Labour Law I CASE ANALYSIS

“Bharat Heavy Electricals Ltd vs M. Chandrasekhar Reddy & Ors 2005 (2)
SCC 481”

(“A CASE ANALYSIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS OF THE

COURSE CURRICULUM FOR THE VTH SEMESTER OF THE COURSE B.A.LL.B (HONS.)”).

NATIONAL UNIVERSITY OF STUDY AND RESEARCH IN LAW, RANCHI

SUBMITTED BY: SUPERVISED BY:

Aditya Dwivedi Mr. Shantanu Braj Choubey
Vth Semester Assistant Professor
Roll- 1214 NUSRL, Ranchi
Section- A
2023
 FACTS OF THE CASE
1) Respondent herein was employed as an Assistant Grade I in the R&D division of the Store
Department of the appellant at Hyderabad. He had taken a house loan from the appellant
and mortgage the title deed of his property as security against the said loan.
2) According to the terms of the said title deed, the property mortgaged would remain in the
custody of the appellant unless the whole amount with interest was discharged. However,
it came to the notice of the appellant that a public offer for sale had been published in a
local newspaper to sell the said property, even though the loan amount of Rs. 1,34,951/ was
still left.
3) When the appellant enquires about the same from the lawyer who on behalf of the
respondent had issued the application, he came to know that the title deed which was
supposed to be under the custody of the company was stealthily taken away by the
respondent.
4) Subsequently, the appellant initiated a departmental enquiry against the respondent and on
the basis of the report submitted by the Enquiry Officer, holding the respondent liable for
the misconduct charge and taking consideration of cognizance of the seriousness of the
charge terminated the service of the respondent.
5) Aggrieved by the said termination, the respondent approached the Labour Court and
challenged the said departmental enquiry and subsequent termination.
6) The Labour Court after considering the report of the Enquiry Officer and the statement of
witness---summoned by it. Reached to the conclusion that the report and its approval by
the Disciplinary Committee were valid. However, the Court by using its discretionary
power given under section 11A of the Industrial Dispute Act, 1947, held that even though
the departmental proceedings are valid yet the decision of termination of service of the
respondent is too harsh on the grounds that i) no previous misconduct of the respondent
was reported ii) respondent actively participate in cultural activities for the common cause
of the employees and therefore reinstated the service of the respondent.
7) Aggrieved by this order of the Labour Court appellant filed a writ petition before the single
judge of the High Court, further respondent also filed a writ petition before the single judge
challenging the observation of the Labour Court upholding his misconduct. However, the
learned single judge dismissed both writ petitions and observed: “There is any amount of
spectrum of discretion vested with the Tribunal in taking into consideration the facts and
circumstances of the case”
8) Thereafter both the parties preferred the appeals before the Division Bench of the High
Court, which dismissed the writ appeals on the grounds that the power of discretion vested
upon the Labour Court was judiciously exercised by it and it has the power to interfere in
the matters where punishment is disproportionate to the established guilt, therefore the
decision of Labour Court reinstating the service of the respondent suffers from no illegality
as held by learned single judge of the High Court.
9) It is against the said orders of the Labour Court, single judge bench, and Division Bench of
High Court respectively, that the appellant appealed before the Hon’ble Supreme Court.

ARGUMENTS BY THE APPELLANT

The counsel appearing for the appellant contended that the courts below (Labour Court and
High Court) were erroneous in coming to the conclusion that the Labour Court has unfettered
discretion under section 11A of the Industrial Dispute Act, 1947, to alter the punishment in
spite of asserting that the enquiry conducted by the management was correct and just and
finding of the guilt by the recorded by the Enquiry Officer is based upon facts.

The counsel also contended that discretion vested upon the Labour Court needs to be used
judiciously, and by taking into consideration the gravity of misconduct proved and loss of and
the loss of confidence suffered by the management due to the proved misconduct of the
respondent

The counsel relied upon the following judgments of the Hon’ble Supreme Court to substantiate
her position:

1) Air India Corporation, Bombay vs. V.A. Rebellow and Anr1: In this case, the Hon’ble
apex court while dealing with the question of loss of confidence had held that “Once
bonafide loss of confidence is affirmed the impugned order must be considered to be
immune from challenge”
2) Francis Klein & Company Private Limited vs. Their Workmen & Anr2: In this case
also the question was over the loss of trust by the employer over his employee the Hon’ble
apex court after considering the facts and evidence produced in the case held that “once an
employer loses confidence in his employee, especially in the case of a person discharging

1
(1972) 1 SCC 814.
2
(1972) 4 SCC 569.
 an office of trust and confidence then there can be no justification for directing his
reinstalment”.
3) Janata Bazaar South Kanara Central Co-operative Wholesale Stores Limited & Ors.
vs. Secretary, Sahakari Noukarara Sangha & Ors3: In this case while dealing with the
question of misappropriation and loss of trust the Hon’ble Supreme Court has held “Once
act of misappropriation is proved, may be for a small or large amount, there is no question
of showing uncalled for sympathy and reinstating the employees in service. Law on this
point is well settled” further the court also noted that in the case of proven misappropriation
the question of considering past service records does not even arise, and it is the discretion
of the employer to consider them, but the Labour Court cannot substitute the penalty
imposed by the empoyer in such cases
4) UPS RTC vs. Mohan Lal Gupta4: In this case which was very much similar to the present
case the apex court has held that “The employee has been found to be guilty of
misappropriation and in such an event, if the appellant-Corporation loses its confidence
vis-`- vis the employee, it will be neither proper nor fair on the part of the Court to substitute
the finding and confidence of the employer with that of its own in allowing reinstatement.
The misconduct stands proved and in such a situation, by reason of the gravity of the
offence, the Labour Court cannot exercise its discretion and alter the punishment”
5) CHRISTIAN MEDICAL COLLEGE HOSPITAL EMPLOYEES' UNION & Anr vs.
CHRISTIAN MEDICAL COLLEGE VELLORE ASSOCIATION & ORS5: In this
case while dealing with the powers of the Labour Court under section 11A of the Industrial
Dispute Act, 1947, the apex court has held “Section 11-A cannot be considered as
conferring an arbitrary power on the Industrial Tribunal or the Labour Court. The power
under Section 11-A of the Act has to be exercised judicially and the Industrial Tribunal or
the Labour Court is expected to interfere with the decision of a management under Section
11-A of the Act only when it is satisfied that the punishment imposed by the management is
highly disproportionate to the degree of guilt of the workman concerned. The Industrial
Tribunal or the Labour Court has to give reasons for its decision”

3
(2000) 7 SCC 517.
4
(2000) 9 SCC 521.
5
1988 SCR (1) 546.
 ARGUMENTS OF THE RESPONDENT

The counsel on behalf of the respondent contended that the Labour Court has wide jurisdiction
and once it came to the just conclusion that the punishment meted out by the employer on his
employee is disproportionate, it can interfere and alter the punishment. The counsel submitted
that the respondent had returned the entire loan amount and the appellant company had not
suffered any monetary loss. Therefore, the Labour Court was justified in altering the
punishment of the respondent as the same was too harsh.

Further, the counsel submitted that even though the Labour Court did accepted the respondent’s
case that the property deed was given to him by the company management yet it is on material
record that on the request of the respondent, the officer of the appellant company had handed
him over the documents so that he can sell the property and return the load amount,

It was also contended by the respondent that till the date of misconduct, the behaviour of the
respondent was exemplary and he has served the company with the utmost honesty. Therefore,
he must not be punished for this one stray act of misconduct.

Lastly the counsel on behalf of the respondent submitted that the loss of confidence as claimed
by the appellant is imaginary as there was nothing as such loss of confidence committed by the
respondent. Therefore, the use of wide discretion by the Labour Court is justified as the same
is judicious and the same was also upheld by the single judge as well as the Division Bench of
the High Court, thus there is absolutely no reason for this Court to interfere with such
concurrent finding.

QUESTION BEFORE THE SUPREME COURT

whether the misconduct alleged against is so serious or grave as to create a genuine lack of
confidence in the respondent by the appellant.

FINDINGS OF THE COURT

1) The Hon’ble apex court in its findings noted that the Labour Court itself reached to the
conclusion that the respondent had without the consent and knowledge of the management
taken the property document out of their possession.
2) Further on the question of having unfettered discretionary power of the Labour Court under
section 11A of the Industrial Tribunal Act, 1947, the court noted that the findings of the
High Court are erroneous as no Judicial or Quasi-Judicial body has absolute discretion as
 the same is the sworn enemy of the constitutional guarantee against discrimination,
therefore no administrative of judicial authority is allowed to exercise discretion in an
unfettered way as the same needs to be exercised on the basis of justifiable grounds
supported by acceptable materials and reasons thereof.
3) Further, the court find that the three extenuating grounds given by the Labour Courts viz:
i) no instance of earlier misconduct are spelt, ii) It appears the respondent is an active
participant in the cultural activities and for the common cause of the employees, iii)
Therefore, it felt the punishment of dismissal from service is harsh, in the facts and
circumstances of the case. Recorded in the background of these proved facts: i) Title deeds
deposited with the appellant for borrowing money were surreptitiously taken away without
the permission of the appellant which act amounts to theft, ii) The said documents so stolen
were admitted to be used for the purpose of selling the property which amounts to fraud,
iii) The documents so taken was sought to be justified by a letter where the signatures are
forged amounting to forgery.
4) Therefore, the apex court held that in such background these extenuating grounds did not
give the Labour Court reasonable grounds to reinstate the respondent.
5) Further the court held that in such circumstances in no way it can be termed that the
discretion exercised by the Labour Court in any way judicious or reasonable.

JUDGEMENT

The Labour Court has concluded that the management has lost confidence in the respondent.
In light of this, the issue of the Labour Court utilizing its jurisdiction under Section 11-A to
modify or reduce the punishment does not arise. Furthermore, the reasons provided by the
Labour Court for reducing the penalty are insufficient to warrant the exercise of discretionary
power. The fact that the current misconduct is the first offense is not a valid justification for
condoning the misconduct. As per the records, neither the lower courts (single judge and
Division Judge Bench of High Court) nor the Labour Court have found the loss of confidence
or the severity of the punishment to be vindictive or shockingly disproportionate. Without such
findings supported by the records, interference with the imposed punishment in a domestic
inquiry is not permissible. Consequently, the appeals are successful, and the orders directing
the respondent's reinstatement are set aside. The dismissal order issued by the appellant
following the inquiry is upheld.
 CRITICAL ANALYSIS OF THE CASE

The present case primarily dealt with the discretionary power of the Labour Code given under
section 11A of the Industrial Tribunal Act. In this case when a Labour Court by exercising its
discretionary power reinstates the service of an employee even after upholding his misconduct
and guilt pointed out by the report of the Enquiry Officer and its verification by the Disciplinary
Committee instituted by the appellant company, by giving some extenuating reasons which in
no way seems reasonable or judicious.

However, here it was not only the Labour Court that was at fault in interpreting section 11A of
the Industrial Dispute Act, 1947. The single judge and Division Benches of the High Court had
also upheld the unfettered discretionary power of the and upheld the decision of the Labour
Court reinstating the service of the respondent. However, when the matter reached before the
Hon’ble Supreme Court, the court took into account the findings of the Labour Court upholding
the report of the Enquiry Officer upholding the guilt and misconduct of the employee for
committing theft (for taking out the deed documents outside of the possession of management
without their consent) and forgery (for trying to camouflage his crime). And upheld that in such
a background when the misconduct was clearly asserted by the Labour Court and when the
employer clearly lost confidence in the employee in such background use of discretionary
power by the Labour Court to reinstate the employee was not valid as the same in not judicious
or reasonable use.

The apex court held that the Labour Court did not have unfettered discretionary power under
section 11A of the Industrial Dispute Act, 1947. Further, the power of discretion given under
the Act needed to be used within the bounds of reasonableness and fairness and further the
power of discretion needs to be tested upon the touchstone of judiciousness and fairness.