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Bhavani Kudal Co-operative Urban Bank Ltd. Vs. B.R. Venkatapati Naidu - Court Judgment

LegalCrystal Citation
SubjectLabour and Industrial
CourtChennai High Court
Decided On
Judge
Reported in(1955)ILLJ21Mad
AppellantBhavani Kudal Co-operative Urban Bank Ltd.
RespondentB.R. Venkatapati Naidu
Cases ReferredArmaoti v. Vithal Vinayak A.I.R.
Excerpt:
- .....have the right of appeal to the general body in the last case. the courts below have held that the power of suspension and dismissal vested in the board of directors under this clause, was not absolute, but was subject to proof of misconduct to the satisfaction of the court. i am unable to agree with this construction of the clause. the words are general and no cause is specified as the justification for a dismissal. in these circumstances the tenure of the plaintiff's office was really one at pleasure and not one terminable for good and sufficient cause. but having regard to the form of the plaintiff's action which is for damages for wrongful dismissal, the difference made by the exact tenure is very little, for whichever be the tenure, the defendant would have to give the plaintiff a.....
Judgment:

Rajagopala Ayyangar, J.

1. The Bhavani Kudal Co-operative Urban Bank which was the defendant in O.S. No. 159 of 1947 on the file of the District Munsif's Court, Erode, is the appellant in this second appeal. The plaintiff-respondent was the secretary of the defendant bank and had been dismissed from the defendant's service by an order, dated 21 May 1944. The suit out of which this appeal arises was filed for the recovery of damages for wrongful dismissal, salary during a period of suspension, the provident fund amount standing to the plaintiff's credit, and interest on these sums, etc.

2. The facts giving rise to these proceedings were shortly these. The plaintiff had been secretary of the defendant bank for nearly fifteen years and as secretary was under bye-law 23 (a)(ii) responsible for the executive administration of the bank. While so a notice, dated 15 October 1943, was received from the Registrar of Co-operative Societies setting out a number of irregularities committed by the management of the bank and threatening the supersession of the board of management and asking them to show cause why this should not be done. On receipt of this communication which is marked as Ex. B. 1, the president of the bank forwarded this to the plaintiff and directed him to explain certain of the irregularities. His explanation Ex. B. 3 was submitted on 25 October 1943. The plaintiff also despatched confidential communications to the Registrar of Co-operative Societies alleging several irregularities against the president and complaining that the latter was coercing the writer to create false records, the last of such communications being on 13 November 1943. The president suspended the secretary by order, dated 24 November 1943, and also served on the latter, further charges of misconduct which he was called on to explain. The secretary submitted his further explanations which consisted in large part of attacks on the president. After an enquiry by the president, it was placed before the board of directors and they ordered on 21 May 1944 that the plaintiff 'be dismissed and removed from office as secretary of the bank.'

3. The plaintiff thereupon filed O.S. No. 257 of 1944 against the president and the board of directors personally for damages, for wrongful suspension and removal and this was dismissed on the ground that the plaintiff's remedy, if any, was against the bank. He then filed O.S. No. 159 of 1947 from which this second appeal arises. The main point alleged as the basis of the plaintiff's suit is to be found in Paras. 12 and 13 of the plaint which run thus:

12. The plaintiff submits that the order of suspension and later order of dismissal from service passed against the plaintiff are arbitrary, malicious and wrongful. The charges alleged against him are unfounded. The charges were not also enquired into and the plaintiff was not even given an opportunity of meeting them or establishing their falsehood. The appropriate rules, regulations and statutory provisions bearing on the matter have also been violated. Even the principle of natural justice against dismissal without giving an opportunity of being beard has been violated by the defendant. Moreover, suspension and dismissal have been brought about maliciously and out of spite.

13. For the above and other reasons, the suspension and dismissal of the plaintiff by the defendant is wrongful. The said wrongful dismissal has caused to the plaintiff heavy damages to the extent of Rupees. 2,189-11-3 as mentioned hereunder. The defendant is bound to pay the same to the plaintiff In spite of repeated demands the defendant has failed to pay the said damages to the plaintiff.

The details of the sums which make the figure of Rs. 2,189-11-3 are given in Para. 16 Which are these:

Rs. A.P.(1) Staff provident fund standingto his credit ... 1,367-7-4(2) Interest on this at 5 per cent per annum from 1 July 1943to 31 March 1947 ... 255-0-0(3) Salary for six months from24 November 1943 to 21 May1944 at Rs. 94 per month ... 564-0-0(4) Three months' salary assessedas damages for want of noticebefore dismissal ... 282-0-0(5) Provident fund for six months'pay mentioned in item 3 at1 anna per rupee per month ... 35-4-0___________(sic) 2,505-11-4Less amount received on 17 April1947 from defendant by cheque ... 316-0-1___________2,189-11-3___________

4. The defendants in their written statement traversed these allegations and rested their main defence on the tenure of the plaintiff being one at pleasure and that even on the footing that the charges against the plaintiff were to be held not proved, their right to terminate the plaintiff's service could not be called in question. They also objected to the interest claimed and the figure of damages set out in Para. 16 of the plaint set out above.

5. A number of issues were framed by the learned district munsif and after an elaborate enquiry on the question whether the charges put forward against the plaintiff were made out or not, he reached the conclusion that they were not. He therefore held the plaintiff's dismissal was wrongful and that the latter was entitled to damages for the wrongful suspension and dismissal but he held that no interest could be claimed on these sums. In reaching the finding on the main point about the need for an enquiry before the plaintiff could be dismissed, the district munsif seemed to rest the tenure of the plaintiff the bye-laws which were in force when the suspension and dismissal took place, but on those which were brought in long subsequently. The distinction between the two sets of rules will be noticed subsequently, but the basis on which the provision of the later bye-laws were held relevant was because of the finding that the bank adopted the bye-laws deliberately only after the dismissal on the plaintiff. The district munsif was also prepared to hold that even under the older bye-laws the plaintiff could not be dismissed except on proof of misconduct; on this matter the finding was that the board of directors did not conduct a proper enquiry and that they merely endorsed the report of the president. He therefore held that the dismissal of the plaintiff was wrongful and malicious. The issues relating to the above having been decided in favour of the plaintiff, a decree was passed in his favour for the sums claimed under heads 1, 3 and 4 in Para. 16 extracted above less Rs. 316-0-1 already paid on the basis that the plaintiff was entitled to salary during the period of suspension and to salary for three months in lieu of notice before the termination of his services.

6. From this decree, the bank filed an appeal to the subordinate judge of Coimbatore, and the appellate 'court confirmed the findings and decree of the trial court.

7. The defendant bank has now come up to this Court in second appeal. The contentions raised by Mr. Gopalaswami Ayyangar, learned Counsel for the appellant, were these:

(1) That the courts below were in error in applying the new bye-laws which came into force long after the dismissal of the plaintiff, to determine the tenure on which he held office.

(2) That on a proper construction of the bye-laws which were in force at the time of the suspension and dismissal, the bank could terminate the services of the plaintiff at pleasure.

(3) That assuming that the plaintiff's services were wrongly terminated, damages computed on the basis of salary for three months was excessive.

(4) That the plaintiff was not entitled to salary during the period of his suspension, i.e., from 24 November 1943 to 21 May 1944-the latter being the date of the dismissal, the claim which was item 3 in Para. 16 of the plaint.

(5) That on the rules of the provident fund, the plaintiff who was dismissed from service was not entitled to be paid the amount contributed by the bank, but only his own contribution.

8. I shall proceed to deal with each of these points in their order.

9. Under the bye-laws which were brought into force long after March 1945, a procedure for the conduct of enquiries was set down. Under this the employee had to be informed in writing of the grounds on which it was proposed to take action and he had to be afforded an opportunity to defend himself including facilities for a personal hearing. Further a sub-committee of the directors was to be set up which alone was to have the power of suspending or dismissing a secretary with a right of appeal to the board of directors. But as these rules came in long subsequent to the suspension and dismissal, the plaintiff can base no claim on the basis of these rules being in force and Mr. Ramachandra Ayyar, learned Counsel for the respondent, did not contest this. But though these rules have to some extent coloured the views of the courts below, in their appreciation of the tenure governing plaintiff's office, 1 am unable to hold that they have rested their decision in favour of the plaintiff on the footing that these rules applied to his case.

10. Under Clause 23 of the bye-laws (Ex. B. 24) which governed the relationship between the plaintiff and the defendant bank

The president shall have power to fine the secretary and the treasurer, the board of directors also have power to suspend or dismiss the secretary and the treasurer, who shall have the right of appeal to the general body in the last case.

The courts below have held that the power of suspension and dismissal vested in the board of directors under this clause, was not absolute, but was subject to proof of misconduct to the satisfaction of the Court. I am unable to agree with this construction of the clause. The words are general and no cause is specified as the justification for a dismissal. In these circumstances the tenure of the plaintiff's office was really one at pleasure and not one terminable for good and sufficient cause. But having regard to the form of the plaintiff's action which is for damages for wrongful dismissal, the difference made by the exact tenure is very little, for whichever be the tenure, the defendant would have to give the plaintiff a proper notice of termination unless misconduct were established to the satisfaction of the court. In this view the entire discussion of the exact nature of the tenure of the plaintiff, which occupies a considerable portion of the judgments of the lower courts, is really academic.

11. The courts below have concurrently found that the charges made against the plaintiff were not established. This finding is binding on this Court. The result of this is that it has to be held that the dismissal of the plaintiff, even on the footing that he held office only during pleasure, was wrongful, since admittedly no notice of termination of service was given to him, nor was he paid salary in lieu of notice, and so he would be entitled to damages for wrongful termination of his service.

12. The next question that has to be considered is whether the salary for three months awarded to the plaintiff by the courts below is excessive. In this matter there is no hard-and-fast rule, and it depends on the nature of the service, the time he would reasonably take to find other employment of a similar nature and other similar factors. The plaintiff had been in service for fifteen years as secretary and taking all the circumstances including the nature of the office into consideration I hold that the sum awarded by the lower courts is reasonable.

13. The next contention urged by the appellant relates to the salary during the period of suspension-from 24 November 1943 to 21 May 1944, the argument being that as there was a specific contractual right in the defendant to suspend the plaintiff under bye-law 23 (ii), the suspension effected in pursuance of it necessarily meant that the plaintiff could not be entitled to salary during the period of suspension.

14. Before considering the decisions on which Mr. Gopalaswami Ayyangar relied in support of his argument it is necessary to determine the exact scope of the power conferred on the employer by bye-law 23. Suspension as is well known is of two kinds--punitive suspension and suspension pending an enquiry into the charges against an employee. If the suspension is punitive and amounts to a punishment, the same considerations, which apply to a dismissal would apply to it and unless the employer is able to make out misconduct, reasonable notice of the temporary termination of the service would have to be given. For it cannot be that the employer who cannot put an end to the contract of service, except on reasonable notice, can temporarily terminate the employment by unilateral action and withhold salary at his pleasure. In my opinion, where there is a power of punitive suspension, unless the master is able to justify it on the ground of proved misconduct, he has no right to suspend or to withhold salary for the period of suspension. In the absence of proved misconduct it would be a case where for no reason the master is preventing and hindering the servant from doing his work, the latter being able and willing to perform his part of the contract, and consequently the wages or salary due to the workman cannot be withheld during the period of suspension. In regard to suspension pending enquiry, the decisions have differed on the question whether this power is a necessary incident of the power of dismissal or has to be specifically conferred by statute or contract. In the decision of this Court in Seshadri Ayyangar v. Ranga Bhattar 35 Mad. 631, it was held that this was an incident of the power of dismissal though the learned Judges took care to lay down that this was not to be taken as of universal application, and 'might not exist where it depends on the rules of a corporation or of a quasi-corporation like a club.' Further dealing with the claim of the archaka the servant concerned in the case to wages during the period of the suspension, the learned Judges said;

Mr. Ramachandra Ayyar contends that his client is entitled to the profits of his office during the time he was under suspension without notice. This proposition is in our opinion quite untenable as the suspension was found to be proper at the subsequent enquiry. The correct rule in such oases is, we think, that laid down at p. 1406 of Vol. 29 of the American Cyclopodia and in Dillon on Municipal Corporations, Section 247, although if the order is set aside as improper he might be entitled to recover the profits.

15. The power of suspension provided for by bye-law 23 is, in my opinion a punitive suspension and not a suspension pending enquiry. Bye-law 23 (b)(i) reads:

The president shall have power to appoint the members of the establishment except the secretary and the treasurer as well as to fine, suspend for a period not exceeding one month and dismiss them subject in the last case to the approval of the board.

(b)(ii) provides:

The president shall also have power to fine the secretary and the treasurer, the board of directors also have power to suspend or dismiss the secretary and the treasurer, who shall have the right to appeal to the general body in the last case.

16. In (b)(i) the expression 'suspension' occurring between 'fine' and 'dismiss' is clearly punitive and its character as a punishment is placed beyond doubt by the limitation of the period for which alone it could be ordered. Disciplinary control over the secretary who is also part of the establishment is dealt with by Sub-clause (ii) and in the context the expression 'suspension' in this sub-clause must bear the same significance as that in the sub-clause that precedes it. In the present case, however, the suspension that has been ordered is not sought to be justified as a punitive suspension, but only as suspension pending enquiry. The authorities are dear on two points:

(1) in the case of a private employment the power of suspension must be specifically contracted for, and

(2) even if the power exists, the employer cannot withhold salary for the duration of the suspension unless the misconduct to~ 'enquire into which the suspension was ordered, is proved to have been made out.

It is sufficient to refer to the decision of a Division Bench of the Calcutta High Court reported in Kamini v. Rebati 33 Cal. L.J. 336 for this position. I am therefore of the opinion that in the present case as I have already indicated, there is no express power reserved to the employer to suspend the servant pending enquiry and even if such, power be held to be implied, on the con, current findings of the courts below, the dismissal was unjustified, improper and malicious. In these circumstances, the employer has no defence to the claim for wages during the period of suspension.

17. In this view it is unnecessary to consider in detail the several decisions to which my attention was drawn by learned Counsel for the appellant, for in my opinion they do not touch the present case. The first decision on which reliance was placed was that of the court of appeal reported in Wallwork v. Fielding 1922 2 K.B. 66. The plaintiff there was borough police constable, who for breach of discipline had been suspended by the watch committee of a municipal corporation, the power to suspend being conferred by Section 191(4) of the Municipal Corporations Act, 1882. The argument against the right to suspend was based on an implied repeal of Section 191(4) of the Act of 1882 by the Police Act of 1919. Two points were raised, the first whether there was a power in the watch committee to suspend at all, based on implied repeal of that part of the statute, and the second that even if the suspension was authorized, the plaintiff could not be deprived of his salary during the period of his suspension. Dealing with the latter point Lord Sterndale, M.R., said:

if there is a power of suspension which is exercised, the whole contract is suspended, the obligations on both sides are suspended. It seems to, me that is the inevitable meaning of suspension, and if there be any power necessary, there was express statutory power here to suspend the man from duty and that involves the suspension of payment for the discharge of the duty. The contract is suspended with regard to its performance by both sides, not only by one; therefore, I think that point also fails.

18. This decision has been followed in the Indian courts-vide Secretary of State for India in Council v. Surendranath Goswami I.L.R. 1939 Cal. 46 and Debi Dutt Dube v. the Central India Electrical Supply Co. Ltd. I.L.R. 1945 Nag. 587. The decision of the Calcutta High Court proceeds on an interpretation of the fundamental rules which applied to determine the rights of the plaintiff who was a Government servant and is therefore not quite in pari materia. In the case in Nagpur, the observations which are relevant are obiter since Sen, J., held that there was misconduct which justified both the suspension as well as the dismissal which followed. The observations of Vivian Bose, J., in an earlier decision of the Nagpur High Court reported in District Council, Armaoti v. Vithal Vinayak A.I.R. 1941 Nag. 125, seem to me to be appropriate and cover the present case:

It is to my mind clear that an ordinary master not given special powers by statute or by some rule or law flowing from a statute has no power to suspend a servant. He can either dismiss him or continue him in service on fresh terms. In either case the servant is entitled to be paid up to the date of dismissal in the one case or of continuance in service in the other. This rule is enunciated in : AIR1938Cal759 and : AIR1921Cal346 . Reliance was also placed on 30 N.L.R 173. The Nagpur case is not quite in point, but it is of assistance in this way. It decides that a servant is entitled to be paid his wages up to the date of dismissal even if he has not worked in the interval. A servant who is suspended is clearly not working in the interval. If therefore a servant who is dismissed is entitled to be paid his wages up to the date of dismissal, it is clear that servant who has not been dismissed but continued in service has a right to similar treatment.... But it would be necessary for the master to prove in such a case first, that there is this fresh agreement, and secondly that he was justified in dismissing the servant and thus forcing him into a fresh engagement.

19. In my judgment the plaintiff is entitled to salary during the period of suspension also--i.e., to the claim covered by item (3) in Para. 16 of the plaint.

20. The last point relates to the claim to the entirety of the provident fund standing to the credit of the plaintiff and covered by item 1 in Para. 16 of the plaint. The right of the plaintiff to the sum is contractual and depends on the proper interpretation of the rules of the fund which embody the contract between himself and the bank in this regard. The relevant rule reads thus:

In case the contributor is dismissed from his service and in the bank he shall be paid his own contribution up to the date of his dismissal together with interest calculated thereon for the whole number of years preceding his dismissal, but shall forfeit all other benefits from the fund.

The amount standing to the credit of an employee in the fund is made up of a monthly contribution of one anna in the rupee by the employee and an equal sum contributed by the bank and interest at the rate of 5 per cent to the contributions of both, The contention of the defendant bank is that the present case is governed by Rule 11 under which in the case of a dismissal of an employee, the latter is entitled to be paid only his own contribution with interest at 5 per cent and not the sum added to the fund by the bank. The courts below have decided against the bank, on the ground that as the dismissal has been held to be improper, the defendant could not take advantage of this improper dismissal to withhold from the plaintiff the contribution by the bank to his fund. I am of the opinion that this view is unsound. The meaning of the expression 'dismissal' in Rule 11 has to be read in the light of the employee's service conditions as determined by the relevant bye-laws and if under the bye-laws the bank were not bound to assign reasons for effecting a dismissal, a termination of service so brought about would also be 'dismissal' within the provident fund rules. For it cannot be that while the bank could validly dismiss a servant on giving reasonable notice, the same would not amount to dismissal for the purpose of the provident fund rules. In my judgment, the plaintiff is entitled only to his contribution and interest thereon, i.e., to the half of the fund--and the decree of the courts below has to be modified by reducing the amount decreed by Rs. 684-11-8. Subject to this modification this appeal is dismissed. In view of the respondent having substantially succeeded in the second appeal, the appellant will pay the respondent three-fourths of the costs of the second appeal. No leave.


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