Holding

Rule 23(vi)(E) is valid when read subject to natural‑justice requirements; loss of lien is not a major penalty and a show‑cause notice suffices, so the termination stands and must be treated as compulsory retirement with full pensionary benefits.

Summary

Purnendu Chakrobarty, a senior employee of Hindustan Paper Corporation, was charged in a murder case and repeatedly applied for leave without proper sanction or medical certificates, resulting in unauthorised absence for more than eight consecutive days. The corporation invoked Rule 23(vi)(E) of its Conduct, Discipline and Appeal Rules to terminate his lien. The Guwahati High Court set aside the termination and ordered reinstatement with 50% back wages. On appeal, the Supreme Court held that the rule, when read subject to the principles of natural justice, is not arbitrary or violative of Article 14; a show‑cause notice suffices and a full inquiry under Rule 25 is unnecessary as loss of lien is not a major penalty. Consequently, the High Court’s interference was unwarranted, but considering the employee’s imminent retirement, the Court directed the corporation to treat the termination as compulsory retirement and to pay all pensionary and terminal benefits, without requiring the employee to refund arrears already paid.

Issues considered

Whether Rule 23(vi)(E) of the Hindustan Paper Corporation Conduct, Discipline and Appeal Rules is arbitrary, unreasonable or violative of Article 14 of the Constitution.
Whether the principles of natural justice must be complied with before terminating lien under Rule 23(vi)(E).
Whether loss of lien constitutes a major penalty requiring an enquiry under Rule 25.
What relief is appropriate – reinstatement with back wages or treatment as compulsory retirement with pension benefits.

Legislation cited

Constitution of Indias. Article 14, s. Article 16

Subjects

natural justiceArticle 14loss of lienunauthorised absenceservice lawdisciplinary actionshow cause noticemajor penaltycompulsory retirementRule 23(vi)(E)Rule 25

Judgment

HINDUSTAN PAPER CORPORATION A
v.
PURNENDU CHAKROBARTY AND ORS.

OCTOBER 30, 1996

[B.P. JEEVAN REDDY AND K. VENKATASWAMI, JJ.] B

Service Law :

Hindustan Paper Corporation Conduct, Discipline and Appeal Rules:
Rule 23 (vi) (E).
c
Loss of Lien in the event of unauthorised absence or overstayal of
leave for more than specified number of consecutive days-Validity a/-
Held: The said provision subject to principles of natural justice-Hence,
not arbitrary, unreasonable or violative ofArticle 14-Constitution ofIndia,
1950, Article 14.
D
Rules 23(vi)(E) and 25-Principles of natural justice-Requirement
of complying with-Before termination of lien under R23 (vi) (E)-Held:
was satisfied by calling for explanation of employee concerned-Holding
of enquiry under R25 not necessary as loss of lien under said Rule did not
amount to major penalty-Mere show cause sufficient when only loss of E
lien was involved.

Rule 23 (vi)(E)-Lien-Termination of-For unauthorised absence
for more than prescribedperiod-Such termination set aside by High Court-
Held: Although High Court ought not to have set aside such termination F
oflien, in the circumstances ofthe case, directed to be treated as compulsory
retirement from date of order of termination of lien-Employee concerned
directed to be given all pensionary and terminal benefits.

The respondent was an employee of the appellant-Corporation.
He entered service as a Fire Fighting Officer and was promoted as G
Assistant Manager (Security and Fire-Fighting). The day after he
applied for cdsual leave an FIR was lodged against him under Sections
302/201 read with Section 34 of the Indian Penal Code, 1860. He
continued to apply for extension of leave but the ~ppellant
Corporation refused to sanction his application and informed him
that he was liable to be treated as an unauthorised absentee. The H
159
160 SUPREME COURT REPORTS [1996] SUPP. 8 S.C.R.

A appellant-Corporation called for his explanation and finding his
explanation to be improper passed an order that under Rule 23(vi)(E)
of the Hindustan Paper Corporation Conduct, Discipline and Appeal 4 .
Rules he had lost lien on his appointment with the Corporation.

The respondent-employee filed a writ petition before the High
B Court challenging the aforesaid order. The High Court set aside the
order and directed re-instatement of the respondent with 50% back
wages. Being aggrieved the appellant-Corporation preferred the
present appeal.

During the pendency of the appellant's appeal, this Court
C directed the appellant to pay I /5th of the arrears to the respondent.
This direction was complied with. By the time of this decision the
respondent was due to retire shortly.

On behalf of the appellant-Corporation it was contended that
Rule 23(vi)(E) of the Rules had to be construed by reading into it the
D principles of natural justice.

Allowing the appeal, this Court

Held I. In view of the concession by the appellant-Corporation
E that Rule 23 (vi) (E) of the Hindustan Paper Corporation Conduct,
Discipline and Appeal Rules must be read and given effect to subject
to the compliance of the principles of natural justice, it cannot be
said that the Rule is arbitrary or unreasonable or ultra vires Article
14 of the Constitution. Be.fore taking action under the said clause, an
opportunity should be given to the employee to show cause against
F the action proposed and if the cause shown by the employee is good
and acceptable, it follows that no action in terms of the said clause
will be taken. Understood in this sense, it cannot be said that the said
clause is either unreasonable or violative of ArtHcle 16 of the
Constitution. (167-B-C]
G
2. The requirement of complying with the principles of natural
justice before terminating the lien under Rule 23 (vi)(E) of the Rules
was satisfied by calling for the explanation of the respondent. Holding
of an enquiry under R. 25 of the Rules is not necessary as loss of lien
under Rule 23 (vi)(E) does not amount to a major penalty. A mere
H issue of show cause notice would suffice where only loss of lien is
HINDUSTAN PAPERCORPN. t'. PURNENDU CHAKROBARlY [VENKATASWAMl,J.] 161

involved. [167-FG) A

D.K. Yadav v. JMA Industries. Ltd., [1993) 3 SCC 259; Hindustan
Steel Ltd. v. Presiding Officer. Labour Court, [1976] 4 SCC 222; L. Robert
D.Souza v. Executive Engineer, Southern Railway, [1982] 1 SCC 645 and
Delhi Transport Corporation v. D.TC. Mazdoor Congress, [1991] Supp 1
sec 600, referred to. B
3. Although there was no good reason for the High Court to
interfere with the order of the appellant-Corporation, and in view
of the fact that the respondent is due to retire shortly, taking the
totality of the facts and circumstances of the case and having due
regard to the services rendered by the respondent, the ends of justice C
would be met if the appellant-Corporation is directed to give all
pensionary and terminal benefits to the respondent treating the case
of the respondent as compulsory retirement on and from the date of
order of termination of lien by the appellant-Corporation. The
amount already paid pursuant to the interim direction of this Court
is not liable to be refunded by the respondent and not to be adjusted D
against the terminal benefits payments, if any. [169-A-C]

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 13389. of
1996.

From the Judgment and Order dated 13.11.95 of the Assam High E
Court in W.A. No. 466 of 1994.

P.P. Rao, Raj kumar Gupta, H.P. Shanna and Rajesh, for the Appellant.

Sanjay Parikh for the Respondents. F
The Judgment of the Court was delivered by

VENKATASWAMI, J. Leave granted.
G
Heard learned counsel for the parties at length.

The appellant-Corporation on January 5, 1989 passed an order
invoking Rule 23 (vi)(E) of the Hindustan Paper Corporation Conduct
Discipline and Appeal Rules !hereinafter called "the Rules". That order
was to the effect that the first respondent herein must be deemed to have H
162 SUPREME COURT REPORTS [1996] SUPP. 8 S.C.R.

A lost his lien on his appointment with the Corporation/Mill.

The first respondent has successfully challenged the said order of ... .
the appellant before the High Court of Guwahati and thus, the appellant is
before us.

B The first respondent entered the services of the appellant as a Fire
Fighting Officer and was eventually promoted on 28.8.1985 as Assistant
Manager (Security and Fire-fighting). On May 26, 1988 the body of one
Shanit Rani Chakrabarty, sister--in--law of the first respondent, was found
in the house of the first respondent. On 27 .5.1988, the first respondent
applied for casual leave. On the next day, an FIR was lodged against the
C first respondent and others under Section 302/201 read with section 34
!PC by Karim Ganj Police. On 3.6.1988. the first respondent after the
expiry of casual leave sent an application for Earned Leave for I I days
giving the reason 'personal affair' and mentioning his leave address as U/
S PWD Dispur. Gauhati. On 6.6.1988 the Senior Manager of the appellant
D received a message from the Police to direct the first respondent to report
to the police station. On 7.6.1988 the Senior Manager informed the police
that the first respondent has se;it an application for Earned Leave. Again
the police requested to intimate the whereabouts of the first respondent.
On 14.6.1988 the appellant informed the police that the whereabouts of
the first respondent were not known. However, the permanent address of
E the first respondent, as available in the official record, was supplied to the
police. Thereafter, the appellant sent series of leave applications dated
21.6.88, 14.7.88, 13.8.88, 28.8.88, 13.9.88, 29.9.88, 16.10.88 and 5.11.88
without minding to find out whether previous applications for leave have
been sanctioned or not. These leave applications initially did not disclose
any reason and subsequently it mentioned 'on medical grounds' without
F enclosing any medical certificate and without disclosing his leave address.
The appellant-Corporation again received on 28.11.1988 a communication
from the police that the first respondent was wanted as an accused in a
murder case. In view of that, the appellant-Corporation by a communication
dated 30.11.1988 informed the first respondent that his leave on medical
G grounds was not sanctioned as his applications were not supported by
medical certificates and that he was liable to be treated as an unauthorised
absentee. He was, therefore, called upon to submit his explanation, if any,
within 15 days of receipt of the letter. He was also incidentally informed
that he was required by the Superintendent of Police. Karim Ganj in
connection with the murder. In response to the above communication from
H the appellant- Corporation the first respondent submitted his reply baldly
HINDUSTANPAPERCORPN. 1'. PURNENDU CHAKROBARTY [VENKATASWAMI,J.] 163

stating that he was suffering from chest pain for quite some time and that A
he had consulted specialist outside HPC for personal reasons and due
medical certificate will be produced at the time ofjointing. He also informed
the Corporation that he knew that he was required to appear before the
police and that he would report to the police as per rules. It is under these
circumstances that the appellant-Corporation passed the order dated
5.l.1989 invoking Rule 23 (vi)(E) the Rules. B

The appellant aggrieved by the said order moved the Guwahati High
Court by filing Civil Rule No. 288 of 1992 under Article 226 of the
Constitution of India. The learned Single Judge as well as the Division
Bench, on appeal by the appellant-Corporation, agreeing with the arguments·
advanced on behalf of the first respondent set aside the order of appellant- C
Corporation dated 5. l.1989 and directed re-instatement of first respondent
with 50% back wages.

When the Special Leave petition came up for admission this Court
while issuing notice passed an order in the following terms: D

"In the light of sub-clause (E) of Clause VI of Rule 23. the
val,idity of which is stated not to have so far been pronounced
upon by this Court in the context ofa Public Sector Corporation,
a notice shall be issued to the respondents."
E
Before actually going into the validity of the said Rule it would be
beneficial to appreciate the facts little more critically, which will be helpful
to come to the correct conclusion.

The first respondent is not a workman to avail or invoke the provisions F
of the Industrial Disputes Act. 1947. He is governed by the Rules framed
by the Corporation in this regard. We have already noted that in view of
the pendency of criminal case registered against him, the first respondent
without disclosing that fact has been sending applications for leave
commencing from 21.6.1988 ending with 5.11.1988. Copies of the
application for leave are filed in the paper book along with copies of G
medical certificates produced by the first respondent, not before the
appellant-Corporation on time, but long subsequently. Initially, as noticed
earlier, the applications for leave did not disclose any reason. Later on, in
the application for leave dated 13.8.1988, the reason given was 'suffering
from heart disease.' Again in the application dated 13.9.1988. the reason H
164 SUPREME COURT REPORTS (1996] SUPP. 8 S.C.R.

A given was 'heart disease since long.' The same reason was given in the
applications dated 29.9.1988. 16. I 0.1988 and 5.11.1988 It is very relevant
to note that according to the medical certificates, copies of which are now
produced which are dated 4.5.1988 onwards ending with 21.1.1989 nowhere
it was stated that he was suffering from heart disease. Further, nature of
the sickness was mentioned in the certificate and in spite of that the same
B was not disclosed correctly in the leave applications. It is also clear that
those certificates were available and inspite of that not enclosed alongwith
the leave applications. From this one has to draw the infernnce that either
the medical certificates are not genuine in the sense that they were not
obtained then and there or the first respondent deliberately did not enclose
them along with the leave applications. Even today no proper explanation
C is forthcoming from the first respondent on this aspect. With this background
we shall not set out the relevant Rule:-

Rule 23. PENALTIES.

The following penalties may be imposed on an employee. as
D hereinafter provided, for misconduct committed by him or
for any other good and sufficient reasons.

Minor Penalties

E (a) censure :

(b) withholding of increment (s) of pay with or without
cumulative effect :

(c) withholding of promotion :
F
(d) recovery from pay or such other amount as may be due to
him of the whole or part of any pecuniary loss caused to the
corporation by negligence of breach of orders.

G Major Penalties

e) reduction to a lower grade or post, or to a lower stage in a
time scale :

H f) removal from service which shall not be a disqualification
HINDUSTAN PAPER CORPN. 1'. PU RN EN DU CHA.KROBARTY [VENKATASWAMI, J.] 165

for future employment: A

g) dismissal:

Explanation: The following shall not amount to a penalty
\Vithin the meaning of this rule.
B
i) withholding of increment of an employee on account of his
work being found unsatisfactory or not being of the required
standard, or for failure to pass a prescribed test or
examination:

ii) stoppage of an employee at the efficiency bar in a time scale,
c
on the ground of his unfitness to cross the bar:

(iii) non-promotion, whether in an officiating capacity or
otherwise, of an employee to a higher post for which he may
be eligible for consideration but for which he is found D
unsuitable after consideration of his case:

(iv) reversion to a lower grade or post, of an employee officiating
in a higher grade or post, on the ground that he is considered,
after trial, to be unsuitable for such higher grade or post, or
on administrative grounds unconnected with his conduct: E

v) reversion to his previous grade or post, of an employee
appointed on probation to another grade, or post during or at
the end of the period of probation in accordance with the
terms of his appointment: F
vi) TERMINATION OF SERVICE

A) of an employee appointed on probation, during or at the
end of the period of probation, in accordance witl1 the terms
of his appointment:
G

B) of an employee appointed in a temporary capacity
otherwise than under a contract or agreement. On the
expiration of the period for which he was appointed. of earlier
in accordance with the terms of his appointment: H
166 SUPREME COURT REPORTS [1996] SUPP. 8 S.C.R.

A C) of an employee appointed under a contract or agreement.
In accordance with the terms of such contract or agreement:

D) of any employee on reduction of establishment; and

E) Loss of lien on his appointment by an employee:

I. Proceeding on leave without prior sanction and remaining
unauthorisedly absent for more than 8 consecutive days.

and/or

c 2. Over-staying his sanctioned leave beyond the period
originally granted or subsequently extended for more than 3
consecutive days."

In the light of the above Rule, in particular Rule 23 (vi)(E) the
D appellant-Corporation factually by communication dat,,d 30-11-1988
informed the first respondent that the leave applications have not been
supported by medical certificates; that period must be treated as
'unauthorised absent' and if he has got anything to say on that aspect he
has to send the reply within 15 days from the date of receipt of that letter.
His reply was that he was suffering from chest pain for quite some time
E and the medical certificates will be produced at the time of joining. To say
the least that should not be the attitude of an employee. First of all, he was
expected to take the leave ordinarily with prior sanction and extend the
same after the earlier one was sanctioned by the appropriate authority.
Right from the beginning his applications were not only not in proper
form but were not supported by any medical certificates to justify the
F claim of the first respondent. At least the first respondent should have
replied properly by enclosing the medical certificates or should have come
forward with a true case. He did neither. It is in that context that the
appellant Corporation invoked the said Rule, namely, Rule 23 (vi)E.

G Mr. P.P. Rao senior counsel appearing for the appellant-Corporation
fairly, in our view rightly, conceded that the Rule, namely Rule 23 (vi)E
has to be construed by reading into it the principles of natural justice.
Otherwise by reading it literally, it would amount to arbitrary and
unreasonable vesting of authority and liable to be struck down. According
to the learned counsel, if only the first respondent had properly responded
H to the show cause notice the Corporation might not have taken the extreme
HINDUSTAN PAPER CORPN. r. PURNENDU CHAKROBARTY [VENKATASW AMI,J.] 167

step of cutting off the lien of the appointment of the first respondent with A
the Corporation.

We consider that in view of this concession made by the learned
counsel on behalf of the appellant-Corporation that the said Rule must be
read and given effect to, subject to the compliance of the principles of
nautral justice, it cannot be said that the Rule is arbitrary or unreasonable 8
or ultra vires Article 14 of the Constitution. In other words, before taking
action under the said clause, an opp_ortunity should be given to the employee
to show cause against the action proposed and if the cause shown by the
employee is good and acceptable, it follows that no action in terms of the
said clause will be taken. Understood in this sense, it cannot be said that
the said clause is either unreasonable or violative of Article 16 of the C
Constitution.

Mr. Sanjay Parikh. learned counsel appearing for the first respondent,
however, vehemently contended that in view of the recent judgment of
this Court in D.K. Yadav v. JMA industries. Ltd., [1993] 3 SCC 259,
which has considered number of earlier judgments of this Court including D
Hindustan Steel Ltd. v. Presiding officer Labour Court, [1976] 4 SCC
222, L. Robert D 'Souza v. Executive Engineer, Southern Railway, [1982]
1 SCC 645: Delhi Transport·Corpn. v. D.T.C. Mazdoor Congress, [1991]
Supp 1 SCC 600, the judgment and order of the High Court cannot be
assailed. According to the learned counsel, before passing the impugned E
order against the first respondent, the appellant-Corporation should have
conducted a full fledged inquiry and the fialure to do so vitiates the
impugned order. He also invited our attention to the reasonings given by
the Division Bench of the High Court.

The Division Bench of the High Court by confirming the order of F
the iearned single Judge appears to have fell into an error in correctly
appreciating the scope of Rule 23. According to the learned Judges of the
Division Bench, the loss of lien is a major penalty and therefore, atrracts
Rule 25 which provides that no major penalty can be imposed without
holding an inquiry under the Rules. This view of the Division Bench led G
them to pass the following observations:

"Admittedly, no inquiry has been held and the alternative
submission of substantial compliance of the Rules as already
discussed above, has been held to be illusory. It cannot
therefore be said in absence of any inquiry whatsoever that H
168 SUPREME COURT REPORTS [1996] SUPP. 8 S.C.R.

A the deliquent writ petitioner deliberately abstained from duty
on a feigned or pretended ground of illnes.s. It was a matter
of inquiry."·

We have extracted Rule 23 in full. The explanation to the Rule
specifically states that certain items enumerated thereunder shall not be
B treated as a penalty at all within the meaning of Rule 23. For our case the
relevant sub clause is (vi)E which says that proceedings on leave without
prior sanction and remaining unauthorisedly absent for more than 8
consecutive days: and/or over-staying his sanctioned leave beyond the
period originally granted or subsequently extended for more than 8
consecutive days would result in loss of lien of the appointment of the
C employee. In this case we have seen that the first respondent had proceeded
on leave without prior sanction and remained unautho1risedly absent for
more than 6 months consecutively which obliged the appellant-Corporation
to issue communication to the first respondent calling upon him to explain.
Unfortunately, the first respondent, for reasons best known to him, has
D not availed himself of the opportunity as seen earlier but replied in a half-
hearted way which resulted in the impugned order. Therefore, under the
circumstances, it cannot be said that the principles of natural justice have
not been complied with or the circumstances require any enquiry as
contemplated under Rule 25. In the case cited by the learned counsel for
the first respondent, this Court has held "that the law must, therefore, be
E now taken to be well-settled that procedure prescribed for depriving a
person of livelihood must meet the challenge of Article 14 and such law
would be liable to be tested on the anvil of Article 14 and the procedure
prescribed by a statute on statutory rule or rules or orders affecting the
civil rights or result in civil consequences would have to answer the
requirement of Article 14. So it must be right, just and fair and not
F arbitrary, fanciful or oppressive. There can be no distinction between a
quasi-judicial function and an administrative function for the purpose of
principles of natural justice. The aim of both administrative inquiry as
well as the quasi judicial inquiry as to arrive at a just decision and ifa rule
of natural justice is calculated to secure justice to put it negatively, to
G prevent miscarriage of justice, it is difficult to see why it should be
applicable only to quasi-judicial inquiry and not to administrative inquiry.
It must logically apply to both."

On a consideration of the entire facts, we are of the view that the test
laid down by this Court, as extracted above has been satisfied by the
H appellant-Corporation and therefore when viewed from the point of Rule
HINDUSTANPAPERCORPN.1•. PURNENDU CHAKROBARlY [VENKATASWAMI,J.] 169

23 (vi)E, there was no good reason for the High Court to interfere with A
the impugned order of the appellant-Corporation dated 5. l.1989.

While ordering notice, this Court has directed the appellant to pay I/
5th of the arrears to the first respondent within 3 months. It is stated that
order has been complied with. It is also brought to our notice that the first
respondent is due to retire shortly within few months. Taking the totality B
of the facts and circumstances of the case and having due regard to the
services rendered by the first respondent, the ends of justice would be met
if the appellant-Corporation is directed to give all pensionary and terminal
benefits to the first respondent treating the case of the first respondent as
compulsory retirement on and from 5.1.1989. We direct accordingly. The
amount already paid pursuant to the interim direction of this Court is not C
liable to be refunded by the first respondent and not to be adjusted against
the terminal benefits payments, if any.

The appeal is accordingly disposed of. However, there will be no
order as to costs.
D
v.s.s. Appeal disposed of.