RADHEY SHYAM GUPTAversusU.P. STATE AGRO INDUSTRIES CORPORATION LTD. AND ANR.

A                            RADHEY SHY AM GUPTA
                                          v.
      U.P. STATE AGRO INDUSTRIES CORPORATION LTD. AND ANR.

                               Dl1CEMBER, I .S 1998
B         [K. VENKATASWAMI AND M. J,\\GANNADHA RAO, JJ.]
                                                                                     ..
          Service Law:

           Termination of service-Temporary employee/probationer-Simpliciter
C    or punitive-If the motive behind the preliminary enquiry is not to determine
     the misconduct but merely to decide the question of retention in service, the
     termination is not punitive-In such cases the departmental enquiry be
     dropped at any stage before recording ofevidence and an order oftermination
     simpliciter passed-No .stigma is attached thereby-Departmental enquiry---
D    Non completion of enquiry before the stage of recording evidence and passing
     termination order simpliciter-Effect of

           Termination of serviceS-Simp/iciter or punitive-Test to determine-
    Temporary employee-Holding of enquiry behind the back of the employee-
  . Test is whether it serves as a motive or foundation of the terminatio1l-Court
E can go behind the order for this purpose-If the purpose of the enquiry is
    not to find out the truth of the a/legations of misconduct but to decide
    whether to retain the employee against whom a cloud is raised on his
   conduct. Such enquiry only serves as a motive for the termination-But
    where the enquiry is held at the back of the employee on the basis of the
   evidence where a definite finding is reached about the misconduct of an
F employee and if such finding forms the basis or foundation of the order of
   termination, such order would be punitive and against the principles of
    natural justice.

          Words and phrases-'Motive' and foundation', in the context of
     departmental enquiry under labour law and service jurisprudence.
G
           The appellant was working in the respondent-Corporation as a Branch
     Manager. He was asked to submit his explanation in respect of allegation of
     having fraudulently taken Rs. 2000 from the complainant. The respondent
     f!either conducted any disciplinary enquiry nor any oral enquiry in the
     presence of the appellant. The enquiry officer examined the witnesses and
II                                        558
              R.S. GUPTA v. U.P. STA TE AGRO INDUS. CORPN. LTD.           559

submitted his report without issuing any charge memo or giving a hearing. A
In his report, the enquiry officer concluded that the appellant had taken· a
sum of Rs. 2000 from the complainant and thereafter recommended that the
services of the appellant be terminated. The very next day a simple order of
termination was passed in terms of the appointment order stating that his
services were being terminated with immediate effect on payment of one B
month's salary in lieu of notice. The Administrative Tribunal allowed the
appellant's application challenging the termination order declaring it to be
violative of principles of natural justice. The High Court, on appeal by the '
respondent, held that the enquiry was conducted "to assess the work" of the
appellant as it was decided to dispense with his temporary service in terms
of Condition No. 3 of the order of appointment, which permitted such C
termination on payment of one month's salary or after giving one month
notice. And that was why a simple order of termination was passed and it did
not cause any stigma inasmuch as it did not refer to any disciplinary inquiry.
The High Court also held that there was "sufficient material" to indicate the
unsatisfactory work and conduct of the appellant. Hence this appeal.
                                                                                  D
      Allowing the appeal, this Court

      HELD: 1.1. The termination of the services of a temporary servant or
one on probation, on the basis of adverse entries or on the basis of an
assessment that his work is not satisfactory will not be punitive in as much      E
as the above facts are merely the motive and not the foundation. The reason
why they are the motive is that the assessment is not done with the object
of finding out any misconduct on the part of the officer. It is done only with
a view to decide whether he is to be retained or continued in service. The
position is not different even if a preliminary enquiry is held because the
purpose of a preliminary enquiry is to find out if there is prima facie           F
evidence or material to initiate a regular departmental enquiry. The purpose
of the preliminary enquiry is not to find out misconduct on the part of the
officer and if a termination follows without giving an opportunity, it will not
be bad. Even in a case where a regular departmental enquiry is started, a
charge-memo issued, reply obtained and an enquiry officer is appointed, if        G
at that point of time the enquiry is dropped and a simple notice of termination
is passed, the same will not be punitive because the enquiry officer has not
recorded evidence nor given any findings on the charges. The departmental
enquiry was stopped because the employer was not sure of establishing the
guilt of the employee. The employer was entitled to say that he would not
continue an employee against whom allegations were made the truth of which        H
    560                         SUPREME COURT REPORTS [1998] SUPP. 3 S.C.R.

A   the employer was not interested to ascertain. In fact, the employer by opting
    to pass a simple order of termination as permitted by the terms of appointment
    or as permitted by the rules was conferring a benefit on the employee by
    passing a simple order of termination so that the employee would not suffer
    from any stigma which would attach to the rest of his career if a dismissal
B   or other punitive order was passed. (573-H; 574-A-E]

          1.2. In cases where termination is preceded by an enquiry and evidence
    is received and findings as to misconduct of a definitive nature are arrived
    at behind the back of the officer and where on the basis of such a report,
    the termination order is issued, such an order will be violative of the principles
C   of natural justice inasmuch as the purpose of the enquiry is to find out the
    truth of the allegations with a view to punish him and not merely to gather
    evidence for a future regular departmental enquiry. In such cases, the
    termination is to be treated as based or founded upon misconduct and will
    be punitive. These are obviously not cases where the employer feels that
    there is mere cloud against the employee's conduct but are cases where the
D   employer has virtually accepted the definitive and clear findings of the
    enquiry officer, which are all arrived at behind the back of the employee-even
    though such acceptance offindings is not recorded in the order of termination.
    That is why the misconduct is the foundation and not merely the motive in
    such cases. [574-F-HJ
E
          1.3. The present is the case where the enquiry officer examined
    witnesses, recorded their statements and gave a clear finding of the appellant
    accepting a bribe and even recommended his termination. All these were
    done behind the back of the appellant. The Managing Director passed the
    termination order the very next day. It cannot, in the above circumstances,
F   be stated that the report is a preliminary enquiry report. Its findings are
    definitive. It is not a preliminary report where some facts are gathered and
    a recommendation is made for a regular departmental enquiry. In view of the
    principles laid down, this case is an obvious case where the reports and its
    findings are the foundation of the termination order and not merely the
G   motive. The Tribunal was right in its conclusion. The High Court was in
    grave error in treating such a report as a preliminary report. (575-D-E]

         Parshotam Lal Dhingra v. Union of India, AIR (1958) SC 36; State of
    Bihar v. Gopi Kishore Prasad, AIR (1960) SC 689; State of Orissa v. Ram
    Narayan Das, (1961] 1 SCR 606; Madan Gopal v. State of Punjab, AIR
H   (1963) SC 531; Ranendra Chandra Banerjee v. Union of India, (1964) 2
               R.S. GUPTA v. U.P. STATE AGRO INDUS. CORPN. LTD.             561
SCR 135; Jagdish Mittar v. Union of India, AIR (1964) SC 449; Champaklal            A
Chimanlal Shah v. Union of India, AIR (1964) SC 1854; Gujarat Steel Tubes
Ltd. v. Gujarat Steel Tubes Mazdoor Sabha, (1980] 2 SCC 593; State of U.P.
v. Ram Chandra Trivedi, (1977] l SCR 462; State of Maharashtra v. Veerappa
R. Saboji (1979] 4 SCC 466; State of Punjab v. Sukh Raj Bahadur, !1968]
3 SCR 234; A.G. Benjamin v. Union of India, (1967) 1 LLJ 718 SC; Nepal
Singh v. State of UP., (1980] 3 SCC 288; Samsher Singh v. State of Punjab,          B
[1974] 2 SCC 831 and Anoop Jaiswal v. Government of India, [1984] 2 SCC
369, relied on.

     State of U.P. v. Kaushal Kishore Shukla, [1991] 1 SCC 691; Triveni
Shankar.Saxena v. State of U.P., [1992) Supp.l SCC 524; Sate of UP v. Prem          C
Lata Misra, [1994] 4 SCC 189 and Commissioner of Food & Civil Supplies
v. Prakash Chandra Saxena, [1994] 5 SCC 177, distinguished.

      Beetham v. Trinidad Cement Co., [1960] AC 132; Medical Board of
Queensland v. Byrne, [1958] 100 CLR 582; Saskatchewan College of
Pyhsicians, exp Samuals, (1966] 58 DLR 2nd 622; Re: Drummoyne, MC, D
[1962] SR (NSW) 193; Wisemen v. Borneman, [1971] AC 297 and Re: All
General Canada and Canadian Tobacco Manufacturers' Council, [1986] 26
DLR 4th 677, referred to.

      2.1. If there was any difficulty as to what was 'motive' or 'foundation'
the said doubts were removed. No doubt, it is a labour matter but the distinction   E
so far as to what is 'motive' or 'foundation' is common to labour cases and
cases of employees in government or public sector. [570-EJ

       2.2. It will be a case of motive if the master, after gathering some prima
facie facts, does not really wish to go into their truth but decide~ merely not
 to continue a dubious employee. The master does not want to decide or to           F
direct a decision about the truth of the allegations. But if he conducts an
enquiry only for purpose of proving the misconduct and the employee is not
 heard, it is a case where the inquiry is the foundation and the termination
 will be bad. [571-E]

        CIVIL APPELLATE JURISDICTION : Civil Appeal No. 6344 of                     G
1998.

     From the Judgment and Order 10.12.97 of the Allahabad High Court in
W.P. No. 1501of1981.

        M.L. Varma, Suresh Singh, Pavan Kumar and Lokesh Kumar for the              B
    562                        SUPREME COURT REPORTS [1998) SUPP. 3 S.C.R.

A   Appellant.

          J.M. Khanna and J.P. Goel for the Respondent No. I.

          The Judgment of the Court was delivered by

          M. JAGANNADHA RAO, J. Leave granted.
B
          This appeal is preferred by the appellant questioning the judgment of
    the High Court of Allahabad dated 10.12.97 (Lucknow Bench) which reversed
    the Judgment of the Administrative Tribunal III, Lucknow in claim No. 686 cf
    Till of 1977 dated 3.12.80.

C          The appellant was working in the respondent Corporation as Senior
    Accountant from 27.7.1970. On 17.7.1973, he was appointed as Branch Manager
    and posted at the Meerut Division of the respondent Corporation and
    transferred to various places. He was posted at Faizabad as Branch Manager
    on 3.10.1975 and while he was working there, he received a letter dated
D    12.1.1976 from the Managing Director on 15.1.1976 alleging that one person
    by name Jai Chandra Lal complained that the appellant had fraudulently taken
    Rs. 2000 Thereafter no disciplinary inquiry was conducted nor any oral inquiry
    in the presence of the appellant was conducted. It appears that a report dated ,
    22.1.1976 (from _him and that the appellant should, therefore, offer his
    explanation. The appellant denied the allegation and submitted his explanation
E   on 22.1.1976) was submitted by one Sri Ram Pal Singh, General Manager
    (Fertiliser) without issuing any Charge Memo or giving hearing. Copy of the
    report was also not given to the appellant. Thereafter, on 23 .1.1976, a simple
    order of termination was passed stating that the appellant had been appointed
    as Branch Manager by order dated 17.7.1973, and Condition No.3 of the
F   appointment order provided that the services of the appellant could be
    terminated at any time after giving one month's notice or one month's pay
    in lieu thereof and that his services were being terminated with immediate
    effect in terms of the aforementioned Condition No. 3 of the appointment
    order. It was stated that the appellant could obtain one month's pay from the
    General Manager (Fertiliser), Lucknow.
G
          It was the appellant's case before the Administrative Tribunal, Lucknow,
    that though the termination order appeared to be innocuous, it was still
    punitive in nature inasmuch as it was based on an exparte report of inquiry
    by the said Ram Pal Singh and that the allegation of accepting a bribe in a
    sum of Rs. 2000 was not merely the motive but the very foundation of the
H   order of termination. The appellant also raised a plea of malafides against the
 R.S. GUPTA v. U.P. STATE AGRO INDUS. CORPN. LTD. [M. JAGANNADHA RAO, J) 563

said Shri Ram Pal Singh who allegedly bore a grudge against the appellant            A
as the appellant while working at Meerut in 1973-74 had made certain serious
complaints against one Balbir Singh Chauhan, Assistant Sales Officer-I - who
was a close friend of the said Shri Ram Pal Singh. In fact, soon aft::r 'the
appellant complained against Balbir Singh, a letter of transfer is said to have
been engineered and the appellant was transferred to Varanasi on 9.5.74.             B
Various details have been given to prove ma/ajides.

      The Administrative Tribunal, Lucknow in its order dated 31.12.80
accepted the appellant's contention and allowed the appellant's application
and quashed the termination order declaring it to be violative of principles of
natural Justice and hence void. It also held that the inquiry report of Shri Ram     C
Pal Singh was a ma/a fide one. It was, however, stated that the respondents
would be at liberty to initiate regular inquiry if they so desired and deal with
the appellant's case in accordance with law.

      Aggrieved by the said judgment, the respondent Corporation filed Writ
Petition No. 1591 of 1981 and the same was allowed by the High Court on              D
10.12.97 holding that though an inquiry was conducted by Shri Ram Pal Singh
and a report was given against the appellant, the same was conducted "to
assess the wor/C' of the appellant as it was decided to dispense with his
temporary service in terms of Condition No.3 of the order of appointment,
which permitted such termination on payment of one month's salary or after
giving one month's notice. That was why a simple order of termination was            E
passed and it did not cause any stigma inasmuch as it did not refer to any
disciplinary inquiry. There was "sufficient material" to indicate the
unsatisfactory work and conduct of the appellant. The High Court referred to
various decisions relied upon by the appellant and said that they did not
apply. It, however, held that the ruling of this Court in State of U.P. v. Kaushal   F
Kishore Shukla, [1991) I SCC 691 was in point, that whenever, the competent
authority was satisfied that the work and conduct of a temporary employee
was not satisfactory, it could pass a simple order of termination and such an
order could not be treated as one of punishment. The High Court also referred
to Triveni Shanker Saxena v. State of U.P., [1992] Suppl. 1 SCC 524 and State
of U.P. v. Km. Premlata Misra, [1994) 4 sec 189. The High Court held as              G
follows:

        "In view of the law laid down by the Hon 'ble Supreme Court, we are
        of the opinion that the temporary services of the respondent No. I
        have not been terminated by way of punishment founded on any
        misconduct but on the other hand, the competent authority has found          H
    564                          SUPREME COURT REPORTS [1998] SUPP. 3 S.C.R.

A          that the respondent No.I was not fit to be continued in services on
           account of unsatisfactory work and conduct. There is no material to
           establish that the respondent No. I had outstanding or meritorious
           service record."

          It further observed:
B
            "Further in view of the law laid down by Hon'ble Supreme Court, even
            if some exparte preliminary inquiry has been conducted or
            disciplinary inquiry was initiated to inquire into some misconduct,
            it is the option of the competent authority to withdraw the disciplinary
            proceedings and take the action of termination of service under the
c           terms of appointment and the same would not be by way of
            punishment."

    On this reasoning, the Writ Petition of the Corporation was allowed, the order
    of the Tribunal was set aside and the termination order was upheld.

D          Aggrieved by the Judgment of the High Court, the appellant has preferred
    this appeal. It is contended by the learned senior counsel for the appellant
    Sri M.L. Verma that the High Court had assumed that the inquiry was a
    preliminary inquiry and that the appellant's conduct was not satisfactory. On
    the other hand, the report was not preliminary inquiry report but it was in fact
    a final one which gave findings as to the guilt of the appellant in regard to
E   the allegation of receiving a bribe of Rs. 2000 and the said finding was arrived
    at by examining witnesses behind the back of the appellant and, therefore,
    there was a clear violation of principles of natural justice. In other words, the
    findings in the inquiry report were the 'foundation' for the termination. This
    was not a case where some allegations against the appellant were the 'motive'.
F   It was permissible for the Court to go behind the order and find out if it was
    punitive in nature. It was also argued that the High Court was in error in not
    going into the question of malajides even though the Tribunal had held that
    the inquiry report was vitiated by malajides.

          On the other hand, learned counsel for the respondent, Sri J.M. Khanna
G   made a vehement submission that the termination was the result of a preliminary
    inquiry and it was always permissible to rely on such an inquiry and pass a
    simple order of termination by giving a one month's notice or giving one
    month's pay in lieu thereof. He contended that it was not permissible for the
    Court to look into the report given by Sri Ram Pal Singh to the General
    Manager as the same was confidential in nature. The Court could not go
H   behind the order.
 R.S. GUPTA v. U.P. STATE AGRO INDUS. CORPN. LTD. [M. JAGANNADHA RAO, J.] 565

       On the basis of the above contention, the following point arises for         A
. consideration:

     Whether the report of Sri Ram Pal Singh was a preliminary report and
whether it was the motive or the foundation for the termination order and
whether it was permissible to go behind the order?
                                                                                    B
      On this point, the question is whether the contents of the report dated
22.1.76 of Sri Ram Pal Singh against the appellar.t were the motive or foundation
for the termination order dated 23.1.76 issued by the General Manager?

      Now, there are two lines of cases decided by this Court which deal with
the question in issue. In certain cases of temporary servants and probationers,     C
this Court has taken the view that if the exparte inquiry or report are the
motive for the termination order, then. the termination is not to be called
punitive merely because principles of natural justice have not been followed.
On the other hand. there is another line of cases where this Court has held
that the facts revealed in the inquiry are not the motive but the foundation
for the termination of the services of the temporary servant or probationer,        D
and hence punitive as principles of natural justice have not been followed,
and such orders are to be declared void. This Court has· held that for finding
out whether a given case falls within either of these two categories, it is
permissible for the High Court or Administrative Tribunal to go behind the
order and look into the record of the proceedings, the antecedent and attendant     E
circumstances culminating in the order of termination.

     In what situations the allegations of misconduct will be the motive and
in what cases they will be the foundation, it is argued, is not clear enough.

      In fact, Krishna Iyer, J. in his characteristic style described the words
'form', 'substance', 'motive' and 'foundation' as the facts of an inscrutable       F
sphinx, baffling lawyers and judges alike. [See Sams her Singh v. State of
Punjab, (1974] 2 SCC 831 at 889]. According to him, the need in this branch
of law is to lay down a simple test which can be grasped by the administrator
or civil ~ervant without much subtlety.

      De Smith says, as to procedural fairness where preliminary inquiries are      G
conducted (See 5th Ed., 1995 (page 491, para 10.027) that the question of
"proximity between investigation and act or decision" depends on the degree
of proximity so far as the person affected claiming a right of hearing is
concerned. He says:

        "Thus, a person empowered or required to conduct a preliminary              H
    566                            SUPREME COURT REPORTS [1998] SUPP. 3 S.C.R.

A           investigation with a view to recommending or deciding whether a
            formal inquiry or hearing (which may lead to a binding and adverse
            decision) should take place, is not normally under any oMigation to
            comply with rules of fairness (Beetham v. Trinided Cement Co., (1960)
            A.C., 132; Medical Board of Queens Landv. Byme, (1958) 100 C.L.R.
            582; Saskatchewan College of Physicians, ex P Samuels, (1996) 58
B           D.L.R.(2ND) 622; Re: Drummoyne M.C. (1962). S.R. (N.S.W.) 193. But
            he may be placed under such an obligation if his investigation is an
            integral part of a process which may terminate in action adverse to
            the interest of a person claiming to be heard before him. (Wiseman v.
            Borneman (1971) AC 297). Re: All General Canada and Canadian
C           Tabacoo Manufacturers' Council (1986) 26.D.L.R (4th) 677 ."

         The above principles stated in De Smith are, as we shall presently see,
    very close to what is laid down in Sams her Singh 's case and other cases
    decided by this Court.

D          It is, therefore, necessary to refer to the development of the law in this
    branch between 1958 to 1974 in the first phase - a development which was
    noticed by Krishna Iyer, J. in the above case and also by E.S. Venkataramiah,
    J. (as the then was) in Anoop Jaiswal v. Government of India, [1984] 2 SCC
    369.

E         There are atleast seven Constitution Bench Judgments and a Judgment
    of seven Judges of this Court on this issue. It will be seen that from stage
    to stage the law has been developed.

          The first decision of the Constitution Bench was in Parshottam Lal
    Dhingra v. Union of India, AIR (1958) SC 826. There a twin test was laid down
F   - whether the order in terms of the appointment gave a right to terminate and
    whether the order was punitive in nature. If misconduct was motive, the order
    was not punitive but if it was the foundation it was punitive. In that case,
    the employee was working in a higher post in an officiating capacity and that
    appointment was terminated and he was reduced in rank. S.R. Das, C.J. stated
G   (para 28) (p49) that misconduct, negligence, inefficiency or other
                               0


    disqualification might be the motive or the inducing factor which influenced
    the Government to take action under the terms of the contract of employment
    or the specific service rule, and the motive was irrelevant. But if the termination
    was 'founded' on misconduct, negligence, inefficiency or other disqualification,
    it would have to be treated as a punishment. It was also held that the use
H   of the word 'termination' or 'discharge' was not conclusive. In spite of the
R.S. GUPTA v. U.P. STATE AGRO INDUS. CORPN. LTD. [M. JAGANNADHA RAO, J.J 567

use of such innocuous expressions, the Court could still hold it to be punitive.   A
On the facts of the case the termination of the officiating appointment was
based upon certain adverse remarks and it was held that it was not by way
of punishment.
      Next came the decision of the Constitution Bench in State of Bihar v.
Gopi Kishore Prasad, AIR (1960) SC 689. Here a test of 'inquiry' was laid          B
down. That was a case of probationer. The Government had come to the
conclusion, on inquiry, that the respondent was unsuitable for the post held
on probation. Because of the inquiry, Sinha, C.J. held this to be "clearly by
way of punishment." Termination (without notice) but after holding an inquiry
into the alleged misconduct or inefficiency or some similar reason would be
punitive. Government could not, "brand him dishonest and incompetent               c
without inquiry." If it did so, it would be by way of punishment, but not if
the position "was that he was found unsuitable', without holding an inquiry.
Both Dhingra and Gopi Kishore Prasad were decided when the law in this
branch was just developing.
      However, Shah, J. (as he then was) in State of Orissa v. Ram Narayan         D
Das, [ 1961] 1 SCR 606 gave a new dimension to the legal principles. That case
also related to a probationer but was governed by Rule 55-B of the Civil
Services (Classification, Control and Appeal) Rules which was a special
provision and which stated that "where it is proposed to terminate the
employment of a probationer, whether during or at the end of the period of         E
probation, for any specific fault or on account of his unsuitability for the
service, the probationer shall be apprised of the grounds of such proposal
and given an opportunity for show cause against it, before orders are passed
by the authority competent to terminate the employment." If the test of
'inquiry' laid down by Sinha, CJ was to be applied, every termination of a
probationer made by following the rule and conducting an inquiry would             F
become punitive. The 'inquiry test' (as pointed out by Krishna Iyer, J. in
Samsher Singh 's case) broken down. A new test had to be invented. Therefore
Shah, J. (as he then was) laid down a new test which required that one should
look into "object or purpose or the inquiry" and not merely hold the termination
to be punitive merely because of an antecedent inquiry. J.C. Shah, J (as he        G
then was) said:

        "Whether it amounts for an order of dismissal depends upon the
        nature of the inquiry, if any, the proceedings taken therein and the
        substance of the final orders passed on such inquiry."

      The learned Judge pointed out that the employee being a probationer,         H
    568                        SUPREME COURT REPORTS [1998] SUPP. 3 S.C.R.

A   "the inquiry against the respondent was for ascertaining whether he was fit
    to be confirmed." His Lordship pointed out that this inquiry was not of the
    same nature as an inquiry into charges of misconduct, negligence, inefficiency
    or other disqualification. On the facts of the case, the termination of a
    probationer was upheld inasmuch as the purpose of the inquiry was to find
    out if the employee could be confirmed. The purpose of the inquiry was not
B   to find out if he was guilty of any misconduct, negligence, inefficiency or
    other disqualification.




C
          We then come to the third case decided by the Constitution Bench in
    Madan Gopal v State of Punjab, AIR (1963) SC 5312. Here Shah, J. (as he
    then was), applied the same principle laid down earlier by him but in this case
                                                                                      l
    he held the order was punitive. That was a case of a temporary employee.
    There was a report of the Settlement Officer about the 'misconduct' of the ·
    employee and the termination was based on the said report. It was, therefore,
    held that though the order of termination was an order simpliciter still the
    Court could go behind the same and further if the foundation was the finding
D   as to misconduct, then the order was punitive. The termination order was
    quashed, even though the employee participated therein because the statutory
    procedure for a regular departmental inquiry was not followed. Emphasis was
    again made on the "purpose of the inquiry". The distinction between the
    earlier case and this case was that while in Ram Narayan Das' Case, the
E   inquiry was made to find out if the probationer could be continued and
    confirmed and was, therefore, not punitive, the position in the Madan Gopal's
    case was that the inquiry by the Settlement Officer was to find out if the
    employee was guilty of misr,onduct. In fact the termination order was based
    on the inquiry held behind his back and was held to be punitive. In Ravindra
    Chandra v. Union ofIndia, AIR (1963) SC 1552, being a case of a probationer
F   to whom Rule 55-B of the Central Rules applied, Wanchoo J. (as he then was)
    upheld the order on the ground that the limited purpose of the inquiry was
    to find out whether he could be 'retained or not' in the service. In other
    words, the inquiry was not with a view to see ifthe employee had misconducted
    in his duties. This case was similar to Ram Narayan Das case.
G
          The theory of 'object of the inquiry' was further emphasised by the
    Constitution Bench in Jagdish Mitter v. Union of India. AIR (1964) SC 449.
    That was a case of a temporary employee. The discharge from service was
    by way of an order 'simpliciter'. But there, an inquiry was held and the
    termination order was based on it as it stated on its face that it was 'found
H   undesirable' to retain the employee and hence his services were being
R.S. GUPTA v. U.P. STATE AGRO INDUS. CORPN. LTD. [M. JAGANNADHA RAO, J.] 569

terminated. The order was held to be punitive on its face and was quashed.           A
Gajendragadkar, J. (as he then was) discussed the earlier cases and held that
in every case the purpose of the inquiry was crucial. If the inquiry was held
'only for the purpose of deciding whether the temporary servant should be
continued or not, it could not be treated as punitive and that the motive
operating in the mind of the authority was not relevant. But "the form in
which the order terminating the service is expressed will not be decisive." It       B
was held that "what the Court will have to examine in each case would be,
having regard to the material facts existing upto the time of discharge, is the
order of discharge in substance one of dismissaf'. Therefore, the 'form' was
not of importance but the 'substance' was.

      Finally, we come to the seventh case, Champaklal Chimanlal Shah v.
                                                                                     c
Union of India, AIR (1964) SC 1854, a case strongly relied upon by the
learned counsel for the respondent, Shri J.M. Khanna. Here, it was the case
of a preliminary inquiry which was intended to find out if aprima facia case
was made out to start a regular departmental inquiry. The question was
whether a termination order passed soon after the completion of the preliminary      D
inquiry could be treated as punitive. Wanchoo, J. (as he then was) held that
it could not be as held. Once the preliminary inquiry was over, it was open
to the employer not to make a regular inquiry for proving the guilt of the
employee. The employer could stop at that stage and pass a simple order of
termination. The facts as gathered or revealed in the preliminary inquiry would      E
be the motive and not the 'foundation' since there was no inquiry as to their
correctness made. The order could not be quashed as being punitive.

       We finally come to the seven Judge Judgment rendered in Samsher
Singh v. State ofPunjab, [1974] 2 SCC 831, to which we made a brief reference
at the beginning of this Judgment. The case concerned two Judicial Officers.         F
So far as the termination order passed against Sri Ishwar Chand Aggarwal
was concerned, it was quashed holding it to be punitive as it was based on
the report of an Inquiry Officer appointed by the Director of Vigilance. The
Inquiry Officer recorded statements of witnesses behind the back of the
officer and definitive findings therein were the basis for the termination. It was
not a preliminary inquiry. A.N. Ray, C.J. held that the object of the said inquiry   G
was (see p 855) (para 79 and 80)

        "to ascertain the truth of the allegation of misconduct. Neither the
        report nor the statements recorded by the Enquiry Officer reached the
        appellant. The Inquiry Officer gave his findings of misconduct. ... The
        order of termination was because of the recommendation in the report.        H
    570                         SUPREME COURT REPORTS [1998] SUPP. 3 S.C.R.

A           The order of termination of the services of Ishwar Chand Aggarwal
            is clearly by way of punishment in the facts and circumstances of the
            case .... The form of the order is not decisive as to whether the order
            is by way of punishment. Even an innocuously worded order
            terminating the service may, in the facts and circumstances of the case
            establish that an inquiry into allegation of serious and grave character
B           of misconduct involving stigma has been made in infraction of Article
            311. In such a case, the simplicity of the form of the order will not give
            any sanctity. That is exactly what has happened in the case of !shwar
            Chand Aggarwal. The order of termination is illegal and must be set
            aside."
c         A.N. Ray, C.J., wrote the opinion for himself and five other learned
    Judges. Krishna Iyer, J. wrote a separate but concurring Judgment where he
    referred to the new dimension to the law given by Shah, J. (as he then was)


D
    in the sixties. The learned Judge said that the words 'form', 'substance',
    'motive' and 'foundation' were baffling and the need of the hour was a simple
    test.
                                                                                         -
          If there was any difficulty as to what was 'motive' or 'foundation' even
    after Shamsher Singh 's case, the said doubts, in our opinion, were removed
    in Gujarat Steel Tubes v. Gujarat Steel Tubes Mazdoor Sangh, [1980] 2 SCC
    593, again by Krishna Iyer, J. No doubt, it is a labour matter but the distinction
E   so far as what is 'motive' or 'foundation' is common to labour cases and
    cases of employees in government or public sector. The learned Judge again
    referred to the criticism by Shri Tripathi in this branch of law as to what was
    'motive' or what was 'foundation', a criticism to which reference was made
    in Samsher Singh 's case. The clarification given by the learned Judge is, in
F   our opinion, very instructive. It reads as follows (at pages 616-617):

            "Masters and servants cannot be permitted to play hide and seek with
            the law of dismissals and the plain and proper criteria are not to be
            misdirected by terminological cover-ups or by appeal to psychic
            processes but must be grounded on the substantive reason for the
G           order, whether disclosed or undisclosed. The Court will find out from
            other proceedings or documents connected with the formal order of
            termination what the true ground for the termination is. If thus
            scrutinised, the order has a punitive flavour in cause or consequence,
            it is dismissal. If it falls short of this test, it cannot be called a
            punishment. To put it slightly differently, a termination effected because
H           the master is satisfied of the misconduct and of the consequent
RS GUPTA v. U.P. STATE AGRO INDUS. CORPN. LTD. [M JAGANNADHA RAO, J.] 571

       desirability of terminating the service of the delinquent servant, it is A
       a dismissal, even if he had the right in law to terminate with an
       innocent order under the standing order or otherwise. Whether, in
       such a case the grounds are recorded in a different proceedings from
       the formal order does not detract from its nature. Nor the fact that,
       after being satisfied of the guilt, the master abandons the enquiry and B
       proceeds to terminate. Given an alleged misconduct and a live nexus
       between it and the termination of service the conclusion is dismissal,
       even if full benefits as on simple termination, are given and non-
       injurious terminology is used.

       On the contrary, even if there is suspicion of misconduct the master        C
       may say that he does not wish to bother about it and may not go
       into his guilt but may feel like not keeping a man he is not happy
       with. He may not like to investigate nor take the risk of continuing
       a dubious servant. Then it is not dismissal but termination simpliciter,
       if no injurious record of reasons or punitive pecuniary cut-back on his
       full terminal benefits is found. For, in fact, misconduct is not then the   D
       moving factor in the discharge. We need not chase other hypothetical
       situations here."

      In other words, it will be a case of motive if the master, after gathering
some prima facie facts, does not really wish to go into their truth but desides
merely not to continue a dubious employee. The master does not want to             E
decide or to direct a decision about the truth of the allegations. But if he
conducts an inquiry only for purpose of proving the misconduct and the
employee is not heard, it is a case where the inquiry is the foundation and
the termination will be bad.

       Subsequent to the above cases, there have been a number of other F
cases where the above principles have been applied. We shall refer to a few
of them where some more principles have been discussed. In State of U.P. v.
Ram Chandra Trivedi, [1997] I SCR 462, the employee's service were terminated
as he allowed some other employees to impersonate him in an examination.
The order was innocuous but the case was preceded by an inquiry and it was G
held that the petitioner in his pleadings had not made out a case for calling
for departmental records to examine if it was a case of punishment. That was
how this case was explained by Pathak, J. (as he then was) in State of
Maharashtra v. SR. Saboji, [1971] 4 SCC 466. In AnoopJaiswal v. Government
of India [1984] 2 SCC 369, it was held while quashing the orderoftermination,
that it was open to the Court to go behind the order and find out if the report/ H
     572                         SUPREME COURT REPORTS [1998) SUPP. 3 S.C.R.

 A recommendation of the superior authority was a camouflage and if that was
     the basis or foundation for the order the report/recommendation, then it
     should be read along with the order for the purpose of determining the true
     character of termination. If on a reading of the two together, the Court reached
     the conclusion that the alleged finding of misconduct was the cause or basis
 B   of the order, and that but for the report containing such a finding, the order
     would not and could not have been passed, the termination order would have
     to fall to the ground as having been passed without the officer being afforded
     a reasonable opportunity. It was also held that it was wrong to presume tha!
     an order would be punitive only if a regular inquiry was conducted ex parte
     or behind the back of the officer. Even if it was not a regular inquiry, any other
 C   inquiry where evidence was taken and findings were arrived behind the back
     of the officer, would make the subsequent termination bad. Vankataramiah, J.
     (as he then was) pointed out in the above case the shift in the Jaw as brought
     about by Samsher Singh 's case.

           So far as Triveni Shankar Saxena v. State of U.P., [1992] Suppl. 1 SCC
 D 524 a>cd State of U.P. v. Prem Lala Motors, [1994] 4 sec 189, relied upon by
     the High Court are ccncemed, in the former case, the termination order was
     a simple order which did not cast any stigma and there were several adverse
     entries in his confidential reports. The termination was as per rules. In the
     latter case the employee's superiors complained that the employee was not
 E   regular in her work, and was in the habit of leaving office during office hours.
     A simple order of termination was passed in terms of the order of her temporary
     appointment. There was no prior inquiry. In both these cases, the termination
     orders were upheld.
                     "
           We shall now refer to a different type of cases where a departmental
 F inquiry was started, then dropped and a simple order of termination was
    passed. In State of Punjab v. Sukh Raj Bahadur, [ 1968) 3 SCR 234, the charge
    memo was served, reply given and at that stage itself, the proceedings were
    dropped and a termination order was passed. The High Court felt that the
    'object of departmental inquiry', being to punish the employee, the order of
  G termination must be treated as punitive. This was not accepted by a three
    Judge Bench consisting of Justice Shah (as he then was) who had laid down
    in Madan Copa/ 's case AIR (1963) SC 531, the principle of 'object of the
    inquiry'. This Court reversed the High Court Judgment and held that neither
    Madan Gopa/'s case nor Jagdish Mitter 's case AIR (1964) SC 449, applied.
    This was because in the case before them the inquiry did not go beyond the
. H stage of the explanation. No findings were given and no inquiry report was
  R.S. GUPTA v. U.P. STATE AGRO INDUS. CORPN. LTD. [M. JAGANNADHA RAO,J.] 573


  submitted as in the above two cases. In that case (i.e. Sukh Raj Bahadur)        A
· this Court felt that the decision in A.G. Benjamin v. Union of India, (Civil
  Appeal No. 1341 of 1966 dated 13.12.1966) (SC) was more direct. In Benjamin's
  case, a charge memo was issued, explanation was received and an Enquiry
  Officer was also appointed but before the inquiry could be completed, the
  proceedings were dropped stating that: "departmental proceedings will take       B
  a much longer time and we are not sure whether after going through all the
  formalities, we will be able to deal with the accused in the way he deserves."
  There also, the order was held not to be punitive. Following the above case,
  this Court in Sukh Raj Bahadur 's case stated that the position before them
  was similar to what happened in Benjamin's case and concluded as follows:

         "the departmental inquiry did not proceed beyond the stage of
                                                                                   c
         submission ofa chargesheet followed by the respondent's explanation
         thereto. The inquiry was not preceded with, there were no sittings of
         any inquiry officer, no evidence recorded and no conclusion arrived
         at in the inquiry."
                                                                                   D
       The underlined words are very important and demarcate the line of
 distinction. If the inquiry officer held no sittings, did not take evidence nor
 record any conclusions and if at that stage the inquiry was dropped and a
 simple order of termination was passed, the same would not be punitive.

       In Nepali Singh v. State ofU.P., [I988) 3 SCC 370, a three Judge Bench      E
 held the order to be punitive as it was passed after issuing a charge memo,
 a reply received, even though no evidence was adduced and no findings were
 given. But in a latter three Judge Bench case in State of U.P. v. Kaushal
 Kishore Shukla, [ 199 I) 1 SCC 691, Nepali Singh 's case was not followed as
 being a judgment rendered per incuriam as it did not consider Champak Lal 's      F
 case AIR (1964) SC 1854. Of course, the above case, i.e. Kaushal Kishore
 Shukla 's case was one where there was an adverse entry and only a preliminary
 report and then a simple order of termination was issued. That order was
 upheld. Similarly, in Commissioner of Food & Civil Supply v. P.C. Saxena,
 [I 994) 5 SCC 177, the facts were that the departmental inquiry was started and
 dropped and this Court held the order not to be punitive.                         G
       It will be noticed from the above decisions that the termination of the
 services of a temporary servant or one on probation, on the basis of adverse
 entries or on the basis of an assessment that his work is not satisfactory will
 not be punitive inasmuch as the above facts are merely the motive and not
 the foundation. The reason why they are the motive is that the assessment         H
    574                         SUPREME COURT REPORTS [1998] SUPP. 3 S.C.R.

A is not done with the object of finding out any misconduct on the part of the
     Officer, as stated by Shah, J. (as he then was) in Ram Narayan Das 's case.
     It is done only with a view to decide whether he is to be retained or continued
     in service. The position is not different even if a preliminary inquiry is held
    because the purpose of a preliminary inquiry is to find out if there is prima
B   facie evidence or material to initiate a regular departmental inquiry. It has been
    so decided in Champaklal 's case. The purpose of the preliminary inquiry is
    not to find out misconduct on the pan of the Officer and if a termination
    follows without giving an opportunity, it will not be bad. Even in a case where
    a regular departmental inquiry is started, a charge memo issued, reply obtained,
    and an Enquiry Officer is appointed - if at that point of time, the inquiry is
C   dropped and a simple notice of termination is passed, the same will not be
    punitive because the Enquiry Officer has not recorded evidence nor given
    any findings on the charges. That is what is held in Sukh Raj Bahadur's case
    and in Benjamin's case. In the latter case, the departmental inquiry was
    stopped because the employer was not sure of establishing the guilt of the
D   employee. In all these cases the allegations against the employee merely
    raised a cloud on his conduct and as pointed by Krishna Iyer, J. in Gujrat
    Steel Tubes case, the employer was entitled to say that he would not continue
    an employee against whom allegations were made the truth of which the
    employer was not interested to ascertain. In fact, the employer, by opting to
    pass a simple order of termination as permitted by the terms of appointment
E   or as permitted by the rules was conferring a benefit on the employee by
    passing a simple order of termination so that the employee would not uffer 0



    from any stigma which would attach to the rest of his career if a dismissal
    or other punitive order was passed. The above are all examples where the
    allegations whose truth has not been found, and were merely the motive.

F         But in cases where the termination is preceded by an inquiry and
    evidence is received and findings as to misconduct of a definitive nature are
    arrived at behind the back of the Officer and where on the basis of such a
    report, the termination order is issued, such an order will be violative of
    principles of natural justice inasmuch as the purpose of the inquiry is to find
G   out the truth of the allegations with a view to punish him and not merely to
    gather evidence for a future regular departmental inquiry. In such cases, the
    termination is to be treated as based or founded upon misconduct and will
    be punitive. These are obviously not cases where the employer feels that
    there is a mere cloud against the employees' conduct but are cases where the
    employer has virtually accepted the definitive and clear findings of the Inquiry
H   Officer, which are all arrived at behind the back of the employee - even though
 R.S. GUPTA"· UP. STATE AGRO INDUS. CORPN LTD. [M JAGANNADHA RAO, J.] 575

such acceptance of findings is not recorded in the order of termination. That       A
is why the misconduct is the foundation and not merely the motive, in such
cases.

      Coming now to the facts of the case before us, the inquiry officer, Sri
R.P. Singh examined witnesses and in his report dated 22.1.76 has said: "I          B
conclude that Sri R.P. Gupta took a sum of Rs.2000 from Sri Jai Chandra Lal",
thereafter referring to certain facts said they 'go to prove the correctness of
the complaint". Not only that, he concluded "I, therefore, suggest that service
of Shri R.S. Gupta may be terminated and one month salary may be given to
him in lieu of the notice". The very next day, the impugned simple order of
termination followed.                                                               C
       In our view, it is an absolutely clear case where the inquiry officer
examined witnesses, recorded their statements and gave a clear finding of the
appellant accepting a bribe and even recommended his termination. All these
were done behind the back of the appellant. The Managing Director passed            D
the termination order the very next day. It cannot in the above circumstances
be stated, by any stretch of inspection that the report is a preliminary inquiry
report. It's findings are definitive. It is not a preliminary report where some
facts are gathered and a recommendation is made for a regular departmental
inquiry. In view of the principles laid down in the cases referred to above, this
case is an obvious case where the report and its findings are the foundation        E
of the tennination order and not merely the motive. The Tribunal was right
in its conclusion. The High Court was in grave error in treating such a report
as a preliminary report.

      For all the above reasons, we set aside the High Court's Judgment and         F
restore the Tribunal's order. There will be no order as to costs.

R.K.S.                                                          Appeal allowed.