I have seen people wondering about, when they reach a situation where they have to ink a document. They get confused what the document could be and what is it called and why it is called so and so many questions alike. Here we would try to decipher the import of MOU and MOA two very usual documents in the business/commercial arenas.
What are MOU’s And MOA’s
MOU stands for Memorandum of Understanding and MOA stands for Memorandum of Agreement.
MOUs and MOAs are both written agreements between two parties. If that be so what is the difference between the two?
There is no established legal difference. Many a times it has been seen the two terms used interchangeably. As in the case of MOA because it contains the word “agreement”, and as per definition in Indian Contract Act 1972 a contract is an ‘agreement’, some people believe that an MOA signifies a more significant commitment than an MOU. So if you are having difficulty with entering a partnership using an “MOA”, then see whether your potential partner wants to sign an “MOU”.
However, if the document whatever way it is named, if does not contain ingredients of an agreement or contract, then it will remain as a mere understanding and can be aptly called MOU rather than MOA.
In MoU, there would not be any default clause or dispute cause. Whatever issue arose upon the document will have to be settled mutually without obligations on either party. Whereas in an agreement usually the obligations will be clear and consequence of default and what liability the parties will have will also be clear. In this view the MOU and MOA can be differentiated and the nature of document can be understood.
To elucidate this a clause from MoU can be quoted here as follows:
“Both the Parties shall carry their own responsibilities and liabilities under this document without any recourse to other Party”
Whereas in an agreement it will be provided as follows:
In case of violation of any of the terms of this agreement by a party, the other party will have a right to terminate this agreement and shall be entitled for penalty as provided herein; notwithstanding his rights to sue him for the loss suffered by such party.
So the differences here are mainly threefold:
1 there is no strict liability to fulfil obligations under MoU but MOA obligations are binding
2 the party not fulfilling his obligations would be still caught free without any consequences under an MOU, but the violation of an agreement will entail penalisation.
3 MoU is not treated as a contract but only as an informal agreement to enter into a contract
Why Use MOA's and MOU's?
If you are signing a contract with someone, whatever it is called, whether MOU or MOA, make sure that the contract has been legally reviewed and that you understand what your obligation is.
An MOU is like an agreement, but it doesn’t have to carry the same legal weight. That is because this kind of an agreement doesn’t need to be intended as a legally enforceable arrangement, but a “Contract- MOA” always is intended that way. However, an MOU can include any or all of a contract’s terms and conditions. If it includes all of them, but is just titled an MOU, it can carry as much legal weight as a contract. Most often, an MOU is just a statement of cooperation or understanding about a specific or general topic between two (or more) parties. It is often used to clarify the roles and responsibilities of each party in a shared situation of interest. For example, when both the A company and B Company want to undertake a critical study on project as assigned by the Authority, they can write an MOU stating that they will cooperate together in making that happen. If none (or just some) of the standard “terms and conditions” are included, an MOU can be an attractive option to a standard contract or MOA, because it will be simpler to use. And it can avoid the potential insult, resentment, or distrust that can result from asking someone to sign a fully-provisioned contract, rather than accepting that they honour their word. Usually, the point to MOU is building a cooperative effort. So an MOU is useful when both (or multiple) parties have developed, or would like to establish, a partnership based on a level of trust, rather than just legal obligation.
Even in a work situation, if the parties have an established working relationship and trust each other, an MOU can be used in lieu of a standard work contract, and serves simply to clarify the work plan or scope of work. MOUs are good ways to start off a formal, recognized partnership with someone. They can contain as little or as much obligation as both parties are willing to sign, and be as specific or general as needed. In the end, even a general and short MOU can be the start of working towards a more meaningful relationship or goal. As a community, the more MOU you can show funding agencies and other potential partners, the better. MOU and demonstrated partnerships will help to bring you the services or funds that you lack for the work you want to do.
However, regardless of how an MOU is used, without the standard contract terms and conditions, MOU doesn’t offer the same legal assurances or protections. If there is a substantial obligation that is being committed to that involves a significant amount of funds or services and if there is distrust or different goal motivations between the signers, then you should consider a standard contract or MOA with the full range of standard contract terms and conditions-- or at least as many that make sense for your situation.
Guidelines for signing documents
Before entering into any of the above documents, the following points may be considered:
Purpose of the document
Does the document link to the plans and objectives
What are the benefits of the document ie what will be delivered to youl
Does the document comply with all of the legal formalities which may be required
What are the commitments/liabilities/resources
What are the main risks associated with the document and can they be insured
Is legal opinion required
Whether the other party has the authority or entitlement to sign the document
What would be the consequences of not signing the document
What other potential partners may get precluded by virtue of this association
How does the relationship enhance and sustain among the parties
What is the scope of the default clause and confidentiality clause in the document
For assessment of the risk associated with the document, consider;
Is the document necessary in order to receive the benefits
What commitments will this document require and over what time period
What due diligence checks have been carried out on the other party or parties to the document
What would the consequences of not signing the document
Is there adequate insurance cover - if not, or not clear, refer to advice
Are there commercial implications of the document
Undertake a risk assessment
Is the initiative high/extreme risk and related
Does the document require the granting of an indemnity or guarantee
Are there any legal issues which require clarification
Are there any financial implications which require consideration
Are there any intellectual property implications
Friday, 29 February 2008
Monday, 25 February 2008
Dismissal without enquiry
Dismissal from services is the greatest punishment an employer can inflict on an employee. It is believed that such an ultimate weapon would be used by an employer only in case of gross violation of the rules and employment contract. It is cardinal to the natural justice principles that wherever the employee is dismissed, it is done after conducting a detailed enquiry and based on the findings thereon. Not only does this give the employee an opportunity to mount a defence, it is also good for the employer for better implementation of such a dismissal order. Let us examine whether a dismissal is possible without an enquiry.
STATUTORY PROVISIONS AND RULES OF THE COMPANY
Article 311 of the Constitution of India stipulates that without contemplating an enquiry proceeding, no employee of the Government shall be dismissed, except under certain exceptional circumstances as provided under the proviso of the said Article. However, the employees of a PSU cannot avail of Article 311 of the Constitution. Nevertheless, under Article 14, 16 and 21 of the Constitution, the employees of PSUs can claim the same kind of protection, claiming the right of equal treatment and safeguard against arbitrariness.
Labour legislations do not strictly prescribe any enquiry proceedings as a pre-requisite for the dismissal of an employee. However, these statutes state that without fair hearing and complying with the principles of natural justice, no employee shall be dismissed. Further, the Fifth Schedule to the Industrial Disputes Act, providing the details of practices covered under the definition of Unfair Labour Practices under s. 2 (ra), under item No. 5 include To discharge or dismiss workmen (a) by way of victimization; (b) not in good faith, but in the colourable exercise of the employers rights; (c) by falsely implicating a workman in a criminal case on false evidence or on concocted evidence; (d) for patently false reasons; (e) on untrue or trumped up allegations of absence without leave; (f) in utter disregard of the principles of natural justice in the conduct of domestic enquiry or with undue haste; (g) for misconduct of a minor or technical character, without having any regard to the nature of particular misconduct or the past record or service of the workman, thereby leading to a disproportionate punishment, also as an unfair labour practice.
If an employee is dismissed from service, that will become a cause of action for him to move the Labour Court having jurisdiction as per the Second Schedule to the Industrial Disputes Act, read with s. 7. The consequence of this provision is that in the event of dismissal of an employee, with or without an enquiry, he can seek reinstatement before the jurisdictional Labour Court and if reinstated, it will be deemed that dismissal never took place.
An employee is also under contract with the employer as per the Indian Contract Act, and his conditions of employment would be the terms of the contract between them. Accordingly, the Standing Orders or CDA Rules will operate as a contract between the employer and employee, the violation of which may lead to remedies contained therein. As the Standing Orders or CDA Rules prescribe and envisage certain circumstances under which the concerned employee can be dismissed without any enquiry proceedings, in such circumstances, the Disciplinary Authority would be entitled to take such an action.
RULES OF A COMPANY AND PRINCIPLES OF NATURAL JUSTICE
The purpose of enquiry proceedings is to comply with principles of natural justice, which include, the right to be heard and defend oneself against arbitrariness or colourable exercise of powers or discretion by an authority. Unless the enquiry is conducted, there is no occasion for the management to find the employee Guilty and hence any punishment without such enquiry, leading to a finding of guilt, would be bad in the eye of law in natural circumstances. However, there exist exceptions to this rule, under article 311 of the Constitution, preventing the Government from dismissing an Employee without an enquiry in which he has been informed of the charges against him and given a reasonable opportunity of being heard in respect of those charges, provide that, such an enquiry is not necessary where the dismissal is on the ground of conduct which has led to his conviction or a criminal charge or where the authority empowered to dismiss or remove a person if satisfied, that for some reasons, to be recorded by that authority in writing, is not reasonably practicable to hold such enquiry; or where the President or Governor, as the case may be, is satisfied that in the interest of the security of the State, it is not expedient to hold such enquiry. It is also provided under the Article that it will be the decision of the Authority empowered to dismiss, to determine whether it was reasonably practicable to hold such enquiry.
As these detailed exemptions are provided, it is open to the employer to have the said exceptions incorporated in its Bye Laws or Rules stipulating the disciplinary rules for its employees.
In Workmen of Hindustan Steel Ltd. vs. Hindustan Steel Ltd., AIR 1985 SC 251, the Standing Order conferred powers on the General Manager that on his being satisfied that it is inexpedient or against the interest of security to continue to employ the Workman, then for reasons to be recorded in writing, the workman can be removed or dismissed from service without following the detailed procedure of enquiries for dealing with cases of misconduct.
The Supreme Court observed that the Standing Order that conferred such arbitrary, uncanalised and drastic powers to dismiss an employee was violative of the basic requirement of natural justice. The Court took the view that reasons for dispensing with a enquiry and reasons for not continuing to employ the workman, stand wholly apart from each other and the standing order did not obligate the General Manager to record reasons for dispensing with the Enquiry. However, the Honble Supreme Court also upheld the power of the employer to dispense with enquiry where the exercise of his power is held to be strict and in exceptional circumstances only.
In Workmen of Hindustan Steel Ltd, the Supreme Court laid down the test as follows:
.when the decision of the employer to dispense with enquiry is questioned, the employer must be in a position to satisfy the Court that holding of the enquiry will be either counter productive or may cause such irreparable and irreversible damage which in the facts and circumstances of the case cannot be suffered. This minimum requirement cannot and should not be dispensed with to control wide discretionary power and to guard against the drastic power to inflict such a heavy punishment as denial of livelihood and lasting stigma without giving the slightest opportunity to the employee to contravert the allegation and even without letting him know what is his misconduct.
In another case, Avinash Nagra vs. Navodaya Vidyalaya Samiti, 1997 (2) SCC 534, the Supreme Court held that in a case where it is deemed hazardous to have such Enquiry, considering the vulnerability of the witness, the same can be dispensed with and punishment of dismissal can be imposed. The High Court of Delhi further in Dayachand vs. National Thermal Power Station, 2004 (IV) LLJ (Suppl) 168, held that
where a disciplinary enquiry is dispensed with on the plea that it was not reasonably practicable to hold one, the Court must be satisfied that it was not a colourble exercise or malafide action of the Employer. The Employer was to satisfy the Court that good and objective reasons existed showing both proof of misconduct and the reasons for dispensing with the enquiry. This minimum requirement cannot and should not be made to suffer.
In this case, the Court upheld the action of the National Thermal Power Station dismissing an employee without holding enquiry, as it was not practicable to hold an enquiry and as a provision for such action existed under its Clause 23(ii)(c) of the Certified Standing Orders.
DISMISSAL WITHOUT ENQUIRY
It may be discerned from the above that:
1) An Enquiry can be dispensed with while dismissing an employee on the following circumstances:
a) An expressed provision exists in the Rules/Standing Orders of the Company.
b) The dismissal is in consequence of conviction of an Employee after due process before a Court.
c) The Disciplinary Authority is of the opinion that the conduct of such Enquiry will have hazardous effect or will be counter productive or will cause irreparable or irreversible damage.
d) Where the Disciplinary Authority opines that it will be expedient in the interest of security.
e) When in the circumstance Disciplinary Authority reasonably apprehends that the Enquiry is not practically possible.
2) However, the Enquiry cannot be dispensed with even under the above circumstances unless it is provided under the Rules/Standing Orders.
3) Further, the Disciplinary Authority has to record in writing under what circumstance the Enquiry was dispensed with before imposing the punishment of `Dismissal on the employee.
4) The act of dispensing with Enquiry before dismissal can be challenged before the appropriate Labour Court at the instance of the Employee.
5) As the action of dismissal without Enquiry will be subjected to judicial review the Disciplinary Authority shall be able to prove that it was not done on colourable exercise of his right or with malafides and that the action was with good and objective reasons under exceptional circumstances.
Accordingly, while it is most desirable/advisable that punishment of dismissal on some employee may be imposed only upon a properly conducted enquiry, it is concluded that by strictly following the above guidelines and if so provided as per CDA Rules, the Disciplinary Authority can dispense with the enquiry proceedings and dismiss an Employee for any of the reasons, as stated above. However, if the Standing Orders do not stipulate any reason to remove or dismiss an employee from service without following the procedure laid down, it is felt that the Disciplinary Authority may not be empowered to dispense with enquiry under any other circumstance. However, if it is most expedient, the enquiry can be dispensed with by complying to all other requirements of principles of natural justice enshrined by the various decisions of the Courts, provided with adequate precaution taking into consideration that the Court may struck down such a dismissal, unless the employer is capable of proving exceptional circumstances and due compliance to the various requirements, including that of natural justice.
Where the terms of the contract of service, i.e. the CDA Rules/Certified Standing Orders, does not provide for dismissal without enquiry, the action of an employer to dismiss so, would become a breach of the contract. However, as under the Law of Contract, a Service Contract cannot be specifically enforced and accordingly the claim of an employee for reinstatement may not sustain and at the most the employer may only be entitled for damages for the breach of contract committed by him.
Under s. 33 of the Industrial Disputes Act, no protected workmen can be dismissed without the approval of Competent Authority. However, the consequence stipulated only is a complaint against such an action by the employee.
However, s. 11A of the Industrial Disputes Act specifically stipulates that a Labour Court/Tribunal in an Industrial Dispute referred to it, relating to the dismissal of a workman, in the course of adjudication proceedings, if finds a dismissal unjustified, can through an award set aside such dismissal order and in the course of proceedings shall not take any fresh evidence in relation to the matter and shall rely only on the materials on record.
Sec. 11A of I.D. Act - Powers of Labour court, Tribunal, and National Tribunal to give appropriate relief in case of discharge or dismissal of workmen : Where an industrial dispute relating to the discharge or dismissal of a workman has been referred to a Labour Court, Tribunal or National Tribunal for adjudication and, in the course of the adjudication proceedings, the Labour Court, Tribunal or National Tribunal, as the case may be, is satisfied that the order of discharge or dismissal was not justified, it may, by its award, set aside the order of discharge or dismissal and direct reinstatement of the workman on such terms and conditions, if any, as it things fit, or give such other relief to the workman including the award of any lesser punishment in lieu of discharge or dismissal as the circumstances of the case may require.
PROVIDED that in any proceeding under this section the Labour Court, Tribunal or National Tribunal, as the case may be, shall rely only on the materials on record and shall not take any fresh evidence in relation to the matter.
The proviso here would mean that in a case where no enquiry has taken place before dismissal, the employer would be prevented from leading evidence for establishing the guilt of the employee, for which he was dismissed. However, the Supreme Court in the Management of Panitole Tea Estate vs. The Workmen (1971) 1 SCC 742, held that even if no enquiry is held by the employer, the Tribunal in order to satisfy itself about the legality and validity of the order, had to give an opportunity to the employer and employee to adduce evidence before it. It is open to the employer to adduce evidence for the first time justifying his action, and it is open to the employee to adduce evidence contra.
In The Workmen vs. Fire Stone Tyre and Rubber Company Ltd., 1973 (1) SCC 813, interpreting the materials on record in the proviso held that the same will take in the following:
1. The evidence taken by the Management at the enquiry and the proceedings of the Enquiry.
2. The above evidence and in addition any fresh evidence led before the Tribunal.
3. Evidence placed before the Tribunal for the first time in support of the action taken by an Employer as well as the evidence adduced by the Workmen contra.
Delhi Cloth and General Mills Company Ltd., vs. Ludh Budh Singh, 1972 (1) LLJ 180 SC, the Apex Court emphasized that when no enquiry has been held by the employer or when the enquiry has been found to be defective, the employer has got the right to adduce evidence before the tribunal justifying his action.
In another case of Bharat Forge Company Ltd., vs. Zodge, 1996 (2) LLJ 643 SC, where the Tribunal rejected the employers request for permission to lead evidence before the closure of the proceedings, although the High Court of Bombay upheld the decision of the Tribunal, the Supreme Court setting aside the order of the Tribunal as well as the High Court, upheld the right of the employer to lead evidence.
In the latest judgment of Amrit Vanaspati Co. Ltd. vs. Khem Chand and Another, 2006 SCC (6) 325, going through various earlier decisions, broad principles with regard to the subject was summarized and it was inter-alia held that the effect of an Employer not holding an enquiry is that the Tribunal would not have to consider only whether there was a prima-facie case. On the other hand, the issue about the merits of the impugned order of dismissal is at large before the Tribunal and the latter, on the evidence adduced before it, has to decide for itself whether the misconduct alleged is proved. In such cases, the point about the exercise of managerial functions does not arise at all. A case of defective enquiry stands on the same footing as no enquiry. Further, it was also enshrined in the said decision that it has never been recognized that the Tribunal should straightaway, without anything more, direct reinstatement of a dismissed or discharged employee, once it is found that no domestic enquiry has been held
The said ruling of the Supreme Court also enables the employer to furnish fresh/further/additional evidence. It is also laid down by the Supreme Court that where an enquiry is conducted and it is vitiated, it will be as good as no enquiry was conducted. The decision in the above case, lays down also that the Labour Court has to consider the entire evidence before it, before arriving at a decision. Practically, this would mean that in a case where no enquiry has been conducted before dismissal, the Labour Court has to look into the entire set of facts and circumstances and evidence led by both the parties before arriving at its conclusion. In short, it could be deemed that, where Enquiry is not conducted, and if the employee challenges such action before the Labour Court, the Labour Court has to enquire into the entire affair, whereby it would conduct an enquiry proceeding as such, in substitution of the employer who was supposed to have conducted such enquiry before imposing any punishment and only the distinction is perhaps that where the enquiry has been conducted before dismissal, the Court has to be satisfied that it is vitiated before arriving at a decision regarding its admissibility. Whereas, in a case where no enquiry was conducted, the admissibility of the matter may be established for the simple reason of non-existence of domestic enquiry proceedings without going to the merits of the case.
STATUTORY PROVISIONS AND RULES OF THE COMPANY
Article 311 of the Constitution of India stipulates that without contemplating an enquiry proceeding, no employee of the Government shall be dismissed, except under certain exceptional circumstances as provided under the proviso of the said Article. However, the employees of a PSU cannot avail of Article 311 of the Constitution. Nevertheless, under Article 14, 16 and 21 of the Constitution, the employees of PSUs can claim the same kind of protection, claiming the right of equal treatment and safeguard against arbitrariness.
Labour legislations do not strictly prescribe any enquiry proceedings as a pre-requisite for the dismissal of an employee. However, these statutes state that without fair hearing and complying with the principles of natural justice, no employee shall be dismissed. Further, the Fifth Schedule to the Industrial Disputes Act, providing the details of practices covered under the definition of Unfair Labour Practices under s. 2 (ra), under item No. 5 include To discharge or dismiss workmen (a) by way of victimization; (b) not in good faith, but in the colourable exercise of the employers rights; (c) by falsely implicating a workman in a criminal case on false evidence or on concocted evidence; (d) for patently false reasons; (e) on untrue or trumped up allegations of absence without leave; (f) in utter disregard of the principles of natural justice in the conduct of domestic enquiry or with undue haste; (g) for misconduct of a minor or technical character, without having any regard to the nature of particular misconduct or the past record or service of the workman, thereby leading to a disproportionate punishment, also as an unfair labour practice.
If an employee is dismissed from service, that will become a cause of action for him to move the Labour Court having jurisdiction as per the Second Schedule to the Industrial Disputes Act, read with s. 7. The consequence of this provision is that in the event of dismissal of an employee, with or without an enquiry, he can seek reinstatement before the jurisdictional Labour Court and if reinstated, it will be deemed that dismissal never took place.
An employee is also under contract with the employer as per the Indian Contract Act, and his conditions of employment would be the terms of the contract between them. Accordingly, the Standing Orders or CDA Rules will operate as a contract between the employer and employee, the violation of which may lead to remedies contained therein. As the Standing Orders or CDA Rules prescribe and envisage certain circumstances under which the concerned employee can be dismissed without any enquiry proceedings, in such circumstances, the Disciplinary Authority would be entitled to take such an action.
RULES OF A COMPANY AND PRINCIPLES OF NATURAL JUSTICE
The purpose of enquiry proceedings is to comply with principles of natural justice, which include, the right to be heard and defend oneself against arbitrariness or colourable exercise of powers or discretion by an authority. Unless the enquiry is conducted, there is no occasion for the management to find the employee Guilty and hence any punishment without such enquiry, leading to a finding of guilt, would be bad in the eye of law in natural circumstances. However, there exist exceptions to this rule, under article 311 of the Constitution, preventing the Government from dismissing an Employee without an enquiry in which he has been informed of the charges against him and given a reasonable opportunity of being heard in respect of those charges, provide that, such an enquiry is not necessary where the dismissal is on the ground of conduct which has led to his conviction or a criminal charge or where the authority empowered to dismiss or remove a person if satisfied, that for some reasons, to be recorded by that authority in writing, is not reasonably practicable to hold such enquiry; or where the President or Governor, as the case may be, is satisfied that in the interest of the security of the State, it is not expedient to hold such enquiry. It is also provided under the Article that it will be the decision of the Authority empowered to dismiss, to determine whether it was reasonably practicable to hold such enquiry.
As these detailed exemptions are provided, it is open to the employer to have the said exceptions incorporated in its Bye Laws or Rules stipulating the disciplinary rules for its employees.
In Workmen of Hindustan Steel Ltd. vs. Hindustan Steel Ltd., AIR 1985 SC 251, the Standing Order conferred powers on the General Manager that on his being satisfied that it is inexpedient or against the interest of security to continue to employ the Workman, then for reasons to be recorded in writing, the workman can be removed or dismissed from service without following the detailed procedure of enquiries for dealing with cases of misconduct.
The Supreme Court observed that the Standing Order that conferred such arbitrary, uncanalised and drastic powers to dismiss an employee was violative of the basic requirement of natural justice. The Court took the view that reasons for dispensing with a enquiry and reasons for not continuing to employ the workman, stand wholly apart from each other and the standing order did not obligate the General Manager to record reasons for dispensing with the Enquiry. However, the Honble Supreme Court also upheld the power of the employer to dispense with enquiry where the exercise of his power is held to be strict and in exceptional circumstances only.
In Workmen of Hindustan Steel Ltd, the Supreme Court laid down the test as follows:
.when the decision of the employer to dispense with enquiry is questioned, the employer must be in a position to satisfy the Court that holding of the enquiry will be either counter productive or may cause such irreparable and irreversible damage which in the facts and circumstances of the case cannot be suffered. This minimum requirement cannot and should not be dispensed with to control wide discretionary power and to guard against the drastic power to inflict such a heavy punishment as denial of livelihood and lasting stigma without giving the slightest opportunity to the employee to contravert the allegation and even without letting him know what is his misconduct.
In another case, Avinash Nagra vs. Navodaya Vidyalaya Samiti, 1997 (2) SCC 534, the Supreme Court held that in a case where it is deemed hazardous to have such Enquiry, considering the vulnerability of the witness, the same can be dispensed with and punishment of dismissal can be imposed. The High Court of Delhi further in Dayachand vs. National Thermal Power Station, 2004 (IV) LLJ (Suppl) 168, held that
where a disciplinary enquiry is dispensed with on the plea that it was not reasonably practicable to hold one, the Court must be satisfied that it was not a colourble exercise or malafide action of the Employer. The Employer was to satisfy the Court that good and objective reasons existed showing both proof of misconduct and the reasons for dispensing with the enquiry. This minimum requirement cannot and should not be made to suffer.
In this case, the Court upheld the action of the National Thermal Power Station dismissing an employee without holding enquiry, as it was not practicable to hold an enquiry and as a provision for such action existed under its Clause 23(ii)(c) of the Certified Standing Orders.
DISMISSAL WITHOUT ENQUIRY
It may be discerned from the above that:
1) An Enquiry can be dispensed with while dismissing an employee on the following circumstances:
a) An expressed provision exists in the Rules/Standing Orders of the Company.
b) The dismissal is in consequence of conviction of an Employee after due process before a Court.
c) The Disciplinary Authority is of the opinion that the conduct of such Enquiry will have hazardous effect or will be counter productive or will cause irreparable or irreversible damage.
d) Where the Disciplinary Authority opines that it will be expedient in the interest of security.
e) When in the circumstance Disciplinary Authority reasonably apprehends that the Enquiry is not practically possible.
2) However, the Enquiry cannot be dispensed with even under the above circumstances unless it is provided under the Rules/Standing Orders.
3) Further, the Disciplinary Authority has to record in writing under what circumstance the Enquiry was dispensed with before imposing the punishment of `Dismissal on the employee.
4) The act of dispensing with Enquiry before dismissal can be challenged before the appropriate Labour Court at the instance of the Employee.
5) As the action of dismissal without Enquiry will be subjected to judicial review the Disciplinary Authority shall be able to prove that it was not done on colourable exercise of his right or with malafides and that the action was with good and objective reasons under exceptional circumstances.
Accordingly, while it is most desirable/advisable that punishment of dismissal on some employee may be imposed only upon a properly conducted enquiry, it is concluded that by strictly following the above guidelines and if so provided as per CDA Rules, the Disciplinary Authority can dispense with the enquiry proceedings and dismiss an Employee for any of the reasons, as stated above. However, if the Standing Orders do not stipulate any reason to remove or dismiss an employee from service without following the procedure laid down, it is felt that the Disciplinary Authority may not be empowered to dispense with enquiry under any other circumstance. However, if it is most expedient, the enquiry can be dispensed with by complying to all other requirements of principles of natural justice enshrined by the various decisions of the Courts, provided with adequate precaution taking into consideration that the Court may struck down such a dismissal, unless the employer is capable of proving exceptional circumstances and due compliance to the various requirements, including that of natural justice.
Where the terms of the contract of service, i.e. the CDA Rules/Certified Standing Orders, does not provide for dismissal without enquiry, the action of an employer to dismiss so, would become a breach of the contract. However, as under the Law of Contract, a Service Contract cannot be specifically enforced and accordingly the claim of an employee for reinstatement may not sustain and at the most the employer may only be entitled for damages for the breach of contract committed by him.
Under s. 33 of the Industrial Disputes Act, no protected workmen can be dismissed without the approval of Competent Authority. However, the consequence stipulated only is a complaint against such an action by the employee.
However, s. 11A of the Industrial Disputes Act specifically stipulates that a Labour Court/Tribunal in an Industrial Dispute referred to it, relating to the dismissal of a workman, in the course of adjudication proceedings, if finds a dismissal unjustified, can through an award set aside such dismissal order and in the course of proceedings shall not take any fresh evidence in relation to the matter and shall rely only on the materials on record.
Sec. 11A of I.D. Act - Powers of Labour court, Tribunal, and National Tribunal to give appropriate relief in case of discharge or dismissal of workmen : Where an industrial dispute relating to the discharge or dismissal of a workman has been referred to a Labour Court, Tribunal or National Tribunal for adjudication and, in the course of the adjudication proceedings, the Labour Court, Tribunal or National Tribunal, as the case may be, is satisfied that the order of discharge or dismissal was not justified, it may, by its award, set aside the order of discharge or dismissal and direct reinstatement of the workman on such terms and conditions, if any, as it things fit, or give such other relief to the workman including the award of any lesser punishment in lieu of discharge or dismissal as the circumstances of the case may require.
PROVIDED that in any proceeding under this section the Labour Court, Tribunal or National Tribunal, as the case may be, shall rely only on the materials on record and shall not take any fresh evidence in relation to the matter.
The proviso here would mean that in a case where no enquiry has taken place before dismissal, the employer would be prevented from leading evidence for establishing the guilt of the employee, for which he was dismissed. However, the Supreme Court in the Management of Panitole Tea Estate vs. The Workmen (1971) 1 SCC 742, held that even if no enquiry is held by the employer, the Tribunal in order to satisfy itself about the legality and validity of the order, had to give an opportunity to the employer and employee to adduce evidence before it. It is open to the employer to adduce evidence for the first time justifying his action, and it is open to the employee to adduce evidence contra.
In The Workmen vs. Fire Stone Tyre and Rubber Company Ltd., 1973 (1) SCC 813, interpreting the materials on record in the proviso held that the same will take in the following:
1. The evidence taken by the Management at the enquiry and the proceedings of the Enquiry.
2. The above evidence and in addition any fresh evidence led before the Tribunal.
3. Evidence placed before the Tribunal for the first time in support of the action taken by an Employer as well as the evidence adduced by the Workmen contra.
Delhi Cloth and General Mills Company Ltd., vs. Ludh Budh Singh, 1972 (1) LLJ 180 SC, the Apex Court emphasized that when no enquiry has been held by the employer or when the enquiry has been found to be defective, the employer has got the right to adduce evidence before the tribunal justifying his action.
In another case of Bharat Forge Company Ltd., vs. Zodge, 1996 (2) LLJ 643 SC, where the Tribunal rejected the employers request for permission to lead evidence before the closure of the proceedings, although the High Court of Bombay upheld the decision of the Tribunal, the Supreme Court setting aside the order of the Tribunal as well as the High Court, upheld the right of the employer to lead evidence.
In the latest judgment of Amrit Vanaspati Co. Ltd. vs. Khem Chand and Another, 2006 SCC (6) 325, going through various earlier decisions, broad principles with regard to the subject was summarized and it was inter-alia held that the effect of an Employer not holding an enquiry is that the Tribunal would not have to consider only whether there was a prima-facie case. On the other hand, the issue about the merits of the impugned order of dismissal is at large before the Tribunal and the latter, on the evidence adduced before it, has to decide for itself whether the misconduct alleged is proved. In such cases, the point about the exercise of managerial functions does not arise at all. A case of defective enquiry stands on the same footing as no enquiry. Further, it was also enshrined in the said decision that it has never been recognized that the Tribunal should straightaway, without anything more, direct reinstatement of a dismissed or discharged employee, once it is found that no domestic enquiry has been held
The said ruling of the Supreme Court also enables the employer to furnish fresh/further/additional evidence. It is also laid down by the Supreme Court that where an enquiry is conducted and it is vitiated, it will be as good as no enquiry was conducted. The decision in the above case, lays down also that the Labour Court has to consider the entire evidence before it, before arriving at a decision. Practically, this would mean that in a case where no enquiry has been conducted before dismissal, the Labour Court has to look into the entire set of facts and circumstances and evidence led by both the parties before arriving at its conclusion. In short, it could be deemed that, where Enquiry is not conducted, and if the employee challenges such action before the Labour Court, the Labour Court has to enquire into the entire affair, whereby it would conduct an enquiry proceeding as such, in substitution of the employer who was supposed to have conducted such enquiry before imposing any punishment and only the distinction is perhaps that where the enquiry has been conducted before dismissal, the Court has to be satisfied that it is vitiated before arriving at a decision regarding its admissibility. Whereas, in a case where no enquiry was conducted, the admissibility of the matter may be established for the simple reason of non-existence of domestic enquiry proceedings without going to the merits of the case.
Service tax on Technology Transfer
Under Sec. 65 (55b) of Finance Act, 1994 and under Sec. 65 (55b) of the Finance Act, 1994 Intellectual Property Services is defined as
(a) transferring temporarily or
(b) permitting the sue or enjoyment of, any intellectual property right.
Sec. 65 (55a) Intellectual Property Rights (IPR) as any right to intangible property, viz., design, patents or any other similar intangible property, under any law for the time being in force, but does not include copyright. Further it says since the service provider has no Office in India, the recipient of the service has to bear the service tax.
However in the case of transfer of technology this may not attract service tax for following reasons:
(a) There is no IPR permitted temporarly. The transfer of technical information and know-how is not temporary. It is a transfer of technical know-how, which means permanent transfer of ownership.
(b) The technical know-how or technical information does not fall within the ambit of definition of IPR under Sec. 65 (55(a)) of the Finance Act, 1994.
Further for deriving an opinion on the meaning attributable to technology in "Technology Transfer" we may refer to the Research and Development Act 1986 and as per Section 2(h) of the said Act, '"Technology" means any special or technical knowledge or any special service required for any purpose whatsoever by an industrial concern under any foreign collaboration, and includes designs, drawings, publications and technical personnel.' Here the technology transferred is not any services but is Technical Information. In such case and even otherwise if at all service tax is chargeable, it may fall under scientific and technical consultancy or as a franchisee and not under IP service is worth noting.
A few decisions on this issue are cited below:
a) Hon'ble CESTAT, West Zonal Branch, Mumbai, has held in the matter of Rubco Huat Woods Pvt. Ltd., -Vs- the Commissioner of Central Excise, Calicut 2006 (4) S.T.R. 603 (Tri. - Bang.) and Volvo India Ltd., -Vs- the Commissioner of Service Tax, Bangalore, 2007 (7) S.T.R. 600 (Tri. - Bang.) that transfer of technology do not attract Service tax.
b) In a similar judgment of CESTAT, West Zonal Branch, Mumbai, 2007 (8) S.T.R. 501 (Tri. - Mumbai) SIKA (I) PVT. LTD.Versus COMMISSIONER OF C. EX., GOA it was held that payment of Royalty cannot be stated to be for a Service and therefore the Service tax cannot be levied on Royalty.
c) Another case of 2006 (3) S.T.R. 397 (Tri. - Mumbai) Navinon Ltd., -Vs- Commissioner of Central Excise, Mumbai, it was held that recipient of technical know-how from foreign company against payment of royalty could not be fastened with service tax liability. It was held in the said case that royalty for technical know-how is not a payment for any service and its payer cannot be liable to service tax.
4 On analysis, it is very clear that the technical know-how/technical information in respect of certain products for enabling someone to produce such products by itself and a specified percentage of net selling prices paid as royalty for such produced products will not pave way for leviablity of Service Tax. The term 'technical know-how' was discussed by CESTAT in a case of Indian Farmer Fertilizers Co-operative Ltd., -Vs- Commissioner of Central Excise. In this case, the know-how was interpreted as a proprietary series of practical, non patented knowledge, derived from the owners experience and tests, which is secret, substantial and identified. Accordingly, the same cannot be equated with IPR. Even if it is IPR, under any law for the time being in force "know-how" is not included into the definition of IPRs. Even if it is assumed that the same is included under IPRs, the transaction does not envisage "Intellectual Property Services" as the IPR is not transferred temporarily or it is not a permission for enjoyment of any IPR. However even in case of such technology transfer service tax would be leviable if :
i) there is a provision for Supervision and Training and technical fee paid is also towards this services.
ii) it states that the ownership of the all patents and other IPRs continues with the owner.
How so ever, the matter is still not resolved. It leaves so much vacuum once we reach here. It definitely points to the fact that there would be much more to deliberate regarding service tax concepts and practice in our country.
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