IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE T.R.RAMACHANDRAN NAIR WEDNESDAY, THE 19TH MARCH 2008 / 29TH PHALGUNA 1929 OP.No. 24897 of 1998(L) --------------------------------- PETITIONER: ------------------- 1. G.RAMAMOHANAN NAIR, RETD., GENERAL MANAGER (RM), KERALASMALL INDUSTRIES DEVELOPMENT CORPORATION LTD., THIRUVANANTHAPURAM. BY ADV. SRI.P.SANTHALINGAM SMT.S.SINDHU RESPONDENTS: ---------------------- 1. KERALA SMALL INDUSTRIES DEVELOPMENT CORPN., LTD., SANTHI NAGAR, TRIVANDRUM, REP. BY MANAGING DIRECTOR. 2. CHAIRMAN, KERALA SMALL INDUSTRIES DEVELOPMENT CORPN. LTD., DO.DO. 3. STATE OF KERALA REP.BY SECRETARY TO GOVERNMENT, INDUSTRIES DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM. BY ADV. SRI.K.C.PETER, SC, SIDCO SRI.VAKKOM N.VIJAYAN SRI.M.A.MANHU, SC, SIDCO THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 07/03/2008, THE COURT ON 19/03/2008 DELIVERED THE FOLLOWING: OP. NO.24987/1998 ORDER ON CMP. NO.43779/1998, 56515/2001, 19645/2000 IN OP. 24897/1998 DISMISSED 19.03.2008 SD/- T.R.RAMACHANDRAN NAIR, JUDGE APPENDIX PETITIONERS EXHIBITS EXT.P1:- COPY OF THE MEMO OF CHARGES IN REF. NO.VIG/19984/94 DT. 18.11.94 AND STATEMENT OF ALLEGATIONS ISSUED BY IST RESPONDENT TO THE PETITIONER. EXT.P2:- COPY OF THE LETTER AND EXPLANATION DT. 13.12.94 AND COVERING LETTER NO.RMD(2) /ESTT/3542/86 DT. 7.3.90 SUBMITTED BY THE PETITIONER TO THE MANAGING DIRECTOR (IST RESPONDENT). EXT.P3:- COPY OF THE MINUTES NO.RMD/(12) / SALES/B.C./87-88 DT. 23.2.1988 SIGNED BY THE GENERAL MANAGER, R.M.DIVISION, COCHIN. EXT.P4:- COPY OF THE PROCEEDINGS NO.VIG/019984/94 DT. 1.2.95 ISSUED BY THE IST RESPONDENT. EXT.P5:- COPY OF THE PROCEEDINGS NO.VIG/019985 DT. 14.7.95 ISSUED BY THE IST RESPONDENT. EXT.P6:- COPY OF THE ENQUIRY REPORT DT. 31.8.95 SIGNED BY ENQUIRY OFFICER, K.V.MATHAI, CHIEF ACCOUNTS OFFICER. EXT.P7:- COPY OF THE SHOW CAUSE NOTICE NO.VIG/019984/94 DT. 27.10.97 ISSUED BY THE IST RESPONDENT TO THE PETITIONER. EXT.P8:- COPY OF THE EXPLANATION DT. 12.11.97 SUBMITTED BY THE PETITIONER TO THE SIT RESPONDENT. EXT.P9:- COPY OF THE ORDER NO.VIG/019984/94 DT. 27.2.98 BY THE IST RESPONDENT TO THE PETITIONER. EXT.P10:- COPY OF THE LETTER DT. 13.3.98 AND APPEAL PETITION BEFORE THE IST RESPONDENT BY THE PETITIONER. EXT.P11:- COPY OF THE ORDER NO.VIG/19984/94 DT. 16.11.98 ISSUED BY IST RESPONDENT TO THE PETITIONER. EXT.P12:- COPY OF THE NOTE TO THE PETITIONER BEFORE THE BOARD OF SIDCO DT. NIL. OP. NO.24897/1998 EXT.P13:- COPY OF THE LETTER DT. 15.3.97 ISSUED BY IST RESPONDENT TO THE COMMISSIONER & SECRETARY GOVT. OF KERALA, TRIVANDRUM. EXT.R1(a):- COPY OF THE MEMO OF CHARGES NO.VIG/019984/94 DT. 9.5.95 ISSUED BY THE IST RESPONDENT TO E.S.JANARDANAN, (MEMO OF CHARGES AND STATEMENT OF ALLEGATIONS). EXT.PR1(b):- COPY OF THE PROCEEDINGS NO.VIG/019984/94 DT. 27.2.98 OF THE IST RESPONDENT TO E.S.JANARDHANAN. EXT.R1(c):- COPY OF THE PROCEEDINGS NO.VIG/019984/94 DT. 20.3.96 OF THE IST RESPONDENT TO SHRI KUTTY HASSAN KUTTY. /TRUE COPY/ P.S. TO JUDGE tss T.R. Ramachandran Nair, J. - - - - - - - - - - - - - - - - - - - - - - - - O.P.NO.24897 of 1998-L - - - - -- - - - - - - - - - - - - - - - - - - - - Dated this the 19th day of March, 2008. JUDGMENT The petitioner has filed this original petition aggrieved by the order Ext.P11 passed against him in a disciplinary proceedings. He was working as the General Manager of the first respondent Corporation. As per Ext.P11, a sum of Rs.48,679.18 has been ordered to be withheld from the retirement benefits of the petitioner. This is described as the proportionate loss apportioned against him. It is also made clear in the order that the amount so withheld will be disbursed to the petitioner on finalisation of the revenue recovery action already initiated in the matter. The short facts leading to the action against the petitioner are the following: 2. The petitioner was appointed as General Manager in the year 1994. Ext.P1 is the memo of charges issued against him. The allegations pertained to the irregularities in the supply of Indian Petro Chemical products from SIDCO Division, Ernakulam. The petitioner submitted Ext.P2 explanation. Thereafter, by Exts.P4 and P5, a detailed enquiry was ordered and the enquiry officer submitted his report on 1.9.1995. The enquiry officer found that the petitioner is not guilty of charges 1, 2, 3 and OP 24897/1998 -2- 5. As regards charge No.4, the finding is that the petitioner has committed dereliction of duty in not reporting the matter to the head office. Ext.P6 is the enquiry report. In the report the enquiry officer finally concluded that the petitioner has been taking action in good faith to realise the amount from M/s. Palm Grove Plastics who has cheated the Corporation by producing forged bank guarantee. 3. By Ext.P7, he was issued with a show cause notice by the disciplinary authority proposing punishment of recovery of Rs.63,600.78 from the retirement benefits and reduction in pay to the minimum of the scale of pay of Rs.5100-150-5700 with effect from 1.11.1996 to 31.10.1997. He filed an explanation, Ext.P9. As per Ext.P9 order the punishment of reduction in pay and recovery was confirmed and the petitioner's liability for the loss was fixed at Rs.48,679.18. Even though Ext.P10 appeal was filed, by Ext.P11 the punishment of reduction of pay was modified and the recovery alone was ordered. In fact, the petitioner has got a case that the amount of loss sustained by the Corporation should have been recovered by initiating revenue recovery proceedings, but on five occasions the said recovery proceedings was stayed by the Government in spite of the request made by the corporation to vacate the order of stay. The petitioner has challenged the orders Exts.P9 and P11 on various grounds. OP 24897/1998 -3- 4. I heard Shri P. Santhalingam, learned counsel appearing for the petitioner and Shri M.A. Manhu, learned Standing Counsel appearing for the corporation. Learned counsel for the petitioner submitted that actually the petitioner was exonerated of the main charges and the finding on charge No.4 will not result in any punishment, as the only finding is that there was dereliction of duty in not reporting the matter to the head office. It is submitted that even accepting the finding in respect of that charge, the punishment imposed has no justification. It is also submitted that the disciplinary authority was not justified in disagreeing with the findings of the enquiry officer and the grounds for disagreement were never informed to the petitioner and he was not allowed an opportunity to persuade the disciplinary authority to accept the findings of the enquiry officer. Relying upon the decision of the Apex Court in Punjab National Bank v. S.P. Goel (1998 (2) KLT SN 39), it is contended that the relevant principles have not been adhered to by the first respondent. It is also pointed out that the revenue recovery proceedings did not proceed in the right way because of the interim orders that were being passed by the Government in favour of the defaulter, viz. Palm Grove Plastics. Apart from recovery of the principal amount, a major portion of the interest due have already been recovered and therefore there is no justification in withholding the amount from the OP 24897/1998 -4- retirement benefits of the petitioner. 5. Learned Standing Counsel for the Corporation has filed a statement wherein it is pointed out that an amount of Rs.5,55,832/- with interest at the rate of 19% i effect from 1.6.2003 is to be recovered from the legal heirs of late Shri P.K. Jacob. 6. The first question to be considered is whether the disciplinary authority has followed the well accepted principles in the matter of continuance of the disciplinary proceedings from the stage of acceptance of the enquiry report. As noticed already, this is a case where the petitioner was found not guilty of charges 1, 2, 3 and 5 which are the major charges. The disciplinary authority, prior to the issuance of the show cause notice Ext.P7, did not communicate the grounds of disagreement to the petitioner as required under law and he was not given any opportunity to object to the above and persuade the disciplinary authority to agree with the findings of the enquiry officer. The legal position as laid down by the Apex Court shows that the principles of natural justice would demand that he should be given a hearing while the authority proposes to decide against him. The dictum laid down by the Apex Court in the Punjab National Bank's case is extracted below: “It will not stand to reason that when the finding in favour of the OP 24897/1998 -5- delinquent officers is proposed to be over-turned by the disciplinary authority then no opportunity should be granted. The first stage of the inquiry is not completed till the disciplinary authority has recorded its findings. The principles of natural justice would demand that the authority which proposes to decide against the delinquent officer must give him a hearing. When, the inquiry report is in favour of the delinquent officer but the disciplinary authority proposes to differ with such conclusions then that authority which is deciding against the delinquent officer must give him an opportunity of being heard for otherwise he would be condemned unheard. In departmental proceedings what is of ultimate importance is the finding of the disciplinary authority. Principles of natural justice have to be read into Regulation 7(2). Whenever the disciplinary authority disagrees with the inquiry authority on any article of charge then before it records its own findings on such charge, it must record its tentative reasons for such disagreement and give to the delinquent officer an opportunity to represent before it records its findings. The report of the inquiry officer containing its findings will have to be conveyed and the delinquent officer will have an opportunity to persuade the disciplinary authority to accept the favourable conclusion of the inquiry officer.” 7. It is clear from the above dictum that the disciplinary authority is bound to record its tentative reasons for such disagreement and give to the delinquent officer an opportunity to represent before it records its findings. Herein, straight away the then Managing Director proceeded to reject the report. This is evident from Ext.P7. A reading of Ext.P7 shows that the then Managing Director entered his own findings without even discussing the findings of the enquiry officer. The conclusion arrived at is merely by referring to the charges and not even the evidence that was available before the enquiry officer have been discussed while rejecting the report itself. OP 24897/1998 -6- The crucial sentence to indicate the same in Ext.P7 is the following: “The enquiry report was examined in detail and the then Managing Director of the Corporation had disagreed with the findings in toto.” The grounds of disagreement have not at all been stated or recorded in Ext.P7. Previous to the issuance of Ext.P7, such grounds were not informed to the petitioner and no hearing was conducted also. As far as the punishment proposed is concerned also, apart from reiterating the conclusions of the previous Managing Director, there had not been any independent consideration by the disciplinary authority, viz. the succeeding Managing Director when he proposed the punishment as per Ext.P7. This is clear from the operative portion of the order and the crucial sentence therein is the following: “ The whole issue is examined in detail and the undersigned has also found that the delinquent officer is jointly responsible for a total loss of Rs.4,17,473.90 out of which Rs.3,05,000/- has been realised. In the circumstances, it is tentatively proposed to recover an amount of Rs.63,600.78 from his retirement benefits and reduction in pay to the minimum of the scale of pay, etc.” 8. It is, thus, clear from the proceedings that the mandatory requirements of law and the principles of natural justice which ought to have been followed, have not been adhered to by the disciplinary authority. OP 24897/1998 -7- In the order passed in appeal also, this crucial aspect was not considered. Hence, these orders are clearly unsustainable. As noticed already, the appellate authority had modified the punishment and has retained only the portion directing recovery of proportionate amount. There also, finally it has been modified with a direction that the withheld amount will be disbursed to the appellant on finalisation of the revenue recovery action already initiated in the matter. Therefore, actually the effect of Ext.P11 is only that the amount will be withheld without being disbursed and the release of the same will depend upon the finalisation of the revenue recovery action. At any rate, this state of affairs cannot be continued indefinitely without any positive action to disburse the amount to the petitioner. Further, as contended by the learned counsel for the petitioner, the interest accumulated since the revenue recovery proceedings were affected by the stay orders issued from time to time, for which the petitioner cannot be denied his retirement benefits. It is clear from the statement that the amount of Rs.5,55,832/- is sought to be recovered from the legal heirs of the defaulter. It is upto the first respondent to proceed with the revenue recovery proceedings and realise the same. It is clear from the proceedings that the only dereliction of duty that is attributed to the petitioner is not reporting of the matter to the head office. At any rate, that has never been OP 24897/1998 -8- treated as a serious offence warranting any punishment against the petitioner by the disciplinary authority also except the temporary withholding of retirement benefits. It is submitted that pursuant to the interim order passed by this court, an amount of Rs.48,679.18 has been released to him already on execution of the bond. 9. In the view I have taken already, Exts.P9 and P11 cannot stand scrutiny and therefore the same are quashed. Consequently, the orders cancelling the bond have to be passed by the first respondent. This judgment will not bar the continuance of the revenue recovery proceedings against the legal heirs of the defaulter. The original petition is allowed as above. (T.R. Ramachandran Nair, Judge.) OP 24897/1998 -9- T.R. Ramachandran Nair, J. - - - - - - - - - - - - - - - - - - - - - - O.P. No.24897 of 1998-L - - - - - - - - - - - - - - - - - - - - - - JUDGMENT 19th March, 2008.