In the ongoing power conflict between capital and labour, a major controversy surrounds the limits of capital’s discretionary power to terminate the services of labour. One of the important grounds for termination has been improper work place behaviour by the labour, known as ‘misconduct’. What amounts to misconduct is generally prescribed under the relevant standing orders in most organisations, but what type of punishment should be considered appropriate for different types of misconduct depends on various factors like the gravity of such misconduct, past service record of employees, number of years of service, etc. Before introduction of Section 11A of the Industrial Disputes Act, 1947 this discretion vested unfettered in the management. In the absence of proven victimisation or malafide intention on the part of management it was not possible to challenge the management’s decision regarding quantum of punishment for an alleged and proven misconduct by a worker. However, with the insertion of Section 11A the labour courts and tribunals were granted wide powers to interfere with the management’s absolute right to decide the quantum and nature of punishment. The courts could in appropriate cases substitute their judgement for the management’s decision regarding consequences of an employee’s misconduct.

In two recent Supreme Court judgements, the court has held that there is no such thing as unlimited or unfettered discretion vested in any judicial or quasi-judicial forum. Hence, the labour court does not have unlimited jurisdiction under Section 11A to interfere with the order of punishment given by the management, if such an order is based on supportive records and materials.

In Bharat Heavy Electricals Ltd. vs M Chandrashekhar Reddy and others (2005 2 SCC 481), the respondent was working as Assistant Grade 1 in the stores department of the company’s research and development division at Hyderabad. He had borrowed house-building advance by depositing the deeds of his properties as securities, which were to remain in the custody of the company till the entire amount was discharged. Meanwhile, it was brought to the notice of the company that the said properties were advertised for sale in the local newspapers. When the company investigated the matter, it was found that the title deeds of the properties were taken away from their custody without their knowledge. A departmental inquiry was instituted and the report by the inquiry officer found the respondent guilty of the misconduct and he was terminated. The dismissal was challenged in the labour court. The labour court found that the inquiry report was correct and the misconduct by the respondent had the effect of shaking the confidence of the employer. But the court also observed that since this was the first instance of misconduct and the respondent was an active participant in the cultural activities and worked for the common cause of employees, the order of dismissal from service was too harsh and he was reinstated as a fresh candidate. The order of the labour court was challenged in the High Court, where it observed that the power of the labour court under Section 11A is without limitation, and hence the labour court has not erred in giving the award of reinstatement. This judgement was challenged in the Supreme Court. A Division Bench of Justice N Santosh Hegde and Justice S B Sinha, held that there is no such thing as unlimited jurisdiction vested with any judicial or quasi-judicial forum. An unfettered discretion is a sworn enemy of the constitutional guarantee against discrimination. Unlimited jurisdiction leads to unreasonableness, hence when the labour court itself has come to the conclusion based on the evidence on record that misconduct committed by the respondent has resulted in loss of confidence, it should not have interfered with the dismissal order by the company. Such interference is exceeding the boundaries of jurisdiction under Section 11A as powers of the labour court or tribunal under the section are not unfettered but must be reasonable and judicious. If the labour court or tribunal wishes to interfere with the punishment given by the management it must show that the quantum of punishment is so harsh as to be vindictive or shockingly disproportionate based on records. Without such finding, interference with the punishment would be arbitrary use of power vested under Section 11A. The Supreme Court upheld the order of dismissal of the respondent and set aside the order of the lower courts reinstating the respondent as a fresh candidate.

Similar observations were made by the Supreme Court in the Bharat Forge Co. Ltd. vs Uttam Manohar Nakate (2005 2 SCC 489) . In this case, the respondent was working as a helper with the company. On one of the working days, he was found lying asleep at his working place. A disciplinary proceeding was initiated against him under the relevant standing order, where in he was found guilty and dismissed from services. On some earlier occasions, he was found guilty of some minor misconducts. The worker challenged the order of dismissal as ‘unfair labour practice’ under the Maharashtra Recognition of Trade Unions and Prevention Of Unfair Labour Practice Act, 1971. It was held by the labour court that the domestic inquiry was proper and fair, but the punishment of dismissal was harsh and disproportionate, so the respondent was directed to be reinstated  in his original post with continuity of service and  50 per cent back wages. When the award was challenged before the High Court, the High Court modified the order of the labour court and held that the employer should pay Rs 250,000 to the employee within one month instead of reinstatement. This order of the High Court was challenged in the Supreme Court. The Supreme Court said in view of fact that the misconduct of the worker was serious and proved in a fair and proper domestic inquiry, the dismissal cannot be interpreted as unfair labour practice or victimisation as it is not a ‘shockingly disproportionate” punishment.

Justice Sinha, while delivering the judgement, observed that if the punishment given to an employee is harsh, a lesser punishment may be imposed, but such an order cannot be passed on either irrational grounds or on a compassionate ground. He referred to another judgement in the Regional Manager, Rajasthan State Road Transport Corporation vs Sohan Lal (2004 8 SCC 218) where in it was held that it is not normal jurisdiction of the superior courts to interfere with the quantum of sentence unless it is wholly disproportionate to the misconduct proved.

Both these judgements have reinterpreted the limits of judicial discretion of the labour courts and industrial tribunals under Section 11A of the Industrial Disputes Act while interfering with the punishments given by the employer after a domestic inquiry, particularly when neither factual nor legal victimisation is proved by the worker.