The Registrar of Co-operative Societies v. G. Manoharan

and consequently direct the respondents to settle all theretirement benefits which the petitioner is entitled to.- - - - - For Appellants : Mr. M. Dhandapani, Spl. Govt. Pleader and Mr. P. Gurunathan, Govt. Advocate. For Respondent-1 : Mr. R. Vijay Narayan, Senior Counsel forMr. R. Parthiban- - - - -J U D G M E N TThe Co-operative Movement was started in our country with aphilosophy behind it and Co-operative Societies were formed with anobject of infusing in the minds of people, the spirit of working in agroup so that the members of the group gain benefit throughcollective contributions. It was truly Gandhian in its ideals. Inits preamble, the Tamil Nadu Co-operative Societies Act, 1983 verynobly states that it is meant to provide an orderly development ofco-operative movement in accordance with principles like openmembership, democratic management, thrift, self-help and mutual aidamong persons with common socio-economic needs. It is intended tobring about improvement in agriculture and industry, better methodsof production, better business and better living. But the objectshave not been achieved. There has been a great deal ofpoliticisation of the co-operative movement; there has also beenwidespread misappropriation and diversion of the funds generated fromthe common man by the persons in charge. Our hearts cannot but bedismayed at this fact. The funds in a co-operative bank are meant toadvance the democratic goal based on socio-economic principles. Ifthey are allowed to be diverted, dissipated or frittered, it isbetrayal of public trust. 2. In this case, the first respondent, in charge of the affairsof a Co-operative Bank, is charged with acts of grave misconduct,including causing huge financial loss to the Bank and has challengedthe disciplinary proceedings on the ground that he has attained theage of superannuation. He must face the proceedings and establishthat he has not caused such loss. He cannot get away merely becausehe has reached a certain age. He must prove that he is innocent ofcausing loss to the Co-operative Society.3. The first respondent was the General Manager of the NilgirisDistrict Central Co-operative Bank ('Bank' in short). He had joinedthe services of then South Arcot Central Co-operative Bank in theyear 1968-69 and when he attained the age of superannuation on30.6.2003, he was the General Manager of the Bank. On that day, anorder in Rc. NO.16/2002/CCA.1 of the same date was served on him bythe Special Officer of the Bank along with the endorsementNo.Rc.5580/2003/E1. By this letter, the first respondent wasinformed that the Common Cadre Authority, under Section 76(1)(b) ofthe Tamil Nadu Co-operative Societies Act, 1983 ('Act' in short) was https://hcservices.ecourts.gov.in/hcservices/ placing him under suspension with effect from 30.6.2003. Heimmediately filed Writ Petition No.19349 of 2003 alleging that thisorder of suspension was served on him without any valid reasons andwith mala fide intention to deny him his retiral benefits. The writpetition was admitted. On 3.8.2004, the second appellant framed twocharges against the first respondent. The first respondent submittedhis explanation. An Enquiry Officer was appointed. The firstrespondent, therefore, filed the second writ petition challenging theaction on the ground that after the attainment of the age ofsuperannuation, framing of the charge memo was illegal andconsequently, the charge memo is liable to be quashed. A counteraffidavit was filed by the appellants. In this, it is stated that anenquiry was conducted by an appropriate authority into theallegations against the first respondent regarding seriousirregularities in the issuance of cooking gas loan, promotion andtransfer of Bank staff and purchase and installation of computers inthe Bank, causing heavy loss to the Bank to the extent of Rupees13.94 Lakhs. It was stated that while the materials were beinggathered, he attained the age of superannuation and therefore, he wasplaced under suspension even before the date of his retirement and hewas not allowed to retire and the terminal benefits were also notpaid to him. The Chairman, Common Cadre Authority initiateddisciplinary action against the first respondent. The firstrespondent submitted his explanation denying all charges by hisletter dated 30.8.2004. The learned single Judge, relying onBhagirathi Jena vs. Board of Directors, O.S.F.C. & Others, (1999) 3S.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 havebeen filed.4. The learned Special Government Pleader appearing on behalf ofthe appellants submitted that the misconduct of the first respondentwas of such grave nature and he had caused so much loss to the Bankthat the appellants must be permitted to continue the proceedings toits logical conclusion. He referred to U.P. State Sugar CorporationLtd. vs. Kamal Swaroop Tondon, (2008) 2 S.C.C. 41, where the SupremeCourt held that departmental enquiry could be continued for recoveryof the loss caused by the employee and the same could be recoveredfrom the retiral benefits. He also referred to R.P. Kapur vs. Unionof India, A.I.R. 1964 S.C. 787. He referred to Section 75 of the Actand vehemently urged that the first respondent deserves no indulgencein view of the huge financial loss that was caused to the Bank by themisconduct of the first respondent. He pointed out that the firstrespondent had not been permitted to retire. He further submittedthat there were enough materials to justify a prima facie conclusionof the first respondent's misconduct. He submitted, as laid down in2008 (2) S.C.C. 41 (supra), that this Court must reach out to removeinjustice.5. Learned senior counsel appearing for the first respondent, on https://hcservices.ecourts.gov.in/hcservices/ the other hand, submitted mainly that there can be no continuance ofdisciplinary proceedings after the age of superannuation and so, thewrit appeals must be dismissed. He referred to the followingdecisions to support his case :S. Natarajan vs. Government of Tamil Nadu, 1987 Writ L.R. 191Mahadevan vs. The Special Officer/Deputy Registrar, South Arcot,etc. Stores Ltd., 1997 Writ L.R. 120General Manager, Adilabad District Co-operative Central Bank Ltd.vs. K. Ranga Rao, 2002 (II) L.L.J. 983G. Ramamoorthy vs. Hindustan Photo Films Manufacturing CompanyLtd., 2003 (2) L.L.N. 719Ramesh Chandra Sharma vs. Punjab National Bank, (2007) 9 S.C.C.15UCO Bank vs. Rajinder Lal Capoor, (2007) 6 S.C.C. 6946. We called for the files, since it is specifically alleged thatan enquiry conducted by an appropriate authority revealed seriousirregularities and also that the Government had the power to givedirections, in public interest, to act on the basis of such discreetenquiry. What we see in the files is quite depressing. It is seenthat right from January 2002, there have been communications to theRegistrar of Co-operative Societies complaining about all themisdeeds of the first respondent. On 1.2.2002, a detailed complaintof what was done by the first respondent has been sent to theRegistrar. On 4.4.2002, members of the Union have again given acomplaint. On 1.2.2002, the Minister for Adi Dravidar Welfare has infact referred to the misdeeds of the first respondent. On 24.9.2002,the Special Secretary to the Government has addressed a letter to theAdditional Registrar of Co-operative Societies, Common CadreAuthority referring to the petitions to the Directorate of Vigilanceand Anti Corruption that it is better to transfer the firstrespondent to a far off place for the conduct of a fair and freeenquiry. So he was transferred to Nilgiris Branch where he wasserving when he attained the age of superannuation. On 1.11.2002,again the Special Secretary to the Government had addressed a letterto the Registrar of Co-operative Societies regarding the transfer ofthe 1st respondent. On 28.5.2003, details of the report fromDirectorate of Vigilance and Anti Corruption were asked for. Thereport of the Directorate of Vigilance and Anti Corruption is dated29.5.2003 and what is stated therein is very disturbing. And, theadvice is that an appropriate decision must be taken regarding theretirement 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 haveexchanged frantic correspondences regarding the very serious andgrave acts of misconduct committed by the first respondent. In fact,the general tenor of the correspondence indicates that the VillupuramCo-operative Society must be saved from the first respondent. Thereis also an indication in the correspondence that he claims to be https://hcservices.ecourts.gov.in/hcservices/ close to someone in power. The Registrar and the AdditionalRegistrar are aware of this and with a view to save the Co-operativeSociety from further loss, they seek orders for transferring thefirst respondent to a far off place where he can cause no harm.8. On 2.6.2003, i.e., before the retirement of the firstrespondent, a charge memo was issued by the Bank and he has repliedto it by his letter dated 16.6.2003, which was received by the Bankon 18.6.2003. He had given his reasons for each of the chargesmentioned therein. There are three charges. The first chargerelates to the failure of the first respondent to adhere to theRegistrar's Circular for purchasing computers worth Rs.30.11 lakhsfor the Bank. The second charge is also an allied charge, viz., thata contract had been entered into with M/s. Suvitha Computers forpurchasing computer software worth Rs.17 lakhs without purchasing thecomputers for the branches. While explaining the charges, in thecharge memo, it is stated that the first respondent had entered intoan arrangement with Suvitha Computers for purchase of computers worthRs.17 lakhs. In the agreement, it is agreed that only after all thebranches, including the Head Office, are fully computerised, thissoftware should be installed. It is a condition found in theagreement entered into between the first respondent with SuvithaComputers and yet, he did not take steps to computerise the otherbranches. Further, in the agreement in paragraph 10, it is statedthat the software should be installed within 15 weeks in all theconcerned branches. But even after two years, this had not beendone. In addition, apart from other violations, Rs.11.90 lakhs hadbeen given to Suvitha Computers from the funds of the Bank.Generally, only after all the computers have been purchased steps aretaken to purchase software for operation of the computers, butcuriously in this case, the first respondent had paid Rs.11.90 lakhsfor the software, after entering into an agreement with the companyfor purchase of software worth Rs.17 lakhs, even without fullycomputerising the Bank and its branches and therefore, it is allegedthat for this loss of Rs.11.90 lakhs, he alone is responsible. Thecharge memo was issued and the reply received before his date ofsuperannuation.9. On 6.6.2003, the Additional Registrar of Co-operativeSocieties had addressed a letter to the Secretary to the Governmentinforming him that the Directorate of Vigilance and Anti Corruptionhas advised to take an appropriate decision on the retirement of thisindividual on account of various allegations against him and the mainallegations are referred to therein. The Additional Registrar hasalso stated that since there is no provision to continue his servicesafter the date of superannuation, it has been decided to allow him toretire, but withholding all his terminal benefits till the outcome ofthe enquiry. To this, there is a response from the Special Secretaryto the Government to place him under suspension immediately. This isdated 11.6.2003. To this, the Chairman, Common Cadre Authority has https://hcservices.ecourts.gov.in/hcservices/ stated that it is not possible to place the first respondent undersuspension, but it has been decided to withhold his terminalbenefits. A charge memo had been issued on 2.6.2003. In responsethereto, on 16.6.2003, the first respondent had submitted hisexplanation. The Registrar of Co-operative Societies, on 28.6.2003,directed the Common Cadre Authority to place the individual undersuspension immediately pending enquiry into grave charges.Accordingly, he was placed under suspension with effect from30.6.2003 (forenoon). On 14.11.2003, the first respondent submitteda mercy application asking the Registrar of Co-operative Societies torevoke the suspension orders, enabling him to get the retirementbenefits. On 30.4.2004, the Secretary to the Government directed theRegistrar of Co-operative Societies to proceed with the actionalready initiated against the first respondent. Therefore, this wouldshow that the proceedings initiated in 2004 are only continuation ofthe earlier proceedings and not fresh proceedings. It is alsoimportant to note that by this order, Suvitha Computers, whose namehad been changed to Core Quest Software, was blacklisted by theGovernment.10. In the charge memo dated 3.8.2004, the first charge is withregard to acceptance of bribe in the matter of transfers and grantingpromotions. The second charge is with regard to Suvitha Computersand the charge is that there is a condition for installation of thesoftware within 15 weeks, failing which penalty should be imposed andthough there is the condition that only after installation of thehardware in the Bank, including its 12 branches, the software shouldbe installed and yet, the software had been purchased and that inthree instalments, a sum of Rs.11.90 lakhs had been paid to SuvithaComputers, though Suvitha Computers had not fulfilled its commitmentof installation of the software within 15 weeks as per the agreement.Therefore, by recommending the payment of Rs.11.90 mala fide and witha view to cause loss to the Bank, the Bank has suffered loss.11. We have already seen that after the first charge memo hadbeen issued on 2.6.2003, a reply had been received from the firstrespondent and on 27.6.2003, after receipt of the letter from theDirectorate of Vigilance and Anti Corruption, the individual wasplaced 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 theexplanation dated 16.6.2003, and it is recommended therein that theenquiry should be concluded at the earliest and that the resultshould be informed. An Enquiry Officer was also appointed. Thefirst respondent was asked to appear before the Enquiry Officer on15.11.2003. It is thereafter that the notice dated 10.6.2004 wasissued, framing the charges afresh. From the records, we see thatafter his explanation was received, there was silence until the dateof his retirement, when he was placed under suspension, till 2004when the fresh charge memo was issued. Considering the urgencyexpressed in the correspondence of the year 2002, we do not https://hcservices.ecourts.gov.in/hcservices/ understand this silence and apparent inaction. A look at the twocharge memos shows that they are almost identical. Therefore, theproceedings have actually been initiated even before his retirementand he had also given his reply. Not only that, he prayed that hemight be treated with indulgence and he may not be denied hismonetary benefits. 12. After orders were reserved in the writ appeals, we perusedthe files. Then, we called the counsel for both sides in thechambers and also listed the matter in open court to ask them whetherthey had any explanation to offer or any written submissions to makeregarding the charge memo dated 6.6.2003 and the reply about whichthe writ petitioner/first respondent had maintained a strategicsilence. Learned counsel for the first respondent submitted that itis true that a show cause notice was issued and a reply was giventhereto, but the proceedings were dropped. Learned SpecialGovernment Pleader also submitted the same.13. We will now look at the relevant provisions of the Tamil NaduCo-operative Societies Act, 1983. Section 81 of the Act contemplatesan inquiry to be held by the Registrar on his own motion or on theapplication 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 becompleted. Section 82 deals with inspection and investigation by theRegistrar on his own motion or on application of a creditor of theRegistered Society and for doing this, he will have all the powersunder Section 81 of the Act. Rule 104 sets down the procedureregarding the inquiry, inspection and investigation. Section 87 isan important provision which deals with surcharge proceedings and itcan be initiated if, "it appears that any person who is or wasentrusted with the organisation or management of the society or anypast or present officer or servant of the society has misappropriatedor fraudulently retained any money or other property or been guiltyof breach of trust in relation to the society or has caused anydeficiency in the assets of the society by breach of trust or wilfulnegligence or has made any payment which is not in accordance withthis Act". The facts relating to misappropriation, fraudulentretention of money or breach of trust may have come to light eitherin the course of an audit under Section 80 or during the course ofthe inquiry under Section 81 or an inspection and investigation underSections 82 or 83. If such fraudulent retention of money,misappropriation, breach of trust or wilful negligence becomesapparent, the Registrar or a person authorised by him is empowered toframe charges against such person and after giving opportunity, anorder can be made to repay or restore the money and such actioncannot be commenced after the expiry of seven years from the date ofthe Act or omission. This section empowers the Registrar to proceedagainst a person who is or was entrusted with the organisation ormanagement of the society, a past or a present officer of the https://hcservices.ecourts.gov.in/hcservices/ society, and a past or present servant of the society. In fact, eventhe representative who inherits the estate of such a person who isdeceased shall answer the charges. The retirement of such person orofficer or servant is not a deterrent to the proceedings that can beinitiated under Section 87. Section 87 is only to recover and makegood the financial loss caused to the society by the individualconcerned by his fraudulent retention of money, misappropriation,wilful negligence or breach of trust, as the case may be. In thiscase, a notice had already been issued which showed clearly that ithad come to light that the first respondent had caused loss ofRs.11.90 lakhs to the Bank and even before his retirement, the chargememo had been issued and his answer had also been obtained. Further,Section 87 gives the authority, the right to proceed against a personwhether he was an officer or a servant, either past or present. 14. In the book "The Nature of Judicial Discretion", JusticeAharon Barak, the Chief Justice of the Supreme Court of Israelwrites, "A statute is to be interpreted in light of thefundamental values of the democratic regime and of thelegal system. These fundamental values include, amongothers, accepted principles such as equality, justice,and morality. They include policies such as theexistence of the state, its democratic character,separation of powers, personal freedom, freedom ofexpression, freedoms of procession, religious worship,property, and occuption, human dignity, integrity ofthe judicial process, and public welfare and safety.These fundamental values include within them standardsof good faith, natural justice, fairness,reasonableness, impartiality, lack of conflict ofinterest. Justice Menachem Elon discussed this in thefollowing terms :"We have an important rule, that a legal systemcannot sustain itself on the body of the law alone.The body of the legal system needs a soul, and perhapseven a super-soul. The legal system will find thissoul in the character and image of various valuenorms"."15. We are unable to see what is the legal hurdle for theproceedings to continue. As rightly contended by the learned SpecialGovernment Pleader, even if the first respondent cannot be imposedwith the punishment of dismissal or reduction in rank since he hasalready attained the age of superannuation, if the charges areproved, the amount of loss caused to the Society by the firstrespondent can always be recovered. Learned senior counsel for thefirst respondent submitted by referring to paragraph 40 of (2008) 2S.C.C. 41 (supra) that right from Bhagirathi Jena (supra), the lawlaid down by the Supreme Court prevents continuation of proceedings. https://hcservices.ecourts.gov.in/hcservices/

16. In the present case, we have found that a charge memo hadbeen issued to the first respondent and he had also given a replythereto before the date of his superannuation. Therefore, thedisciplinary proceedings had already commenced. The first respondentwas not permitted to retire. He was suspended. But no order waspassed permitting him to retire either. Further, the language ofSection 87 of the Act clearly shows that proceedings can be initiatedeven in respect of a person who has retired, if he has committed theacts specified in Section 87 or is guilty of misconduct as mentionedin the same section, then we cannot restrain the appellants fromproceeding with the action against the first respondent. As rightlyheld in (2008) 2 S.C.C. 41 (supra), the appellants may proceedagainst the first respondent for the financial loss caused by him tothe Society, if it is proved in the enquiry. In this particularcase, we have seen from the facts that even before the date ofretirement of the first respondent, the charge memo had been issuedand therefore, the condition precedent for initiation of departmentalproceedings, 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, thefirst respondent was served with a charge memo and he had alsoreplied to the charge memo. In the proceedings which continued after2004, one of the earlier charges had been dropped, but mainly theallegation regarding the illegal payment to Suvitha Computers is themain charge. The loss is not a small amount, it was a sum ofRs.11.90 lakhs which was unauthorisedly paid by the first respondent.Definitely the proceedings can be continued and completed. Sections75 and 76 of the Act deal with the powers that can be exercised overpaid officers and servants of the society. This includesdisciplinary powers and punishing powers. Therefore, the firstrespondent can definitely be proceeded against for repayment andrestoration of the loss caused to the Bank, since Section 87 of theAct provides for such proceedings even against a person who was anemployee, in case the charge against him in this behalf is proved,and any money payable to him towards his terminal benefits can alsobe withheld until such proceedings are completed.17. If we apply the facts of the present case to the twodecisions relied on by the learned single Judge in the impugnedorder, viz., Bhagirathi Jena (supra) and Partap Singh (supra), wefind that the said decisions do not really support the case of thefirst respondent. Learned senior counsel for the first respondentalso submitted that all the case laws are against initiation ofaction against the aberrant employee after he retires and this Courtmay not hold to the contrary. So we will examine each decisionindependently.18. In Bhagirathi Jena's case, the Supreme Court had held infavour of the employee because there was no provision in the OrissaState Financial Corporation Staff Regulations for conducting anenquiry after the retirement of the employee or for deduction ofretirement benefits. There, the employee was relieved without https://hcservices.ecourts.gov.in/hcservices/ prejudice to the claims of the Corporation. Before the SupremeCourt, the question really was, whether an enquiry that had lapsed inthe absence of specific provisions for its continuance afterretirement could be continued for the purpose of effecting recoveryfrom the appellant's Provident Fund. The Supreme Court held thus :"6. It will be noticed from the abovesaid regulationsthat no specific provision was made for deducting any amountfrom the provident fund consequent to any misconductdetermined in the departmental enquiry nor was any provisionmade for continuance of the departmental enquiry aftersuperannuation.7. In view of the absence of such a provision in theabovesaid regulations, it must be held that the Corporationhad no legal authority to make any reduction in the retiralbenefits of the appellant. There is also no provision forconducting a disciplinary enquiry after retirement of theappellant and nor any provision stating that in casemisconduct is established, a deduction could be made fromretiral benefits. Once the appellant had retired fromservice on 30-6-1995, there was no authority vested in theCorporation for continuing the departmental enquiry even forthe purpose of imposing any reduction in the retiralbenefits payable to the appellant. In the absence of such anauthority, it must be held that the enquiry had lapsed andthe appellant was entitled to full retiral benefits onretirement."Therefore, it is clear that in that case, the Supreme Court had onlyto decide whether deduction could be made from the provident funddues of the appellant without there being any specific provisiontherefor, especially when no provision was made for continuance ofthe departmental enquiry after retirement of the appellant therein.Here, the first respondent was suspended on the eve of the day onwhich he was to attain the age of superannuation. No relieving orderwas passed. 19. Partap Singh's case is quite different altogther. In thatcase, Raghubar Dayal, J., in the minority opinion, held with regardto the retention in service of a Government Servant pendingdepartmental proceedings as follows :"70. ...We are of opinion that such retention would befor a public purpose, as it is in the larger interests ofthe efficiency of the services that a Government servantshould remain within the control of the Government so longas the departmental enquiry against him on a charge ofmisconduct is not concluded and final, orders are notpassed.71. It was also contended that some of the chargesframed against the appellant, if true, would constitutecriminal offences and that, therefore, criminal prosecutionshould have been launched against him in place of the https://hcservices.ecourts.gov.in/hcservices/ departmental proceedings. There is nothing in the rules orthe general law which would support this contention. It isfor the Government to decide what action should be takenagainst the Government servant for certain misconduct. Sucha discretion in the Government does not mean that theprovision for the departmental enquiry on such charges ofmisconduct is in violation of the provisions of Article 14.The service rules apply equally to all the members of theservice i.e., to all persons similarly placed and are not,therefore, discriminatory. The Government has thediscretion in every case, considering the nature of thealleged misconduct and other circumstances, whether acriminal prosecution should be launched or not. TheGovernment is also free to conduct departmental proceedingsafter the close of the criminal proceedings, if instituted.There is, therefore, nothing illegal in the Governmentinstituting the departmental proceedings against theappellant."The majority opinion in the words of Ayyangar, J. clearly held thatthe impugned orders are vitiated by mala fides, but that theappellant had failed to make the other point about the orders beingcontrary to the service rules. And, the Full Court actually held inparagraph 5 that the Service Rules based the power to pass theimpugned orders on the Government. The order therein was that theappellant was a Civil Surgeon in the employment of the StateGovernment, who was granted leave preparatory to retirement, wasrecalled to duty by revoking the leave. Simultaneously, he wasplaced under suspension and departmental enquiry was also initiatedagainst him. To repeat, these orders were quashed not because theGovernment had no power, but because the orders were vitiated by malafides. Therefore, strictly speaking, this decision does not help thefirst respondent. 20. In 1987 Writ L.R. 91 (supra), a learned single Judge of thisCourt held that mere contemplation of starting of disciplinaryproceedings in future before the employee attains the age ofsuperannuation is not permissible. In the case on hand, we find fromthe files that a charge memo was in fact issued to the firstrespondent 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 providedthat the drawing up of a charge sheet was the condition precedent forinitiation of a disciplinary proceeding. So on facts, it was foundthat in the absence of a statutory rule, resorting to a preliminaryenquiry by itself will not amount to initiation of disciplinaryproceedings. In this case, a charge memo had been issued and a replyhad also been given.22. In 1997 Writ L.R. 120 (supra), a Division Bench of this Court https://hcservices.ecourts.gov.in/hcservices/ held that when disciplinary proceedings are initiated against aperson, the Government, to retain him in service on his attaining theage of superannuation, will have to issue a positive order givingreasons as on what ground he is retained in service. In paragraph 7of 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 publicservant or a government servant in service after his attaining theage of superannuation, a positive order in writing will have to bepassed by the Government giving the reasons as on what grounds he isbeing retained in service, while Rule 56(c) says that he should beretained in service until the enquiry into the charge is conducted.Therefore, the Division Bench held that for retaining the employee inservice for continuing the departmental proceedings, a positive orderin writing is required to be passed. We are not sure if that is thecorrect interpretation. We are of the opinion that when Rule 56(a)speaks of retaining a government servant in service after he attainsthe age of superannuation, it is obvious that the retention is not ondisciplinary 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. Rule56(c) uses the words "should be retained in service". If the wordsare "should be retained in service", the question of requiring thesanction of the Government will not arise. So, if we have toharmoniously read Rules 56(a) and (c) together, it would appear thatwhile normally retention of a government servant in service beyond 58years can only be with the sanction of the Government in writing, onpublic grounds, the government servant who is under suspension on acharge of misconduct shall not be permitted to retire, but should beretained in service until the enquiry is conducted. But in the caseon hand, it is not necessary for us to decide this issue, since thefirst respondent is not a government servant and the reasons why wepermit the continuance of the departmental proceedings initiatedagainst him have already been given.23. The words "who is or was" as found in Section 87 of the Acthave also been considered by the Supreme Court in Joint Registrar ofCo-operative Societies vs. P.S. Rajagopal Naidu, (1970) 1 S.C.C. 753and State of Maharashtra vs. Budhikota Subbarao, (1993) 3 S.C.C. 339.24. In Ahmed Ali vs. The Managing Director, Tamil Nadu WaterSupply and Drainage Board, 1992 Writ L.R. 619, the delinquent officerwas placed under suspension one day prior to the date of hisretirement and it was challenged on the ground that the respondenthas no such power and also that the Managing Director of the TWADBoard was not competent to pass the order of suspension. The learnedsingle Judge held that the power to decline permission to an employeeto retire from service on his attaining the age of superannuation isvalid inasmuch as such a power to refuse permission to retire fromservice has been considered be a concomitant of the power to place https://hcservices.ecourts.gov.in/hcservices/ the employee under suspension. For this purpose, the learned singleJudge 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. Thelearned single Judge also held that under Regulation 10 of theRegulations, the Managing Director was competent to place thepetitioner therein under suspension. On appeal by the delinquentofficer, the Division Bench held that there was no infirmity in theorder of the learned single Judge.25. In 2002 (II) L.L.J. 983 (supra), a Division Bench of theAndhra Pradesh High Court dealt with a question that is somewhatsimilar to the present case. There too, the delinquent officer was amanager of a co-operative bank and the charges show that his lapseswere of serious nature and related to misappropriation of the bank'sfunds. But the differences between that case and the case on handare many and crucial. In that case, the employee was permitted toretire without prejudice to the disciplinary action and though heretired, he was not given 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 stepsshould not be taken for recovery of the amounts due to the bank.Then the delinquent officer filed a writ petition to quash the saidmemorandum. A Division Bench of the Andhra Pradesh High Court,relying on Bhagirathi Jena (supra), held that the retirement benefitscannot be withheld. In the present case, however, the firstrespondent was not permitted to retire. He was instead suspendedfrom service on the eve of his retirement. In fact, in the abovecase, the Andhra Pradesh High Court observed that if disciplinaryaction 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 thatin view of the authoritative pronouncements of the Apex Court, theright of the employer to continue the disciplinary proceedings afterthe employee had been allowed to retire was not permissible. TheDivision Bench observed, "The only course open to the authorities isnot to allow the petitioner to retire on superannuation". In thecase on hand, no order permitting the first respondent to retire hasbeen passed. The Division Bench also observed that proceedings canbe initiated against a retired employee for the purpose ofwithholding the whole or part of his pension amount, provided thereexists any provision therefor. The Division Bench also cruciallyobserved that if a case is made out, it is always permissible for theBank to "initiate surcharge proceedings against the first respondenttherein, viz. the delinquent employee". But however, they observedthat though that cannot by itself be a reason for the Bank towithhold the dues payable to the employee under provident fund,gratuity, leave salary etc. 26. In (2007) 9 S.C.C. 15 (supra), disciplinary proceedings formajor penalty were initiated against the appellant therein, who wasan employee of the Bank, while he was still in service. He retired https://hcservices.ecourts.gov.in/hcservices/ on superannuation on 31.1.1997, but the disciplinary proceedingscontinued after his superannuation. On 13.11.1997, he was dismissedfrom service and in the dismissal order, it was stated that theterminal dues would be settled. The issues involved there were,whether it was permissible to dismiss an employee who already stoodretired on superannuation and the related question was, whether theHigh Court can interfere with the penalty imposed by the departmentalauthorities. The Supreme Court held that the question whether thedepartmental proceedings can continue after the officer reaches theage of superannuation will depend on the applicability of the extantrules. The Supreme Court also observed that it may be true thatdismissal of such an officer may not "ordinarily arise" (emphasissupplied). But they held, "In our opinion (emphasis supplied), itwould not be correct to contend that imposition of such a punishmentwould be wholly impermissible in law". Therefore, it is clear thatthe Supreme Court had not held outright that it is impermissible; onthe contrary, they have said that it may be permissible in somecircumstances, and the Supreme Court in that case, held that it waspermissible for the Bank to continue with the departmentalproceedings and further, while dealing with the observation of thedisciplinary authority who imposed the punishment that the terminaldues of the appellant were to be settled, the Supreme Courtcategorically held that it was merely an observation and no positivedirection was being issued and therefore, no legal right was createdin favour of the appellant to obtain his terminal benefits. TheSupreme Court held that the observation that the terminal dues of theappellant were to be settled will only mean that law would take itsown course. The Supreme Court in fact dismissed the appeal preferredby the employee and allowed the appeal filed by the Bank. TheSupreme Court also held that even where no pecuniary loss was causedto the Bank, a major punishment can be inflicted – and in that case,the facts were that the employee had in fact caused financial loss tothe 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 topay pension and provident fund to the employees who had retired fromservice of the bank. They were denied to them by the bank on theground that there were some lapses on their part while they were inservice. The rules governing the employees provided that theretirement of all officers of the bank shall be subject to thesanction of the Executive Committee of the Central Board and theretirement of all other employees shall be subject to the sanction ofthe Executive Committee of the Local Board and that an employee wholeaves the service without sanction will forfeit all claims upon thefund for pension. Relying on these rules, the State Bank of Indiaclaimed that the right to pension had been forfeited since nosanction was accorded. The Supreme Court held that the "rule cannotbe interpreted to mean that claim to pension ... can be defeated bythe bank by merely withholding sanction of retirement". The Supreme https://hcservices.ecourts.gov.in/hcservices/ Court further held that Rule 11 of the Rules therein will have noapplication in cases of retirement on attaining the age ofsuperannuation and the proceeding in the garb of disciplinaryproceedings cannot be permitted since the service rules do notprovide for continuation of disciplinary proceedings after the dateof superannuation. Further, Rule 20 of the Provident Fund Rulesapplicable to the bank provided that if a member resigning orretiring is under a liability incurred by him to the bank, then thetrustees ... 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 thisrule will apply only if the employee retiring from the service of thebank is under a liability incurred by him to the bank, and theSupreme Court also observed that, "in any case, the bank should atleast prima facie establish that any liability has been incurred bythe employee for which it will lay claim to the provident fund of theemployee. But in the present case, there is indisputably a primafacie finding regarding the misappropriation or misuse of the fundsby the first respondent since the Directorate of Vigilance and AntiCorruption has given a preliminary finding against him. This letterhad been received even before 27.6.2003 and there are strongindications to show that we can prima facie accept that there isbasis for the charges levelled against the first respondent. Ofcourse, the rules applicable in the above case are different. 28. In T.K.K. Tharmar vs. Registrar, Central AdministrativeTribunal, Chennai Bench & Others, (2008) 3 M.L.J. 877, the petitionerwas working as an Income Tax Officer and grave charges were levelledagainst him. It was contended on behalf of the petitioner that sincethe petitioner was allowed to retire, no further proceedings can beinitiated against him and the superannuation will terminate allfurther proceedings. Paragraph 19 of the said judgment reads asfollows :-"19. Therefore, even if all the judgments in Union ofIndia vs. K.K. Dhawan, (1993) 2 S.C.C. 56, ZunjarraoBhikaji 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. HighCourt of Allahabad and Another, (2007) 4 M.L.J. 1055 (SC)and Inspector Prem Chand vs. Government of NCT of Delhi andOthers, (2007) 4 S.C.C. 566 are read together, it isnecessary that before initiating disciplinary action, theDepartment must have prima facie material to showrecklessness and the officer had acted negligently or hisorder unduly favoured a party and his action was actuatedby corrupt motive."This condition is fully satisfied in the present case, viz., therewas prima facie material which showed that the first respondent hadunduly favoured Suvidha Computers and it was actuated by corruptmotive. The Division Bench had dealt with Bhagirathi Jena's case inparagraph 24 as follows :- https://hcservices.ecourts.gov.in/hcservices/ "24. But on a careful reading of the judgment of theSupreme Court in Bhagirathi Jena vs. B.D.O.S.F. Corporation(supra), it can be seen that the said case proceeded on thebasis that in the absence of any specific provision in therelevant rule, the authority will have no legal power toreduce the retiral benefit or conduct of a disciplinaryproceeding."We have also dealt with the said decision earlier. The DivisionBench has also relied on the U.P. State Sugar Corporation Ltd. case,as we have done too and has concluded that the petitioner mustparticipate in the enquiry and establish his innocence. We are incomplete 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 gravenature. Not only was he guilty of negligence in duty, but the Statehad suffered losses on account of his action. The Supreme Courtrefused to interfere with the finding of fact that he had committedgrave misconduct or the order passed withholding the pension. Thatwas a case of a government servant. Though the first respondent inthis case is not a government servant, we are referring to thisdecision just to show that where there is financial loss, recovery ofthe same is lawful. Further, in the present case, the statutorypower provided under Section 87 of the Act has already been referredto. 30. In State of U.P. vs. R.C. Misra, (2007) 9 S.C.C. 698, theSupreme Court interpreted the word "institute". There, thedelinquent was working as a Block Development Officer. He was placedunder suspension by order dated 20.10.1997. He attained the age ofsuperannuation on 31.10.1997 and retired from service. The EnquiryOfficer submitted a report on 16.11.1999 holding that all the twelvecharges framed against him were proved. An order was passed on25.1.2001 directing recovery of a sum of Rs.9,69,141.60 from hispension. The Supreme Court held as follows :-"10. A combined reading of the proviso and theExplanation would show that there is no fetter orlimitation of any kind for instituting departmentalproceedings against an officer if he has not attained theage of superannuation and has not retired from service. Ifan officer is either placed under suspension or charges areissued to him prior to his attaining the age ofsuperannuation, the departmental proceedings so institutedcan validly continue even after he has attained the age ofsuperannuation and has retired and the limitations imposedby sub-clause (i) or sub-clause (ii) of Clause (a) ofproviso to Regulation 351-A will not apply. It is onlywhere an officer is not placed under suspension orcharges are not issued to him while he is in service and https://hcservices.ecourts.gov.in/hcservices/ departmental proceedings are instituted against him underRegulation 351-A after he has attained the age ofsuperannuation and has retired from service and is notunder 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”. Thedictionary meaning of the word “institute” is: set up;cause to come into existence; to originate and getestablished; to commence. It obviously refers to theinitial action or the commencement of the action. It isentirely different from continuance of an action alreadyinitiated. If the intention of the rule-making authorityhad been that an enquiry instituted against an officerwhile 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 theproviso, there is absolutely no warrant for holding that anenquiry validly instituted against an officer while he wasin service would, after retirement of the officer, requiresanction of the Governor for its continuance andculmination."Therefore, the Supreme Court allowed the appeal filed by the State ofUttar Pradesh and remitted the matter to the Administrative Tribunalfor fresh decision, holding as follows :-"12. In the present case, the respondent had beenplaced 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. Theenquiry which had been instituted prior to the retirementof the respondent and was completed after his retirementcould not, therefore, be held to be illegal on the groundof want of sanction of the Governor. The view to thecontrary taken by the Tribunal and by the High Court is,therefore, clearly erroneous in law and cannot besustained."In this case, we have already referred to the relevant records toshow that the charge memo had been issued and the first respondenthad even replied to it and pleaded for mercy, all before his date ofsuperannuation. So, the action taken subsequent to the date of hissuperannuation is really only a continuation of what was "instituted"at the time when he was in service. Further, no orders were passedpermitting him to retire. 31. We have attempted to examine the legal position from allpossible angles, since while a person who has caused huge loss to the https://hcservices.ecourts.gov.in/hcservices/ co-operative society shall not escape, we can also not allow theappellant to continue with an action which is not permissible in law.32. We are of the opinion that (2008) 2 SCC 41 (supra), willapply fully to the present case on facts and law. In that case, theSupreme Court had held that the High Court was wrong in quashing thedisciplinary proceedings since under the Uttar Pradesh State SugarCorporation General Service Rules, proceedings could have beeninitiated even after an employee has retired for recovery of lossescaused to the Corporation by the respondent/employee. The SupremeCourt also accepted the contention of the Corporation that thejurisdiction of the High Court under Article 226 is equitable anddiscretionary and must reach out to remove injustice wherever it isfound 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 Courtspeaking through Chandrasekhara Aiyar, J. observed (AIRpp.195-96, para 20) that the writs referred to in Article226 of the Constitution,“are obviously intended to enable the High Courtto issue them in grave cases where the subordinatetribunals or bodies or officers act wholly withoutjurisdiction, or in excess of it, or in violation of theprinciples of natural justice, or refuse to exercise ajurisdiction vested in them, or there is an errorapparent on the face of the record, and such act,omission, error, or excess has resulted in manifestinjustice”.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 Article226 of the Constitution, Bose, J. stated: (AIR p.429, para14):“14. That, however, is not to say that thejurisdiction will be exercised whenever there is an errorof law. The High Courts do not, and should not, act ascourts of appeal under Article 226. Their powers arepurely discretionary and though no limits can be placedupon that discretion it must be exercised alongrecognised lines and not arbitrarily; and one of thelimitations imposed by the courts on themselves is thatthey will not exercise jurisdiction in this class of caseunless substantial injustice has ensued, or is likely toensue. They will not allow themselves to be turned intocourts of appeal or revision to set right mere errors oflaw which do not occasion injustice in a broad andgeneral sense, for, though no legislature can imposelimitations on these constitutional powers it is a sound https://hcservices.ecourts.gov.in/hcservices/ exercise of discretion to bear in mind the policy of thelegislature to have disputes about these special rightsdecided as speedily as may be. Therefore, writ petitionsshould 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 haddirected release of all benefits to an employee against whom penalrent was charged for unauthorised retention of officialaccommodation. The Supreme Court held that the High Court was whollyunjustified in exercising equitable jurisdiction in favour of thatemployee who was in error.33. From the records produced in this case, the following factsare obvious :-(a) The activities of the first respondent had caused a greatdeal of consternation among the authorities and they wereforced to transfer him from the place where, according tothem, he was causing a lot of damage.(b) The disciplinary proceedings had been actually initiatedbefore his age of superannuation, since the first chargememo is dated 6.6.2003, whereas his age of superannuationis 31.6.2003.(c) He had also given a reply to the charge memo dated6.6.2003, but had not chosen to reveal the fact of theissuance of this earlier charge memo in his writaffidavit.(d) No orders had been passed permitting him to retire; on thecontrary, he was suspended on the eve of his attaining theage of superannuation.(e) The Supreme Court has held that even if a person hadretired, if it is proved that he had caused loss to theestablishment, then proceedings can be initiated torecover 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 notbe 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 toproceed against even a past employee for recovery andrestoration 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 suchorders in accordance with law and the provisions of the Act,including the action contemplated under Section 87 of the Act. It isdesirable that the proceedings are concluded within three months fromthe date of the receipt of a copy of this judgment. In the facts and https://hcservices.ecourts.gov.in/hcservices/ 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.1and 2 in W.A. No.257 of 2008 are closed. abSd/Asst.Registrar/true copy/Sub Asst.Registrar ToThe Special Officer,Villupuram District Central Co-operative Bank,No.2, Hospital Road, Villupuram. Pre-delivery Judgment in W.As.256 and 257 of 2008PUR (CO) SS (29.10.209)