Holding

The termination order was void because the show‑cause notice relied on unauthorised absence that occurred before the amendment of Regulation 16.14, although termination on the post‑amendment ground of unauthorised absence could be valid.

Summary

Pyare Lal Sharma, a chemical engineer employed by Jammu & Kashmir Industries Ltd., was served a show‑cause notice on 21 April 1983 under the newly added grounds of unauthorised absence and participation in politics, and his services were terminated on 14 June 1983 by the Managing Director. Sharma challenged the termination before the High Court, which set aside the order on grounds of natural justice, lack of authority of the Managing Director, and arbitrariness of Regulation 16.14, but denied back‑wages. On appeal, the Supreme Court examined whether Regulation 16.14 was arbitrary, whether the required notice period applied to the new grounds, whether a subordinate authority could dismiss an employee appointed by the Board, whether the termination violated natural‑justice rules, and whether unauthorised absence prior to the amendment could be relied upon. The Court held that the regulation was not arbitrary, that a 15‑day show‑cause notice sufficed for grounds (c) and (d), and that the Managing Director, having delegated appointing powers, could validly terminate. However, the period of unauthorised absence relied upon fell before the amendment and could not be used, rendering the termination order illegal; the order was set aside and Sharma was awarded sixty percent of his back‑wages.

Issues considered

Whether Regulation 16.14 is arbitrary and violative of Article 14 of the Constitution
Whether three months' notice or pay in lieu is required for termination under grounds (c) and (d) of Regulation 16.14
Whether the Managing Director, a subordinate authority, could validly terminate an employee appointed by the Board of Directors
Whether the termination order violated principles of natural justice by not giving notice for the political activity ground
Whether unauthorised absence occurring before the amendment of Regulation 16.14 can be taken as a ground for termination

Legislation cited

Companies Act, 1956
Constitution of Indias. Article 14, s. Article 311

Subjects

termination of serviceshow cause noticenatural justiceArticle 311Article 14retrospective amendmentunauthorised absencepolitical activitydelegated authorityback wages

Judgment

A PYARE LAL SHARMA
v.
MANAGING DIRECTOR, JAMMU & KASHMIR
INDUSTRIES LTD. & ORS. & VICE VERSA.

JULY 19, 1989
B
[MURARI MOHON DUTT AND KULDIP SINGH, JJ.] +-
Jammu & Kashmir Industries Employees Service Rules &
Regulations-R. 16.14-Termination of service-Provision of show
cause notice'sufficient safeguard against arbitrary action-Held regula- ~. -
C tion not arbitrary. 1

Regulation 16.14-Termination of service-Ground (a) & (b)- ~
Three months notice or pay in lieu thereof. Amended Regulation-
grounds (c) & (d) unauthorised absence and taking part in politics-15
days notice required-No requirement of any other notice or pay in
D lieu thereof: Show cause for the period prior to amendment-Held
amended regulation not operative retrospectively and the notice served
on the employee was illegal and the order of termination had to be set
aside. Also held termination on the basis of taking part in politics not
maintainable as no show cause given.

E Constitution of India 1951)-Article 311( 1) Employees of the com-
pany not civil servants-Cannot claim protection of Art. 311(1) of the
Constitution of India nor the extension of that guarantee on parity-
Employees governed by the provisions of Articles of Association and
Regulations of the Company.

F Natural Justice-Principle-No one can be penalised for the action
which was not penal on the day it was committed.

Delegated authority acquires the power ofappointing authority-
Held M.D. who had been delegated the powers of the Board of
Directors was legally competent to terminate the services of the
G employee.

According to the Regulation 16.14 Of the Jammu & Kashmir
Industries Employees Service Roles & Regola'tioos the services of the 'r'
permanent employee could be terminated if the posl'is ·abolished ot he is
declared medically uiifit after giving three month's ·notice or pay in lien
H -thereof and in case oftemjlOrary employee·oue month's ·notice or paylin
428
P.L. SHARMA v. J. & K. INDUSTRIES 429
lieu thereof.
A

This regulation was amended on April 20, 1983 by adding two
more grounds namely, if the employee remains on an unauthorised
absence or if he takes part in active politics, in such cases the services
shall be terminated if he fails to explain his conduct satisfactorily within
15 days from the date of issue of notice and the management shall be B
empowered to take a decision without resorting to further enquiries.

Pyare Lal Sharma was employed as a Chemical Engineer by the
Jammu & Kashmir Industries Ltd. hereinafter called 'Com11any'. The
Company issued a show cause notice on 21.4.83 in terms of the added
clauses for his unauthorised absence from duty. As no reply was sub-
mitted, the M.D. terminated his services by an order dated 14.6.1983.
c
Sharma challenged the order of termination by way of a writ petition
before the J & K High Court. Learned Single Judge allowed the Writ
Petition on three grounds namely, violation of Rules of Natural Justice,
that the Board of Directors having appointed Sharma, the M.D. who is
subordinate authority could not terminate his services and that the D
regulation 16.14 was arbitrary and violative of Art. 14 of the Constitu-
tion of India. The Letters Patent Bench of the High Court dismissed the
appeal of the Company but denied backwages to Sharma. Aggrieved by
that order both the Company as well as Sharma came up in appeals
before this court. While allowing the appeal of Sharma partially and
dismissing the appeal of the Company, this Court, E

HELD: That Regulation 16.14 was not arbitrary. The provision
of show cause notice is a sufficient safeguard against arbitrary
action. Under grounds (a) & (b) of the Regulations three months notice
or pay in lieu thereof is required. Regarding grounds (c) & (d) the
regulations provide for IS days notice to explain the conduct satis- F
factorily and there is no requirement of any other notice or pay in lieu
thereof. [437C-D]

There is no provision in the Articles of Association or the
regulations of the company giving same protection to the employees
of the company as is given to the civil servants under Art. 3ll(l) of G
the Constitution of India. An employee of the Company cannot,
therefore, claim that he cannot be dismissed or removed by an
authority subordinate to that by which he was appointed. Since on the
date of termination of Sharma's services the M.D. had the powers of
the appointing authority he was legally compeient to terminate
Sharma's services. [437F-GJ H
430 SUPREME COURT REPORTS [1989] 3 S.C.R.

Grounds (c) & (d) in regulation 16.14 exclusively and individually
A
are sufficient to terminate the services of an employee. Once it is
established that an employee remains on an unauthorised absence frum
duty the only actiQn which can be taken is termination of his services.
Similar is the case when an employee takes part in active politics. The
finding in the termination order cannot be sustained because no notice
B in this respect was given to Sharma but the order of termination can be
supported on the ground of his remaining on unauthorised absence
from duty. [437H; 438A-BI

State of Orissa v. Vidyabhushan Mahapatra, [1963] 1 Supp. SCR
648 and Railway Board v. Niranjan Singh, [1969] 1 SCR 548, relied
C upon.

It is a basic principle of natural justice that no one can be
penalised on the ground of a conduct which was not penal on the day it
was committed. The date of show cause notice being April 21, 1983 the
unauthorised absence from duty which has been taken into considera-
D lion is from December 20, 1982 to April 20, 1983. Whole of this period
being prior to the date of amendment of regulation 16.14, the same
could not be made as a ground for proceeding under ground (c) of
Regulation 16.14. The Notice served on the appellant was thus illegal
and as a consequence the order of termination can not be sustained and
has to be set aside. [438F-G]
E
When the termination order is set aside by the courts normally the
employee becomes entitled to backwages and all other consequential
benefits. In view of the facts and circumstances of this case the court
ordered that only sixty percent of the backwages be paid to Sharma.
Moneys already received by Sharma under orders of either this Court
F or High Court shall be adjusted and the balance paid to him. If the
money already paid to Sharma is more than what has been ordered to
J
1

be paid now then there shall be no recovery from him. [439A-C]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3154-
3155 of 1985.
G
From the Judgment and Order dated 26.3. 1985 of the Jammu &
Kashmir High Court in L.P.A. (W) No. 59 of 1984. ·

For the Appellant In-Person in Civil Appeal No. 3154/85

H M.N. Tiku, Rakesh Tiku and Pandey Associates for the
Respondents.
P.L. SHARMA v. J. & K. INDUSTRIES [KULDIP SINGH, J.) 431

-~ M.N. Tiku, Rakesh Tiku and Pandey Associates for the
A
I Appellants.

For the Respondent In-Person in Civil Appeal No. 3155/85.

The Judgment of the Court was delivered by
,..~
B
KULDIP SINGH, J. Jammu & Kashmir Industries Limited
'"-.
(hereinafter called 'company') is a company registered under the
Indian Companies Act, 1956 and is wholly owned and managed by the

- State of J ammu & Kashmir. Pyare Lal Sharma was employed by the

'
'

'r-
company as Chemical Engineer. His services were terminated by the
Managing Director of the company on June 14, 1983. Sharma's writ
petition was allowed by a learned Single Judge of the Jammu & Kash-
mir High Court. On appeal by the company the Letters Patent Bench
c
upheld the judgment but denied back-wages to Sharma. This is how
these two appeals, one by the company and the other by Sharma, are ·
before us.
D
We may briefly notice the necessary facts. Pyare Lal Sharma
joined the company as Assistant Chemical Engine.er on July 12, 1972,
In 1974 he was sent to England as management trainee but he returned
back without completing the training. Sharma's conflict with the com-
.J pany started in 1976 when he filed a suit against the company in
Jammu & Kashmir High Court with various reliefs including a direc- E
tion that he be again sent to England on company's expense. The suit
was dismissed and further appeal to the Division Bench was also dis-
missed. He then filed another suit in the Delhi High Court claiming
Rs.50 lakhs as damages from the company but the same did not
,.I proceed on technical grounds. Thereafter, it seems, Sharma started
~ suspecting ma/a-fide in every ·action of the company and resorted to F
court proceedings even on slight pretext. He challenged the order of
transfer from Baramulla to the headquarters by way of suit in the
Jammu & Kashmir High Court. Interim stay, initially granted, was
vacated by the High Court. In December, 1979 he applied for leave on
medical grounds without disclosing the ailment. He remained absent
from December 7, 1979 to March 7, 1980 without any sanctioned G
leave. Disciplinary proceedings were initiated against him on the
~ charge of unauthorised absence and he was placed under suspension
\ on March 8, 1980. He filed Writ Petition No. 58/80 in the Jammu &
Kashmir High Court against suspension. Ultimately Sharma expressed
regrets and he was reinstated into service by an order dated May 15,
1980. In April, 1981 he was transferred from headquarters to one of H
432 SUPREME COURT REPORTS [1989] 3 S.C.R.

A the units. He again filed a writ petition in the Jammu & Kashmir High
Court challenging the order of transfer but the same was dismissed.
Thereafter he filed Writ Petition No. 4086 of 1982 in this Court which
was heard by Chinnappa Reddy, J. (Vacation Judge) on 1st of June,
1982. The learned Judge passed the following order:

B "Issue notice returnable on June 15, 1982. Notice be al~
served on the counsel for the State of Jammu & Kashmir f-'•
Mr. Altaf Ahmad. Mr. Altaf Ahmad will take instructions
from his clients and assist this Court to know the precise
facts of the case which it is impossible to find from the
petitioner. I have suggested to the petitioner that he may
~ -
engage a counsel but he does not appear to be inclined to
c do so. Nor is he willing to be assisted by the counsel
engaged by the court." -1
The writ petition was, however, dismissed as withdrawn on June
15, 1982. Sharma filed two more writ petitions being 293 of 1982 and
D 410 of 1982 in the Jammu & lfashmir High Court challenging the
promotions of some other officers.

Sharma absented from duty on September 8, 1982. He was asked
to explain his absence. A para out of his reply is as under:

E "I have been submitting charge sheet against you since last
~
one year to authorities about your corrupt practices,
communal character, and illegal financial advancement you
have made but no action has been taken against you since
you utilise political pressure and bribed the chairman."

F Sharma was served with a charge-sheet dated September 24, I..
-4>
1982 and he was placed under suspension. Use of derogatory language
in various communications was one of the charges against him. He
submitted his reply to the charge-sheet on October 7, 1982. Part of the'
opening paragraph is as under:

G "You have become frustrated, lost balance of mind and to
cover the various irregularities committed by you for exam-
ple ..... You will be prosecuted for levelling false charge
sheet and false charges against me. Coming to the charge
sheet with above reverence I have to say as under."

H On October 22, 1982 an enquiry officer was appointed to enquire
P.L. SHARMA v. J. & K. INDUSTRIES {KULDIP SINGH, J.J 433

into the charges against Sharma. He challenged the order of suspen-
A
sion by way of Civil Writ Petition 661of1982 in the Jammu & Kashmir
High Court. The High Court stayed the suspension by its order dated
December 20, 1982. The order of suspension having been stayed by
the High Court it was incumbent on Sharma to have joined duty. But
inspite of company's letters asking him to do so he remained absent.
B
Sharma filed Writ Petition 471/82, Writ Petition 129/83 and
Letters Patent Appeal 24/83 for payment of his salary and allowances
for various periods which were granted by the High Court.

It is also on record that while in service Sharma unsuccessfuUy
fought assembly elections on two occasions. He filed his nomination
papers for contesting elections to the Lok Sabha from Baramulla
c
constituency. But the nomination papers were rejected.

Regulation 16.14 of Jammu & Kashmir Industries Employees
Service Rules and Regulations before amendment was as under:
D
"The service of the permanent employee shall be termi-
nated by the company, if (a) his post is abolished or (b) he
is declared on medical grounds to be unfit for further
service after giving three months' notice or pay in lieu
thereof. For similar reasons the service of .a temporary
employee also be dispensed with after giving him one E
month's notice or pay in lieu thereof."

The above quoted regulation 16.14 was amended on April 20,
1983. Amended regulation is as under:

"16.14. the services of an employee shall be terminated by F
the Company if:

(a) his post is abolished, or

(b) he is declared on medical grounds to be unfit for
• further service, or G

(c) if he remains on un-authorised absence, or(d) if he
takes part in active politics.

In the case of (a) and (b) above the services shall be
terminated after giving three months notice to a permanent H
434 SUPREME COURT REPORTS [1989] 3 S.C.R.

employee and one month's notice to a temporary employee
A
or pay in lieu thereof.

In the case of (c) and (d) above the services of an
employee shall be terminated if he fails to explain his con-
duct satisfactorily within 15 days from the date of issue of
B notice. The management shall be empowered to take a
~····
decision without resorting to further enquiries.

By order of the Board of Directors."

The company issued a show cause notice dated April 21, 1983 in
C terms of clause (c) of amended regulation 16. 14. The notice was in the
following terms:

"In compliance to the orders of the Hon 'ble High Court
Your suspension was stayed till further orders vide Order
No. JKI/319/82 dated 21.12.82 issued vide endorsement
D No. Adm.(P) S0-65/4866 dated 21.12.82. From that date
also you have continuously remained absent unauthori-
sedly from your duties. You are, therefore, served this
notice to show cause within a period of 15 days as to why
your services should not be terminated under rules of the
Corporation."
E
No reply to the show cause notice was submitted by Sharma. By
an order dated June 14, 1983 the Managing Director of the company
terminated his service~. The termination order is reproduced as under:

"Shri Pyare Lal Sharma Chemical Engineer, Jammu and
F Kashmir Industries Limited has remained on unauthorised
absence continuously from 21.12.82 (since the date of his
suspension was stayed as per orders from the Hon 'ble High
Court). Shri Sharma was served with a notice under Jammu
& Kashmir Industries Limited Employees Service Rules to
show cause within a period of 15 days as to why his services
G should not be terminated. This notice was served to him
under registered post but the same was received back in
this office and later on delivered to him in person on 7.5.83 'f
as per his request. Shri Sharma has failed to explain his
position.

H It has now also been established that Shri Sharma was
P.L. SHARMA v. J. & K. INDUSTRIES [KULDIP SINGH, J.] 435

taking part in active politics during the period of his A
un-authorised absence and has filed nomination papers for
contesting election from 1-Baramulla Parliamentary
Constituency. Now that his unauthorised absence as well as
his taking part in the active politics has been established,
and in exercise of the powers vested in the management
under Jam mu & Kashmir Industries Employees Services B
Regulations the services of said Shri Pyare Lal Sharma
Chemical Engineer J & K Industries Limited are hereby
terminated."

Sharma challenged the order of termination by way of Writ Peti-
tion No. 70 of 1984 before the Jammu & Kashmir High Court. Learned
Single Judge by his judgment dated October 16, 1984 allowed the writ c
petition on three grounds.

The learned Judge found the impugned order violative of Rules
of Natural Justice as nr> opportunity to show cause was afforded to
Sharma in respect of the ground of taking part in active politics. It was D
also held that the Board of Directors having appointed Sharma, The
Managing Director who is subordinate autnority could not terminate
his services. Finally, the learned Judge held regulation 16.14 to be
arbitrary and as such violative of Article 14 of the Constitution of
India.
E
The Letters Patent Bench of the High Court dismissed the appeal
of the company but denied back-wages to Sharma. The Bench held
that Sharma's services could not be terminated by an authority sub-
ordinate to the authority which appointed him. The Bench also found
that either three rrionths notice or salary in lieu thereof under regula-
tion 16.14 was mandatory. The Division Bench did not agree with the F
other reasons given by the learned Single Judge in support of his
judgment.

Mr. Pyare Lal Sharma appeared in person and argued his case.
He has been of no assistant to us. During fh~ course of arguments we
suggested to Mr. Sharm.a to engage a counsel which de declined. We G
also repeatedly offered to him to have the services of a counsel engaged
by the Court but he did not agree and insisted on arguing the case
himself.

From the pleadings of the parties, documents on the record, the
judgment of the learned Single Judge and of the Letters Patent Bench 1-1
436 SUPREME COURT REPORTS [1989] 3 S.C.R.

A and from Sharma's arguments the following points arise for our )'
consideration:

1. Whether Regulation 16.14 is arbitrary and as such ultra
vires Article 14 of the Constitution of India.

B 2. Whether three months' notice or pay in lieu of the
notice period was required to be given under Regulation
16.14.

3. The termination order having been passed by the
Managing Director who was an authority subordi11ate
to the Board of Directors which appointed Sharma, the
c order was bad on that ground.

4. Whether the impugned order is violative of rules of
natural justice so much so that the ground of taking part
in active politics was not mentioned in the show cause
D notice whereas it was relied upon in the termination
order.

5. Whether the period of absence, which was prior to the
date of coming into force of the amended Regulation

E
16.14, could be taken into consideration for invoking
ground (c) of the Regulation.
,(:
We see no arbitrariness in Regulation 16.14. The Regulation bas
been framed to meet four different eventualities which may arise
during the service of a company employee. Under this regulation
services of an employee may be terminated (a) if his post is abolished
f or (b) if he is declared on medical grounds to be unfit for further
service or (c) he remains on unauthorised absence or (d) if he takes
part in active politics. In the case of (a) and (b) three months notice to
a permanent employee and one month notice to temporary employee
or pay in lieu thereof is to be given. In case of (c) and (d) a show cause
notice, to explain his conduct satisfactorily, is to be given. So far as
G grounds (a) and (b) are concerned there cannot be any objection.
When a post is abolished or an employee is declared medically unfit for
further service the termination is the obvious consequence. In the case
of abolition of post the employee may be adjusted in some other post if
legally permitted. Ground (c) has also a specific purpose. "Remains
on un-authorised absence" means an employee who has no respect for
H discipline and absents himself repeatedly and without any justification
P.L. SHARMA v. J. & K. INDUSTRIES (KULDIP SINGH, J.] 437

or the one. who remains absents for a sufficiently long period. The
object and purport of the regulation is to maintain efficiency in the A
service of the company. The provision of show cause notice is a ·suffi-
cient safe-guard against arbitrary action. Regarding ground (d) "acting
politics" means almost whole time in politics. Company job and active
politics cannot go together. The. position of the civil servants who are
governed by Article 311 is entirely different but a provision like B
grounds (c) and (d) in Regulation 16,14 concerning the employees of
companies/corporations/public undertakings is within the competence
of the management.

We do not agree with the Division Bench of the High Court that
three months' notice or pay in lieu thereof was to ]:>e given to Sharma
under Regulation 16.14. It is clear from the plain language of the c
regulation,that three months notice or pay in lieu, is only required
when termination is under ground (a) or (b). Regarding (c) and (d),
the regulation provides for a 15 days notice to explain the conduct
satisfactorily and there is no requirement of any other notice or pay in
lieu thereof. · D

We may now take-up the third point. Sharma was· appointed as
Chemical Engineer by the Board of Directors. The powers of the
Board of Directors to appoint officers of Sharma's categQry were
delegated to the Managing Director on September 12, 1974 and as such
from that date the Managing Directo or became the appointing autho- E
rity. Needless to say that employees of the company are not civil
servants and as such they can neither claim the protection of Article
311(1) of the Constitution of India nor the extension of that guarantee
on parity. There is no provision in the Articles of Association or the
regulations of the company giving same protection to the employees of
the company as is given to the civil servants under Article 311(1) of the F
Constitution of India. An employee of the company cannot, therefore,
· claim that he cannot be dismissed or removed by an authority subordi-
nate to that by which he was appointed. Since on the date of termina-
tion of Sharma's services the Managing Director had the powers of
appointing authority, he was legally competent to terminate Sharma's
. , L
services. u
The learned Single Judge allowed the writ Petition on the fourth
point though the same did not find favour with the Division Bench.
Grounds (c) and ( d) in regulation 16.14, exclusively a1td individually,
are sufficient to t~rminate the services of an employee. Once it is
established to the satisfaction of the authority that an employee H
438 SUPREME COURT REPORTS [1989] 3 S.C.R.

remains on unauthorised absence from duty, the only action which can
A be taken is the termination of his services. Similar is the case when an
employee takes part in active politics. The finding in the termination
order regarding taking part in active politics cannot be sustained be-
cause no notice in this respect was given to Sharma but the order of
termination can be supported on the ground of remaining unautho-
B rised absence from duty. This Court in State of Orissa v. Vidyabhushan
Mahapatra, [1963] 1 Supp. SCR 648 and Railway Board v. Niranjan
Singh, [1969] 1 SCR 548 has held that if the order can be supported on
one ground for which the punishment can lawfully be imposed it is not
for the courts to consider whether that ground alone would have
weighed with the authority punishing the public servant. Thus there is
no force in this argument.
c
This takes us to the last point which we have discovered from the
facts. Regulation 16.14 before amendment consisted of only clauses
(a) and (b) relating to abolition of post and unfitness on medical
ground. The company had no authority to terminate the services of an
D employee on the ground of unauthorised absence without holding dis-
ciplinary proceedings against him. The regulation was amended on
April 20, 1983 and grounds (c) and (d) were added. Amended regula-
tion could not operate retrospectively but only from the date of
amendment. Ground (c) under which action was taken came into exis-
tence only on April 20, 1983 and as such the period of unauthorised
E absence which could come within the mischief of ground (c) has to be
the period posterior to April 20, 1983 and not anterior to that date.
The show cause notice was issued to Sharma on April 21, 1983. The
period of absence indicated in the show cause notice is obviously prior
to April 20, 1983. The period of absence prior to the date of amend-
ment cannot be taken into consideration. When prior to April 20, 1983
F the services of person could not be terminated on the ground of
unauthorised absence from duty under Regulation 16.14 then it is
wholly illegal to make the absence during that period as a ground for
terminating the services of Sharma. It is basic principle of natural
justice that no one can be penalised on the ground of a conduct which
was not penal on the day it was committed. The date of show cause
G notice being April 21, 1983 the unauthorised absence from duty which
has been taken into consideration is from December 20, 1982 to April
20, 1983. Whole of this period being prior to the date of amendment of
regulation 16.14 the same could not be made as a ground for proceed-
ing under ground (c) of Regulation 16.14. The notice served on the
appellant was thus illegal and as a consequence the order of termina-
H lion cannot be sustained and has to be set aside.
•
P.L. SHARMA v. J. & K. INDUSTRIES [KULDIP SINGH, J.] 439

When the termination order is set aside by the courts normally A
the servant becomes entitled to back-wages and other consequential
benefits. This case has a chequered history. From 1976 onwards there
has been continuous litigation and mistrust between the parties. The
facts which we have narrated ab0ve go to show that Sharma has
equally contributed to this unfortunate situation. In view of the facts
B
and circumstances of this case we order_ that sixty per cent of the
back-wages be paid to Sharma. Money already received by Sharma
under orders of this Court or the High Court shall be adjusted and the
balance paid to him. If the money already paid to Sharma is more than
\
what we have ordered then there shall be no recovery from him.
I
Civil Appeal 3154/85 is allowed to the extent indicated above, C
Civil Appeal 3155/85 filed by the company is dismissed. C.M.P. 1213/
88 is dismissed as infructuous. There shall be no order as to costs.

R.N.J.

l

'
\