Doctrine of Loss of Confidence By S. Sensharma

Loss of confidence is no new armour of the management. In law, it will be the consequence of the loss of Confidence Doctrine. The plea of the employer of his “loss of confidence’, particularly, where holding a position of trust and confidence, the concerned employee misused that position rendering it insecure and undesirable to retain him in service, despite his discharge or dismissal having been held to be invalid, will mitigate against the award of reinstatement as it is not desirable to force an employer upon an unwilling employer in such a case.

The doctrine of “loss of confidence” was for the first time accepted by the Supreme Court in Assam Oil Co. Ltd. vs. Its Workmen reported in AIR 1969 SC 1264 / 1960 I LLJ 587 / 1960 (1) FLR 190 / 1960-61 (18) FJR 380 wherein the Manager of the Company was thoroughly dissatisfied with the work and behavior of the employee who was his secretary and had lost confidence in her. In Ruby General Insurance Co. Ltd. vs. P. P. Chopra reported in 1970 II LLJ 63, the Supreme Court accepted the employer’s plea of loss of confidence in the workman who was a stenographer. This plea was the only plea pressed before the Court. In this case the workman superstitiously retained with him the copies of some communications as the employer could legitimately entertain the feeling that if reinstated, he would again retain with him copies of documents of confidential nature whenever he felt that it would be of use to him.

In Hindustan Steel Ltd. vs. A.K. Roy reported in AIR 1970 SC 1401 / 1970 I LLJ 228 / 1970 LIC 1166, the plea of loss of confidence was accepted by the Supreme Court. The Court observed that if the management truly felt that it was not possible to retain the workman in the Company‘s service on the ground of security, the case would be one of those exceptions where the general rule of reinstatement could not properly be applied. In Francis Klein & Co.(P) Ltd. vs. Their Workmen reported in AIR 1971 SC 241 / 1971 LIC 1393 / 1971 II LLJ 615, the Supreme Court said, “…….. when an employer looses confidence in his employee particularly in respect of a person who is discharging an office of trust and confidence, there can be no justification for directing his reinstatement.”

In Binny Ltd. vs. Their Workmen reported in AIR 1972 SC 1975 / 1972 SCR (3) 518, a Division Bench of the Supreme Court observed, “ It has become almost a settled principle that reinstatement should not be awarded where the management justifiably alleges that they have ceased to have confidence in the dismissed employee. In other cases, the Tribunal must consider carefully the circumstances of the case to come to finding that justice and fair play require that reinstatement should be awarded. “

In Binny Ltd vs. Their Workmen reported in 1973 LIC 1119, the workman had taken leave on the false pretext of going to his village but during this period, he participated in hunger strike as a member of Trade Union. The Supreme Court held that neither reinstatement nor back wages would have been awarded as the employer had lost confidence in the workman on account of his having obtained leave on a false pretext.

In  Air India Corporation vs. V A Rebellow  reported in  1972 I LLJ 501 / AIR 1972 SC 1343 / 1972 (41) FJR 436,  the Supreme Court found justification for the Corporation’s loss of confidence in the workman due to grave suspicion regarding his private conduct and behavior with Air Hostesses employed by the Corporation. While disposing the matter, the Court observed “if the termination of service is a colourable exercise of the power vested in the management or a result of victimization or unfair labour practice, the Industrial Tribunal would have jurisdiction to intervene and set aside such a termination. In order to find this out, the Tribunal has ample jurisdiction to go into all the circumstances which led to the termination simplicitor.”

In L. Michael vs. Johnson Pumps (P) Ltd. reported in 1975 I LLJ 262 / AIR 1975 SC 661, a three judge Bench of the Supreme Court elucidated as under:

“Loss of confidence is often a subjective feeling of individual reaction to an objective act of facts & motivations. The Court is concerned with the latter and not with the former although circumstances may exist which justify a genuine exercise of power of simple termination. In a reasonable case of a confidential or responsible post being abused, it may be high risk to keep the employee, once suspicion has started and a disciplinary enquiry cannot be forced on a matter. There a termination simplicitor may be a bonafide not colourable and loss of confidence may be evidentiary of good faith of the employer.”

The Court can always examine whether such an action i.e. discharging simplicitor, is bonafide or not.
The plea of loss of confidence was sustained by a three judge Bench of the Supreme Court in the matter of Anil Kr. Chakrabarty vs. Saraswatipur Tea Co. Ltd.  reported in AIR 1982 SC1062 / 1982 (45) FLR 71 /1982 I LLJ 483 where the workman held the position of trust & confidence as a compounder in which capacity he was entrusted with drugs & medicines for being supplied & distributed to the needy and/ ailing workers free of cost but by abusing the trust, he indulged in trafficking in those drugs & medicines to the detriment of the health of the workers. In the matter of State Bank of India vs. Bela Bagchi reported in AIR 2005 SC 3272, 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 Indian Airlines Ltd. vs. Prabha D. Kanan reported in AIR 2007 SC 548 while dealing with a similar issue, the Supreme Court held that “loss of Confidence’ cannot be subjective but there must be objective facts which would lead to a definite inference of apprehension in the mind of the employer regarding trust worthiness of the employee and which must be alleged and proved. In Karnataka SRTC vs. M G Vittal Rao reported in 2012 (1) SCC 442, the Supreme Court held that once the employer has lost confidence in the employee and the bonafide 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 in case of loss of confidence, reinstatement cannot be directed.

An employee 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 case where the employer states that he has lost confidence in the employee, the matter has to be weighed properly. The mere assertion of the employer that he has lost confidence cannot compel the Tribunal to refrain from passing an order of reinstatement. The Tribunal should consider whether the employer genuinely feels that it is risky to retain an employee in future or that it is hazardous or prejudicial to the interest of the industry to do so or it is a mere allegation made to send the employee out of employment.

To end the article, it is imperative to note as to what the Supreme Court laid down in the matter of Kanhaiya Lal Agarwal vs. Factory Manager, Gwalior Sugar Co. Ltd. reported in AIR 2001 SC 3645 / 2001 II LLJ 1239 / 2002 SCC (L&S) 257. The Division bench laid down that what must be pleaded and proved to invoke the principle of “loss of Confidence” is that (i) the workman is holding a position of trust and confidence; (ii) by abusing such position, he commits acts which results in forfeiting of trust and confidence; (iii) to continue him in service would be embarrassing and inconvenient to the employer or would be detrimental to the discipline or security of the establishment. All these three aspects must be present to refuse reinstatement on ground of loss of confidence.

Learned readers may also refer to the following judgments on the issue:
  1. Westing House Saxby Farmer Ltd. vs Raj Behari Ram, 1996 III LLJ 122 Cal HC
  2. UPSRTC vs. Mohan Lal Gupta, 2001 SCC (L&S) 109 SC
  3. Supertex (India) Corp. vs. R K Pandey 2002 (92) FLR 474 Bom HC
  4. Sanjeev Kr Mahapatra vs. A L Alaspurkar 2003 LIC 77 / 2003 (103) FJR 520 Bom HC
  5. Ram Bahadur vs. Labour Court 2003 LIC 3812 / 2004 IV LLJ Suppl (NOC) 508 Andhra  HC
  6. UPSRTC vs. Vinod Kumar 2008 (116) FLR 382 SC
  7. Crompton Greaves Ltd. vs. Sharad Maheshwari 2014 (143) FLR 908 M P HC
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