Allowed

James Josson v. the Muvattupuzha Rubber Marketing Co-Operative Society Ltd.

Kerala HC2 Sept 2016WP(C)/2125/2015

Case brief

AI extract

What is this about?

This writ petition challenged the detention of gratuity and earned leave surrender amounts by a rubber marketing society. The court held that pending criminal proceedings do not justify withholding retirement benefits, relying on Supreme Court precedent, and directed payment.

What did the court decide?

Directed the 1st respondent to pay gratuity and EL surrender amounts with 7% interest within four months; directed 3rd and 4th respondents to ensure payment via liquidation if unable.

James Josson Vs the Muvattupuzha Rubber… — Pension and Retirement Benefits | Kerala HC (2016)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT:

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THE HONOURABLE MR. JUSTICE SHAJI P.CHALY

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FRIDAY, THE 2ND DAY OF SEPTEMBER 2016/11TH BHADRA, 1938

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WP(C).No. 2125 of 2015 (M)

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PETITIONER(S) :

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1. JAMES JOSSON, CHIRAKKATTU HOUSE, EAST MARADY P.O., MUVATTUPUZHA, ERNAKULAM DISTRICT.

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2. VASUDEVAN NAMBOODIRI A.K, ALANKOTTU ILLAM, MARKET P.O., MUVATTUPUZHA, ERNAKULAM DISTRICT.

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BY ADVS. SRI.V.G.ARUN

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SRI.T.R.HARIKUMAR

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RESPONDENT(S) :

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1. THE MUVATTUPUZHA RUBBER MARKETING CO-OPERATIVE SOCIETY LTD.NO. 3094, REPRESENTED BY ITS MANAGING DIRECTOR, MUVATTUPUZHA, ERNAKULAM DISTRICT, PIN-686 661.

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2. THE ADMINISTRATIVE COMMITTEE OF THE MUVATTUPUZHA RUBBER MARKETING CO-OPERATIVE SOCIETY LTD NO. 3094, REPRESENTED BY ITS CONVENOR, MUVATTUPUZHA, ERNAKULAM DISTRICT, PIN - 686 661.

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3. THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES (GENERAL) KAKKANADU, ERNAKULAM, PIN - 682 030.

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4. THE REGISTRAR OF CO-OPERATIVE SOCIETIES, THIRUVANANTHAPURAM, PIN- 695 001.

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R1 & R2 BY ADVS. SRI.C.S.AJITH PRAKASH

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SRI.P.S.SYAMKUTTAN

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R3 & R4 BY SR. GOVERNMENT PLEADER SRI. PAUL VARGHESE.M

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THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 02-09-2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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Msd.

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WP(C).No. 2125 of 2015 (M)

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APPENDIX

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PETITIONER(S)' EXHIBITS :

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EXHIBIT P1: A TRUE COPY OF THE RELEVANT PAGES OF THE AUDIT CERTIFICATE AND AUDIT MEMORANDUM OF THE 1ST RESPONDENT SOCIETY IN THE YEAR 2013-2014 OBTAINED UNDER THE RTI ACT.

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EXHIBIT P2: A TRUE COPY OF THE RELEVANT PAGES OF THE ANNUAL REPORT OF THE 1ST RESPONDENT FOR THE YEAR 2013-2014.

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EXHIBIT P3: A TRUE COPY OF THE REPRESENTATION SUBMITTED BY THE FIRST PETITIONER BEFORE THE 3RD RESPONDENT DATED 29.10.2014.

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EXHIBIT P4: A TRUE COPY OF THE REPRESENTATION SUBMITTED BY THE SECOND PETITIONER BEFORE THE 3RD RESPONDENT DATED 29.10.2014.

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EXHIBIT P5: A TRUE COPY OF THE ENQUIRY REPORT OF THE ASSISTANT REGISTRAR (GENERAL), MUVATTUPUZHA DATED 24.01.2011.

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EXHIBIT P5(A): ENGLISH TRANSLATION OF EXHIBIT P5.

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EXHIBIT P6: A TRUE COPY OF THE REPORT OF THE ASSISTANT REGISTRAR (SC/ST), OFFICE OF THE JOINT REGISTRAR (GENERAL), KAKKANADU DATED 20.03.2013.

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EXHIBIT P6(A): ENGLISH TRANSLATION OF EXHIBIT-P6.

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EXHIBIT P7: A TRUE COPY OF THE SANCTION ORDER OF WORKING CAPITAL OVERDRAFT ISSUED BY THE ERNAKULAM DISTRICT, CO-OPERATIVE BANK LTD., DATED 27.07.2015.

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RESPONDENT(S)' EXHIBITS :

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EXHIBIT R1(A): TRUE COPY OF THE BYELAW OF THE 1ST RESPONDENT SOCIETY.

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EXHIBIT R1(B): TRUE COPY OF THE ORDER DATED 05.02.2014 IN CRL.M.P.NO. 480/2011 AND CRL.M.P.NO. 259/2013 PASSED BY THE COURT OF THE ENQUIRY COMMISSIONER AND SPECIAL JUDGE, THRISSUR.

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EXHIBIT R1(C): TRUE COPY OF THE REPORT DATED 19.02.2013 SUBMITTED BY ASSISTANT REGISTRAR (GENERAL), MUVATTUPUZHA SUBMITTED BEFORE THE JOINT REGISTRAR (GENERAL), ERNAKULAM.

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EXHIBIT R1(D): TRUE COPY OF THE TENTATIVE BALANCE SHEET AS ON 31.03.2015.

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WP(C).No. 2125 of 2015 (M)

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EXHIBIT R1(E): TRUE COPY OF THE FIRST INFORMATION REPORT IN CRIME NO. 2/2014 DATED 11.08.2014 REGISTERED BY THE VIGILANCE AND ANTICORRUPTION BUREAU, ERNAKULAM UNIT.

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EXHIBIT R1(F): TRUE COPY OF THE RELEVANT PAGES OF THE MINUTES BOOK OF THE FIRST RESPONDENT SOCIETY.

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EXHIBIT R1(G): A TRUE COPY OF THE RELEVANT PAGES OF THE MINUTES OF THE COMMITTEE MEETING NO. 7 OF THE 1ST RESPONDENT SOCIETY HELD ON 09.09.2015 WITH TRANSLATION.

//TRUE COPY//

P.A.TO JUDGE.

Msd.

SHAJI P. CHALY, J.

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W.P.(C). No.2125 of 2015

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Dated this the 2^nd day of September, 2016

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JUDGMENT

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This writ petition is filed by the petitioners, retired Managing Director and Accountant of the 1^st respondent society respectively. Admittedly, society was running on loss. Ext.P1 audit report shows that, for the financial year 2013 - 2014 an amount of Rs.24,28,224/- had been set apart for payment of gratuity. Ext.P2 annual report of the year 2013 - 2014 shows that, services rendered by the petitioners are acknowledged and the 1^st respondent has expressed its gratitude towards the services rendered by the petitioners. However, the gratuity and Earned Leave surrender were not paid to the petitioners. Consequent to which, petitioners have submitted Exts.P3 and P4 representations before the 3^rd respondent seeking direction to the 1^st respondent society to release the aforesaid amounts due to the petitioners. First respondent society was always taking a stand that, the society has no sufficient financial viability and flexibility for payment

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W.P.(C). No.2125 of 2015

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of the amounts due to the petitioners. It was thereupon without being yielding any result on Exts.P4 and P5, petitioners have filed this writ petition seeking appropriate direction for payment of gratuity and Earned Leave surrender. This writ petition was filed on 20.01.2015 and till such time, there was no allegation raised against the petitioners, justifying the action of detaining the retiral benefits. It is in this background, this writ petition is filed.

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However, when a counter affidavit is filed on 9.2.2015, allegations are made against the 1^st petitioner attributing responsibility of loss sustained by the 1^st respondent and alleging that he had indulged in various offences in association with the then Managing Committee members. That apart, on the basis of complaint filed before the Special Court, Thrissur and as per the directions thereto, a crime was registered, in which, the 1^st petitioner is the 3^rd accused. Any how, even in the counter affidavit, there is no allegation raised against the 2^nd petitioner. In the counter affidavit, it is also stated that, 1^st respondent is taking steps to institute

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W.P.(C). No.2125 of 2015

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arbitration proceedings to recover the amounts from the 1^st petitioner as well as other responsible members of the Managing Committee.

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First respondent has also contended that, 1^st petitioner, the Managing Director of the 1^st respondent society in association with the then Board Members had indulged in certain misappropriation and maladministration in the society. Consequent to which, actions were initiated pursuant to the direction issued by the Special Judge, Vigilance, Thrissur and a crime was registered. In the meantime, in connection with the financial misappropriation, the Assistant Registrar (General),Muvattupuzha submitted a report before the Joint Registrar (General), Ernakulam stating that, rubber sheets are procured without raising any bill and the same were sold without fixing any price and also without the consent of the members of the 1^st respondent society and there are no enabling provisions in the bye-law empowering the 1^st petitioner or the other persons to act accordingly. It is also stated that, in the stock of rubber sheets so purchased,

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W.P.(C). No.2125 of 2015

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there is deficiency of 3545.6 kgs. for which, the then market value is Rs. 5,56,659/-, evident from Ext.R1(c), report of the Assistant Registrar (General). According to the 1^st respondent, consequent to the financial misappropriation, 1^st respondent is running at a net loss of Rs.36,302,983.42, evident from the tentative balance sheet, Ext.R1(d). Therefore, it is the contention of the 1^st respondent that, the society is finding it difficult to meet the expenses of its day-to-day affairs including payment of salary and other service benefits to its employees. That apart, it is stated that though an amount of Rs.24,28,224/- is set apart towards the provisions for gratuity, no liquid funds are available with the society since it is running in loss. That apart it is also contended that, 1^st petitioner has suppressed the material fact that, there is a crime registered against the 1^st petitioner in terms consequent to the directives issued by the Special Judge, Vigilance. Therefore, it is the contention of the 1^st respondent, 1^st petitioner is not entitled to get any amounts towards the gratuity since consequent to the actions of the 1^st

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W.P.(C). No.2125 of 2015

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petitioner, loss has been suffered by the society, and so also the recovery proceedings in arbitration is pending before the concerned Arbitrator.

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Further, it is contended by the learned counsel, the society is not having sufficient financial sources to pay the amounts to the petitioners as claimed in the writ petition. So also, petitioners are vested with statutory remedy to approach the statutory authorities under the Gratuity Act and the provisions of the Kerala Co-operative Societies Act and Rules. Therefore, according to the 1^st respondent, writ petition lacks merit and it is liable to be dismissed. An additional counter affidavit is also filed by the 1^st respondent reiterating the stand adopted in the counter affidavit and also stating that the mismanagement of the 1^st petitioner has caused financial difficulties to the 1^st respondent society and during the period of his term, the society has suffered huge loss.

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Petitioners have filed a reply affidavit reiterating the stand adopted in the writ petition and also contending that time and again enquiries were conducted by the departmental

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W.P.(C). No.2125 of 2015

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authorities and the Police and the allegations raised by the complainant was found to be false. In that regard, petitioners have produced Exts.P5 and P6 reports. It is thereafter that the complainant has preferred a complaint before the Special Judge and has secured a direction to investigate into the matter and therefore, according to the petitioners, contentions raised in the complaint filed by the complainant as well as the submissions made by the 1^st respondent in the counter affidavit has no basis at all. The attempt of the 1^st respondent is only to see that the amounts are paid to the petitioners somehow or other.

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Petitioners have filed I.A No.1502/2015 and produced a communication dated 27.7.2015 issued by the Ernakulam District Co-operative Society Ltd, wherein, the 1^st respondent society is provided with an Overdraft facility of Rs.1 crore, which is valid up to 30.04.2016. That apart it is also contended that, the society is carrying on its day-to-day affairs and salary is being paid to the employees. So also the members of the Managing Committee are drawing the

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W.P.(C). No.2125 of 2015

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honorarium due to them. Therefore, according to the learned counsel, there is enough financial flexibility for the 1^st respondent to pay off the gratuity as well as the other amounts due to the petitioners.

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Heard learned counsel for the petitioners, learned Senior Government Pleader, learned counsel appearing for the 1^st respondent and perused the documents on record and the pleadings put forth by the respective parties.

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The question to be considered is whether the 1^st respondent bank is at liberty and entitled as of right to detain the gratuity and other amounts on the pretext of the pending criminal proceedings and the pending ARC proceedings against the 1^st petitioner. As noted above, there is no manner of allegation against the 2^nd petitioner. Therefore, the 1^st respondent bank can in no way detain the amounts due to the 2^nd petitioner. The question open for consideration is whether the bank is vested with any power on the basis of the pending proceedings to non-suit the 1^st petitioner for the claim of gratuity and the amounts due towards EL surrender. As

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W.P.(C). No.2125 of 2015

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provided under Section 4(6) of the Gratuity Act, otherwise than thereunder, under no circumstances the gratuity payable to an employee can be detained. Therefore, it can be seen that, 1^st respondent could not point out any provision of law by which the gratuity due to the 1^st petitioner can be detained against the terms and provisions of Gratuity Act. Even going by the principles of law under Part III of Kerala Service Rules also, the gratuity can be retained, only if an action is initiated against an employee while in service. There is no case for the 1^st respondent that any such action was initiated against the petitioners prior to their retirement. Therefore, in my considered opinion, the 1^st respondent is not at liberty to detain the gratuity amount and other legal entitlements to the petitioners. Yet another contention raised by learned counsel for the 1^st respondent is that, the criminal proceedings initiated against the 1^st petitioner along with others is still in force and therefore, till such time the criminal proceedings are culminated in a logical conclusion, the amounts due towards the gratuity and other benefits can be detained by

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W.P.(C). No.2125 of 2015

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the 1^st respondent since, consequent to the actions of the 1^st petitioner, bank has suffered loss.

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In that regard, learned counsel for the petitioners have brought my attention to the judgment of the Apex Court in State of Jharkhand v. Jitendra Kumar Srivastava [2013 (3) KLT 782], wherein the Apex Court had occasion to consider this issue and held that merely because departmental or criminal proceedings are pending, pension or gratuity cannot be withheld by the authorities. In my considered opinion the principles of law laid down in the said judgment is a wholesome answer to the question raised by the petitioners in the writ petition and disputed by the 1^st respondent in its counter. To the contention with respect to a statutory remedy available to the petitioners, I am of the considered opinion that, the pension and gratuity due to an employee is a right emanating from Article 21 of the Constitution of India and therefore, non-payment of the same is an arbitrary and illegal action on the part of the 1^st respondent and therefore, the writ petition is perfectly

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W.P.(C). No.2125 of 2015

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maintainable.

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Therefore, taking into account the respective submissions made across the Bar and reckoning the factual and legal circumstances discussed above, I am of the considered opinion that, petitioners are entitled to succeed in the writ petition. Accordingly the writ petition is allowed. Consequently, there will be a direction to the 1^st respondent to pay the gratuity and EL surrender amounts due to the petitioners with interest @ 7%, within four months from the date of receipt of a copy of this judgment. However, taking into account the submissions made by learned counsel for the 1^st respondent that, the society is not having sufficient financial resources to pay off the amount, if the society is unable to pay the amounts as directed above, 3^rd and 4^th respondents shall take necessary steps to ensure that, payments are effected to the petitioners by resorting to the liquidation proceedings as contemplated under the Kerala Co-operative Societies Act and the Rules and settle the terminal benefits at the earliest and at any rate within eight

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W.P.(C). No.2125 of 2015

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months thereafter. First respondent will also be free and at liberty to approach the 4^th respondent seeking to sell off a portion of the property in order to have sufficient financial resources to pay off the petitioners within the time limit of four months prescribed above and if so, the 4^th respondent shall consider the same at the earliest and without any delay.

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Writ petition is disposed of accordingly.

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Sd/- SHAJI P. CHALY JUDGE

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smv 02.09.2016

James Josson v. the Muvattupuzha Rubber Marketing Co-Operative Society Ltd.

Case brief

What is this about?

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James Josson v. the Muvattupuzha Rubber Marketing Co-Operative Society Ltd.

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