Author: ritika ahari

Edited by: A I Sugandesh

ABSTRACT / HEADNOTE

In this case, the question of law arises, through which there is a conflict between the decisions of the Supreme Court. To resolve the conflict the bench of three judges of the Supreme Court convened the Chief Justice to lay before the larger bench. B. Karunakar was the general director in the ECIL, he had worked in various posts in the company, the company occupied the manufacturing unit of electronic products. It was alleged that B. Karunakar was involved in misconduct acts and misuse of the cars of the company without permission after various complaints were received by the managing director, he called a meeting in which an inquiry officer was appointed. The managing director himself was the inquiry officer and declared B. Karunakar and terminated him from the service. Being aggrieved by the decision B. Karunakar appealed to review the decision to the Labour Tribunal, and the tribunal set aside the termination. But the managing director further challenged the decision in the High Court of Andhra Pradesh & later in the Supreme Court. The question of law was whether the report of the inquiry officer had to be furnished to the employee before the decision of the disciplinary authority. Whether the employee has any right to know the findings of the report before the trial so that he may defend or represent himself. Another question was non-disclosure of the inquiry report can be considered a violation of the principles of natural justice and also the punishment given by the authority in the form of termination from the service is justified in the view of the law.

Keywords (Minimum 5): Principles of Natural Justice, Disciplinary proceedings, Inquiry officer’s report, Central Administrative Tribunal (CAT), Misconduct, furnishing report, Public Servants (Inquiries) Act, 1850

CASE DETAILS

INTRODUCTION AND BACKGROUND OF JUDGEMENT

Managing Director Ecil Hyderabad Etc. … vs B. Karunakar Etc is the landmark judgment on principles of natural justice and procedural fairness in disciplinary proceedings against employees. The judgment lays down the disciplinary guidelines regarding the dismissal grounds and inquiry reports which must be furnished to the employee before a decision is made by the disciplinary authority. Guidelines given in this case judgment seek to balance between the rights of the employee and the interest of the employer and the requirements of administrative efficiency.

The case arose from a disciplinary action initiated against B. Karunakar was dismissed from the service. The managing director of the ECIL conducted the inquiry and found B. Karunakar guilty of misconduct. B. Karunakar challenged the order before the labor court which set aside the dismissal. The managing director filed a writ petition in the CAT after dismissal, and the High Court of Andhra Pradesh also dismissed the writ petition. The primary question before the Supreme Court was whether, before the decision of the disciplinary authority, the non-furnishing of the inquiry report to the employee was considered a violation of the principles of Natural Justice. After examining the scope of the principles of Natural Justice in the present situation the court gives guidelines to furnish the inquiry report before the employee is mandatory, he has the right to know the grounds on which he was dismissed.

FACTS OF THE CASE

1. Procedural Background of the Case
   1. The decision of disciplinary authority – Various complaints were received by the managing director regarding the misconduct act of Akar. The inquiry committee was called upon, and an inquiry report found guilty and dismissed Karunakar from his service as a punishment.
   2. Labour Court – Karunakar challenged the dismissal in the labor court, the court set aside the decision of the authority.
   3. Central Administrative Tribunal (CAT)- Being aggrieved by the decision of the Labour Court, the managing director filed a writ in the CAT, but the CAT also dismissed the decision.
   4. High Court of Andhra Pradesh – A Writ petition was filed by the managing director, which was further dismissed.
   5. Supreme court – Court on special leave petition, look upon the case. The primary question was whether the inquiry report had to be furnished to an employee before the decision of the disciplinary authority, whether it this a violation of the principles of natural justice, and whether the dismissal was right on such grounds.
2. Factual Background of the Case

            The Respondent B. Karunakar was the senior technical Officer of the Company. On December 27, 1986 “a Memorandum of Charges setting out the misconduct, said to have been committed by him, with details thereof that he had unauthorizedly sold T.V. sets.” For this purpose, an enquiry officer was appointed, and a reasonable opportunity has been given to B. Karunakar to give his reasoning. Enquiry officer’s report was produced after enquiring the evidences on March 13, 1987, stating that B. Karunakar acted prejudicially with the companies interest, and was found guilty. On its consideration, the disciplinary authority agreeing with the findings, removed B. Karunakar from the services of the Company. The writ petition was dismissed by the single judge of the Andhra Pradesh High court, but the division Court allow the case on appeal on relying on the case of Union of India v.  Mohammad Ramzan Khan.  

LEGAL ISSUES RAISED

1. Whether the employee is entitled to receive a copy of the inquiry officer’s report before any proceeding against him?
2. Whether the scope of the principles of natural justice required to furnish the report of the inquiry officer or non-disclosure may be considered a violation of Natural Justice principles?
3. Whether there is no responsibility on the authority to submit the report if the employee does not demand submission of the report?
4. From what date furnishing of the report come into operation according to law?
5. Whether the decision laid down in Mohd. Ramzan Khan’s case (AIR 1991 SC471) (supra) will be applicable in the sphere of all the establishment – Government, non-government, private & Public undertakings?
6. whether the employee is eligible to claim any relief as the inquiry report was not furnished to him before the order of the punishment?
7. whether the prospective operation of the decision laid down in Ramzan Khan’s case (AIR 1991 SC 471) is applicable to the order of punishment was passed on 20 November?

PETITIONER/ APPELLANT’S ARGUMENTS

1. It was submitted by the counsel for the petitioner that the inquiry report is an internal document, which consists of confidential and sensitive information, this is the discretion of the disciplinary authority to supply a copy of the inquiry report to the employee or not. They contended that there is no mandatory requirement under Article 311(2) of the Constitution or the relevant service rules to provide the report. Article – 311(2) of the constitution states that –

“No such person as aforesaid shall be dismissed or removed or reduced in rank except after an inquiry in which he has been informed of the charges against him and given a reasonable opportunity of being heard in respect of those charges:

Provided that where it is proposed after such inquiry, to impose upon him any such penalty, such penalty may be imposed on the basis of the evidence adduced during such inquiry and it shall not be necessary to give such person any opportunity of making representation on the penalty proposed”.

1. It was argued that the principles of natural justice are adequately satisfied by holding an oral inquiry, examining witnesses, and allowing the delinquent employee to cross-examine the witnesses and present their defense. Providing a copy of the inquiry report was not considered an essential part of natural justice and therefore there is no violation of principles of natural justice. Petitioner referred the previous judgment of the Supreme Court, Nirmala J. Jhala v. State of Gujarat (1980) and Satyavir Singh v. Union of India (1985),“which held that supply of the inquiry report to the delinquent employee is not necessary for compliance with the principles of natural justice”.

• The petitioner contended that the disciplinary authority is not obliged to supply a copy of the inquiry report suo motu (on its own motion) to the delinquent employee. If the employee does not request the report, the authority can proceed with the disciplinary action without providing the report. The onus lies on the employee to demand a copy of the inquiry report if they wish to have it. The petitioner claimed that if the employee does not exercise this right and remains silent, it can be presumed that they have waived their right to receive the report. The petitioner relied on the principle of “waiver” and argued that if the employee does not request the inquiry report, it amounts to a waiver of their right to receive it. Consequently, the disciplinary authority cannot be held responsible for not supplying the report when no demand was made by the employee.

1. It was argued that a prospective application of the decision would mean that the requirement to furnish the inquiry report would apply only to disciplinary proceedings initiated after the date of the court’s judgment. The petitioner sought to avoid the retroactive application of the decision to already concluded or ongoing disciplinary cases.
2. The petitioner contended that ECIL is a public sector undertaking and “Public sector undertakings have operational flexibility” to frame their own rules, service conditions, and pay scales according to their financial constraints and operational requirements. On applying the Mohd. Ramzan Khan’s case decision, the operational flexibility may be restrained, and also the decision of the said case only applies to sovereign functions of the state and not to commercial activities carried out by public sector undertakings.
3. The petitioner argued that there are no specific statutory provisions regarding the mandate of furnishing the inquiry report to the employee and there is no violation of the principles of natural justice because the employee was given an appropriate opportunity to represent himself and non-furnishing of the report did not deprive him of the reasonable opportunity to be heard.

• It was argued that the decision of the Mohd. Ramzan Khan’s case should have a prospective operation and not be applied retrospectively. Applying retrospectively the decision of the said case would disturb vested rights and would be unfair as employers like ECIL did not have prior knowledge and ‘notice to prepare for the implications of the new legal principle’.

RESPONDENT’S ARGUMENTS

1. The counsels for Respondent submitted that B. Karunakar is entitled to receive a copy of the inquiry report before the disciplinary proceeding. Depriving him from a copy of the inquiry report is a clear violation of the principles of natural justice, which empowers a person to represent himself and be transparent in the disciplinary proceeding.
2. It was argued that the scope of the principles of natural justice requires furnishing the report of the inquiry officer to the employee, and non-disclosure of the report should be considered a violation of these principles. There is also an application of the Latin maxim ‘Audi Alteram Partem’ which means the other side heard’ so that there is a clear violation of the natural principles.

• It is the primary duty of the disciplinary authority to provide necessary information and evidence to employees whether employees ask for it or not. This is essential to the employee having full knowledge of the charges against him, and to comply with the natural justice principles, a fair chance to represent himself must be given to the employee.

1. Counsel contended that the date of furnishing of the report should come into operation with immediate effect in compliance with the natural justice principles.
2. The decision given in the Mohd. Ramzan Khan’s case was based on the principles of natural justice, these principles are universal regardless of public, private, government, and nongovernment undertakings.
3. The inquiry officer’s failure to comply with the principles of natural justice and to furnish the inquiry report before the disciplinary proceeding, this violation renders the entire disciplinary process void, and the employee is entitled to relief.

• “There is no need for prospective application of the decision in Mohd. Ramzan Khan’s case. The requirement to furnish the inquiry officer’s report is not a new legal principle but rather an integral part of the well-established principles of natural justice. Therefore, it should be applied to all cases, regardless of the date of the order of punishment”.

RELATED LEGAL PROVISIONS

1. Industrial Employment (Standing Orders) Act, 1946: This act provides provisions regarding the procedure for the disciplinary actions against the employee and also protects the interest of the employees by facilitating fair and just disciplinary actions.
2. Industrial Disputes Act, 1947:  This act states the investigation, settlement, termination of employment, and the payment of compensation to employees.
3. Various labor laws – Such as 

Factories Act, 1948 & The Slopes and Establishments Act, 1954, which protect the rights of the welfare of employees and also protect employees from employers’ arbitrary or unjust actions.

6. Article – 14 of the Constitution – which provides equal protection to all the people and prohibits the discrimination.
7. Scope of the Public Servant (Inquiries) Act, 1850:  The Supreme Court of India also examined whether the Public Servant (Inquiries) Act, of 1850 applied to the case. The Act provides for the conduct of inquiries into the conduct of public servants and sets out the procedures to be followed in such inquiries. The court held that the Act did not apply in this case because the inquiry was not conducted by a public servant but by the Managing Director of a public company. The court noted that the inquiry was conducted under the rules and regulations of ECIL and that the company had its own procedures for conducting disciplinary proceedings.
8. Section- 240(3) of the Government of India Act, 1935- states “that the civil servant shall not be dismissed or reduced in rank until he had been given “reasonable opportunity to show cause against the action proposed to be taken in regard to him”.

JUDGEMENT

1. RATIO DECIDENDI
   1. Furnishing the inquiry officer’s report: The Supreme Court takes the stand for the right of the employee to receive a copy of the inquiry report, this is the fundamental principle of natural justice that must be followed, and fair opportunity should be given to the employee to defend himself on the findings of the report.
   2. Applicability to all establishments – The furnishing of the inquiry report before the disciplinary proceeding applies to all the establishments nonetheless of private sector, public sector, and government or non-governmental undertakings.

• Immediate application – There is a question of law arose that from what date furnishing of the report should come into operation the honorable court held that the inquiry report should be given immediately before the disciplinary proceeding

1. Relief to the employee – If the inquiry report is not furnished before the disciplinary proceeding, then the employee is liable to claim relief.
2. Principle of natural justice – In this case, all the questions of law raised, come into the sphere of the principles of natural justice, and the court also prioritizes them.
3. OBITER DICTA 
   1. Role of the disciplinary authority – The disciplinary authority has the discretion to accept or not the evidence and inquiry report of the officer and such discretionary power must be exercised with reasonable care and in compliance with the natural justice principles.
   2. Importance of cross-examination – Cross-examination should be done in the disciplinary proceedings and reasonable opportunity must be given to the employee to defend himself.

• Exceptions to the rule of furnishing the report – In some cases, furnishing the report is undesirable due to confidentiality, and such exceptions should be used rarely and must be justified.

1. Role of labor courts and tribunals – Labour courts should prevent disputes between the employees and employees and also harmonize the relationship, in the situation of disputes such courts must complete the natural justice principles.
2. Importance of fairness and transparency – Disciplinary proceedings must be fair and transparent and not deprive any person’s rights and interests.

CONCLUSION & COMMENTS- The decision of this case laid down the basic principle of natural justice and its implications. The judgment also plays an important role in safeguarding the rights of the employees and also harmonizing the relationship between them. It emphasizes the fair and just disciplinary proceedings to be followed and also derecognizes the right of the employee to receive an inquiry report to defend himself, it protects the employees from waiver of their rights. The judgment of this case clarifies the conflicting decisions of the various High courts on the matter of whether the inquiry report should be furnished to the employee before the disciplinary proceeding. “The Court referred to its earlier decision in Mohd. Ramzan Khan v. Ajay Kumar Verma (AIR 1991 SC 471), where it had held that the inquiry officer’s report should be provided to the employee. However, the Court in Karunakar’s case went further and held that this principle would apply to all establishments, not just those governed by specific statutes or rules.”

REFERENCES

1. Important Cases Referred

• Ramzan Khan v. Ajay Kumar Verma (AIR 1991 SC 471): “This case dealt with the requirement of furnishing the inquiry officer’s report to the employee in disciplinary proceedings. The Supreme Court held that the report should be provided to the employee to comply with the principles of natural justice”.
• State of Uttar Pradesh v. Om Prakash Gupta (AIR 1970 SC 679): This case dealt with the principles of natural justice in disciplinary proceedings. The Supreme Court held that the principles of natural justice must be followed in disciplinary proceedings to ensure fairness and justice.
• Suresh Koshy George v. University of Kerala (AIR 1969 SC 198): This case dealt with the right of an employee to be heard in disciplinary proceedings.  The Supreme Court held that an employee has the right to be heard and to present their case in disciplinary proceeding
• State of Madhya Pradesh v. Chintaman Sadashiva Waishampayan (AIR 1961 SC 1623):  This case dealt with the role of the disciplinary authority in disciplinary proceedings. The Supreme Court held that the disciplinary authority has the power to disagree with the findings of the inquiry officer but must exercise this power reasonably and with due care.
• Associated Cement Companies Ltd. v. Workmen (AIR 1964 SC 1595):  This case dealt with the importance of cross-examination in disciplinary proceedings. The Supreme Court held that cross-examination is an essential part of the principles of natural justice and should be allowed unless there are compelling reasons to deny it.
• Khem Chand v. Union of India, 1958 SCR 1080: (AIR 1958 SC 300) where two questions squarely fell for consideration, viz., what is meant by the expression “reasonable opportunity of showing cause against the action proposed” and at what stage the notice against the proposed punishment was to be served on the delinquent employee. After referring to the decisions of the Judicial Committee in R. Venkata Rao v. Secretary of State for India, (1937) 64 Ind App 55: (AIR 1937 PC 31) and of the Federal Court in Secretary of State for India v. I. M. Lall, 1945 FCR 103 : (AIR 1945 FC  the Court held that the reasonable opportunity envisaged by the provisions of Art. 311(2) as originally enacted was at the following stages:

“(a) An opportunity to deny his guilt and establish his innocence, which he can only do if he is told what the charges levelled against him are and the allegations on which such charges are based.

(b) an opportunity to defend himself by cross-examining the witnesses produced against him and by examining himself or any other witnesses in support of his defense; and finally

(c) an opportunity to make his representation as to why the proposed punishment should not be inflicted on him, which he can only do if the competent authority, after the inquiry is over and after applying his mind to the gravity or otherwise of the charges proved against the government servant tentatively proposes to inflict one of the three punishments and communicates the same to the government servant ……….”

Important Statutes Referred

1. 1. Constitution of India: – Article 14: Equality before law and equal protection of laws.

• Article 21: Protection of life and personal liberty.
• Article 311: Dismissal, removal, or reduction in rank of persons employed in civil capacities under the Union or a State.
• Industrial Employment (Standing Orders) Act, 1946:
• This act regulates the conditions of employment in industrial establishments.
• It lays down the procedures for disciplinary action against employees and requires that these procedures be fair and just.
  • Industrial Disputes Act, 1947:
• This act provides for the investigation and settlement of industrial disputes.
• It also lays down the principles for the termination of employment and the payment of compensation to employees.
  1. Factories Act, 1948:
• This act regulates the working conditions in factories and ensures the health, safety, and welfare of workers.
• It also provides for the rights of workers and the obligations of employers.