' ·'! • ..

SHAW WALLACE & CO. LTD. v.

STATE OF TAMIL NADU

March 23, 1976

[A. N. RAY, C.J. AND JASWANT SINGH, JJ.]

Tamil Nadu General Sales J; ax Act, 1959-Sec. 3-First Schedule Entry 21- Fertilizer mixture prepared by mixing manually some of cheniical fertilizers 1nentioned in Schedule whether exempted from tax-Whether same n1arketable commodity-Whether 1nanufacturing process of relevant consideration.

TID.e appellant is a registered dealer under the Tamil Nadu General Sales

Tax Act. 1959. The appellant manufactures and deals in chemical fertilizers.

C The appellant paid tax under the Act on certain cheniical fertilizers which are shown as sub items 1 to 1§ of Serial No. 21 of the First Schedule to the Act. The appellant prepared {ertilizer mixtures by dry-mixing various chemical fertilizers which had already suffered tax. The appellants claimed exemption for the turnover in respect of fertilizers mixtures on the ground that it cannot be said to be a commodity different from the ingredients composing it which had been purchased within the State and bad suffered tx under item No. 21 of the First Schedule. The Assessing Officer disallowed the exemption.

On D appeal the Appeilate Assistant Commissioner allowed the exemption on the ground that no manufacturing process was involved at the time of preparing the fertilizer mixture and that the resultant product is not a product different from the ingredients constituting it which had already suffered tax.

In an appeal, the Tribunal reversed the decision of the Appellate Assistant Commissioner and refused to grant the exemption. The Revision Application filed by the appellants to the Tamil Nadu High Court was dismissed at the stage of admission on the ground that each of the competent article and the fertilizer mixture have different chemical properties of their own and their use .also is different and that. therefore, it is not possibJe to treat the fertilizer mixture as the same article as the components themselves.

The appellants contended in appeal by special leave

(I) As s. 3(2) of the Act provides for levy of sales tax in respect of

oods mentioned in the First Schedule at the rate and only at the point specified thereunder and as the fertilizer mixture"! are prepared F by mixing manually by means of shovels some of the chemical fertilizers mentioned in sub items 1 to 15 in Entry 21 in the Schedule without admixture of any organic manure, they are not

(2)

liable to tax inside the State.

Even if such fertilizer bears a specific commercial name, for the purpose of the Act, it has no identity except as a chemical fertilizer and secondly the mixing of one or more chemical fertilizers cannot but be the same article entitled to application of single point scheme in respect of its ingredients. This is the natural implication of the expression 'chemical fertilizers' followed by the expression 'that is to say'.

Dismissing the appeal,

HELD : (I) The pr.incipal question for determination in these appeals is whether the fertilizer mixtures in question can be treated as the same article H as chemical fertilizers composing them. A plain reading of s. 3 read with item 21 of the First Schedule shows that it is only when a chemical fertilizer specified in sub items 1 to 15 of item No. 21 of the First Schedule is sold in the same condition in which it is purchased that it is not subject to a

fresh levy.

Fertilizer mixture it would be noted is not the same article as the igredients composi1;1g it.

It is sold as a different commercial produLi. The question w~ther tere is _any manufacturing process involved in the preparation of any fert1hzer mixture is wholly irrelevant for the present purpose.

[798A

G-H, 799AJ '

(2) The fertilizer mixture is a marketable commodity different from its components, it is put to different use and has different properties. [800-G-1

State of Ta1nil Nadu v. Rallis lndia, 34 S.T.C. 532 and State of Ta1nil Nadu

v. Pyarelal Malhotra [1976] 3 S.C.R. 168, relied on.

Appeal by Special Leave from the Judgment and Order dated the 5-3-74 of the Madras High Court in Tax Cases Nos. 77 and 78/74.

K. S. Ramamurthi and A. T. M. Sampath for the Appellant.

S. T. Desai, A. V. Rangam and A. Subhashini; for Respondent.

The Judgment of the Court was delivered by

JASWANT SINGH, J.-These appeals by special leave from the common judgment of the Madras High Court dated March 5, 1974, in Tax Cases Nos. 77 and 78 of 1974 which involve the interpretation of section 3 and item No. 21 of the First Schedule to the Tamil Nadu General Sales Tax Act, 19 59 hereinafter referred to as 'the Act', shall be disposed of by this judgment.

The appellant, Tvl. Shaw Wallace & Co. Ltd., a public limited company, is a registered dealer under the Act and is an assessee on the rolls of the Commercial Tax Officer IV, Central Assessment Circle- 23, Madras.

Amongst other things, the appellant manufactures and deals in chemical fertilisers.

It also prepares fertiliser mixtures. For the assessment years 1969-70 and 1970-71, the appellant claimed exemption on a turnover of Rs. 2,35,01,129.47 and Rs. 2,07,94,490.73 respectively relating to sales of fertiliser mixtures.

The case of the appellant was that as the fertiliser mixtures were prepared by dry mix ing of various chemical fertilisers (shown as sub-items (1) to (15) of S. No. 21 of First Schedule to the Act) according tothe standard formula approved by the Director of Agriculture at its mixing works manually by means of shovels and as the resultant product could not be said to be a commodity different from the ingredients composing it which had been purchased within the State and had suffered tax under item No. 21 of the First Schedule to the Act, they could not be taxed again.

The Assessing Officer disallowed the exemption on the entire turnover for the year 1969-70.

He, however, allowed exemption on a turnover of Rs. 1,65,44,223.73 which represented the mixture sold after August 6, 1970-the date when the Tamil Nadu General Sales Tax (Third Amendment) Act (26 of 1970) amending item 21 of Schedule came into force.

On appeal, the Appellate Assistant Commissioner (CA) 1, Madras City, found that part of the ingredients which went into the production of fertiliser mixtures had suffered tax under the Act.

He, therefore, allowed exemption on the turnover which had suffered tax by following the earlier decision of the Sales Tax Appellate Tribunal dated July 27, 1972 in the case of Rallis India Ltd. T. A. 114 of 1971, Where it was held that there is no manufacture and the resultant product viz. manure mixture is not a different product than the ingredients constituting it which have already suffered tax. The

., "

exemption allowed by the Appellate Assistant Commissioner for the years 1969-70 and 1970-71 amounted to Rs. 1,20,18,842.80 and Rs. 42,38,182.90 respectively.

The appellant filed further appeals for both the years under secton 36(1) of the Act before the Tamil Nadu Sales Tax Appellate Tribunal against the orders of the Appellate Assistant Commissioner.

The State of Tamil Nadt• also filed enhancement petitions.

Since the earlier order of the 5des Tax Appellate Tribunal dated July 27, 1972 in T. A. No. 114 of 1971 (supra) which was the basis of the relief granted by the Appellate Assistant Commissioner was reversed by the Madras High Court vide its judgment dated September 18, 1973, in T.C. No. 18 of 1973, the Sales Tax Appellate Tribunal by its orders Nos. 1138/1139 of 1972 dated February 21, 1974 cancelled the relief granted to the appellant by the Appellate Assistant Commissioner.

The appellant thereupon took the matter in revision to the Madras High Court under section 38 of the Act but its applications were dismissed at the stage of admission by that Court on March 5, 1974 in the light of its earlier judgment dated September 18, 1973 in T. C. No. 18 of 1973 (Revision No. 6 of 1973) where it was observed :-

"Each of the component article and the manure mixture have different chemical properties of their own and their use also is different. It is not, therefore, possible to treat the manure-mixture as the same article as the components themselves ..... Whether the process adopted (in the preparation of manure mixture) is manufacture or otherwise, if the resultant product obtained by mixing the various articles of chemical fertilisers referred to in item 21 is sold as a different commercial product and for a different user, it has to be treated as a different article from the components".

In rendering this decision, the Madras High Court relied on the . ratio of the decision of its own Court in Imperial Fertilisers and Company v. State of Madras,(') to the effect that if the mixture sold has different chemical properties and is tested as a different commodity in commerce, its sale cannot be taken to be a second sale of chemical fertiliser merely because the components have suffered ta" at an earlier stage as chemical fertilisers.

After failing to obtain a certificate of fitness for appeal to this Court, the appellant applied for special leave to this Court which was granted vide order dated March 15, 1974.

Appearing in support of the appeals, Mr. Desai has urged that as section 3 (2) of t.he Act provides for levy of sales tax in respect of good.s ment10ned JU the FlfSt Schedule at the rate and only at the point

pec1fied therein and chemical fertilisers which are specified in sub- 1tems (1) to (15) of item No. 21 of the First Schedule to lhe Act are liable to tax at the point of first sale inside the State' the sales of fertiliser mixtures which are prepared by mixing manally by means of shovels, some of t:'ne aforesaid chemical fertilisers mentioned at subitems 1 t~ 15 in the Sceule without ad-mixture of any organic manure are not hble to tax. ns1de the State .. Mr. Desai has further urged that even if_ each fert1hsers bears a specified commercial name, for the

(1) [1973] 31 S.T.C. 390

purpose of the Act, it has no identity except as a 'chemical fertiliser' and consequently the mixture of one or more chemical fertilisers cannot but be the same article entitled to application of single point scheme in respect of its ingredients.

This, accordi!lg to Mr. Desai, is the natural implication of the expression 'chemical fertilisers' followed by the expression "that is to say".

The principal question for determination in these appeals is whe ther the fertiliser mixtures in question can be treated as the same article as chemical fertilisers composing them.

For a proper determination of the contention raised on behalf of the appellant, it is necessary to refer to section 3 of the Act and to item No. 21 of the First Schedule to the Act which run as under:-

"3. Levy of taxes on sales or purchases of goods :- ( 1) Every dealer (other than a casual trader or agent of a non-resident dealer) whose total turnover for a year is not less than fifteen thousand rupees and every casual trader or agent of a non-resident dealer. whatever be his turnover for the year, shall pay a tax for each year at fue rate of (three per cent) of his taxable turnover .

(2) Notwithtanding anything contained in sub-section ( 1), in the case of goods mentioned in the first schedule, the tax under this Act shall be payable by a dealer, at the rate and only at the point specified therein on the turnover in a year relating to such goods whatever be the quantum of turnover in that year. "

"Item 21 of the First Schedule: Chemical fertilisers, that is to say :-

( 1) Ammonium sulphate; (2) Ammonium nitrate; .(3)

Urea ( 4) Ammonium Choloride; (5) Sodium Nit rate; (6) Calcium Ammonium nitrate; (7) super phosphate single; (8) super phosphate triple; (9) Kotka phosphate (10) di-calcium phosphate; (11) Potassium chloride (nuriate of potash); (12) sulphate of potash; (13) mone ammonium phosphate;

(14) di-ammonium phosphate; (15) bone meal; ( 16) any mixture of one or more of the articles mentioned in items ( 1 to 15) and one or more of the organic manures.

Point of levy is at the point of first safo in the State, rate of tax is 31 /27." _,

A plain reading of the above mentioned provisions would show that it is only when a chemical fertiliser specifid in sub-items 1 .. to 15 of item No. 21 of the First Schedule is sold m the same cond1t1on in which it is purchased that it is not subject to .a fresh levy; Fertiser mixture it would be noted is not the same article as the mgred1ents composing it.

It is sold a; a different commercial product. It is put to a different use and has different chemical properties.

As such, it

...

, )

has to be treated as a different article from its component parts. The question whether there is any manufacturing process involved in the preparation of any fertiliser, mixture or whether shovel mixing of the chemical fertilisers amounts to manufactute or not is wholly irrelevant for the purpose of the determination of the question before us.

The decision of the Bombay High Court in Nilgiri Ceylon Tea Supplying Co. v. The State of Bombay,(') on which reliance is placed by counsel for the appellant in support of his contention has no bearing on the question before us as the language of the prov1So to section (8a) of the Bombay Sales Tax Act, 1953 which fell for consideration in that case is not the same as section 3 and item 21 of the First Schedule to the Act befor~ us. It has also to be borne in mind that we are not called upon in the instant appeals to consider as to whether the chemical fertilisers which had been purchased by the assessee had been processed as in the case of Nilgiri Ceylon Tea Supplying Co. (supra). The only question before us, as already indicated, is as to whether there was any mixture of one or more of the articles shown as sub-items (1) to (15) of item No. 21. It is admitted by the appellant in the statement of the case that the fertiliser mixture is prepared by mixing various chemical fertilisers and fillers like china clay, gypsom etc. by a shovel.

It cannot also be disputed that the fertiliser mixture is a marketable commodity different from its components, is put to different use and has different properties.

In the case of Imperial Fertiliser and Co. (supra) where the assessee purchased various items of chemical manure referred to in item 21 of the First Schedule to the Act and brought about a new product by mixing one or more of the said articles with one or more of the organic manure, the resultant product, it was held, could not be said to be the same chemical manure or fertiliser which the assessee had purdhased, as the mixture would have different properties of its own and it could not be said that it retained the same characteristics or properties of any of the chemical manures or organic manures which went to make up the resultant mixture.

It was further held in that case that for getting an exemption on the ground that the sale 'of an article is a second or subsequent sale, it must be established that there has been a sale of the same goods at an anterior point of time and if there is no identity between the product purchased and the product sold, it is not possible to treat the sales of the product by an assessee as second sales.

In State of Tamil Nadu v. Rallis India Ltd.(') it was held that as manure mixture prepared from one or more of the articles mentioned in sub-items (1) to (1S) of item No. 21 of the First Schedule has chemical properties different from its comoonents and its use is also different, it is not possible to treat the manure mixture as the same article as the components themselves. 'I'he following observations made in this decision .are pertinent :-

"If the product obtained by mixing the various chemical fertilisers referred to in item 21 is sold as a different commercial product and for a different user, it has to be

(1) 10 S.T.C. 500.

(2) 34 S.T.C. 532

treated as a different aritcle from the components, whether the process of such mixture is one of manufacture or not".

In State of Tamil Nadu v. Mis Pyari Lal Malhotra etc.(') a bench of four judges of this Court, to which one of us, namely, My Lord the Hon'ble Chief Justice was a party, had occasion to consider the meaning of the expression "that is to say" and the tests to be applied in determining whether the sale of a certain class of goods is subject to the levy of single point sales tax.

With regard to the expression "that is to say", our learned brother, Beg, J. who spoke for the Court observed :-

"We think that the precise meaning of the words "t!l\at is to say''. must vary with the context.

But in the context of single point sales tax, subject to special conditions when imposed on separate categories of specified goods, the expression was apparently employed to specifically enumerate separate categories of goods on a given list.

The purpose of such specification and enumeration in a statute dealing with sales tax at a single point in a series of sales would, very naturally, be to indicate the types of goods each bf ..yhich would constitute a separate class for a series of sales.

Otherwise, the listing itself loses all meaing and would very naturally, be to indicate thet ypes of goods each of be without any purpose behind it".

In regard to the test for determining the taxable events in relation to the sales tax, same learned brother observed as follows :-

"The mere fact that the substance or raw material out of which it is made has also been taxed in some other form, when it was sold as a separate "commercial commodity, would make no difference for purposes of the law of sales tax.

The object appears to us to be to tax sales of goods of each variety and not the sale of the substance out of which they are made. . . . . As soon as separate commercial commodities change or come into existence, they become separately taxable goods or entitles for purposes of sales tax .....

The law of sales tax is also concerned with "goods" of various descriptions.

It, therefore, becomes necessary to determine when they cease to be goods of one taxable description and become those of a commercially different category and description".

A; s in the instant. cases, the mixtures produced by the appellant are d1erent from therr component parts, their properties and uses are

also different and thy are sold as diffrent commercial products, the

appellnt was ot entitled o !J?.e exemp!ion claimed by it.

The appeals accordmgly fail and are dJS1mssed with costs.

P.H.P.

Appeals dismissed.

SHAW WALLACE & CO. LTD

STATE OF TAMIL NADU

A. N. RAY, C.J.

JASWANT SINGH, JJ.

Sec. 3

First Schedule

First Schedule

First Schedule

Tamil Nadu High Court

s. 3(2)

First Schedule

s. 3

First Schedule

First Schedule

[1976] 3 S.C.R. 168

K. S. Ramamurthi

A. T. M. Sampath

S. T. Desai

A. V. Rangam

A. Subhashini

section 3

First Schedule

Tvl. Shaw Wallace & Co. Ltd.

Madras

First Schedule to the Act

First Schedule

Sales Tax Appellate Tribunal

27, 1972

Rallis India Ltd.

State of Tamil Nadt•

Madras High Court

section 38

March 5, 1974

March 15, 1974

Desai

section 3

First Schedule

section 3

First Schedule

First Schedule

First Schedule

Bombay High Court

Bombay Sales Tax Act, 1953

section 3

First Schedule

Nilgiri Ceylon Tea Supplying Co.

Imperial Fertiliser and Co.

First Schedule

First Schedule

Beg


I }

D. C. ROY

80 1

THE PRESIDING OFFICER, MADHYA PRADESH INDUSTRIAL

COURT, INDORE AND OTHERS

March 23, 1976

[Y. V. CHANDRACHUD AND V. R. KRISHNA IYER, JJ.]

Labour Law-Dismissal of employee after dotnestic enquiry-Enquiry found by LaboW' Court to be vitiated but order of disn1issal held justified on evidence, adduced before it-Whether order of dismissal relates back to the date of the original order of dis1nissal.

The Madhya Pradesh Industrial Employn1ent (Standing Orders) Rules, 1963, Standard Standing Order 12(b )-Major n1isconduct, what is.

When the flying squad checked a bus of the State Road Transport Corporation, it was found that the appellant, who was a ticket-examiner of the Corporation ; ind whose duty was to check whether all the passengers had paid the fare and whether the conductor had i&sued ticket; s to the passengers, was on the bus; and that. though all the passengers in the bus had paid their fares the conductor had not issued 9t tickets.

If the appellant were so minded, he could easily have detected the conductor's misconduct. The appellant \Vas charged with the breach of Standard Standing Order 12 (b) under the Madhya Pradesh Industrial Employment (Standing Orders) Rules, 1963, which governed the matter, and he was dismissed after a domestic enquiry. On his application

tnder s. 31, Madhya Pradesh Industrial Relations Act, the Labour Court held that the enquiry was defective as it infringed principles of natural justice, but C'1me to the conclusion, after considering the evidence adduced before it by the parties, that the dismissal was justified.

The appellant's revision to the industrial Court and writ petition in the High Court were dismissed.

In appeal to this Court, it was contended by the appellant that : ( 1) the charge did not amount to a 'major misconduct' under the Standing Orders; and

(2) the Labour Court, having found that there \Vas no proper domestic enquiry, should have ordered payment of \\'ages till the date of the decision by the Labour Court.

Dismissing the appeal, HELD : ( 1) Standard Standing Order 12(b) provides that "theft. fraud or

dishonesty in connection with the business or property of the undertaking" shall F amount tO a major misconduct on the part of the employee. The appellant •Db\1iouSly colluded with the conductor in depriving the Corporation of its legitimate earnings. The appellant, having thus acted dishonsetly in connection v..ith the business of the Corporation, was clearly guilty of a major misonduct.

[803G-804CJ

(2) In a case where the domestic enquiry does not suffer from any defect, so serious or fundamental as to make it non est, the award of the Labour CouJt, based on the evidente produced before it relates back to the date when G the order of dismissal was passed on the termination of the domesti-: enquiry; and so, the appellant was not entitled to any back wages.

[807 B-C]

P.H. Kalya11i v. Mis. Air France Calcutta (1964] S.C.R. 104, followed.

The observation in the Hotel linperial case f1960j 1 S.C.R. 476, 487, that in the Phulbari Tea Estate case [1960] 1 S.C.R. 32, it was held that in a case where the employer makes good the defects in the domestic enquiry by producing necessary evidence before the Industrial Tribunal, the employer "will have to H pay the wages up to the date of the award of the Tribunal" even if the award went in favour of the employer, is not correct.

Jn the Phulbari Tea Estate\ case, the employers made no aUempt to make good the defect in the domestic enquiry by producing necessary evidence before the Tribunal with the result

that the Tribunal, which found that the enquiry was vitiated, had no evidence before it. to examine the legality or propriety of the order of dismissal. It was in that context that instead of ]!eing re-instated, the employee was given the alternative relief of compensation by payment of wages. [805F-806C]

Mis. Sasa Musa Sugar Works (P) Ltd. v. Shobrati Khan [1959] 2 SCR 836 explained and distinguished. •

An enauiry blatantly and consciously violating principles of natural justice so as to amount to a pretence J]lay, however, be equated with a total absence of an enquiry so as to exclude the application of the 'relation back' doctrine. [807

C-DJ

ClVIL APPELLATE JURISDICTION: Civil Appeal No. 466 of 1970.

Appeal by Special Leave from the Judgment and Order dated the 6th March, 1968 of the Madhya Pradesh High Court in Misc. Petition No. 75 of 1968.

M. K. Ramamurthi and Vineet Kumar for the Appellant.

Ram Punjwani and Rameshwar Nath for the Respondents.

The Judgment of the Court was delivered by

CHANDRACHUD, J.

The appellant was working as a Ticket Examiner in the Madhya Pradesh State Road Transport Corporation at its Nagpur Depot.

On March 21, 1964 a bus belonging to the Corporation was checked by the Flying Squad when nine and half passengers out of 26 were found travelling without tickets.

The appellant was on the bus in the discharge of his duties as a Ticket Examiner.

The Flying Squad prepared a Panchnama on the spot obtaining thereon the signatures of the appellant, the driver and the ticked conductor. It was found that the conductor had collected the fare from all the 26 passengers who were travelling in the bus but had not issued tickets to

9t passengers.

Since it was the duty of the appellant as a Ticket Examiner to check whether the conductor had collected fare from all the passengers and in token thereof had issued tickets to them, a chargesheet was served on the appellant for breach of clauses 12(b) and ( d) of the Madhya Pradesh Standard Standing Orders which govern the matter by reason of Rule 7 of the Madhya Pradesh Industrial Employment (Standing Orders) Rules, 1963.

A Domestic inquiry was thereafter held into the charges and the appellant having been found guilty the Corporation, through its Depot Manager, dismissed him by an order dated August 14, 1964.

On December 9, 1964 the appellant filed an application in the Labour Court, J abalpur, under section 31 of the Madhya Pradesh Industrial Relations Act challenging the validity of the inquiry on various grounds and praying that the order of dismissal bp set aside and that an order of reinstatement be passed with back wages.

By a preliminary order dated December 7, 1966 the Labour Court held that the Qomestic tribunal did not hold a proper inquiry into the charges levelled against the appellant but that it was open to the parties to lead evidence before it on the merits of the case and to satisfy it whether the appellant was guilty of the charges and further whether the conduct of the appellant was such as to call for an order of dismissal.

Parties thereafter led evidence before the Labour Court, on a

I )

consideration of which it held by an order dated August 18, 1967 that A, the appellant was guilty of the charges levelled against him and that in the circumstances of the case the punishment of dismissal was neither harsh nor unjust.

Feeling aggrieved by the aforesaid order of the Labour Court the appellant preferred a revision application to the Industrial Court, Indore, under section 66 of the Madhya Pradesh Industrial Relations B Act.

The Industrial Court confirmed the findings of fact recorded by the Labour Court and upheld the order of dismissal.

As regards back wages, the Industrial Court held that the order of the Labour Court dated August 18, 1967 would relate back to the date when the appellant was dismissed by the Corporation al\d therefore the appellant was not entitled to back wages till the date when the Labour Court passed 1ts final order.

The appellant thereafter filed a petition in the High Court of Madhya Pradesh under articles 226 and 227 of the Constitution challenging the order of the Industrial Court. The High Court by its order dated March 6, 1968 dismissed the petition in limine, though with a speaking order.

It held that the omission of the appellant to check ticketless travellers in the bus which he had boarded as a Ticket Exa- 1)1 miner amounted to major misconduct under Standing Order 12(b).

The High Court further held that no interference was called for on the question whether the order of dismissal was justified and since the order of the Labour Court related back to the date when the order of dismissal was passed by the Corporation, the appellant was not entitled to wages until the date on which the Labour Court passed lhe judgment, The appellant has filed this appeal in forma pauperis by E special leave of this Courf.

Mr. M. K. Ramamurthi who appeared as an amicus for the appellant raised two points for our consideration in this appeal.

He contended in the first place that the charge made against the appeUant does not amount to a "major misconduct" under the Madhya Pradesh Industrial Employment (Standing Orders) Rules, 1963 and secondly F that in any event, the Labour Court having found that the Domestic tribunal had failed to hold a proper inquiry, the appellant was entitled to back wages until the final decision of the Labour Court.

The Madhya Pradesh Industrial Employment (Standing Orders) Rules, 1963 provide by Rule 7, to the extent material, that the Standard Standing Orders for all undertakings to which the Madhya Pradesh G Industrial Employment (Standing Orders) Act, 26 of 1961, applies shall be those set out in the Annexures to the Rules. We are concerned in this case with Standard Standing Order 12 (b) which provides that "theft, fraud, or dishonesty in connection with the business or property of the undertakings" shall amount to a major misconduct on the part of an employee.

The appellant had evidently entered the

padrt~t'1!iar bdJ!S intodrdehr

1 t<;>tcheckh.it din his cap 1

ac:ty abs ahTichket Examiner K an 1 1s un 1spn e t a 1 was is uty t•) c 1ec~ w et er t e passengers travelling in the bus had paid the fare and whether tickets were issued to them by the conductor on collecting the fare from them. The bus

.A was carrying a complement of 26 passengers out of whom 9J passengers did not hold tickets.

The Panchnama which was drawn on the spot shows that the conductor had collected the fare from the passengers but had not issued any tickets to them.

There cannot be the least doubt that if the appellant were so minded, he could have easily detected the misconduct of the conductor.

Obviously, the appellaHt had colluded with the conductor in depriving the Corporation of its B legitimate earnings.

The only explanation offered by the appellant was that he was not travelling in the bus at the relevant time and that explanation has been found to be false consistently by all the courts.

The appellant having acted dishonestly in connection with the business of the Corporation, he was clearly guilty of a major misconduct..

On the second question as to whether the appellant is entitled to

 C back wages from the date of dismissal until the date on which the Labour Court delivered its judgment, learned counsel for the appellant relies strongly. on the observations made by this Court in The Managen<ent oj Hotel Imperial, New Delhi & Ors. v.

Hotel Workers' Union (1), to the following effect :

"In Phulbari Tea Estate v. Its Workmen('), the rider laid down in the case Messrs. Sasa Musa Sugar Works (P) Ltd. ( 3) was further extended to a case of an adjudication under s. 15 of the Act and it was pointed out that if there

was. any defect in the enquiry by the employer he could make good that pefect by producing necessary evidence before the tribunal; but in that case he will have to pay the wages up to the date of the award of the tribunal, even if the award went in his favour". (p. 487)

We will consider the impact and implication of the concluding portion of this passage but before we do so, we must draw attention to a 5-Judge Bench decision of this Court in P. fl. Kalya11i v.

M /s.

Arr France Calcutta('), which is directly in point and concludes the question under consideration.

In that case an inquiry was held against an employee of M/s. Air France by the Station Manager, on whose findings the employee was dismissed by the Regional Representative of the Company on payment of one month's wages.

The employee challenged the order of dismissal by filing an application under section 33A of the Industrial Disputes Act, 1947 on the ground that the Station Manager was biased against him and therefore the inquiry was vitiated as being contrary to the principles of natural justice.

The Labour Court took the view that the employee's contention that the Station Manager was biased against him could not be brushed aside lightly but it went on to hold that even if there was some violation of the principles of natural justice on account of the bias of the Inquiry Officer, the Company was entitled to adduce, as it did, all the evidence before it in support of its action and therefore it was open to the Labour Court to decide on that evidence whether the action was justified and whether the approval to the order of dismissal should be granted.

On going into that evidence, the Labour Court held that the

D. c. ROY v. PRESIDING OFFICER IND. ('.OURT (Chandrachud, J.) 805

breaches committed by the employee were of a serious nature and the order of dismissal passed by the employer was therefore justified.

In an appeal by special leave against the decision of the Labour Court, it was contended in this Court on behalf of the employee that smce the Domestic inquiry was found defective, the Labour Court, even if it was of the opinion that the dismissal was justified, should have ordered the dismissal from the date of its award and not from the date when the Regional Representative passed the order of dismissal.

Rejecting this contention, this Court held :

"The present is a case where the employer has held an inquiry though it was defective and has passed an order of dismissal and seeks approval of that order. If the inquiry is not defective, the Labour Court has only to see whether there was a prima facie case for dismissal and whether the employer bad come to the bona fide conclusion that the employee was guilty of misconduct.

Thereafter on coming to the conclusion that the employer had bona fide come to the conclusion that the employee was guilty i.e. there was no unfair labour practice and no victimisation, the Labour Court would grant the approval which would relate back to the date from which the employer had ordered the dismissal. If the inquiry is defective for any reason, the Labour Conrt would also have to consider for itself on the evidence adduced before it whether the dismissal was justified.

However, on coming to the conclusion on its own appraisal of evidence adduced before it that the dismissal was justified its approval of the order of dismissal made by the employer in a defective inquiry would still relate back to the date when the order was made." These observations directly cover the case before us because though the Labour Court, in the instant case, found that the inquiry was defective as it infringed the principles of natural justice, it came to the conclusion after considering the evidence adduced before it, that the dismissal was justified. The award of the Labour Court must therefore relate back to the date when the order of dismissal was passed on the termination of the Domestic inquiry.

The observations extracted earlier from the judgment of a 3-Judge Bench in Hotel lmperial's case (p. 487 of the Report), on which the appellant relied strongly prima facie support the appellant's contention that if an inquiry is found to be defective, the employer can make good the defect by producing the necessary evidence before the Labour Court but that in such a case he will have to pay wages up to date of the decision of the Labour Court even if that decision went in his favour.

The particular observations purport to summarize what was decided by the same Bench a fortnight earlier in Phubari Tea Estate v. Its Workmen(').

Learned counsel for the respondent took us closely through the judgment in Phulbari Tea Estate but we are unable to find anything in that judgment showing that whenever there is a defect in a Domestic inquiry, the employer would have to pay wages up to the date of the award of the Labour Court or the Industrial

1. (1960) (I) S.C.R. 32 .

Tribunal even if the order passed in the Domestic inquiry was ultimately upheld by the Labour Court or the Tribunal.

In Phulbari Tea Estate (supra), the domestic inquiry was in gross violation of the limdamental principles of natural justice and was therefore vitiated.

The employers did not lead proper evidence before the Tribunal to justify the order of dismissal and weg content merely to produce before the Tribunal the statements which were recorded during the inquiry.

The employee therefore had no opportunity to cross-examine the witnesses before the Tribunal. Since the inquiry was bad and the Tribunal had no evidence before it to sustain the order of dismissal it set aside that order but held that in the , peculiar circumstances of the , case, the employee may be granted the alternative relief of compensa- ' tion instead of an order of reinstatement.

The Tribunal accordiugly , granted to the employee pay and allowance from the date of his suspension till payment. The award of the Tribunal was upheld is appeal by this Court.

It shall have been seen that in the case of Phulbari Tea Estate

(supra) the employers made no attempt to make good the defect in the inquiry by producing necessary evidence before the Tribunal and by affording an opportunity to the employee to cross-examine their witnesses. "This left the matters where they were'', a' observed by Wanchoo J. who spoke on behalf of the Court, with the result that the Tribunal which found that the inquiry was vitiated had no evidence before it to examine the legality and propriety of the order of dismissal.

In the instant case, the Domestic inquiry was held to be in violation of the principles of natural justice but the employer led evidence before the Labour Court in support of the order of dismissal and on a fresh appraisal of that evidence, the Labour Court found that the order of dismissal was justified.

The ratio of P. H. Kalyani's case would therefore govern the case and the judgment of the Labour Court must relate back to the date on which the order of dismissal was passed.

With great respect, the ratio of Phulbari Tea Estate is not stated correctly in the particular passage at page 487 of the Report in the case of Hotel l mperial.

That passage is partly a reproducti0n in substance of what is said in Phulbari Tea Estate at page 38 of the Report but the last clause of the passage following the semi-colon is ml addition not borne out by the judgment in Phulbari Tea Estate.

Counsel for the appellant also relied on the decision of this Court in M/s. Sasa Musa Sugar Works (P) Ltd. v. Shobrati Khan & Ors.( 1) but that case is clearly distinguishable.

As pointed out by this Court in P. H. Kalyani's case, Sasa Musa was a case where an application had been made under section 33 (1) of the Industrial Disputes Act for permission to dismiss the employees and such permission was asked for, though no inquiry whatsoever was held by the employer and no decision was taken that the employees be dismissed. The case for dismissal of the employees was made out for the first time in the proceedings under section 33 ( 1) and it was for that reason that it was held that the employees were entitled to back wages until the decision of the application filed under stion 3 3. Commenting on the decision in Sasa Musa, this Court observed in P. H. Kalyani's case that the

matter would have been different if in Sasa Musa, an inquiry had been A held, the employer had come to the conclusion that the dismissal was the proper punishment and had then applied under section 33(1) for permission to dismiss the employees. "In those circumstances the permission would have related back to the date when the employer came to the conclusion after an inquiry that dismissal was the proper punishment and had applied for removal of the bim by an application under section 33(1)." (page 113).

The second cotention must also therefore fail.

We would, however, like to add that the decision in P. H. Kalyani's case is not to be construed as a charter for employers to dismiss employees after the pretence of an inquiry.

The inquiry in the instant case does not suffer from defects so serious or fundamental as to make it non-est.

On on appropriate occasion, it may become necessary to carve an exception c to the ratio of Kalyani's case so as to exclude from its operation at least that class of cases in which under the facade of a domestic inquiry, the employer passes an order gravely detrimental to the employee's interest like an order of dismissal.

An inquiry blatantly and consciously violating principles of natural justice may well be equated with the total absence of an inquiry so as to exclude the application of the 'relation-back' doctrine.

But we will not pursue the point beyond this D as the facts before us do not warrant a closer consideration thereof.

In the result, the appeal is dismissed but there will be no order as to costs.

V.P.S.

Appeal dismissed.

D. C. ROY

Y. V. CHANDRACHUD

V. R. KRISHNA IYER, JJ.

s. 31

Madhya Pradesh Industrial Relations Act

[1960] 1 S.C.R. 32

Phulbari Tea Estate\

[1959] 2 SCR 836

M. K. Ramamurthi

Vineet Kumar

Ram Punjwani

Rameshwar Nath

CHANDRACHUD

August 14, 1964

December 9, 1964

Labour Court, J abalpur

section 31

December 7, 1966

August 18, 1967

Industrial Court, Indore

section 66

High Court of Madhya Pradesh

articles 226 and 227

March 6, 1968

M. K. Ramamurthi

Sasa Musa Sugar Works (P) Ltd.

s. 15

section 33A

Industrial Disputes Act, 1947

Phulbari Tea Estate

Wanchoo

P. H. Kalyani

Sasa Musa

section 33

Industrial Disputes Act

section 33

section 33(1)

section 33(1)

Kalyani