Employee Can Be Dismissed Even After Retirement If Found Guilty In Disciplinary Proceeding Initiated During Service: Orissa High Court

The Orissa High Court has held that an employer has the right to dismiss an employee from service even after his retirement with retrospective effect, if he is found to be guilty in a disciplinary proceeding which was initiated during his service period.

The Single Bench of Justice Sanjay Kumar Mishra, however, clarified that an employer cannot direct forfeiture of payment of gratuity to an employee while passing order of dismissal from service, though it can withhold such payment till the conclusion of disciplinary proceedings.

Case Background

The Opposite Party No. 3 ('OP No.3') was working as the Manager, Sub-Branch, National Small Industries Corporation Ltd. (NSIC), Balasore. While working in such position, just prior to his superannuation, a disciplinary proceeding was initiated against him and he was placed under suspension with immediate effect.

The Disciplinary Authority ordered to hold an enquiry against the OP No.3, who was allowed to submit written statement in his defence. Though several notices and intimations were sent to the OP No.3 to cooperate in the enquiry, he remained recalcitrant and he rather sent letters to the Inquiry Officer indicating therein that as he has already retired, the enquiry as well as the disciplinary proceedings are illegal.

The Inquiry Officer set him ex parte and submitted his report wherein he found the charges against the OP No.3 to be genuine. Taking into account the report of the Inquiry Officer as well the fact that the act of the OP No.3 endangered crores of investment of the NSIC, the Disciplinary Authority dismissed him from service with effect from 30.11.2016, i.e. the date of his retirement.

While the matter stood thus, the OP No.3 approached the Controlling Authority under the Payment of Gratuity Act, 1972 praying for release of gratuity amount in his favour. Though the NSIC opposed such prayer, the Controlling Authority ordered it to pay a sum of Rs. 10 lakhs to the petitioner with 10% interest per annum.

The said order was challenged by the NSIC before the Appellate Authority, who confirmed the impugned order. Being aggrieved by the same, the NSIC approached the High Court filing the writ petition.

Contentions

It was contended on behalf of the petitioner-corporation that both the Controlling Authority as well as the Appellate Authority have relied upon the judgment of the Supreme Court in Jaswant Singh Gill v. M/s. Bharat Coking Coal Ltd. & Ors. which has been overruled by another judgment in Chairman-cum-Managing Director, Mahanadi Coalfields Limited v. Rabindranath Choubey and thus, the impugned orders are per incuriam.

It was further submitted that the misconducts, which have been proved against the OP No.3, amount to moral turpitude. Hence, the petitioner was justified to impose the punishment of forfeiture of gratuity of the OP No.3.

Court's Observations

The Court referred to the decision of the Apex Court in Rabindranath Choubey (supra) which had held that employees can be dismissed pursuant to a disciplinary inquiry, which was initiated before the retirement but completed after the retirement, if the relevant Rules permit it. The top Court had further held:

“Once it is held that a major penalty which includes the dismissal from service can be imposed, even after the employee has attained the age of superannuation and/or was permitted to retire on attaining the age of superannuation, provided the disciplinary proceedings were initiated while the employee was in service, sub-section 6 of Section 4 of the Payment of Gratuity Act shall be attracted and the amount of gratuity can be withheld till the disciplinary proceedings are concluded.”

The Court opined that the power of 'prospective overruling' is vested only in the Supreme Court.

“Unless it is so mentioned in a judgment, vide which an earlier judgment of the apex Court is overruled, that the same will be made applicable prospectively, it will have a retrospective operation and will be made applicable to all the pending litigations, even though the impugned order/judgment in the pending litigation is based on a judgment of the apex Court, which was in vogue at the relevant juncture, but was subsequently overruled by a larger Bench,” it added.

Accordingly, Justice Mishra was of the considered view that the petitioner-employer has a right to continue with the disciplinary proceeding till its conclusion as the same was instituted before the retirement of the delinquent employee, i.e. OP No.3.

“The Petitioners-Employer had a right to impose the major penalty of dismissal with retrospective effect i.e. the date when the Opposite Party No.3 was superannuated, and legality of punishment imposed is subject to judicial scrutiny,” he further held.

The Court, however, held that there is no such provision under the National Small Industries Corporation Limited (Control and Appeal) Rules, 1968 to order forfeiture of gratuity. Though the said Rules provide for 'withholding of gratuity' for ordering recovery of pecuniary loss caused to the Corporation, but forfeiture of retiral benefits, i.e. gratuity and encashment of leave is illegal.

“...the amount liable to be forfeited would be only to the extent of damage or loss caused and the disciplinary authority has to quantify the same before ordering for forfeiture of the gratuity,” it clarified.

Therefore, the impugned orders, so far as they contradicted the dictum laid down in Rabindranath Choubey (supra), were set aside. However, the Court ordered the petitioner to process the payment of gratuity to the OP No.3 as his entitlement is pending since 2016.

Case Title: The Sr. Branch Manager, the NSIC Ltd., Bhubaneswar & Anr. v. The Deputy Chief Labour Commissioner (Central), Bhubaneswar & Ors.

Case No: W.P.(C) No. 20160 of 2019

Date of Judgment: March 15, 2024

Counsel for the Petitioners: Mr. P.K. Jena, Advocate

Counsel for the Respondents: Mr. R.D. Sarkar, Advocate

Citation: 2024 LiveLaw (Ori) 26

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