C. Philip v. Registrar of Co-operative Societies, Joint Registrar of Co-operative Societies (General), AnapantHy Service Co-Operative Bank Limited, and The Board of Directors, AnapantHy Service Co-Operative Bank Limited

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE V.CHITAMBARESH & THE HONOURABLE MR. JUSTICE SATHISH NINAN TUESDAY, THE 10TH DAY OF JULY 2018 / 19TH ASHADHA, 1940 W.A.No.284 of 2018 IN WPC.NO.22488/2014 AGAINST THE JUDGMENT IN WP(C).NO.22488/2014 OF HIGH COURT OF KERALA DATED 22-05-2017 APPELLANT/PETITIONER: C.M.PHILIP, S/O. MATHEW, CHEMPAKASSERY HOUSE, MUNDAYAMPARAMBU P.O., KANNUR - 670 704. BY ADVS.SRI.V.G.ARUN SRI.T.R.HARIKUMAR ## RESPONDENTS/RESPONDENTS: 1. THE REGISTRAR OF CO-OPERATIVE SOCIETIES, THIRUVANANTHAPURAM - 695 001. 2. THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES (GENERAL), KANNUR - 670 001. 3. ANAPANTHY SERVICE CO-OPERATIVE BANK LIMITED NO. F 516, ANGADIKKADAVU P.O., KANNUR - 670 706, REPRESENTED BY ITS SECRETARY. 4. THE BOARD OF DIRECTORS, ANAPANTHY SERVICE CO-OPERATIVE BANK LIMITED NO. F 516, ANGADIKKADAVU P.O., KANNUR - 670 706, REPRESENTED BY ITS PRESIDENT. R1 & R2 BY SENIOR GOVERNMENT PLEADER SMT.K.R.DEEPA. R3 & R4 BY ADV.SRI.R.SURENDRAN THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 6.7.2018, THE COURT ON 10.7.2018 DELIVERED THE FOLLOWING: WA284/2018 -2- ## APPENDIX APPELLANT'S EXHIBIT (ANNEXURE TO I.A.NO.738/2018): ANNEXURE-I A TRUE COPY OF THE DETAILS REGARDING THE PRESENT STAGE OF THE EXECUTION PROCEEDINGS IN THE ARBITRATION CASES. -TRUE COPY- PS TO JUDGE “CR” ## V. CHITAMBARESH & SATHISH NINAN, JJ. = = = = = = = = = = = = = = = = = = = = = = = = ## W.A.No.284 of 2018 = = = = = = = = = = = = = = = = = = = = = = = = Dated this the 10[th] day of July, 2018 ## Judgment ## Chitambaresh, J. 1.The appellant while working as an Accountant in the third respondent Bank faced disciplinary action on the ground that he was privy to the indiscriminate grant of loans by the then Branch Manager. A punishment of reduction to the lower rank of Senior Clerk was imposed and an appeal filed therefrom by the appellant was rejected by the Board of Directors of the Bank. The appellant suffered the punishment and later retired from service on 30.4.2014 and the disbursement of retiral benefits like pension, gratuity, pay revision arrears etc. remains. Separate representations addressed to the Bank, its Board of Directors and the Joint WA284/2018 -: 2 :- Registrar by the appellant were of no avail and hence the writ petition. The appellant submitted that he does not challenge either the disciplinary proceedings or the punishment and only sought for the disbursement of his retiral benefits at the earliest. - 2.The learned single Judge observed that the equitable remedy of restitution comes into play which needs no statutory sanction and that the Bank is entitled to appropriate the loss suffered from the retiral benefits of the appellant. The judgment in the case titled C.M.Philip v. The Registrar of - - Co operative Societies and others [2017(2) KLT 1087] concludes as follows: - “32. I hold that the Society's effort to - quantify the misappropriated amount and, then, having it set off from the amounts due to Philip is unexceptionable. 33. But because Philip had retired from WA284/2018 -: 3 :- service long back, the Society will speed up the recovery or adjustment out of Philip's terminal benefits and pay the balance amount to him at the earliest.” The appellant points out that the Bank cannot unilaterally appropriate amounts from the retiral benefits without resorting to the adjudicatory process under the Kerala Cooperative Societies Act, 1969 ['the Act' for short]. The appellant contends that the Bank has not hitherto filed any arbitration case against him under Section 69 of the Act and sought to attach the retiral benefits. Whether the retiral benefits such as pension and gratuity can be so attached is another moot question and hence the appellant claims interest on the amount due to him. 3.We heard Mr. V.G.Arun, Advocate on behalf of the appellant, Mr. R.Surendran, Advocate on behalf of the Bank and Mrs. WA284/2018 -: 4 :- ## K.R.Deepa, Senior Government Pleader. 4.The following penalties can be imposed on any member of the establishment of a co-operative society under Rule 198 of the Kerala Co-operative Societies Rules, 1969 ['the Rules for short'] for good and sufficient reasons: - “(a) Censure; - (b) Fine (in the case of employees in the last grade); - (c) Withholding of increments with or without cumulative effect; - (d) Withholding of promotion; - (e) Recovery from pay of the whole or part of any pecuniary loss caused to the society, by negligences or breach of orders or otherwise; - (f) Reduction to a lower rank; - (g) Compulsory retirement; - (h) Dismissal from service.” WA284/2018 -: 5 :- The disciplinary authority could have imposed the punishment of recovery from pay of any pecuniary loss caused to the Bank while the appellant was in service as a member of the establishment. No such penalty was imposed and the disciplinary authority was rest contended with imposing the penalty of reduction to a lower rank which the appellant has already suffered. A fresh disciplinary proceedings for imposing the penalty of recovery from pay (even if it includes pension) can be initiated only if the appellant is still a member of the establishment. No other disciplinary proceedings are possible at this juncture after the appellant has retired from service on 30.4.2014 and four years have elapsed since then. There is therefore no rationale or justification in the Bank retaining the retiral benefits of the appellant which are no longer a bounty but valuable rights in his hands. 5.The learned single Judge has observed that the principles of WA284/2018 -: 6 :- unjust enrichment and restitution enables the bank to suo motu appropriate the amounts from the retiral benefits to recompense the loss suffered. We are unable to subscribe to that view since the loss allegedly suffered by the Bank has to be quantified by an adjudicatory process as envisaged under Section 69 of the Act. A dispute of that nature can be raised by the Bank even against a past member going by the terminology of Section 69 of the Act and the retirement of the appellant is immaterial. But it is a fact conceded that the Bank has not hitherto raised a dispute before the Cooperative Arbitration Court and has only issued a notice dated 25.11.2014 pending writ petition. Even otherwise the Bank is debarred from being an arbiter in its own cause and the maxim nemo debet esse judex in propria sua causa is too well known to be overlooked. There is a real likelihood of bias if the Bank were to unilaterally appropriate the amounts from the retiral benefits after quantifying the damages by itself in the circumstances. The principles of WA284/2018 -: 7 :- unjust enrichment recognised in Sections 70 and 72 of the Indian Contract Act, 1872 cannot be imported to service jurisprudence in the absence of specific rules. 6.It will not be out of place to state that another learned single Judge has disapproved the broad principles stated in C.M.Philip's case (supra) by observing as follows in the judgment dated 19.9.2017 in W.P(C).No.32379/2014: “9. Yet another point raised by the learned counsel for petitioner bank is that, bank is vested with every powers to recover the loss suffered by the bank. However, learned counsel could not point out any provision of law either under the Co-operative Societies Act or Rules empowering the Management to quantify damages allegedly suffered by the bank. When there is no power granted to the Board of Management to quantify the damages under the statute or the Rules, the Board of Management is not at liberty to quantify WA284/2018 -: 8 :- damages allegedly suffered by the bank, especially when Section 69 of the Co-operative Societies Act enables the bank to seek recovery of any damages from its employees by instituting appropriate proceedings. In my considered opinion, without any power conferred under law, nobody is vested with power to quantify the damages suo motu and recover the same unilaterally. The procedure adopted by the Management as per Ext.P3, to recover the amount is strange and alien to rule of law. Moreover, it is basic and well settled proposition in law that no man can be a judge of his own cause. Damages is a matter to be adjudicated through a procedure established under law. Having not conferred with any power to quantify damages and that too without even providing an opportunity to the 3rd respondent, petitioner committed grave illegality in quantifying and recovering the damages from the retiral benefits.” We are in perfect agreement with the reasoning above and WA284/2018 -: 9 :- hold that the bank cannot take steps purporting to quantify the misappropriated amount and have it set off from the retiral benefits of the appellant. 7.The appellant relied on Pappachan v. Oriental Kuries Ltd. [2017(2) KLT 305] to contend that pension and gratuity are exempt from attachment even if the bank chooses to file an arbitration case later. That is a matter to be decided by the Co-operative Arbitration Court as and when an issue crops up and not in this writ appeal even before a dispute of that nature has commenced. We also notice that no supervening factors have been pointed out against the appellant resulting in his forfeiture of the gratuity under Section 4(6) of the Payment of Gratuity Act, 1972. The appellant hastens to add that substantial amounts have been recovered by the bank in execution of the awards obtained against the loanees who were allegedly ineligible. What exactly is the amount realised and the extent of the loss allegedly suffered by the bank due WA284/2018 -: 10 :- to the misdemeanor of the appellant are matters to be adjudicated in an arbitration case only. We set aside the impugned judgment and direct the Joint Registrar to pass orders on the representation dated 1.8.2014 put in by the appellant within a period of three months. We make it clear that the appellant as well as the bank shall be heard before orders are passed on the disbursement of the retiral benefits in the light of the observations above. The writ appeal is allowed. No costs. Sd/- V. CHITAMBARESH, JUDGE Sd/SATHISH NINAN, JUDGE Sha/070718 -true copy- PS to Judge