iska Subbarami Reddy Vs. the Nellore District Co-operative Wholesale Stores Ltd. - Court Judgment

Jaganmohan Reddy, J.

1. The appellant was an employee of the Nellore District Co-operative Wholesale Stores Ltd., hereinafter referred to as the 'Co-opsra-tive Stores', initially as a clerk, then as an Accountant and on the date when the notice for discharge was given, he was occupying the post of a Supervisor to which he was promoted. There were in all 48 persons employed in this Co-operative Stores which was evidently dealing in food-grains.

As a result of the abolition of the controls, the work of the Co-operative Stores was not so heavy and consequently some of the employees had to he retrenched. The Co-operative Stores gave to allits employees notices of retrenchment on 7-7-1952 and later purported to re-employ 37 of its employeeswhile dispensing with the services of 11 of whomthe appellant was one of them. The respondent gave another notice on 5-8-1952 terminating the services of the appellant from 7-8-1952 as per Ex. A-2.

The appellant thereafter appealed to the Appellate Authority under Section 41 (2) of the Madras Shops and Establishments Act (Madras Act XXXVI of 1947) against this order of retrenchment The Labour Commissioner, Madras heard both the parties and set aside the order of the retrenchment passed against the appellant on 18-4-1953. This order wascommunicated to the appellant on 8-5-1953. Imme-diately thereafter, the appellant served several notices on the respondent asking them to intimate the date on which he can join, but the respondent remainedsilent.

Ultimately the appellant was forced to give asuit notice on 9-3-1954 to which the respondent re-plied on 29-3-1954 saying that they will not entertain him in employment. As a result of this, hefiled a suit in the District Munsifs Court, Nellore on 19-4-1954 claiming salary from 7-8-1952 to 7-3-1954 with interest thereon at 6 per cent per annum from the date of the plaint till the date of realisation.

In paragraph 10 of the plaint, he averred that having regard to the order of the Commissioner dated 16-4-1953, the original order of the Defendant-stores dated 5-8-1952 stands vacated and must be deemed to be non esse. He further averred that he was throughout and is even now willing and available to perform such duties as may be entrusted to him by the defendant and that the allegation in the reply notice of the defendant that the plaintiff is running business in coffee seeds etc. is not true, and that in any case, even assuming that it is true, it would not disentitle him to make the claim.

Several pleas were taken by the Co-operative Stores contending that the order of the Commissioner for Workman's Compensation was recommendatory, that it was not a final order, that the finality of the Commissioner's order is confined to the penal clause of the Workmen's Compensation Act, that the plaintiff was employed otherwise after the termination of his services, that the plaintiff is not entitled to any arrears of salary or arrears of allowances and that the suit was barred by limitation.

The trial court, on the basis of the decision in Bhavani Kudal Co-operative Urban Bank Ltd. v. Venkatapalhi Naidu, (1955) 1 Mad LJ 293: (AIR 1956 Mad 150) held that the plaintiff is entitled for damages for the time he would reasonably take to find other employment of a similar nature and on that basis, award him one year's salary as a clerk which amounted to Rs. 420/- with proportionate costs. The suit claim with respect to the further period and the prayer for allowances was dismissed.

The first appellate Court held that it was entitled to go into the merits of the retrenchment as Section 41 (3) of the Madras Shops and Establishments Act did hot bar the Court from going into such questions. It further held that, on the merits, the retrenchment was reasonable and that the appellant was not.entitled to file a suit for arrears. In this view, St dismissed the suit.

2. It appears to me that the first appellate court has not approached the points in issue correctly and also did not appreciate correctly the ambit and scope of Section 41 of the Madras Shops and Establishments Act which is as follows :

'41(1) No employer shall dispense with the services of a person employed continuously for a period of not less than 6 months except for a reasonable cause and without giving such person at least one month's notice or wages in lieu of such notice, provided, however, that, such notice shall not be necessary where the services of such person are dispensed with on a charge of misconduct supported by satisfactory evidence recorded at an inquiry held for the purpose.'

(2) The person employed shall have a right to appeal to such authority and within such time as may be prescribed either on the ground that there was no reasonable cause for dispensing with bis services or on the ground that he had nof been guilty of misconduct as held by the employer.

(3) The decision of the appellate authority shall be final and binding on both the employer and the person employed.'

For the purposes of Section 41 (1), the employer could dispense with the services of an employee who has been continuously in service for a period of not less than 6 months without notice on a charge of misconduct supported by satisfactory evidence recorded at an inquiry held for the purpose. But that is not so in the instant case. The facts in this case do not attract that provision.

If misconduct is not one of the grounds for discharge of an employee, then the- employer can only dispense with the services if there is a reasonable cause and even if there is reasonable cause, he can only dispense with his services after giving at least one month's notice. In all these cases, where the services of a person arc not dispensed with in accordance with the provisions of Section 41 (1) of the Act, he has a right to appeal to the prescribed authority within the prescribed time challenging tho order either on the ground that there was no reasonable cause for dispensing with bis services or on tho ground that he had not been guilty of misconduct as held by the employer.

Under Sub-section (3) of Section 41, the order of the appellate authority is final and binding on both the employer and the person employed. This provision envisages firstly that the employer and the employee are duly heard and that the decision of tho appellate authority is binding on both and is final. The decision of the first appellate court was that since Sub-section (3) of Section 41 doss not say that civil courts will have no jurisdiction, it could go into the merits and determine the effect of the order of the appellate authority setting aside the order of retrenchment.

An Order of the appellate authority setting aside the Order of retrenchment has given rise to a question whether it amounts to a reinstatement and whether the appellate authority has such a power under the Act, If the Appellate Authority has the power to reinstate them its not directing reinstatements frees the employer, from arty liability to reinstate him.

3. The first appellate court took the view that it is not within the competence of the Labour Commissioner to imposed on an employer a condition to retain posts not required by him or in excess of bis requirements and then direct the employer to reinstate a person retrenched while abolishing some of the supernumerary posts. The order of the Labour Commissioner does not refer to this aspect at all nor does it ask the Stores to reinstate the plaintiff to bis original post in preference to other persons and consequently to that extent, the order of the labour Commissioner was held to be invalid and inoperative.

Further, it was held that even assuming that the defendant is not entitled to question the correctness of the order of the Labour Commissioner and that it is final, even then the plaintiff has no real claim to be reinstated on the strength of the said order. Thirdly, the appellate court held that tho remedy open to the plaintiff-appellant, even assuming that his removal or dismissal is wrongful, is only by way of a suit for damages and not by way of a suit to recover salaries as such; much less for reinstatement by specific performance or odienvise. In support of this, reliance was placed upon the case of Md. Mustafa Ali v. District Board, Bareilly, AIR 1934 All 101. The appellate court having taken this view, held that the remedy of the plaintiff even assuming that he was wrongfully dismissed was to be only by way of damages and not for recovery of salary as such.

4. The learned advocate for the appellant has urged three points in this Second Appeal : Firstly, that the decision of the Commissioner under Seciton 41 (3) of the Madras Shops and Establishments Act is final and binding on both the parties; secondly that the effect of the order setfing aside the order of retrenchment is that tho appellant is deemed to continue in service till he is reinstated, that is, that the order of retrenchment, by virtue of the appellate authority setting aside that order, is to treat the employee as if he was not discharged or retrenched.

In that view, he submits that there is no question of a suit for damages on the basis of common law employment because the remedy which the appellant has, is a statutory remedy regulated by thaE statute and therefore there is no impediment in courts granting him salary on tho basis that his employment is still continuing. Thirdly, he submits that the relief to which he is entitled should be on the basis that he is still continuing in service.

5. With respect to the first point, it is abun-dantly clear, both on principle and on authority, that when a statute confers on an authority a judicial or quasi judicial function to hear and determine certain matters arising between the parlies and treats that decision by that authority as final and binding on both the parties, that decision cannot be assailed in a court of law unless it be on certain accepted principles relating to jurisdiction and on principles of natural justice.

Their Lordships of the Privy Council in the famous case of Secretary of State v. Mask and Co., AIR 1940 PC 105 construing a similar provision i.e., Section 188 of the Sea Customs Act which pro-. vides that every order passed in appeal under that Section shall, subject to the power of revision conferred by Section 191 be final, held that the jurisdiction of the Civil Courts is excluded by the order of the Collector of Customs on an appeal under Section 188. Lord Thankerton observed at page 110 as follows :

'It is settled law that the exclusion of thejurisdiction of the Civil Courts is not to be readilyinferred, but that such exclusion must either beexplicitly expressed or clearly implied. It is alsowell settled that even if jurisdiction is so excluded,the Civil Courts have jurisdiction to examine intocases where tho provisions of the Act have notbeen complied with, or the statutory tribunal has notacted in conformity with the fundamental principlesof judicial procedure.

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By Sections 188 and 191 a precise and self-contained code of appeal provided in regard to obligations which are created by the statute itself and it enables the appeal to be carried to the supreme bead, of the executive Government. It is difficult to conceive what further challenge of the order was intended to bo excluded other than a challenge in the Civil Courts.'

Again, at the same page, considering the view held by the High Court that the finality clause was not so worded as to exclude the jurisdiction of the Civil Courts, Lord Trankerton observed:

'Their Lordships are unable to agree with this distinction. Their Lordships are of opinion that in this case the jurisdiction of the Civil Courts is excluded by the order of the Collector of Customs on the appeal under Section 188, and it is unnecessary to consider whether, prior to taking such appeal under Section 188 the respondents would have been entitled to resort to the Civil Courts, or whether they would have been confined to the right of appeal under Section 188.'

6. In a recent English decision in Dean v. District Auditor for Ashton-in-Makerfield, (1960) 1 QBD 149, Lord Parker C. J. dealt with this matter at page 157 thus :

'But the matter does not rest there because, as I have already said, Sub-section (3) provides that subject to the stating of a special case the decision of the Minister shall be final. If those words do not mean what they say, the position would be rather extraordinary. There would be in a sense no end to the possibilities of litigation and the absurdities that would arise. Take the present case. Whitter, instead of appealing, as a person aggrieved, to the Minister, might have appealed to this Court and this Court might have done what the Minister did. Is it then to be said that these appellants could go to the Minister and in effect ask the Minister to reverse the decision arrived at by this Court? It seems to me that the words 'the decision of the Minister shall be final' mean what they say. It is submitted that those words only mean that the decision shall be final as between the appellant Whitter and the district auditor and possibly the local authority. But the decision whether Whitter's objection is right and whether Dean and Burrows ara liable to be surcharged is really one and indivisible, and Sub-section (3) is an added reason for saying there can be no appeal in this case.'

In Bhaishankar v. Municipal Corporation of Bombay, ILR 31 Bom 604 at pp. 609 and 610 dealing with a question whether the civil court's jurisdiction is ousted in matters which have been prescribed by a statute, Jenkins C. J. observed as follows at page 609 :

'But where a special tribunal, out of the ordinary course, is appointed by an Act to determine questions as to rights which are the creation of that Act, then except so far as otherwise expressly provided or necessarily implied, that tribunal's jurisdiction to determine those questions is exclusive.

It is an essential condition of those rights that they should be determined in the manner prescribed by the Act to which they owe their existence. In such a case there is no ouster of the jurisdiction of the ordinary courts, for they never had any; there is no change of the old order of things; a new order is brought into being'.

These observations were adopted with approval in Nataraja Mudaliar v. Municipal Council of Mayavaram, ILR 36 Mad 120, where it was held that an order of a Collector declaring the invalidity of an election of a candidate to a seat in a Municipal Council, passed under Rule 36 of the Election Rules after enquiry and based on proper grounds and otherwise complying with the requirements of the Rules framed under Section 250 of Madras Act IV of 1884 cannot be questioned in a civil suit; but is conclusive as far as the result of the election is concerned.

7. There are two other decisions which deal with the scope of Section 41 of the Madras Shops and Establishments Act. In South India Bank Ltd. v. Pichuthayappan, : AIR1953Mad326 , Subba Rao J., (as he then was) at page 315 (of Mad LJ) ;(at p 332 of AIR) observed :

'On the facts he came to the conclusion that the discharge of the employee was not for a reasonable cause. The Commissioner had jurisdiction to decide under Section 41 whether the discharge of an employee was for reasonable cause or not, and having taken into consideration the contentions advanced by either side, he came to the conclusion in favour of the employee. His finding is not liable to be questioned''.

In appeal against this decision in South India Bank Ltd. v, Rchuthayappan, : (1954)ILLJ289Mad , Rajamannar C. J. and Venkatarama Aiyar J. while holding that it is the management that has the power to decide the principles on which it should regulate its own business and Section 41(2) has not the effect of converting the Commissioner into a Manager of the establishment or director of their policies, none-the-less held having regard to the decision of the Supreme Court in Parry and Co. v. Commercial Employees' Association, : (1952)ILLJ769SC that the order of the Commissioner is open to challenge under Article 226 only on the grounds mentioned in the above decision of the Supreme Court.

In this view, they held that the subject-matter of the appeal was clearly within the exclusive jurisdiction of the Commissioner under Section 41(2) and consequently there was no question of any irregularity, nor has the Commissioner left any matter undetermined in respect of which a writ of mandamus might be issued. Though the only thing that could be said against the order was that it was erroneous on the merits, the jurisdiction of a Court over a subject-matter does not depend upon whether its conclusions are correct or not and that the Court has jurisdiction to decide wrong as well as right.

8. These decisions demonstrate clearly that when the Commissioner has heard both the parties and took into consideration the contentions urged before him and has arrived at a decision, that decision is final and binding on the parties. It cannot be challenged in Civil Courts unless it be on the question of improper exercise of jurisdiction or failure to exercise jurisdiction where there is a duty to exercise it or for disregard of principles of natural justice. It is true that the Commissioner must consider the question of reasonableness from the point of view of the economic and efficient management of the concern and the principles upon which retrenchment should be effected, namely, 'last come, First go' But even that is subject to the qualification that if the management effected retrenchment on some other salutary principle, it will be for the management to prove that that is salutary and beneficial. In Swadesamitran Ltd. v. Their Workmen, : (1960)ILLJ504SC , the Supreme Court held:

'If a case for retrenchment is made out, it would normally be for the employer to decide which of the employees should be retrenched; but there can be no doubt that the ordinary industrial rule of retrenchment is 'last come, first go', and where other things are equal, this rule has to be followed by the employer in effecting retrenchment'. While; this is the normal rule it is open to the employer to depart from it for valid and sufficient reasons and where it is departed from, there should he reliable evidence preferably in the recorded history of the workmen concerned showing their inefficiency, unreliability or habitual irregularity; for, it is not as if industrial tribunals insist inexorably upon compliance with the industrial rule of retrenchment.

What they insist on is on their being satisfied that wherever the rule is departed from, the departure is justified by sound and valid reasons. If, therefore, the employer has let in evidence to establish why he has departed from the normal rule of retrenchment arid the Commissioner or the Tribunal has not considered it but has applied the rule, irrespective of the evidence in the case, that would be a case of non-exercise of jurisdiction.

But in this case, we are not concerned with that aspect of the matter because, the Commissioner's report has taken into consideration every contention raised before him. In fact, the Co-opevative Stores gave notice to every one and reemployed some of them. That was certainly not what they were entitled to do. They could have given notices to such of those employees who came last or applied some other rule of qualification or efficiency and retrenched only such persons.

The Commissioner stated that the very fact that they did not retrench the junior most among the employees but instead served notices of retrenchment on all the employees without intending to give effect to the notices on all by retaining some persons without following any principle in the matter of retrenchment of personnel, shows that the management wanted to get rid of some of the employees who were not liked by them'.

In the absence of any material before him, it cannot be said that there is anything which would justify the order of the Commissioner from being challenged on any of the principles adumbrated above. I am, therefore, of the view that the decision of the Commissioner is final and binding on the parties under Section 41 (3) of the Madras Shops and Establishments Act and that the effect of that decision setting aside the order of retrenchment is to treat the original order of the management as if it did not exist.

The conclusion which would logically follow is that the employee has not been retrenched or discharged and that there is no necessity to reinstate him. If that is so, then the objection that unless the order of the Commissioner directs reinstatement, it was not an obligatory order and consequently the Co-operative Stores were not obliged to give effect to it has little validity.

9. A Bench of the Madras High Court consisting of Rajamannar C. J., and Viswanatha Sastri 7. in Tata Iron and Steel Co., Ltd. v. Rarnakrishna Iyer (1950) 2 Lab IJ ,1043 (Mad) dealt with a similar objection as that urged before me by the learned counsel for the respondent,. The learned Judges at page 1044 observed thus:

'It is next contended by Mr. Rarnakrishna Aiyar that in any event the order of the Commissioner wa3 bad in so far as it directed a reinstatement in service of the first respondent. The argument was that there is no specific provision in the Act which enabled the authority to make an order of reinstatement. He referred us by way of analogy to the jurisdiction of Industrial Tribunals to make orders of reinstatement, but we think such reference is wholly irrelevant. To a certain extent we agree with the learned counsel, namely, that the authority should not have said that the employee would be entitled to reinstatement, But this is only quarrelling with his language. Actually the legal position is this. The employer passes art order dispensing with the services of an employee. That order is carried on appeal to a higher authority. That authority reverses the decision of the employer and the result is that the order of the employer is set aside. It is no longer in existence. It follows that the effect of the original order of the employer also disappears and it is as if the order is non esse. Though, therefore, it may not be quite accurate to say that the employee will be entitled to reinstatement in service, yet the result of the order of the appellate authority is virtually the same. Probably the result of the appellate order is even better than an order of reinstatement. It is as if the employee had never been properly dismissed from service'.

These observations, if I may say so with respect, set out the correct position in law of an order made under Section 41 (2). There arc several other recent decisions of single Judges of the Madias High Court Vide : Balnsundara Mudaliar v. Ellappa Mudaliar, (1957) 1 Mad LJ 7, Dhandapani v. Salem Co-operative Wholesale Stores, (1959) 1 Mad LJ 108; followed in Mohan Krishna Naidu v.National Bank of India Ltd., : AIR1960Mad213 .

This last case refers to the Bench decision in (1950) 2 Lab LJ 1043 (Mad). Though the previous decisions of the Madras High Court did not say that a remedy open to the workman is by way of damages, Suhramanyam J., seems to think that that remedy would also be open. In : AIR1960Mad213 (supra) a question was raised as to whether when an employee resorts to the remedy of prosecuting the employer under Section 45 (1) for contravention of Section 41 (1), is it open to him to claim relief on the basis that his services have not been dispensed with

That question was determined in the negative and it was further observed that where the services of an employee has been dispensed with, it is open to the employee to treat himself as continuing in service and claim salary or he may claim damages for wrongful dismissal. In the former case, he will be disabled from seeking employment elsewhere whereas in the latter case he will be free to do so. It is unnecessary to consider these observations for the purposes of this present case because there was no question of any prosecution under Section 45(1); nor of getting the employer convicted for disobeying the order.

At any rate, the observations of the Bench Decision to which I have referred to above are clear and admit of no doubt that when once an order dispensing with the services of an employee is set aside on the ground that it is not made on any reasonable ground and that there is no justification for it, the services of the employee cannot be deemed to have been dispensed with.

His services must be treated as having continued till the date when the Co-operative Stores, notwithstanding the order of the Commissioner, refused to entertain him in service which they did in the teeth of that order. This action on their part would expose them to criminal prosecution under Section 45, of the Madras Shops and Establishments Act, but that is a different matter. At any rate, the salary claimed is for a period upto a date prior to 29-3-1954 viz., till 7-3-1954. The employee was left in no doubt that as from 29-3-1954 he would not be entertained in service.

10. It is urged that the employee was in service and was running a partnership business in coffee seeds and consequently he would not be entitled to any salary as he is otherwise employed. That is a question which must be left to be determined by the first appellate court viz. whether his being in the partnership business was in employment, what is the remuneration ho was getting and whether having regard to that remuneration, what is the amount due to him on the basis that he was in the employ of the Co-operative Stores and that if there is any difference between the two, he would be entitled to the difference from the date of retrenchment (7-8-3952) upto 7-3-1954,

11. In this view, the appeal is allowed with costs and the case sent back to the first appellate court with the above directions. Court-fee paid on the memorandum of appeal will be refunded.