LOSS OF CONFIDENCE – A GROUND FOR DISMISSAL OF THE EMPLOYEE

[Mr. M. GOVINDARAJAN]

Once the employer has lost the confidence in the employee and the bona fide loss of confidence is affirmed, the order of punishment must be considered to be immune from challenge, for the reason that discharging the office of trust and confidence requires absolute integrity and reinstatement cannot be directed in a case of loss of confidence.

In ‘Kanhaiyalal Agarawal and others V. Factory Manager, Gwaliar Sugar Co. Limited’ – 2001 -TMI - 105135 - SUPREME COURT OF INDIA the Supreme Court has laid down the tests for loss of confidence to find out as to whether there was bona fide loss of confidence in employee, observing that-

(i) The workman is holding the position of trust and confidence;

(ii) By abusing such position, he commits act which results in forfeiting the same; and

(iii) To continue him in service/establishment would be embarrassing and inconvenient to the employer, or would be detrimental to the discipline or security of the establishment.

In ‘Indian Airlines Limited V. Prabha D. Kanan’ – 2006 -TMI - 105140 - SUPREME COURT OF INDIA the Supreme Court held that loss of confidence cannot be subjective, based upon the mind of the management.   Objective facts which would lead to a definite inference of apprehension in the mind of management, regarding trustworthiness or reliability of the employee, must be alleged and proved.

In ‘State Bank of India and another V. Bela Bagchi and Others’ – 2005 -TMI - 105144 - SUPREME COURT OF INDIA the Supreme Court repelled the contention that even if by the misconduct of the employee the employer does not suffer any financial loss, he can be removed from service in a case of loss of confidence. 

In ‘Binny Limited V. Their workmen and another’1972 -TMI - 105149 - SUPREME COURT OF INDIA the Supreme Court held that an employer is not bound to keep an employee in service with whom relations have reached the point of complete loss of confidence/faith between the two. 

In ‘A.P. SRTC V. Raghudha Shiva Sankar Prasad’ 2006 -TMI - 105152 - SUPREME COURT OF INDIA the Supreme Court held that in case of theft, the quantum of theft is not important and what is important is the loss of confidence of the employer in employee.

In ‘Divisional Controller, KSRTC V. M.G. Vittal Rao’ – 2012-I-LLJ-320 (SC)  the employee while working as helper was subjected to charge sheet which contained the article of charges mainly on allegations that the employee stayed away beyond his duty hours at his place of employment and opened the door of the blacksmith section with the aid of a duplicate key and pulled the gas cylinder trolly and equipment from blacksmith section to the cash room along with other four employees and opened the inner door of the cash room by cutting the padlock and used the gas cylinder equipment for committing the theft from cash chest.  An enquiry was conducted.   The Disciplinary Authority on the report of the inquiry and after completing the formalities imposed the punishment of dismissal of the employee from the service.  A criminal case was also launched against the employee.

The employee raised an industrial dispute and the State Government made a reference to the Principal Labor Court for adjudication of the dispute.   The Labor Court by its award answered the reference in negative holding that there was sufficient evidence before the enquiry officer to hold that the respondent with his colluders had actively involved in breaking and opening the door of the cash room and drilling the cash chest to commit the theft.   The employee was caught red handed and hence the charges were rightly held to be proved.  

The High Court, on the writ petition filed by the employee allowed the petition to the extent that the order of dismissal was modified into an order of termination and directed the management to pay the terminal benefit since the respondent had retired from the services accepting the contention of the employee that since he was acquitted from criminal case he was entitled to all consequential benefits..  However the High Court held that the employee was not eligible to get back wages or other monetary benefits till the date of his termination.

On appeal by the employee the Division Bench of the High Court allowed the writ appeal of the employee.  The Division Bench held that the employee was entitled to be reinstated into service with all consequential benefits.  However, since he was retired from service, he was entitled to 50% of back wages till the date of retirement.  He was also entitled retirement benefits.   The Company filed an appeal before Supreme Court against the decision of Division Bench of the High Court. 

The Supreme Court held that there can be no doubt regarding the settled legal proposition that as the standard of proof in both the proceedings is quite different, and the termination is not based on mere conviction of an employee in a criminal case, the acquittal of the employee in a criminal case cannot be the basis of taking away the effect of departmental proceedings.  The Supreme Court also considered the principle of loss of confidence.  Considering the gravity of the charge the Supreme Court was of the view that there is no reason to interfere with the order of the Labor court which confirmed the dismissal of the employee.