IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE S.SIRI JAGAN THURSDAY, THE 20TH NOVEMBER 2008 / 29TH KARTHIKA 1930 OP.No. 38489 of 2002(F) ----------------------- PETITIONER(S): --------------- K.C.SEBASTIAN, DEPUTY MANAGER, PARENTERAL SECTION, KERALA STATE DRUGS AND PHARMACEUTICALS LTD., KALAVOOR P.O., ALAPPUZHA. BY ADV. SRI.S.P.ARAVINDAKSHAN PILLAY SMT.N.SANTHA SRI.V.VARGHESE RESPONDENT(S): --------------- 1. KERALA STATE DRUGS AND PHARMACEUTICALS LTD., KALAVOOR P.O., ALAPPUZHA, REPRESENTED BY ITS MANAGING DIRECTOR. 2. CHAIRMAN, KERALA STATE DRUGS AND PHARMACEUTICALS LTD., KALAVOOR P.O., ALAPPUZHA. ADV. SRI.P.R.RAMACHANDRA MENON,SC,KSDP LTD. FOR R1 THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 20/11/2008, ALONG WITH OP NO. 38609 OF 2002 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: OP.No. 38489 of 2002 ORDERS ON C.M.P.NO.64989 OF 2002 AND I.A.NO.1729 OF 2005 IN O.P.NO.38489 OF 2002 CLOSED 20.11.2008 SD/- S. SIRI JAGAN, JUDGE. APPENDIX EXT.P1: COPY OF THE JUDGMENT IN O.P.NO.6609/99-J DATED 24.3.1999 OF THIS HON'BLE COURT. EXT.P2: COPY OF THE ORDER NO.KSDP/MD/F. 100/99 DATED 7.6.1999 OF THE FIRST RESPONDENT. EXT.P3: COPY OF THE CHARGE SHEET NO.KSDP/MD/F. 100/99 DATED 21.4.99 OF THE FIRST RESPONDENT. EXT.P4: COPY OF THE NOTICE NO.KSDP/MD/F. 197/2002 DATED 20.8.2002 OF THE R1. EXT.P5: COPY OF THE MEMORANDUM OF APPEAL FILED BY THE PETITIONER BEFORE R2 DATED 2.9.2002. EXT.P6: COPY OF THE LETTER NO.KSDP/MD/F. 194/2002 DATED 5.12.2002 OF THE R1. TRUE COPY PA TO JUDGE. S. SIRI JAGAN, J. ------------------------------------ O.P.Nos.38489 & 38609 OF 2002 ---------------------------------------- Dated this the 20th day of November, 2008 JUDGMENT These two original petitions raise the same issue as to whether the petitioners are liable to make good alleged loss caused to the 1st respondent Company allegedly on account of certain misconducts stated to have been committed by them, on the sole basis of a vigilance enquriy report. The short facts necessary for disposal of these original petitions are as follows: 2. Two companies supplied certain quantity of Tincture Ipecac to the 1st respondent Company, which was later found to be adulterated and not fit for manufacturing expectorant for which the same was procured. Therefore, expectorant prepared with the same had to be destroyed with consequential loss to the Company. The Vigilance and Anti Corruption Bureau registered a case on the basis that it is because of irregularity in placing orders by the petitioners and others that the loss happened, and conducted an investigation. Ultimately, they came to the conclusion that the evidence available with them was not O.P.NO.38489/02 &N Con.case 2 sufficient to initiate a successful prosecution. Therefore, by Ext.P4 in both the original petitions, the Vigilance and Anti Corruption Bureau recommended initiation of action for the time being to recover an amount of Rs.2,98,468.50/- from the petitioners and others towards loss caused to the Company on account of their misconduct. Since certain civil suits were pending for recovery, a further recommendation was also made to initiate further action for recovery depending upon the outcome of the pending civil suit at a later date. In accordance with the same, by a demand dated 20.8.2002, which is part of Ext.P4 the petitioners have been directed to pay large amounts allegedly towards their share of the loss caused to the Company on account of their misconduct. Appeals were filed by the petitioners which resulted in Ext.P6 order in both the original petitions confirming the demand, but permitting the petitioners to pay the amount in 89 equal monthly instalments. The petitioners are challenging that part of Ext.P4 demanding alleged loss and Ext.P6 order in an appeal O.P.NO.38489/02 &N Con.case 3 passed by the Managing Director in these original petitions. 2. The contention of the petitioners is that in so far as the report of the Vigilance and Anti Corruption Bureau is not after notice and opportunity of being heard to the petitioners solely based on the report, without a further opportunity to the petitioners to show cause as to why the amounts should not be recovered, the petitioners cannot be made liable to pay the same, in so far as such action would be amount to violation of principles of natural justice. The petitioners further submit that as far as the petitioner in O.P.No.38489/2002 is concerned, a disciplinary action was initiated by issuing Ext.P3 memo of charges, in which one of the charges was relating to the same issue. The said proceedings were abandoned after some time, without the same having culminated in a final order. In respect of the petitioner in O.P.No.38609/2002, although the enquiry culminated in an enquiry report and a show cause notice in which there was no finding regarding loss caused on account of the alleged misconduct of the petitioner, O.P.NO.38489/02 &N Con.case 4 the same was also abandoned thereafter. As such according to them, there is no finding regarding the fixation of responsibility for the loss or the quantum with an opportunity to the petitioners to defend themselves and therefore, the demand itself is illegal. They have opted for voluntary retirement which has been accepted and they have left the service of the 1st respondent also. However, the alleged loss proposed to be recovered from them has been withheld from the terminal benefits due to them. It is submitted that they accepted the balance under protest subject to the result of these original petitions. 3. I have heard the learned counsel appearing for the Company also. The 1st respondent heavily relies on the report of the Vigilance and Anti Corruption Bureau. According to them, in so far as that report specifically assessed the damages caused to the Company on account of the conduct of the petitioners, the same is sufficient for recovery of the loss from the petitioners. It is also pointed out by the learned O.P.NO.38489/02 &N Con.case 5 counsel for the 1st respondent that the 1st respondent has been declared as a relief undertaking and therefore even if these original petitions are allowed, the Company cannot be directed to pay the amounts, which have been withheld. 4. I have considered the rival contentions in detail. 5. Admittedly, the demand from the petitioners are based solely on the report of the Vigilance and Anti Corruption Bureau. The 1st respondent has not been able to satisfy me that, that report was prepared by the Vigilance and Anti Corruption Bureau with an opportunity to the petitioners to disprove the allegations against them regarding the loss. The quantification was also not with notice to them. As such, the demand without an enquiry, in which the petitioners could participate, is violative of principles of natural justice. In fact in the report of the Vigilance and Anti Corruption Bureau what has been directed is to initiate action for recovery of the loss. That action would definitely include a notice to the petitioners and an opportunity to show cause why the amounts should not O.P.NO.38489/02 &N Con.case 6 be recovered from them. Admittedly, such course of action had not been adopted by the 1st respondent before issuing the demand. That being so, I am satisfied that the demands raised against the petitioners are violative principles of natural justice and on the basis of that demand, no amounts can be recovered from the petitioners. Accordingly, the impugned orders are quashed with consequential reliefs and it is declared that in the absence of an enquiry with notice, and opportunity to defend themselves, to the petitioners, no amount could have been recovered from them with consequential reliefs to the petitioners. The original petitions are allowed as above. S. SIRI JAGAN, JUDGE Acd O.P.NO.38489/02 &N Con.case 7