IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE ANTONY DOMINIC TUESDAY, THE 7TH JULY 2009 / 16TH ASHADHA 1931 WP(C).No. 20627 of 2008(E) -------------------------------------- PETITIONER: ------------------- A.GOPINATHAN, AMBADI HOUSE, ELANAD, CHELAKKARA, THRISSUR. BY ADV. MR.P.RAMAKRISHNAN. RESPONDENTS: ------------------------ 1. PULAYAKODE SERVICE CO-OPERATIVE BANK LIMITED, PULAYAKODE, VIA. CHELAKKARA, THRISSUR, REPRESENTED BY ITS SECRETARY. 2. KERALA STATE CO-OPERATIVE EMPLOYEES PENSION BOARD, REPRESENTED BY ITS SECRETARY, T.C. 28/2781, RAJASREE, CHETTIKULANGARA, THIRUVANANTHAPURAM-1. R1 BY MR. P.N. MOHANAN, SC. R2 BY MR. P.V.MOHANAN, SC. THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 07/07/2009, ALONG WITH W.P.(C). NO. 29545 OF 2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P.(C). NO.20627/2008-E: APPENDIX PETITIONERS' EXHIBITS: EXT.P.1: COPY OF THE JUDGMENT DTD. 29/09/03 IN O.P. NO. 3000/01. EXT.P.2: COPY OF THE COMPROMISE PETITION FILED BEFORE THIS HONOURABLE COURT AS I.A. NO. 514/06 IN W.A. NO. 80/04. EXT.P.3: COPY OF THE JUDGMENT IN W.A. NO. 80/04. EXT.P.4: COPY OF THE LETTER DTD. 30/09/06 FROM THE R.1. TO THE R.2. EXT.P.5: COPY OF THE DEMAND NOTICE DTD. 09/06/08 ISSUED BY THE R.2. RESPONDENTS' EXHIBIT: EXT.R1.A: COPY OF THE LETTER DTD. 25/07/08 OF THE R.1. //TRUE COPY// P.A. TO JUDGE. Prv. ANTONY DOMINIC, J. ------------------------- W.P.(C.) Nos.20627 & 29545 of 2008 --------------------------------- Dated, this the 7th day of July, 2009 J U D G M E N T WP(C) No.29545/2008 is filed by the Bank and WP(C) No.20627/2008 is filed by its ex-secretary, Sri.A.Gopinathan. 2. For the sake of convenience, I shall refer the facts of the case as pleaded in WP(C) No.29545/2008. The 2nd respondent was the Secretary of the petitioner Bank. While, so, disciplinary proceedings were initiated and he was placed under suspension with effect from 05/03/1994. On conclusion of the proceedings, the Managing Committee of the Society dismissed the 2nd respondent with effect from 06/03/1995. That resolution was rescinded by the Joint Registrar and the appeal filed by the Bank before the Government was also rejected. Thereafter fresh proceedings were initiated by the Bank, and by order dated 04/01/2001, the Sub Committee of the Bank dismissed the 2nd respondent. The order dismissing the 2nd respondent was challenged before this Court in WP(C) No.3000/2001. During the pendency of the writ petition, the 2nd respondent attained the age of WP(C) Nos.20627 & 29545/2008 -2- superannuation on 31/07/2002. 3. Subsequently, by Ext.P1 judgment rendered on 29/09/2003, WP(C) No.3000/01 was allowed, and the order dismissing him from service was set aside. Paragraph 6 of the judgment being relevant for the resolution of the controversy in these writ petitions is extracted below for reference:- “6. As long as Exhibits P1 and P2 are not under challenge, the Bank is bound by that. Therefore, the further action taken against the petitioner, as per Exhibit P7 is unsustainable. Therefore, the Petitioner was liable to be reinstated in service pursuant to Exhibit P1 & P2. So, he is also entitled to all consequential benefits flowing from Exhibits P1 and P2. The same shall be granted to him, less liability if any fixed, within two months from the date of receipt of a copy of this judgment.” 4. The Bank filed Writ Appeal No.80/2004. During the pendency of the writ appeal, the petitioner and the 2nd respondent compromised the dispute between them, and Ext.P2 is the compromise petition. Clauses 2, 3 & 4 of the compromise petition, being relevant, reads as under:- “2. The appellant Bank agrees to disburse to the first respondent the arrears of pay and allowances, gratuity and provident fund after adjusting the amount due to be paid by the first respondent as per the Award in ARC 2364/1976 and P.F.Loan at the rate of 50% of the total amount being Rs.5.5 lakhs (Rupees five WP(C) Nos.20627 & 29545/2008 -3- lakhs and fifty thousand only). 3. The parties hereby agree to withdraw the appeals filed before the Co-operative Tribunal from the Award in ARC 2364 of 1976. 4. The appellant will take steps to enrol the first respondent in the Kerala Co-operative Self Financing Pension Scheme and hereby agrees to remit interest on the employers contribution. The first respondent will have to remit back the portion of the employer's contribution as per the demand issued by the Pension Board.” 5. The compromise petition was produced before this Court along with I.A.No.514/2006 in W.A.No.80/2004, and recording the compromise, the writ appeal was disposed of as per Ext.P3 judgment. Subsequent to all the above, the Bank applied to the 1st respondent for allotment of code number in order to give coverage of the Pension Scheme, 1994 to the 2nd respondent. It is stated that in September, 2006, the Employer's contribution, along with interest accrued thereon, was remitted by the Bank to the 1st respondent. But, however, the same was returned by the 1st respondent under cover of Ext.P13 dated 07/04/2009. 6. Thereafter the 1st respondent issued Ext.P5 demand notice calling upon the Bank to remit an amount of Rs.6,26,112/-, enclosing a proforma for calculation of pension fund. On receipt of Ext.P5, WP(C) Nos.20627 & 29545/2008 -4- realising that penal interest under Clause 39 has also been demanded, this writ petition was filed contending that the petitioner cannot be made liable for the interest. 7. Prior to the filing of this writ petition, the 2nd respondent (Shri.Gopinathan) in the writ petition filed by the Bank, filed WP(C) No.20627/2008. The prayer made by him is that the Pension Board should sanction and disburse the pension along with arrears, recovering the amount demanded in Ext.P5 mentioned above from the Bank. In WP(C) No.20627/2008 filed by Shri.Gopinathan, this Court passed order dated 14/07/2008 directing the 2nd respondent, the Pension Board, to enforce and recover the amount mentioned in Ext.P5 demand notice. That was followed by order dated 21/08/2008 recording that recovery proceedings in terms of the Revenue Recovery Act has been initiated for recovering the amount and show cause was issued to the Bank as to why they shall not be superseded under Section 32 for non-compliance with the demand notice. Again order dated 04/09/2008 was passed directing that the recovery proceedings will be withheld if the petitioner Bank deposits an amount of Rs.6 lakhs provisionally with the Pension Board subject to further orders. This was followed by order dated 21/01/2009, where WP(C) Nos.20627 & 29545/2008 -5- the amount, deposited by the Bank and kept in the suspense account of the Pension Board, was directed to be given credit in the Pension Fund account of the employer and to give benefit on that basis. It was made clear that any such appropriation will be subject to the result of the writ petition. 8. Thus in WP(C) No.29545/2008, the writ petition filed by the Bank, they are disputing the liability to pay interest as demanded in Ext.P5, and the fate of WP(C) No.20627/2008 filed by the Ex- Secretary will necessarily depend upon the out come of the writ petition filed by the Bank. 9. The contention raised by the learned counsel for the Bank is that the liability of the Bank is governed by the provisions of Kerala Co-operative Societies Employees Self Financing Pension Scheme, 1994. According to him, the Scheme was notified on 14/03/1995 with effect from 03/06/1993. Clause 39 of the Scheme provides for transfer of accumulation from the Contributory Provident Fund. Clause 39(1A) also provides that if any society fails to transfer the employers contribution with the accrued interest within a period of one year from 14/03/1995 or has only transferred a part of the amount, the Society shall be liable to transfer the amount with WP(C) Nos.20627 & 29545/2008 -6- interest at the rate of 24% per annum. It is contended that as on 1995, when the Scheme was introduced, the 2nd respondent was a dismissed employee, and therefore, the Bank could not have remitted employer's contribution with interest accrued thereon. It is stated that the dismissal was set aside only after Ext.P3 judgment was rendered by the Division Bench of this Court on 29/03/2006, and that the contribution and the accrued interest were transferred by Ext.P13 in September, 2006. It is stated that going by the terms of Clause 39 (1A) of the Pension Scheme referred to above, unless there is a willful failure or default on the part of the Society in transferring the contribution with accrued interest, the Society cannot be made liable to pay the penal interest. It is stated that in the facts of this case, there was no fault on the part of the Bank to make it liable for penal interest. On that basis, the learned counsel for the petitioner Bank contends that it is not liable to pay interest as demanded in Ext.P5. 10. On behalf of the Pension Board, it is stated that the calculation as indicated in Ext.P5 demand notice is as per the regular pattern of calculation of the dues followed by the Pension Board and that such calculation of liability is not under challenge. It is stated that the Scheme is a self generating one, and the employers are WP(C) Nos.20627 & 29545/2008 -7- required to make monthly contribution, and that if timely remittance is not made, sufficient funds will not be generated, and if sufficient funds are not generated, the Pension Board will not be in a position to pay pensionary benefits to the employees at the rate as specified in the Scheme. In this case, it is pointed out that although, the 2nd respondent is entitled to have coverage with effect from July, 1973, the contribution was remitted only in 2006. It is stated that if remittance was made in time, interest would have accrued and that this loss has to be made good by the employer and therefore, Ext.P5 is perfectly in order. 11. The contention raised by the 2nd respondent in WP(C) No.29545/2008, the Ex-Secretary, is that by Ext.P2 compromise, they had arrived at a settlement, and that as per Exts.P1 and P3 judgments rendered by this Court, he is deemed to have continued in service till his superannuation on 31/07/2002. It is stated that he is entitled to be paid pension treating him to have continued under employment without any break. It is also stated that in Ext.P2 compromise, the Bank had undertaken to discharge the liability of interest, with the full knowledge that it will be liable for payment of interest under the Pension Scheme also. It is stated that in such circumstances, the Bank WP(C) Nos.20627 & 29545/2008 -8- cannot wriggle out of its liability to pay interest taking refuge under Clause 39(1A) of the Pension Scheme, 1994. 12. I have considered the submissions made. 13. Admittedly, the pensioner is eligible to get coverage under the Pension Scheme from July, 1973, when the Contributory Provident Fund was introduced in the Bank. Once, the Scheme is applied to the Society, under Clause 39, the Bank had the responsibility to transfer the employer's contribution with accrued interest to the Pension fund. In this case, but for the disciplinary action, within one year of the introduction of the Pension Scheme, such amount ought to have been transferred to the fund. Only if such transfer takes place, will interest accrue on such corpus of the pension fund, and only if interest is generated on that corpus, will the authorities have necessary funds to discharge the pension liability at the rate as fixed in the Pension Scheme. It is anticipating such remittance, accrual of interest and availability of sufficient corpus, that the Scheme is framed with a fixed amount of pension to be paid to retired employees. 14. In this case, the transfer was made only in 2006, although the employee got coverage from 1973. The justification offered by the Bank is that in 1995, the employee was under dismissal and that WP(C) Nos.20627 & 29545/2008 -9- the same was set aside only in 2006. Therefore, according to the Bank, there was no default on its side to make it liable for interest. In my view, this explanation of the Bank is not acceptable. This is for the reason that, first of all, the termination was set aside by Ext.P1 judgment of the learned Single Judge, and in the judgment itself, the learned Single Judge has held that the employee is entitled to all consequential benefits flowing from the earlier order rescinding the resolution and the Government Order confirming the order passed by the Joint Registrar. The judgment of the learned Single Judge has been upheld by the Division Bench. As a consequence of this judgment, the fact of termination gets erased and the employee is deemed to have continued in service, without any break in service and is entitled to all benefits on that basis. If that be so, he should get all benefits that are available for the continued and unbroken service under the Bank. This will certainly include the pensionary benefits as well. 15. As contended by the learned counsel for the petitioner Bank it may be that there was no willful failure or default on its part in remitting the dues. In my view, as a consequence of Ext.P1 judgment and Ext.P2 compromise, where the Bank has also undertaken to WP(C) Nos.20627 & 29545/2008 -10- discharge the liability for interest, irrespective of whether non remittance was willful or not, the Bank is liable to pay the interest as well. The contention of the learned counsel that the interest mentioned in Clause 4 of Ext.P2 is interest for subsequent period or the accrued interest is also not acceptable, and any interest which fell due under the Scheme has to be covered by Clause 4 of Ext.P2. 16. If I am to take a different view accepting the contention of the learned counsel for the Bank that will necessarily affect the availability of fund with the Pension Board, while at the same time, the Pension Board will have the liability to pay pension at the rate prescribed under 1994 Scheme. This will certainly affect the viability of the fund itself, and therefore, I am not persuaded to accept the contention raised by the Bank. Necessarily therefore, WP(C) No.29545/2008, filed by the Bank, will stand dismissed. It is declared that the Bank has the liability to pay the amount due under Ext.P5. 17. Needless to say that it will be open to the Bank to apply to the Pension Board for the benefit of One Time Settlement Scheme, whereunder, the liability for interest has been reduced from 24% to 12%, and if such an application is made, the Pension Board shall consider the application and pass orders thereon. WP(C) Nos.20627 & 29545/2008 -11- 18. The learned counsel for the petitioner Bank referred to me Ext.P14 communication dated 11/06/2009, and complained that the benefit of reduction of interest to 12% has been offered to the Bank only for the period subsequent to 01/02/2009. A reading of Clause 2 of Ext.P11, the One Time Settlement Scheme dated 05/02/1999 makes it clear that the benefit of reduction of interest to 12% is admissible for the whole dues. In the light of this, if an application for the benefit of OTS is made by the Bank, the Pension Board shall consider the same, rework the liability, appropriate the remittance already made, and excess, if any, shall be refunded. 19. WP(C) No.20627/2008 filed by Shri.A.Gopinathan, Ex- Secretary, is disposed of directing that the Pension Board shall release the pensionary benefits due to the petitioner. This shall be done as expeditiously as possible. These writ petitions are disposed of as above. (ANTONY DOMINIC, JUDGE) jg