Holding

A clause in certified standing orders that permits automatic termination of a permanent employee without a hearing is invalid, and such termination constitutes retrenchment under the Industrial Disputes Act.

Summary

Uptron India Ltd., a manufacturing concern, terminated the services of Ms. Shammi Bhan, a confirmed permanent employee, invoking clause 17(g) of its certified standing orders which provided for automatic termination if a workman overstayed leave for more than seven days. The employee challenged the termination before the Industrial Tribunal, which held that the dismissal amounted to "retrenchment" under Section 2(oo) of the Industrial Disputes Act, 1947, and ordered reinstatement with back wages. The High Court upheld the Tribunal's finding, emphasizing that the employee was not afforded a hearing before the automatic termination was effected. On special leave, the Supreme Court examined whether such a clause is valid for a permanent employee and whether the termination constitutes retrenchment. The Court held that a provision allowing automatic termination without a hearing is void for permanent employees and that the dismissal is indeed retrenchment, requiring compliance with the statutory safeguards. Consequently, the petition was dismissed, leaving the Tribunal's order intact.

Issues considered

The validity of clause 17(g) of the certified standing orders providing for automatic termination of a permanent employee for unauthorised leave
Whether termination under such a clause amounts to "retrenchment" within the meaning of Section 2(oo) of the Industrial Disputes Act, 1947
Whether the employee was entitled to a hearing and compliance with principles of natural justice before termination
Whether the termination violates constitutional guarantees under Articles 12, 14 and 21 of the Constitution of India

Legislation cited

Constitution of Indias. Article 12, s. Article 14, s. Article 21
Indian Contract Act, 1872
Industrial Disputes Act, 1947s. 2(oo), s. 2(oo)(bb)
Industrial Employment (Standing Orders) Act, 1946

Subjects

automatic terminationpermanent employeeretrenchmentIndustrial Employment (Standing Orders) ActIndustrial Disputes Actnatural justicedue processArticle 14Article 21employment security

Judgment

UPTRON INDIA LTD. A
v.
SHAMMI BHAN AND ANR.
'. J

FEBRUARY 6, 1998

[S. SAGHIR AHMAD AND M. JAGANNADHA RAO, JJ.] B

Labour Law:

Industrial Employment (Standing Orders) Act, 1946 :

Objects-Employment-Under industrial law-Concept of-Transition
c
from contract to status under labour law enactment-Explained

Contract Act, 1872 :

General principles-Service contracts-Terms and conditions- D
Applicability of-Stated-Confirmation-Held : Guarantees security of
tenure-Hence, services of a permanent employee in an establishment, which
is 'State' under Art. 12 cannot be terminated abruptly and arbitrarily by
giving a simple notice-Constitution of India, 19.50, Art. 12.

Unauthorised absence-Automic termination of service-Permissibility E
of-Held: The expression "liable to automatic termination" in the Certified
Standing Orders confers discretion upon the management to terminate or not
to terminate the services of a permanent employee who overstays leave--
Such discretion cannot be exercised capriciously-Principles of natural justice
have to be read into the relevant clause-Therefore, the affected employee
must be given an opportunity of hearing-Hence, a provision in Certified F
'( Standing Orders providing for automatic termination of service is bad unless
it is directly related to production in a factory or an industrial establishment-
Administrative Law.

Industrial Disputes Act, 1947 : Section 2(00).
G
Retrenchment-Definition of-Held : is conclusive.

Section 2(oo)(bb)-Unauhorised absence-Automatic termination of
service-Certified Standing Orders-Provided for atomatic termination of
services of a workman if he overstayed on leave without permission for more H
719
720 SUPREME COURT REPORTS [1998] l S.C.R.
,,-
A than seven days-Validity of-Held : In the absence for a fixed term of 4
contract termination of service in pursuance stipulation in the Cert(fied r
Standing Orders is not covered by S. 2(oo)(bb)-Hence, auotmatic termination
in such cases amounts to retrenchment under S. 2(00).

Practice and Procedure :
B
Wrong concession on-Question of law-Made by counsel-Held : Not '7:-
binding on his client-Further, such concession cannot constitute a binding
precedent.

The respondent was a confirmed employee of the petitioner, and acquired
c the status of "permanent" employee. The respondent's services were
terminated due to her overstay on leave without permission in terms of
clause 17(g) of the Certified Standing Orders, which provided for automatic
termination if a workman overstayed on leave.

The respondent raised an industrial before the Industrial Tribunal
D which held that the termination of services of the respondent amounted to )
"Retrenchment" within the meaning of Section 2(oo) of the Industrial Disputes
Act, 1947. The Tribunal further held that since all other legal requirements
had not been followed, the termination was bad and that the respondent had
to be reinstated with fifty per cent back wages.
E
The High Court dismissed the writ petition filed by the petitioner and
held that while invoking the provisions of clause 17(g) of the certified
Standing Orders, the respondent ought to have given an opportunity for
he~ring. Hence, this Special Leave Petition.

F On behalf of the petitioner it was contended that as per remarks of this
<·-
Court in an earlier case provision for automatic termination of services y
· could be validly made .in the Certified Standing Orders and therefore,
automatic termination of services of the respondent for overstay on leave was
valid.

G Dismissing the petition, this Court

HELD : 1.1. The concept of employment under industrial law involves,
like any other employment, three ingredients :

(i) management/industry/factory/employer, who employs or, to put
H it differently, engages the services of the workman;
UPTRONINDIALTD. v. S. BHAN 721
(ii) employee/workman, that is to say, a person who works for the A

-
employer for wages or monetary compensation; and
(iii) contract of employment or the agreement between the employer
and the employee whereunder the employee/worlmtan agrees to
. render services to the employer, in consideration of wages,
subject to the supervision and control of the employer. B
(726-C-EJ
1.2. The general principles of the Contract Act, 1872 applicable to an
agreement between two 1iersons having capacity to contract, are also applicable
to a contract of industrial employment, but the relationshi1i so created is
party contractual, in the sense that the agreement of service may give rise C
to mutual obligations, for example, the obligation of the employer to pay
wages and the corresponding obligation of the workman to render services,
and party non-contractual, as the States have already, by legislation,
presc1ibed positive obligation for the employer towards his workman, as, for
example, terms, conditions and obligations prescribed by the Payment of
Wages Act, 1936; Industrial Employment (Standing Orders) Act, 1946; D
Minimum Wages Act, 1948; Payment of Bonus Act, 1965; Payment of
Gratuity Act, 1972 etc. (726-F-G]

1.3. Prior to the enactment of labour laws, in many industrial
establishments, even terms and conditions of service were often not reduced
into writing nor were they uniform in nature, though applicable to a set of E
similar employees. The position was wholly incompatible to the notions of
social justice, in~much as there being no statutory protection available to
the workmen, the contract of service was often so unilateral in character
that it could be described as mere manifestation of subdued wish of the
workman to the workmen to sustain their Jiving at any cost. An agreement F
of this nature was an agreement between two unequals, namely those that
invested their labour and toil, flesh and blood, as against those who brought
in Capital. The necessary corollary of such an agreement was the generation
of conflicts at various levels disturbing industrial peace and resulting
necessarily in loss of production and sometimes even closure or lockout of
the industrial e~1ablishment. In order to overcome this difficulty and achieve G
indu~1rial harmony and peace, the lndu~1rial Employment (Standing Orders)
Act, 1946 was enacted requiring the management to define, with sufficient
11recision and clarity, the conditions of employment under which the workmen
were working in their establishments. The underlying object of the Act was
to introduce uniformity in conditions of employment of workmen discllarging
similar functions in the same industrial establishment under the same H
722 SUPREME COURT REPORTS [1998] l S.C.R.

A management and to make those terms and conditions widely known to all the

-
workmen to before they could be asked to express their willingness to accept r
the employment [726-H; 727-A-E]

1.4. The Act also aimed at achieving a transition from mere contract
between unequals to the conferment of "Status" on workmen through
B conditions statutorily imposed upon the employees by requiring every
industrial establishment to frame "Standing Orders" in respect of matters ·,1c
enumerated in the Schedule appended of the Act. [727-E-F)

2.1. Conferment of 'permanent' statues on an employee guarantees
security"of tenure. It is now well settled that the services of a permanent
C employee, whether employed by the government, or Govt. company or Govt.
Instrumentality or Statutory Corporations or any other "authority" within
the meaning of Article 12, cannot be terminated abruptly and arbitrarily,
either by giving him a month's or three months notice or pay in lieu thereof
or even without notice, notwithstanding that there may be a stipulation to that
D effect either in the contract of service or in the Certified Standing Orders.

(728-EJ
2.2. In view of the above legal position action taken against the
respondent who was a permanent employee was wholly illegal. (729-C]

West Bengal State Electricity Board v. Desh Bandhu Ghosh, (1985] 3
E SCC 116; Central Inland Water Transport Corproation Ltd. v. Brojo Nath
Ganguly, (1986] 3 SCC 156; O.P Bhandari v. Indian Tourism Development
Corporation Ltd., (1986] 4 SCC 337 and Delhi Transport Corporation v.
D. T. C. Mazdoor Congress, (1991) Sup11. 1 SCC 600, relied on.
3.1. Clause 17(g) of the Certified Standing Orders says that "th1!
F services are liable to automatic termination". This provision, therefore,
confers a discretion upon the management to terminate or not to terminate y·
the services of an employee who overstays the leave. It is obvious that this
discretion cannot be exercised, or permitted to be exercised, capriciously.
The discretion has to be based on an objective consideration of all the
circumstances, material which may be available on record. What are the
G circumstances, which compelled the employee to proceed on leave; why he
over~1ayed the leave; was there any just and reasonable cause for ove~1ayin1~
the leave; whether he gave any further application for extension of leave;
whether any medical certificate was sent if he had, in the meantime, fallen
ill? These are questions, which would naturally arise while deciding to
H terminate the services of the employee for overstaying the leave. Who would

i
UPTRON INDIA LTD. v. S. BHAN 723
answer these questions and who would furnish the material to enable the A
-.;· management to decide whether to terminate or not to terminate the services
'+ are again questions which have an answer inherent in the provision itself,
namely that the employee against whom action on the basis of this provision
is proposed to be taken must be given an opportunity of hearing. The principles
of natural Justice, which have to be read into the offending clause, must be
com1>lied with and the employee must be informed of the grounds for which
B
-~
action was proposed to be taken against him for overstaying the leave.
[729-C-G)
3.2. Any clause in the Certified Standing Order providing for automatic
termination of service of a permanent employee, not directly related to
"Production" in a Factory or Industrial Establishment, would be bad if it does c
not purport to provide an opportunity of hearing to the employee whose

- services are treated to have come to an end automatically. [731-C)

D.K. Yadav v. J.MA. Industries Ltd., [1993) 3 SCC 259, relied on.

Scooters India v. Vijay E. V Eldred, (CA No. 3486 of 1992 decided by D
~ S.C. on 10-3-1996), held inapplicable.

4.1. Definition of "Retrenchment" in Section 2(oo)of the Industrial
Disputes Act, 1947 is conclusive in the sense that "Retrenchment" has been
defined to mean the termination of the services of a worlanan by the employer
for any reason whatsoever. If the termination was by way of punishment as E
a consequence of disciplinary action, it would not amount to "Reternchment".
Provision for automatic termination of services on account of absence is not
covered by exception (bb) in Section 2(oo) of the Act. [732-A]
4.2. The contract of employment referred to in the earlier part of
Section 2(oo)(bb) has to be the same as is referred to in the latter part. This F
--(
'\'- is clear by the use of words "such contract" in the earlier part of this
Clause. What Section 2(oo)(bb), therefore, means is that there should have
been a contract of employment for a fixed-term between the employer and the
workmen containing a stipulation that the services could be terminated even
before the expiry of the period of contract. If ~'Uch contract, on the expiry of
its original period, is not renewed and the services are terminated as a G
consequence of that period, it would not amount to "Retrenchment."
F
[732-H; 733-A]
Similarly, if the services are terminated even before the expiry of the
period of contract but in pursuance of a stipulation contained in that contract
that the services could be so terminated, then in that case also, the termination H
724 SUPREME COURT REPORTS [1998] 1 S.C.R.

A would not amount to "Retrenchment".
r
facorts Ltd. v. Presiding Officer, [1997] 11 SCC 521, relied on. .,
4.3. In the present case, the respondent was a permanent em11Ioyee of
the 11etitioner. There was no fixed-term contract of service between them.
B . There was, therefore, no que~1ion of his services being terminated on the
ex11iry of that contract. In the absence of a fixed-term contract between the ·y.
parties, the question relating to the second-c0n1lngency, namely, that the
terminati~n was in 1mrsuance of a ~1ipulation to that effect in the contract
of employment, does nor arise. This case does not fall in either of the two
situations contemplated by Clause (hb). The "Rule of exception", therefo1·e,
c is not applicable in the instant case. The respondent's termination, therefore,
amounts to retrenchment. (732-G; 733-C]

5. Remarks of this Court in an earlier case cannot be treated to be a
finding that provision for automatic termination of services can be validly
made in a the Certified Standing Orders. Even othenvise, a wrong concession
-
D
on a question of law, made by a counsel, is not binding on his client. Such
concession cannot constitute binding precedent. (730-H; 731-A)

Scooters India v. Vijay E. V Eldred, (CA. No. 3486 of 1992 decided by
S. C. on' 10-3-96), referred to.
E
CIVIL APPEAL JURISDICTION : Special Leave Petition (c) No. 1079
of 1998.

From the Judgment and Order dated 28.10.97 of the Allahabad High
Court in C.M.W.P. No. 7770 (SS) of 1992.
'
F
Manoj Swamp for the Petitioner.
r
The Judgment of the Court was delivered by

S•. SAGHIR AHMAD, J. Respondent 1 was appointed as an operator
(Trainee) on 13.5.1980 in the petitioner's establishment. On completion of
G
training, she was absorbed on that post with effect from 13.7.1981 and was
confirmed on 13.7.1982. She thus acquired the status of a permanent employee. ~·

With effect from 7th of November, 1984, respondent 1 proceeded, and
remained till 29th January, 1985, on maternity leave. Thereafter, she allegedly
H remained absent with effect from 30.1.1985 to 12.4.1985 without any application
UPTRON INDIA LTD. v. S. BHAN [S. SAGHIRAHMAD, J.] 725

for leave and consequently, by order dated 12th April, 1985, the petitioner A
~ infom1ed respondent 1 that her services stood automatically temrinated in
terms of Clause 17 (g) of the Certified Standing Orders. Respondent 1 raised
an Industrial Dispute and made a prayer to the State Government in 1985 that
her case may be referred to the Industrial Tribunal for adjudication. Her
application, filed before the Deputy Labour Commissioner, Lucknow, was
registered as C.B. Case No. 310-1985. The State Government, by its order
B
)(
dated 18.7.1990, referred the following question for adjudication to the
Industrial Tribunal, Lucknow:

"Whether the tennination of the services of female Smt. Shammi Bhan,
.,, operator, daughter of C.N. Kaul, by the management by its letter dated
12.4.1985 is proper and legal. If not, the relief which the employee will
c
be entitled to?"

(Translated from Hindi)

3. The Tribunal, by its Award dated 21st July, 1992, held that the
termination of services of respondent 1 amounted to "Retrenchment" within D
the meaning of Section 2(00) of the Industrial Disputed Act and since all other
legal requirements had not been followed, the termination was bad and
consequently she was entitled to reinstatement as also fifty per cent of back
wages from the date of termination till reinstatement.
E
4. This Award was challenged by the petitioner through a Writ Petition
in the Allaliabad High Court (Lucknow Bench) and the High Court, by the
impugned judgment dated 28.10.1997, dismi$sed the writ petition upholding

- - r
·...:'
the findings of the Tribunal that termination of respondent's services was
"retrenchment". The High Court further held that while invoking the provisions
of Clause l 7(g) of the Certified Standing Orders, the petitioner ought to have F
been given an opportunity of hearing to respondent.

5. Mr. Manoj Swamp, learned counsel appearing for the petitioner in
this Special Leave Petition, has contented that since there was a specific
provision contained in Para 17 (g) of the Certified Standing Orders that if the
employee overstays the leave without permission for more than seven days G
~ his services would be liable to automatic termination, the Industrial Tribunal
as also the High Court were wrong in holding that the tem1ination of her
services was bad. He has also contented that the termination of respondent's
services on account of her continued absence would not amount to
"retrenchment" as defined in Section 2(00) of the Industrial Disputes Act (for H
726 SUPREME COURT REPORTS [1998] l S.C.R.

A short, 'the Act') and, therefore, there was no occasion for the High Court or
the Industrial Tribunal to grant reinstatement or direct payment of back r-
wages.

6. The Tribunal as also the High Court have recorded a categorical
finding of fact that the respondent was a permanent employee in the petitioner's
B establishment.
y
7. We have to see whether the services of the respondent, who had
acquired t11e status of a pemianent employee, could be terminated in the mode
and manner adopted by the petitioner, who maintains that it was done in
accordance with Clause 17 (g) of the Certified Standing Orders and no
c grievance can, tllerefore, be raised by tlle respondent on t11at account.

8. Before examining Clause l 7(g) of t11e Certified Standing Orders, we
may point out that,tlle concept of employment under industrial law involves,
like any ot11er employment, tlrree ingredients:
D (l) management/industry/factory/ employer, who employs or, to put
it differently, engages the services of tlle worlanan;
(li) employee/workman, that is to say, a person who works for the
employer for wages or monetary compensation; and
(ill) contract of employment or tlle agreement between the employer
E
and the employee whereunder tlle employee/workman agrees to
render services to tlle employer, in consitleration of wages,
subject to tlle supervision and control of tlle employer.

9. The general principles of the Contract Act, applicable to an agreement ,,____

F between two persons having capacity to contract, are also applicable to a
contract of industrial employment, but t11e relationship so created is partly 1 -
r
contractual, in tlle sense that tlle agreement of service may give rise to mutual
obligations, for example, tlle obligation of tlle employer to pay wages and the
corresponding obligation of tlle workman to render services, and partly non-
contractual, as tlle States have already, by legislation, prescribed positive
G obligations for tlle employer towards his workmen, as, for example, terms,
conditions and obligations prescribed by tlle Payment of Wages Act, 1936;
Industrial Employment (Standing Orders) Act, 1946; Minimum Wages Act,
1948; Payment of Bonus Act, 1965; Payment of Gratuity Act, 1972 etc.

H 10. Prior to the enactment of tllese laws, tlle situation, as it prevailed
UPTRON INDIA LTD. v. S. BHAN (S. SAGHIRAHMAD, J.] 727
in many industrial establishments, was that even tenns and conditions of A
,: service were often not reduced into writing nor were they unifonn in nature,
though applicable to a set of similar employees. This position was wholly
incompatible to the notions of social justice, inasmuch as there being no
statutory protection available to the workmen, the contract of service was
often so unilateral in character that it could be described as mere manifestation
of subdued wish of the workmen to sustain their living at any cost. An
B
I(
agreement of this nature was an agreement between two unequals, namely
those who invested theit labour and toil, flesh and blood, as against those
who brought in Capital. The necessary corollary of such an agreement was
the generation of conflicts at various levels disturbing industrial peace and
resulting necessarily in loss of production and sometimes even closure or c
lock out of the industrial establishment. In order to overcome this difficulty
and achieve industrial harmony and peace, the Industrial Employment (Standing
Orders) Act, 1946 was enacted requiring the management to define, with
sufficient precision and clarity, the conditions of employment under which the
workmen were working in their establishments. The underlying object of the
,( Act was to introduce uniformity in conditions of employment of workmen D
discharging similar functions in the same industrial establishment under the
same management and to make those terms and conditions widely known to
all the workmen before they could be asked to express their willingness to
accept the employment.

11. The Act also aimed at achieving a transition from mere contract E
between unequals to the confennent of "Status" on wor,kmen through
conditions statutorily imp.osed upon the employers by requiring every industrial
establishment to frame "Standing Orders" in respect of matters enumerated
in the Schedule appended to the Act. The standing Orders so made are to
:=-
be submitted to the certifying officer who is required to make an enquiry
- r whether they have been framed in accordance with the Act and on being
F
"' satisfied that they are in consonance with provisions of the Act, to certify
them. Once the Standing orders are so certified, they become binding upon
both the parties, namely, the employer and the employees. The certified
Standing Orders are also required to be published in the manner indicated by
the Act which also sets out the Model Standing Orders. Originally, the
G
jurisdiction of the Certifying Officer was limited to examine the draft Standing
,,. Orders and compare them with the model Standing Orders. But in 1956, the
Act was radically amended and Section 4 gave jurisdiction to the Certifying
Officer, as also the Appellate Authority, to adjudicate and decide the questions,
if raised, relating to the fairness or reasonableness of any provision of the
Standing Orders. H
"--
728 SUPREME COURT REPORTS [1998] l S.C.R.
,
A 12. In pursuance of the above powers, the petitioner framed its own
Standing Orders which have been duly certified. Clause l 7(g) of the Certified r--

Standing Orders, which constitutes the bone of contention between the
parties, is quoted below:

"The services of a workman are liable to automatic termination if he
B overstays on leave without permission for more than seven days. In
f.
case of sickness, the medical certificate must be submitted within a
week." ,

13. It was in pursuance of the above provision that the services of the
respondent were· terminated by the petitioner by observing in its letter dated
c 12th April, 1985, as under:

"The services of Mrs. Shammi Bhan, Token No. 158, Operator ceased
automatically from Uptron Capacitors Ltd., Lucknow with immediate .<

effect, in accordance with the clause l 7(g) of the Certified Standing
orders ofUptron Capacitors Limited."
D ".>
14. Respondent No. I, admittedly, was a permanent employee.

15. Conferment of 'permanent' status on an employee guarantees security
of tenure. It is now well settled that the services of a permanent employee,
whether employed by the Government, or Govt. company or Govt.
E instrumentality or Statutory Corporations or any other "Authority" within the
meaning of Article 12, cannot be terminated abruptly and arl>itrarily, either by
giving him a month's or three months' notice OF pay in lieu thereof or even
without notice, notwithstanding that there may be a stipulation to that effect

F
either in the contract of service or in the Certified Standing Orders.

16. TI1is Court ii). West Bengal State Electricity Board & Ors. v. Desh ',.. -
-
Sandhu Ghosh & Ors., [1985] 3 SCC 116, held that any provision in the
Regulation enabling the management to terminate the services of a permanent
employee by giving three months' notice or pay in lieu thereof, would be bad
as violative of Article 14 of the Constitution. Such a Regulation was held to
G be capable of vicious discrimination and was also held to be naked 'hire and
fire' rule. This view was reiterated in Central Inland Water Transport
Corporation Limited & Anr. v. Brojo Nath Ganguly & Anr., [1986] 3 SCC 156. "'
17. Again in 0.P. Bhandari v. Indian Tourism Development Corporation
Ltd. & Ors., [1986] 4 SCC337, this Court held thatRule31 (v) of the Indian
H Tourism Development Corporation (Conduct, Discipline & Appeal) Rules,
UPTRON INDIA LTD. v. S. BHAN [S. SAGIDRAHMAD, J.] 729
1978, which provided that the seivices of a pennanent employee could be A
--f tenninated by giving him 90 days' notice or pay in lieu thereof, would be
violative of Articles 14 and 16 of the Constitution.

18. The whole case law was reviewed by the Constitution Bench in
Delhi Transport Corporation v. D. T.C. Mazdoor Congress & Ors., [1991]
Supp I SCC 600, and except the then Chief Justice Sabyasachi Mukharji, who B
J(
dissented, the other 4 Judges reiterated the earlier view that the seivices of
a confirmed employee could not be legally terminated by a simple notice.

19. This being the legal position, the action taken against the respondent,
who, as pointed out earlier, was a pennanent employee, was wholly illegal.
......-- c
20. There is another angle of looking at the problem. Clause l 7(g), which
has been extracted above, significantly does not say that the seivices of a
• workman who overstays tl1e leave for more than seven days shall stand
automatically tenninated. What it says is that "the seivices are liable to
automatic tennination." This provision, therefore, confers a discretion upon
-~ -the management to tenninate or not to tenninate the services of an employee D
who overstays the leave. It is obvious that this discretion carniot be exercised,
or pennitted to be exercised, capriciously. The discretion has to be based on
an objective consideration of all the circumstances and material which may
be available on record. What are the circumstances which compelled the
employee to procbed on leave; why he overstayed the leave; was there any E
just and reasonable cause for overstaying "the leave; whether he gave any
I
further application for extension of leave; whether any medical certificate was
sent' if he had, in the meantime, fallen ill? These are questions which would
naturally arise while deciding to tenniriate the seivices of the employee for
:=- overstaying the leave. Who would answer these questions and who would
-) furnish the material to enable· the management to decide whether to tenninate F
.....
or not to terminate the seivices are again questions which have an answer
inherent in the provision itself, namely, that the employee against whom
action on the basis of this provision is proposed to be taken must be given
an opportunity of hearing. The principles of natural justice, which have to be
read into the offending clause, must be complied with and t11e employee must G
....'. be infonned of the grounds for which action was proposed to be taken
against him for overstaying the leave.

21. This Court inD.K. Yadavv. J.MA Industries Ltd., [1993] 3 SCC 259
has laid down that where the Rule provided that the seivices of an employee
who overstays the leave would be treated to have been automatically H
730 • SUPREME COURT REPORTS (1998] l S.C.R.

A terminated, would be bad as violative of Articles 14, 16 and 21 of the
Constitution. It was further held that if any action was taken on the basis of · r
such a rule without giving any opportunity of hearing to the employees, it
would be wholly unjust, arbitrary and unfair. The Court reiterated and
emphasised in no uncertain terms that principles of natural justice would have
to be read into the provision relating to automatic termination of services.
B
22. Learned counsel for the petitioner has placed strong reliance upon
a decision of this Court in Civil Appeal No. 3486 of 1992, Scooters India &
Ors. v. VijayE V. Eldred, c;ecided on 10.3.1996, in support of his contention

C
that any stipulation for automatic termination of services made in the Standing
Orders could not have been declared to be invalid. We have been referred to
a stray sentence in tliat judgment, which is to the following effect:

"It is also extraordinary fortl1e High Court to have held clause 9.3.12
-
of the standing orders as invalid."

D This sentence in tlle judgment camiot be read in isolation and we must
refer to the subsequent sentences which run as under:

"Learned counsel for the respondent rightly made no attempt to
support tl1is part of the High Court's order. In view of the fact that
we are setting aside the High Court's judgment, we need not deal with
E this aspect in detail.'~

23. In view of this observation, the question whether the sti~ulation for
automatic termination of services for overstaying the leave would be legally
bad or not, was not decided by tl1is Court in the judgment relied upon by Mr.
Manoj Swamp. In that judgment the grounds on which tlle interference was
F made were different. The judgment of tlle High Court was set aside on the
ground tllat it could not decide tlle disputed question of fact in a writ petition
-
. and tlle matter should have been better left to be decided by tlle Industrial
Tribunal. Further, tlle High Court was approached after more than six years
..
of tlle date on which tlle cause of action had arisen witllout tllere being any
cogent eiqilanation for tlle delay. Mr. Manoj Swamp contended that it was
G conceded by tlle counsel appearing on behalf of tlle employee tllat the
provision in tlle Standing Orders regarding automatic termination of services
is not bad. This was endorsed by tllis Court by observing that "Learned
counsel for the respondent rightly made no attempt to support tllis part of
tlle High Court's order.'' This again camiot be treated to be a finding tllat
H provision for automatic termination of services can be validly made in tlle
d5~
UPTRON INDIA LTD. v. S. BHAN [S. SAGHIRAHMAD, J.) 731
Certified Standing Orders. Even othenvise, a wrong concession on a question A
,'(1' of law; made by a counsel, is not binding on his cli~nt. Such concession
,,., cannot constitute a just ground for a binding precedent. The reliance placed
by Mr. Manoj Swamp on this judgment, therefore, is wholly out of place.

24. It will also be significant to note that in the instant case the High
Court did not hold that Clause l 7(g) was ultra vires but it is did hold that B
the action taken against the respondent to whom a.n opportunity of hearing
was not given was bad.

25. In view of the above, we are of the positive opinion that any clause
in the Certified Standing Orders providing for automatic termination of service
of a permanent employee, not directly related to "production" in a Factory or c
Industrial Estab'lishment, would be bad if it does not purport to provide an
opportunity of hearing to the employee whose services are treated to have
come to an end automatically.

26. We may now consider the question of "Retrenchment" which is
D
·''
.~ defined in Section 2(00) as under:-

"2(00) 'retrenchment' means the tem1ination by the employer of the
service of a workman for any reason whatsoever, othenvise than as
a punishment inflicted by way of disciplinary action, but does not
include- E
(a) voluntary retirement of the workman; or

(b) retirement of the workman on reaching the age of superannuation
ifthe contract of employment between the employer and the workman
.,. concerned contains a stipulation in that behalf; or
-(
F
-...- (b) termination of the service of a workman as a result of the non-
renewal of the contract of employment between the employer and the
workman concerned on its expiry or of such contract being terminated
under a stipulation in that behalf contained therein; or

(c) temiination of the seivice of a workman on the ground of continued
G
-~... ill-health."

27. The definition of "Retrenchment" was introduced in the Act by Act
43 of 1953 with effect from 24th of October, 1953. Clause (bb) was inserted
in the definition by Act 49of1984 with effect from 18.8.1984. H
732 SUPREME COURT REPORTS [1998] l S.C.R.

A 28. The definition is conclusive in the sense that "retrenchment" has
been defined to mean the terminr.tion of the service of a workman by the
employer for any reason whatsoever. If the termination was by way of
punishment as a consequence of disciplinary action, it would not amount to
"Retrenchm~nt". Originally, there were two other exceptions, namely,

B (i) voluntary retirement of the workman and

(Ii) retirement of the workman on reaching the age of superannuation
if the contract of employment contained a stipulation to that
effect.

C 29. By the Amending Act 49 of 1984, two further exceptions were
introduced in the definition by inserting clause (bb) with effect from 18.8.84;
one was the·termination of service on the ground of continued ill-health of
the workman and the other was termination of service on account of non-
renewal of the contract of employment on the expiry of the term of that
contract. If such contract of employment contained a stipulation for termination
D of service and the services of the workman are terminated in accordance with
•,_
that stipulation, such termination, according to Clause (bb ), would also not
amount to "Retrenchment". '
r

30. What was contended before the Tribunal as also before the High
Court was that the termination of the services of respondent was covered by
E Clause (bb) of Section 2(00), .and, therefore, it could not be treated as
"Retrenchment" with the result that other statutory provisions, specially
those contained in Section 25F of the Act were not required to be complied
with. This argument which was not accepted by the Tribunal and the High
Court has been stressed before us also and here also it must meet the same
F fate as it is without any substance or merit.
"(-

31. From the facts set out above, it would be seen that the respondent
was a permanent employee of the petitioner. There was no fixed-term contract
of service between them. There was, therefore, no question of services being
terminated on the expiry of that contract. In the absence of a fixed-term
G contract between the parties, the question relating to the second contingency,
namely, that the termination was in pursuance of a stipulation to that effect
in the contract of employment, does not arise.
...
32. The contract of employment referred to in the earlier part of Clause
(bb) has to be the same as is referred to in the latter part. This is clear by
H the use of words "such contract" in the earlier part of this Clause. What the
UPTRON INDIA LTD. v. S. BHAN (S. SAGIDRAHMAD, J.] 733

clause, therefore, means is that there should have been a contract of A
employment for a fixed-term between the empli:>yer and the worlanan containing
a stipulation that the services could be terminated even before the expiry of
the period of contract. If such contract, on the expiry of its original period,
is not renewed-and the services are terminated as a consequence of that
period, it would not amount to "Retrenchment''. Similarly, if the services are B
terminated even before the expiry of the period of contract but in pursuance
of a stipulation contained in that contract that the services could be so
terminated, then in that case also, the termination would not amount to
"retrenchment". This view finds support from a decision of this Court in
Escorts Ltd. v. Presiding Officer, [1997) 11 SCC 521.

33.' This case does not fall in either of the two situations contemplated
c
by Clause (bb). The 'Rule of exception', therefore, is not applicable in the
instant case and consequently the finding recorded by the Tribunal on
"retrenchment" cannot be-disturbed. 34.

For the reasons stated above, we find no merit in this petition which D
is dismissed at the SLP stage.

V.S.S. Petition dismissed .

•