V Anil Kumar vs SOUTH CENTRAL RAILWAY on 6 November 2026

O R D E R

Per: Justice Sunil Thomas, Judicial Member –

The applicant who is a retired Officer Superintendent of Hyderabad

Division of South-Central Railway, aggrieved by the action of respondents Nos. 1 to 4 in recovering a sum of Rs. 2,05,990/- from the applicant’s retirement gratuity, towards the debt arrears payable by the 5th respondent to the 6th respondent Co-operative Society under a contract has approached this Tribunal.

2. The applicant joined the service of South-Central Railway and after long service, superannuated on 31.1.2022, while working as an Office Superintendent. After the retirement, the applicant was issued with Annexure A1 indicating that the total retirement gratuity payable was Rs. 12,29,894/- and out of the said amount, Rs. 2,05,990/- has been recovered towards arrears due to the society. In 2014, the 5th respondent had availed a loan from the 6th respondent Cooperative Society, with the applicant as a surety. He had submitted a declaration for recovery of loan/interest on monthly instalment basis from his regular salary. The recovery was to be made by the 2nd respondent as a matter of course and remitted to the 6th respondent Co-operative Society. Inspite of the above declaration and undertaking given by the 5th respondent, according to the applicant, recoveries towards loan and interest was not being made regularly in the office of the 2nd respondent either by collusion or by negligence on the part of the concerned dealing staff in the office of the 2nd respondent. However, the 5th respondent was regularly drawing his salary without interruption. While so, the 5th respondent submitted a request for voluntary retirement on 20.11.2019 and within a short time his request was accepted with effect from 31.12.2019 duly waving the balance period of notice period. The fact that the request for voluntary retirement of the 5th respondent was accepted at short notice and given effect to by waiving the balance of notice period, is evident from Annexure A4 memorandum issued by the 2nd respondent.

3. According to the applicant, well before the retirement of the 5th respondent, the 6th respondent Co-operative Society had by Annexure A5 intimation dated 9.12.2019 informed that an amount of Rs. 4,30,000/- was due from the 5th respondent and liable to be recovered from his settlement dues. However, the Divisional authorities for reasons best known to them did not recover the monthly dues regularly nor remitted the same to the 6th respondent. In view of it, the 6th respondent had sent Annexure A6 communication dated 31.12.2021 addressed to the 2nd respondent informing that an amount of Rs. 2,05,990/- was liable to be recovered from the applicant’s retirement gratuity. Hence, the said amount was recovered from the retirement of the applicant. Having well known about this and well before applicant’s superannuation on 31.1.2022, the applicant had submitted Annexure A7 representation dated 17.1.2022 informing the respondents about this position. Since it was not responded, Annexure A8 representation dated 16.5.2022 was submitted. Annexure A7 was responded from the office of the Additional General Manager (In-charge of General Manager) by Annexure A9 informing that he may track his grievance through the concerned portal. It was also informed that his grievance was sent to the Additional Divisional Railway Manager, Hyderabad for redressal.

4. According to the applicant, the 5th respondent was actually paid an amount of Rs. 24,15,144/- and out of which the entire DCRG amount of Rs. 8,15,520/- alone was recovered. Further, out of the recovery amount of Rs. 8,15,520/- an amount of Rs. 6,87,625/- was sent to CCS/SC from which an amount of Rs. 1,19,611/- was refunded to the 5th respondent. This is discernible from Annexure A10. Annexure A11 is a communication issued from the office of the 3rd respondent which would show that after deducting the gratuity of Rs. 8,15,520/- balance amount paid to the 5th respondent was Rs. 15,99,103/-.

5. Coming to know about this, the applicant submitted Annexure A12 representation dated 14.7.2022. Annexure A13 is a letter dated 14.12.2020 indicating the action to be taken by the Railways before relieving a person. Annexure A14 is the memorandum regarding recovery from the retired employees.

6. Hence, the applicant has approached this Tribunal seeking the following reliefs: “(i) Call for the records leading to the issue of Annexures A1, A2 and A3 and quash the same to the extent they recover an amount of Rs. 2,05,990/- (Rupees two lakhs five thousand nine hundred and ninety only) from the retirement gratuity of the applicant;

(ii) Direct the respondents 1 to 3 to release and pay the amount of Rs. 2,05,990/- (Rupees two lakhs five thousand nine hundred and ninety only) withheld from the retirement gratuity of the applicant forthwith, with interest @ 9% per annum, to be calculated from 1.2.2022 up to the date of full and final settlement of the same.”

7. Respondents Nos. 1 to 4 filed a detailed reply statement. It was stated that the applicant and the 5th respondents were members of two Co- operative Societies namely Railway Employees Co-operative Credit Society Limited, Secunderabad and Railway Employees Co-operative Credit Society Limited, Chennai. Both the Societies were thrift societies restricted to Railway employees only. Applicant and the 5th respondent are sharing each other as security for availing loans from the above- mentioned Co-operative Credit Societies. The 5th respondent retired from service on 31.12.2019 voluntarily and at the time of retirement liability towards Railway had been recovered from this gratuity amount. In the membership form of both the societies there is a clause that he is not a member of any other Co-operative Society. Both the employees being Government servants had violated the norms fixed in the above Co- operative Societies Act.

8. Both the Societies informed the Railway authorities every month the amount due from the employees, who are going to retire from service. At the time of retirement of the applicant, the Societies by their letter dated 6.1.2022 had advised to recover an amount of Rs. 2,05,990/- towards the applicant’s dues to the society. Accordingly, the 4th respondent recovered the amount and withheld with the Department. The OA was filed only on 29.9.2022 and he retired from service on 31.1.2022. Annexure A1 gratuity bill was created on 31.1.2022 on the same day on which he retired on superannuation. It was stated in Annexure A1 that a sum of Rs. 2,05,990/- was recovered from the Gratuity and deposited in pension account. 5th respondent retired voluntarily from service and at the time of retirement a sum of Rs. 8,15,520/- was recovered from the retirement gratuity towards Railway dues. The applicant had availed a loan from the society. It was the sole responsibility of the applicant to repay the loan availed from the society since the money sanctioned as loan by the society is a public money and it belongs to the members of the society. Being a Government servant, he has to follow the Conduct Rules and it is his duty to avoid indebtness. The recovery of a sum of Rs. 2,05,990/- was based on the advice of the Cooperative Society. The 5th respondent had availed a loan from the Cooperative Credit Society, Secunderabad and at the time of the voluntary retirement the total outstanding loan with the Society was Rs. 11,00,000/-. The total gratuity payable to 5th respondent was 8,15,520/- out of which Rs. 1,27,895/- was adjusted against Railway dues. The balance amount of Rs. 6,87,625/- was recovered from gratuity towards dues to Cooperative Society, Secunderabad. Hence, the entire gratuity has been adjusted against the dues of the society. Annexure R2(a) is the letter of the society dated 6.1.2022 informing the existence of the liability of the applicant.

9. Under the Rules an employee who is seeking voluntary retirement has to give 3 months notice period. However, in appropriate cases it can be waived. The balance notice period of 3 months as per Rule 67(2) of Railway Service (Pension) Rules, 1993 can be waived. Hence, the acceptance of the voluntary retirement application in a short period was in order as evident from the said Rules. At the time of retirement of the 5th respondent, he was entitled to a sum of Rs. 8,15,520/- towards the retirement gratuity. Out of it Rs. 1,25,895/- was recovered towards over payment of wages due to the Railways and balance amount of Rs. 6,87,625/- was recovered from the gratuity of the 5th respondent and sent to the Railway Employees Cooperative Credit Society Limited, Secunderabad.

10. Further, by virtue of Section 126 of the Indian Contract Act, 1872 the applicant being a surety of respondent No. 5, has the duty to refund the liability of the principle debtor. The applicant though claims to have sent a communication as Annexure A4, it was not received by the 2nd respondent. Hence, it was contended that the claim set up by the applicant was not sustainable.

11. The 6th respondent Society filed a separate reply statement admitting that the applicant as well as the 5th respondent, were members of the

society. In terms of Section 84(1) and (2), any dispute between a member and the society, including claim by a surety against the principle debtor, where the multi state Co-operative society has recovered from the surety, any amount, in respect of any debt, has to be referred only under Arbitration. Admittedly, the applicant and the 5th respondent are members of the Society and the substantial relief sought by the applicant in this OA pertains to the aforesaid dispute. The remedy provided under the Multi State Cooperative Societies Act, namely arbitration alone can be invoked by the applicant.

12. According to the Society, the 2nd respondent did not inform the Society about the voluntary retirement of the 5th respondent. However, on coming to know about it, a recovery advice dated 9.12.2019 was sent to the 2nd respondent seeking to deduct a sum of Rs. 4,30,000/- from the settlement dues of the 5th respondent. Annexure R6(E) is the copy of the DCRG advice sent to the 2nd respondent. It was further stated that the Filed Unit Staff at Hyderabad had met the applicant on 5.3.2020 and had informed him about the loan dues and about the borrower’s failure to clear his loan dues and that the society has to adjust the CMTD savings of the applicant. Annexure R6(F) is the report. It was further stated that on

25.8.2020 the Field Unit Staff met the applicant again and informed him about the pendency of the loan evidenced by Annexure R6(H) report of the Field Unit. The applicant himself had availed a loan evidenced by Annexure R6(H). His loan was fully extinguished by regular recovery. On the basis of the above pleadings it was contended that the claim of the applicant is not sustainable.

13. Answering the replies submitted by the respondents, a rejoinder was also filed by the applicant, traversing the allegations in the Original Application.

14. Heard the learned counsel for the parties. Examined the records.

15. The grievance of the applicant is that the 5th respondent had sought for voluntary retirement by communication dated 20.11.2019 and within a short span of time it was sanctioned and he retired on 31.12.2019. His further grievance is that due to the laches on the part of the Society as well as the Railway authorities, the entire recovery could not be effected from the 5th respondent and consequently his arrears had to be taken discharged by the applicant. Thus, a sum of Rs. 2,05,990/- was recovered from the applicant. There is also no dispute that the 5th respondent had availed a loan in 2014 and applicant had stood as a surety. It is also not in dispute that he had committed default. It is also an admitted fact that the applicant himself was the principle debtor and to the loan transaction the 5th respondent was a surety. However, he had discharged his entire liabilities.

16. The 6th respondent had specifically raised a contention that the Original Application is not sustainable in the light of Section 84 of the Multi State Cooperative Societies Act, 2002 (Act 39 of 2002). It was contended that the Section 84(2)(b) specifically provided that disputes regarding recovery has to be resolved through the process of arbitration. Section 84 states that the disputes mentioned therein by a multi-state co- operative society against its paid employee or an industrial dispute has to be resolved by arbitration. Clause 84(2)(b) state that the claim by a surety against the principle debtor where the society had recovered from the surety an amount in respect of any debt or demand due to it from the principle debtor as a result of the default of the principle debtor forms such a dispute. Accordingly, it was contended that the claim set up by the applicant is not susceptible to an Original Application. Evidently, clause 84(2)(a) includes a claim by a multi-state cooperative society for any debt or demand due to it from a member or the nominee, heirs or legal representatives of a deceased member, whether such debt or demand can be admitted or not. In the light of this specific provision, we feel that the Original Application is not legally sustainable.

17. Since the contention that the OA was not sustainable in view of clause 84 of the above Act, was not initially heard and decided, we proceed to consider the case of the applicant on merits also. Annexure R2(c)4 is the surety agreement executed by the 5th respondent, wherein the applicant is a surety. They had jointly affirmed and consented to the recovery of EMIs from them, in case of default. It is also pertinent to note that the Railway Services (Pension) Rules, 1993 provides for recovery and adjustment of Government or Railway dues from pensionary benefits. It includes, claim made by a society also. Rule 15(4)(iii)(c) provides that amounts payable by a Railway servant to Consumer Cooperative societies, Consumer Credit Societies may be recovered from the retirement gratuity which has become payable to the retiring employees.

18. Though the applicant has a specific contention that the Railway did not take proper action, it is evident from Annexure A5 DCRG advice of the credit society dated 9.12.2019 that the respondents were informed about the arrears of Rs. 4,30,000/-. It is also admitted that from the arrears of the 5th respondent a sum of Rs. 6,87,625/- was recovered. Since there was no provision for recovery of the balance amount, it was recovered from the applicant.

19. Evidently, the liability of the surety is co-extensive with that of the principle debtor. Under Section 126 of the Indian Contract Act, 1872, a contract of guarantee, is a contract to perform the promise, or discharge the liability of a third person in case of default. Evidently, the liability of the applicant being a surety is indisputable. It is also clear that under the Indian Contract Act the surety will be discharged from his obligation only if it is established that the principal debtor had colluded with the society. There is absolutely nothing on record to show this except that there are some allegations. On the other hand, it seems that from the DCRG of the 5th respondent, substantial amount was recovered. The applicant being a surety cannot wriggle out of his responsibility. Further, the 6th respondent has a clear specific contention that the staff of the society had informed the applicant orally about the pendency of the liability and Annexures R6(F) and R6(G) were issued. However, the applicant did not take any action.

20. Having considered the entire facts we are of the clear opinion that the claim set up by the applicant cannot be sustained. The respondents have correctly withheld the DCRG from the applicant. Accordingly, the Original Application fails and is accordingly, dismissed. No order as to costs.

(V. RAMA MATHEW)

(JUSTICE SUNIL THOMAS) ADMINISTRATIVE MEMBER JUDICIAL MEMBER

“SA”

Original Application No. 180/00531/2022

APPLICANT’S ANNEXURES Annexure A1 – True copy of the Gratuity Bill, issued by the 4th respondent-Bill Compiling Officer bearing No. nil dated nil.

Annexure A2 – True copy of the order bearing No. SCR/P- HYB/695/Sett./DPG/2022 dated 7.6.2022 and 3.8.2022 issued from the office of the second respondent.

Annexure A3 – True copy of the order bearing No. SCR/P- HYB/695/Sett.DPG/2022 dated 3.8.2022.

Annexure A4 – True copy of the memorandum bearing No. SCR/P- HYB/240/E-Admn/ONRs dated 31.12.2019 issued by the second respondent.

Annexure A5 – True copy of the intimation issued by the 6th respondent-Railway Co-operative Credit Society Ltd. Dated 9.12.2019.

Annexure A6 – True copy of the communication/DCRG Advice dated 31.12.2021 sent by the sixth respondent.

Annexure A7 – True copy of the representation submitted by the applicant dated 17.1.2022 to the second respondent.

Annexure A8 – True copy of the representation submitted by the applicant dated 16.5.2022 to the In-charge General Manager, South Central Railway.

Annexure A9 – True copy of the letter bearing No. G.50/SCRLY/P/2022/00215 dated 30.5.2022.

Annexure A10 – True copy of the letter of intimation of Assets and Liabilities communicated by the Employees Co- operative Credit Society, Secunderabad dated 9.10.2020.

Annexure A11 – True copy of the communication bearing No. PEN/HYB/TIL-DII/24310002492/11.12.19.

Annexure A12 – True copy of the representation dated 14.7.2022 to the Hon’ble Ministry of State, Public Grievances & Pensions, Prime Minister’s Office, New Delhi.

Annexure A13 – True copy of the letter bearing No. SCR/P- HQ/477/SRECCS/MAS dated 14.12.2020.

Annexure A14 – True copy of the memorandum bearing No. 18/03/2015-Estt.(Pay-I) dated 2.3.2016.

Annexure A15 – True copy of the Special Notice bearing No. SN170212 dated 12.10.2017 issued by the 6th respondent, addressed to the 5th respondent.

RESPONDENTS’ ANNEXURES

Annexure R2(a)–True copy of the letter dated 6.1.2022 issued by the Railway Employee’s Co-operative Credit Society Limited, Chennai to the 2nd respondent.

Annexure R2(b)–True copy of the relevant portion of Rule 67(2) of the Railway Services (Pension) Rules, 1993.

Annexure R2(c)–True copy of the authorization given by the applicant to Railway Employees Co-operative Credit Society, Chennai standing as a surety to respondent No. 5.

Annexure R6(A)–True copy of the member application form No. 133547 dated 24.6.2014 submitted by the applicant.

Annexure R6(B)–True copy of the membership application form dated 5.1.2012 submitted by the 5th respondent Shri Md. Azam Hussain.

Annexure R6(C)–True copy of the General Loan Application No. 314378 dated 2.12.2014 submitted by 5th respondent Shri Md. Azam Hussain.

Annexure R6(D)–True copy of the memorandum No. SCRD/P- HYB/240/E-Admn/ONRs dated 31.12.2019, issued by the Sr. DPO, 2nd respondent.

Annexure R6(E)–True copy of the advice No. DN1700167 dated 9.12.2019 to the 2nd respondent.

Annexure R6(F)–True copy of the inter section reply form No. 850026 by Section Officer/Hyderabad Branch of the 6th respondent society.

Annexure R6(G)–True copy of the inter section reply form No. 850022 by Section Officer/Hyderabad Branch of the 6th respondent society.

Annexure R6(H)–True copy of the loan bond No. 307901 submitted by the applicant Shri V. Anil Kumar.

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