Employee Can Be Dismissed In Disciplinary Inquiry Completed After Retirement If Rules Permit It: SC Holds By 2:1 Majority

The Supreme Court [2:1] has observed that disciplinary enquiry against an employee can continue even after the retirement of the employee and major punishment like dismissal or removal can be imposed, if the relevant Service Rules permit it.

Rule 34 of the Conduct, Discipline & Appeal Rules, framed by Mahanadi Coalfield Limited provides for special procedure in certain cases and which permits continuance of disciplinary proceedings even after the final retirement of an employee, provided the disciplinary proceedings are instituted while the employee was in service whether before his retirement or during his reemployment. It provides that such disciplinary proceedings shall be continued and concluded by the authority by which it was commenced in the same manner as if the employee had continued in service. Rule 34.3 provides for withholding the payment of gratuity during the pendency of the disciplinary proceedings and it further permits for ordering the recovery from gratuity of the whole or part of any pecuniary loss caused to the company, if have been guilty of offences/misconduct as mentioned in sub­section (6) of Section 4 of the Payment of Gratuity Act, or to have caused pecuniary loss to the company by misconduct or negligence, during his service.

The High Court, in this case, relied on the decision in Jaswant Singh Gill v. Bharat Coking Coal Ltd. (2007) 1 SCC 663, and held even if the disciplinary inquiry was initiated before attaining the age of superannuation, if the employee attains the age of superannuation, the question of imposing a major penalty by removal or dismissal from service would not arise.

In appeal, the Apex Court held that the disciplinary authority has powers to impose the penalty of dismissal/major penalty upon the respondent even after his attaining the age of superannuation, as the disciplinary proceedings were initiated while the employee was in service. Overruling the decision in Jaswant Singh Gil, the majority of the bench Justices Arun Mishra and MR Shah, referring to a three judge bench decision in State Bank of India v. Ram Lal Bhaskar, (2011) 10 SCC 249. observed:

"Several service benefits would depend upon the outcome of the inquiry, such as concerning the period during which inquiry remained pending. It would be against the public policy to permit an employee to go scot­free after collecting various service benefits to which he would not be entitled, and the event of superannuation cannot come to his rescue and would amount to condonation of guilt. Because of the legal fiction provided under the rules, it can be completed in the same manner as if the employee had remained in service after superannuation, and appropriate punishment can be imposed. Various provisions of the Gratuity Act discussed above do not come in the way of departmental inquiry and as provided in Section 4(6) and Rule 34.3 in case of dismissal gratuity can be forfeited wholly or partially, and the loss can also be recovered. An inquiry can be continued as provided under the relevant service rules as it is not provided in the Payment of Gratuity Act, 1972 that inquiry shall come to an end as soon as the employee attains the age of superannuation. We reiterate that the Act does not deal with the matter of disciplinary inquiry, it contemplates recovery from or forfeiture of gratuity wholly or partially as per misconduct committed and does not deal with punishments to be imposed and does not supersede the Rules 34.2 and 34.3 of the CDA Rules. The mandate of Section 4(6) of recovery of loss provided under Section 4(6)(a) and forfeiture of gratuity wholly or partially under Section 4(6)(b) is furthered by the Rules 34.2 and 34.3. If there cannot be any dismissal after superannuation, intendment of the provisions of Section 4(6) would be defeated. The provisions of section 4(1) and 4(6) of Payment of Gratuity Act, 1972 have to be given purposive interpretation, and no way 83 interdict holding of the departmental inquiry and punishment to be imposed is not the subject matter dealt with under the Act. "

Justice Ajay Rastogi dissented and opined that after conclusion of the disciplinary inquiry, if held guilty, a penalty can be inflicted upon an employee/delinquent who stood retired from service and what should be the nature of penalty is always depend on the relevant scheme of Rules and on the facts and circumstances of each case, but either of the substantive penalties specified under Rule 27 of the Rules, 1978 including dismissal from service are not open to be inflicted on conclusion of the disciplinary proceedings and the punishment of forfeiture of gratuity commensurate with the nature of guilt may be inflicted upon a delinquent employee provided under Rule 34.3 of Rules, 1978 read with sub­section (6) of Section 4 of the Act, 1972.

Another issue considered by the bench was whether it is permissible in law for the employer to withhold the payment of gratuity even after the employee has attained his superannuation from service because of the pendency of disciplinary proceedings against him?. The bench [Justice Rastogi agreed with the majority on this issue] observed:

"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, sub­section 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. 9.1 Even otherwise, Rule 34.3 of the CDA Rules permits withholding of the gratuity amount during the pendency of the disciplinary proceedings, for ordering recovering from gratuity of 24 the whole or part of any pecuniary loss caused to the company if have been guilty of offences/misconduct as mentioned in subsection 6 of Section 4 of the Payment of Gratuity Act, 1972 or to have caused pecuniary loss to the company by misconduct or negligence, during his service. It further makes clear that Rule 34.3 for withholding of such a gratuity would be subject to the provisions of Section 7(3) and 7(3A) of the Payment of Gratuity Act, 1972 in the event of delayed payment in the case of an employee who is fully exonerated. Rule 34.3 of the CDA Rules is in consonance with sub­section 6 of Section 4 of the Payment of Gratuity Act and there is no inconsistency between sub­section 6 of Section 4 of the Payment of Gratuity Act and Rule 34.3 of the CDA Rules. Therefore Section 14 of the Act which has been relied upon shall not be applicable as there is no inconsistency between the two provisions "

Case no.: CIVIL APPEAL NO. 9693 OF 2013
Case name: Chairman ­cum ­Managing Director, Mahanadi Coalfields Limited vs. Sri Rabindranath Choubey
Coram: Justices Arun Mishra, MR Shah and Ajay Rastogi
Counsel: Sr. Advocates Mahabir Singh and Anukul Chandra Pradhan

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