Madras High Court
The Registrar Of Co-Operative ... vs G. Manoharan on 21 October, 2009
Author: Prabha Sridevan
Bench: Prabha Sridevan, C.T. Selvam
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated ; 21..10..2009
C O R A M
The Honourable Mrs. Justice PRABHA SRIDEVAN
and
The Honourable Mr. Justice C.T. SELVAM
Writ Appeal Nos.256 and 257 of 2008
1. The Registrar of Co-operative Societies,
Kilpauk, Chennai-10.
2. The Additional Registrar of Co-operative Societies (Credit),
Chairman-Common Cadre Authority,
Office of the Registrar of Co-operative Societies, .. Appellants in
Kilpauk, Chennai-10. both W.As.
versus
G. Manoharan .. Respondent in W.A.256/2008 &
1st Respondent in
W.A.257/2008
Villupuram District Central Co-operative Bank,
Rep. By its Special Officer, .. 2nd Respondent
No.2, Hospital Road, Villupuram. in W.A.257/2008
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Prayer : Writ Appeals against the order dated 19.12.2006 passed by a learned single Judge of this Court in Writ Petition Nos.19349 and 34352 of 2004.
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For Appellants : Mr. M. Dhandapani, Spl. Govt. Pleader and
Mr. P. Gurunathan, Govt. Advocate.
For Respondent-1 : Mr. R. Vijay Narayan, Senior Counsel for
Mr. R. Parthiban
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J U D G M E N T
Prabha Sridevan, J.
The Co-operative Movement was started in our country with a philosophy behind it and Co-operative Societies were formed with an object of infusing in the minds of people, the spirit of working in a group so that the members of the group gain benefit through collective contributions. It was truly Gandhian in its ideals. In its preamble, the Tamil Nadu Co-operative Societies Act, 1983 very nobly states that it is meant to provide an orderly development of co-operative movement in accordance with principles like open membership, democratic management, thrift, self-help and mutual aid among persons with common socio-economic needs. It is intended to bring about improvement in agriculture and industry, better methods of production, better business and better living. But the objects have not been achieved. There has been a great deal of politicisation of the co-operative movement; there has also been widespread misappropriation and diversion of the funds generated from the common man by the persons in charge. Our hearts cannot but be dismayed at this fact. The funds in a co-operative bank are meant to advance the democratic goal based on socio-economic principles. If they are allowed to be diverted, dissipated or frittered, it is betrayal of public trust.
2. In this case, the first respondent, in charge of the affairs of a Co-operative Bank, is charged with acts of grave misconduct, including causing huge financial loss to the Bank and has challenged the disciplinary proceedings on the ground that he has attained the age of superannuation. He must face the proceedings and establish that he has not caused such loss. He cannot get away merely because he has reached a certain age. He must prove that he is innocent of causing loss to the Co-operative Society.
3. The first respondent was the General Manager of the Nilgiris District Central Co-operative Bank ('Bank' in short). He had joined the services of then South Arcot Central Co-operative Bank in the year 1968-69 and when he attained the age of superannuation on 30.6.2003, he was the General Manager of the Bank. On that day, an order in Rc. NO.16/2002/CCA.1 of the same date was served on him by the Special Officer of the Bank along with the endorsement No.Rc.5580/2003/E1. By this letter, the first respondent was informed that the Common Cadre Authority, under Section 76(1)(b) of the Tamil Nadu Co-operative Societies Act, 1983 ('Act' in short) was placing him under suspension with effect from 30.6.2003. He immediately filed Writ Petition No.19349 of 2003 alleging that this order of suspension was served on him without any valid reasons and with mala fide intention to deny him his retiral benefits. The writ petition was admitted. On 3.8.2004, the second appellant framed two charges against the first respondent. The first respondent submitted his explanation. An Enquiry Officer was appointed. The first respondent, therefore, filed the second writ petition challenging the action on the ground that after the attainment of the age of superannuation, framing of the charge memo was illegal and consequently, the charge memo is liable to be quashed. A counter affidavit was filed by the appellants. In this, it is stated that an enquiry was conducted by an appropriate authority into the allegations against the first respondent regarding serious irregularities in the issuance of cooking gas loan, promotion and transfer of Bank staff and purchase and installation of computers in the Bank, causing heavy loss to the Bank to the extent of Rupees 13.94 Lakhs. It was stated that while the materials were being gathered, he attained the age of superannuation and therefore, he was placed under suspension even before the date of his retirement and he was not allowed to retire and the terminal benefits were also not paid to him. The Chairman, Common Cadre Authority initiated disciplinary action against the first respondent. The first respondent submitted his explanation denying all charges by his letter dated 30.8.2004. The learned single Judge, relying on Bhagirathi Jena vs. Board of Directors, O.S.F.C. & Others, (1999) 3 S.C.C. 666 and Partap Singh vs. State of Punjab, A.I.R. 1964 S.C. 72, allowed the writ petition. Against that, these writ appeals have been filed.
4. The learned Special Government Pleader appearing on behalf of the appellants submitted that the misconduct of the first respondent was of such grave nature and he had caused so much loss to the Bank that the appellants must be permitted to continue the proceedings to its logical conclusion. He referred to U.P. State Sugar Corporation Ltd. vs. Kamal Swaroop Tondon, (2008) 2 S.C.C. 41, where the Supreme Court held that departmental enquiry could be continued for recovery of the loss caused by the employee and the same could be recovered from the retiral benefits. He also referred to R.P. Kapur vs. Union of India, A.I.R. 1964 S.C. 787. He referred to Section 75 of the Act and vehemently urged that the first respondent deserves no indulgence in view of the huge financial loss that was caused to the Bank by the misconduct of the first respondent. He pointed out that the first respondent had not been permitted to retire. He further submitted that there were enough materials to justify a prima facie conclusion of the first respondent's misconduct. He submitted, as laid down in 2008 (2) S.C.C. 41 (supra), that this Court must reach out to remove injustice.
5. Learned senior counsel appearing for the first respondent, on the other hand, submitted mainly that there can be no continuance of disciplinary proceedings after the age of superannuation and so, the writ appeals must be dismissed. He referred to the following decisions to support his case :
S. Natarajan vs. Government of Tamil Nadu, 1987 Writ L.R. 191 Mahadevan vs. The Special Officer/Deputy Registrar, South Arcot, etc. Stores Ltd., 1997 Writ L.R. 120 General Manager, Adilabad District Co-operative Central Bank Ltd. vs. K. Ranga Rao, 2002 (II) L.L.J. 983 G. Ramamoorthy vs. Hindustan Photo Films Manufacturing Company Ltd., 2003 (2) L.L.N. 719 Ramesh Chandra Sharma vs. Punjab National Bank, (2007) 9 S.C.C. 15 UCO Bank vs. Rajinder Lal Capoor, (2007) 6 S.C.C. 694
6. We called for the files, since it is specifically alleged that an enquiry conducted by an appropriate authority revealed serious irregularities and also that the Government had the power to give directions, in public interest, to act on the basis of such discreet enquiry. What we see in the files is quite depressing. It is seen that right from January 2002, there have been communications to the Registrar of Co-operative Societies complaining about all the misdeeds of the first respondent. On 1.2.2002, a detailed complaint of what was done by the first respondent has been sent to the Registrar. On 4.4.2002, members of the Union have again given a complaint. On 1.2.2002, the Minister for Adi Dravidar Welfare has in fact referred to the misdeeds of the first respondent. On 24.9.2002, the Special Secretary to the Government has addressed a letter to the Additional Registrar of Co-operative Societies, Common Cadre Authority referring to the petitions to the Directorate of Vigilance and Anti Corruption that it is better to transfer the first respondent to a far off place for the conduct of a fair and free enquiry. So he was transferred to Nilgiris Branch where he was serving when he attained the age of superannuation. On 1.11.2002, again the Special Secretary to the Government had addressed a letter to the Registrar of Co-operative Societies regarding the transfer of the 1st respondent. On 28.5.2003, details of the report from Directorate of Vigilance and Anti Corruption were asked for. The report of the Directorate of Vigilance and Anti Corruption is dated 29.5.2003 and what is stated therein is very disturbing. And, the advice is that an appropriate decision must be taken regarding the retirement of this individual, viz. the first respondent.
7. The records show that at least from 2002, the Registrar of Co-operative Societies as well as the Secretary to the Government have exchanged frantic correspondences regarding the very serious and grave acts of misconduct committed by the first respondent. In fact, the general tenor of the correspondence indicates that the Villupuram Co-operative Society must be saved from the first respondent. There is also an indication in the correspondence that he claims to be close to someone in power. The Registrar and the Additional Registrar are aware of this and with a view to save the Co-operative Society from further loss, they seek orders for transferring the first respondent to a far off place where he can cause no harm.
8. On 2.6.2003, i.e., before the retirement of the first respondent, a charge memo was issued by the Bank and he has replied to it by his letter dated 16.6.2003, which was received by the Bank on 18.6.2003. He had given his reasons for each of the charges mentioned therein. There are three charges. The first charge relates to the failure of the first respondent to adhere to the Registrar's Circular for purchasing computers worth Rs.30.11 lakhs for the Bank. The second charge is also an allied charge, viz., that a contract had been entered into with M/s. Suvitha Computers for purchasing computer software worth Rs.17 lakhs without purchasing the computers for the branches. While explaining the charges, in the charge memo, it is stated that the first respondent had entered into an arrangement with Suvitha Computers for purchase of computers worth Rs.17 lakhs. In the agreement, it is agreed that only after all the branches, including the Head Office, are fully computerised, this software should be installed. It is a condition found in the agreement entered into between the first respondent with Suvitha Computers and yet, he did not take steps to computerise the other branches. Further, in the agreement in paragraph 10, it is stated that the software should be installed within 15 weeks in all the concerned branches. But even after two years, this had not been done. In addition, apart from other violations, Rs.11.90 lakhs had been given to Suvitha Computers from the funds of the Bank. Generally, only after all the computers have been purchased steps are taken to purchase software for operation of the computers, but curiously in this case, the first respondent had paid Rs.11.90 lakhs for the software, after entering into an agreement with the company for purchase of software worth Rs.17 lakhs, even without fully computerising the Bank and its branches and therefore, it is alleged that for this loss of Rs.11.90 lakhs, he alone is responsible. The charge memo was issued and the reply received before his date of superannuation.
9. On 6.6.2003, the Additional Registrar of Co-operative Societies had addressed a letter to the Secretary to the Government informing him that the Directorate of Vigilance and Anti Corruption has advised to take an appropriate decision on the retirement of this individual on account of various allegations against him and the main allegations are referred to therein. The Additional Registrar has also stated that since there is no provision to continue his services after the date of superannuation, it has been decided to allow him to retire, but withholding all his terminal benefits till the outcome of the enquiry. To this, there is a response from the Special Secretary to the Government to place him under suspension immediately. This is dated 11.6.2003. To this, the Chairman, Common Cadre Authority has stated that it is not possible to place the first respondent under suspension, but it has been decided to withhold his terminal benefits. A charge memo had been issued on 2.6.2003. In response thereto, on 16.6.2003, the first respondent had submitted his explanation. The Registrar of Co-operative Societies, on 28.6.2003, directed the Common Cadre Authority to place the individual under suspension immediately pending enquiry into grave charges. Accordingly, he was placed under suspension with effect from 30.6.2003 (forenoon). On 14.11.2003, the first respondent submitted a mercy application asking the Registrar of Co-operative Societies to revoke the suspension orders, enabling him to get the retirement benefits. On 30.4.2004, the Secretary to the Government directed the Registrar of Co-operative Societies to proceed with the action already initiated against the first respondent. Therefore, this would show that the proceedings initiated in 2004 are only continuation of the earlier proceedings and not fresh proceedings. It is also important to note that by this order, Suvitha Computers, whose name had been changed to Core Quest Software, was blacklisted by the Government.
10. In the charge memo dated 3.8.2004, the first charge is with regard to acceptance of bribe in the matter of transfers and granting promotions. The second charge is with regard to Suvitha Computers and the charge is that there is a condition for installation of the software within 15 weeks, failing which penalty should be imposed and though there is the condition that only after installation of the hardware in the Bank, including its 12 branches, the software should be installed and yet, the software had been purchased and that in three instalments, a sum of Rs.11.90 lakhs had been paid to Suvitha Computers, though Suvitha Computers had not fulfilled its commitment of installation of the software within 15 weeks as per the agreement. Therefore, by recommending the payment of Rs.11.90 mala fide and with a view to cause loss to the Bank, the Bank has suffered loss.
11. We have already seen that after the first charge memo had been issued on 2.6.2003, a reply had been received from the first respondent and on 27.6.2003, after receipt of the letter from the Directorate of Vigilance and Anti Corruption, the individual was placed under suspension. On 29.7.2003, in Na.Ka. No.5539/97/E1, there is reference to the charge memo dated 2.6.2003 and the explanation dated 16.6.2003, and it is recommended therein that the enquiry should be concluded at the earliest and that the result should be informed. An Enquiry Officer was also appointed. The first respondent was asked to appear before the Enquiry Officer on 15.11.2003. It is thereafter that the notice dated 10.6.2004 was issued, framing the charges afresh. From the records, we see that after his explanation was received, there was silence until the date of his retirement, when he was placed under suspension, till 2004 when the fresh charge memo was issued. Considering the urgency expressed in the correspondence of the year 2002, we do not understand this silence and apparent inaction. A look at the two charge memos shows that they are almost identical. Therefore, the proceedings have actually been initiated even before his retirement and he had also given his reply. Not only that, he prayed that he might be treated with indulgence and he may not be denied his monetary benefits.
12. After orders were reserved in the writ appeals, we perused the files. Then, we called the counsel for both sides in the chambers and also listed the matter in open court to ask them whether they had any explanation to offer or any written submissions to make regarding the charge memo dated 6.6.2003 and the reply about which the writ petitioner/first respondent had maintained a strategic silence. Learned counsel for the first respondent submitted that it is true that a show cause notice was issued and a reply was given thereto, but the proceedings were dropped. Learned Special Government Pleader also submitted the same.
13. We will now look at the relevant provisions of the Tamil Nadu Co-operative Societies Act, 1983. Section 81 of the Act contemplates an inquiry to be held by the Registrar on his own motion or on the application of the majority, into any alleged misappropriation, fraudulent retention of any money, breach of trust etc. Section 81(4) fixes the time frame within which such enquiry shall be completed. Section 82 deals with inspection and investigation by the Registrar on his own motion or on application of a creditor of the Registered Society and for doing this, he will have all the powers under Section 81 of the Act. Rule 104 sets down the procedure regarding the inquiry, inspection and investigation. Section 87 is an important provision which deals with surcharge proceedings and it can be initiated if, "it appears that any person who is or was entrusted with the organisation or management of the society or any past or present officer or servant of the society has misappropriated or fraudulently retained any money or other property or been guilty of breach of trust in relation to the society or has caused any deficiency in the assets of the society by breach of trust or wilful negligence or has made any payment which is not in accordance with this Act". The facts relating to misappropriation, fraudulent retention of money or breach of trust may have come to light either in the course of an audit under Section 80 or during the course of the inquiry under Section 81 or an inspection and investigation under Sections 82 or 83. If such fraudulent retention of money, misappropriation, breach of trust or wilful negligence becomes apparent, the Registrar or a person authorised by him is empowered to frame charges against such person and after giving opportunity, an order can be made to repay or restore the money and such action cannot be commenced after the expiry of seven years from the date of the Act or omission. This section empowers the Registrar to proceed against a person who is or was entrusted with the organisation or management of the society, a past or a present officer of the society, and a past or present servant of the society. In fact, even the representative who inherits the estate of such a person who is deceased shall answer the charges. The retirement of such person or officer or servant is not a deterrent to the proceedings that can be initiated under Section 87. Section 87 is only to recover and make good the financial loss caused to the society by the individual concerned by his fraudulent retention of money, misappropriation, wilful negligence or breach of trust, as the case may be. In this case, a notice had already been issued which showed clearly that it had come to light that the first respondent had caused loss of Rs.11.90 lakhs to the Bank and even before his retirement, the charge memo had been issued and his answer had also been obtained. Further, Section 87 gives the authority, the right to proceed against a person whether he was an officer or a servant, either past or present.
14. In the book "The Nature of Judicial Discretion", Justice Aharon Barak, the Chief Justice of the Supreme Court of Israel writes, "A statute is to be interpreted in light of the fundamental values of the democratic regime and of the legal system. These fundamental values include, among others, accepted principles such as equality, justice, and morality. They include policies such as the existence of the state, its democratic character, separation of powers, personal freedom, freedom of expression, freedoms of procession, religious worship, property, and occuption, human dignity, integrity of the judicial process, and public welfare and safety. These fundamental values include within them standards of good faith, natural justice, fairness, reasonableness, impartiality, lack of conflict of interest. Justice Menachem Elon discussed this in the following terms :
"We have an important rule, that a legal system cannot sustain itself on the body of the law alone. The body of the legal system needs a soul, and perhaps even a super-soul. The legal system will find this soul in the character and image of various value norms"."
15. We are unable to see what is the legal hurdle for the proceedings to continue. As rightly contended by the learned Special Government Pleader, even if the first respondent cannot be imposed with the punishment of dismissal or reduction in rank since he has already attained the age of superannuation, if the charges are proved, the amount of loss caused to the Society by the first respondent can always be recovered. Learned senior counsel for the first respondent submitted by referring to paragraph 40 of (2008) 2 S.C.C. 41 (supra) that right from Bhagirathi Jena (supra), the law laid down by the Supreme Court prevents continuation of proceedings.
16. In the present case, we have found that a charge memo had been issued to the first respondent and he had also given a reply thereto before the date of his superannuation. Therefore, the disciplinary proceedings had already commenced. The first respondent was not permitted to retire. He was suspended. But no order was passed permitting him to retire either. Further, the language of Section 87 of the Act clearly shows that proceedings can be initiated even in respect of a person who has retired, if he has committed the acts specified in Section 87 or is guilty of misconduct as mentioned in the same section, then we cannot restrain the appellants from proceeding with the action against the first respondent. As rightly held in (2008) 2 S.C.C. 41 (supra), the appellants may proceed against the first respondent for the financial loss caused by him to the Society, if it is proved in the enquiry. In this particular case, we have seen from the facts that even before the date of retirement of the first respondent, the charge memo had been issued and therefore, the condition precedent for initiation of departmental proceedings, and which is the first step according to (2008) 2 S.C.C. 41, has been taken in this case, since even before he retired, the first respondent was served with a charge memo and he had also replied to the charge memo. In the proceedings which continued after 2004, one of the earlier charges had been dropped, but mainly the allegation regarding the illegal payment to Suvitha Computers is the main charge. The loss is not a small amount, it was a sum of Rs.11.90 lakhs which was unauthorisedly paid by the first respondent. Definitely the proceedings can be continued and completed. Sections 75 and 76 of the Act deal with the powers that can be exercised over paid officers and servants of the society. This includes disciplinary powers and punishing powers. Therefore, the first respondent can definitely be proceeded against for repayment and restoration of the loss caused to the Bank, since Section 87 of the Act provides for such proceedings even against a person who was an employee, in case the charge against him in this behalf is proved, and any money payable to him towards his terminal benefits can also be withheld until such proceedings are completed.
17. If we apply the facts of the present case to the two decisions relied on by the learned single Judge in the impugned order, viz., Bhagirathi Jena (supra) and Partap Singh (supra), we find that the said decisions do not really support the case of the first respondent. Learned senior counsel for the first respondent also submitted that all the case laws are against initiation of action against the aberrant employee after he retires and this Court may not hold to the contrary. So we will examine each decision independently.
18. In Bhagirathi Jena's case, the Supreme Court had held in favour of the employee because there was no provision in the Orissa State Financial Corporation Staff Regulations for conducting an enquiry after the retirement of the employee or for deduction of retirement benefits. There, the employee was relieved without prejudice to the claims of the Corporation. Before the Supreme Court, the question really was, whether an enquiry that had lapsed in the absence of specific provisions for its continuance after retirement could be continued for the purpose of effecting recovery from the appellant's Provident Fund. The Supreme Court held thus :
"6. It will be noticed from the abovesaid regulations that no specific provision was made for deducting any amount from the provident fund consequent to any misconduct determined in the departmental enquiry nor was any provision made for continuance of the departmental enquiry after superannuation.
7. In view of the absence of such a provision in the abovesaid regulations, it must be held that the Corporation had no legal authority to make any reduction in the retiral benefits of the appellant. There is also no provision for conducting a disciplinary enquiry after retirement of the appellant and nor any provision stating that in case misconduct is established, a deduction could be made from retiral benefits. Once the appellant had retired from service on 30-6-1995, there was no authority vested in the Corporation for continuing the departmental enquiry even for the purpose of imposing any reduction in the retiral benefits payable to the appellant. In the absence of such an authority, it must be held that the enquiry had lapsed and the appellant was entitled to full retiral benefits on retirement."
Therefore, it is clear that in that case, the Supreme Court had only to decide whether deduction could be made from the provident fund dues of the appellant without there being any specific provision therefor, especially when no provision was made for continuance of the departmental enquiry after retirement of the appellant therein. Here, the first respondent was suspended on the eve of the day on which he was to attain the age of superannuation. No relieving order was passed.
19. Partap Singh's case is quite different altogther. In that case, Raghubar Dayal, J., in the minority opinion, held with regard to the retention in service of a Government Servant pending departmental proceedings as follows :
"70. ...We are of opinion that such retention would be for a public purpose, as it is in the larger interests of the efficiency of the services that a Government servant should remain within the control of the Government so long as the departmental enquiry against him on a charge of misconduct is not concluded and final, orders are not passed.
71. It was also contended that some of the charges framed against the appellant, if true, would constitute criminal offences and that, therefore, criminal prosecution should have been launched against him in place of the departmental proceedings. There is nothing in the rules or the general law which would support this contention. It is for the Government to decide what action should be taken against the Government servant for certain misconduct. Such a discretion in the Government does not mean that the provision for the departmental enquiry on such charges of misconduct is in violation of the provisions of Article 14. The service rules apply equally to all the members of the service i.e., to all persons similarly placed and are not, therefore, discriminatory. The Government has the discretion in every case, considering the nature of the alleged misconduct and other circumstances, whether a criminal prosecution should be launched or not. The Government is also free to conduct departmental proceedings after the close of the criminal proceedings, if instituted. There is, therefore, nothing illegal in the Government instituting the departmental proceedings against the appellant."
The majority opinion in the words of Ayyangar, J. clearly held that the impugned orders are vitiated by mala fides, but that the appellant had failed to make the other point about the orders being contrary to the service rules. And, the Full Court actually held in paragraph 5 that the Service Rules based the power to pass the impugned orders on the Government. The order therein was that the appellant was a Civil Surgeon in the employment of the State Government, who was granted leave preparatory to retirement, was recalled to duty by revoking the leave. Simultaneously, he was placed under suspension and departmental enquiry was also initiated against him. To repeat, these orders were quashed not because the Government had no power, but because the orders were vitiated by mala fides. Therefore, strictly speaking, this decision does not help the first respondent.
20. In 1987 Writ L.R. 91 (supra), a learned single Judge of this Court held that mere contemplation of starting of disciplinary proceedings in future before the employee attains the age of superannuation is not permissible. In the case on hand, we find from the files that a charge memo was in fact issued to the first respondent even before the date of his superannuation. Therefore, this decision does not apply to the present case.
21. In (2008) 5 SCC 257 (supra), the regulations therein provided that the drawing up of a charge sheet was the condition precedent for initiation of a disciplinary proceeding. So on facts, it was found that in the absence of a statutory rule, resorting to a preliminary enquiry by itself will not amount to initiation of disciplinary proceedings. In this case, a charge memo had been issued and a reply had also been given.
22. In 1997 Writ L.R. 120 (supra), a Division Bench of this Court held that when disciplinary proceedings are initiated against a person, the Government, to retain him in service on his attaining the age of superannuation, will have to issue a positive order giving reasons as on what ground he is retained in service. In paragraph 7 of that judgment, the Division Bench extracted Fundamental Rules 56(a) and 56(c) as they stood at the relevant point of time. Therefore, the Division Bench held that for retaining a public servant or a government servant in service after his attaining the age of superannuation, a positive order in writing will have to be passed by the Government giving the reasons as on what grounds he is being retained in service, while Rule 56(c) says that he should be retained in service until the enquiry into the charge is conducted. Therefore, the Division Bench held that for retaining the employee in service for continuing the departmental proceedings, a positive order in writing is required to be passed. We are not sure if that is the correct interpretation. We are of the opinion that when Rule 56(a) speaks of retaining a government servant in service after he attains the age of superannuation, it is obvious that the retention is not on disciplinary grounds, but in public interest and it is, therefore, that there must be a sanction of the Government recorded in writing. This is to check favouritism and arbitrary orders of retention. Rule 56(c) uses the words "should be retained in service". If the words are "should be retained in service", the question of requiring the sanction of the Government will not arise. So, if we have to harmoniously read Rules 56(a) and (c) together, it would appear that while normally retention of a government servant in service beyond 58 years can only be with the sanction of the Government in writing, on public grounds, the government servant who is under suspension on a charge of misconduct shall not be permitted to retire, but should be retained in service until the enquiry is conducted. But in the case on hand, it is not necessary for us to decide this issue, since the first respondent is not a government servant and the reasons why we permit the continuance of the departmental proceedings initiated against him have already been given.
23. The words "who is or was" as found in Section 87 of the Act have also been considered by the Supreme Court in Joint Registrar of Co-operative Societies vs. P.S. Rajagopal Naidu, (1970) 1 S.C.C. 753 and State of Maharashtra vs. Budhikota Subbarao, (1993) 3 S.C.C. 339.
24. In Ahmed Ali vs. The Managing Director, Tamil Nadu Water Supply and Drainage Board, 1992 Writ L.R. 619, the delinquent officer was placed under suspension one day prior to the date of his retirement and it was challenged on the ground that the respondent has no such power and also that the Managing Director of the TWAD Board was not competent to pass the order of suspension. The learned single Judge held that the power to decline permission to an employee to retire from service on his attaining the age of superannuation is valid inasmuch as such a power to refuse permission to retire from service has been considered be a concomitant of the power to place the employee under suspension. For this purpose, the learned single Judge had relied on Shelat vs. State of Gujarat, A.I.R. 1978 S.C. 1109 and P.R. Nayak vs. Union of India, A.I.R. 1972 S.C. 554. The learned single Judge also held that under Regulation 10 of the Regulations, the Managing Director was competent to place the petitioner therein under suspension. On appeal by the delinquent officer, the Division Bench held that there was no infirmity in the order of the learned single Judge.
25. In 2002 (II) L.L.J. 983 (supra), a Division Bench of the Andhra Pradesh High Court dealt with a question that is somewhat similar to the present case. There too, the delinquent officer was a manager of a co-operative bank and the charges show that his lapses were of serious nature and related to misappropriation of the bank's funds. But the differences between that case and the case on hand are many and crucial. In that case, the employee was permitted to retire without prejudice to the disciplinary action and though he retired, he was not given his dues under provident fund, gratuity, leave salary etc. He made several representations. Thereafter, in 2000, the Bank issued a notice asking him to show cause why steps should not be taken for recovery of the amounts due to the bank. Then the delinquent officer filed a writ petition to quash the said memorandum. A Division Bench of the Andhra Pradesh High Court, relying on Bhagirathi Jena (supra), held that the retirement benefits cannot be withheld. In the present case, however, the first respondent was not permitted to retire. He was instead suspended from service on the eve of his retirement. In fact, in the above case, the Andhra Pradesh High Court observed that if disciplinary action is sought to be taken, it must be done before he retires. This has been done in the case on hand. The Division Bench held that in view of the authoritative pronouncements of the Apex Court, the right of the employer to continue the disciplinary proceedings after the employee had been allowed to retire was not permissible. The Division Bench observed, "The only course open to the authorities is not to allow the petitioner to retire on superannuation". In the case on hand, no order permitting the first respondent to retire has been passed. The Division Bench also observed that proceedings can be initiated against a retired employee for the purpose of withholding the whole or part of his pension amount, provided there exists any provision therefor. The Division Bench also crucially observed that if a case is made out, it is always permissible for the Bank to "initiate surcharge proceedings against the first respondent therein, viz. the delinquent employee". But however, they observed that though that cannot by itself be a reason for the Bank to withhold the dues payable to the employee under provident fund, gratuity, leave salary etc.
26. In (2007) 9 S.C.C. 15 (supra), disciplinary proceedings for major penalty were initiated against the appellant therein, who was an employee of the Bank, while he was still in service. He retired on superannuation on 31.1.1997, but the disciplinary proceedings continued after his superannuation. On 13.11.1997, he was dismissed from service and in the dismissal order, it was stated that the terminal dues would be settled. The issues involved there were, whether it was permissible to dismiss an employee who already stood retired on superannuation and the related question was, whether the High Court can interfere with the penalty imposed by the departmental authorities. The Supreme Court held that the question whether the departmental proceedings can continue after the officer reaches the age of superannuation will depend on the applicability of the extant rules. The Supreme Court also observed that it may be true that dismissal of such an officer may not "ordinarily arise" (emphasis supplied). But they held, "In our opinion (emphasis supplied), it would not be correct to contend that imposition of such a punishment would be wholly impermissible in law". Therefore, it is clear that the Supreme Court had not held outright that it is impermissible; on the contrary, they have said that it may be permissible in some circumstances, and the Supreme Court in that case, held that it was permissible for the Bank to continue with the departmental proceedings and further, while dealing with the observation of the disciplinary authority who imposed the punishment that the terminal dues of the appellant were to be settled, the Supreme Court categorically held that it was merely an observation and no positive direction was being issued and therefore, no legal right was created in favour of the appellant to obtain his terminal benefits. The Supreme Court held that the observation that the terminal dues of the appellant were to be settled will only mean that law would take its own course. The Supreme Court in fact dismissed the appeal preferred by the employee and allowed the appeal filed by the Bank. The Supreme Court also held that even where no pecuniary loss was caused to the Bank, a major punishment can be inflicted and in that case, the facts were that the employee had in fact caused financial loss to the Bank.
27. In State Bank of India vs. A.N. Gupta, (1997) 8 S.C.C. 60, the State Bank of India challenged the direction of the High Court to pay pension and provident fund to the employees who had retired from service of the bank. They were denied to them by the bank on the ground that there were some lapses on their part while they were in service. The rules governing the employees provided that the retirement of all officers of the bank shall be subject to the sanction of the Executive Committee of the Central Board and the retirement of all other employees shall be subject to the sanction of the Executive Committee of the Local Board and that an employee who leaves the service without sanction will forfeit all claims upon the fund for pension. Relying on these rules, the State Bank of India claimed that the right to pension had been forfeited since no sanction was accorded. The Supreme Court held that the "rule cannot be interpreted to mean that claim to pension ... can be defeated by the bank by merely withholding sanction of retirement". The Supreme Court further held that Rule 11 of the Rules therein will have no application in cases of retirement on attaining the age of superannuation and the proceeding in the garb of disciplinary proceedings cannot be permitted since the service rules do not provide for continuation of disciplinary proceedings after the date of superannuation. Further, Rule 20 of the Provident Fund Rules applicable to the bank provided that if a member resigning or retiring is under a liability incurred by him to the bank, then the trustees ... can pay to the bank out of the balance to his credit, the amount due by him to the bank. The Supreme Court held that this rule will apply only if the employee retiring from the service of the bank is under a liability incurred by him to the bank, and the Supreme Court also observed that, "in any case, the bank should at least prima facie establish that any liability has been incurred by the employee for which it will lay claim to the provident fund of the employee. But in the present case, there is indisputably a prima facie finding regarding the misappropriation or misuse of the funds by the first respondent since the Directorate of Vigilance and Anti Corruption has given a preliminary finding against him. This letter had been received even before 27.6.2003 and there are strong indications to show that we can prima facie accept that there is basis for the charges levelled against the first respondent. Of course, the rules applicable in the above case are different.
28. In T.K.K. Tharmar vs. Registrar, Central Administrative Tribunal, Chennai Bench & Others, (2008) 3 M.L.J. 877, the petitioner was working as an Income Tax Officer and grave charges were levelled against him. It was contended on behalf of the petitioner that since the petitioner was allowed to retire, no further proceedings can be initiated against him and the superannuation will terminate all further proceedings. Paragraph 19 of the said judgment reads as follows :-
"19. Therefore, even if all the judgments in Union of India vs. K.K. Dhawan, (1993) 2 S.C.C. 56, Zunjarrao Bhikaji Nagarkar vs. Union of India and Others, (1999) Supp. M.J.L. 71, Union of India and Others vs. Duli Chand, 2006 (III) L.L.J. 1069 (SC), Ramesh Chander Singh vs. High Court of Allahabad and Another, (2007) 4 M.L.J. 1055 (SC) and Inspector Prem Chand vs. Government of NCT of Delhi and Others, (2007) 4 S.C.C. 566 are read together, it is necessary that before initiating disciplinary action, the Department must have prima facie material to show recklessness and the officer had acted negligently or his order unduly favoured a party and his action was actuated by corrupt motive."
This condition is fully satisfied in the present case, viz., there was prima facie material which showed that the first respondent had unduly favoured Suvidha Computers and it was actuated by corrupt motive. The Division Bench had dealt with Bhagirathi Jena's case in paragraph 24 as follows :-
"24. But on a careful reading of the judgment of the Supreme Court in Bhagirathi Jena vs. B.D.O.S.F. Corporation (supra), it can be seen that the said case proceeded on the basis that in the absence of any specific provision in the relevant rule, the authority will have no legal power to reduce the retiral benefit or conduct of a disciplinary proceeding."
We have also dealt with the said decision earlier. The Division Bench has also relied on the U.P. State Sugar Corporation Ltd. case, as we have done too and has concluded that the petitioner must participate in the enquiry and establish his innocence. We are in complete agreement with this approach.
29. In Pandit D. Aher vs. State of Maharashtra, (2007) 1 S.C.C. 445, the charges alleged against the appellant therein were of grave nature. Not only was he guilty of negligence in duty, but the State had suffered losses on account of his action. The Supreme Court refused to interfere with the finding of fact that he had committed grave misconduct or the order passed withholding the pension. That was a case of a government servant. Though the first respondent in this case is not a government servant, we are referring to this decision just to show that where there is financial loss, recovery of the same is lawful. Further, in the present case, the statutory power provided under Section 87 of the Act has already been referred to.
30. In State of U.P. vs. R.C. Misra, (2007) 9 S.C.C. 698, the Supreme Court interpreted the word "institute". There, the delinquent was working as a Block Development Officer. He was placed under suspension by order dated 20.10.1997. He attained the age of superannuation on 31.10.1997 and retired from service. The Enquiry Officer submitted a report on 16.11.1999 holding that all the twelve charges framed against him were proved. An order was passed on 25.1.2001 directing recovery of a sum of Rs.9,69,141.60 from his pension. The Supreme Court held as follows :-
"10. A combined reading of the proviso and the Explanation would show that there is no fetter or limitation of any kind for instituting departmental proceedings against an officer if he has not attained the age of superannuation and has not retired from service. If an officer is either placed under suspension or charges are issued to him prior to his attaining the age of superannuation, the departmental proceedings so instituted can validly continue even after he has attained the age of superannuation and has retired and the limitations imposed by sub-clause (i) or sub-clause (ii) of Clause (a) of proviso to Regulation 351-A will not apply. It is only where an officer is not placed under suspension or charges are not issued to him while he is in service and departmental proceedings are instituted against him under Regulation 351-A after he has attained the age of superannuation and has retired from service and is not under re-employment, that the limitations imposed by sub-clauses (i) and (ii) of Proviso (a) shall come into play.
11. The word used in Proviso (a) is institute. The dictionary meaning of the word institute is: set up; cause to come into existence; to originate and get established; to commence. It obviously refers to the initial action or the commencement of the action. It is entirely different from continuance of an action already initiated. If the intention of the rule-making authority had been that an enquiry instituted against an officer while in service should not proceed after his retirement, save with the sanction of the Governor, then Proviso (a) would have been differently worded and instead of the word instituted, the words continue or proceed or go on would have been used. This being not the language of the proviso, there is absolutely no warrant for holding that an enquiry validly instituted against an officer while he was in service would, after retirement of the officer, require sanction of the Governor for its continuance and culmination."
Therefore, the Supreme Court allowed the appeal filed by the State of Uttar Pradesh and remitted the matter to the Administrative Tribunal for fresh decision, holding as follows :-
"12. In the present case, the respondent had been placed under suspension and charges were also served upon him while he was in service. In such circumstances, Proviso (a) did not come into play at all and there was no requirement of obtaining sanction of the Governor. The enquiry which had been instituted prior to the retirement of the respondent and was completed after his retirement could not, therefore, be held to be illegal on the ground of want of sanction of the Governor. The view to the contrary taken by the Tribunal and by the High Court is, therefore, clearly erroneous in law and cannot be sustained."
In this case, we have already referred to the relevant records to show that the charge memo had been issued and the first respondent had even replied to it and pleaded for mercy, all before his date of superannuation. So, the action taken subsequent to the date of his superannuation is really only a continuation of what was "instituted" at the time when he was in service. Further, no orders were passed permitting him to retire.
31. We have attempted to examine the legal position from all possible angles, since while a person who has caused huge loss to the co-operative society shall not escape, we can also not allow the appellant to continue with an action which is not permissible in law.
32. We are of the opinion that (2008) 2 SCC 41 (supra), will apply fully to the present case on facts and law. In that case, the Supreme Court had held that the High Court was wrong in quashing the disciplinary proceedings since under the Uttar Pradesh State Sugar Corporation General Service Rules, proceedings could have been initiated even after an employee has retired for recovery of losses caused to the Corporation by the respondent/employee. The Supreme Court also accepted the contention of the Corporation that the jurisdiction of the High Court under Article 226 is equitable and discretionary and must reach out to remove injustice wherever it is found and in paragraphs 36 and 37, held as follows :-
"36. In G. Veerappa Pillai v. Raman & Raman Ltd., A.I.R. 1952 S.C. 192, the Constitution Bench of this Court speaking through Chandrasekhara Aiyar, J. observed (AIR pp.195-96, para 20) that the writs referred to in Article 226 of the Constitution, are obviously intended to enable the High Court to issue them in grave cases where the subordinate tribunals or bodies or officers act wholly without jurisdiction, or in excess of it, or in violation of the principles of natural justice, or refuse to exercise a jurisdiction vested in them, or there is an error apparent on the face of the record, and such act, omission, error, or excess has resulted in manifest injustice.
37. Again, in leading case of Sangram Singh v. Election Tribunal, A.I.R. 1955 S.C. 425, dealing with the ambit and scope of powers of the High Courts under Article 226 of the Constitution, Bose, J. stated: (AIR p.429, para 14):
14. That, however, is not to say that the jurisdiction will be exercised whenever there is an error of law. The High Courts do not, and should not, act as courts of appeal under Article 226. Their powers are purely discretionary and though no limits can be placed upon that discretion it must be exercised along recognised lines and not arbitrarily; and one of the limitations imposed by the courts on themselves is that they will not exercise jurisdiction in this class of case unless substantial injustice has ensued, or is likely to ensue. They will not allow themselves to be turned into courts of appeal or revision to set right mere errors of law which do not occasion injustice in a broad and general sense, for, though no legislature can impose limitations on these constitutional powers it is a sound exercise of discretion to bear in mind the policy of the legislature to have disputes about these special rights decided as speedily as may be. Therefore, writ petitions should not be lightly entertained in this class of case. (emphasis supplied) The Supreme Court disapproved of the decision in Secretary, ONGC Ltd. vs. V.U. Warrier, (2005) 5 S.C.C. 245, where the High Court had directed release of all benefits to an employee against whom penal rent was charged for unauthorised retention of official accommodation. The Supreme Court held that the High Court was wholly unjustified in exercising equitable jurisdiction in favour of that employee who was in error.
33. From the records produced in this case, the following facts are obvious :-
(a) The activities of the first respondent had caused a great deal of consternation among the authorities and they were forced to transfer him from the place where, according to them, he was causing a lot of damage.
(b) The disciplinary proceedings had been actually initiated before his age of superannuation, since the first charge memo is dated 6.6.2003, whereas his age of superannuation is 31.6.2003.
(c) He had also given a reply to the charge memo dated 6.6.2003, but had not chosen to reveal the fact of the issuance of this earlier charge memo in his writ affidavit.
(d) No orders had been passed permitting him to retire; on the contrary, he was suspended on the eve of his attaining the age of superannuation.
(e) The Supreme Court has held that even if a person had retired, if it is proved that he had caused loss to the establishment, then proceedings can be initiated to recover the amount of loss from him.
(f) Even if a person has attained the age of superannuation, it is possible to dismiss him, in which event, he will not be entitled to his terminal dues vide (2007) 9 S.C.C. 15 (supra).
(g) In any event, Section 87 of the Act gives the power to proceed against even a past employee for recovery and restoration of the financial loss caused to the Society.
34. For the reasons stated above, the writ appeals are allowed. The appellants may proceed against the first respondent and pass such orders in accordance with law and the provisions of the Act, including the action contemplated under Section 87 of the Act. It is desirable that the proceedings are concluded within three months from the date of the receipt of a copy of this judgment. In the facts and circumstances of the case, there shall be no order as to costs. Consequently, M.P. No.1 of 2008 in W.A. No.256 of 2008 and M.P. Nos.1 and 2 in W.A. No.257 of 2008 are closed.
ab To The Special Officer, Villupuram District Central Co-operative Bank, No.2, Hospital Road, Villupuram