Kandalloor Farmers Service Co-operative Bank Limited v S. Devarajan and Joint Registrar of Co-operative Societies (WA Nos. 1650/2012 & 1652/2012 in WP(C).10926/2010)

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC & THE HONOURABLE MR. JUSTICE P.D.RAJAN FRIDAY, THE 29TH DAY OF NOVEMBER 2013/8TH AGRAHAYANA, 1935 WA.No. 1650 of 2012 () IN WP(C).10926/2010 -------------------------------------------AGAINST THE JUDGMENT IN WP(C) 10926/2010 DATED 24-07-2012 APPELLANT(S)/2ND RESPONDENT IN WPC : -------------------------------------------------------------- THE KANDALLOOR FARMERS SERVICE CO-OPERATIVE BANK LIMITED NO.1410, KANDALLOOR, KAYAMKULAM REPRESENTED BY ITS MANAGING DIRECTOR. BY ADV. SRI.P.P.JACOB RESPONDENT(S)/PETITIONER AND 1ST RESPONDENT IN WPC : ------------------------------------------------------------------------------------------ 1. S. DEVARAJAN MANAGING DIRECTOR (UNDER SUSPENSION) KANDALLOOR FARMERS SERVICE CO-OPERATIVE BANK LTD.NO.1410 KANDALOOR KAYAMKULAM (UNDER SUSPENSION - NOW RETIRED) RESIDING AT NADASSERIL HOUSE, KANDALLOOR SOUTH KAYAMKULAM, PIN-690 535. 2. THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES (G) ALAPPUZHA - OFFICE OF THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES ALAPPUZHA-688 001. R1 BY ADV. SRI.K.RAMAKUMAR (SR.) R1 BY ADV. S.M.PRASANTH R1 BY ADV. SMT.SMITHA GEORGE R2 BY SPL.GOVT PLEADER SRI.D.SOMASUNDARAM THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 29-11-2013, ALONG WITH WA. 1652/2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ## **ANTONY DOMINIC & P.D.RAJAN, JJ.** ------------------------------------------- W.A.Nos.1650 & 1652 of 2012 ------------------------------------------Dated this the 29[th] day of November, 2013 ## **JUDGMENT** ## Antony Dominic, J. - 1.These appeals are filed against the judgments in W.P(C). Nos.10926/10 and 14116/09 respectively. 2. We shall deal with WA.No.1652/12 first. - 3.First respondent herein was working as the Managing Director of the first appellant co-operative Bank. On the allegation that he committed certain misconducts in relation to the selection of peons in the bank, by order dated 19.10.2001, he was placed under suspension. Memo of charges were issued and on the basis that his explanation was unsatisfactory, disciplinary proceedings were initiated. An Advocate was appointed as the enquiry officer and in the enquiry, both the management and the delinquent were also represented by advocates. The enquiry officer completed the proceedings and submitted his report to the sub committee of the Board of Directors, the disciplinary authority. The sub committee WA.1650/12 & 1652/12 2 appears to have accepted the report and proposing a punishment of dismissal, it issued a show cause notice to the delinquent. Along with the notice, a copy of the enquiry report was also enclosed. Overruling the objections of the delinquent, by Ext.P1 order dated 14.1.2003, punishment was imposed, reverting him to the entry post of Junior Clerk. He filed an appeal to the Board of Directors and that appeal was dismissed by Ext.P2 order dated 15.5.2003. 4. Thereupon, the delinquent filed Ext.P3 arbitration case before the Co-operative Arbitration Court. That resulted in Ext.P5 award rendered on 19.10.2007. In that award, the disciplinary action was invalidated on the ground that natural justice was violated by the management on account of its failure to furnish a copy of the enquiry report to the delinquent before accepting the findings of the enquiry officer. Accordingly, he was ordered to be reinstated. The appellants filed an appeal to the Co-operative Tribunal as AP.37/07. By Ext.P6 dated 16.3.2009, the Tribunal allowed the appeal and confirmed WA.1650/12 & 1652/12 3 Exts.P1 and P2 orders of the disciplinary authority and appellate authority (Exts.A14 and A15). However, the punishment was held to be disproportionate and in exercise of its appellate power, the Tribunal reduced the punishment to reversion to the immediate lower rank or that of Senior Accountant, whichever is applicable. Soon thereafter, the delinquent attained the age of superannuation on 14.4.2009 and thereupon, the bank issued Ext.P7 letter informing him the same. 5.The delinquent filed the writ petition seeking to quash Exts.P1, P6 and P7 and also for a direction to the appellants and the second respondent herein to issue orders for the disbursal of his terminal benefits. The writ petition was heard by a learned Single Judge of this Court and it was allowed. The reasoning of the learned Single Judge is that due to non-furnishing of a copy of the enquiry report to the delinquent before the findings of the enquiry officer were accepted by the disciplinary authority, natural justice was violated and that the WA.1650/12 & 1652/12 4 absence of an opportunity to him to canvass against the findings of the enquiry officer itself amounted to prejudice to the delinquent. On the above reasoning, the learned Judge quashed Ext.P6 and directed that since the first respondent has already attained the age of superannuation, it must be deemed that he has retired from service without any punishment. It is challenging this judgment of the learned Single Judge, this appeal has been filed. 6. Learned counsel for the appellants contended that after the enquiry report was received by the disciplinary authority, a copy was furnished to the delinquent and therefore, the delinquent had the opportunity to make his representation against the findings of the enquiry officer. According to him, there was no violation of the principles of natural justice, and even if it is accepted that copy of the enquiry report was furnished to the delinquent subsequent to its acceptance by the disciplinary authority, the delinquent did not either plead or prove that any prejudice has been caused to him. WA.1650/12 & 1652/12 5 7.He also contended that in **Managing Director, ECIL, Hyderabad** v. **B.Karunakar** [(1993) 4 SCC 727], the Apex Court has clarified that in a case where there is failure to furnish the enquiry report on a delinquent, that does not result in the automatic invalidation of the whole proceedings and that instead, the court or tribunal should, after furnishing a copy of the enquiry report to the delinquent, allow him to show how, on account of the said failure, prejudice has in fact been caused to the delinquent. The complaint of the counsel for the appellant is that in Ext.P5 award, the Arbitration Court did not bother to examine the matter in the light of the above principle laid down by the Apex Court and that instead, invalidated the disciplinary action and ordered reinstatement on the mere finding that the report was not furnished to the delinquent. He also contended that the finding of the learned Judge that prejudice was caused to the delinquent is, especially when there was no pleading to that effect in the writ petition, baseless. 6 WA.1650/12 & 1652/12 - 8.On the other hand, learned senior counsel for the first respondent contended that throughout it has been the consistent case of the appellant that a copy of the enquiry report was not furnished to him in time and that as a result, prejudice has been caused to him. He also contended that in Ext.P6 judgment of the Tribunal, the delinquent was exonerated of the misconduct and that in spite of exonerating him completely, the Tribunal proceeded to substitute the punishment. This, according to the learned senior counsel, justified the view taken by the learned single Judge. - 9.We have considered the submissions made at the Bar. In so far as this case is concerned, it cannot be disputed that the report of the enquiry officer was not furnished to the delinquent before the findings were accepted by the disciplinary authority and that, as a result, the delinquent lost an opportunity to represent to the disciplinary authority against the findings of the enquiry officer. Though this amounts to an irregularity, the question to be considered is WA.1650/12 & 1652/12 7 what are the consequences of such violation. This issue has been considered by the Apex Court and in the judgment in **ECIL** (supra), it was held thus: “Hence it has to be held that when the Inquiry Officer is not the disciplinary authority, the delinquent employee has right to receive a copy of the inquiry Officer's report before the disciplinary authority arrives at its conclusions with regard to the guilt or innocence of the employee with regard to the charges levelled against him. That right is a part of the employee's right to defend himself against the charges ' levelled against him. A denial of the Inquiry Officer s report before the disciplinary authority takes its decision on the charges is a denial of reasonable opportunity to the employee to prove his innocence and . is a breach of the principles of natural justice Hence the incidental questions raised above may be answered as follows: (i)Since the denial of the report of the Inquiry Officer is a denial of reasonable opportunity and a breach of the principles of natural justice, it follows that the statutory rules, if any, which deny the report to the employee are against the principles of natural justice and, therefore, invalid. The delinquent employee will, therefore, be entitled to a copy of the report even if WA.1650/12 & 1652/12 8 ## the statutory rules do not permit the furnishing of the . report or are silent on the subject (ii) The relevant portion of Article 311(2) of the Constitution is as follows: "(2) No such person as aforesaid shall be dismissed or removed or reduced in rank except after an enquiry in which he has been informed of the charges against him and given a reasonable opportunity of being heard in respect of those charges." Thus the Article makes it obligatory to hold an inquiry before the employee is dismissed or removed or reduced in rank. The Article, however, cannot be construed to mean that it prevents or prohibits the inquiry when punishment other than that of dismissal, removal or reduction in rank is awarded. The procedure to be followed in awarding other punishments is laid down in the service rules governing the employee. What is further, Article 311(2) applies only to members of the civil services of the Union or an all India service or a civil service of a State or to the holders of the civil posts under the Union or a State. In the matter of all punishments both Government servants and others are governed by their service rules. Whenever, therefore, the service rules contemplate an inquiry before a punishment is awarded, and when the Inquiry Officer is not the disciplinary authority the delinquent employee ' will have the right to receive the Inquiry Officer s . report notwithstanding the nature of the punishment WA.1650/12 & 1652/12 9 (iii)Since it is the right of the employee to, have the report to defend himself effectively, and he would not know in advance whether the report is in his favour or against him, it will not be proper to construe his failure to ask for the report, as the waiver of his right. Whether, therefore, the employee asks for the, report . or not, the report has to be furnished to him (iv) In the view that we have taken, viz., that the right to make representation to the disciplinary authority against the findings recorded in the inquiry report is an integral part of the opportunity of defence against the charges and is a breach of principles of natural justice to deny the said right,it is only appropriate ' that the law laid down in Mohd. Ramzan Khan s case (AIR 1991 SC 471) (supra) should apply to employees in - all establishments whether Government or non Government, public or private. This will be the case whether there are rules governing the disciplinary proceeding or not and whether they expressly prohibit the furnishing of the copy of the report or are silent on the subject. Whatever the nature of punishment, further, whenever the rules require an inquiry to be held, for inflicting the punishment in question, the delinquent employee should have the benefit of the report of the Inquiry Officer before the disciplinary authority records its findings on the charges levelled against him. Hence question (iv) is answered . accordingly (v) The next question to be answered is what is the effect on the order of punishment when the report of WA.1650/12 & 1652/12 10 the Inquiry Officer is not furnished to the employee and what relief should be granted to him in such cases. The answer to this question has to be relative to the punishment awarded. When the employee is dismissed or removed from service and the inquiry is set aside because the report is not furnished to him, in some - cases the non furnishing of the report may have prejudiced him gravely while in other cases it may have made no difference to the ultimate punishment awarded to him. Hence to direct reinstatement of the - employee with back wages in all cases is to reduce the rules of justice to a mechanical ritual. The theory of reasonable opportunity and the principles of natural justice have been evolved to uphold the rule of law and to assist the individual to vindicate his just rights. They are not incantations to be invoked nor rites to be performed on all and sundry occasions. Whether in fact, prejudice has been caused to the employee or not on account of the denial to him of the report, has to be considered on the facts and circumstances of each case. Where, therefore, even after the furnishing of the report, no different consequence would have followed, it would be a perversion of justice to permit the employee to resume duty and to get all the consequential benefits. It amounts to rewarding the dishonest and the guilty and thus to stretching the concept of justice to illogical and exasperating limits. It amounts to a "unnatural expansion of natural " . justice which in itself is antithetical to justice Hence, in all cases where the Inquiry Officer's report is not furnished to the delinquent employee in the WA.1650/12 & 1652/12 11 disciplinary proceedings, the courts and Tribunals should cause the copy of the report to be furnished to the aggrieved employee if he has not already secured it before coming to the Court! Tribunal, and give the employee an opportunity to show how his or her case - was prejudiced because of the non supply of the report. If after hearing the parties, the Court., - Tribunal comes to the conclusion that the non supply of the report would have made no difference to the ultimate findings and the punishment given, the Court/Tribunal should not interfere with the order of punishment. The Court/Tribunal should nut mechanically set aside the order of punishment on the ground that the report was not furnished as is regrettably being done at present. The courts should - avoid resorting to short cuts. Since it is the Courts/ Tribunals which will apply their judicial mind to the question and give their reasons for setting aside or not setting aside the order of punishment, (and not any internal appellate or revisional authority), there would be neither a breach of the principles of natural justice nor a denial of the reasonable opportunity. It is only if the Courts/ Tribunals find that the furnishing of the report would have made a: difference to the result in the case that should set aside the order of punishment Where after following the above procedure the Courts/Tribunals sets aside the order of punishment, the proper relief that should be granted is to direct reinstatement of the employee with liberty to the authority, management to proceed with the inquiry, by placing the employee under suspension and continuing the inquiry from the stage of furnishing him with the WA.1650/12 & 1652/12 12 report. The question whether the employee would be - entitled to the back wages and other benefits from the date of his dismissal to the date of his reinstatement if ultimately ordered should invariably be left to be decided by the authority concerned according to law, after the culmination of the proceedings and depending on the final outcome. If the employee succeeds in the fresh inquiry and is directed to be reinstated, the authority should be at liberty to decide according to law how it will treat the period from the date of dismissal till the reinstatement and to what benefits, if any and the extent of the benefits, he will be entitled. The reinstatement made as a result of the setting aside of the inquiry for failure to furnish the report should be treated as a reinstatement for the purpose of holding the fresh inquiry from the stage of furnishing the report and no more, where such fresh inquiry is held. That will also be ” . the correct position in law 10.From the above principles laid down by the Apex Court, it is obvious that where enquiry has been held by an authority other than the disciplinary authority and when it is found that before that findings are accepted by the disciplinary authority, copy was not served on the delinquent, the court cannot straight away proceed to set aside the whole proceedings and order reinstatement and thus reward the delinquent. Instead, WA.1650/12 & 1652/12 13 in cases where report has not been served on the delinquent, serve a copy and call upon him to demonstrate how his case was prejudiced b the non-supply of the report. On such examination, if it is satisfied that prejudice was caused, it should remit the matter to the disciplinary authority for continuing the enquiry, from the stage where the irregularity was committed. On the other hand, if the conclusion is that it would not have made any difference on the findings the court should decline to interfere. Therefore, the question of interfering with the matter arise only in a case where the court concludes that prejudice has in fact been caused. This principle has been reiterated by a Division Bench of this Court in **Damodaran Pillai** v. **State of Kerala** [2010 (4) KLT 769] also, where, it has been held thus in paragraph 12: “12. Ultimately, it needs to be re-stated that in view of Managing Director, E.C.I.L. v. B.Karunakar (1993) 4 SCC 727) and Mohammed Faisal (2010 (1) KLT 857) and as found by us in paragraphs 6 and 7 above, the courts would not interfere in judicial review merely on the technical contention that the copy of the enquiry report was not served even in cases where what is WA.1650/12 & 1652/12 14 ultimately imposed is a major penalty and there would be no interference except in cases where prejudice is demonstrated.” 11.Prejudice is factual and is to be pleaded and proved by the person who is claiming to have been prejudiced. Therefore, in a proceeding arising out of disciplinary action, if the delinquent has a grievance that he was prejudiced due to nonfurnishing of the enquiry report before its acceptance by the disciplinary authority, it is for him to prove that he was prejudiced. Similar view has been taken in respect of a case where the delinquent had contended that he was prejudiced on account of non-furnishing of the enquiry report before its acceptance. One such relevant relevant in this context is **Haryana Financial Corporation** v. **Kailash Chandra Ahuja** [(2008) 9 SCC 31], where, after referring to the principles laid down in **ECIL** (supra), the Apex Court held thus: “21. From the ratio laid down in B. Karunakar, it is explicitly clear that the doctrine of natural justice requires supply of a copy of the Inquiry Officer's report to the delinquent if such Inquiry Officer is WA.1650/12 & 1652/12 15 other than the Disciplinary Authority. It is also clear that non-supply of report of Inquiry Officer is in the breach of natural justice. But it is equally clear that failure to supply a report of Inquiry Officer to the delinquent employee would not ipso facto result in proceedings being declared null and void and order of punishment non est and ineffective. It is for the delinquent-employee to plead and prove that non-supply of such report had caused prejudice and resulted in miscarriage of justice. If he is unable to satisfy the Court on that point, the order of punishment cannot automatically be set aside. 22. In the instant case, it is not in dispute by and between the parties either before the High Court or before us that a copy of the report of Inquiry Officer was not supplied to the delinquent-writ-petitioner. While the contention of the writ petitioner is that since failure to supply Inquiry Officer's report had resulted in violation of natural justice and the order was, therefore, liable to be quashed, the submission on behalf of the Corporation is that no material whatsoever has been placed nor a finding is recorded by the High Court that failure to supply Inquiry Officer's report had resulted in prejudice to the delinquent and the order of punishment was, therefore, liable to be quashed. 23. The High Court, unfortunately, failed to appreciate and apply in its proper perspective the ratio laid down in B. Karunakar, though the High Court was conscious of the controversy before it. The Court also noted the WA.1650/12 & 1652/12 16 submission of the Corporation that there was 'no whisper' in the writ petition showing any prejudice to the delinquent as required by B. Karunakar, but allowed the writ petition and set aside the order of punishment observing that in such cases, prejudice is 'writ large'. 24. In our considered view, the High Court was wrong in making the above observation and virtually in ignoring the ratio of B. Karunakar that prejudice should be shown by the delinquent. To repeat, in B. Karunakar, this Court stated; "Whether in fact, prejudice has been caused to the employee or not on account of the denial to him of the report, has to be considered on the facts and circumstances of each case". 25.It is settled law that principles of natural justice have to be complied with. One of the principles of natural justice is audi alteram partem ("Hear the other side").But it is equally well settled that the concept 'natural justice' is not a fixed one. It has meant many things to many writers, lawyers, jurists and systems of law. It has many colours, shades, shapes and forms. Rules of natural justice are not embodied rules and they cannot be imprisoned within the strait-jacket of a rigid formula.” Thereafter, the Apex Court remitted the matter to the High Court to examine whether failure to furnish the report of WA.1650/12 & 1652/12 17 enquiry officer had or had not resulted in any prejudice to the delinquent employee. If the facts of this case are appreciated in the light of these principles, it can be seen from paragraph 7 of Ext.P5 award that the Arbitration Court invalidated the disciplinary action against the delinquent on the sole ground that the enquiry report was not furnished to the delinquent, before its acceptance by the disciplinary authority. This paragraph also shows that the question whether by such failure, any prejudice has been caused to the delinquent was not examined by the Arbitration Court at all. Therefore, while invalidating the disciplinary action, the court did not comply with the principles laid down by the Apex Court in the judgments noticed above. 12.Although the management appealed against the award of the Arbitration Court and that it was allowed by Ext.P6 order, the Tribunal also did not specifically deal with this issue. In the writ petition filed before this Court also, the first respondent did not plead that any prejudice was caused to the delinquent WA.1650/12 & 1652/12 18 and the delinquent has also no contention that such a pleading was raised either before the Arbitration Court or before the Tribunal. It is in spite of it, the contention was entertained and upheld by the learned Judge and the learned Judge also proceeded to infer that prejudice was in fact caused to the delinquent. In the light of the above facts obtaining in this case, we feel that prejudice, which is a factual issue to be pleaded and proved by the delinquent, could not have been inferred from the vacuum. 13.In such circumstances, according to us, the proper course would be to set aside Ext.P5 award of the Arbitration Court and Ext.P6 order of the Tribunal and to remit the matter back to the Arbitration Court with a direction to examine the question as to whether, as a result of the failure to furnish the report of the enquiry officer to the delinquent before its acceptance by the disciplinary authority, any prejudice was caused to him. Needless to say that in the mean while, since the delinquent has attained the age of superannuation, there is WA.1650/12 & 1652/12 19 no question of continuing the disciplinary action against him. Therefore, if the finding of the arbitration court is that the delinquent succeeded in proving that prejudice was caused, naturally, the entire disciplinary action will have to come to a stop with such a finding. - 14.For the aforesaid reasons, the judgment in W.P(C).14116/09 is set aside. Exts.P5 award and P6 order of the Tribunal are set aside and the matter is remitted to the Arbitration Court, which shall consider whether, as a result of the failure to furnish the enquiry report to the delinquent before it was accepted by the disciplinary authority, any prejudice was caused to him. The Arbitration Court shall examine the matter after affording the parties adequate opportunity to be heard and shall allow the parties to supplement their pleadings and evidence. WA.1652/12 is allowed as above. - 15.WA.1650/12 arises from the judgment in W.P(C).10926/10. That writ petition was filed by the first respondent contending WA.1650/12 & 1652/12 20 that he has not been paid the retiral benefits due to him. By the impugned judgment, following the judgment allowing W.P (C).14116/09, the learned Single Judge directed disbursement of the retiral benefits due to him as expeditiously as possible, at any rate, within three months. 16.Since we have allowed WA.1652/12 filed against the judgment in W.P(C).14116/09, this judgment also has to be modified. At present, the delinquent can aspire to get terminal benefits only at the rate as applicable to the post of Junior Clerk to which he was reverted by Ext.P1 order dated 14.1.2003 and further claim, if any, can only be based on the fresh orders that are to be passed by the Arbitration Court. WA.1650/12 will also stand disposed of with this clarification. ANTONY DOMINIC, Judge. P.D.RAJAN, Judge. kkb.