Misconduct as a Ground for Termination of

Employment
Introduction
Misconduct has not been defined either in Industrial Disputes Act, 1947 or in
Industrial Employment (Standing Orders) Act 1946.Oxford Advanced Learner’s
Dictionary gives the meaning of misconduct as unacceptable behaviour, especially by
a professional person [1] . But the dictionary meaning is not indicative of the diverse
forms of connotation that statutes and judicial pronouncements have carved out of
it. Black’s Law dictionary defines ‘Misconduct’ as “A transgression of some
established and definite rule of action, a forbidden act, a dereliction from duty,
unlawful behaviour, wilful in character, improper or wrong behaviour". Further
regarding employer employee relationship it says, “Misconduct, which renders
discharged employee ineligible for unemployment compensation, occurs when the
conduct of employee evinces wilful or wanton disregard of employer’s interest, as in
deliberate violations, or disregard of standard of behaviour which employer has the
right to expect of his employees, or in carelessness or negligence of such degree or
recurrence as to manifest wrongful intent or evil design" [2] .

A good place to find the meaning of the term ‘misconduct’ for a legal practitioner
would be the decision of the Queen’s Bench Decision in Pearce v. Foster [3] . The
decision was affirmed by the Supreme Court of India in Govinda Menon v. Union of
India [4] . It was held in by Lopes, LJ in Pearce that, “If a servant conducts himself in a
way inconsistent with faithful discharge of his duty in the service, it is misconduct
which justifies immediate dismissal. That misconduct, according to my view, need not
be misconduct in carrying of the service or the business. It is sufficient if it is conduct
which is prejudicial or is likely to be prejudicial to the interests or to the reputation of
the master and the master will be justified, not only if he discovered at the time, but
also if he discovers it afterwards, in dismissing that servant".

This Labour Law paper deals with misconduct as a ground for termination of
employment. The author has limited the scope of this paper to defining misconduct,
analyzing the approach of the Courts towards interpreting the term and trying to
answer whether the approach of the Courts towards misconduct as a ground for
termination of employment has been detrimental to industrial efficiency. To achieve
this, the author has employed an analytical approach based on reference to case-law.

Misconduct Defined
“Misconduct spreads over a wide and hazy spectrum of industrial activity; the most
seriously subversive conducts rendering an employee wholly unfit for employment to
mere technical default are covered thereby." [5]

‘Misconduct’ covers a large area of human conduct. It can be an act that prejudices
the smooth functioning of the establishment where the actor is employed. Grounds
for misconduct can be trivial such as neglect of work or more serious like
insubordination or riotous behaviour during working hours.

Schedule 1, Clause 14(3) of Industrial Employment (Standing Orders) Central rules

1946, framed under Industrial Employment (Standing Orders) Act 1946 provides for
certain acts and omissions as misconduct. These acts or omissions include wilful
insubordination, disobedience, theft, fraud, dishonesty and habitual negligence. The
Supreme Court in M S Dhantwal v. Hindustan Motors [6] held that the grounds
mentioned in the Standing Orders are not exhaustive but merely illustrative.
Employers are free to frame their own standing orders taking into account the
peculiarities and requirements of their own establishment.

A liberal approach was taken similarly in W M Agnani v. Badri Das [7] , where the
Court ruled that Courts could not shut their eyes to the realities of the institution and
it depended upon each case whether the circumstances demanded for the
classification of a particular act into the fold of misconduct.

In M S Dantwal, the Court was prepared to give a wide meaning to the term
‘misconduct’ saying that an act can be considered to be an instance of misconduct
even if it is not mentioned in the model standing orders or certified standing orders
of the company provided that the act strikes on the purposeful functioning of the
establishment and cannot be condoned.

However, in the Glaxo Labaratories case [8] , the Court took a different stand by
declaring that if there was no enumeration of an act of misconduct in the standing
orders of the company, a

new ground of misconduct cannot be invoked to hold the employees liable ex post
facto. Subsequent decisions of the Supreme Court reiterated this approach in Rasiklal
Patel v. Ahmedabad Municipal Corporation [9] and A L Kalra v. PECIL [10] . The
Karnataka High Court has held that “. . . it can be safely concluded that any act of an
employee which would constitute an offence of penal consequences under the
Indian Penal Code or any other analogous legislation is misconduct. Broadly stated,
all offences with penal consequences are misconducts but not all misconducts are
offences." [11] Keeping this in mind, we can conclude that an act can be misconduct
even if is not mentioned in the certified standing orders provided that it falls within
the general penal provisions. This saves the employer of the trouble of mentioning
every penal provision in the standing orders.
Supreme Court while dealing with the question as to forfeiture of gratuity by the
employer held that misconduct can be of three types. First, technical misconduct
where there is no iota of indiscipline. Secondly, misconduct relating to the damage of
property of the employer in which the court held that the amount of gratuity
forfeited will be equivalent to the amount of loss. And thirdly, serious misconduct
such as act of violence against the management or other employee or riotous or
disorderly behaviour in or near the place of employment which, though not directly
causing damage is conducive to grave indiscipline, in this case the forfeiture being
the entire sum of gratuity of the workman. [12]

We observe that the Supreme Court until M S Dantwal [13] was prepared to give a
wide and liberal definition to ‘misconduct’. However, if we bear the recent cases in
mind, we must conclude that this definition has been subject to restrictions where
‘misconduct’ loses its wide meaning but acquires a restricted but more coherent
meaning.

Approach of the Courts towards Misconduct

Misconduct can be misconduct relating to duty and can include acts like non-
observance of duty, non-performance of work, negligence of duty, absence without
leave, strikes, go-slow, gherao and other acts directly relating to discipline including
acts subversive to discipline, insubordination, disobedience, riotous and disorderly
behaviour, damage to property et al. [14] Misconduct also encompasses acts like
theft, dishonesty and fraud, disloyalty, moral turpitude, corruption et al. [15]

A few acts of employee that qualify as ‘misconduct’ need deliberation as they have
created problems in ascertaining their true nature. Habitual negligence is one of
them. Habitual negligence has been provided as ground for misconduct in Subclause
(3)(i) of Schedule I Clause 14 of Industrial Employment (Standing Orders) Central
Rules, 1946. Generally it has been understood by the courts that habitual negligence
means a habit of negligence that is the breach of duty of care not once but on
multiple occasions by the employee of the organisation. [16] However, acts of single
time negligence that can lead to immeasurable loss to the property and reputation
of the employer can be construed as a ground for misconduct. The Supreme Court of
India through a series of decisions has clarified that those types of acts that are acts
of single time negligence but owing to their seriousness qualify as gross negligence
can be valid grounds of construing an act as misconduct on the part of the
employee. In PH Kalyani v. Air France [17] where the mistake of the employee could
have caused accident of an aircraft, the act though not being habitual but one time
was held as a ground of termination of employment. Again, in Caltex (India) Ltd. v.
Eugene Fernanandes [18] where the employee was dismissed due to his smoking in
the vicinity of refuelling of aircrafts, which could have caused a serious accident to
the aircraft, the Supreme Court upheld the dismissal on the ground of gross
negligence. Again, in case of habitual loitering by the employee the Supreme Court
has rejected the reinstatement of an employee citing this a clear cut case of
misconduct. [19] Going through the case study of habitual negligence and gross
negligence cases we can surely say that the concepts do not carry a fixed meaning to
the court. It depends upon case to case analysis and circumstances surrounding a
particular case.

Relationship between Misconduct and Termination

Balnesburgh, LJ in Bell v. Lever Bros. [20] observed that there is no fixed rule of law
defining the degree of misconduct which will justify dismissal. Each case would
depend on its own facts and circumstances.

An employer may dismiss his employee for the following reasons mentioned by the
Bombay High Court in Sharda Prasad Onkarprasad Tiwari v. Central Rly [21] . The list
is illustrative and not exhaustive [22] :

Where an act or conduct of the servant is prejudicial or likely to be prejudicial to the

interests of the master or to the reputation of the master;

Where the act or conduct of the servant is inconsistent or incompatible with the due
or peaceful discharge of his duty to his master;

Where the act or conduct of a servant makes it unsafe for the employer to retain him
in service;

Where the act or conduct of the servant is so grossly immoral that all reasonable
men will say that the employee cannot be trusted;

Where the act or conduct of the employee is such that the master cannot rely on the
faithfulness of his employee;

Where the act or conduct of the employee is such as to open before him temptations
for not discharging his duties properly;

Where the servant is abusive or he disturbs the peace at the place of his
employment;

Where the servant is insulting and insubordination to such a degree as to be

incompatible with the continuance of the relation of master and servant;

Where the servant is habitually neglect in respect of the duties for which he is
engaged; and

Where the neglect of the servant though isolated, tends to cause serious
consequences.
Yet, one must remember that whether dismissal from service is warranted is a
question whose answer depends upon the facts and circumstances of each case.

Impact of the Courts’ Approach on Industrial Efficiency

Looking at the case-law, one may conclude that the concepts pertaining to the
relationship between misconduct and termination do not carry a fixed meaning
before the Courts. Much depends on the facts and circumstances of each case. A
vague terminology results only in wastage of the Courts’ time. Though there are clear
cut categories of as what qualifies as misconduct in the model standing orders like
habitual late coming or theft or fraud, there are a few hazy areas like habitual
negligence and gross negligence interpretation of which depends upon cases and
specific circumstances. The courts and legislature need to be more specific and
certain about some acts qualifying as misconduct or not. Uncertainty breeds
inefficiency in the system and legal tangles sometimes break the continuity of
moving wheels of commerce and economy. More consistency is needed for industrial
matters. At the same time, the courts also must remain the watchdog in case there is
an encroachment on the rights of the employees.

An employer may face difficulties, owing to the usage of a wide range of concepts
relating to employee misconduct, when trying to prove the acts of an employee as
misconduct. The application of strict standards by the Courts cannot benefit the
employers, causing harm to the efficiency of the economy. It would be desirable if
certain fixed standards were evolved by the Courts so as to ensure the quick disposal
of cases and to dispel the darkness that surrounds employers.

Conclusion

Misconduct is a ground for the termination of employment of the workers in an

organisation or industrial concern. Misconduct means any act of the employee that is
detrimental to the property and reputation of the employer as well as the business
concern. Misconduct can be any act that comes into fold in model standing orders or
the standing orders of the business concern specially framed in consonance with the
needs and requirement of the organisation. Not just the loss to the employer but
also the general peace and tranquillity of the organisation is a driving factor in
determining whether a particular act or omission is misconduct or not. Misconduct
has many subspecies and a lot of varied acts of the employees can be considered
within the ambit of misconduct.