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CochIn Port S.C.S. Association Vs. Harrisons and Crosfield Limited - Court Judgment

LegalCrystal Citation
SubjectLabour and Industrial
CourtKerala High Court
Decided On
Judge
Reported in1982(II)KLT141
AppellantCochIn Port S.C.S. Association
RespondentHarrisons and Crosfield Limited
Cases ReferredSociety v. Dy. Registrar
Excerpt:
.....'to better his prospects'.he even stated in his resignation letter that he was no longer in the service of the management-company. it is well-established that repudiation by one party does not put an end to the contract. or if the agreement was that notice for a period was required, resignation would effectively put an end to the contract after the expiry of that period, whether accepted or not. 12. the tribunal was, therefore, in error in holding that d'souza's resignation had effectively put an end to his service the moment he had sent in his resignation letter; and if a servant quits employment without notice, the master can also make a like claim against the servant. 118, that where one party conducts himself in a manner clearly evincing an intention to be no longer bound by a..........from service under the government, acceptance of resignation was not necessary to put an end to employer-employee relationship. the following passages from the award show how its mind was working :now, the grievance of the employee is that his resignation was not accepted by the management and that he was also not allowed to attend the officer either. the point as per the issue before us is that either his resignation should be accepted or that he should be permitted to resume duty from 17th june, 1974, according to the employee, the management is not justified in denying both. now, the point for adjudication is very simple and can be disposed of without any difficulty. the management before us is a private firm and there was only a contract of service between the employer and the.....
Judgment:

M.P. Menon, J.

1. What is challenged in this Original Petition, filed by a registered trade union, is Ext. P1 award of the Central Government Industrial Tribunal at Madras, in a dispute relating to the non-employment of a clerk named Ivan D'Souza. The facts disclosed by the award, and the documents produced before the Tribunal and referred to at the hearing, are these.

2. D'Souza had commenced service in the Steamer Department of Harrisons & Crosfield Ltd. from 1954. At the material time, it was his duty to supply provisions and to meet the claim of staff, crew, etc., when ships arrived at the Cochin Port. For this purpose, he was being entrusted with company's funds and the practice was for him to furnish bills and accounts after meeting the necessary expenses. On 17-12-73 D'Souza sent a telegram to the management resigning from its service, and this was confirmed by a letter of the same date, which contained the following 'post-cript':

I would be sending you various bills for respective ships which please debit to the concerned people and adjust where required in the event there are outstandings. This would be done in the course of a month.

It is said that the management then made an attempt to ascertain what his problems were and that after some discussions, D'Souza agreed to continue in service. He was, however, irregular in attendance from February, 1974. On 11-5-74 he forwarded another letter to the management, through an advocate, reading as follows:

In continuation of my telegram and letter dated 7-12-73 tendering my resignation, I hereby reaffirm the same, and submit that I resign the clerk's job of your concern forthwith, to better my prospects. As I have not yet received your reply accepting my resignation, kindly treat this letter of mine as final, and that I would be no more in your services My legitimate dues may be paid to me at your earliest convenience.

The management replied on 29-5-74 that on checking the accounts, an amount in excess of Rs. 69,000 was found to be due from him and that before considering his request, the matter had to be settled. D'Souza wrote back on 12-6-74 denying liability to account for any sum of money and requesting that early arrangements be made to pay him the 'dues for the last 20 years of unstinted loyal service'. By another letter dated 24-6-74, the management reiterated that accounts had yet to be rendered, and reminded D'Souza that he had attended office on 17/6 and 20/6 ''apparently for the purpose of verification' and had thereafter remained at large. On 31st July, 1974 they also wrote to the Police complaining that D'Souza had misappropriated over Rs. 69.000. In his letter of 7th September, I 1974 D'Souza explained that he had made the two visits to verify fictitious entries, and again requested for payment of dues in respect of past service. On 28th September, 1974 he again requested for being released' with all his dues, adding:

I understand that you are arranging to get me harrassed. I request you not to do so, as you are thus doing an injustice to me and my family. I confirm as before that i am prepared to co-operate with you in any form but I humbly request you not to disgrace me and spoil my future at least for the sake of my past service'.

On the same day, he complained to the conciliation officer that the company was neither allowing him to work nor paying his legal dues.

3. It was in the above background that the conciliation officer investigated the dispute and made his report to the Central Government. The Government referred the dispute to the Tribunal on 20-9-75, and the issue was :

Whether the action of the management of M/s. H. & C. Ltd., Steamer Agents, Cochin, in neither accepting the resignation of Sri Ivan D'Souza, their Steamer Clerk, and paying to him his legitimate dues nor allowing him to resume duties from 17th June, 1974 is justified? If not, to what relief is the concerned workman entitled and from what date?.

4. I have set out the facts somewhat elaborately only to show that certain aspects of the case are beyond the pale of dispute. The first is that even after the telegram and letter dated 7-12-73 the employee was continuing to work, temporarily or otherwise. But on 11-5-74 he declared that he was no longer in the service of the management. He did not present himself for work thereafter. Two or three visits were made to the office in June, 1974 but that was only for the purpose of verifying accounts. The management did not formally accept his resignation at any time. From 11 5-74 to 7-9-74, the only demand of the employee was that he should be paid the dues for his past services. The grievance that he was neither being allowed to return to work nor being paid his dues was raised for the first time on 28-9-74, after coming to learn that criminal proceedings had been initiated against him. It is also seen that even as late as March, 1975 the demand of his union was for gratuity and Provident Fund only, and not for reinstatement

5. Turning now to the award impugned, it appears that the claim before the Tribunal was for reinstatement of the employee on the basis that his resignation had not been accepted. The Tribunal, however, thought that in private employments, as distinct from service under the Government, acceptance of resignation was not necessary to put an end to employer-employee relationship. The following passages from the award show how its mind was working :

Now, the grievance of the employee is that his resignation was not accepted by the management and that he was also not allowed to attend the officer either. The point as per the issue before us is that either his resignation should be accepted or that he should be permitted to resume duty from 17th June, 1974, According to the employee, the management is not justified in denying both. Now, the point for adjudication is very simple and can be disposed of without any difficulty. The management before us is a private firm and there was only a contract of service between the employer and the employee. The employee was employed as a clerk in the shipping department of the management-company at Cochin. Needless to state that it is open to an employee in a private firm to resign his job at any time and it is not as if the employee is a Government servant. In other words, it was only a private contract of service terminable at will of either party....

X X XI have carefully considered the contentions of both parties on this aspect and I am of opinion, that no formal acceptance of resignation is necessary in the circumstances of this case. As already stated this is a private firm and the clerk voluntarily resigned his job and walked out. Therefore, his resignation must be deemed to have being accepted by the management, subject to liability, if any.

X X XIn these circumstances, there is no ground at all either in law or equity requiring the management to accept the letter of resignation without references of the liability. As I said, he volutarily abandoned the employment and left the job forthwith stating that he wanted 'to better his prospects'. He even stated in his resignation letter that he was no longer in the service of the management-company. Therefore, that is the end of the matter with reference to the employment and no formal acceptance of the same is necessary by the management as in case of a Government servant.

X X XThe result is that I find that no formal acceptance of resignation is necessary in the circumstances, and the clerk in question had voluntarily resigned his job and went out. Consequently, the question of reinstatement does not arise. Therefore, no relief can be granted to the claimant in this reference except recording the fact that he has resigned his job from the management-company, at any rate from 11-5-74, if not earlier.

And counsel for the petitioner contends that the Tribunal has committed a serious error of law in making a distinction between private and public employments, and confusing resignation with abandonment. It is argued that acceptance of resignation is as much necessary in private employments as in public service, to put an end to the contract of employment, and that mere abandonment of employment does not put an end to the contract, but only furnishes a ground to the employer to take disciplinary action and terminate the contract. The contract of employment in this case had not come to an end at all, because the resignation was never accepted and no action was also taken by the employer to terminate the contract. The employee should, therefore, be deemed to have been continuing in service.

6. The first question to be considered, therefore, is whether acceptance of resignation is necessary for putting an end to the contract of employment, irrespective of whether the employment is public or private service. The second question is whether abandonment of employment by the employee, not followed by any action by the employer, is sufficient to discharge the contract. And the third is, whether an employee , should be deemed to be in service in a case where the employer refuses to accept his resignation and also fails to terminate the employment.

7. When one person offers employment to another, and that other agrees to work on certain terms, the relationship between the two is contractual and the agreement itself is called a contract of service. In services under the Government some corporations rules and regulations define the rights and obligations of the parties; and where service conditions are thus mostly governed by law, elements of contract fade out of the picture and status becomes the symbol of the relationship. In private employment also, statutes, rules, standing orders, settlements and awards may regulate the mutual obligations and rights to some extent. But in areas not covered by law, what operates is still the contract of service, i.e., the express or implied terms of the agreement. When it is said that an employee is inefficient, dishonest, disobedient or habitually late, and when he is found guilty of one or other of these charges, the legal principle behind it is that in every contract of employment, there is an implied warranty that the employee will be competent for the work, that he will take due care of the employer's property, that he is bound to obey lawful and reasonable orders, that he would report for work punctually, and that breach of these warranties entitles the employer to terminate the contract of employment by the method of what is known as dismissal for 'misconduct'. What is the remuneration payable for the work done, i how many hours a week the employee should work, whether he can claim wages for periods of absence, whether he is entitled to sickness benefits and such other questions are normally matters of contract, sometimes express, sometimes implied. In the matter of variation, frustration, rescission and termination, as also in matters relating to validity or voiability of a contract of employment, the general principles of the law of contract are applicable. It is trite law for example, that no party to a contract can vary its terms unilaterally. Under the prestine law of master and servant, a master's right is only to hire and fire, and he cannot 'suspend' a servant from work and deny wages for the period. If the master does so, he is unilaterally varying the contract and will be bound to pay full wages during such period, unless the matter is governed by an express agreement to the contrary or by statutory rules and regulations. Frustration occurs when the performance of contract becomes impossible. Section 56 of the Contract Act provides that a contract to do an act which becomes impossible of performance after its making, either by reason of an event which the promisor could not prevent or because of operation of law becomes void. Thus where a factory is gutted by fire, or work is stopped in mines for reasons beyond the control of the employer, the contract of employment may become void. A contract may be determined by operation of law also; and where a partnership employing a number of persons is dissolved, their employment is supposed to come to an and. Rescission takes place when both parties to a contract agree to put an end to it as if it had never been made. A ''discharge' of the contract takes place 3 when what is required of both parties has been performed, as for example, when a person is employed for a particular work and that is completed. Where a contract specifies that it can be terminated by notice on either side, for a specific period, it comes to an end when notice is so given by one and the period expires. Resignation, with which we are here concerned, is only one of the many methods by which one of the parties to a contract of employment attempts to terminate it; and the question is whether the contract stands discharged or determined where the man resigns but the employer does not accept it.

8. In White and Carter v. Mc Gregor [1962] A.C. 413, Lord Reid said:

If one party to a contract repudiates it in the sense of making it clear to the other party that he refuses or will refuse to carry out his part of the contract, the other party, the innocent party has an option. He may accept that repudiation and sue for damages for breach of contract, whether or not the time for performance has come; or he may if he chooses disregard or refuse to accept it and then the contract remains in full effect.

Lord Mortop said:

It is well-established that repudiation by one party does not put an end to the contract. The other party can says : 'I hold you to your contract, which still remains in force.

And Lord Keith of Avonhold quoted with approval the opinion of Asquith L.J. that:

An unaccepted repudiation is a thing writ in water and of no value to anybody; it confers no legal rights of any sort or kind.

In State of Kerala v C.C. Refineries : [1968]3SCR556 , the Supreme Court observed:

Breach of contract by one party does not automatically terminate the obligation under the contract; the injured party has the option either to treat the contract as still in existence, or to regard himself as discharged. If he accepts the discharge of the contract by the other party the contract is at an end. If he does not accept the discharge, he may insist on performance.

The general principle thus seems to be that a mere declaration by one party that he is unwilling to perform his part of the contract is insufficient to extinguish the contract: the other party can still say. if he is not willing to assent to the declaration, that the contract remains in tact and that he will hold the declarant to its terms.

9. The question was considered by the Bombay High Court in Ganesh Ramachandra v. G.I.P. Railway, 2 Bom. LR. 798, with particular reference to contracts of employment. The employee was on leave and instead of rejoining duty on the expiry of the period, he wrote to the railways that he was resigning and requested for its acceptance within 24 hours. The railways did not accept the resignation but issued an order dismissing him. The employee sued the railways for moneys allegedly due and contended that his resignation had put an end to the contract of employment; and the Court was called upon to decide whether the employee had ceased to be in service by reason of his resignation or whether it was only the dismissal which had brought about that result. The Court held that a contract of service, by reason of its continuing nature, was terminable only ''in certain defined modes'. Mere resignation was not enough, unless it was assented to or unless it complied with the terms the parties had agreed to expressly or impliedly. If the parties had agreed, for example, that mere resignation was sufficient, no question of acceptance could arises; or if the agreement was that notice for a period was required, resignation would effectively put an end to the contract after the expiry of that period, whether accepted or not. In all other cases, where no such agreement, express or implied, was there, resignation without acceptance would not be effective. Jenkins, C.J., observed:

The plaintiff by absenting himself from his duties did not terminate the contract; all he did was to give his employer the right to determine it, and that the company maintain they did by dismissing him. The plaintiff's argument comes to this, that a man can by violating his obligation determine his contract against the will of the other side, and in my opinion, that argument offends the first principles of contract law.

Thus the effect of a resignation, understood in the light of the 'first principles of contract law', was that it was no more than a refusal by the employee to perform his part of the contract, giving the employer thereby the right to determine it. Without anything more, it had not the capacity by itself to put an end to the contract.

10. The decision of the Gujarat High Court in Sarabhai v. Vin 1964 II L.L.J. 201, is almost on the same lines. And in P. Kasilingom v. P.S.C. College 1981-I L.L.J. 358, the Supreme Court observed:.the services of a Government servant normally stands terminated from the date on which the letter of resignation is accepted by the appropriate authority, unless there is any law or statutory rule governing the conditions of service to the contrary. There is no reason why the same principle should not apply to the case of any other employee.

If the matter is to be decided under the rules of contract, it is difficult to think that they operate differently in public and private employments; and we have also the authority of the Supreme Court that in the absence of rules or regulation, the principle is the same for all kinds of employments.

11. The decisions in State of Bihar v. Sitaram : AIR1967Pat433 and T. Murari v. State (1977 Tax. L.R. 1847, cited by the other side, are not helpful as they deal with agency, and not with employment contracts.

12. The Tribunal was, therefore, in error in holding that D'Souza's resignation had effectively put an end to his service the moment he had sent in his resignation letter; and without anything more, it could not also have taken the view that the resignation 'must be deemed to have been accepted by the management'. When 'D'Souza informed the management by the letter of 11th May, 1974 that 'I would be no more in your service' he only disclosed an intention to be no longer bound by the contract of service. That did not sever the relationship or dissolve the vinculum juris, that only furnished a right to the management to terminate the contract of service on the ground that he was in breach thereof.

13. But the above conclusion does not fully answer the real question in this case. Admittedly, the management had neither accepted the employee's resignation nor terminated the contract by dismissing him from service; but does it follow that he should be deemed to have been in service all the while? To answer this question, I think, one has again to fall back on the principles of contract. Ordinarily, every contract is prima facie permanent and irrevocable; but some contracts, by their very nature, are considered to be terminable, Contracts involving trust and confidence, personal relationship between the parties and mutual satisfaction with their conduct, such as contracts of partnership and contracts of employment, belong to this latter class (see Halsbury, Vol. 6, P. 156, 3rd Edition). Where a person employs another, it is an implied term of the contract that the employer could get himself discharged from the obligation undertaken by him by giving notice to the employee. The employee has also a similar right, again implied, to give reasonable notice and quit. If a master terminates the service of a servant without reasonable notice, the latter can claim damages; and if a servant quits employment without notice, the master can also make a like claim against the servant. The quantum of damages will be assessed by taking into account the loss sustained by one party because of the breach committed by the other. The law does not impose an obligation on the employer to employ the servant for ever, nor does it require the employee to serve for ever. In this sense, an employee is entitled to tell his employer that he intends to quit, say at the expiry of one month from the date on which the intention is communicated. That is resignation. If there is an agreement between the parties that the contract is terminable by one month's notice, the employer can do nothing except to wait for the period and watch the employee walking out. If on the other hand, the employee gives a week's notice and walks out, the employer can bring an action against him on the ground that the contract survives and that the refusal of the employee to perform it entitles him to damages. He cannot, however, insist that the employee should work for the remaining three weeks, because a contract of employment cannot be specifically enforced. The employer cannot also bring an action after months of waiting and hold the employee liable for losses sustained during the whole of the period; the Court will certainly tell him that after a period of notice reasonably fixed by law, he was bound to employ another and carry on. Therefore, in the case of a resignation which remains unaccepted, the employee cannot be deemed to be in service for months or years together; after the lapse of a reasonable period of notice, the contract would be deemed to have come to an end. whether the resignation is accepted or not. Barwell and Kar says Law of services in India Harwell and Kar. Vol. I. p. 353.

Resignation by a servant does not operate as discharging the contract by bringing it lawfully to an end, unless such resignation be accepted by the master. When that is the case, the parties have, by agreement, determined the contract from the date of the master's acceptance. But if the resignation be not accepted, the servant remains bound, and should he choose to withhold his services, his conduct will be a breach of the contract entitling the master to damages, though speaking of his action as one of resignation, the servant is in fact mentioning a date for it to take effect which would bring his conduct within what the contract requires as a proper notice to determine it.

By resigning, therefore, what a servant does is only to mention a date from which he wants to be relieved of his obligation. The date may be too early, and may leave the employer without sufficient notice; yet, there is no reason to think that the bond will survive the expiry of a date which will amount to sufficient or reasonable notice, on the facts and circumstances of the case.

14. The petitioner's case that D'Souza should be deemed to have continued in service for all times notwithstanding his resignation, cannot, therefore, be accepted. He should be deemed to have left service, though not from the date of resigning as the Tribunal seems to have thought, yet from some date coinciding within the expiry of what could be considered as reasonable notice. On his own showing, D'Souza had resigned on 7-12 -73 and was not willing to return to work, till at least September, 1974. As this period of nine months is longer than any period of 'reasonable notice' a court could think of, it must he held that by the time D'Souza started having second thoughts, the contract of employment had come to an end and there was no question of reinstating him on the basis that he was still in service.

15. It is also possible to hold, as indicated by Lord Collins in General Billposting Co. v. Atkinson [1909] A.C. 118, that where one party conducts himself in a manner clearly evincing an intention to be no longer bound by a contract, the other party will be justified in regarding himself as freed from the contract. So long as the employee's breach is not condoned by the employer by words or deed, it is open to him to take such a stand.

16. Afterall, the function of an industrial Tribunal in a dispute relating to non-employment, is to examine all the surrounding circumstances and ensure that an employee is not dealt with arbitrarily or unjustly. The dispute is to be resolved not entirely on the basis of hair-splitting technicalities, but on considerations of social justice and fair play. The union's case in its letter dated 13-3-75 was that D'Souza had irrevocably decided to snap the tie with his employer from 6th January, 1974 and that he had worked in the establishment a few days more only to train up his assistant, and : that too under a different and temporary contract. The only claim even at this stage was for gratuity and provident fund relating to past service. In fairness, therefore, the Tribunal could not have accepted the union's claim that the employee was in service during all the intervening period.

17. An attempt was also made to argue that the non-employment of D'Souza should have been construed as retrenchment as defined in the Industrial Disputes Act. No such point was raised before the Tribunal, and no such specific ground is taken in the original petition also. Even otherwise, it cannot be assumed that the non-employment was a result of the management terminating his service; for all practical purposes, it was brought about by the employee himself.

18. It is then said that a preliminary question of jurisdiction had been raised before the Tribunal and that without deciding that question, it could not have gone into the merits of the case. The management had no doubt raised a point that the reference by the Central Government was invalid, and that the appropriate Government was the State Government. The union, on the other hand, had maintained that the reference was fully valid. And parties ultimately agreed that a decision could be given on merits without deciding the jurisdictional question. On the authority of this Court in District Wholesale Co-operative Society v. Dy. Registrar (1975 KLT. 589), I should bold that such an attack by the union is not entertainable in proceedings under Article 226 of the Constitution.

19. In the result, the original petition is dismissed, leaving the parties to bear their own costs.


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