State Sugar Corporation Ltd. & Ors. Vs. Kamal Swaroop Tondon  Insc 59
(18 January 2008)
Thakker & P. Sathasivam
out of SLP (c) Nos. 11599 of 2006) C.K. Thakker, J.
present appeal is filed against the judgment and order passed by the High Court
of Judicature at Allahabad (Lucknow Bench) on February 24, 2006 in Writ
Petition No. 484 (S/B) of 2000.
Necessary facts giving rise to the appeal are that the respondent herein was
serving with the appellant- U.P. State Sugar Corporation Ltd.
(Corporation for short) as Resident Engineer at the Head Office of
the Corporation at Lucknow. On January 13, 2000, a show cause notice was issued to him stating therein that
a work was allotted to M/s Gupta & Co., Dehradoon for construction of
residential houses in Saharanpur. The Contractor had given two Fixed
Deposit Receipts (FDRs) towards the security for the work to be done. The
details of FDRs were given in the notice. It was alleged that the Corporation
suffered loss of Rupees one lakh due to lack of precaution, irregularity, gross
negligence and carelessness by the respondent.
respondent was, therefore, called upon to submit explanation within three days
why disciplinary action should not be taken against him. On January 15, 2000, the respondent submitted his reply
denying the allegations and contending that he had not committed any illegality
and there was no justification to ask for his explanation. The Corporation was
not satisfied with the reply filed by the respondent and decided to hold
departmental inquiry against him. On January 31, 2000, therefore, show cause notice was
issued to the respondent for the losses caused to the Corporation due to
negligence and carelessness on the part of the respondent.
be noted at this stage that the respondent retired on attaining the age of
superannuation (60 years) on the same day, i.e. January 31, 2000. According to the respondent, since he retired from service
on January 31, 2000, no proceedings could have been
initiated against him and issuance of show cause notice which was received by
him after office hours at 6.45 p.m. on January 31, 2000 was illegal as there was no
relationship of employer and employee between the Corporation and him. He,
therefore, filed a writ petition in the High Court of Allahabad at Lucknow
Bench on April 11, 2000. In the petition a prayer was made
for quashing charge-sheet and departmental proceedings.
the pendency of the petition, however, two orders came to be passed against the
respondent on March 24,
2001 and April 26, 2005. By the first order of March 24, 2001, an amount of Rupees one lakh was
ordered to be recovered from the respondent as the Corporation suffered loss of
the said amount which was ordered to be adjusted from the gratuity of the
respondent. By the second order dated April 26, 2005, an amount of Rs.73,235-50ps which
was = portion of the amount of Rs.1,46,471.00ps was directed to be recovered as
loss had been caused to the Corporation due to negligence of the respondent.
The respondent sought amendment in the petition and challenged the above two
orders as well.
High Court, by the impugned order, allowed the writ petition holding that the
order dated January 31,
disciplinary inquiry against the writ petitioner was illegal as he had retired
on that day. No proceedings, hence, could have been initiated against him.
Consequently, orders passed in 2001 and 2005 could not have been made and they
were liable to be quashed.
Corporation was directed to pay to the writ petitioner all the benefits of
gratuity, leave encashment and other dues payable to him with interest @ 8%
p.a. from the date of retirement till the date of actual payment. Being
aggrieved by the order passed by the High Court, the Corporation has approached
5. On July 28, 2006, notice was issued by this Court.
Since contempt proceedings were initiated by the writ petitioner in the
meantime, who succeeded before the High Court, this Court stayed those
proceedings. Counter- affidavit and affidavit-in-rejoinder were filed
thereafter and the matter was ordered to be placed for final hearing. That is
how the matter has been placed before us.
have heard the learned counsel for the parties.
learned counsel for the appellant- Corporation contended that the High Court
was wholly wrong in quashing departmental proceedings and consequential orders
passed by the authorities which were legal, valid and in consonance with law.
It was submitted that show cause notice was issued on January 13, 2000 well in time before the writ
petitioner retired asking for an explanation as to why proceedings should not
be initiated against him. It was further submitted that even charge-sheet was
issued on January 31,
2000 and it was within
power of the Corporation to issue such charge-sheet and the High Court ought
not to have set aside the inquiry proceedings and consequential orders. It was
urged that it is settled law that relationship of employer and employee
continues to remain so long as all retiral benefits have not been paid to the
employee. Since the amount of gratuity, leave encashment and other pensionary
benefits were yet to be paid to the employee, the tie continued and proceedings
initiated against the writ petitioner were in accordance with law and should
not have been interfered with.
apart, under the U.P. State Sugar Corporation Ltd. General Service Rules, 1988
(hereinafter called the Rules), such proceedings could have been
initiated even after an employee has retired since they related to the recovery
of losses caused to the Corporation by the respondent-employee.
the present proceedings were for recovery of loss caused to the Corporation,
such an action could have been taken under the Rules and the High Court was
wrong in holding that the proceedings could not have been held.
it was submitted that it was the case of the Corporation that because of acts
and omissions of the respondent-employee, loss had been caused to the
Corporation. When the amount of loss was sought to be recovered from the
employee, the High Court ought not to have exercised discretionary and
equitable jurisdiction under Article 226 of the Constitution and on that count
also, the impugned action deserves to be set aside. On all these grounds, it
was submitted that the impugned order of the High Court is liable to be set
aside and the writ petition filed by the writ-petitioner should be ordered to
be dismissed by allowing the appeal.
learned counsel for the respondent, on the other hand, supported the order of
the High Court. He submitted that the date of issuance of show cause notice was
totally irrelevant. Charge-sheet was issued only on January 31, 2000 and a finding was recorded by the High Court that it was
received by the respondent after office hours of January 31, 2000. By the time, the tie was broken and there was no
relationship of employer and employee between the Corporation and the
writ-petitioner. No departmental proceedings, therefore, could have been
initiated against the writ-petitioner and they were liable to be quashed. When
the proceedings were without jurisdiction, orders passed in 2001 and 2005 which
were consequential, were obviously without power, authority or jurisdiction on
the part of the Corporation in passing them. The High Court was, therefore,
fully justified in quashing those orders also. Since the order passed by the
High Court is legal, valid and proper, it calls for no interference by this
Court and the appeal deserves to be dismissed.
the facts noted above, it is amply clear that two orders which were passed
against the respondent-employee related to recovery of certain amount from the
respondent-employee on the ground that there was carelessness, negligence or
omission on his part in the discharge of his duties which resulted in loss to
the Corporation. By the order dated March 24, 2001, an amount of Rupees one lakh which
was financial loss suffered by the Corporation was ordered to be adjusted
against the gratuity of the employee.
by order dated April
26, 2005, an amount of
Rs.73,235.50 p. [= of Rs.1,46,471.00] was ordered to be adjusted against the
amount of gratuity and encashment of earned leave which was also the financial
loss suffered by the Corporation as a result of negligence of the respondent.
It is in the light of the above facts that we have to consider whether such an
action could have been taken against the respondent-employee by the
The learned counsel for the appellant is right when he submitted that show cause
notice was issued to the respondent-employee on January 13, 2000 when he was very much in service. The respondent submitted
his explanation on January
15, 2000 which was not
found to be satisfactory. A regular show cause notice was, therefore, issued by
the Corporation on January
31, 2000 and was
served upon the respondent-employee on the same day.
notice was also sent by registered post which was received by the employee on February 11, 2000. But it is clear from the documents
that show cause notice was issued and replied.
regular show cause notice as to departmental inquiry was also served upon the
respondent- employee on the last day of his service which was January 31, 2000. In our opinion, therefore, it
could not be said that the proceedings had been initiated against the
respondent-employee after he retired from service.
Now it is well settled that retiral benefits are earned by an employee for long
and meritorious services rendered by him/her.
are not paid to the employee gratuitously or merely as a matter of boon. It is
paid to him/her for his/her dedicated and devoted work.
Garment Cleaning Works, Bombay v. Wokmen, AIR 1962 SC 673, the
relevant clause of the Gratuity Scheme provided that if a workman was dismissed
or discharged for misconduct causing financial loss to the employer, gratuity
to the extent of loss should not be paid to the workman concerned. It was
contended on behalf of the employer that the retrenchment benefit and gratuity
were payable to the employee for his long and meritorious services and if he
was dismissed by misconduct, he would not be entitled to claim retrenchment
benefits or gratuity and the benefits could be denied to him.
Dealing with the argument and the basis of payment of gratuity, this Court,
speaking through P.B. Gajendragadkar, J. (as His Lordship then was), said:
On principle if gratuity is earned by an employee for long and meritorious
service it is difficult to understand why the benefit thus earned by long and
meritorious service should not be available to the employee even though at the
end of such service he may have been found guilty of misconduct which entails
his dismissal. Gratuity is not paid to the employee gratuitously or merely as a
matter of boon. It is paid to him for the service rendered by him to the
employer, and when it is once earned it is difficult to understand why it
should necessarily be denied to him whatever may be the nature of misconduct
for his dismissal. Then, as to the definition of retrenchment in the Industrial
Disputes Act, we are not satisfied that gratuity and retrenchment compensation
stand exactly on the same footing in regard to the effect of misconduct on the
rights of workmen. The rule of the provident fund scheme shows not that the
whole provident fund is denied to the employee even if he is dismissed but it
merely authorises certain deductions to be made and then too the deductions
thus made do not revert to the employer either. Therefore we do not think that
it would be possible to accede to the general argument that in all cases where
the service of an employee is terminated for misconduct gratuity should not be
paid to him. It appears that in award which framed gratuity schemes sometimes
simple misconduct is distinguished from gross misconduct and a penalty of
forfeiture of gratuity benefit is denied in the latter case but not in the
former, but latterly industrial tribunals appear generally to have adopted the
rule which is contained in clause (ii)(b) of the present scheme. If the
misconduct for which the service of an employee is terminated has caused
financial loss to the works, then before gratuity could be paid to the employee
he is called upon to compensate the employer for the whole of the financial loss
caused by his misconduct, and after this compensation is paid to the employer
if any balance from the gratuity climbable by the employee remains that is paid
to him.. (emphasis supplied)
Calcutta Insurance Co. Ltd. v. Workmen,
(1967) 2 SCR 596, this Court considered the concept of gratuity. It referred to
Garment Cleaning Works and other cases. It noted that the opinion expressed in
those cases was that gratuity was earned by an employee for long and
meritorious service and consequently it must be given to him even though
at the end of such service, he may have been found guilty of misconduct
entailing his dismissal.
The Court then said;
principle, it is difficult to concur in the above opinion. Gratuity cannot be
put on the same level as wages. We are inclined to think that it is paid to a
workman to ensure good conduct through out the period he serves the employer.
"Long and meritorious service" must mean long and unbroken period of
service meritorious to the end. As the period of service must be unbroken, so
must the continuity of meritorious service be a condition for entitling the
workman to gratuity. If a workman commits such misconduct as causes financial
loss to his employer, the employer would under the general law have a right of
action against the employee for the loss caused and making a provision for
withholding payment of gratuity where such loss caused to the employer does not
seem to aid to the harmonious employment of labourers of workmen. Further, the
misconduct may be such as to undermine the discipline in the workers - a case
in which it would be extremely difficult to assess the financial loss to the
employer. (emphasis supplied)
M. Narasimhachar v. State of Mysore, AIR 1960 SC 247, an amount of Rs.5,215/-
was deducted from pension of the Government servant. The action was challenged
by the employee. Considering the relevant provisions of the Rules, this Court
held that the Government had reserved to itself the right to order the recovery
from pension and compassionate allowances of the Government servant of any
amount on account of losses found to have been caused to Government by
negligence or fraud of such officer during his service.
Again, in Jarnail Singh v. Secretary, Ministry of Home Affairs & Ors., (1993)
1 SCC 47 JT 1992 Supp SC 489, this Court considered the provisions of Central
Civil Services (Pension) Rules, 1972. The definition of pension
included gratuity under Rule 3.
conferred on the President power to withhold or withdraw pension in certain
circumstances. An order was passed against an employee withholding pension and
the entire amount of death-cum-retirement gratuity otherwise admissible to him.
The direction was given on account of serious irregularities found to have been
committed by the workman.
workman challenged that order unsuccessfully and thereafter approached this
Court. His contention was that an amount of gratuity could not have been
the contention, this Court held that the power to withhold gratuity was
conferred on the President and such action could not be said to be illegal. It
was ruled that the Government could adjust its dues against the amount of
death-cum-retirement gratuity otherwise payable to Government servant.
State of Uttar Pradesh v. Brahm Datt Sharma & Anr., (1987) 2 SCC 179 : JT
1987 (1) SC 571, this Court held that it was open to Government to reduce,
forfeit, withhold or recover pension, after affording hearing to the affected
person, on ground of unsatisfactory service based on proved findings of serious
misconduct or causing pecuniary loss to the Government. Such proceedings can be
initiated even after retirement for misconduct, negligence or financial
irregularity. Where Government servant was found guilty of misconduct or
negligence resulting in financial loss to the Government, it was competent to
the Government to direct reduction in pension.
Interpreting Article 470 of U.P. Civil Service Regulations, this Court observed
that the said provision stated that full pension would not be awarded as a
matter of course to a Government servant on his retirement. It was awarded to
him if service rendered by him was satisfactory. In case of absence of
thoroughly satisfactory service, the authority was competent to reduce
the amount of pension. Referring to Deokinandan Prasad v. State of Bihar, 1971 Supp SCR 634, State of Punjab v. K.R. Erry, (1973) 2 SCR 405 and
D.S. Nakara v. Union of India, (1983) 2 SCR 165, the Court held that pension
was not a bounty and an employee was entitled to pensionary benefits,
but proceeded to state that a Government employee would earn pension by
rendering long and efficient service.
Narasimhachar, the Court held that the employer had right to reduce pension of
an employee if services rendered by him were found to be unsatisfactory. Only
thing is that in such cases before taking any action, principles of natural
justice must be observed.
State of Maharashtra v. M.H. Mazumdar, (1988) 2 SCC 52 : JT 1988 (1) SC 432,
the Court held that departmental inquiry can be instituted against a Government
servant after superannuation and pension can be reduced on proved charges of
misconduct, negligence or financial irregularity committed during the period of
service. Following Narasimhachar and Brahm Datt Sharma, and distinguishing B.J.
Shelat v. State of Gujarat, (1978) 2 SCC 202, the Court held that when
financial loss was caused to the Government by any act or omission on the part
of its employee, the purpose of inquiry was not to inflict any punishment, but
to determine the pension of an employee. Such an action, in our view, can be
taken so that the Government may not have to suffer financially.
Reference was also made to a leading decision in Union of India & Ors. v.
K.V. Jankiraman & Ors., (1991) 4 SCC 109 : JT 1991 (3) SC 527. In Jankiraman,
the question which came up for consideration before this Court related to
promotion of an officer and adoption of sealed cover procedure. It
was held that consideration of case of an employee for promotion could not be
withheld merely on the ground of pendency of any departmental inquiry/criminal
investigation against him.
could, however be resorted to once charge memo/charge-sheet is issued.
was submitted by the learned counsel for the Corporation that in the case on
hand, not only notice was issued to the respondent-employee on January 13,
2000, but even regular show cause notice was issued on January 31, 2000 and
hence the proceedings could have been continued on the basis of law laid down
UCO Bank & Ors. v. Sanwar Mal, (2004) 4 SCC 412 JT 2004 Supp 2 SC 487, the
Court held that two concepts;
were different and employed for different purposes and in different contexts.
Resignation brings about complete cessation of master and servant relationship,
but retirement does not do so.
case of retirement, master and servant relationship continues for grant of retiral
it is so, the appellant- Corporation, in our opinion, is right in submitting
that the proceedings could have been continued after the retirement of the
respondent-employee as far as the financial loss caused to the Corporation
because of negligence on the part of employee and the benefit claimed by the
respondent-workman on his terminal benefits.
Strong reliance was placed by the learned counsel for the respondent on P.V. Mahadevan
v. MD. T.N. Housing Board, (2005) 6 SCC 636 : JT 2005 (7) SC 417. In that case,
there was inordinate delay of ten years in initiating departmental proceedings
against an employee. In absence of convincing explanation by the employer for
such inordinate delay, this Court held that the proceedings were liable to be
our opinion, Mahadevan does not help the respondent. No rigid, inflexible or
invariable test can be applied as to when the proceedings should be allowed to
be continued and when they should be ordered to be dropped.
such cases there is neither lower limit nor upper limit. If on the facts and in
the circumstances of the case, the Court is satisfied that there was gross,
inordinate and unexplained delay in initiating departmental proceedings and
continuation of such proceedings would seriously prejudice the employee and
would result in miscarriage of justice, it may quash them. We may, however,
hasten to add that it is an exception to the general rule that once the
proceedings are initiated, they must be taken to the logical end. It,
therefore, cannot be laid down as a proposition of law or a rule of universal
application that if there is delay in initiation of proceedings for a
particular period, they must necessarily be quashed.
the present case, the High Court has not quashed the proceedings on the ground
that there was inordinate and unexplained delay on the part of the Corporation
in initiating such proceedings against the respondent. According to the High
Court, since the respondent retired on January 31, 2000, the proceedings could
not have been continued against him. From the case law referred to by us
hereinabove, it is clear that such proceedings could have been continued since
they were initiated for the recovery of losses sustained by the Corporation due
to negligence on the part of the respondent-employee. Such loss caused to the
Corporation could be recovered from the respondent from the retiral benefits of
The learned counsel for the appellant- Corporation also referred to the Rules.
IV titles Fundamental Duties of Service. Rule 31 expressly states
that an employee of the Corporation would be whole time employee.
Chapter VIII (Rules 93 to 107) deals with Disciplinary Proceedings.
Rule 93 is material and relevant part thereof reads thus;
The following penalties may, for good and sufficient reason and as hereinafter
provides, be imposed on an employee.
With-holding of annual increment(s), including stoppage of an efficiency
bar/assessment stage with or without cumulative effect.
Recovery from pay or from such other amounts as may be due to the employee of
the whole or part of any pecuniary loss caused to the Corporation by negligence
or breach of orders on his part;
to a lower grade or post or to a lower stage in a time scale;
from service which does not disqualify from future employment,
from service which ordinarily disqualifies from future employment.
Rule 102 prescribes procedure before starting enquiry. Rule 103 provides for
major penalties. Rule 109 lays down procedure for imposition of minor penalties
and is another important provision which may be quoted in extenso.
(1) Whenever the punishing authority is satisfied that good and sufficient
reasons exist for adopting such a course it may impose the penalty of
Stoppage at an efficiency bar.
that it shall not be necessary to frame formal charges against the employee
concerned but his explanation may be called and considered before imposing such
all cases where the punishing authority imposes the penalty of-
Withholding of increments in the time scale at stages where there is no
from pay of the whole or part of any pecuniary loss caused to the Corporation
by negligence or breach of orders.
proceedings embodying statement of the offence or fault, the explanation of the
person concerned, and the reasons for punishment shall be recorded.
that it shall not be necessary to record such proceedings in cases where an
employees increment in the time scale of his pay at any stage other than
an efficiency bar is stopped due to his integrity remaining uncertified.
is, therefore, clear that so far as minor penalty is concerned, it is not
necessary for the Corporation to follow detailed and lengthy procedure laid
down for imposition of major penalties. In the instance case, the proceedings
had been initiated by the appellant-Corporation against the respondent-
employee for recovery of pecuniary loss caused to the Corporation by negligence
on his part.
proceedings, hence, could be instituted by issuing notice which was done on
January 13, 2000. The said action, therefore, could not have been held bad or
without power, authority or jurisdiction on the part of the Corporation.
have already observed earlier, even regular show cause notice was served on
January 31, 2000 which was also during the employment of respondent. The High
Court, in our view, was wrong in quashing the proceedings and setting aside
orders dated March 24, 2001 and April 26, 2005. The impugned order of the High
Court, therefore, deserves to be set aside.
Finally, the learned counsel for the appellant-Corporation is right in
submitting that the High Court was exercising discretionary and equitable
jurisdiction under Article 226 of the Constitution. It is well- settled that
the jurisdiction of the High Court under Article 226 of the Constitution is
equitable and discretionary. The power under that Article can be exercised by
the High Court to reach injustice wherever it is found.
Veerappa Pillai v. Raman & Raman Ltd. & Ors., 1953 SCR 583, the
Constitution Bench of this Court speaking through Chandrasekhara Aiyar, J.
observed 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 tribunals or bodies or officers act wholly without jurisdiction,
or in excess of it, or in violation of the principles of natural justice, or
refuse to exercise jurisdiction vested in them, or there is an error apparent
on the face of the record, and such act, omission, error, or excess has
resulted in manifest injustice.
Again, in leading case of Sangram Singh v. Election Tribunal, Kotah, (1955) 2
SCR 1, dealing with the ambit and scope of powers of High Courts under Article
226 of the Constitution, Bose, J. stated;
however, is not to say that the jurisdiction will be exercised whenever there
is an error of law.
High Courts do not, and should not, act as courts of appeal under Article 226.
Their powers are purely discretionary and though no limits can be placed upon
that discretion it must be exercised along recognized lines and not
arbitrarily; and one of the limitations imposed by the courts on themselves is
that they will not exercise jurisdiction in this class of case unless
substantial injustice has ensued, or is likely to ensue. They will not allow
themselves to be turned into courts of appeal or revision to set right mere
errors of law which do not occasion injustice in a broad and general sense,
for, though no legislature can impose limitations on these constitutional
powers it is a sound exercise of discretion to bear in mind the policy of the
legislature to have disputes about these special rights decided as speedily as
writ petitions should not be lightly entertained in this class of case. (emphasis
supplied) 35. Recently, in Secretary, ONGC Ltd. & Anr. v. V.U. Warrier,
(2005) 5 SCC 245 : JT 2005 (4) SC 489, an employee of Oil and Natural Gas
Commission (ONGC) unauthorisedly retained an official accommodation after his
penal rent was charged and sought to be recovered from retiral benefits of the
employee, he filed a petition invoking Article 226 of the Constitution. The
High Court allowed the petition and directed the Corporation to release all the
benefits to which the employee was entitled. The High Court observed that it
was open to the Corporation to take appropriate proceedings for recovery of the
dues claimed by the Corporation. Aggrieved ONGC approached this Court.
Allowing the appeal, setting aside the order passed by the High Court and
considering the relevant decisions on the point, one of us (C.K. Thakker, J.)
already adverted to by us hereinabove, the facts of the present case did not
deserve interference by the High Court in exercise of equitable jurisdiction
under Article 226 of the Constitution. The respondent-petitioner before the
High Court-, was a responsible officer holding the post of Additional Director
(Finance & Accounts). He was, thus, gold collar employee of the
Commission. In the capacity of employee of the Commission, he was allotted a
residential quarter. He reached the age of superannuation and retired after
office hours of February 28, 1990. He was, therefore, required to vacate the
quarter allotted to him by the Commission. The Commission, as per its policy,
granted four months time to vacate. He, however, failed to do so. His
prayer for continuing to occupy the quarter was duly considered and rejected on
relevant and germane grounds. The residential accommodation constructed by him
by taking loan at the concessional rate from the Commission was leased to
Commission, but the possession of that quarter was restored to him taking into
account the fact that he had retired and now he will have to vacate the quarter
allotted to him by the Commission. In spite of that, he continued to occupy the
quarter ignoring the warning by the Commission that if he would not vacate
latest by June 30, 1990, penal rent would be charged from him. In our judgment,
considering all these facts, the High Court was wholly unjustified in
exercising extraordinary and equitable jurisdiction in favour of the petitioner
respondent herein and on that ground also, the order passed by the High Court
deserves to be set aside. (emphasis supplied)
Considering the facts and circumstances in their entirety, in our considered
opinion, the High Court was wrong in holding that the proceedings were
initiated after the respondent retired and there was no power, authority or
jurisdiction with the Corporation to take any action against the writ-petitioner
and in setting aside the orders passed against him. In our judgment,
proceedings could have been taken for the recovery of financial loss suffered
by the Corporation due to negligence and carelessness attributable to the
respondent-employee. The impugned action, therefore, cannot be said to be
illegal or without jurisdiction and the High Court was not right in quashing
the proceedings as also the orders issued by the Corporation.
appeal, therefore, deserves to be allowed by setting aside the order of the
For the foregoing reasons, the appeal is allowed and the order passed by the
High Court is set aside. But since the High Court has allowed the petition only
on the ground that the proceedings could not have been instituted against the
writ-petitioner, it would be appropriate if we remit the matter to the High
Court so as to enable it to consider the rival contentions of the parties and
take an appropriate decision on merits. We may clarify that we may not be
understood to have expressed any opinion one way or the other on the
controversy involved in the case and as and when the High Court will take up
the writ petition, it will decide the same without being influenced by any
observation made in this judgment. On the facts and in the circumstances of the
case, the parties will bear their own costs.