Kerala Co-operative Societies Act | Employer Entitled To Continue Disciplinary Proceedings Even After Retirement Of Employee: High Court

The Kerala High Court on Friday held that under Rule 198 (7) of the Kerala Co-operative Societies Rules, the employer is entitled to continue disciplinary proceedings after retirement of employee, as well as withhold the retiral benefits until the culmination of such proceedings. 

The Division Bench comprising Justice A.K. Jayasankaran Nambiar, and Justice Mohammed Nias C.P., while holding so, reasoned that, 

"If the argument that the proceedings cannot continue after the retirement is accepted, any delinquent employee can commit any fraud, misappropriation, grave dereliction of duty etc., on the eve of his retirement and can plead that he is beyond the reach of the employer, which would result in such delinquent employee escaping without punishment. Law cannot allow such a course and in all those cases larger public interest must be the guiding factor to decide the case".

As per the factual matrix of the case, the appellant had joined the service of the Kerala State Co-operative Bank (respondent) in the year 1989 and was posted as a Manager when he was served with a memo of charges on the ground that while he had been officiating the aforementioned post, there were serious irregularities in granting loans to several customers by showing higher value to the secured assets, and subsequently, he was suspended vide an order dated 30th April 2020.

Certain charges were subsequently deleted on 13th May 2020. The appellant retired on 31st May 2020. It was contended by the appellant before the Single Judge that in the absence of any enabling provision in the Kerala Co-operative Societies Act or Rules for continuing the disciplinary enquiry after retirement, the continuance of the disciplinary proceedings is without jurisdiction and that Rule 198 (7) of the Kerala Co-operative Societies Rules (KCS Rules) do not grant any permission to go ahead with the disciplinary proceedings. It was contended that in this circumstance, the appellant was entitled to all the terminal benefits.

However, the Single Judge observed that since the memo was issued while the petitioner was in service, which denotes the start of the departmental proceedings, the same can be continued by withholding the retiral benefits, and added that the power of the Society to recover the amounts was not denuded even after the retirement. It was in this context that the instant appeal had been filed. 

It was contended on behalf of the appellant by Advocates Jawahar Jose and Jaison Antony that there was no provision in the KSC Rules for conducting or continuing a disciplinary enquiry after the retirement, nor for authorizing the employer to deduct the retiral benefits. On this ground, it was contended that the enquiry that had been initiated ought to be treated as lapsed and the appellant ought to be entitled to all retiral benefits. It was further submitted that as per Rule 198 (7) of the KCS Rules, while the respondents may withhold the retiral benefits, it does not vest them with the power to carry on with the disciplinary proceedings that had been initiated. It was emphasized that pension and gratuity which are regarded as a bounty to be handed over by the employer, could not be withheld by the respondent in the absence of any valid provision. It was further argued that the employer had no authority to withhold the provident fund, welfare fund dues and the leave encashment as these could not be treated as retiral benefits.

On behalf of the respondents, it was contended by the Standing Counsel for the Kerala State Co-Operative Bank, Gilbert George Correya, that as per Rule 198 (7) of the KCS Rules, disciplinary proceedings could be continued even after retirement, and the employer is also vested with the power to withhold the retiral benefits till finalisation of the same. It was contended that the charges that had been levelled against the appellant were of serious nature, and accordingly, retiral benefits could not be granted to him until the culmination of the proceedings. 

The question posed before the Court was whether disciplinary proceedings initiated under the Kerala Co-operative Societies Act and Rules, come to an end on the retirement of the employee.

The Court examined the provision Rule 198 (7) of the KSC Rules, and ascertained that it presupposes two situations - that of pendency of the disciplinary proceedings already initiated while the employee was in service, as well as the power to withhold the retiral benefit in such cases till completion of the proceedings initiated. According to the Court, 

"The rule therefore must be understood as one which gives the power to the bank to retain the retiral benefits only till the culmination of the disciplinary proceedings"

and accordingly, the arguments of the appellant that rule does not enable the employer to carry on with the disciplinary proceedings after his retirement was rejected. It was added that although, 

"...the Rules may not allow a society to initiate disciplinary proceedings after the retirement of an employee, but it certainly enables the society to continue with the disciplinary proceedings already initiated before the retirement and also speaks about the consequence of withholding the retiral benefits as long as the disciplinary proceedings continue".

The Court also found that as per the provision, the act of the Bank in withholding the retiral benefits also could not be faulted. 

It was in this light that the Court dismissed the appeal on finding that the withholding of retiral benefits until culmination of disciplinary proceedings is not illegal. However, considering that the appellant had retired as early as on May 31st, 2020, the Court directed the employer to complete the proceedings expeditiously, within 6 months. 

Case Title: S. Yadava v. Kerala State Co-Operative Bank & Ors. 

Citation: 2022 LiveLaw (Ker) 490

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