A) ABSTRACT / HEADNOTE
The Supreme Court in The Chartered Bank, Bombay v. The Chartered Bank Employees’ Union, [1960] 3 SCR 441, analysed the legality of termination of an Assistant Cashier, Colsavala, by The Chartered Bank. The primary issue was whether the termination, done without a formal misconduct enquiry, was valid under the All India Industrial Tribunal (Bank Disputes) Award, 1953, particularly under paragraph 522(1). The Chief Cashier had withdrawn his guarantee for the Assistant Cashier due to procedural insubordination. The Bank relied on a longstanding internal system where Assistant Cashiers were hired under the Chief Cashier’s guarantee. The Industrial Tribunal held the termination invalid, stating that it was disciplinary in nature and required compliance with paragraph 521 of the Award, which mandates a misconduct enquiry. The Supreme Court overturned the Tribunal’s decision, asserting that the action was bona fide and not a colourable exercise of power. The judgment strengthens the employer’s discretion in certain organisational structures, subject to non-arbitrariness and good faith.

Keywords: Industrial Dispute, Termination, Misconduct, Bank Award 1953, Security Guarantee, Assistant Cashier, Colourable Exercise of Power, Reinstatement, Labour Tribunal

B) CASE DETAILS

i) Judgement Cause Title
The Chartered Bank, Bombay v. The Chartered Bank Employees’ Union

ii) Case Number
Civil Appeal No. 14 of 1959

iii) Judgement Date
April 4, 1960

iv) Court
Supreme Court of India

v) Quorum
P.B. Gajendragadkar, K.N. Wanchoo, and K.C. Das Gupta, JJ.

vi) Author
Hon’ble Mr. Justice K.N. Wanchoo

vii) Citation
[1960] 3 SCR 441

viii) Legal Provisions Involved
Paragraphs 521 and 522(1) of the All India Industrial Tribunal (Bank Disputes) Award, 1953
Labour Appellate Tribunal Principles (1952 L.A.C. 490)

ix) Judgments overruled by the Case
None

x) Case is Related to which Law Subjects
Labour and Industrial Law

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT
The judgment involves interpretation and application of Paragraphs 521 and 522(1) of the Bank Award, 1953. It pivots on the crucial distinction between termination simpliciter and termination for misconduct. The Assistant Cashier, Colsavala, was discharged from service after the Chief Cashier—who was responsible for the security and conduct of the entire cash department—formally withdrew his guarantee for Colsavala. According to the Bank’s operational system, all Assistant Cashiers were employed based on the Chief Cashier’s recommendation and guarantee.

Despite his longstanding service since 1937, Colsavala repeatedly left the bank without permission before daily cash verification and lock-up, violating institutional protocol. Following the guarantee withdrawal, the Bank terminated his services under para 522(1). The employees’ union challenged this, alleging misconduct requiring compliance with para 521, which mandates a formal inquiry. The Industrial Tribunal ruled in favour of the employee, but the Supreme Court reversed this, holding the action valid under the internal operational context and award provisions.

D) FACTS OF THE CASE
Colsavala, employed since 1937 as an Assistant Cashier, worked in the cash department of The Chartered Bank, Bombay. The department had a unique system where all Assistant Cashiers worked under the Chief Cashier, who provided a blanket guarantee for their integrity and accountability. Based on this guarantee, no individual security was obtained from Assistant Cashiers.

The Bank required all cash staff to remain until cash was verified and locked. In breach of this, Colsavala regularly left before lock-up without prior permission. Despite circulars reiterating the protocol, he continued this behaviour. The Chief Cashier reported this to the management and officially withdrew his guarantee for Colsavala, stating his continued service posed a risk to the security of the department. The Bank, upholding the Chief Cashier’s concerns and the integrity of the guarantee system, chose not to investigate or assign blame but instead acted under para 522(1) to terminate Colsavala’s employment with three months’ notice and pay.

The employee’s union raised an industrial dispute alleging that the termination was essentially punitive for misconduct and thus required formal inquiry under para 521. The Tribunal agreed, deeming the termination illegal and ordered reinstatement with back wages. The Bank then appealed to the Supreme Court.

E) LEGAL ISSUES RAISED

i) Whether the termination of Colsavala’s services amounted to punitive dismissal for misconduct, requiring a disciplinary enquiry under paragraph 521 of the Bank Award, 1953.

ii) Whether the Bank’s action in terminating employment under paragraph 522(1) was a colourable exercise of power.

iii) Whether in banking systems where security is centrally guaranteed, the employer has discretion to terminate employment if the guarantee is withdrawn.

F) PETITIONER/ APPELLANT’S ARGUMENTS

i) The counsels for Petitioner / Appellant submitted that the Bank exercised lawful powers under para 522(1). The dismissal did not result from a misconduct enquiry or punitive action, but rather from the operational exigency that the Chief Cashier could no longer vouch for Colsavala. The system depended on such guarantees. Therefore, when it was withdrawn, the Bank had no viable option but termination. The Bank argued that forcing it to conduct an inquiry or retain the employee without a guarantee would jeopardise the department’s integrity.

They referred to Buckingham and Carnatic Company Ltd. v. Workers, 1952 L.A.C. 490, where it was held that tribunals may intervene only if the termination is arbitrary, harsh, or capricious. The Bank asserted its action was bona fide, reasonable, and aimed at maintaining the operational sanctity of a sensitive department. The management, it contended, chose not to assign fault or conduct a disciplinary process to avoid internal conflicts, but lawfully executed its right under para 522(1).

G) RESPONDENT’S ARGUMENTS

i) The counsels for Respondent submitted that the termination was essentially due to alleged insubordination and disobedience. Therefore, it qualified as misconduct under labour jurisprudence. As per para 521 of the Bank Award, such misconduct necessitates a disciplinary proceeding with an opportunity for the accused to be heard.

The union stressed that the Bank did not initiate any enquiry, nor provided Colsavala a chance to defend his conduct. The mere reference to para 522(1) cannot override the mandatory safeguards of para 521 when the termination arises out of misconduct. The respondent contended that labelling the action as a “termination simpliciter” was a facade. The mention of his misconduct in the termination letter evidenced that it was a disguised punitive action.

H) RELATED LEGAL PROVISIONS

i) Paragraph 521 – All India Industrial Tribunal (Bank Disputes) Award, 1953
Deals with: Disciplinary actions and misconduct; mandates proper enquiry, charge-sheeting, and opportunity to be heard.

ii) Paragraph 522(1) – All India Industrial Tribunal (Bank Disputes) Award, 1953
Deals with: Termination not involving misconduct, permitting three months’ notice or pay in lieu of notice.

iii) Labour Appellate Tribunal Principles, 1952 L.A.C. 490
Deals with: Discharge simpliciter and the scope of tribunal’s jurisdiction to interfere in cases of mala fide, arbitrary, or capricious termination.

I) JUDGEMENT

a. RATIO DECIDENDI
The Supreme Court held that termination simpliciter under para 522(1) is lawful if not exercised in a mala fide, arbitrary, or colourable manner. The Court observed that due to the unique system of guarantee by the Chief Cashier, withdrawal of the guarantee rendered the Bank incapable of continuing the employee. The Bank acted bona fide without apportioning blame or indulging in disciplinary processes. The Court emphasized that the Tribunal erred by mandating that every instance involving alleged misconduct must necessarily follow para 521.

The decision clarified that the existence of allegations does not automatically convert a termination into a punitive dismissal. The key test is whether the employer acted with malice, unfairness, or violated natural justice, which was not the case here.

b. OBITER DICTA 
The Court stated that while tribunals have powers to examine the real nature of a termination, they must refrain from presuming mala fide without concrete evidence. Additionally, it is incorrect to render para 522(1) ineffective by interpreting that all terminations require a misconduct enquiry merely due to some allegations.

c. GUIDELINES 

• Employers can terminate employment under para 522(1) provided it is done in good faith.

• Mere mention of employee’s shortcomings does not convert termination into punishment.

• Tribunals may interfere only if the termination is arbitrary, capricious, or mala fide.

• In sensitive departments relying on internal guarantees, withdrawal of guarantee may justify termination.

• Termination letters giving reasons do not necessarily indicate punitive intent.

J) REFERENCES

a. Important Cases Referred
i. Buckingham and Carnatic Company Ltd. v. Workers of the Company, 1952 L.A.C. 490
ii. The Chartered Bank, Bombay v. The Chartered Bank Employees’ Union, [1960] 3 SCR 441

b. Important Statutes Referred
i. All India Industrial Tribunal (Bank Disputes) Award, 1953, Paragraphs 521 and 522(1)