulging in misappropriation. After recording all these findings, the Labour Court very curiously observed that the petitioner is not entitled to order of reinstatement or back-wages because there is ample material to justify the contention of the company regarding loss of confidence. The Labour Court declined to award back-wages on the ground that the workman had not taken any steps to secure a job till he was acquitted by the criminal Court. The order of the Labour Court is under challenge.
5. Sri Purandare, learned counsel appearing on behalf of the petitioner, submitted that the final order of the Labour Court cannot be sustained. The submission is correct and deserves acceptance. It is not permissible for the employer to throw out the workman on a specious ground of loss of confidence without following any procedure. It is not in dispute that the workman was not served with any notice, nor any steps were taken to hold any enquiry against the workman. The principle of loss of confidence cannot be applied unless there is substantial material on record to indicate that any reasonable employer would lose confidence due to the activities of the workman. In the present case, there is no such material save and except that the police had arrested the petitioner on the charge of misappropriation. That fact loses all its relevance when the Judicial Magistrate found that the petitioner was not guilty of the charge levelled by the police. It is not then open for the employer to claim that the loss of confidence is because of framing of charge by the police. In our judgment, the Labour Court was clearly in error in declining to pass order of reinstatement on the ground that the employer was justified in claiming loss of confidence. Sri Purandare is also right in his submission that the Labour Court was in error in denying the back-wages. The sole consideration for passing order of removal of the petitioner is arrest by the police. In view of the fact that the petitioner was acquitted, the arrest can have no impact upon the rights of the petitioner. The Labour Court very curiously observed that the petitioner claims to have tried for job but there is no material to corroborate that. The Labour Court overlooked that in accordance with catena of decisions, the burden is upon the employer to establish that the workman was gainfully employed during the interregnum for dental of back-wages. The Supreme Court held that the general rule is that the workman shall be awarded back-wages once the order of removal is set aside unless during the interregnum he was gainfully employed The employer has not produced any evidence in that regard. In our judgment, the order of the Labour Court declining reinstatement and back-wages cannot be sustained.
6. Initially. Sri C J. Sawant had filed appearance on behalf of the respondent-employer. When the petition was called out for hearing on last Friday, Sri Sawant informed us that the employer had taken away the papers from him and the law officer of the employer had contacted him and informed him that some other advocate has been engaged. No other advocate was present on behalf of the employer and, therefore, we adjourned the matters till today and requested Sri Sawant to inform the law officer who was present in Court that the matter will not be postponed any longer. Today, nobody has appeared on behalf of the respondent. Sri Sawant is permitted to withdraw his appearance.
7. Accordingly, petition succeeds and the impugned order, dated 31 July, 1981, passed by the Presiding Officer, Second Labour Court, Bombay, in Reference (IDA) No. 689 of 1979, is set aside and the following order is passed:
“The reference is allowed. The order of termination is set aside. The workman is reinstated with continuity of service in the post from which he was removed with effect from 16 August, 1973. The workman is entitled to back-wages from 16 August, 1973, till the date of reinstatement. The back-wages shall be paid by the employer within one month from today. The employer to pay costs.”
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