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United Karnatak Insurance Company Ltd. (Successor - Life Insurance Corporation of India) Vs. Govardhana Rao Venkat Rao Maliye - Court Judgment

LegalCrystal Citation
SubjectLabour and Industrial
CourtKarnataka High Court
Decided On
Case NumberR.A. (B) No. 117 of 1956
Judge
Reported in(1961)ILLJ472Kant
ActsInsurance Act - Sections 29
AppellantUnited Karnatak Insurance Company Ltd. (Successor - Life Insurance Corporation of India)
RespondentGovardhana Rao Venkat Rao Maliye
Excerpt:
.....that the decision to dismiss him is vitiated by the company's failure to observe the principles of natural justice is correct, then the merits of the decision have no relevance for our purpose. 18. one line of decisions have taken the view that even when the statutory provisions are silent about the mode of enquiry, the persons or authorities rendering decisions are bound in the exercise of their functions, by the rule expressed in the maxim audi alteram partem, that no man shall be condemned to consequences resulting from alleged misconduct, unheard and without having opportunity of making his defence. my lords, when a central administrative board deals with an appeal from a local authority it must do its best to act justly, and to reach just ends by just means. and lawyer-like methods..........because in arriving at the decision the authorities concerned did not conform to the rules of natural justice. it is urged that the principle audi alteram partem applies to all cases which have to be decided fairly and justly, whatever the agency that decides the question may be. it is contended that it is a basic principle of law admitting of no exception. 16. it is not denied that in the present case the relationship between the company and the plaintiff is that of a master and a servant and that relationship is not regulated either by contract or by rules of the company. hence the plaintiff cannot complain that his dismissal is against the terms, explicit or implicit, in the contract or that the same is in contravention of the rules of the company. therefore the plaintiff can.....
Judgment:

Hegde, J.

1. These proceedings arise out of the decree and judgment of the learned Civil Judge, Senior Division, at Dharwar, in Special C.S. No. 12 of 1951 on his file. The appellant is the defendant in that suit and the respondent is the plaintiff.

2. The defendant at the relevant time was a public limited company (which shall be hereinafter referred to as 'the company') carrying on insurance business having had its head office at Dharwar. The plaintiff was a servant under that company. He joined that company in the year 1931. Between 1931 and 1936, he served the company in different capacities. He was appointed as the manager of that company in about October 1936. On 7th April, 1948 the managing director of the company placed the plaintiff under suspension on the basis of certain charges served on him. That order of the managing director was duly approved by the directors subsequently. Ultimately the plaintiff was dismissed from the company's services by the board of directors. The plaintiff has brought the present suit for a declaration that he is still in the service of the company as the order dismissing him is illegal and inoperative. Further he has claimed a sum of Rs. 13,698 as amounts due to him in respect of the several claims made by him. He has also claimed a mandatory injunction directing the company to revive his policy (No. 1227) which was ordered to be paid up by the company on the ground that the premiums due were not paid.

3. The Court below has refused to give the plaintiff the declaration prayed for. As regards the rival of the policy in question, the order of the Court below is ununderstandable. It has not granted to the plaintiff any relief in this respect. But in the course of its judgment it has stated in Para. 93 that 'So, as the contract of service is to be treated as continued, the defendant will have to contribute half of the arrears of premium during the period of suspension, if plaintiff offers to pay the other half with interest on his half as per rules of revival and also the subsequent order till date of application he applies for survival.' To say the least, these observations are unintelligible. The Court below has decreed in favour of the plaintiff a sum of Rs. 3,024 as arrears of salary due to him and it has further decreed his salary accruing during the period of his suspension at Rs. 180 per month along with dearness allowance at Rs. 22 per month. In all it has decreed in favour of the plaintiff a sum of Rs. 7,232. The plaintiff has been given half costs in the suit.

4. Aggrieved by the decision of the Court below, the company has come up in appeal and the plaintiff has filed cross-objections to the extent his claims were disallowed by the Court below. From the arguments advanced in this Court, the following questions emerge for decision :

(1) Is the plaintiff entitled for salary and dearness allowance during the period of his suspension If so, what is the amount he is entitled to

(2) Is the termination of the services of the plaintiff invalid and inoperative And as such, is the plaintiff entitled to the declaration prayed for by him

(3) Is the plaintiff entitled to any arrears to pay If so, what is the amount

(4) Is the plaintiff entitled to get a mandatory injunction directing the company to revive his policy

5. Admittedly the plaintiff has entered the service of the company in the year 1931. He was posted as the manager of the company in the year 1936 on a salary of Rs. 60 per mensem. The relationship between the company and the plaintiff is that of a master and servant. That relationship does not appear to have been fixed or regulated either by any contract entered into between the parties or by any rules framed by the company. The evidence on recorded does not show that the company was a well-managed company. In the initial stages no regular scale of pay was fixed for the servants of the company. Increments were granted as and when the directors were pleased. A committee of the directors appointed as per the board's resolution dated 6 November, 1937 submitted certain proposals regarding gradation, salary, increments, leave, etc., for the office staff as per its report marked as Ex. 109 in the case. The committee recommended that the manager's maximum salary should be fixed at Rs. 200 and that he should reach Rs. 100 before the end of two years from October 1937. Even under this report no time-scale was fixed. Increments to him were granted by the board by specific resolutions. It is unnecessary to refer to this aspect in detail as it has no direct bearing on the points in issue in this case. Reference will be made to the relevant resolutions at the appropriate places. Suffice it to say that on the day when the plaintiff was suspended, i.e., 7 April, 1948, he was actually drawing a monthly salary of Rs. 188 plus Rs. 22 as dearness allowance.

6. Admittedly the plaintiff was under suspension from 7 April 1948 to 2 December 1949. A controversy has been raised in the Court below as to whether the managing director had competence to suspend the plaintiff. It is unnecessary to pronounce on the same as in our judgment the plaintiff is entitled to receive his remuneration during the period of his suspension irrespective of the competence of the managing director to suspend him. We have earlier mentioned that the plaintiff's service conditions had neither been regulated by any contract nor by the rules of the company. That being so, the relationship between the company and the plaintiff is the ordinary relationship existing between a master and a servant. A suspended servant is still the servant of the master and so long as he is the servant he is entitled to the remuneration fixed. It is now well settled that :

'The power of the employer to suspend an employee under the ordinary law of master and servant in the sense of a right to forbid a servant to work, is not an implied term in an ordinary contract between master and servant, and such a power can only be the creature either of a statute governing the contract, or of an express term in the contract itself. Ordinarily, therefore, the absence of such power either as an express terms in the contract or in the rules framed under some statute would mean that the master would have no power to suspend a workman and even if he does so he will have to pay wages during the so-called period of suspension. Where however there is power to suspend either in the contract of employment or in the statute or the rules framed thereunder, the suspension has the effect of temporarily suspending the relation of master and servant with the consequence that the servant is not bound to render service and the master is not bound to pay.'

7. See Management, Hotel Imperial, New Delhi v. Hotel Workers' Union [1959 - II L.L.J. 544]. Hence the decision of the Court below that the plaintiff is entitled to his remuneration during the period of his suspension cannot be properly assailed.

8. This takes us to the question as to what was the monthly remuneration that the plaintiff was getting at the time of his suspension.

9. In the Court below there were unnecessary and irrelevant controversies on this point. It is conceded before us that at the time of the suspension of the plaintiff, he was in fact drawing a monthly salary of Rs. 180 and Rs. 22 as dearness allowance. There is satisfactory evidence to show that sometime during the end of 1945, the plaintiff's basic salary was fixed at Rs. 300 and the same was given retrospective effect as from 1 September, 1945. This is clear from Ex. 96, a copy of the resolution passed by the working committee of the company on 8 October, 1947. This point was not challenged before us. The plaintiff admits that in September 1947 the principal officers of the company including himself agreed to have a cut of 40 per cent in their salaries, as the company was working at a loss. But his case is that cut was restored in the year 1948, i.e., sometime after he was placed under suspension. No resolution of the board of directors has been brought to our notice under which the cut in the salary of the plaintiff was restored. It is true that the cut in the salary of the staff which was imposed by the management had been restored in October 1948 with retrospective effect. Similarly the cut in the salary of the secretary and the managing director was restored. But at no stage the company purported to restore the cut in the salary of the plaintiff. That was possibly because he was under suspension, at the time when the board considered the question of restoration of the cut in the salaries of its officers. Unless the plaintiff is able to satisfy us that either directly or by necessary implication the company has restored the cut in his salary, he is only entitled to claim remuneration at the rate at which he was drawing at the time of his suspension, i.e., Rs. 180 as basic pay and Rs. 22 as dearness allowance per month. No such evidence is forthcoming. In my judgment the Court below was right in decreeing the plaintiff's claim at that rate.

10. I now turn to consider the question whether the dismissal of the plaintiff is invalid and inoperative. The plaintiff challenges the validity of his dismissal on various grounds. He contends that charges levelled against him are vague and unsubstantial; they were made maliciously by the managing director; and he was not given adequate opportunity to meet those charges. On the order hand it is the contention of the company that they had absolute right to terminate the services of the plaintiff whenever they thought fit and he cannot complain about the same; charges made against him in Ex. 122 are clear and definite the plaintiff had been given adequate opportunity to meet those charges and under any circumstance the facts established in the case fully justify the action taken against the plaintiff. Be it noted that the plaintiff's services were not terminated by giving notice but he was dismissed.

11. A number of accusations have been made against the plaintiff under Ex. 122. The only substantial charge amongst those made in that letter is the one relating to the loans in the name of Sri Melligatti. The other charges are either not substantial or not proved. There is very little evidence in support of them. Nor were they pressed before this Court.

12. The alleged loans to Sri Melligatti have figured prominently during the trial of this case and we have heard a great deal about them during the course of the hearing of this appeal. In substance the allegation is that the plaintiff had opened an account in the name of his friend Sri Melligatti and was freely operating the same in spite of the objections taken by the directors and the moneys were drawn without the authority of the managing director and sometimes against the instructions of the board of directors. Under S. 29 of the Insurance Act, loans or temporary advances either on hypothecation of property or on personal security or otherwise, except loans on life policies issued by the insurer within their surrender value, to any director, manager, managing agent, actuary, auditor or officers of the insurer, are prohibited. To get round this prohibition, it is alleged that the plaintiff managed to open an account in the name of his friend Sri Melligatti and went on drawing moneys from the company's fund using the accounts of Sri Melligatti as a shield. Sri Melligatti has been called in as a witness by the plaintiff. He and the plaintiff are admittedly close friends. From his evidence it is clear that the khata standing in his name in the books of the company was not really operated by him.

* * *

13. The evidence both oral and documentary left us in no doubt that loans borrowed in the name of Sri Melligatti were in fact loans taken by the plaintiff. That is also made clear by the entries in the account books. The plaintiff and Sri Melligatti say that those loans were sanctioned by the managing director. The managing director has denied the same. There is no reliable evidence to show that they were sanctioned by him. On this point the managing director's evidence appears to be probable. Moreover whether he borrowed the same with the consent of the managing director or not there can be no doubt that he was contravening the provisions contained in S. 29 of the Insurance Act. Even if I accept the version of Sri Melligatti that Sri Nalavadi, one of the directors, was also operating his account, that fact does not minimize the misconduct of the plaintiff.

* * *

14. It is idle for the plaintiff to contend that he was not the person who operated Sri Melligatti's accounts. Apart from the evidence and circumstances above referred to, there is one other circumstance. The increments and back-pay granted to the plaintiff were directed to be paid in discharge of the amounts due from Sri Melligatti. The plaintiff would not have agreed to it if he had not drawn the amounts in question.

15. The contention that was debated before us is, whether the order of dismissal in the final analysis is justifiable or not, it is vitiated because in arriving at the decision the authorities concerned did not conform to the rules of natural justice. It is urged that the principle audi alteram partem applies to all cases which have to be decided fairly and justly, whatever the agency that decides the question may be. It is contended that it is a basic principle of law admitting of no exception.

16. It is not denied that in the present case the relationship between the company and the plaintiff is that of a master and a servant and that relationship is not regulated either by contract or by rules of the company. Hence the plaintiff cannot complain that his dismissal is against the terms, explicit or implicit, in the contract or that the same is in contravention of the rules of the company. Therefore the plaintiff can only take his stand on the basis that principles of natural justice are of universal application in all cases where justice is the essence of the matter. In my judgment, for the reasons mentioned earlier, the plaintiff was clearly guilty of breach of an implied term of his contract though one may properly go further and say that he was guilty of temporary misappropriations. His continuance in the office was detrimental to the interest of the company and his dismissal was fully justified. In this view it is not necessary to consider the allegation that he had disobeyed the direction of the board of directors by falling to credit the entire sum granted to him as back-pay. The evidence on this point is conflicting and it is possible to take more than one view on the same. But if the contention of the plaintiff that the decision to dismiss him is vitiated by the company's failure to observe the principles of natural justice is correct, then the merits of the decision have no relevance for our purpose. Hence the question is whether that contention is correct. Viscount Haldane, L.C., observed in Local Government Board v. Arlidge [1915 A.C. 120] that natural justice is 'an expression sadly lacking in precision.' It is a concept which is very real and at the same time difficult to fully comprehend - a concept so full of meaning but difficult of definition. Both in England and in this country its source, in general, is not raced to any positive law. In a sense it is a corollary to our judicial system, our political institutions and our democratic way of life. Hence its contents are necessarily somewhat fluid.

17. On an examination of the decisions of English Courts, two distinct lines of thought are discernible. One view emphasizes the rights of the individual - the imperative need of doing justice to him - which can be guaranteed only by what we may call a judicial approach. The other view concentrates on social needs and practical requirements of life. Individual versus the State is the epitome of the political history of the modern man. Actions and reactions of a particular generation have resulted in glorifying the one at the expense of the other in the course of history, all the while forgetting that there can be no society without the individual and the individual cannot exist without and apart from the society.

18. One line of decisions have taken the view that even when the statutory provisions are silent about the mode of enquiry, the persons or authorities rendering decisions are bound in the exercise of their functions, by the rule expressed in the maxim audi alteram partem, that no man shall be condemned to consequences resulting from alleged misconduct, unheard and without having opportunity of making his defence. This rule was held not to be confined to the conduct of strictly legal tribunals but is applicable to every tribunal or body of persons invested with authority to adjudicate upon matters involving evil consequences to individuals. [See Cooper v. Board of Works for the Wandsworth District - 143 E.R. 414 : 14 C.B. (N.S.) 180; and Board of Education v. Rice (1911 A.C. 179).] Lord Shaw of Dunfermline in Arlidge case [1915 A.C. 120 at 138] said :

'The words 'natural justice' occur in arguments and sometimes in judicial pronouncements in such cases. My Lords, when a central administrative board deals with an appeal from a local authority it must do its best to act justly, and to reach just ends by just means. If a statute prescribes the means it must employ them. If it is left without express guidance it must still act honestly and by honest means. In regard to these, certain ways and methods of judicial procedure may very likely be imitated; and lawyer-like methods may find especial favour from lawyers. But that the judiciary should presume to impose its own methods on administrative or executive officers is a usurpation. And the assumption that the methods of natural justice as ex necessitate those of Courts of justice is wholly unfounded. This is expressly applicable to steps of procedure or forms of pleading. In so far as the term 'natural justice' means that a result or process should be just, it is a harmless though it may be a high-sounding expression; in so far as it attempts to reflect the old jus naturale it is a confused and unwarranted transfer into ethical sphere of a term employed for other distinctions, and, in so far as it is resorted to for other purposes, it is vacuous.'

19. These observations represented the approach of the Courts in England till then. But some of the later decisions struck a different note. I shall only refer to one of them as an illustration. In Franklin v. Minister of Town and Country Planning [1948 A.C. 87] following are the material facts. In that case the question arose in respect of the Town and Country Planning undertaken under the relevant statute on the order of the Minister following a public local enquiry under the provisions of the Act. The question was whether the order of the Minister was a quasi-judicial act or a purely administrative one. Lord Thankerton pointed out that the Minister's duty was purely administrative but the Act prescribed certain method or steps in the discharge of his duty. The Minister was required to satisfy himself that it was a sound scheme before taking steps for issuing a draft order, the purpose of inviting objections and of having a public enquiry to be held by someone other than the Minister to whom that person reports, was for his further information for the final consideration of the soundness of the scheme. His lordship observed :

'I am of opinion that no judicial duty is laid on the respondent in discharge of these statutory duties and that the only question is whether he has complied with the statutory directions to appoint a person to hold the public enquiry and to consider that person's report.'

20. This decision is often cited in support of the proposition that there are no principles of natural justice except those that spring from the provisions of relevant statutes and rules. There is no doubt that such a conclusion is available from that decision. The view taken in Franklin case [1948 A.C. 87] has commended itself to our Supreme Court in Province of Bombay v. Khushaldas S. Advani [A.I.R. 1950 S.C. 282]. The decisions in Franklin case [1948 A.C. 87] and other similar cases have dismayed many jurists in England, one of whom recently remarked that at present they are passing through a twilight of natural justice. The concept of natural justice no doubt strongly appeals to the minds of lawyers and judges. It touches a sympathetic chord in us. It is in tune with our thinking. But unlike in America we do not have any due process clause in this country or in England. Hence it is no wonder that the concept of natural justice is subjected to stresses and strains of the time. Consequently while the concept has remained as something real, its contends have changed. This is inevitable. In my view we shall be doing injustice to this great concept by trying to put the same in a straight jacket. Clearly it is not a rule of law that can override the laws of the land. It cannot also be made a touchstone to find out the validity of any piece of legislation. But if a given statute can be interpreted both consistently with the principles of natural justice as well as de hors those principles, I see no reason why it should not be construed in accordance with the principles of natural justice. Similarly unless there is something in the contract either specifically or by necessary implication, negativing the application of that rule, it is proper to read into the terms of that contract if it deals with the civil rights of a person the rule of audi alteram partem as an implied term. I am not unaware of the fact that this rule of construction had not commended itself - at any rate that appears to be the implication - to the highest Court in the land. [See Kushal Das Advani case (A.I.R. 1950 S.C. 282).] [See also Bibhuti Bhusan Ghosh v. Damodar Valley Corporation : AIR1953Cal581 .] But I still feel that another look at this question is necessary.

21. The essence of natural justice is rendering justice. By no means it is a mere dogma or ritual to be adhered to and observed irrespective of the consequences. It cannot, unless it has been laid down as a statutory requirement or otherwise made binding, be urged as a ground by itself to invalidate a decision irrespective of its merits. If the Court is satisfied that the impugned decision is essentially just, then the same cannot be set at nought on the excuse that no respect to principles of natural justice had been shown in arriving at the decision. We have earlier come to the conclusion that the decision to dismiss the plaintiff was essentially just and was in the interest of the company. Moreover the plaintiff had been duly informed about the charges against him, and he had been given opportunity to meet those charges. The fact that he was not given a personal hearing or that the board of directors made further enquiries about his conduct through other agencies before coming to a final decision and that he was not given opportunities to meet the recommendations of those agencies are not circumstances sufficient to vitiate the decision. [See Arlidge case (1915) A.C. 120).]

22. Again in this case the relief asked for is that it should be declared that the plaintiff's dismissal is invalid and consequently he continues to be in the service of the company. The declaration asked for is a discretionary relief and in the circumstances of this case there is no justification for granting it. Further such a decree can be easily nullified by the company by terminating the services of the plaintiff after giving him due notice and therefore this Court would be stultifying itself by granting such a relief. As in my view the company was justified in dismissing the plaintiff, I have not thought it necessary to grant the plaintiff damages in lieu of notice. Such a relief is also not prayed for in the plaint.

23. I now come to the question whether the plaintiff is entitled to a sum of Rs. 3,024 as arrears of pay due to him. He has set out his claim in this respect in Para. 6 of the plaint. It is alleged therein that the working committee by its resolution dated 26 July, 1946 granted to the plaintiff a sum of Rs. 5,040 as arrears of salary due to him; but this amount was made payable in five annual instalments of Rs. 1,008 beginning from 1946. The plaintiff says that he received two instalments out of that sum and the balance of Rs. 3,024 is due. This claim is denied by the company. There was some difficulty in considering the claim under this head as all the relevant papers have not been printed. Further it is difficult to understand some of the resolutions of the company or its working committee. They do not make intelligible reading. But from the available material on record we are convinced that the plaintiff's claim is justified.

* * *

24. The last point that remains to be considered is whether the plaintiff is entitled to the mandatory injunction prayed for by him. From the evidence on record it is seen that the plaintiff was given life policy of Rs. 2,000 in 1937. It was given in pursuance of the recommendation made by a committee of the directors as per Ex. 109. The relevant portion of that report reads thus :

'We think we have finished with all the branches of working of the office and we are now coming to the final recommendation about granting a policy to the members of the staff. In all Government offices and in all other public offices the staff are given the benefit of provident fund, pension or bonus. Similarly our company being a life office, the staff are paying for a life policy in their names. We do not consider that their request is unreasonable and would recommend the granting of a policy for Rs. 1,000 in the name of every member on the permanent establishment in the clerical grade and a policy for Rs. 250 to all the permanent menials, 50 per cent of the premium being paid by the members of the staff and 50 per cent being contributed by company. If an employee leaves the company's services (not dispensed with or dismissed) the policy should be treated as paid-up assurance from the date of leaving the service. We also recommend that the manager should be granted a policy for Rs. 2,000 in his name on the above conditions.'

25. It is admitted that ever since his suspension, the plaintiff had not paid his share of the premium. Consequently the policy had been ordered to be paid up. The plaintiff says that he was unable to pay the premium amount as the company placed him under suspension in the first instance and later on dismissed him from service, and hence he is entitled to a direction from this Court to the company to revive his policy without any further payment by him. We do not think that such a direction can be given. For whatever reasons it might be, the fact remains, the plaintiff has not paid his share of the premium amount and thus failed to perform his part of the contract. If the company has unlawfully deprived him of the means to pay the premium and thereby caused him loss, he must seek other remedies. No provision of law was brought to our notice under which we could grant the injunction prayed. The plaintiff has clearly misconceived his relief if he has one. Hence the plaint claim in this regard is rejected.

26. In the result, both the appeal as well as the cross-objections fail and the same are dismissed with costs.

Iqbal Husain, J.

27. I agree.


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