Kerala High Court
C.M.Philip vs The Registrar Of Co-Operative ... on 30 April, 2013
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU
MONDAY, THE 22ND DAY OF MAY 2017/1ST JYAISHTA, 1939
WP(C).No. 22488 of 2014 (I)
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PETITIONER:
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C.M.PHILIP,
S/O.MATHEW,AGED CHEMPAKASSERY HOUSE,
MUNDAYAMPARAMBU P.O,KANNUR 670 704.
BY ADVS.SRI.CIBI THOMAS
SRI.V.G.ARUN
RESPONDENTS:
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1. THE REGISTRAR OF CO-OPERATIVE SOCIETIES
THIRUVANANTHAPURAM 695 001
2. THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES(GENERAL)
KANNUR 670001
3. ANAPANTHY SERVICE CO-OPERATIVE BANK LIMITED,
NO F 516,ANGADIKKADAVU P.O,KANNUR 670 706,
REPRESENTED BY ITS SECRETARY.
4. THE BOARD OF DIRECTORS,
ANAPANTHY SERVICE CO-OPERATIVE BANK LIMITED NO.
F 1516,ANGADIKKADAVUP.O,KANNUR 670 706
REPRESENTED BY ITS PRESIDENT.
R3,4 BY ADV. SRI.R.SURENDRAN
R1 & R2 BY GOVERNMENT PLEADER SMT.A.C.VIDHYA
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON
22-05-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
WP(C).No. 22488 of 2014 (I)
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APPENDIX
PETITIONER'S EXHIBITS
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EXHIBIT P1 TRUE COPY OF THE REPRESENTATION SENT BY THE PETITIONER TO
THE 4TH RESPONDENT DATED 30-04-2013.
EXHIBIT P2 TRUE COPY OF THE REPRESENTATION DATED 10-05-2014 SENT BY
PETITIONER TO THE 4TH RESPONDENT.
EXHIBIT P3 TRUE OF THE ORDER OF THE APPEAL COMMITTEE DATED 16-07-2014.
EXT.P4 TRUE COPY OF THE REPRESENTATION SUBMITTED BY THE
PETITIONER TO THE 2ND RESPONDENT.
RESPONDENT'S EXHIBITS
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EXT.R3(a) TRUE COPY OF THE PROCEEDINGS ISSUED BY THE DISCIPLINARY
SUB COMMITTEE DATED 3.4.2014.
EXT.R3(b) TRUE COPY OF THE COMMUNICATION DATED 16.1.2013 BY THE
KANNUR DISTRICT CO-OPERATIVE BANK.
EXT.R3(c) TRUE COPY OF THE LETTER DATED 21.1.2013 ISSUED BY THE
KANNUR DISTRICT CO-OPERATIVE BANK.
EXT.R3(d) TRUE COPY OF THE VOUCHER DATED 31.1.2013.
EXT.R3(e) TRUE COPY OF THE INTERIM REPORT SUBMITTED BY THE
INVESTIGATING OFFICER BEFORE THE JFCM COURT, MATTANNUR.
EXT.R3(f) TRUE COPY OF THE NOTICE DATED 25.11.2014 ISSUED BY THE
THIRD RESPONDENT TO THE PETITIONER AND SRI.P.K.THOMAS.
EXT.R3(g) TRUE COPY OF THE LETTER DATED 30.6.2014 ISSUED BY THE
THIRD RESPONDENT TO THE 2ND RESPONDENT.
EXT.R3(h) TRUE COPY OF THE JUDGMENT DATED 8.4.2016 IN W.P.(C)No.
25299 of 2011 ON THE FILE OF THE HONOURABLE HIGH COURT
OF KERALA.
EXT.R3(i) TRUE COPY OF THE INTERIM ORDER DATED 1.7.2016 IN
W.A.No.1280 of 2016 ON THE FILE OF THE HONOURABLE HIGH
COURT OF KERALA.
TRUE COPY
P.S.TO JUDGE
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C.R.
Dama Seshadri Naidu, J.
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WPC No.22488 of 2014
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Dated this the 22nd day of May, 2017
JUDGMENT
C. M. Philip, the petitioner, now retired, while serving the third- respondent Society, faced disciplinary proceedings: when he was working as an accountant, along with the Assistant Secretary, he misappropriated funds.
2. Initially, on 17.1.2011 the Society suspended Philip, but on 2.1.2012, pending the disciplinary proceedings, it reinstated him. Eventually, the Society concluded the disciplinary proceedings it initiated against Philip: he was found guilty of embezzlement and misappropriation. He was punished with reversion in the rank--from Accountant to Senior Clerk. Philip retired from service on 30th April 2014. Though he filed an intradepartmental appeal before he could retire, after Philip's retirement, the Appeal Committee dismissed the appeal through Ext.P3 on 16.7.2014. No further challenge laid, the WPC No.22488 of 2014 2 punishment imposed on Philip became final.
3. Duly retired, in course of time, Philip submitted Ext.P4 representation claiming his terminal benefits. His request not accepted, Philip has filed this writ petition. Objection:
Pending Proceedings:
4. Before I could adjudicate on merits, the Society's counsel has submitted that the other delinquent employee--the Assistant Secretary, who too was punished--filed WPC No.25299 of 2011. According to him, the Society objected to the Assistant Secretary's writ petition on the ground of alternative remedy. But this Court went ahead and decided it in the delinquent employee's favour. He has further submitted that, aggrieved, the Society has filed an appeal, now pending before a learned Division Bench. In these circumstances, the Society's counsel has urged this Court not to decide the issue but to await the writ appeal's outcome.
5. On the other hand, Philip's counsel has submitted that the issue in this writ petition differs from that in WPC No.25299 of 2011, WPC No.22488 of 2014 3 filed by the Assistant Secretary. According to him, in the other writ petition, the employee questioned the very punishment. Here, Philip accepted the punishment; he questioned only the Society's disinclination to disburse his terminal benefits.
6. After hearing both the counsel, I reckon that the issue raised in this writ petition differs from the one raised in WPC No.25299 of 2011. Subject to other parameters, I believe, I can proceed with the matter on merits.
Submissions on Merits:
Petitioner's:
7. On merits, Sri V.G. Arun, Philip's counsel, has submitted that the terminal benefits, as is well established, are not a bounty. Nor are they matters of the employer's munificence. So, he contends that the Society has no justification to withhold Philip's terminal benefits.
8. Sri V.G.Arun, to begin with, has contended that the Society could not continue with the disciplinary proceedings even after Philip's retirement. He has further submitted that neither the Kerala Co-operative Society Act nor any other statute governing the Society WPC No.22488 of 2014 4 interdicts an employee's right to receive terminal benefits once he or she is allowed to retire in the usual course. In other words, unless an employee's services were terminated because of any grave misconduct, the mere reduction in rank will not affect his prospects to receive the terminal benefits.
9. In elaboration, Sri Arun has drawn my attention to Rule 198 of the Kerala Cooperative Society Rules, to hammer home his contention that once an employer chooses a particular form of punishment, it cannot travel beyond that and order recovery of money, too. Put differently, reduction in rank does not contemplate recovery of money from the delinquent merely because he did not question the punishment. The proposed recovery from Philip, according to Sri Arun, amounts to double jeopardy.
10. Specifically referring to Philip's entitlement to receiving the gratuity, Sri Arun has drawn my attention to Section 4 (4) of the Payment of Gratuity Act. He has submitted that unless the employee's service is terminated, the employer cannot withhold or deduct the gratuity from the retired employee. In the end, the WPC No.22488 of 2014 5 learned counsel has urged this Court to allow the writ petition. Society's:
11. Per contra, Sri R. S. Surendran, the Society's counsel, has submitted that by the time Philip retired, the disciplinary proceedings had not become final. Merely because Philip's appeal had been pending by then, it cannot be said that the Society proceeded against Philip even after his retirement.
12. As to the legal impact of Rule 198, Sri Surendran would contend that the recovery under that Rule has nothing to do with the amounts found to have been misappropriated by an employee. On the contrary, the Rule contemplates a notional quantification of the loss imminently caused by a delinquent employee's negligence or dereliction of duty. He has also submitted that if Philip's contentions were true, even then the doctrine of double jeopardy would have no place in service jurisprudence.
13. In elaboration, Sri Surendran has submitted that Section 4 of the Payment of Gratuity Act does not apply; instead, the Co- operative Societies Act does.
14. On the alternative remedy Philip allegedly has, Sri WPC No.22488 of 2014 6 Surendran would contend that Section 69 of the Act provides for a remedial mechanism: a suit before the Co-operative Tribunal.
15. Sri Surendran has also further submitted that it is inequitable to let go an employee on technicalities even after his admitting misappropriation. In elaboration, he submits that because the findings against Philip in the disciplinary proceedings--that he had misappropriated the funds--have become final, he could receive his terminal benefits only after the misappropriated amount is adjusted. According to Mr. Surendran, the Payment of Gratuity Act is a self-contained code. And, if at all Philip has any grievance about, say, the employer's withholding the gratuity, he ought to have approached the authority under the Act, but not this Court under Article 226.
16. Heard Sri V. G. Arun, the learned counsel for Philip, and Smt.M.U.Vijayalaxmi, the learned counsel for the respondents, besides perusing the record.
Issues:
17. An employee was found guilty of misappropriation of the WPC No.22488 of 2014 7 employer's funds. A punishment of reduction in rank was imposed. With the punishment attaining finality, the employer, after the employee's retirement, sought to recover the embezzled amount from his terminal benefits. In this context, the following questions arise:
1. Does Philip have an efficacious alternative remedy?
2. Does a punishment of reduction in rank preclude the employer from recovering from the delinquent employee amounts admittedly misappropriated?
3. Does restitutionary disgorgement amount to a punitive measure over and above the punishment already imposed?
Discussion:
Issue No.1: Alternative Remedy:
18. At the outset, I may have to rule on the technical plea taken by the Society: Philip has an efficacious alternative remedy of approaching the Co-operative Tribunal under Section 69 of the Act. True, as seen from the statutory provisions, Section 69 permits an aggrieved person to approach a Co-operative Tribunal. But it is not a forum of the first instance. This is evident from Section 70, under WPC No.22488 of 2014 8 which the Co-operative Tribunal could adjudicate any dispute only on a reference under Section 69 (1) of the Act. More explicit is Section 82, which declares the Tribunal to be an Appellate Authority. At any rate, here, the writ petition has been pending since 2014. And the record reveals that it has been admitted, too.
19. In WPC No.17539/2014 this Court, per me, had an occasion to examine the alternative remedy vis-`-vis a writ petition already admitted by the court. It referred to the Supreme Court's decision in ABL International Ltd. v. Export Credit Guarantee Corpn. of India Ltd1: While entertaining an objection on a writ petition's maintainability under Article 226 of the Constitution, the High Court should acknowledge that the power to issue prerogative writs under Article 226 of the Constitution is plenary and is not limited by any other provisions of the Constitution. The High Court, as dictated by the facts and circumstances of the case, has the discretion to entertain or not to entertain a writ petition. The restraint, after all, is self-imposed. ABL International, in this regard, quotes with approval Whirlpool Corpn. v. Registrar of Trade Marks2. 1 (2004) 3 SCC 553 2 (1998) 8 SCC 1 WPC No.22488 of 2014 9
20. Nevertheless, ABL International Ltd., serves a caveat that the High Court will normally refuse to exercise its plenary power to issue prerogative writs to exclude other remedies. If the action of the State or its instrumentality is so arbitrary or unreasonable that it violates the constitutional mandate, for example, of Article 14, the plea of alternative remedy hardly avails itself.
21. Facts examined, I must acknowledge that the writ petition has been pending close to three years, and it stands admitted, too. So, I do not, at this juncture, deem it appropriate to non-suite Philip on the ground of an alternative remedy, even if it is available. Issues Nos.2 & 3:
Recovery:
22. Before paying Philip's terminal benefits, the Society intends to quantify the misappropriated sum and set it off, by way of recovery, from those benefits. Can the Society do it? Let us see what Rule 198 is to say.
23. Rule 198 deals with `disciplinary action'. Any member of "the establishment of a Co-operative Society may, for good and WPC No.22488 of 2014 10 sufficient reasons, be punished with the following penalties: (a) Censure, (b) fine (in the case of employees of last grade), (c) withholding of increments with or without cumulative effect, (d) withholding of promotion, (e) recovery from pay of the whole or part of any pecuniary loss caused to the society by negligence or breach of orders or otherwise, (f) reduction to a lower rank, (g) compulsory retirement, and (h) dismissal from service.
24. Item (e) speaks of recovering from an erring employee the pecuniary loss he or she caused to the society by negligence, or breach of orders, or otherwise. First, "or otherwise" needs to be read ejusdem generis. Second, the first two instances--negligence and breach of order--have nothing to do with misappropriation or embezzlement. In fact, if an employee neglects his duty or breaches orders, it may lead to many consequences: some direct and some indirect or collateral. The organization may suffer in many ways; for one, its sustaining `pecuniary loss'. It is more a collateral consequence of the act neglected, or rule breached. Recovering that inadvertent pecuniary loss does not amount to disgorgement. This WPC No.22488 of 2014 11 recovery has a punitive element, though. Embezzlement or misappropriation, I reckon, stands on a different footing. Unjust Enrichment:
25. Statutes, rules, or regulations, usually prescribe both the procedural and substantial parameters for punishing erring employees. Punishment, punitive as it is, can be retributive, or reformatory, or both. For what somebody has done, punishment is just deserts. For what somebody has taken, its recovery is restitution
--no punishment; it has no punitive element. This recovery prevents only unjust enrichment.
26. In Understanding Unjust Enrichment, edited by Jason W. Neyers, et al.3, the concept of unjust enrichment arising out of a tort is dealt with: `Restitution for wrongs' or `unjust enrichment for wrongs' is generally recognised as a category of the law of unjust enrichment. It appears to comprise claims regarding benefits received because of a wrong, as opposed to claims like the claim to recover an invalid transfer or for payment for work done, which do 3 Oxford and Portland Oregaon, Ed.2004, p.159 WPC No.22488 of 2014 12 not depend on a wrong by the defendant. Under the subheading "Disgorgement", the author avers that a claim for disgorgement is a claim for the benefit made through a wrong, based on the principle that a wrongdoer should not benefit from the wrong.
27. It admits of no ambiguity that an employee is an agent of his employer. Entrusted, for example, with a fund to be utilized, the employee stands in a fiduciary position vis-`-vis his employer. In English v. Dedham Vale Properties Ltd.4, Slide J has observed that the list of relationships standing in fiduciary positions, leading to constructive trusteeship, remains inexhaustible. He holds thus: "I do not think that the categories of fiduciary relationships which give rise to a constructive trusteeship should be regarded as falling into a limited number of strait-jackets or as being necessarily closed. They are, after all, no more than formulae for equitable relief".
28. In The Modern Law of Unjust Enrichment and Restitution5, Gerard McMeel, citing Henderson v Merrett Syndicates Ltd.6, and 4 [1978] 1 All ER 382 5 Oxford, Indian Ed.2003, pp 309-10 (internal quotations omitted) 6 (1995) 2 AC 145, at 205 WPC No.22488 of 2014 13 Bristol and West Building Society v Mothew7, observes that the core idea of fiduciary duty is the assumption of responsibility for the property or affairs of others. Parallel developments at common law and in equity yielded the recognition of a duty of care of those in analogous positions of being entrusted with another's property or affairs, including bailees, carriers, trustees, directors, and agents. The duty to take care of another's interests in such circumstances is clearly established, although the exact standard of liability may vary from case to case. The characteristic response is compensatory, although the remedies are respectively termed damages at common law and equitable compensation.
29. The commentary, further, points out that breaches of "this duty of care" are not breaches of fiduciary duty: 'It is obvious that not every breach of duty by a fiduciary is a breach of fiduciary duty.... Breach of fiduciary obligation, therefore, connotes disloyalty or infidelity. Mere incompetence is not enough. A servant who loyally does his incompetent best for his master is not unfaithful and is not guilty of a breach of fiduciary duty.
7 (1998) Ch 1, at 16 WPC No.22488 of 2014 14
30. Where the money or property of another is entrusted to a person, equity has always suspected the temptations which might thereby arise. A restitutionary response has therefore been recognised, aptly, for two reasons: first, infidelity is likely to result in enriching behaviour for the person entrusted with the money or property of another; second, the policy of deterrence of prophylaxis weighs heavily with the court--holds Gerard McMeel.
31. Indeed, Rule 198 of the Rules deals with mere breach of duty, collaterally causing, perhaps, some pecuniary damages. It does not deal with the breach of fiduciary duty resulting in, say, misappropriation. So the equitable remedy of restitution comes into play. It needs no statutory sanction. So long as a statute does not interdict, a remedy either in equity or in common law survives. Conclusion:
32. I hold that the Society's effort to quantify the misappropriated amount and, then, having it set off from the amounts due to Philip is unexceptionable.
33. But because Philip had retired from service long back, the WPC No.22488 of 2014 15 Society will speed up the recovery or adjustment out of Philip's terminal benefits and pay the balance amount to him at the earliest.
The writ petition, accordingly, stands disposed of. No order on costs.
Sd/- Dama Seshadri Naidu, Judge css/ true copy P.S.TO JUDGE css/