THE SECRETARY, LOCAL SELF GOVERNMENT DEPARTMENT & ORS. ETC. versus K. CHANDRAN ETC. on 15 March 2022

1. On the conviction in a criminal case for violation of integritynorms in performance of official duties and an appeal pending beforethe High Court, is the employee still entitled to the release of his Death- AB

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Acum-Retirement Gratuity (for short ‘DCRG’) is the moot point arisingfor consideration in the present appeals. We are, in fact, examining aFull Bench judgment of the Kerala High Court which resolved the conflictof view of the Division Benches and ruled in favour of the employees.The controversy having been set down, the Government of Kerala, whichis naturally aggrieved by the decision of the Full Bench is before us onBthe aforesaid issue.

Factual Background:

2. In the main appeal before us, the question of law is the samebut the facts differ in the two cases of the two employees.C

3. (A) K. Chandran, the respondent in the appeal was workingas Village Extension Officer, Noolaphuza. In the course of his employmentthe Vigilance Department registered a crime under Sections 7, 13(1)(d)read with Section 13(2) of the Prevention of Corruption Act, 1998(hereinafter referred to as the ‘PC Act’) alleging that he had receivedDRs.500 as bribe from one K.K. Mohanan. Mr. Chandran was suspendedfrom service on 27.10.2006 and was reinstated in service on 01.03.2008.He retired from service on 31.03.2011 on superannuation while workingas the General Extension Officer in Wayanad.

4. The Inquiry Commissioner and Special Judge, KozhikodeEconvicted K. Chandran vide judgment dated 29.07.2011 in CC No.13/2008 and sentenced him to undergo rigorous imprisonment (for short‘RI’) for 2 years and a fine of Rs.5,000. Aggrieved by the same, K.Chandran filed an appeal before the High Court of Kerala, which wasregistered as Crl. A. No.6053/2013. The appeal was admitted and theFsentence was suspended in the meantime.

5. K. Chandran submitted a request before the AccountantGeneral to release his DCRG in 2014. On not receiving a favourableresponse, he filed an application numbered O.A.(EKM) No.104/2014before the Kerala Administrative Tribunal (for short ‘KAT’), whichGdismissed his application on 09.12.2014 on the ground that judicialproceedings had been concluded and K. Chandran had been convicted.The issue which arose pertained to the intent and purport of Rule 3Aof Part III of the Kerala Service Rules (for short ‘KSR’), which wasstated to require the outcome of departmental or judicial proceedingsto be concluded for the release of DCRG. Thus, if the criminal caseH

went against K. Chandran, it had to be withheld or otherwise it had tobe released. It was opined that K. Chandran being a convict and thattoo for receiving a bribe, could not claim entitlement to the DCRG and,thus, accepting his application would defeat the very purpose of theRule.

6. (B) D. Alexander, another respondent in this matter allegedlycommitted an offence punishable under Section 120B of the Indian PenalCode, 1860 (hereinafter referred to as the ‘IPC’) and Sections 7, 13(1)(d)read with Section 13(2) of the PC Act while he was in service and avigilance case was initiated against him. He was suspended from serviceon 28.11.2003 and was reinstated in service on 29.03.2004. He retiredfrom service on 30.04.2004 on superannuation while working as theTaluk Supply Officer of Mukundapuram, Irinjalakuda.

7. The Inquiry Commissioner and Special Judge, Thrissurconvicted D. Alexander vide judgment dated 11.07.2014 in CC No.07/2006 and sentenced him to undergo RI for 2 years and a fine of Rs.2,000.An appeal was filed before the High Court of Kerala, being Crl. A.No.672/2014, the same was admitted and the sentence suspended pendingthe disposal of the appeal which is still pending before the High Court ofKerala.

8. D. Alexander was also aggrieved by the non-issuance of theDCRG and, thus, filed O.A. No.300 of 2015 before the KAT.

9. He submitted that the DCRG can only be withheld only untilthe proceedings against an employee are concluded. The vigilance caseagainst him had already been concluded in terms of the judgment dated11.07.2014. The KAT, however, observed that the pensionary claims ofD. Alexander had been duly admitted but only provisional pension wasgranted to him since a vigilance inquiry was pending against him at thetime of retirement.

10. It was opined that the appeal instituted by D. Alexander wasnot capable of being treated as a proceeding against him and therefore,no judicial proceedings were pending against him. The KAT directed theState to release the DCRG and other pensionary benefits of D. Alexanderwithout any delay, within a period of three months from the date ofreceipt of the order.

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A11. We thus set forth the factual matrix of the two cases whereindifferent conclusions were reached on the interpretation of the rules.We may also note here that the Government of Kerala had issued specificguidelines on 27.03.2002 directing the authorities to finalise departmentalaction or vigilance inquiries within one year of the retirement. That periodexpired a long time ago. Thus, there is no issue here of any futureBdepartmental proceedings being initiated irrespective of the results ofthe criminal appeals. The result of the appeals or any proceeding arisingfurther would determine the fate of the respondents insofar as the chargeagainst them is concerned. The only issue, thus, to be examined by theHigh Court was whether pending criminal appeal, and with the sentenceCbeing suspended, could the DCRG be directed to be released on theconstruction of the applicable rules.

12. In the two factual matrices referred to, K. Chandranapproached the High Court of Kerala in O.P.(KAT) No.78/2015 seekingto set aside the order and requiring the disbursement of DCRG within aDfixed time, while the State in the latter matter of D. Alexander approachedthe High Court of Kerala in O.P.(KAT) No.428/2019 for setting aside ofthe relief which had been granted to the employee.

13. In view of there being a divergence of opinion, the DivisionBench considered it appropriate to refer the matter to a larger Bench asEthe two applications before the KAT had produced different results.

The High Court proceedings:

14. The State of Kerala sought to advance a plea that normallythere cannot be any proceedings continued against a Government servantFafter retirement as the employer-employee relationship does not subsist.However, Rule 3 in the KSR deems continuation of service in the caseof a delinquent servant even after superannuation if any departmental orjudicial proceedings are initiated, for the limited purpose of theirfinalisation. A punishment under Rule 3 could be for grave misconductor negligence which may also lead to dismissal. In the event of an orderGof dismissal being passed, even after retirement, the Government servantwould have to forfeit his pension and DCRG.

15. On the other hand, the counsel for K. Chandran and D.Alexander sought to canvas the valuable right of a Government servantflowing from service rules. As a consequence, any action could only beH

taken against pension and not against DCRG. There was contended tobe no enabling provision allowing automatic forfeiture of DCRG onconviction in a criminal proceedings and hence it cannot be withheldeven if the proceedings culminate adversely against the employee.

16. The High Court in terms of the impugned judgment dated08.09.2020 opined in favour of the respondent-employees. Rule 3 ofthe KSR was read as empowering the Government to punish thedelinquent employee by withholding, withdrawing or reducing, for aspecified period or permanently, the pension payable or to orderrecovery for any pecuniary loss, but again only from the pension. Thesame could not be done from the DCRG. Rule 3A of the KSR wasopined to be only tailored towards the effective implementation of Rule3 and could not have any separate or distinct consequences. Rule 3Ahaving two parts, it was opined that the first part dealt with certainconditions on the disbursal of pension in the cases of a continuingproceeding while the second part allowed DCRG or gratuity to bewithheld until the conclusion of the proceedings. The second part washeld to have an unnecessary penalising effect on an employee whileproceedings are pending and would have onerous consequences if theproceedings ended in exoneration. This was so as the provision did notcontemplate any modality for recompensation if the DCRG is paidafter a long period of time.

17. The High Court also referred to Ruling Nos. 2 & 3 under Rule3 of the KSR providing that the disciplinary authority was only empoweredto reach a finding and the ultimate action could only be taken by thePublic Service Commission. The conclusion, thus, sought to be drawnwas that it showed that the Government was conscious of the deleteriouseffect of withholding of pension on an employee. Note 2 to Rule 3 providedthat the word ‘pension’ did not include DCRG and, thus, liabilities couldbe recovered from DCRG only after giving the employee a reasonableopportunity to explain. Ruling 3 clarified that consent was not necessaryfrom the employee before recovering the same and only a communicationof such liability was necessary.

18. In view of the aforesaid, it was held that the recovery underRule 3 could only be against pension and not DCRG, and Rule 3A insofaras it permitted DCRG to be withheld was struck down.

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SUPREME COURT REPORTS

The Rules:

19. The relevant Rules of the KSR read as under:

“THE KERALA SERVICE RULES

PART III

PENSION

CHAPTER I

SECTION 1 – General Rules”

“3 The Government reserve to themselves the right of withholdingor withdrawing a pension or any part of it, whether permanentlyor for a specified period, and the right of ordering the recoveryfrom a pension of the whole or part of any pecuniary loss causedto government if in a departmental or judicial proceeding, thepensioner is found guilty of grave misconduct or negligence duringthe period of his service, including service rendered upon re-employment after retirement:

Provided that –

(a) such departmental proceeding, if instituted while the employeewas in service, whether before his retirement or during his re-employment, shall after the final retirement of the employee, bedeemed to be a proceeding under this rule and shall be continuedand concluded by the authority by which it was commenced inthe same manner as if the employee had continued in service; (b) such departmental proceeding, if not instituted while theemployee was in service, whether before his retirement or duringhis reemployment,-

(i) shall not be instituted save with the sanction of the Government;(ii) shall not be in respect of any event which took place morethan four years before such institution; and

(iii) shall be conducted by such authority and in such place as theGovernment may direct and in accordance with the procedureapplicable to departmental proceeding in which an order ofdismissal from service could be made in relation to the employeeduring his service;

(c) no such judicial proceedings, if not instituted while the employeewas in service whether before his retirement or during hisreemployment, shall be instituted, save with the sanction of theGovernment, in respect of a cause of action which arose or anevent which took place more than four years before such institutionand; (d) The public Service Commission shall be consulted before finalorders are passed.

Explanation: - For the purpose of this rule –

(a) a departmental proceeding shall be deemed to be instituted onthe date on which the statement of charges is issued to theemployee or pensioner or if the employees has been placed undersuspension from an earlier date, on such date; and (b) a judicial proceeding shall be deemed to be instituted-

(i) in the case of a criminal proceeding, on the date on which thecomplaint or report of police officer on which the Magistrate takescognizance, is made, and

(ii) in the case of a civil proceeding, on the date of presentation ofthe plaint in the Court.

Note1.- As soon as proceedings of the nature referred to in thisrule are instituted the authority which institutes such proceedingsshould without delay intimate the fact to the Audit Officer. Theamount of pension withheld under this rule should not ordinarilyexceed one–third of the pension originally sanctioned. In fixingthe amount of pension to be so withheld regard should be had tothe consideration whether the amount of the pension left to thepensioner in any case would be adequate for his maintenance.

Note2.- The word ‘pension’ used in this rule does not includedeath-cum-retirement-gratuity. Liabilities fixed against anemployee or pensioner can be recovered from the death-cum-retirement-gratuity payable to him without the departmental /judicial proceedings referred to in this rule, but after giving theemployee or pensioner concerned a reasonable opportunity toexplain.

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Note-3 The liabilities of an employee should be quantified eitherbefore or after retirement and intimated to him before retirementwithin a period of three years on becoming pensioner. The liabilitiesof pensioner should be quantified and intimated to him.

Amounts due from a Government employee or pensioner toGovernment Companies, Local Bodies, Co-operative Societies,etc., though not treated as Government dues may be recoveredfrom the death-cum-retirement gratuity payable to him with hisconsent in writing.

RULING No. 2

According to proviso (a) under this rule, departmental proceedings,if instituted while the employee was in service, whether beforehis retirement or during his reemployment, shall after the finalretirement of the employee be deemed to be a proceeding underthis rule and shall be continued and concluded by the authority bywhich it was commenced in the same manner as if the employeehad continued in service. A doubt was raised as to whether in thecase of an employee whose case falls within the purview of theproviso and proceedings against whom were instituted by anauthority subordinate to Government, order for withdrawal/withholding of pension can be passed by the subordinate authorityon the conclusion of the proceedings. The function of theDisciplinary Authority is only to reach a finding on the charge andto submit a report recording its findings to the Government.Government will then consider the findings and take a final decision.In case Government decide to take further action under Rule 3the Government will serve the person concerned with a show-cause notice specifying the action proposed to be taken under thisrule and the person concerned will be required to submit his replyto the show-cause notice within such time as may be specified bythe Government. The Government will consider the reply inconsultation with the Public Service commission and passnecessary orders in the name of the Governor.

The above procedure in regard to the issue of show-cause noticewill also apply to a case where the Governor functions as theDisciplinary Authority.

THE SECRETARY, LOCAL SELF GOVERNMENT DEPARTMENT &

The note 2 above does not mean that the employee’s or pensioner’sconsent should be obtained for recovering the liabilities from thedeath-cum-retirement gratuity payable to him. What itcontemplated is only a communication of such liabilities to him soas to enable him to submit his explanation before the recovery iseffected. It should be specifically stated in the communicationthat if no reply is received within 30 days of its issue, it will bepresumed that the employee or pensioner has no explanation tooffer and that further action will be taken on that basis.

3-A. (a) Where any departmental or judicial proceedings is institutedunder Rule 3 or where a departmental proceeding is continuedunder clause (a) of the proviso thereto, against an employee whohas retired on attaining the age of compulsory retirement orotherwise he shall be paid during the period commencing fromthe date of his retirement to the date on which, upon conclusion ofsuch proceeding final orders are passed, a provisional pension notexceeding the maximum pension which would have beenadmissible on the basis of his qualifying service up to the date ofretirement, or if he was under suspension on the date of retirementup to the date immediately preceding the date on which he wasplaced under suspension, but no gratuity or death-cum-retirementgratuity shall be paid to him until the conclusion of such proceedingand the issue of final orders thereon.

(b) Payment of provisional pension made under clause (a) shallbe adjusted against the final retirement benefits sanctioned to suchemployee upon conclusion of the aforesaid proceeding, but norecovery shall be made where the pension finally sanctioned isless than the provisional pension or the pension is reduced orwithheld either permanently or for a specified period.

Note:- The grant of pension under this rule shall not prejudiceoperation of Rule 59 when final pension is sanctioned uponconclusion of the proceeding.”

The Appellant’s submissions:

20. Learned counsel for the appellant contended that Rule 3reserves with the Government the right to withhold or withdraw pensionand the proviso stipulates that if such departmental proceedings are AB

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Ainstituted while an employee was in service, they are to be deemed to beproceedings under this Rule even post retirement. Note 2 to Rule 3 ofthe KSR states that the liabilities against an employee or pensioner canbe recovered from the DCRG without any departmental or judicialproceedings but after giving such a person a reasonable opportunity toexplain. Thus, DCRG can be utilised to compensate the losses of theBdepartment. Ruling 1 to Rule 3 states that the amounts due from aGovernment employee or pensioner may be recovered though nottreated as Government dues. It was, thus, contended that Rule 3 allowsrecovery of amounts due to the Government from DCRG even asrecovery from pension is restricted so as to enable the pensioner toCmaintain themselves.

21. Rule 3A was contended to be applicable to departmental/judicialproceedings which had not concluded. Thus, it provided for payment ofprovisional pension to an employee and was independent of what hasbeen observed in Rule 3. His contention was that the High CourtDproceeded on a wrong premise that Rule 3A was only for effectiveimplementation of Rule 3.

22. A reference was also made to Clause 303A(4) of the KeralaFinancial Code, Volume I, which provides that a loss sustained by theGovernment can be recovered from the DCRG. The relevant portionEreads as under:

“General principles and procedure for fixing andenforcing responsibility for losses 303A. The following general principles should be followed inenforcing the personal responsibility of the Government servantFor servants concerned for a loss sustained by the Governmentthrough fraud or negligence on his part or on the part of any otherGovernment servant to the extent be contributed to the loss by hisown action or negligence and of any person for a loss sustainedby the Government on account of a criminal offence committedby him:—”

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“(4). (a) In cases where a competent authority holds that aGovernment servant is responsible for a loss sustained by theGovernment and orders that any amount should be recovered fromHhim and he is about to retire from service, the amount should be recovered as far as possible by deduction from the last pay andallowances or leave salary due to him. If the amount due toGovernment exceeds the amount payable to the Governmentservant, the excess shall be recovered from his claim for death-cum-retirement-gratuity after giving the officer a reasonableopportunity to explain. If the amount proposed to be recoveredexceeds the death-cum-retirement-gratuity, the excess over death-cum-retirement-gratuity can be recovered from the arrears ofpension, if any, due to the officer if written consent is obtainedfrom him as pension (as distinct from death-cum-retirement-gratuity) enjoys the protection of the ‘Pension Act’. A writtenconsent is valid only to the extent it covers the amount of pensionearned by him till the date of such written consent.

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(b) If, however, the liabilities could not be finalised but could beestimated at the time of retirement, either the estimated amountof the outstanding dues plus 25 per cent thereof should be withheldfrom death-cum-retirement-gratuity or a surety bond or cashdeposit not exceeding the estimated amount of the outstandingdues plus 25 per cent thereof should be accepted before releasingpension and death-cum-retirement gratuity.

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(c) If disciplinary proceedings are being continued against anofficer under the Service Rules on the date of retirement, only aprovisional pension should be sanctioned to him withholdinghowever, the entire death-cum-retirement-gratuity due to him.

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(d) In cases where the liabilities could not be estimated the pensionand death-cum-retirement-gratuity will be released provisionallyafter withholding from the death-cum-retirement gratuity theamount noted below:

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(1) Officers in charge of cashor stores

The full amount of death-cum-retirement gratuity.

(2) Gazetted Officers otherthan those in (1) above 10 per cent of the death-cum-retirement gratuity or Rs. 2,000Gwhichever is higher.

(3) Non-Gazetted Officersother than (1)

10 per cent of the death-cum-retirement gratuity or Rs. 600whichever is higher H

In all cases where the liabilities could not be assessed and fixedbefore retirement of the Government servants, efforts should bemade to assess and adjust the recoverable dues within a period ofone year from the date of retirement of the Government servantconcerned. If in any case, the liability could not be assessed andadjusted within one year, the amount withheld from the death-cum-retirement gratuity or the surety bond or cash deposit acceptedunder paragraph (c) or (d) above will be released. Disciplinary actionshall be taken against the officers responsible for the failure to assessand adjust the liabilities within the prescribed period.

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(e) If in any case the amount withheld from the death-cum-retirement gratuity or the cash deposit, or the surety bond takenfrom the officer is not adequate to cover the liabilities finally fixed,action should be taken against him under the Service Rules tomake up the loss by withholding, withdrawing or effectingrecoveries from the pensions sanctioned. If action under the ServiceRules is not possible due to the expiry of the time limit prescribedfor such action or due to any other reason, the retired officer willbe proceeded against through a Civil Court for recovering thepecuniary loss caused to Government.

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(f) When a retired Government servant whose pension has alreadybeen sanctioned is held to have caused a loss to the GovernmentEby fraud or negligence while in service and it appears likely thatthe amount could be recovered by bringing a suit against him, thematter should be reported to the Government for orders. If in anyparticular case, it is not found feasible to take action against aretired Government servant in regard to a loss sustained by theFGovernment on account of any fraud or negligence found to havebeen committed by him while in service, this should not be madean excuse for absolving any other Government servants who arealso responsible for the loss and are still in service. Similarly, thefact that it is not possible to fix responsibility on the officials whoGinitiated or acquiesced in the initiation of any irregularity resultingin loss to Government will not exonerate those who subsequentlyacquiesced in the continuation of the irregularity. It is the duty ofall Government officials to look after the financial interests ofGovernment and Government will hold their officers responsiblefor such irregularities, not only those who originated them but alsoHthose who subsequently permitted their continuance.”

23. In view of the aforesaid provision, it was contended that Rule3A is necessary for temporary forfeiture of DCRG during pendency ofdepartmental proceedings. Another contention sought to be raised wasthat Section 4(6)(b) of the Payment of Gratuity Act, 1972 (hereinafterreferred to as the ‘Gratuity Act’) enables forfeiture of gratuity if theservice of an employee has been terminated. Thus, unless a provisionfor forfeiture of DCRG during pendency of proceedings is maintained,no forfeiture at all can be effected after the disciplinary proceedings arecomplete and the observations of the High Court would render Section4(6)(b) otiose. The relevant provision reads as under:

“4. Payment of gratuity. – (1) Gratuity shall be payable to anemployee on the termination of his employment after he hasrendered continuous service for not less than five years, - (a) on his superannuation, or (b) on his retirement or resignation, or

(c) on his death or disablement due to accident or disease:”

“(6) Notwithstanding anything contained in sub-section (1), - (a) the gratuity of an employee, whose services have beenterminated for any act, wilful omission or negligence causing anydamage or loss to, or destruction of, property belonging to theemployer, shall be forfeited to the extent of the damage or loss socaused.

(b) the gratuity payable to an employee may be wholly or partiallyforfeited] -

(i) if the services of such employee have been terminated for hisriotous or disorderly conduct or any other act of violence on hispart, or

(ii) if the services of such employee have been terminated for anyact which constitutes an offence involving moral turpitude, providedthat such offence is committed by him in the course of hisemployment.”

24. Learned counsel for the appellant submitted that the issuewas really no more res integra in view of the judgment of this Court in A

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AChairman-cum-Managing Director, Mahanadi Coalfields v.Rabindranath Choubey[1] opining that an employer can withhold paymentof gratuity even after retirement due to pendency of disciplinaryproceedings until the same are concluded and that the High Court hadincorrectly distinguished the judgment on the ground that the KSR didnot have a provision for recovery of gratuity.B

The Respondent’s submissions:

25. Learned counsel for the respondent, on the other handdefended the High Court’s judgment and submitted that Chairman-cum-Managing Director, Mahanadi Coalfields[2] of this Court interpretedCthe provisions of the Conduct, Discipline and Appeal Rules, 1978, whichare the rules of a private company and provided for withholding of gratuity.The KSR stood on a different footing and did not empower theGovernment to withhold or recover any amount from the DCRG. Further,the Gratuity Act did not apply to Government employees of the State. Inthis behalf a reference was made to the definition of “employee” underDSection 2(e) of the Gratuity Act, which reads as under:

“2. Definitions.—In this Act, unless the context otherwiserequires, -”

E“(e) “employee” means any person (other than an apprentice)employed on wages, in any establishment, factory, mine, oilfield,plantation, port, railway company or shop to do any skilled, semi-skilled, or unskilled, manual, supervisory, technical or clerical work,whether the terms of such employment are express or implied,F[and whether or not such person is employed in a managerial oradministrative capacity, but does not include any such person whoholds a post under the Central Government or a State Governmentand is governed by any other Act or by any rules providing forpayment of gratuity].

26. It was submitted that there is a specific exclusion of a personGwho holds the post under the Central or a State Government and isgoverned by any other Act or by any rules providing for payment ofgratuity.

1 (2020) 18 SCC 71H2 (supra)

Our View:

27. We have given thought to the matter and find it difficult tosustain the judgment of the High Court on the interpretation of the Rules.

28. We must keep in mind the very objectives of holding backpension or the DCRG. One can be to recover the amounts found duefrom the delinquent employee of any nature whatsoever after appropriatenotice and proceedings. The second eventuality is if an employee isdismissed from service. It can hardly be doubted that in the secondeventuality of the dismissal from service the employee would lose allretirement benefits.

29. In the present case separate departmental proceedings havenot been concluded within the given timeframe. The State in its wisdomhas deemed it appropriate to await the outcome of the criminalproceedings. The result of this would mean that the State would still beempowered to dismiss an employee from service based on the convictionin the criminal case. The State cannot have an opportunity to have separatedisciplinary proceedings even if the acquittal takes place. If this werethe intention, the departmental proceedings should have been concludedin the stipulated time. We are conscious of the fact that a mere acquittalin a criminal case would not imply that no action can be taken indepartmental proceedings. However, the choice was with the StateGovernment as to whether they would like to hold separate departmentalproceedings or go by the final view of the criminal court, the latter isnaturally based not on preponderance of probabilities but on proof beyondreasonable doubt. It is the latter course which the State has followed.Thus, an employee’s entitlement to all benefits and the right not to benow dismissed from service all inure if the criminal proceedings concludein favour of the employee. However, were these proceedings to beconcluded against the employee and the conviction upheld it cannot besaid that the department would still be required to pay all the retirementbenefits. The department can also pass an order of dismissal based solelyon the criminal conviction.

30. The aforesaid being the position, the question is as to whatshould be done in the hiatus period as per the Rules.

31. The KSR do provide for a provisional pension so that theeconomic sustenance requirements of an employee are taken care of.The provisional pension cannot be more than the actual pension. It isnobody’s case that the respondents-employees are not getting provisional A

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Apension. Note 1 to Rule 3 clarifies that even if the pension is finallywithheld, ordinarily the withheld portion should not be more than 1/3[rd] ofthe pension originally sanctioned, as the issue of sustainability comes tothe fore. However, there is no such limitation on the DCRG. The importantaspect is whether Rule 3A is to be construed in the context of Rule 3 orshould be read independently of itself. The High Court seeks to take aBview that Rule 3A is in a sense assisting Rule 3 and does not have anyindependent existence.

32. We are unable to agree to this line of reasoning.

32. We are unable to agree to this line of reasoning.

33. Rule 1 to Part III of the KSR begins with the entitlement ofCpension of all employees to whom the service rules apply. Rule 2stipulates that future good conduct shall be an implied condition of everygrant of a pension and there is entitlement to withhold or withdraw apension or part thereof whether permanently or for a specified period.In terms of Rule 2(b), where a pensioner is convicted of a serious crimeby a court of law, action under clause (a) shall be taken in the light of theDjudgment of the court relating to such conviction. In the facts of the caseit can hardly be said that the conviction on the ground of corruptionwould not be classified as a serious crime for a person holding a publicpost. In terms of clause (c) of Rule 2, in case of prima facie guilt ofgrave misconduct, a procedure has been prescribed to be followed, whichEincludes as per clause (d) of Rule 2 consultation with the Public ServiceCommission. It is after the aforesaid Rules that Rule 3 commences wherethe Government reserves to themselves the right to withhold or withdrawa pension or any part of it, whether permanently or for a specified period,and all its ramifications. Certain protective provisions have been madeeven in that eventuality. This provision is applicable to pension is clarifiedFby Note 2, as it is stipulated that the word ‘pension’ would not includeDCRG. Thus, DCRG and pension have been dealt with as separateaspects. The three Notes are followed then by Rulings 1, 2, & 3.

34. However, Note 2 provides that the liabilities fixed against anemployee or a pensioner can be recovered from DCRG without theGdepartmental/judicial proceedings referred to in this Rule but after givingan employee or pensioner concerned a reasonable opportunity to explain.If any part of DCRG was not supposed to be available for recovery ofamounts, there would be no reason of inclusion of this aspect of DCRGin Note 2 and a view to the contrary would make the latter part of Note2 otiose.H

35. The aforesaid Note 2 is further clarified by Ruling No. 3,which stipulates that Note 2 does not mean that the employee’s orpensioner’s consent should be obtained for recovering the liabilities fromDCRG. What has been contemplated is only a communication of suchliabilities to him so as to enable him to submit his explanation. Thus, thisRuling No.3 also deals with the DCRG. It is thereafter that Rule 3Astarts which refers to the grant of provisional pension not exceeding themaximum pension which would have been admissible on retirementwhere departmental or judicial proceedings have been initiated underRule 3. It is clearly stipulated that no gratuity or DCRG shall be paid tohim until the conclusion of such proceedings and the issuance of finalorder thereof.

36. The High Court, in our view, has introduced a new legislationby undertaking the exercise of reading down. We do believe that there isabsolutely no need to do so when the language of the rule is so clearconveying its intended meaning without any ambiguity.

37. We are, thus, of the view that Rule 3A cannot be read inisolation nor the latter part of it struck down as done by the High Court.Rule 3, Note 2, Ruling 3, and Rule 3A have to be read in conjunction asthey provide for the treatment of the DCRG in case of disciplinary orjudicial proceedings pending at the stage of retirement. Even in the absenceof these proceedings in certain eventualities the amounts can be recoveredfrom the DCRG.

38. We are of the view that the principle as enunciated inChairman-cum-Managing Director, Mahanadi Coalfields[3] wouldapply even though it is in the context of a different set of Rules. It wouldbe suffice to reproduce paragraphs 11 & 11.2 and 46 & 47 of the saidjudgment as under:

“11. Once it is held that a major penalty which includes thedismissal from service can be imposed, even after the employeehas attained the age of superannuation and/or was permitted toretire on attaining the age of superannuation, provided thedisciplinary proceedings were initiated while the employee was inservice, sub-section 6 of Section 4 of the Payment of GratuityAct shall be attracted and the amount of gratuity can be withheldtill the disciplinary proceedings are concluded.”................

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SUPREME COURT REPORTS

“11.2. It is required to be noted that in the present case thedisciplinary proceedings were initiated against the respondent-employee for very serious allegations of misconduct allegingdishonestly causing coal stock shortages amounting to Rs.31.65crores and thereby causing substantial loss to the employer.Therefore, if such a charge is proved and punishment of dismissalis given thereon, the provisions of sub-section 6 of Section 4 ofthe Payment of Gratuity Act would be attracted and it would bewithin the discretion of the appellant-employer to forfeit the gratuitypayable to the respondent. Therefore, the appellant-employer hasa right to withhold the payment of gratuity during the pendency ofthe disciplinary proceedings.”

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“46. Several service benefits would depend upon the outcome ofthe inquiry, such as concerning the period during which inquiryremained pending. It would be against the public policy to permitan employee to go scot-free after collecting various servicebenefits to which he would not be entitled, and the event ofsuperannuation cannot come to his rescue and would amount tocondonation of guilt. Because of the legal fiction provided underthe rules, it can be completed in the same manner as if theemployee had remained in service after superannuation, andappropriate punishment can be imposed. Various provisions ofthe Gratuity Act discussed above do not come in the way ofdepartmental inquiry and as provided in Section 4(6) and Rule34.3 in case of dismissal gratuity can be forfeited wholly or partially,and the loss can also be recovered. An inquiry can be continuedas provided under the relevant service rules as it is not provided inthe Payment of Gratuity Act, 1972 that inquiry shall come to anend as soon as the employee attains the age of superannuation.We reiterate that the Act does not deal with the matter ofdisciplinary inquiry, it contemplates recovery from or forfeiture ofgratuity wholly or partially as per misconduct committed and doesnot deal with punishments to be imposed and does not supersedethe Rules 34.2 and 34.3 of the CDA Rules. The mandate of Section4(6) of recovery of loss provided under Section 4(6)(a) andforfeiture of gratuity wholly or partially under Section 4(6)(b) is furthered by the Rules 34.2 and 34.3. If there cannot be anydismissal after superannuation, intendment of the provisions ofSection 4(6) would be defeated. The provisions of section 4(1)and 4(6) of Payment of Gratuity Act, 1972 have to be givenpurposive interpretation, and no way interdict holding of thedepartmental inquiry and punishment to be imposed is not thesubject matter dealt with under the Act.

47. Thus considering the provisions of Rules 34.2 and 34.3 of theCDA Rules, the inquiry can be continued given the deemingfiction in the same manner as if the employee had continued inservice and appropriate punishment, including that of dismissalcan be imposed apart from the forfeiture of the gratuity whollyor partially including the recovery of the pecuniary loss as thecase may be.”

39. We also believe that it is a very restrictive view to disburseDCRG on account of the proceedings against a pensioner coming to anend, even where a conviction has arisen. This is especially so where theconvicted person has availed of the remedy of appeal. An appeal is acontinuation of the proceedings in trial and would be, thus, a continuationof judicial proceedings. For example, if no appeal had been filed, can itbe said that despite conviction in the criminal case, the State is withoutauthority of forfeiting the DCRG or pension for that matter? If it is notso, as we believe, then the pendency of the appeal cannot disentitle theState from withholding the DCRG, considering that it is a hiatus periodwithin which certain arrangements have to be made which would bedependent on the outcome of the appeal.

40. Learned counsel for the respondent did seek to contend beforeus that if the appeals are pending over a long period of time it should notprejudice the respondents. That is a matter for them to take up beforethe High Court for disposal of the appeals, which are undoubtedly quiteold.

41. We have aforesaid also clarified that there is no question ofany other departmental proceedings arising independently against therespondents, as the conclusion of the criminal proceedings would entitlethe State to pass appropriate orders based solely on the result of theaforesaid proceedings.

A

B

C

D

E

F

G

H

AConclusion:

42. We are, thus, of the view that the impugned judgment of theFull Bench of the Kerala High Court cannot be sustained, and it cannotbe opined that the DCRG would have to be released to the respondentspending consideration of the criminal appeal.

B

43. The impugned judgment is set aside and the appeals areaccordingly allowed leaving the parties to bear their own costs.

C

Devika Gujral

(Assisted by : Shubhanshu Das, LCRA)

Appeals allowed.

D

E

F

G

H