The Registrar of Co-Operative ... vs G. Manoharan on 21 October, 2009

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 inWrit 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

The Registrar Of Co-Operative ... vs G. Manoharan on 21 October, 2009

Indian Kanoon - http://indiankanoon.org/doc/506114/ 1

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-operativeSocieties were formed with an object of infusing in the minds of people, the spirit of working in a group sothat the members of the group gain benefit through collective contributions. It was truly Gandhian in itsideals. In its preamble, the Tamil Nadu Co-operative Societies Act, 1983 very nobly states that it is meant toprovide an orderly development of co-operative movement in accordance with principles like openmembership, democratic management, thrift, self-help and mutual aid among persons with commonsocio-economic needs. It is intended to bring about improvement in agriculture and industry, better methodsof production, better business and better living. But the objects have not been achieved. There has been a greatdeal of politicisation of the co-operative movement; there has also been widespread misappropriation anddiversion of the funds generated from the common man by the persons in charge. Our hearts cannot but bedismayed at this fact. The funds in a co-operative bank are meant to advance the democratic goal based onsocio-economic principles. If they are allowed to be diverted, dissipated or frittered, it is betrayal of publictrust.

2. In this case, the first respondent, in charge of the affairs of a Co-operative Bank, is charged with acts ofgrave misconduct, including causing huge financial loss to the Bank and has challenged the disciplinaryproceedings on the ground that he has attained the age of superannuation. He must face the proceedings andestablish 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' inshort). He had joined the services of then South Arcot Central Co-operative Bank in the year 1968-69 andwhen he attained the age of superannuation on 30.6.2003, he was the General Manager of the Bank. On thatday, an order in Rc. NO.16/2002/CCA.1 of the same date was served on him by the Special Officer of theBank along with the endorsement No.Rc.5580/2003/E1. By this letter, the first respondent was informed thatthe 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 WritPetition No.19349 of 2003 alleging that this order of suspension was served on him without any valid reasonsand with mala fide intention to deny him his retiral benefits. The writ petition was admitted. On 3.8.2004, thesecond appellant framed two charges against the first respondent. The first respondent submitted hisexplanation. An Enquiry Officer was appointed. The first respondent, therefore, filed the second writ petitionchallenging the action on the ground that after the attainment of the age of superannuation, framing of thecharge memo was illegal and consequently, the charge memo is liable to be quashed. A counter affidavit wasfiled by the appellants. In this, it is stated that an enquiry was conducted by an appropriate authority into theallegations 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 heavyloss to the Bank to the extent of Rupees 13.94 Lakhs. It was stated that while the materials were beinggathered, he attained the age of superannuation and therefore, he was placed under suspension even before thedate of his retirement and he was not allowed to retire and the terminal benefits were also not paid to him. TheChairman, Common Cadre Authority initiated disciplinary action against the first respondent. The firstrespondent submitted his explanation denying all charges by his letter dated 30.8.2004. The learned singleJudge, relying on Bhagirathi Jena vs. Board of Directors, O.S.F.C. & Others, (1999) 3 S.C.C. 666 and PartapSingh vs. State of Punjab, A.I.R. 1964 S.C. 72, allowed the writ petition. Against that, these writ appeals havebeen filed.



http://indiankanoon.org/doc/653387/









4. The learned Special Government Pleader appearing on behalf of the appellants submitted that themisconduct of the first respondent was of such grave nature and he had caused so much loss to the Bank thatthe 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 heldthat departmental enquiry could be continued for recovery of the loss caused by the employee and the samecould be recovered from the retiral benefits. He also referred to R.P. Kapur vs. Union of India, A.I.R. 1964S.C. 787. He referred to Section 75 of the Act and vehemently urged that the first respondent deserves noindulgence in view of the huge financial loss that was caused to the Bank by the misconduct of the firstrespondent. He pointed out that the first respondent had not been permitted to retire. He further submitted thatthere were enough materials to justify a prima facie conclusion of the first respondent's misconduct. Hesubmitted, 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 therecan be no continuance of disciplinary proceedings after the age of superannuation and so, the writ appealsmust 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 authorityrevealed serious irregularities and also that the Government had the power to give directions, in publicinterest, to act on the basis of such discreet enquiry. What we see in the files is quite depressing. It is seen thatright from January 2002, there have been communications to the Registrar of Co-operative Societiescomplaining about all the misdeeds of the first respondent. On 1.2.2002, a detailed complaint of what wasdone by the first respondent has been sent to the Registrar. On 4.4.2002, members of the Union have againgiven a complaint. On 1.2.2002, the Minister for Adi Dravidar Welfare has in fact referred to the misdeeds ofthe first respondent. On 24.9.2002, the Special Secretary to the Government has addressed a letter to theAdditional Registrar of Co-operative Societies, Common Cadre Authority referring to the petitions to theDirectorate of Vigilance and Anti Corruption that it is better to transfer the first respondent to a far off placefor the conduct of a fair and free enquiry. So he was transferred to Nilgiris Branch where he was serving whenhe attained the age of superannuation. On 1.11.2002, again the Special Secretary to the Government hadaddressed a letter to the Registrar of Co-operative Societies regarding the transfer of the 1st respondent. On28.5.2003, details of the report from Directorate of Vigilance and Anti Corruption were asked for. The reportof the Directorate of Vigilance and Anti Corruption is dated 29.5.2003 and what is stated therein is verydisturbing. And, the advice is that an appropriate decision must be taken regarding the retirement of thisindividual, viz. the first respondent.

7. The records show that at least from 2002, the Registrar of Co-operative Societies as well as the Secretary tothe Government have exchanged frantic correspondences regarding the very serious and grave acts ofmisconduct committed by the first respondent. In fact, the general tenor of the correspondence indicates thatthe Villupuram Co-operative Society must be saved from the first respondent. There is also an indication inthe correspondence that he claims to be close to someone in power. The Registrar and the Additional Registrarare 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 andhe has replied to it by his letter dated 16.6.2003, which was received by the Bank on 18.6.2003. He had givenhis reasons for each of the charges mentioned therein. There are three charges. The first charge relates to thefailure of the first respondent to adhere to the Registrar's Circular for purchasing computers worth Rs.30.11lakhs for the Bank. The second charge is also an allied charge, viz., that a contract had been entered into withM/s. Suvitha Computers for purchasing computer software worth Rs.17 lakhs without purchasing thecomputers for the branches. While explaining the charges, in the charge memo, it is stated that the firstrespondent had entered into an arrangement with Suvitha Computers for purchase of computers worth Rs.17lakhs. In the agreement, it is agreed that only after all the branches, including the Head Office, are fullycomputerised, this software should be installed. It is a condition found in the agreement entered into betweenthe 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 inall the concerned branches. But even after two years, this had not been done. In addition, apart from otherviolations, Rs.11.90 lakhs had been given to Suvitha Computers from the funds of the Bank. Generally, onlyafter all the computers have been purchased steps are taken to purchase software for operation of thecomputers, but curiously in this case, the first respondent had paid Rs.11.90 lakhs for the software, afterentering into an agreement with the company for purchase of software worth Rs.17 lakhs, even without fullycomputerising the Bank and its branches and therefore, it is alleged that for this loss of Rs.11.90 lakhs, healone 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 tothe Government informing him that the Directorate of Vigilance and Anti Corruption has advised to take anappropriate decision on the retirement of this individual on account of various allegations against him and themain allegations are referred to therein. The Additional Registrar has also stated that since there is noprovision 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 theSpecial Secretary to the Government to place him under suspension immediately. This is dated 11.6.2003. Tothis, the Chairman, Common Cadre Authority has stated that it is not possible to place the first respondentunder suspension, but it has been decided to withhold his terminal benefits. A charge memo had been issuedon 2.6.2003. In response thereto, on 16.6.2003, the first respondent had submitted his explanation. TheRegistrar of Co-operative Societies, on 28.6.2003, directed the Common Cadre Authority to place theindividual under suspension immediately pending enquiry into grave charges. Accordingly, he was placedunder suspension with effect from 30.6.2003 (forenoon). On 14.11.2003, the first respondent submitted amercy application asking the Registrar of Co-operative Societies to revoke the suspension orders, enablinghim to get the retirement benefits. On 30.4.2004, the Secretary to the Government directed the Registrar ofCo-operative Societies to proceed with the action already initiated against the first respondent. Therefore, thiswould show that the proceedings initiated in 2004 are only continuation of the earlier proceedings and notfresh proceedings. It is also important to note that by this order, Suvitha Computers, whose name had beenchanged 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 oftransfers and granting promotions. The second charge is with regard to Suvitha Computers and the charge isthat there is a condition for installation of the software within 15 weeks, failing which penalty should beimposed and though there is the condition that only after installation of the hardware in the Bank, including its12 branches, the software should be installed and yet, the software had been purchased and that in threeinstalments, a sum of Rs.11.90 lakhs had been paid to Suvitha Computers, though Suvitha Computers had notfulfilled its commitment of installation of the software within 15 weeks as per the agreement. Therefore, byrecommending the payment of Rs.11.90 mala fide and with a view to cause loss to the Bank, the Bank hassuffered loss.



11. We have already seen that after the first charge memo had been issued on 2.6.2003, a reply had beenreceived from the first respondent and on 27.6.2003, after receipt of the letter from the Directorate ofVigilance 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 beinformed. An Enquiry Officer was also appointed. The first respondent was asked to appear before theEnquiry Officer on 15.11.2003. It is thereafter that the notice dated 10.6.2004 was issued, framing the chargesafresh. From the records, we see that after his explanation was received, there was silence until the date of hisretirement, 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 silenceand apparent inaction. A look at the two charge memos shows that they are almost identical. Therefore, theproceedings have actually been initiated even before his retirement and he had also given his reply. Not onlythat, 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 bothsides in the chambers and also listed the matter in open court to ask them whether they had any explanation tooffer or any written submissions to make regarding the charge memo dated 6.6.2003 and the reply aboutwhich the writ petitioner/first respondent had maintained a strategic silence. Learned counsel for the firstrespondent submitted that it is true that a show cause notice was issued and a reply was given thereto, but theproceedings 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. Section81 of the Act contemplates an inquiry to be held by the Registrar on his own motion or on the application ofthe majority, into any alleged misappropriation, fraudulent retention of any money, breach of trust etc. Section81(4) fixes the time frame within which such enquiry shall be completed. Section 82 deals with inspection andinvestigation by the Registrar on his own motion or on application of a creditor of the Registered Society andfor doing this, he will have all the powers under Section 81 of the Act. Rule 104 sets down the procedureregarding the inquiry, inspection and investigation. Section 87 is an important provision which deals withsurcharge proceedings and it can be initiated if, "it appears that any person who is or was entrusted with theorganisation or management of the society or any past or present officer or servant of the society hasmisappropriated or fraudulently retained any money or other property or been guilty of breach of trust inrelation to the society or has caused any deficiency in the assets of the society by breach of trust or wilfulnegligence or has made any payment which is not in accordance with this Act". The facts relating tomisappropriation, fraudulent retention of money or breach of trust may have come to light either in the courseof an audit under Section 80 or during the course of the inquiry under Section 81 or an inspection andinvestigation under Sections 82 or 83. If such fraudulent retention of money, misappropriation, breach of trustor wilful negligence becomes apparent, the Registrar or a person authorised by him is empowered to framecharges against such person and after giving opportunity, an order can be made to repay or restore the moneyand 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 organisationor management of the society, a past or a present officer of the society, and a past or present servant of thesociety. In fact, even the representative who inherits the estate of such a person who is deceased shall answerthe charges. The retirement of such person or officer or servant is not a deterrent to the proceedings that canbe initiated under Section 87. Section 87 is only to recover and make good the financial loss caused to thesociety by the individual concerned by his fraudulent retention of money, misappropriation, wilful negligenceor breach of trust, as the case may be. In this case, a notice had already been issued which showed clearly thatit had come to light that the first respondent had caused loss of Rs.11.90 lakhs to the Bank and even before hisretirement, the charge memo had been issued and his answer had also been obtained. Further, Section 87 givesthe authority, the right to proceed against a person whether he was an officer or a servant, either past orpresent.



14. In the book "The Nature of Judicial Discretion", Justice Aharon Barak, the Chief Justice of the SupremeCourt of Israel writes,

"A statute is to be interpreted in light of the fundamental values of the democratic regime and of the legalsystem. These fundamental values include, among others, accepted principles such as equality, justice, andmorality. They include policies such as the existence of the state, its democratic character, separation ofpowers, personal freedom, freedom of expression, freedoms of procession, religious worship, property, andoccuption, human dignity, integrity of the judicial process, and public welfare and safety. These fundamentalvalues include within them standards of good faith, natural justice, fairness, reasonableness, impartiality, lackof conflict of interest. Justice Menachem Elon discussed this in the following terms : "We have an importantrule, that a legal system cannot sustain itself on the body of the law alone. The body of the legal system needsa soul, and perhaps even a super-soul. The legal system will find this soul in the character and image ofvarious value norms"."

15. We are unable to see what is the legal hurdle for the proceedings to continue. As rightly contended by thelearned Special Government Pleader, even if the first respondent cannot be imposed with the punishment ofdismissal or reduction in rank since he has already attained the age of superannuation, if the charges areproved, the amount of loss caused to the Society by the first respondent can always be recovered. Learnedsenior 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 ofproceedings.

16. In the present case, we have found that a charge memo had been issued to the first respondent and he hadalso given a reply thereto before the date of his superannuation. Therefore, the disciplinary proceedings hadalready commenced. The first respondent was not permitted to retire. He was suspended. But no order waspassed permitting him to retire either. Further, the language of Section 87 of the Act clearly shows thatproceedings can be initiated even in respect of a person who has retired, if he has committed the acts specifiedin Section 87 or is guilty of misconduct as mentioned in the same section, then we cannot restrain theappellants 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 theSociety, if it is proved in the enquiry. In this particular case, we have seen from the facts that even before thedate of retirement of the first respondent, the charge memo had been issued and therefore, the conditionprecedent 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 chargememo and he had also replied to the charge memo. In the proceedings which continued after 2004, one of theearlier charges had been dropped, but mainly the allegation regarding the illegal payment to SuvithaComputers is the main charge. The loss is not a small amount, it was a sum of Rs.11.90 lakhs which wasunauthorisedly 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 thesociety. This includes disciplinary powers and punishing powers. Therefore, the first respondent can definitelybe proceeded against for repayment and restoration of the loss caused to the Bank, since Section 87 of the Actprovides for such proceedings even against a person who was an employee, in case the charge against him inthis behalf is proved, and any money payable to him towards his terminal benefits can also be withheld untilsuch 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 theimpugned order, viz., Bhagirathi Jena (supra) and Partap Singh (supra), we find that the said decisions do notreally support the case of the first respondent. Learned senior counsel for the first respondent also submittedthat all the case laws are against initiation of action against the aberrant employee after he retires and thisCourt 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 noprovision in the Orissa State Financial Corporation Staff Regulations for conducting an enquiry after theretirement of the employee or for deduction of retirement benefits. There, the employee was relieved withoutprejudice to the claims of the Corporation. Before the Supreme Court, the question really was, whether anenquiry that had lapsed in the absence of specific provisions for its continuance after retirement could becontinued for the purpose of effecting recovery from the appellant's Provident Fund. The Supreme Court heldthus : "6. It will be noticed from the abovesaid regulations that no specific provision was made for deductingany amount from the provident fund consequent to any misconduct determined in the departmental enquirynor 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 Corporationhad no legal authority to make any reduction in the retiral benefits of the appellant. There is also no provisionfor conducting a disciplinary enquiry after retirement of the appellant and nor any provision stating that incase misconduct is established, a deduction could be made from retiral benefits. Once the appellant had retiredfrom service on 30-6-1995, there was no authority vested in the Corporation for continuing the departmentalenquiry even for the purpose of imposing any reduction in the retiral benefits payable to the appellant. In theabsence of such an authority, it must be held that the enquiry had lapsed and the appellant was entitled to fullretiral benefits on retirement." Therefore, it is clear that in that case, the Supreme Court had only to decidewhether deduction could be made from the provident fund dues of the appellant without there being anyspecific provision therefor, especially when no provision was made for continuance of the departmentalenquiry after retirement of the appellant therein. Here, the first respondent was suspended on the eve of theday 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 asfollows :

"70. ...We are of opinion that such retention would be for a public purpose, as it is in the larger interests of theefficiency of the services that a Government servant should remain within the control of the Government solong as the departmental enquiry against him on a charge of misconduct is not concluded and final, orders arenot passed.

71. It was also contended that some of the charges framed against the appellant, if true, would constitutecriminal offences and that, therefore, criminal prosecution should have been launched against him in place ofthe departmental proceedings. There is nothing in the rules or the general law which would support thiscontention. It is for the Government to decide what action should be taken against the Government servant forcertain misconduct. Such a discretion in the Government does not mean that the provision for thedepartmental enquiry on such charges of misconduct is in violation of the provisions of Article 14. Theservice 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 thealleged misconduct and other circumstances, whether a criminal prosecution should be launched or not. TheGovernment is also free to conduct departmental proceedings after the close of the criminal proceedings, ifinstituted. There is, therefore, nothing illegal in the Government instituting the departmental proceedingsagainst the appellant." The majority opinion in the words of Ayyangar, J. clearly held that the impugnedorders are vitiated by mala fides, but that the appellant had failed to make the other point about the ordersbeing contrary to the service rules. And, the Full Court actually held in paragraph 5 that the Service Rulesbased the power to pass the impugned orders on the Government. The order therein was that the appellant wasa 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 departmentalenquiry was also initiated against him. To repeat, these orders were quashed not because the Government hadno power, but because the orders were vitiated by mala fides. Therefore, strictly speaking, this decision doesnot help the first respondent.



20. In 1987 Writ L.R. 91 (supra), a learned single Judge of this Court held that mere contemplation of startingof 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 evenbefore 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 wasthe condition precedent for initiation of a disciplinary proceeding. So on facts, it was found that in the absenceof a statutory rule, resorting to a preliminary enquiry by itself will not amount to initiation of disciplinaryproceedings. 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 areinitiated 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 ofthat judgment, the Division Bench extracted Fundamental Rules 56(a) and 56(c) as they stood at the relevantpoint of time. Therefore, the Division Bench held that for retaining a public servant or a government servantin service after his attaining the age of superannuation, a positive order in writing will have to be passed bythe Government giving the reasons as on what grounds he is being retained in service, while Rule 56(c) saysthat he should be retained in service until the enquiry into the charge is conducted. Therefore, the DivisionBench held that for retaining the employee in service for continuing the departmental proceedings, a positiveorder in writing is required to be passed. We are not sure if that is the correct interpretation. We are of theopinion that when Rule 56(a) speaks of retaining a government servant in service after he attains the age ofsuperannuation, 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 favouritismand 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, ifwe have to harmoniously read Rules 56(a) and (c) together, it would appear that while normally retention of agovernment servant in service beyond 58 years can only be with the sanction of the Government in writing, onpublic grounds, the government servant who is under suspension on a charge of misconduct shall not bepermitted to retire, but should be retained in service until the enquiry is conducted. But in the case on hand, itis not necessary for us to decide this issue, since the first respondent is not a government servant and thereasons why we permit the continuance of the departmental proceedings initiated against him have alreadybeen given.

23. The words "who is or was" as found in Section 87 of the Act have also been considered by the SupremeCourt in Joint Registrar of Co-operative Societies vs. P.S. Rajagopal Naidu, (1970) 1 S.C.C. 753 and State ofMaharashtra 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 waschallenged on the ground that the respondent has no such power and also that the Managing Director of theTWAD Board was not competent to pass the order of suspension. The learned single Judge held that thepower to decline permission to an employee to retire from service on his attaining the age of superannuation isvalid inasmuch as such a power to refuse permission to retire from service has been considered be aconcomitant of the power to place the employee under suspension. For this purpose, the learned single Judgehad 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 ManagingDirector 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 questionthat is somewhat similar to the present case. There too, the delinquent officer was a manager of a co-operativebank 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, theemployee was permitted to retire without prejudice to the disciplinary action and though he retired, he was notgiven his dues under provident fund, gratuity, leave salary etc. He made several representations. Thereafter, in2000, the Bank issued a notice asking him to show cause why steps should not be taken for recovery of theamounts due to the bank. Then the delinquent officer filed a writ petition to quash the said memorandum. ADivision Bench of the Andhra Pradesh High Court, relying on Bhagirathi Jena (supra), held that the retirementbenefits cannot be withheld. In the present case, however, the first respondent was not permitted to retire. Hewas instead suspended from service on the eve of his retirement. In fact, in the above case, the AndhraPradesh 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 authoritativepronouncements of the Apex Court, the right of the employer to continue the disciplinary proceedings afterthe employee had been allowed to retire was not permissible. The Division Bench observed, "The only courseopen to the authorities is not to allow the petitioner to retire on superannuation". In the case on hand, no orderpermitting the first respondent to retire has been passed. The Division Bench also observed that proceedingscan be initiated against a retired employee for the purpose of withholding the whole or part of his pensionamount, provided there exists any provision therefor. The Division Bench also crucially observed that if a caseis made out, it is always permissible for the Bank to "initiate surcharge proceedings against the firstrespondent therein, viz. the delinquent employee". But however, they observed that though that cannot byitself 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 theappellant therein, who was an employee of the Bank, while he was still in service. He retired onsuperannuation on 31.1.1997, but the disciplinary proceedings continued after his superannuation. On13.11.1997, he was dismissed from service and in the dismissal order, it was stated that the terminal dueswould be settled. The issues involved there were, whether it was permissible to dismiss an employee whoalready stood retired on superannuation and the related question was, whether the High Court can interferewith the penalty imposed by the departmental authorities. The Supreme Court held that the question whetherthe departmental proceedings can continue after the officer reaches the age of superannuation will depend onthe applicability of the extant rules. The Supreme Court also observed that it may be true that dismissal ofsuch an officer may not "ordinarily arise" (emphasis supplied). But they held, "In our opinion (emphasissupplied), it would not be correct to contend that imposition of such a punishment would be whollyimpermissible in law". Therefore, it is clear that the Supreme Court had not held outright that it isimpermissible; on the contrary, they have said that it may be permissible in some circumstances, and theSupreme Court in that case, held that it was permissible for the Bank to continue with the departmentalproceedings and further, while dealing with the observation of the disciplinary authority who imposed thepunishment that the terminal dues of the appellant were to be settled, the Supreme Court categorically heldthat it was merely an observation and no positive direction was being issued and therefore, no legal right wascreated in favour of the appellant to obtain his terminal benefits. The Supreme Court held that the observationthat 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 theBank. The Supreme Court also held that even where no pecuniary loss was caused to the Bank, a majorpunishment can be inflicted and in that case, the facts were that the employee had in fact caused financial lossto 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 directionof the High Court to pay pension and provident fund to the employees who had retired from service of thebank. They were denied to them by the bank on the ground that there were some lapses on their part whilethey were in service. The rules governing the employees provided that the retirement of all officers of thebank shall be subject to the sanction of the Executive Committee of the Central Board and the retirement of allother employees shall be subject to the sanction of the Executive Committee of the Local Board and that anemployee 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 wasaccorded. The Supreme Court held that the "rule cannot be interpreted to mean that claim to pension ... can bedefeated by the bank by merely withholding sanction of retirement". The Supreme Court further held thatRule 11 of the Rules therein will have no application in cases of retirement on attaining the age ofsuperannuation and the proceeding in the garb of disciplinary proceedings cannot be permitted since theservice 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 orretiring is under a liability incurred by him to the bank, then the trustees ... can pay to the bank out of thebalance to his credit, the amount due by him to the bank. The Supreme Court held that this rule will applyonly if the employee retiring from the service of the bank is under a liability incurred by him to the bank, andthe Supreme Court also observed that, "in any case, the bank should at least prima facie establish that anyliability 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 ofthe funds by the first respondent since the Directorate of Vigilance and Anti Corruption has given apreliminary finding against him. This letter had been received even before 27.6.2003 and there are strongindications to show that we can prima facie accept that there is basis for the charges levelled against the firstrespondent. 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) 3M.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 furtherproceedings 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 ofIndia 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 ChanderSingh 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 beforeinitiating disciplinary action, the Department must have prima facie material to show recklessness and theofficer had acted negligently or his order unduly favoured a party and his action was actuated by corruptmotive." This condition is fully satisfied in the present case, viz., there was prima facie material whichshowed that the first respondent had unduly favoured Suvidha Computers and it was actuated by corruptmotive. 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 specificprovision in the relevant rule, the authority will have no legal power to reduce the retiral benefit or conduct ofa disciplinary proceeding."

We have also dealt with the said decision earlier. The Division Bench has also relied on the U.P. State SugarCorporation Ltd. case, as we have done too and has concluded that the petitioner must participate in theenquiry 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 appellanttherein were of grave nature. Not only was he guilty of negligence in duty, but the State had suffered losses onaccount of his action. The Supreme Court refused to interfere with the finding of fact that he had committedgrave 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 toshow that where there is financial loss, recovery of the same is lawful. Further, in the present case, thestatutory 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 EnquiryOfficer 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. TheSupreme Court held as follows :- "10. A combined reading of the proviso and the Explanation would showthat there is no fetter or limitation of any kind for instituting departmental proceedings against an officer if hehas not attained the age of superannuation and has not retired from service. If an officer is either placed undersuspension or charges are issued to him prior to his attaining the age of superannuation, the departmentalproceedings so instituted can validly continue even after he has attained the age of superannuation and hasretired and the limitations imposed by sub-clause (i) or sub-clause (ii) of Clause (a) of proviso to Regulation351-A will not apply. It is only where an officer is not placed under suspension or charges are not issued tohim while he is in service and departmental proceedings are instituted against him under Regulation 351-Aafter 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 tocome into existence; to originate and get established; to commence. It obviously refers to the initial action orthe commencement of the action. It is entirely different from continuance of an action already initiated. If theintention of the rule-making authority had been that an enquiry instituted against an officer while in serviceshould not proceed after his retirement, save with the sanction of the Governor, then Proviso (a) would havebeen differently worded and instead of the word instituted, the words continue or proceed or go on wouldhave been used. This being not the language of the proviso, there is absolutely no warrant for holding that anenquiry 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 allowedthe appeal filed by the State of Uttar Pradesh and remitted the matter to the Administrative Tribunal for freshdecision, holding as follows :-

"12. In the present case, the respondent had been placed under suspension and charges were also served uponhim while he was in service. In such circumstances, Proviso (a) did not come into play at all and there was norequirement of obtaining sanction of the Governor. The enquiry which had been instituted prior to theretirement of the respondent and was completed after his retirement could not, therefore, be held to be illegalon the ground of want of sanction of the Governor. The view to the contrary taken by the Tribunal and by theHigh Court is, therefore, clearly erroneous in law and cannot be sustained." In this case, we have alreadyreferred to the relevant records to show that the charge memo had been issued and the first respondent hadeven replied to it and pleaded for mercy, all before his date of superannuation. So, the action taken subsequentto the date of his superannuation is really only a continuation of what was "instituted" at the time when he wasin 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 hascaused huge loss to the co-operative society shall not escape, we can also not allow the appellant to continuewith 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 disciplinaryproceedings since under the Uttar Pradesh State Sugar Corporation General Service Rules, proceedings couldhave been initiated even after an employee has retired for recovery of losses caused to the Corporation by therespondent/employee. The Supreme Court also accepted the contention of the Corporation that the jurisdictionof the High Court under Article 226 is equitable and discretionary and must reach out to remove injusticewherever 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 ChandrasekharaAiyar, 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 tribunalsor bodies or officers act wholly without jurisdiction, or in excess of it, or in violation of the principles ofnatural justice, or refuse to exercise a jurisdiction vested in them, or there is an error apparent on the face ofthe 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 theambit and scope of powers of the High Courts under Article 226 of the Constitution, Bose, J. stated: (AIRp.429, para 14):

14. That, however, is not to say that the jurisdiction will be exercised whenever there is an error of law. TheHigh Courts do not, and should not, act as courts of appeal under Article 226. Their powers are purelydiscretionary and though no limits can be placed upon that discretion it must be exercised along recognisedlines and not arbitrarily; and one of the limitations imposed by the courts on themselves is that they will notexercise jurisdiction in this class of case unless substantial injustice has ensued, or is likely to ensue. Theywill not allow themselves to be turned into courts of appeal or revision to set right mere errors of law whichdo not occasion injustice in a broad and general sense, for, though no legislature can impose limitations onthese constitutional powers it is a sound exercise of discretion to bear in mind the policy of the legislature tohave disputes about these special rights decided as speedily as may be. Therefore, writ petitions should not belightly entertained in this class of case. (emphasis supplied) The Supreme Court disapproved of the decision inSecretary, ONGC Ltd. vs. V.U. Warrier, (2005) 5 S.C.C. 245, where the High Court had directed release of allbenefits to an employee against whom penal rent was charged for unauthorised retention of officialaccommodation. The Supreme Court held that the High Court was wholly unjustified in exercising equitablejurisdiction 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 andthey 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 firstcharge 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 theissuance 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 hisattaining 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 theestablishment, 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, hewill 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 recoveryand 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 firstrespondent and pass such orders in accordance with law and the provisions of the Act, including the actioncontemplated under Section 87 of the Act. It is desirable that the proceedings are concluded within threemonths 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



Documents

The Registrar of Co-Operative ... vs G. Manoharan on 21 October, 2009