Bank has to act as a Model Employer, Cannot be Permitted to act as a Dictator : Kerala HC

Service Law - Whether fine can be imposed after retirement of an employee unilaterally and adjust the said fine from the amount due to him towards arrears of salary.

Held:- The respondent bank, which is constituted under a statute and governed by the provisions contained in Regional Rural Banks Act and the regulation framed under the Act, has to act as a model employer in accordance with those provisions and cannot be permitted to act as a dictator and to impose punishment of fine on an officer after his retirement unilaterally and to deduct the amount of fine from the amount legally due to the officer.

Service Law - Whether the employer Bank can effect any recovery from the arrears of salary which became due to an employee after his retirement consequent to pay revision with retrospective effect, alleging that the employee had caused loss to the bank, even without conducting any inquiry in which he is found liable for the loss and without quantifying such liability with notice to him.

In the present case the respondents themselves arrived at a conclusion that petitioner caused loss to the bank. Admittedly no such conclusion was arrived at with notice to the petitioner either before or after his retirement. In a democratic country where rule of law prevails, no employer can be allowed to withhold or adjust the arrears of pay due to the employee, on the ground that there is no rule which prohibits such withholding or adjustment from the arrears of pay. On the other hand in the absence of any rule or regulation or consent or at least an undertaking or consent of the employee the employer cannot have any authority to withold or deduct or adjust any amount which becomes due to the employee, either as arrears of pay or otherwise, by virtue of the service rendered by him to the employer, either by revision of pay, long term settlements, or the like. The adjustment or deduction from the arrears of pay due to an employee without initiating any proceedings while he was in service and in the absence of any rules which permits any proceedings against him after retirement that too without notice to him are arbitrary and unreasonable. An employer like the respondent cannot assume to have any authority to proceed with whatever action it likes to take against a person who was employed under him, and appropriate the amount due to him without his consent.

IN THE HIGH COURT OF KERALA AT ERNAKULAM

P.V. ASHA, J.

W.P. (C) No. 36918 of 2017-L

Dated this the 8th day of May, 2018 

PETITIONER

V. PRAKASH CHANDRAN, RETIRED CHIEF MANAGER, KERALA GRAMIN BANK, 

BY ADVS.SRI.B.KRISHNAN SRI.R.PARTHASARATHY 

RESPONDENTS

1. THE KERALA GRAMIN BANK REP. BY THE CHAIRMAN (HR WING), KERALA GRAMIN BANK, HEAD OFFICE, MALAPPURAM-676505.

2. THE GENERAL MANAGER, KERALA GRAMIN BANK (HUMAN RESOURCES WING), KERALA GRAMIN BANK, HEAD OFFICE, MALAPPURAM-676505.

R1 & R2 BY ADV. SRI.T.R.RAVI, SC, KERALA GRAMIN BANK ADV. SRI. BIJOY CHANDRAN, (AMICUS CURIAE)

JUDGMENT 

The question arising in this case is whether the employer Bank can effect any recovery from the arrears of salary which became due to an employee after his retirement consequent to pay revision with retrospective effect, alleging that the employee had caused loss to the bank, even without conducting any inquiry in which he is found liable for the loss and without quantifying such liability with notice to him and also whether fine can be imposed after retirement of an employee unilaterally and adjust the said fine from the amount due to him towards arrears of salary.

2. The petitioner retired from the 1st respondent - Kerala Gramin Bank on 30.6.2014, while working as Chief Manager at Kaloor Branch, after rendering 37 years of service. He was paid the terminal benefits on 30.6.2014. While so in August 2015 revision of pay was effected for the employees of the Regional Rural Banks with retrospective effect from 01.11.2012. Petitioner submitted several representations requesting for disbursement of the benefits on account of the pay revision. In reply to one of his representations, the 1st respondent, as per Ext.P3 letter, informed him on 30.01.2017 that a sum of Rs.2,19,335.02 towards arrears of salary and a sum of Rs.83,450.50 payable to the petitioner as per the 10th bipartite settlement were withheld on account of the gold auction deficit at Kaloor branch during his tenure as Branch Manger. However it was stated that “now it has been decided by the competent authority to have a lenient view on the issue of accountability on gold auction deficit and to exonerate by imposing a fine of 15% by the deficit amount as on the date of auction”. Accordingly a fine to the tune of Rs.168887.00 was imposed on him for the auction deficit and the balance amount of Rs.133878.52 was released to him.

3. Thereupon petitioner addressed the Chairman of the 1st respondent bank in Ext.P5 letter stating that there were no deficit in auction conducted during his tenure as Manager as alleged in the letter and that gold auctions were deferred as advised by the Regional Manager, due to crash on market value of gold in April 2013 as the outstanding dues could not be realized. He also stated that all these accounts were sanctioned under 'one month gold loan scheme' where the lending rates were 75% to 80% of the market rate of gold complying with the guidelines. It is stated that a minimum fall in prices affected the full recovery of those loan accounts by auction and he had taken timely action in those accounts as per the procedure. Even though he had issued auction notices it could not be completed since regional office did not grant permission to conduct the auction without realizing the outstanding dues in full, as the prevailing market price of gold at that time was due to fall in price. He stated that he had pointed out this to the General Manager and sought permission to auction at least two accounts with a predicted deficit amount. Producing Ext.P5 letter dated 5.11.2013 addressed to the head office, petitioner submits that the head office did not reply or did not give any direction to proceed with the auction. Therefore it was stated that only 18 accounts were pending at the time of his retirement out of the 36 reported on 5.11.2013, though prices went down. He also pointed out that subsequent to his retirement the head office had directed the branch to auction the gold and to initiate revenue recovery proceedings against the defaulters for the deficit amount.

4. He pointed out that in case auction was permitted, when he requested, the deficit would have been minimal. He also stated that the fine imposed was unilateral and contrary to the principles of natural justice. Therefore he requested for payment of the arrears with interest.

5. On the basis of repeated representations, the 1st respondent as per Ext.P6 letter dated 13.03.2017 informed the petitioner that the bank had taken a lenient view in his case imposing a fine of 15% of the deficit amount as on the date of auction and since the deficit in his case was in 17 accounts bank had imposed a fine of Rs.1,68,887/- for the lapse on his part and hence the same was recovered from the arrears of his salary. It was stated that the gratuity due to him was already released on 03.07.2014; the privilege leave encashment amount was released on 15.07.2014 and thereafter the balance gratuity and balance towards privilege leave encashment on account of revision of pay were released to him on 16.08.2016 and 07.02.2017. Similarly the amount due to him towards arrears of house rent allowance and city compensatory allowance were also disbursed to him on 03.03.2017, apart from the amount due to annual medical aid paid on 07.02.2017. Therefore petitioner's demand for arrears of pay and interest thereon was declined.

6. This writ petition was filed at that stage alleging that the respondents do not have any authority to withhold any amount due to the petitioner after his retirement and that there is no rule which permits imposition of fine on an officer after his retirement except after initiating disciplinary proceedings in accordance with Regulation 45 of the Kerala Gramin Bank (Officers and Employees) Service Regulations, 2013/Regulation 45 of the North Malabar Gramin Bank (Officers and Employees) Service Regulations, 2010, (hereinafter referred to as 'the Regulations'). It is pointed out that the Regulations only permit continuation of disciplinary proceedings which are already initiated while an officer was in service. It was also pointed out that petitioner has not caused any loss to the bank on account of any misconduct. The deficit occurred on account of the sudden fall of market value of gold in 2013 and petitioner had taken all possible steps to auction the gold at the relevant time.

7. Learned Standing Counsel for the respondents filed a statement on behalf of the 1st respondent stating that petitioner had submitted clearance certificate from the Kaloor branch at the time of his retirement concealing the fact that there were 36 gold loan overdue accounts pending for auction and that the bank had suffered a loss of Rs.24,69,551/- under 21 gold loan accounts on auction of the jewels after the retirement of the petitioner and that the deficit was brought down to Rs.11,25,912/- in 17 accounts as a result of the efforts of the successor Managers. It is stated that the amount due to the petitioner towards arrears on account of revision of pay was Rs.2,19,335.02 and the bank withheld that amount on account of the loss caused to it and thereafter taking a lenient view a fine of 15% of the deficit amount as on the date of auction was imposed on the petitioner which amounted to Rs.1,68,887/-. After deducting the fine, the balance amount due to the petitioner towards arrears of his salary was paid on 07.02.2017. It was stated that all other amounts due to the petitioner towards his terminal benefits were disbursed to him immediately after retirement and thereafter after the revision of pay. Therefore it is stated that the amount withheld from the arrears of salary towards the loss suffered by the bank cannot be released to him as the loss occurred on account of the negligence of the petitioner in taking timely action to recover the over due amount.

8. Petitioner field a reply affidavit denying the allegations against him and pointing out that the claim against 36 gold loan accounts is baseless. He pointed out that clearance certificate he produced was only with respect to the personal loans availed by him. The liabilities of bank officers are fixed by the internal audit wing after conducting audit before retirement and that such an audit was conducted before his retirement also. Petitioner stated that he had already brought to the notice of all the gold loan accounts pending in the branch and requested for permission to auction the gold pointing out the fall in prices. He stated that the respondents do not have any authority to withhold the arrears of salary after his retirement and no penalty including fine can be imposed on a retired officer without any disciplinary action. He stated that he had submitted representation dated 2.12.2016 before the Chairman requesting for the payment due to him and that he had preferred a complaint before the Centralized Public Grievance Redressal and Monitoring System on 24.01.2017 and it was thereafter that respondents issued Ext.P3 notice imposing fine on him. Petitioner had approached the Human Rights Commission also in view of the delay in disbursing the benefits due to him.

9. The respondents stated that petitioner had sought permission for auction in the case of only two loan accounts and there was no other request. The stand of the respondent bank is that there is no prohibition from withholding or adjusting any amount, which the bank finds due, from the amount due to the petitioner towards arrears of pay. The bank had made the entire payment due to the petitioner towards gratuity and all other statutory benefits and therefore petitioner does not have any right to claim arrears of pay.

10. I heard Sri.Parthasarthy, the learned counsel for the petitioner and Sri.T.R.Ravi, learned Standing Counsel appearing for the 1st respondent. I had the benefit of hearing Advocate Bijoy Chandran also who readily assisted the court, as Amicus Curiae.

11. Learned counsel for the petitioner relied on the judgment of the apex court in Bhagirathi Jena vs. Board of Directors, O.S.F.C. and others : (1999) 3 SCC 666 and Dev Prakash Tewari vs. Uttar Pradesh Co-operative Institutional Service Board, Lucknow and others :2014 (7) SCC 260, and argued that in the absence of any provision authorising action against an employee after his retirement no recovery can be made from the arrears of pay and that petitioner is also entitled to get the entire benefits due to him, as directed in those cases. The judgment in Velayudhan Chettiar v. Kerala State Electricity Board : 2016 (3) KLT SN P 59 was also relied on and argued that as long as the liability is not quantified and the responsibility is not fixed after conducting duly constituted proceedings, no action can be taken for recovery of any amount from a pensioner.

12. Sri.T.R.Ravi, the learned Standing Counsel for the 1st respondent argued that prohibition is only for recovery or withholding of gratuity and other statutory benefit and that arrears of salary is not a statutory benefit; it arises out of a contract between bank and the employee and there is no prohibition in withholding or recovering the amount due to the bank from the salary due to the employee. Relying on the judgment in Secretary ONGC Ltd and another V V.U.Warrier : 2005 (5) SCC 245 it was argued that if a workman commits misconduct and caused financial loss to his employer, employer would have a right of action against the employee under the general law, for the financial loss to the employer.

13. Sri.Bijoy Chandran, the learned Amicus Curiae argued that the arrears of pay became due to the petitioner on account of revision of pay effected in the bank with retrospective effect. Relying on the judgment in Mahatma Gandhi Mission v. Bhartiya Kamgar Sena : 2017 (1) KLT SN 68, it was argued that the revision of pay is ordered in tune with Article 43 of the Constitution of India. It is also pointed out that the respondents have as per Ext.P6 imposed a fine on petitioner. Fine is one of the punishments enumerated in clause 37 of the Regulations and as per the proviso to that clause, a penalty can be imposed only after following the procedure prescribed therein and the respondents have not followed the same. Relying on the judgment of the apex court in Bhagirathi Jena v. Board of Directors, OSFC : (1999) 3 SCC 666, Kottayam District Co-operative Bank Ltd., Tvm v. Co-operative Tribunal, Tvm and others :2017 (5) KHC 382, Velayudhan Chettiar V. v. Kerala State Electricity Board, Tvm and another : 2016 KHC 629 , Vasudevan Namboodiri v. State of Kerala : 1997 (2) KLT 539 and Sreedharan Pillai v. State of Kerala : 1977 KLT 758, it was argued that no action can be taken against a person who is retired from service either to make recovery from his salary or other retirement benefits unless there are rules which permit the same. The judgments in W.A. Nos.1288 of 2007 and 2112 of 2012 were also relied on in support of the contention that when recovery from pay is a punishment, such punishment can be awarded only if one is found guilty in a duly conducted enquiry as per rules. More over it was pointed out that going by the judgment in State of Punjab v. Rafiq Masih : 2015 (4) SCC 334, no recovery can be made from a retired hand. The corollary is that no amount due to an employee can be withheld after his retirement. It is also pointed out that there cannot be any recovery from the monetary benefits due to an employee without observing the principles of natural justice as held in Indiramma S. v. District Educational Officer, Punalur and others : 2012 (4) KHC 295. It was also pointed out that any action taken by the respondent bank shall be on the basis of rules and regulations. Relying on the judgment in Pepsu Road Transport Corproation , Patala v. Mangal Singh and others : (2011) 11 SCC 702, it was argued that the respondent Bank is bound by the Regulations and they can only act in accordance with those Regulations which are statutory.

14. Having heard the contentions, it is necessary to examine whether fine can be imposed on the petitioner on the assumption of or the unilateral conclusion of the Bank that it sustained loss, at the instance of petitioner. The 1st respondent Bank is a Regional Rural Bank constituted under Section 3 of the Regional Rural Banks Act, 1976 (hereinafter referred to as 'the Act'). Sec.17 of the Regional Rural Banks Act provides for appointment of officers and other employees in Regional Rural Banks. Sec.30 empowers the board of Directors of Regional Rural Banks to make regulations in consultation with the sponsor bank and the national bank, with the previous sanction of the Central Government to provide for all matters for which provision is necessary for the purpose of giving effect to the provisions of the Act. Kerala Gramin Bank (Officers and Employees) Service Regulations 2013 (Ext.P7) as well as the Regulations which were in force prior to those regulations for the North Malabar Gramin Bank were made in exercise of the powers conferred on the board of directors under Sec.30 of the Act. These regulations provide for disciplinary action against the employees; the penalties which can be imposed and the procedure to be followed. It is an admitted fact that no proceedings were initiated against the petitioner with notice to him in which petitioner was found liable for such a loss. In other words the loss if any caused or the person responsible for causing the loss are not determined in any duly constituted enquiry with notice to petitioner. There was no quantification of any such loss with notice to petitioner. A fine of Rs.1,68,887/- was imposed on the petitioner without even issuing any notice to him. Imposing of fine is a punishment. Even in the absence of any rule it is settled law that no person shall be punished unheard. The respondents are of the view that they can withhold any amount which is with them towards the arrears of salary to the petitioner on account of the pay revision with retrospective effect. In other words, when the amount due to the petitioner has come to the hands of the respondents they are free to appropriate the same towards the alleged loss without conducting any enquiry or without hearing the petitioner.

15. The only provision which provides for disciplinary action against an employee is regulation 47 and that regulation provides for such action only when the employee is in service. In the absence of any provision to proceed against a retired hand the bank cannot withhold any amount due to the petitioner. It is also relevant to note that fine is a punishment and no punishment can be imposed except in accordance with law. But the respondent bank has in Ext.P6 as well as in the counter affidavit stated that they imposed a fine on the petitioner and that fine is recovered from the arrears of pay which became due to him, on account of retrospective revision of pay. It is an admitted fact that fine is imposed much after his retirement unilaterally and that fine amount is deducted from the arrears of pay due to petitioner. Clause 39 provides for the penalties, which can be imposed on an officer or employee who commits a breach of these regulations or who displays negligence, inefficiency or indolence or who commits acts detrimental to the interests of the Bank or in conflict with its instructions or who commits a breach of discipline or is guilty of any other acts of misconduct. Proviso to clause 39 of the regulation provides that none of the penalties shall be imposed by the competent authority unless the officer is given a notice in writing and following the procedure prescribed therein. Recovery from pay is a penalty enumerated under clause 4 of regulation 39.1(a) (iv). None of these provisions are followed before imposing the fine and recovering that amount of fine from petitioner's dues. Moreover there is no provision in the regulation to initiate any disciplinary action against an employee after his retirement. What is permitted under Regulation 45 is only continuation of disciplinary proceedings in the case of those who have retired from service. Therefore the action of the respondents in imposing any penalty either minor or major on the petitioner and recovering that amount from his pay is without authority.

16. Clause 6 of Ext.P7 regulations provides that the scale of pay, allowances and increments of an officer or employee appointed to a post in any of the groups referred to in regulation 3 shall be as determined by Central Government from time to time under sub section 1 of sec. 17 of the Act. The 2nd proviso to Section 17(1) of the Regional Rural Banks Act read infra: 

“Provided further that the remuneration of officers and other employees appointed by a Regional Rural Bank shall be such as may be determined by the Central Government and in determining such remuneration, the Central Government shall have due regard to the salary structure of the employees of the state Government and the local authorities of comparable level and status in the notified area”.

A perusal of Section 17 of the Rural Bank Act and regulation 3 would show that right to get salary is a statutory right of the officer in a Rural Bank. Therefore the contention of the respondents that salary or arrears of salary are not statutory and are governed by personal contracts is unsustainable.

17. An employee gets the remuneration towards the services rendered by him to the employer. Under Article 43 of the Constitution of India, the Bank, which is a State within the meaning of Article 12 of the Constitution, to take steps to provide living wages to its employees ensuring them a decent standard of living. It is with this objective that revision of pay is effected from time to time so as to enable the employee to cop up with rise in cost of living, in tune with the directive principles of State Policy to ensure living wages to the employees, the payment of arrears of pay on account of revision of pay is a constitutional obligation of the respondents. Article 43 of the Constitution of India, as held in Mahatma Gandhi Mission's case (supra) and right to get pay is a statutory right of the petitioner. In that case the apex court was considering the claim of the nonteaching staff of unaided colleges for pay and allowances in terms of the recommendations of the 6th pay commission. It is also pertinent to note that in the light of the direction of the apex court in Society of retired Forest Officers v. State of U.P. :2008 (3) KLT 788 (SC), the State, Central Government and Corporation or public sector undertakings like respondent bank have to ensure that every incumbent under them are getting the benefits on account of revision of pay, within two months of the revision.

18. In view of the provisions contained in section 17 of the Regional Rural Banks Act it is the statutory duty of the bank to pay the salary due to the employees and in the event of revision when the amount became due to the petitioner after the retirement of an officer, the bank cannot withhold the same and unless and until the statute provides for any recovery the employer cannot do any act which is not authorized under the provisions. As rightly pointed out by Adv.Bijoy Chandran, Ext.P7 Regulations which are framed in exercise of powers conferred under Section 30 of the Regional Rural Banks Act are binding on the respondents and the respondents are bound to act only in accordance with rules and they cannot go beyond that. The apex court while considering the claim for pensionary benefits by a person who failed to submit his option in time as provided in the scheme, had considered the effect of Regulations in PEPSU RTC v. Mangal Singh : (2011) 11 SCC 702 and held as follows: 

29. It is well-settled law that the regulations made under the statute laying down the terms and conditions of service of the employees, including the grant of retirement benefits, have the force of law. The regulations validly made under the statutory powers are binding and effective as the enactment of the competent legislature. The statutory bodies as well as general public are bound to comply with the terms and conditions laid down in the regulations as a legal compulsion. Any action or order in breach of the terms and conditions of the regulations shall amount to violation of the regulations which are in the nature of statutory provisions and shall render such action or order illegal and invalid.

19. The apex court in the judgment in Bhagirathi Jena's case (supra) while considering the validity of the recovery effected from the retirement benefits, directed payment of entire benefits including arrears of pay, seeing that there was no provision authorising the Orissa Financial State Corporation to continue proceedings against the petitioner therein after retirement. The Corporation had placed the petitioner under suspension and initiated disciplinary action against him under the Staff Regulations. But disciplinary enquiry was not concluded before he was relieved on superannuation. On interpretation of the provisions contained in the Corporation Employees Provident Fund Regulations and the Staff Regulations, it was held as follows in paragraphs 6 and 7: 

“It will be noticed from the abovesaid regulations that no specific provision was made for deducting any amount from the provident fund consequent to any misconduct determined in the departmental enquiry nor was any provision made for continuance of the departmental enquiry after superannuation.

7. In view of the absence of such a provision in the abovesaid regulations, it must be held that the Corporation had no legal authority to make any reduction in the retiral benefits of the appellant. There is also no provision for conducting a disciplinary enquiry after retirement of the appellant and nor any provision stating that in case misconduct is established, a deduction could be made from retiral benefits. Once the appellant had retired from service on 30-6-1995, there was no authority vested in the Corporation for continuing the departmental enquiry even for the purpose of imposing any reduction in the retiral benefits payable to the appellant”.

The apex court held that an enquiry against an employee lapses on his retirement and the Orissa State Financial Corporation did not have any authority to continue a departmental enquiry even for the purpose of imposing any reduction in retiral benefits payable to the appellant in the absence of any rules for the same. It was directed therein that the entire retirement benefits including the arrears of salary and other allowances payable to the employee should be paid to him.

20. In Dev Prakash Tewari's case (supra) relied on by the learned Counsel for the petitioner, the apex court was considering the case of an Assistant Engineer, who was working in the Uttar Pradesh Cooperative Institutional Service Board, governed by the Uttar Pradesh Co-operative Societies Employees' Service Regulations, 1975. The regulation did not provide for deduction of any amount from provident fund consequent to any misconduct determined in a departmental enquiry. It was therefore held that once the appellant therein retired from service, no authority vested with the respondents for continuing the disciplinary proceedings and in the absence of such an authority the enquiry itself lapsed. The appellant therein was entitled to get full retirement benefits.

21. In Vasudevan Namboodiri's case (supra), a learned Single Judge of this court held that educational authorities have no right to proceed against a Headmaster for recovery of loss caused on account of bogus admissions in the School. It was held that the power is given only to revise the order of staff strength and that the right to recover the loss is not incidental to the power to revise the order of fixation of staff strength and that the power to revise staff strength does not include the right to recover the salary paid to the teacher on the ground that the Headmaster or Manager were responsible for misleading the authorities. It was held that recovery from pay of the whole or part of any pecuniary loss caused to the State Government by negligence or breach of orders is a penalty which can be imposed on a Headmaster by proceeding against him under R. 65 of Chap. XIV A, KER and therefore only if it was found in the disciplinary proceedings, that the original staff fixation happened on account of the negligence or breach of the Headmaster that such loss can be recovered from the Headmaster. The very same proposition was laid down in the judgment dated 25.06..2009 in W.A.No.1288 of 2007 and in the judgment dated 26.02.2014 in W.A. No. 2112 of 2012.

22. In Sreedharan Pillai's case (supra), the proceedings for recovery of loss caused to Government subsequent to his retirement and adjustment of the same from his Death-cum-Retirement Gratuity was held without authority, as the pre-amended Rule 3 of Part III of Kerala Service Rules, provided for such recovery only from employees and it was held that the word “employee” in Note 2 to Rule 3 as it existed then, did not take in a retired government servant.

23. In Velayudhan Chettiar's case (supra), I had occasion to consider the validity of the proceedings for recovery ordered after more than 4 years of retirement of the petitioner from KSEB. It was held that in the absence of any finding that the loss was caused on account of the negligence of petitioner therein, in a duly constituted enquiry in which the petitioner was given fulfledged opportunity to defend, no recovery can be made from him.

24. In Kottayam District Co-operative Bank's case (supra), another learned Single Judge of this court, affirmed the award passed in ARC and the judgment of the Co-operative Tribunal and held that the Managing Committee of a Society do not have any authority to direct recovery of any amount from an employee of the bank after his retirement after the enquiry officer had in the departmental enquiry, already absolved him from the charges and those findings were approved by the earlier managing committee 4 years ago. It was held that when the Bank is not conferred with any power to quantify damages that too without providing any opportunity to the affected person, the quantification as well as recovery from the employee that too without years after his retirement and without even giving him any opportunity of hearing were unsustainable.

25. In Indiramma's case (supra), this court held that even in a case where payment was made in excess, the employee was entitled to an opportunity of hearing and the proceedings for recovery without notice was illegal, being violative of the principles of natural justice.

26. On the other hand in Secretary , ONGC Ltd. And another v. V.U.Warrier : (2005) 5 SCC 245, relied on by the learned Standing Counsel, there was a specific provision for retaining the benefits, in the event an employee is committing misconduct. In that case the officer did not vacate the residential accommodation provided to him by the employer even after the time granted to him was over and they had to proceed under Public Premises (Eviction of Unauthorised Occupants) Act, 1971. The employer in that case deducted a sum of Rs.53,632/- from the gratuity which was payable to the officer towards the charges for unauthoirsed occupation of official accommodation. Rule 12 of the rules provided that after cancellation of the allotment, if the premises are not vacated, the occupation thereof shall be considered unauthroised, and the ex-allottee shall be liable to pay liquidated damages for occupation of the premises either twice of the standard rent or at the rate of the rent as may be determined by the Commission from time to time. It was in the above circumstances that the apex court held that the employer has a right under the general law against the employee for the loss caused. Therefore the dictum laid down therein cannot be applied in the present case.

27. It is also pertinent to note the parameters laid down by the apex court in Rafiq Masih's case (supra) in respect of recovery from pay/retirement benefits of the employees in cases where payment was later found to be in excess, though the present case is not one of excess payment but short payment. Relevant portion of paragraph 18 of the judgment reads as follows: 

“18. It is not possible to postulate all situations of hardship which would govern employees on the issue of recovery, where payments have mistakenly been made by the employer, in excess of their entitlement. Be that as it may, based on the decisions referred to hereinabove, we may, as a ready reference, summarise the following few situations, wherein recoveries by the employers, would be impermissible in law: 

(i) xxxxx 

(ii) Recovery from the retired employees, or the employees who are due to retire within one year, of the order of recovery.

xxxx 

(v) In any other case, where the court arrives at the conclusion, that recovery if made from the employee, would be iniquitous or harsh or arbitrary to such an extent, as would far outweigh the equitable balance of the employer's right to recover” 

Though the apex court was considering cases where recovery cannot be made where there was excess payment the present case is one in which the petitioner is faced with a recovery years after his retirement from the benefits which are due to him. Therefore the same principle will apply in his case, especially when it is by way of punishment and without authority.

28. In the present case the respondents themselves arrived at a conclusion that petitioner caused loss to the bank. Admittedly no such conclusion was arrived at with notice to the petitioner either before or after his retirement. In a democratic country where rule of law prevails, no employer can be allowed to withhold or adjust the arrears of pay due to the employee, on the ground that there is no rule which prohibits such withholding or adjustment from the arrears of pay. On the other hand in the absence of any rule or regulation or consent or at least an undertaking or consent of the employee the employer cannot have any authority to withold or deduct or adjust any amount which becomes due to the employee, either as arrears of pay or otherwise, by virtue of the service rendered by him to the employer, either by revision of pay, long term settlements, or the like. The adjustment or deduction from the arrears of pay due to an employee without initiating any proceedings while he was in service and in the absence of any rules which permits any proceedings against him after retirement that too without notice to him are arbitrary and unreasonable. An employer like the respondent cannot assume to have any authority to proceed with whatever action it likes to take against a person who was employed under him, and appropriate the amount due to him without his consent. The respondent bank, which is constituted under a statute and governed by the provisions contained in Regional Rural Banks Act and the regulation framed under the Act, has to act as a model employer in accordance with those provisions and cannot be permitted to act as a dictator and to impose punishment of fine on an officer after his retirement unilaterally and to deduct the amount of fine from the amount legally due to the officer.

29. In the above circumstances, I am unable to accept the contention raised by the respondents. Just because the amount due to the petitioner happened to be with the respondents, respondents cannot have any authority to appropriate any portion of it. The pay revision was ordered in the year 2015. Petitioner was entitled to get the entire amount due to him immediately after the pay revision was ordered or atleast when the balance amount was paid to him. Therefore by retaining the amount due to the petitioner for all these years respondents have unlawfully got enriched. Petitioner would therefore be entitled to be compensated by payment of interest at market rate at least with effect from the date on which the balance amount towards arrears of pay was paid to petitioner i.e from 07.02.2017.

30. Before concluding, I place on record my appreciation and gratitude over the valuable assistance rendered by Adv.Bijoy Chandran, the learned Amicus Curiae.

The writ petition is accordingly allowed directing the respondents to disburse arrears of pay due to the petitioner within a period of one month from the date of receipt of a copy of the judgment along with interest at 7% per annum from 07.02.2017.