Holding

The Supreme Court held that the Industrial Court was right to reverse the loss‑of‑confidence finding, that denial of back wages for negligence is justified, and that the writ appeals under Article 227 were not maintainable.

Summary

The workmen of Gwalior Sugar Co. Ltd., including Kanhaiyalal Agrawal, were dismissed for allegedly colluding to falsify weigh‑ment slips, leading the Labour Court to refuse reinstatement on the ground of loss of confidence and award half salary with full retirement benefits. The Industrial Court held that the employees had only been negligent, not dishonest, and reversed the loss‑of‑confidence finding, ordering reinstatement without back wages. The Single Judge of the Madhya Pradesh High Court upheld the Industrial Court’s order. Both the employer and the workmen filed writ appeals, which the Division Bench dismissed on the ground that the appeals arose under Article 227, a revisional jurisdiction. The Supreme Court affirmed that loss of confidence must be proved by objective facts, that denial of back wages for negligence is justified, and that the writ appeals were not maintainable, thereby dismissing the appeals.

Issues considered

Whether the Industrial Court was correct in reversing the Labour Court's finding of loss of confidence and ordering reinstatement without back wages.
Whether loss of confidence can be based on the employer's subjective belief or must be established by objective evidence.
Whether a writ appeal arising from proceedings under Article 227 of the Constitution is maintainable.
Whether denial of back wages is a permissible punishment for negligence in employment.

Legislation cited

Constitution of Indias. Article 226, s. Article 227

Subjects

loss of confidencereinstatementindustrial courtlabour courtback wagesArticle 226Article 227negligenceemployment terminationwrit appealindustrial dispute

Judgment

A KANHAIYALAL AGRAWAL AND ORS.
v.
THE FACTORY MANAGER, GWALIOR SUGAR CO. LTD.

SEPTEMBER 13, 2001

B [S. RAJENDRA BABU AND S.N. VARIAVA, JJ.]

Lt1bour Lt1ws :

Termination-Workmen-Labour court refused reinstatement on ground
of loss of c01~fidence of employer-Awarded ha({ salary and full retirement
c bene.fit-lndustrial court directed reinstatement without backwages-Upheld
by Single Judge of the High Court-Writ appeal dismissed by Division Bench-
On appeals held {f Single Judges exercises jurisdiction under Article 227, writ
appeal not maintainable-Industrial Court right in reversing the finding of loss
of confidence in employee and granting reinstatement without backwages-
D Constitution of India, 1950-Article 227.

Services of appellant-workmen were terminated for contravening
the .prescribed procedure of th~ respondent-employer. Labour Court refused
to grant reinstatement as there was loss of confidence of employer on the
basis of the evidence produced. However, it awarded half salary and full
E retirement benefits. The Industrial court held that the workQlan had not
COJllmitted any misappropriation of money but were negligent in performing
their duties; and directed their reinstatement without back wages. Single
Judge of High Court upheld the order of the Industrial Court. Division
Bench dismissed the appeal on the ground of maintainability as they arose
F out of the proceedings under Article 227 of the Constitution of India, 1950
which is revisional in nature. Hence the present appeals.

The employer contended that the finding of loss of confidence in the
workman by the Labour Court has been reversed by the Industrial Court
on unreasonable grounds.
G
Dismissing the appeals, the Court

HELD : 1. The Industrial Court was right in reversing the finding of
loss of confidence in employee. Loss of confidence cannot be subjective
based upon the mind of the Management. Objective facts which would
H lead to a definite inference of apprehension in the mind of the Management
84
K. AGRAWAL v. FACTORY MANAGER, GWALIOR SUGAR CO. LTD. 85
regarding trustworthiness or reliability of the employee must be alleged A
and proved. Else, the right of reinstatement ordinarily available to the
employee will be lost. [90-E; A-BJ

2. It cannot be stated that the conclusions emanating from the orders
of the Industrial Court are one of non-application of mind to the facts 9r
ignoring any of the relevant facts or taking into consideration any of the B
facts not available on record, much less can the conclusions be characterised
as perverse. Therefore, writ jurisdiction has been appropriately exercised.

[90-D]

3. Regarding claim for payment of back wages, the Industrial Court
and the single Judge of High Court have given a cogent reason that for the
c
negligence committed by the workmen the punishment of denial of back
wages would meet the ends of justice. Therefore, there is no justification in
interferring with the same. [90-E; 88-H; 89-A]

4. If Single Judge exercised jurisdiction under Article 226 under the D
Constitution of India, 1950 Letters Patent Appeal would be maintainable,
but if the jurisdiction is exercised under Article 227 it will not be maintainable.
However, while considering a petition under Article 226 or Article 227, if the
Single Judge does not state under which provision he has decided the matter
, and where the facts justify filing of petition both under Article 226 and
Article 227 and the petition so filed is dismissed on merits, the matter may be E
considered in its proper perspective in an appeal. [89-C; D]

Lokmat Newspapers Pvt. Ltd. v. Shankarprasad, [1999] 6 SCC 275,
relied on.

Umaji Keshao Meshram v. Radhikabai, [1986] Supp. SCC 401; Ratnagiri
F
District Central Co-operative Bank Ltd. v. Dinkar Kashinath Watve & Ors.,
[1993] Supp. 1 SCC 9 and Sushilabai Laxminarayan Mudliyar & Ors. v.
Nihalchand Waghajibhai Shaha & Ors., [1993] Supp 1 SCC 11, referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 6878-6880 of
1999.
G
From the Judgment and Order dated 12.5.99 of the Madhya Pradesh
High Court in L.P.A. Nos. 247, 249 and 255 of 1996.

WITH
C.A. Nos. 6881-6883 of 1999. H
86 SUPREME COURT REPORTS [2001] SUPP. 3 S.C.R.
A Dr. T.N. Singh, S.K. Gambhir, N.R. Choudhary, J.P. Pandey, Abhijit
Bhattacharjee, Anil K. Sharma, A. Sinha and A.K. Sanghi for the appearing
parties.

The Judgment of the Court was delivered by

B RAJENDRA BABU, J. These two sets of cases are cross-appeals filed
by the Management of the Gwalior Sugar Company Limited and their workmen.

The workmen were charged that on 9.2.1979 when Kanhaiyalal Agrawal
was on duty on trailer weigh bridge of the factory gate from 2 a.m. to 10 a.m.
in collusion with Harihar Giri, Centre Incharge, Ramesh Chandra Sa vita, Harihar
C Sharma, Devi Ram Rajak, Dedaram, C.P. Madan, Hari Singh, Umeshchandra
and Narendra Singh conspired to allow one trailer sugar cane requisition slip
No. 5999 in the name of Chatura for bringing sugar cane by bullock cart at
Sunwai Depot on false payment slip No. 14964 wrote gross weight 46.70 and
did help him in making payment of Rs. 373.1 paise without the arrival of sugar
cane in the company for their respective benefits and each of the workmen was
D
dismissed after inquiry. Applications were filed by them before the Labour
Court challenging their termination from service.

In the case of Kanhaiyalal Agrawal, the labour court came to the
conclusion as follows :-
E "In the present case, the applicant is working on the post of weighment
clerk and he has contravened the prescribed procedure and in collusion
with other colleagues signed payment slip wrongly prepared for a
wrong date while on the day of incident Chetu or Chatura did not bring
sugarcane to the mill. The responsibility of applicant is that he should
F sign on payment slip with cmTect date and the amount of sugarcane
of concerned farmer, while he should do its weigh. As a weighment
clerk his work was of faith and full responsibility. On the basis of
evidence produced in the case loss of trust of non-applicant in applicant
appears to be proper. Therefore, it is not proper to award relief of
reinstatement to applicant. According to accepted formula in the citation
G of 1990 Lab l.C. 995 (Dayaram & Ors. v. The Gwalior Sugar Company
Ltd. & Anr.), which is in respect of industry of non-applicant, applicant
is entitled to get half salary and full returning allowance from the date
of dismissal till the date of this order."

H On that basis, the labour court disposed of the matter.
K. AGRAWAL 1•. FACTORY MANAGER, GWALIOR SUGAR CO. LTD. [RAJENDRA BABU J.] 87
In the case of Ramesh Kumar Savita, the labour court came to the A
conclusion as follows :-

"In the present case, applicant was doing the work of punch man on
gate and this was his responsibility that he should allow the correct
gadi on correct slip on correct date inside the gate and if any vehicle
comes without it then he should not allow to make its payment non- B
applicant is successful in proving this thing that applicant has done
contravention of prescribed procedure. Due to this reason his faith is
correctly lost from applicant and on the basis of evidence, which has
come in the case, basis of loss of faith of non-applicant from applicant
is proved. Therefore, it is not proper to award relief of reinstatement c
in the citation of 1990 Lab. I.C. 995 (Dayaram & Ors. v. 77w Gwalior
Sugar Company Ltd. & Am:), applicant is entitled to get half salary
with full returning allowance from the date of dismissal from service
till the date of this order."

And, in case of Chandra Prakash Madan the labour court held as follows:- D

"In the present case, applicant was working on the post of checking
clerk and he contravened the prescribed procedure and in collusion
with other colleagues on wrong slip and from the slip of original date
prepared weighment slip and did his signature. His responsibility was
E
this that he should prepare his weighment slip on correct slip and on
the basis on it. As a checking clerk his work (duty) was of full faith.
On the basis of security and on the basis of evidence came in the case
loss of faith of non-applicant from applicant appears to be proper.
Therefore, it is not proper to award relief of reinstatement to applicant.
According to accepted formula in citation of industry of non-applicant, F
applicant is entitled to get half salary with full returning allowance
from the date of dismissal from service till the date of this order."

Against these orders appeals were preferred before the Industrial Court. The
Industrial Court held that the employees had not committed any mis-
--· appropriation of money but were negligent in performing their duties and the
finding recorded by the labour court is in order. The Industrial Court, therefore,
G

directed reinstatement of the workmen in the office in each of the cases,
however, withour back wages and the discussion on this aspect is as under :

"In the case, whatever evidence (proof) is produced, from its perusal, H
88 SUPREME COURT REPORTS [2001] SUPP. 3 S.C.R.
A this thing appears definitely that employee had done negligence in his
work definitely procedure of purchase of sugarcane, its weighment and
its payment of price at employer's mill is shown. From the perusal of
procedure only this conclusion is not drawn that actually and knowingly
employee has committed any such act with the object of causing
damage to employer, witnesses of employer has told that weighment
B
slip is prepared at mill gate. But according to the witnesses of employer
actually sugarcane is not weigh at the gate of mill. Therefore, some
other instances of this type also on the basis of which it will not be
proper to draw inference of dishonesty towards employees.

c Learned Presiding Officer of Labour Court has not held the employee
guilty of misappropriation of money. I agree with this conclusion. In
the opinion of Labour Court employee had done the act of causing
damage to employer knowingly employee has done any wrong
proceeding with the object of causing damage to employer and fulfilment
of his self interest. I agree with this argument of Shri Bansal that doubt
D may be forceful to any extent, but it cannot be given the place of
proved evidence. In such circumstance in my opinion it is not proper
to deprive the employee from the relief of reinstatement.

I also considered those arguments of Shri Gupta according to which
employer has lost faith on employee. In my opinion on the basis of
E
proof, which is produced, this argument of Shri Gupta is not acceptable.
This is definite that procedure, which was shown by the witnesses is
of employer was not followed word by word by the employee. This
is also not misconduct in itself but it is definitely serious negligence.
In my opinion for the acts like negligence it is not proper to deprive
F the employee from the relief of reinstatement. After the termination of
services of employee, about more than 10 years time has lapsed. If
employee is deprived from the back salary or returning allowance of
this period even then in view of the circumstances of the case it will
be sufficient punishment."
G Against the said decision both the workmen and the Management filed writ
petitions. The learned Single Judge of the High Court did not interfere with the
order made by the Industrial Court in any one of the matters after noticing that
the conclusion reached by the Industrial Court on examination of the case on
the question of loss of confidence that it was not such a case and for the
H negligence committed by the workmen in question, held the punishment of
K. AGRAWAL'" FACTORY MANAGER, GWALIOR SUGAR CO. LTD. [RAJENDRA BABU J.) 89
denial of back wages would meet the ends of justice and, therefore, upheld the A
order made by the Industrial Court. Against that order of the learned Single
Judge writ appeals were preferred by both the Management and the Workmen.
The writ appeals were, however, dismissed on the basis that they were not
maintainable inasmuch as the same arose out of proceedings under Article 227
of the Constitution which is revisional in nature. In the appeals before us the
B
order made by the Division Bench of the High Court is in challenge.

So far as the law on the matter is concerned as to whether an appeal
would lie against an order made in writ petition before the High Court challenging
an order of the Jabour court, this Court in its decision in Loknuzt Newspapers
Pvt. Ltd. v. Shankarprasad, [1999] 6 SCC 275, stated that "if a Single Judge c
exercises jurisdiction under Article 226, Letters Patent Appeal would be
maintainable, but if the jurisdiction is exercised under Article 227 ii will not
be maintainable''. But with an explanation that if the Single Judge of the High
Court in considering the petition under Article 226 or Article 227 does not state
under which provision he has decided the matter and where the facts justify
filing of petition both under Article 226 and Article 227 and a petition so filed D
is dismissed by the Single Judge on merits, the matter may be considered in
its proper perspective in an appeal. This Court held as aforesaid in view of the
./ decisions of this in Umaji Keshao Meshram v. Radhikabai, [ 1986] Supp. SCC
401; Ratnagiri District Central Co-operative Bank Ltd. v. Dinkar Kashinath
\.\iztve & Ors., [1993] Supp l SCC 9, and Sushilabai Laxminarayan Mudliyar E
& Ors. v. Nihalchand Waghajibhai Shaha & Ors., [1993] Supp l SCC 11.

Hence, we are of the view that it is wholly unnecessary for us to examine
this aspect of the matter in view of the declaration of law made by this Court
in Lokmat New~papers Pvt. Ltd. v. Shanfwrprasad (supra) after adverting to all
the decisions on the point. F

We have looked into the orders made by the labour court, the Industrial
Court and the learned Single Judge of the High Court and we are of the view
that the conclusions drawn by the Industrial Court in appeal which stood
affirmed in the writ petitions are based upon the facts arising in the case.
G
Substantial contention on the merits of the case by the employer in these
appeals is that the finding of loss of confidence in the employee by the labour
court has been reversed in appeal by the Industrial Court on unreasonable
grounds. What must be pleaded and proved to invoke the aforesaid principle
is that (i) the workman is holding a position of trust and confidence; (ii) by H
90 SUPREME COURT REPORTS (2001) SUPP. 3 S.C.R.

A abusing such position, he commits acts which results in forfeiting the same; and
(iii) to continue him in service would be embarrassing and inconvenient to the
employer or would be detrimental to the discipline or security of the
establishment. All these three aspects must be present to refuse reinstatement
on ground of loss of confidence. Loss of confidence cannot be subjective based
upon the mind of the Management. Objective facts which would lead to a
B
definite inference of apprehension in the mind of the Management regarding
trustworthiness or reliability of the employee must be alleged and proved. Else,
the right of reinstatement ordinarily available to the employee will be lost.

Tested on these principles on the charges against the workmen concerned
c on the proved facts whether there was any loss of confidence so far as the
workmen were concerned, the inferences have been appropriately drawn.

It cannot be stated that the conclusions emanating from the orders of the
Industrial Court are one of non-application of mind to the facts or ignoring any
of the relevant facts or taking into consideration any of the facts not available
D on record, much less can the conclusions be characterised as perverse. We
think, the writ jurisdiction has been appropriately exercised by the learned
Single Judge. Hence, we decline to interfere with the order by the learned
Single Judge.

The appellants in these appeals also claim payment of back wages. On
E that aspect also both the Industrial Court and the learned Single Judge have
given cogent reasons and, therefore, we do not think, there is any justification
for us to interfere with that aspect of the matter either.

In the light of this order, it is unnecessary to make any order on I.A. Nos.
F 4, 5 and 6 and are rejected. It is open to the parties to work out their respective
rights in appropriate proceedings.

In the resull, these appeals stand dismissed. However, in the circumstances,
there shall be no order as to costs.

N.J. Appeals dismissed.