Holding

The discharge under paragraph 521(10)(c) of the Shastri Award is a punitive disciplinary action and not retrenchment, so Section 25F does not apply.

Summary

The State Bank of India dismissed a clerk after a departmental inquiry found him guilty of several acts of misconduct. The bank invoked paragraph 521(10)(c) of the Shastri Award, discharging him on payment of one month's salary in lieu of notice, and claimed this was not a disciplinary action. The Union raised an industrial dispute; the Labour Court upheld the dismissal, but the Bombay High Court set it aside, holding the termination to be retrenchment under Section 2(oo) of the Industrial Disputes Act and therefore violative of Section 25F. The Supreme Court examined the language of paragraphs 521(5)(e) and 521(10)(c) and held that the discharge is a punitive disciplinary measure, not retrenchment, so Section 25F does not apply. Consequently, the High Court’s order was set aside and the Labour Court’s award restored, without requiring the employee to refund back‑wages already paid.

Issues considered

Whether termination of service under paragraph 521(10)(c) of the Shastri Award constitutes retrenchment within the meaning of Section 2(oo) of the Industrial Disputes Act, 1947.
Whether Section 25F of the Industrial Disputes Act applies to such termination.
Interpretation of paragraphs 521(5)(e) and 521(10)(c) of the All India Industrial Tribunal (Bank Disputes) Award – is the discharge punitive disciplinary action or a simple termination.

Legislation cited

Industrial Disputes Act, 1947s. 25F, s. 2(oo)

Subjects

industrial disputeretrenchmentdisciplinary actionShastri Awardtermination of serviceSection 25Fpunitive dischargebank clerklabour law

Judgment

STATE BANK OF INDIA
A
v.
WORKMEN OF STATE BANK OF INDIA AND ANR.

AUGUST 24, 1990

[P.B. SAWANT AND K. RAMASWAMY, JJ.] B
Industrial Disputes Act, 1947: Sections 2(oo) and 25F-Bank
clerk-Charged with misconduct-Issued notice and enquiry held-
Para 52I(IO)(a) Shastri Award-Discharged on payment of one
month's pay in lieu of notice-Held discharge-Punitive in character-
Not amounting to 'retrenchment'.
c
All India Tribunal (Bank Disputes) Award-Shastri Award-
Paragraphs 52 I(5)(c) and 52 I ( IO)(c)-Punitive discharge a11d dis-
charge simpliciter-Distinction between-Predominant object of the
Award-To protect employees.
D
The appellant Bank instituted a departmental inquiry against one
of its employees, a clerk in one of its branches. The departmental
t inquiry was held for four acts of misconduct and the inquiry officer
came to the conclusion that two of the charges were fully proved, while
one charge was proved to a limited extent, and the fonrth charge was
not established. On the basis of tl!e report of the inquiry officer, !he E
competent authority decided to dismiss the employee from service, and
issued a notice to him under paragraph 52I(IO)(a) of the Award of the
All India Industrial Tribunal popularly known as the Shastri Award,
requiring him to show-cause as to why the said punishment should not
be imposed on him. He was also given a hearing as required by the said
provision, and thereafter an order was passed to the effect: that the F
established charges viz. uttering indecent words, threatening the
agent, and failure to do the work allotted are quite serious and would
warrant dismissal, though he may not be dismissed, in view of the
extenuating circumstances, but that at the same time it would not be
desirable to retain him in the Bank's service, and that as such, "he be
discharged on payment of one month's pay and allowances in lieu of G
notice. In terms of para 52l(IO)(c) of the Shastri Award this would not
amount to disciplinary action."

An industrial dispute was raised by the first respondent-Union,
and it was referred to the Central Government Labour Court, for
" adjudication and by its award the Labour Court upheld the order of H
dismissal.
II
12 SUPREME COURT REPORTS [1990] Supp. l S.C.R.
A The first respondent-Union preferred a writ petition to the High
Cotirt arid raised several contentions, but the High Court confined its
decision only to oiie point, viz. whether the termination of the serVice
Was retrefichment, and whether it was made in accordance with the
provisions of Section 25F of the Industrial Disputes Act, 1947; held that
the termination of the service of the second respondent was retrench-
ment within the meaning of section 2(00), and was made in breach of the
statutory provision contained in Section 25F in as much as no retrench-
ment compensation was paid to the employee, and set aside, the order of
termination of service.

In the appeal by the Bank to this Court, the question for consid-
eration was: whether the order of termination of service served on the
employee, llmoonts to punishment or not.

Allowing the appeal, this Court,

HELD: I. It is not possible to sustain the view taken by the High
b Court since it proceeds on too literal an interpretation of the provisions
of paragraphs 521(-S)(e) and 52J(JO)(c) of the Award and ignoring their
context. [17BJ

2. The termination of service of the employee in the instant case
under paragraph 521(10)(c) of the Award is as a result of the discip-
E
linary proceedings, and is punitive. It is, therefore, not "retrench-
ment" within the meaning of Section 2(oo) of the Industrial Disputes
Act, 1947. Hence, there was no questiou of complyiug with the provi-
sions of Section 25F of the Act. The decision of the High Court has,
therefore, to be set aside. [25G-H; 26A)

3. It is clear from the context in which sub-clause (e) of sub-para
(5) occurs that the entite expression, namely, "have his misconduct
condoned and be merely discharged" has nothing but penal implica-
tions, and the measure mentioned therein is a sequal to the disciplinary
action taken for one of the gross misconducts mentioned in sub-para
(4). His not possible to arrive at any other conclusion on a reading of
the sub-paragraph as a whole. The discharge spoken of there is nothing
but a punishment for a gross misconduct. This is so not only because it
is enumerated as· one of the punishments along with others but also
because firstly there is a provision of simple discharge elsewhere in
paragraph 522 of the Award, and when the Award intended to provide
for it, it has done so in sub-paras (2)(c), (2)(d) and (3). [20G-H; 21A-B)
H
S.B.I. v. WORKMEN 13

4, Sub-paras (9) and (10) of paragraph 521 lay dowii the pfoce' A
dure for taking disciplinary action as well as for awarding purilshriieiit
following such action. Sub-paras (9); lO(a), lO(b) would indlcaie that
discharge under sub-paras (2)(c), (3), (5) and (lO)(c) is also a punish'
ment, for when the employee is discharged under the said provisions
•fter the inquiry, under the provisions of sub-paras (9) and (10), there
is nci provision made for treating either the whole cir part of the period ll
of suspension during the inquiry, as on duty. [210 & G-H]

5. In view of the fact that sub-clause (a) requires that a hearing
should he given to the employee against the proposed punishment, the
authority is enjoined under sub-clause (c) to take into account the gra-
vity of- the mis-conduct, the previous record of the employee arid any
other aggravating or extenuating circumstances that may exist and may C
be brought ou record "while awarding punishment by way of discip-
linary action". The sub-clause then provides for discharge with or with-
out notice or on payment of a month's pay and allowances, in lieu of
notice. The punishment of discharge is to be awarded in two circum-
stances. _The first circumstance is when there are sufficiently extenuat- D
ilig circumstances but the mis-conduct is of a "gross" type. The second
circumstance is when the charge is such that the Bank does not for some
reason or other think it expedient to retain the employee any foni:er in
service but the evidence is insufficient to prove the charge. [220-E]

6. Read with sub-para (5)(e), the provisions of sub-clause (c) of E
sub-para (10) become more clear that if a mis-conduct is riot of a
"gross" type, it may be merely condoned without any further action.
But when it is of "gross" type, the authority has no option but to
condone and to proceed to discharge the employee. The expressions
i used both in sub-para (5)(e) and sub-para lO(c) in that respect are
identical. Similar is the action contemplated for the second circum' F
stance referred to in sub-para lO(c), namely when the charge though
unsustainable for want of evidence is such that it is considered inex•
pedient to retain the employee in service. [230-E]

7. Since in the context, such a discharge is by way ofpunisbmerit,
the relevant provisions give a discretionary power to the authority to G
convert, what would otherwise be a dismissal into a mere discharge.
This is for the benefit of the employee. It protects him from the baneful
consequences of dismissal. At the same time, it relieves the management
of the burden of retaining him in service when it has become inexpe'
dient to do so. Thus the provision of such discharge works to the
advantage of both. At the same time, it cannot be gainsaid that the said H
14 SUPREME COURT REPORTS [1990] Supp. l S.C.R.

discharge is as a result of the disciplinary proceeding. Although bt form
A
it may not, and in the peculiar circumstances, it is intended that it
should not look like a disciplinary action, it cannot be denied that it
flows from and is a result of the disciplinary .Proceedings. To make
clear, however, that the action, though spawned by the disciplinary
proceedings should not prejudice the employee, the last sentence viz:
B "Discharge in such cases shall not be deemed to amount to disciplinary
action", has been added by way of abundant precaution. [23F-H; 24A]

8. That this is not a discharge simpliciter or a simple termination
of service becomes clear when it is compared both with the provisions of
para 522(1), and with those of sub-paras (2)(c), (2)(d) and (3) of
paragraph 521 itself. The distinction between discharge contemplated
1mder paragraph 521(10)(c) and discharge simpliciter or simple ter-
llli!lation of employment under the other provisions is clear enough.
T!tis will also show that the two belong to different categories and are
not the same. While the former is intended to be punitive, the latter is
not. As is further clear from the provisions of paragraphs 521(2)(c),
D (2)(d) and (3), the discharge contemplated there, as against simple
terminatiqn, is in proceedings under "sub-paragraphs (9) and (10)
infra relating to discharge". In other words, it is as a result of a disci-
plinary proceeding. [248; 2SC-DI

9. Tl! construe the discharge under paragraphs 52I(S)(e) and
E 521(Hl)(~J as a simple discharge not flowing from disciplinary proceed·
ings will deprive an employee of a valuable advantage, viz. that of
challenging the legality and pr11priety of the disciplinary action taken
against him, whatever the form of the order, by showing that he was
either not guilty of any misconduct or thal the misconduct was not of a
"gross" type or that the punishment meted out to him by way of dis·
F charge was not warranted In the circumstances etc. It is not, therefore,
ii! the Interests of the employees to construe the provisions as the High
Court has done. The predominant object of the Award is to protect the
interests of the employees. [2SE-F]

10. Remanding the matter to the High Court for deciding the
(i other contentions raised in the writ petition, is not advisable for various
reasons. The misconducts complained of against the employee are of
1966. lie was charge-sheeted In January 1968 and removed from service
on April 9, 1970. The Court proceedings have been pending for more
than about 23 years. In the meapwhile, the respondent No. 2 who was a
clerk on the date he was charge-sheeted, has become a lawyer and has
H been practising as such. Further, the mis-conducts, which are held
S.B.l. v. WORKMEN [SAWANT, J.] 15

proved by the Labour Court are of "gross" type within the meaning of
paragraph 521(4) of the Award. 'l;he Labour Court is the final fact·
finding forum. The High Court while setting aside the order of the
Labour Court has granted reinstatement in service and back wages and
pursuant to the said order, the employee has already received an
amount of Rs.93,000. The effect of decision would be to set aside not
only the order of reinstatement but also of the back-wages which would B
require the employee to refund the said amount. Even though the
employee was prepared to refund the amount and to contest the petition
on other grounds, at present, the employee is in his fifties. Taking into
consideraiion all these facts the interests of justice would be served if
the order of the High Court is set aside and the order of the Labour
Court is restored without requiring the employee to refund the amount
he has already received. [26E-G; 27C·E] c
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4381
of 1990.

From the Judgment and Order dated 23.8. 1989 of the Bombay D
High Court in W.P. No. 494of1982.

Ashok H. Desai, SolicitorfGeneral, Shishir Sharma and P.H.
Parekh for the Appellant.

Vinod Bobde, S.V. Deshpande and P.S. Sadavartey for the E
Respondents.

The Judgment of the Court was delivered by

( SA WANT, J. Special leave granted. The appeal is set down for
hearing by consent of both the parties. F

2. This appeal involves a question of interpretation of paragraphs
521(5)(e) and 52l(IO)(c) of the Award of the All India Industrial
Tribunal (Bank Disputes) which is popularly known as the Shastri
Award, (hereinafter referred to as the Award) and is important for the
entire banking industry in the country covered by the Award. G

3. In order to appreciate the significance of the question, it is
necessary to narrate the facts leading to this appeal. The employee
concerned was working as a clerk in the Gadchiroli branch of the
appellant State Bank of India at the relevant time. A departmental
inquiry was held against him for four acts of misconduct and the H
16 SUPREME COURT REPORTS (1990] Supp. 1 S.C.R.

inquiry officer came to the conclusion that two of the charges were
A
fully proved while one charge was proved to a limited extent and the
fourth charge was not established. On the basis of the report of the
inquiry officer, the competent authority tentatively decided to dismiss
the employee from service, and issued a notice to him under paragraph
52 l(lO)(a) of the Award, to show cause as to why the said punishment
B should not be imposed on him. The competent authority also gave him
a hearing as required by the said provision, and thereafter passed an
order, the operative and relevant part of which is as follows:

"Looking 'at the entire case I find that the established
charges, viz., uttering indecent word, threatening the Agent
and failure to do the work allotted are quite serious charges
c and would warrant dismissal. However, the employee has
had the benefit of a very tenacio~s defence from the date of
the issue of the show cause notice for dismissal and various
arguments have been raised with a view to evade )he
punishment which would normally follow out of the seri-
D ousness of the offences. Taking note of them, even though
I do not quite find them tenable, as indicated in my
detailed observations thereon, and of the extenuating '
circumstances (most important of which is the comparati-
vely young age of the employee) I have decided not to
impose the punishment of dismissal. At the same time I am
E of the opinion that it would not be desirable to retain Shri
Sadavarte in the Bank's service and accordingly I order
that he be discharged on payment of one month's pay and
allowances in lieu of notice. In terms of para 521( 10)(c) of
the Sastry Award, this would not amount to disciplinary
action."
F
4. An industrial dispute was raised by the first respondent-
Union, and in due course it was referred to the Central Govt. Labour
Court, Bombay for adjudication. By its award of March 2, 1981, the
Labour Court held that the order of dismissal of the petitioner was
proper. Against the said decision, the respondent-Union preferred a
writ petition before the High Court raising several contentions. The
High Court confined its decision only to one point, viz., whether the
termination of the service was retrenchment, and if so, whether it was
made in accordance with the provisions of Section 25F of the Industrial
Disputes Act, 1947 (hereinafter referred to as the Act). The Court
held that the termination of tlje services was retrenchment and was
H made in breach of the said provisions in as ml!ch as nq retrenchment
S.B.I. v. WOR](MEN [SAWANT, J.] 17

compensation was paid to the employee. The termination of the A
services was, therefore, set aside.

5. It is not possible to sustain the view taken by the High Court
since it proceeds on too literal an interpretation of the provisions of
paragraphs 521(5)(e) and 52J(!O)(c) of the Award and ignoring their
context. We may first refer to the provisions with regard to retrench,
men! under the Act. Section 2(oo) of the Act defines retrenchment as
follows: .

"Retrenchment" means the termination by the
employer of the service of a workman for any reason what-
soever, otherwise than as a punishment inflicted by way of
disciplinary action, but does not include- c
(a) voluntary retirement of the workman; or

"Compensation in cases of retrenchment''.
D
6. As pointed out above, paragraph 521 is in Section III which
contains the only other paragraph. namely, paragraph 520. That
paragraph is a prologue to Section III and to paragraph 521, which
both deal with procedure for taking disciplinary action. Para 520 reads
as follows:
E
"Under the subject of disciplinary action we deal with
dismissal, suspension, warning or censure, fine, the making
of adverse remarks and the stoppage of an increment."

{ It is, therefore, clear both from the heading of Section III as well as
from the contents of para 520 that the provisions of para 521 deal with F
nothing but disciplinary action and th_e procedure for taking such
action.

7. Paragraph 521 which is a self-contained code of disciplinary
action and of the procedure for taking it, begins with the following
statement: G

"A person against whom disciplinary action is pi-o-
posed or likely to be taken should, in the first in>tance, be
informed of the particulars of the charge against him; he
should have a proper opportunity to give his explanµtion <1s
to such particulars. Final orders shoulcj-be passed after due H
18 SUPREME COURT REPORTS [1990] Supp. 1 S.C.R.

consideration of all the relevant facts and circumstances.
A
With this object in view we give the following directions:
,,

It classifies delinquencies into three categories, namely, (i) offences
(ii) gross-misconduct and (iii) minor-misconduct and prescribes proce-
B <lure to deal with each of them.

Sub-paragraph (1) to (3) deal with the cases of offences. Sub-
para (1) defines offence to mean any act involving moral turpitude and
for which an employee is liable to conviction and sentence under the
provisions of law. Sub-para 2(a) states that when in the opinion of the
management, the employee has committed an offence and he is not
c prosecuted by the prosecuting agency, the bank may take steps to
prosecute him or get him prosecuted. The bank is also empowered to
suspend the employee in such circumstances. Sub-paragraph 2(b)
states that if the employee is convicted in such prosecution, he may
either be dismissed or "be given any lesser form of punishment as
D mentioned in sub-para 5 below". However, if he is acquitted with or
without the benefit of doubt, sub-para 2(c) lays down two different
procedures to meet the two situations. It states that even if an
employee is given a clean acquittal, it is open to the management to
proceed against him under the provisions set out in sub-paras (9) and
( 10) "relating to discharges". It may be mentioned here that the provi-
E sions with regard to the discharges in sub-paras (9) and (10) referred to
here, are contained only in sub-para JO(c) and they come into play
only when the management decides under sub-para (9) to take a disci-
plinary action and the action is taken after the procedure for the same
as laid down in sub-para (10) is followed. But with that, we may deal
with a little later. •
F
In cases of clean acquittal and a departmental inquiry held there-
after, the management is given yet another option. Instead of the
discharge as provided under sub-para 10(c), the management may only
terminate the services of the employee with three months' pay and
allowances in lieu of notice, if it comes to the decision not to continue
G the employee in service. In such cases, he shall be deemed to have
been on duty during the entire period of suspension, if any, and there-
fore shall be entitled to the full pay and allowances minus the subsi-
stance allowances he had drawn and also to all other privileges for the
period of suspension. Such simple termination of service is not pro- ·-.
vided for either in sub-para (5) or in sub-para (10). Thus it is obvious
H from sub-paragraph 2(c) that when a departmental inquiry is held or
.,._
S.B.l. v. WORKMEN {SAWANT, j.l 19

when disciplinary action is taken in case of a clean acquittal. two
options are given to the management, namely, (i) to discharge the A
employee under sub-paragraph lO(c) with or without notice or on
payment of only a month's pay and allowances, in lieu of notice but
without the benefit of the suspension being converted into a period of
duty or (ii) to terminate the services with three months' pay and allo-
wances, in lieu of notice and also with the further benefit of converting !3
the period of suspension into a period of duty. However, when the
acquittal is with the benefit of doubt and the management does not
proceed to discharge the employee under sub-para 10(c) bµt wants to
resort to the second option of the termination of service with three
months' pay and allowances in lieu of notice, it is left to the discretion
of the management to pay the employee such portion of the pay and
allowances for the period of suspension as the managemellt may deem c
proper, and unless the management so directs, the period of suspen-
sion is not to be treated as the period spent on duty. It should, how-
~ver, be remembered that the course of action open to the manage,
ment under sub-paragraph 2( c) is in tlje alternative to and not in neg4,
tion of the other modes of punishment, namely, to dismiss etc. the D
I~ 'I
employee. What is, however, necessary to note is the distinction bet-
ween an action of discharge following the disciplinary proceedings
under sub-paras (9) and (JO) and that of simple termination of service
under sub-para 2( c). The same distinction is also maintained in sub-
para 2(d).

Sub-para (3)°throws yet more light on the subject. It states that
where an employee is guilty of an offence but he is not put on trial
within a year of the commission of the offence, the management l)lay
"
deal with him as if he had committed an act of "gr 0ss misconduct'', or
' "minor misconduct" as the case may be. The employee may not be put
on trial within an year, either because the prosecuting authority re, f
fuses to do so, or because it comes to the conclusion that there is no
case for prosecution. Hence although the management is empowered
to proccCd against the employee under the provisions set out in sub-
paras (9) and (10) relating to discharge, he has to be given the benefit
of being treated on duty for the period he was under suspension, if
any, and he is entitled to all the further benefits accruing on that G
account. In the departmental inquiry following such non-prosecution,
the management may also come to the decision not to continue the
employee in service. In that case instead of proceeding against him,
under the provisions relating to discharge in sub-paras (9) and (10),
" the management is el)lpowered to terminate his services with tliree
months' pay and allo.,,,ances in lieu of notice as provided in sub-para H
20 SUPREME COURT REPORTS [1990] Supp. 1 S.C.R.

(2). Thus sub-paragraph (3) like sub-para (2) also makes a distinction
A
between discharge under sub-paragraph (lO)(c) and a mere termina-
tion of service with three months' pay and allowances, in lieu of notice.
It is the latter action which amounts to the simple discharge and for it,
a separate .Provision is made in paragraph 522 in Section IV. We will
refer to that provision at a later st.age. What is necessary, to bear in
B mind at this stage is the distinction made between the discharge under
sub-paragraph ( 10) and simple termination of service in sub-paras
2(c). 2(d) and (3).

8. Sub-para (4) of paragraph 521 defines "gross misconduct" and
sub-para (5) prescribes punishment for "gross misconduct". Sub-para
(6) defines "Minor misconduct" and sub-para (7) prescribes punish-
c ment for such misconduct. Sub-para (8) then states the manner in
which the record is to be kept when action is taken under sub-paras
(3), (5) or (7) which deal with the punishment for "gross misconduct"
or "minor misconduct" as the case may be.

D Sub-para (5) as stated above, follows on the heels of the enu-
meration of gross misconducts in sub-para (4), and reads as follows:
'
"(5) An employee found guilty of gross misconduct may:

(a) be dismissed without notice, or
E
(b) be warned or censured, or have an adverse remark
entered against him, or

(c) be fined, or

F (d) have his increments.topped, or

(e) have his misconduct condoned and be merely dis-
charged".

It should be clear from the context in which sub-clause (e) of sub-
G paragraph (5) occurs that the entire expression, namely. "have his
mis~onduct condoned and be merely discharged" has nothing but
penal implications, and the measure mentioned therein is a sequel to
the disciplinary action taken for one of the gross misconducts
mentioned in sub-para (4). It is not possible to arrive at any other
conclusion on a reading of the sub-paragraph as a whole. The dis-
H charge spoken of there is nothing-but a punishment for a gross miscon-
S.B.I. v. WORKMEN (SAWANT, J.] 21

duct. This is so not only because it is enumerated as one of the punish- A
ments along with others but also because firstly there is a provision of
simple discharge elsewhere in paragraph 522 of the Award, as pointed
earlier, and when the Award intended to provide for it, it has done so
in sub-paras (2)(c), (2)(d) and (3). If it was intended to provide for a
discharge simpliciter there, which was not meant to be penal, there
was no need to enumerate it in sub-para (5) which specifically enu- B
merates punishments for acts of gross-misconduct. Secondly, nothing
prevented the authors of the Award in stating in the said sub-clause (e)
that the discharge simpliciter was in terms of paragraph 522. We have
pointed out earlier the distinction made by the Award in sub-para-
graphs (2)(c), (2)(d) and (3) between the discharge following proceed-
ings under paras (9) and (10) and the simple termination of service or
discharge simpliciter as contemplated by paragraph 522. c
9. Sub-paragraphs (9) and (10) of paragraphs 521 lay down the
procedure for taking disciplinary action as well as for awarding punish-
ment following such action. Sub-para (9) says that when it is decided to
take a disciplinary action against an employee, such decision shall .be D
communicated to him within three days thereof. Sub-Para (lO)(a) then
lays down the procedure to be followed while conducting the disci-
plinary proceedings. It also enjoins upon the management to give the
employee a hearing with regard to the nature of the proposed punish-
ment. The latter provision has also bearing on the construction of
sub-clause (c) thereof. We will advert to it instantly. E

Sub-clause (b) of sub-para (JO) gives power to the management
to. suspend the employee pending inquiry. Its other provisions also
throw light on the construction of sub-clause (c) thereof. These provi-
sions state that although the employee is suspended during the inquiry,
if on the conclusion of the inquiry it is decided to take no action F
whatsoever against him, he shall be ·deemed to have been on duty
throughout the period of suspension and would accordingly, be
entitled to the full wages and allowances and all other privileges for the
said period. On the other hand "if some punishment other than dismis-
sal" is inflicted, it is left to the discretion of the management to treat
either the whole or a part of the period of suspension as on duty with G
the right to corresponding portion of the wages, allowances, etc. These
provisions would indicate that discharge under sub-paras (2)(c), (3),
(5) and (JO)(c) is also a punishment, for when the employee is dis-
charged under the said provisions after inquiry, under the provisions
of sub-paras (9) and ( 10), there is no provision made for treating either
the whole or part of the period of suspension during the inquiry, as on H
duty.
22 SUPREl>JE COURT ~EPORT& (!990) Sµpp, l S,C.R. I "
1
T.hen fpUows t.he provision of sub-clause (c) wqich is crucial fpr 1
A our purpqse. Tl]e said sub-clause reads as follows:

"In awarding punisbrnen,t by way of disciplinqfy
action the authority concerned sha!l ta~e into accoµnt the
gravity of the misconduct, the preyipus recofd, if any, of
B tlte employee and any otper aggravating pr ~xtequating
circumstances that may exist. Where sufficie11t!y e~t~l)µ~!
ing circumstances exist the misconduct may be condoned
and jn ~ase such misconduct is of the "gross" type J1e may
be merely discharged, with or without notice pr on pay-
ment of a month's pay and allowances, in lieu of notice.
Suc!i discharge may also be given where the evidence is
c found to be insufficient to sustain the charge and where the
bank does not, for some reason or other, tpink it elfPedient
to retain the employee in question any longer .in service.
Discharge in such cases shall not be deemed to amount \o
djsciplinary action."
D
ln view of the fact that sub clause (a) requires that a hearing )

should be given to the employee against the proposed punishment, the
authority js enjoined under sub-clause (c) to take into account the
gravity of the mis-conduct, the previous record of the employee and
any ot]jer aggravating or extenuating circumstances that may exist and
E may be brought on record "while awarding punishment by way of
disciplinary action". The sub-clause then provides for discharge with
or without notice or on payment of a month's pay and allowances, in
lieu of notiF~· The punishment of discharge is to be awarded in two
circumstances. Tue first circumstance is when there are sufficiently
extenuating circumstances but the misconduct is of a "gross" type. In
f Atlter words, where the misconduct is not of a "gross" type and there
are extenuating circumstances, the misconduct may merely be con-
doneq without the authority proceeding to inflict the punishment of
discharge. That is made clear by stating thus-"and in case such mis-
conduct is of the gross type he may be merely discharged" etc. The
secbnd circ1Jmstance in which the authority is given power to inflict
5µ~h discharge is when (he charge is such that the Bank does not for
sqll)e reason or other t]jink it expedient to retain the employee any
lopger in service but the evidence is insufficient to prove the charge.
Read in the context, therefore,-tlle discharge given under sub-clause
(c) can hardly be doµbteq as being a punishment. However, as was .,
s0 ught to b~ con\endeq on belialf of the respopdent-Un,iqp al!!'! £er-
tai11lv with s0me force, t\le !~st sen\ence of the said clause is couc~ed. iq
S.B.I. v. WORKMEN [SAWANT; J.) 23

a language wllich is calculated to create considerable doubt arid corifu-
siciri with regard io the true nature of the action bf dischar.ge spoken of
there. The said sentence states in so mariy words that the disi:harge
effected riridei both the circulllstarices shail not be "deellled'; io
atiiollnt to "disciplinary action". Read in isolation, the said sentence
does purport to convey that the discharge is not by way bf a puriish-
rilerit arid ori that score we may ilbt firid any fault with the reasoning of
the High CoiJrt. But as stated at the very outset, we have to tead this
seriterice also in its proper context and in the light of the othet provi-
sions of the Awatd.

As pointed out earlier, one of the two circumstances in which
such discharge is to be effected is when the tiiiscoriduct is bf a "gross';
type and even if there ate extenuating circumstances. It is to provide a c
I punishment precisely for misconducts of gross type that a provision
for such discharge is made in sub-clause (e) of sub-para (5) to which we
have already made a reference. Read with the said sub-para (5)(e), the
provision of the present sub-clause (c) of sub-para (10) becomes more
clear. If a misconduct is not of a "gross" type, it may be merely
condoned without any further action. But when it is of "gross" type,
tlie authority has no option but to condone and to proceed to discharge
the employee. The expressions used both in sub-para 5(e) and sub-
para 10(c) iri that respect are identical. Similar is the action coniemp-
lated for the second circumstances referred to in sub-para IO(c),
namely' when the charge though unsustainable for want of evidence is E
such that it is considered inexpedient to retain the employee iri sefvice.

10. If our reading of the provisions is correct, then it needs no
elal5oraie explanation as to why the punishlllerit of discharge both in
sril5-para 5(e) and lO(c) has beeri worded as it is and why forther ii
became necessary to add the last sentence to sub' para 10(c). Sirice iri
the coritext, such a discharge is by way of punishment, the relevant
provisions give a discretionary power to the authority to convert, what
would otherwise be a dismissal into a mere discharge. This is for tlie
benefit of the employee. It protects him from the baneful coilse-
q uences of dismissal. At the same time, it relieves the management of
the burden of retaining him in service when it has become inexpedient
to do so. Thus the provision of such discharge works to the advantage
of both. At the same time, it carinot be gainsaid that the said discharge
is as a result of the disciplinary proceeding. Although in form it rriay
not, arid for the reasons stated above in the peculiar Circulllstarices, it
is iiiiendeci that it should riot look like a ciiscipliriaty aciiori, ii canri6t
be' detiied that it flows from arid is a result of the diseijJlinary jJioceed'
24 SUPREME COURT REPORTS [1990] Supp. 1 S.C.R. ...,

A ings. To make clear, however, that the action, though spawned by the
disciplinary proceedings should not prejudice the employee, the last
sentence in question has been added by way of an abundant pre-
caution.

11. That this is not a discharge simpliciter or a simple termina-
B tion of service becomes clear when it is compared both with the provi-
sions of paragraph 522(1), and with those of sub-paras (2)(c), (2)(d)
and (3) of paragraph 521 itself. Paragraph 522 as stated earlier is in
section IV and is entitled "procedure for termination of employment"
as distinct from the title of section III, namely, "procedure for taking
disciplinary action" in which paragraph 521 occurs. Paragraph 522
begins by saying "We now proceed to the subject of termination of
c employment. We give the following directions: .......... "There-
after in sub-paragraph (1) thereof, it speaks of a simple termination of
service of a permanent employee and in sub-paragraph (4), talks of
similar discharge simpliciter of employees other than permanent
I
employees. But what is important to note is that the discharge simplici-
D ter or simple termination of service which is provided for here, has two
distinguishing features. Firstly, it is effected in cases not involving
disciplinary action for mis-conduct and secondly, it is to be effected by
giving three months' notice or of payment of three months' pay and
allowances in lieu of notice, in the case of permanent employees and
by giving one month's notice or on payment of one month's pay and
E allowances, in lieu of notice in case of probationers. There is some
apparent conflict in the provisions of sub-clause (1) and sub-clause (4)
with regard to the period of notice in case of an employee other than a
permanent employee. It is, however, immaterial for our purpose.
There are yet other conditions imposed by sub-para (6) of paragraph
522 when the termination of the service of the employees is on account
F of the closing down of the establishment or when retrenchment of
more than 5 employees is to be effected. But those conditions again do
not obliterate the distinction between discharge simpliciter or simple
termination of service other than as a result of a disciplinary proceed~
ing, and discharge effected under sub-paras 5(e) and lO(c) as a result
of such proceedings. As stated earlier, the termination of employment
G other than discharge provided for in sub-paras 2(c), 2(d) and 3 of
paragraph 521 also requires three months' pay and allowances, in lieu
of notice as do the provisions of paragraph 522(1). But unlike the
provisions of paragraph 522(1) which require three months' notice or
payment of three months' pay and allowances only in case of per-
manent employees and one month's notice or one month's pay and
H allowances, in lieu of notice in case of employees other than per-
•
,. ')-
S.B.l. v. WORKMEN (SAWANT, J.l 25

"' manent employees, the relevant provisions of paragraphs 521(2)(c)
and 521(3) require, a notice of three months' or pay and allowances for A
three months' in lieu of notice, in respect of all employees. Further,
~
what is equally important to note is that whereas para 522(1) and
521(2)(c) and (3) relating to simple termination of service, require the
requisite notice to be given or the payment of salary allowances in lieu
thereof, the provisions of discharge contained in the sub-paras (2)(c) B
and (3) and ( 10)(c) of para 521 do not in all cases require notice or pay
and allowances, in lieu of notice. The discharge may also be affected
under the said provisions without any notice or pay and allowances in
f lieu of it. Thus the distinction between the discharge contemplated
under paragraph 521( lO)(c) and discharge simpliciter or simple termi-
nation of employment under the other provisions is clear enough. This
c
• will also show that the two belong to different categories and are not
the same. While the former is intended to be punitive, the latter is not.
As is further clear ftom the provisions of paragraphs 521(2)(c). (2)(d)
and (3), the discharge contemplated there, as against simple termina-
tion. is in proceedings under "sub-paragraphs (9) and ( 10) infra relat-
ing to discharge". Jn other words. it is as a result of a disciplinary
... , proceeding.
D

12. Apart from it, we find that to construe the discharge under
521(5)(e) and 521( IO)(c) as a simple discharge not flowing from disci-
plinary proceedings will deprive an employee of a valuable advantage.
viz .. that of challenging the legality and propriety of the disciplinary ~
action taken against him. whatever the form of the order, by showing
that he was either not guilty of any misconduct or that the misconduct
.. was not of a "gross" type or that the punishment meted ou.t to him by
way of discharge was not warranted in tile circumstances etc. It is not.
• therefore. in the interests of the employees to construe the provisions
as the High Court has done. The predominant object of the Award is to F
protect the interests of the employees.

' It is for all these reasons that we are unable to accept the very
able arguments advanced by Mr. Bobde on behalf of the respondent-
Union to support the reasoning of the High Court.
G
13. The result to our aforesaid discussion is that the termination
of service of the employee in the present case under paragraph
52 l(IO)(c) of the Award is as a result of the disciplinary proceedings
~
and is punitive. It is. therefore. not "retrenchment" within the mean-
-.;' ing of Section 2(oo) of the Act. Hence. there was no question of
complying with the provisions of Section 25F of the Act. The decision H
,,..,-
•
§UPREME touin RE!lokts [1990] Supp. 1 S.C.R. "
...
of ihe HigHCoutt has. therefore; lo oe set aside.
14. IH view bf the iriierpretation piated oy us on the provisions
bf paragraph 52 l(S)(e) and 52 l(lO)(c). there is a queer situation in 'j

whicli both the appellant-Bank and the respondent-Union would find
themselves. The Bank has been supporting the interpretation which
we have placed and the respondent-Union has been opposing it. but
both not looking beyond their immediate interest involved in the pre-
sent tase, Which is qua an individual employee. We are happy that the
Bank has canvassed the view that it has done in this case. For that view
is calcuiated to benefit the employees at large and in the long run
though, it may be tb its advantage and to the disadvantage of the
individual employee iii lhis case. The respondent-Union, however; by
pfessing ihe propbsiiicin to the contrary, was supporting a view which
was not iii the interests of the employee at all. Though, therefore, it
may be a loser in the present case, it should thank itself that the
interpretation is not in accordance with the submissions made on its
behalf.

15. This leaves us with the question of the relief to be granted in
...Iii
the present case. Shri Bobde. submitted that if we are not to accept the
inierj:iteiation placed by the High Court on the provisions in question,
we shoula remand the matter to the High Court for deciding the other
contentions raised in the writ petition, since the court had not gone
E: into the same and had allowed the petition only on the basis of its
interpreta:ion of the said provisions. We find that this course is not
advisable in the present case for various reasons. The mis-conducts
complain~ d of against the employee are of 1966. He was charge-
sheeted iil January 1968 and removed frorri service on April 9, 1970.
The Cciiirt-pioceedings have been pending since then till today, i.e.,
F for more than about 23 years noiv. In the meanwhile, we are informed
ihat the appellant who was a clerk on the date he was charge-sheeted,
h_as become a lawyer and has been practising as such. We. further, find
tlfai the fnis-conducts which are held proved by the Labour Court are
of "gross" type within the meaning of paragraph 521(4) of the Award.
The Labour Court is the final fact-finding forum. Further. while set-
G ting aside the order of the Labour Court. the High Court has granted
re-instatenient in service and back wages as follows:

(i) 50 per cent of the back wages from 9.4.70 to 24.11.75. (which
is the date of the reference for adjudication to the Labour Court)
on the ground that the damages for the delay in making should
H be shared by both the parties equally. and (ii) full back wages
S.B.I. v. WORKMEN [SAWANT. J.] 27

from 25.11.75 till 31.5.79 on the ground that though the emp- A
loyee started his· practice as a lawyer in June 1978, he was not
well-settled in practice for the first year, and (iii) no back wages
for the period from 1.6. 79 till the date of his re-instatement
which is the date of the High Court's judgment. i.e .. August 23.
1989.
B
Shri Desai, the learned Solicitor General appearing for the Bank
wanted to produce before us a letter from the Maharashtra State
Electricity Board to show that in fact the employee was in gainful
) employment with the said Board for about six years. Although we
have not taken the said letter on record, there is no denial of such
employment from the side of the employee. We are further informed c
that pursuant to the order of the High Court, the employee has already
received an amount of Rs.93,000. The effect of our decision would be
to set aside nor only the order of re-instatement but also of the back
wages which would require the employee to refund the said amount of
Rs.93,000. Of course, Shri Bobde stated that the employee was pre-
pared to refund the said amount and to contest the petition on other D
grounds. At present, the employee is in his fifties. Taking into consi-
deration all the facts. we are of the view that it would serve the
interests of justice if we set aside the order of the High Cou~t and
restore that of the Labour Court without requiring the employee to
refund the amount which he has already received.
E
16. The appeal is allowed, accordingly. There will be no order as
to costs.

N.V.K. Appeal allowed .

.•
,
..
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ii;