S. Vidyashankar Vs Union of India (UOI) and Securities and Exchange Board of India

A.P. Shah, C.J.@mdashThe appellant has challenged the decision of the learned single Judge dismissing his writ petition and upholding the order passed by the Securities and Exchange Board of India, the second respondent herein, terminating the service of the appellant.

2. The appellant was temporarily appointed as an Officer in the Securities and Exchange Board of India (SEBI) on 10.4.1989. The appointment was subject to SEBI Service Regulations, 1988. Regulations 10(1) and 10(4) inter alia read as follows:

10 (1). A person directly appointed in any of the specified scales of pay shall be on probation for a period of two years.

10 (4). During the first month of his probation, an employee shall be liable to be discharged at one day''s notice and thereafter at one month''s notice or by payment of substantive pay for one day or one month as the case may be in lieu thereof. Provided that an employee promoted from one grade/scale to another shall, during the period of probation be liable to be reverted to the grade/scale from which he was promoted.

3. While on probation, the appellant availed of leave from 31.7.1989 to 09.8.1989, again from 10.8.1989 to 13.10.1989 and again from 06.11.1989 to 05.12.1989, which was extended upto 22.12.1989 on medical grounds. On production of medical certificate, the leave was regularised. The appellant again applied for leave in the year 1990 and the leave periods upto October 1990 were regularised in November 1990. The appellant once again applied for two months leave from 03.12.1990. The leave was not sanctioned. Nevertheless, the appellant proceeded and sought for extension of leave for a further period of two months. By the order, dated 22.3.1991, he was discharged from service on the ground that his services are not found to be satisfactory. The language used in the order inter alia reads as follows:

... During the period of probation, your services have not been found to be satisfactory. In accordance with ` 10(4) of SEBI Service Regulations, 1988, you are discharged from the services of SEBI with immediate effect from today, i.e. 22nd March 1991.

The crossed cheque for Rs. 2,700/- (Rupees two thousand seven hundred only) bearing No. 107750, dated 22nd March 1991 of State bank of Mysore, Bombay Main Branch, being one month''s substantive pay in lieu of one month''s notice period as required under Regulation 10(4) of SEBI Service Regulations, 1988, is enclosed.

4. According to the appellant, the order was punitive and cast a stigma on the appellant and could not be sustained without a full-scale departmental inquiry. It has been argued that the termination order was founded upon allegations of misconduct against the appellant. In support of his submission that the order was punitive, reliance is placed on the letter, dated 19.9.1990, wherein it was stated that his action of not accepting official communication amounts to an act of highest disobedience, which shall be pursued separately. It was further stated in the said letter that the appellant''s leave record has been far from satisfactory. It is submitted that if the appellant had been given an opportunity of being heard by the second respondent before giving the finding of alleged disobedience, he could have explained that the official communication alleged to have been sent on 13.7.1990 rejecting his leave application was not received by him and thus the order is violative of the principles of natural justice and is punitive in nature.

5. The learned Counsel appearing for the SEBI submitted that there is absolutely no basis for contending that the termination of service was by way of punishment imposed by the respondents. It was a discharge simpliciter and not a punitive action. The learned Counsel further submitted that out of 331 days, the appellant was granted 258 days of Extraordinary Leave without pay and allowances and his period of probation could have automatically expired on 09.4.1991. The service of the appellant has been terminated solely on account of unsatisfactory performance and, therefore, the termination cannot be said to be punitive.

6. The learned single Judge has accepted the submissions of the SEBI and accordingly dismissed the writ petition.

7. The question as to when the termination of the temporary appointee or probationer''s service amounts to punishment has been first considered by the Supreme Court in Parshotam Lal Dhingra Vs. Union of India (UOI), . In that case, the employee had been reverted back from an officiating post. The records showed that adverse remarks had been made against the employee in his confidential reports while he was officiating. These remarks were placed before the General Manager who said that he was ''''disappointed" to read them and that he should be reverted as a subordinate ''''till he makes good the shortcomings noticed...". The order of reversion was passed by the General Manager soon after this. When the issue ultimately came before the Constitution Bench of the Supreme Court, the Court upheld the order of reversion, saying: AIR p.50, para 29:

He had no right to continue in that post and under the general law the implied term of such appointment was that it was terminable at any time on reasonable notice by the Government and, therefore, his reduction did not operate as a forfeiture of any right and could not be described as reduction in rank by way of punishment. Nor did this reduction under Note 1 to Rule 1702 amount to his dismissal or removal. Further it is quite clear from the orders passed by the General Manager that it did not entail the forfeiture of his chances of future promotion or affect his seniority in his substantive post. In these circumstances, there is no escape from the conclusion that the petitioner was not reduced in rank by way of punishment and therefore, the provisions of Article 311(2) do not come into play at all.

8. Another Constitution Bench of the Supreme Court in Benjamin (A.G.) v. Union of India (1967) 1 LLJ 718 explained the decision of Parshotam Lal Dingra, cited supra. It followed the two tests mentioned in Dhingra case, viz., (i) whether the temporary government servant had a right to the post or the rank, or (ii) whether he has been visited with evil consequences. In that case, complaints had been received against the temporary employee. A notice had been sent to the employee to show cause why disciplinary action should not be taken against him. The Inquiry Officer was appointed, but before the inquiry was completed, the services of the employee were terminated with one month''s salary in lieu of notice. The Constitution Bench upheld the order of termination and drew a distinction between a preliminary inquiry and a departmental inquiry. It was held that a preliminary inquiry held to satisfy the Government whether there was no reason to dispense with the services of the temporary employee should not be mistaken for a departmental inquiry held to decide whether punitive action should be taken.

9. In H.F. Sangati etc. Vs. R.G. High Court of Karnataka and Others etc., , the Supreme Court dealt with the question whether an order terminating the appointment of a probationer Munsif could be considered to be punitive. In that case, during the period of probation, several adverse remarks had been made in the confidential records of the probationer. The Administrative Committee of the High Court considered these confidential records and came to the conclusion that the appellant was not fit to be confirmed in the post of a judicial officer. They recommended to the High Court accordingly. The High Court accepted the recommendation at a full court meeting and referred the matter to the State Government. The State Government accepted the recommendation and discharged the probationer from service. The order of termination mentioned that the employee was ''''unsuitable to hold the post of Munsif". The Court held that the order did not cast any stigma on the employee and was not punitive.

10. In Samsher Singh Vs. State of Punjab and Another, , the Supreme Court held that the Courts can look behind the form of the order to find out whether the termination was in substance punitive. The Court summarised the legal position as follows:

64. Before a probationer is confirmed the authority concerned is under an obligation to consider whether the work of the probationer is satisfactory or whether he is suitable for the post. In the absence of any rules governing a probationer in this respect the authority may come to the conclusion that on account of inadequacy for the job or for any temperamental or other object not involving moral turpitude the probationer is unsuitable for the job and hence must be discharged. No punishment is involved in this. The authority may in some cases be of the view that the conduct of the probationer may result in dismissal or removal on an inquiry. But in those cases the authority may not hold an inquiry and may simply discharge the probationer with a view to giving him a chance to make good in other walks of life without a stigma at the time of termination of probation. If, on the other hand, the probationer is faced with an inquiry on charges of misconduct or inefficiency or corruption, and if his services are terminated without following the provisions of Article 311(2) he can claim protection.

11. In Pavanendra Narayan Verma Vs. Sanjay Gandhi P.G.I. of Medical Sciences and anr, , a two-Judge Bench referred to the decided cases and came to the conclusion that whenever a probationer challenges his termination, the court''s first task will be to apply the test of stigma or the ''''form" test. If the order survives this examination the ''''substance" of the termination will have to be found out. One of the judicially evolved tests to determine whether in substance an order of termination is punitive is to see whether prior to the termination there was (a) a full-scale formal enquiry (b) into allegations involving moral turpitude or misconduct which (c) culminated in a finding of guilt. If all three factors are present, the termination has been held to be punitive irrespective of the form of the termination order. Conversely, if any one of the three factors is missing, the termination has to be upheld. Ruma Pal, J. speaking for the Bench, observed:

29. Before considering the facts of the case before us one further, seemingly intractable, area relating to the first test needs to be cleared viz., what language in a termination order would amount to a stigma? Generally speaking, when a probationer''s appointment is terminated, it means that the probationer is unfit for the job, whether by reason of misconduct or ineptitude, whatever the language used in the termination order may be. Although strictly speaking, the stigma is implicit in the termination, a simple termination is not stigmatic. A termination order which explicitly states what is implicit in every order of termination of a probationer''s appointment, is also stigmatic. The decisions cited by the parties and noted by us earlier, also do not hold so. In order to amount to a stigma, the order must be in a language which imputes something over and above mere unsuitability for the job.

12. The decision in Pavanendra Narayan Verma''s case, cited supra, was followed by a three-Judge Bench in State of West Bengal and Ors. v. Tapas Roy (2006) 6 SCC 453. That was a case where the respondent was appointed as a temporary constable and was kept on probation. He was sent for training to the training centre, where he absented himself on several occasions. On the ground that he had absented himself unauthorisedly on fourteen different occasions from the training centre, an order of discharge was passed under Rule 10 of the Recruitment Rules for Constables, 1992, discharging him from service. The three-Judge Bench, following the decision in Pavanendra Narayan Verma case, held that in order to constitute a stigmatic order necessitating a formal inquiry, it would have to be seen whether prior to the passing of the order, there was an inquiry into the allegations involving moral turpitude or misconduct so that the order of discharge was really a finding of guilt. If any of these three factors are absent, the order would not be punitive. The Court held that the stigma in the wider sense of the word is implicit in every order of termination during probation. It is only when there is something more than imputing unsuitability for the post in question, that the order may be considered to be stigmatic. In that case, in the order of discharge, it was inter alia stated that the respondent is not likely to make an efficient constable and is unsuitable for the Police Department and his frequent unauthorised absence from training centre also indicates his lack of interest in training and his scant respect for discipline. It was held that the language in the discharge order cannot be said to be stigmatic as it neither alleges any moral turpitude or misconduct on the part of the respondent nor was there an inquiry as such preceding the order of discharge.

13. In State of Punjab and Others Vs. Sukhwinder Singh, , a Bench of three learned Judges, after referring to several earlier decisions, laid down the principle as under in para 19 of the report:

19. It must be born in mind that no employee whether a probationer or temporary will be discharged or reverted, arbitrarily, without any rhyme or reason. Where a superior officer, in order to satisfy himself whether the employee concerned should be continued in service or not, makes inquiries for this purpose, it would be wrong to hold that the inquiry which was held, was really intended for the purpose of imposing punishment. If in every case where some kind of fact finding inquiry is made, wherein the employee is either given an opportunity to explain or the inquiry is held behind his back, it is held that the order of discharge or termination from service is punitive in nature, even a bona fide attempt by the superior officer to decide whether the employee concerned should be retained in service or not would run the risk of being dubbed as an order of punishment. The decision to discharge a probationer during the period of probation or the order to terminate the service of a temporary employee is taken by the appointing authority or administrative heads of various departments, who are not judicially trained people. The superior authorities of the departments have to take work from an employee and they are the best people to judge whether an employee should be continued in service and made a permanent employee or not having regard to his performance, conduct and overall suitability for the job. As mentioned earlier a probationer is on test and a temporary employee has no right to the post. If mere holding of an inquiry to ascertain the relevant facts for arriving at a decision on objective considerations whether to continue the employee in service or to make him permanent is treated as an inquiry ''''for the purpose of imposing punishment" and an order of discharge or termination of service as a result thereof ''''punitive in character", the fundamental difference between a probationer or a temporary employee and a permanent employee would be completely obliterated, which would be wholly wrong.

14. In a recent judgment rendered by the Supreme Court in Kendriya Vidyalaya Sangathan Vs. Arunkumar Madhavrao Sinddhaye and Another, , a two-Judge Bench held that the nature of enquiry conducted against the respondent therein was merely a preliminary or fact finding enquiry and no formal full-scale departmental enquiry had been conducted against the respondent. In fact, the enquiry officer had himself recommended that disciplinary action be taken against the respondent. However, the authorities chose not to hold a disciplinary enquiry against the respondent and did not serve him with any article of charges or take any further steps in that regard. Instead, they chose to exercise power under the terms and conditions of the appointment order. The termination order is wholly innocuous and does not cast any stigma upon the respondent nor it visits him with any evil consequences.

15. The learned Counsel appearing for the appellant relied upon the judgment of the Supreme Court in Prithipal Singh Vs. State of Punjab and Others, and another judgment of the Supreme Court in V.P. Ahuja Vs. State of Punjab and Others, . We have gone through both the decisions and we find that the order of discharge was held to be stigmatic on the basis of peculiar facts of the case and they are not of any relevance in the facts and circumstances of the instant case.

16. Law is well settled. The order of termination can be said to be in substance punitive only when prior to the termination there was a full-scale formal enquiry into the allegations involving moral turpitude or misconduct which culminated in a finding of guilt. If all the three factors are present, the termination may be held to be punitive irrespective of the form of the termination order. Further, the order of termination, in order to amount to stigma, must be in a language which imputes something over and above mere unsuitability for the job. In the present case, the respondents have merely stated in the discharge order that the services of the appellant are not found to be satisfactory. The order cannot, by any stretch of imagination, be said to be casting stigma on the appellant.

17. In the result, no interference is warranted with the order of the learned single Judge and the appeal accordingly stands dismissed. Consequently, the connected miscellaneous petition is also dismissed.