IN THE HIGH COURT OF KERALA AT ERNAKULAM
OP.No. 38956 of 2001(K)
1. K.K.PRABHAKARAN
... Petitioner
Vs
1. K.S.F.E.
... Respondent
For Petitioner :SRI.S.V.BALAKRISHNA IYER (SR.)
For Respondent :SRI.A.M.SHAFFIQUE
The Hon'ble MR. Justice S.SIRI JAGAN
Dated :18/01/2010
O R D E R
S. SIRI JAGAN, J.
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O.P. No.38956 of 2001
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Dated this the 18th day of January, 2010
J U D G M E N T
The petitioner was a Senior Manager of the
1st respondent Kerala State Financial Enterprises Ltd. On
25.04.1994, he was the Branch Manager of Kannur-I
branch. At that time, one of the subscribers of a chitty
being conducted by that branch, offered his property as
security for repayment of chitty installments in respect of a
chit auctioned in his favour. As the Branch Manager, the
petitioner had to inspect the property offered as security
and value the same. The petitioner submitted Ext.R3(a)
valuation report dated 01.06.1994. The property comprised
of 1.5 acres. In the petitioner’s valuation he stated that
there is a cartable road to the property and there were 75
arecanut trees and 100 coconut trees in the property. He
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valued the property at Rs.7.5 lakhs and opined that in a
distress sale it would fetch Rs. 5 lakhs. On the basis of his
report, an amount of Rs.2.5 lakhs was released to the
subscriber. On 04.06.1994 the petitioner was transferred
from that branch. The subscriber did not pay the balance
installments. Recovery proceedings were initiated against
him for recovery of the amounts due from him in respect of
the chitty. In the recovery proceedings, the property
mortgaged as security was brought to sale. Nobody was
willing to purchase the same although five persons were
present at the auction. The Village Officer valued the
property only at Rs.45,000/-, which apparently was known
to the prospective bidders. It was found that improvements
mentioned by the petitioner in his report were not actually
there in the property. The cartable road leading to
property, mentioned in this report was also found to be non-
existent. On the allegation that the petitioner colluded with
the subscriber to over-value the property, Ext.P2 charge
memo was issued to the petitioner. Petitioner filed Exts.P3
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& P4 explanations. The tenor of the explanations was that
he misidentified the property since the party misled him,
although he does not categorically say so. His contention
was that the party showed him the wrong property and
therefore probably there was a misidentification of the
property. Dissatisfied with his explanation, an enquiry was
ordered. Initially the Regional Manager was appointed as
the Enquiry Officer. Later on he was changed and an
Advocate was appointed as the Enquiry Officer. He
conducted the enquiry, took evidence and submitted Ext.P8
report finding the petitioner guilty of the charges levelled
against him. Petitioner was given opportunity to show
cause against the proposed penalty of dismissal from
service. Petitioner filed Ext.P9 reply to the same. However
by Ext.P.10 order, the disciplinary authority, namely the
Managing Director agreed with the findings of the Enquiry
Officer to find the petitioner guilty of the charges of
misconduct. By Ext.P12 order, the punishment of removal
from service was imposed on the petitioner. Petitioner filed
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Ext.P13 appeal before the Board of Directors of the 1st
respondent. The appeal was placed before the Board of
Directors and Ext.P14 notice dated 25.01.2000 was issued
to the petitioner for a hearing on 02.02.2000 on the appeal.
On 02.02.2000 the petitioner was heard by the Board of
Directors. Petitioner contends that thereafter the 4th
respondent Managing Director had a discussion with the
subscriber and reached a settlement with him. Subscriber
was offered an one time settlement, on payment of which
the security documents were offered to be released, as per
the agreement reached in the discussion held on
15.02.2000. According to the petitioner, in that discussion
although the petitioner was also directed to be present, he
was not allowed to participate in the discussion and he was
kept out. The petitioner came to understand that on
28.02.2000 the Board of Directors had adopted a resolution,
in which it was decided to accept Rs.3 lakhs from
subscriber and to return the title deeds of the property
given as security. The petitioner also learnt that it was
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decided to obtain an indemnity bond from the petitioner to
make good the loss caused to the company on account of
the over-valuation. But that board resolution was not
communicated to the petitioner. According to the
petitioner, petitioner was constantly contacting the 4th
respondent requesting for and enquiring about the orders in
the appeal. The petitioner expected release of his terminal
benefits. When nothing happened for a long time, the
petitioner filed this writ petition on 10.12.2001. In the writ
petition, respondents filed a counter affidavit dated
19.06.2002, wherein while controverting the contention of
the petitioner, they produced Ext.R3 (c) resolution adopted
by the Board of Directors in the petitioner’s appeal, in
which the following decisions were taken :
“The Board considered the note. During discussion the M.D.
explained that he has discussed the issue of default clearance with
the mortgager, Sri. Shaju and also with Sri. K.K. Prabhakaran, M.D.
also explained that Sri. Shaju has promised to pay Rs.3,00,000/- on
condition that the title deed of the property mortgaged has to be
given back to him or to the purchaser of the property as they have
entered into an agreement to transfer the property concerned.
Shri. Shaju also explained that he has no other source/means to pay
the balance amount of default. The total amount to be realised in the
above RR account come to Rs.5,30,000/- as on 30/9/99. The Board
after discussion decided as follows:
O.P. No.38956 of 2001
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1. To authorize the Managing Director to collect Rs.3,00,000/- and
release the property document as requested.
2. To obtain an undertaking as well as an indemnity bond from
Sri.K.K. Prabhakaran to compensate the loss to the Company
amounting to Rs.2,30,000/-
3. Decided to realise the default amount with interest upto
30/9/1977.
4. To exempt collection of 2 =% other charges on RR collection.
5. To authorise the Managing Director to give a proposal in the
next Board meeting regarding the reinstatement of
Sri. K.K. Prabhakaran.”
2. Thereafter the matter came up for hearing before
a learned Single Judge of this court on 26.03.2008 and
03.04.2008. According to the petitioner, the matter was
fully heard and the learned Single Judge expressed an
opinion that for over-valuation no disciplinary proceedings
would lie under the standing orders applicable for want of
any specific provision in the same making the same a
misconduct. In such circumstances, the court adjourned the
matter treating the same as part heard, to be heard after
vacation so as to enable the respondents to explore the
possibility of an amicable settlement in the matter.
However, thereafter, instead of settling the matter, the
O.P. No.38956 of 2001
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Board of Directors passed Ext.P21 order, dismissing the
petitioner’s appeal. Consequently, the petitioner amended
the writ petition including a challenge against Ext.P21 also.
Petitioner seeks the following reliefs:
“i) issue a writ of certiorari or any other appropriate writ or order
quashing Exhibit P-8 and Exhibit P-12;
ii) issue a writ of mandamus or any other appropriate writ, order or
direction, directing the Respondents to pay the entire terminal
benefits and suitable compensations to the petitioner forthwith;
iii) issue a writ of mandamus or any other appropriate writ or
direction directing the respondents to notionally grant the
petitioner promotion to the post of Regional Manager from the
date on which promotion fell due, treat him to be in service
between 31-7-2000 and 30-9-2001 and pay arrears of salary
and benefits of pay revision on that basis forthwith;
iiiA) issue a writ of certiorari or any other writ, order or direction
quashing Ext.P15;
iiiB) issue a writ of certiorari or any other appropriate writ, order
or direction quashing Ext.P21; and
iv) Award the petitioner the cost of this Original Petition.”
3. The petitioner’s contention is that although the
allegation against the petitioner was that he over-valued the
property in collusion with the subscriber, no evidence was
led in the enquiry to prove the same, despite which in
Ext.P8 enquiry report, the enquiry officer entered a vague
finding that “the delinquent might have over-valued the
O.P. No.38956 of 2001
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property in order to please the party for reasons best known
to him”. Thereafter the enquiry officer found the petitioner
guilty of all the three charges of misconduct levelled against
him. Petitioner would contend that the finding in the
enquiry is totally vitiated since it is based on no evidence,
but purely on conjectures and surmises. The petitioner
points out that the respondents were not also able to
identify the property in question properly, since at different
times, different reports were obtained by the respondents,
containing contradictory details regarding the
improvements in the property. According to the petitioner
the valuation report of the Village Officer, which is now
produced as Ext.R3 (b) along with the counter affidavit, was
never produced in evidence in the enquiry, nor was the
Village Officer who prepared the same examined as a
witness. Petitioner points out that in Ext.R3 (b) itself, the
Village Officer had noted 24 coconut trees aged four years
and 30 cashew trees aged five years. But in Ext.P2 it is
mentioned that as per the report of the Deputy Tahsildar
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and Regional Manager no such improvements noted by the
petitioner in his report were existing in the property.
Petitioner points out that the report of the Deputy Tahsildar
which is relied upon for this purpose, which is Ext.P7, did
not deal with any improvements as existing or not existing
in the property. In fact that report was only about the
reasons why the auction could not take place and not at all
concerned with the description of the property as such and
does not give any valuation of the property. He points out
that in the report of the Regional Manager, who inspected
the property, who was examined as MW5 there were only
about 50 plantains, 5 cashew nut trees and 50 arecanut
plants. According to the petitioner these would show that
respondents themselves were not also able to identify the
properties properly. Petitioner contends that even
assuming that the petitioner was guilty of anything, it can
only be of committing the mistake in properly identifying or
valuing the property and he cannot be found guilty of
anything else. Petitioner points out that in the charge
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memo there was no charge for even negligence. He also
submits that in Ext.P16 Standing Orders, over-valuation of a
property as such is not shown as a misconduct at all.
Therefore the petitioner could not have been found guilty of
any of the misconduct detailed in Ext.P2 is his contention.
He further points out that over-valuation is not a rare thing
in the 1st respondent’s establishment. The Board of
Directors themselves, in Ext.P18, recognized the fact that
such over-valuation is likely to occur in the course of normal
valuation itself. Therefore, according to the petitioner, over-
valuation cannot be considered as a misconduct at all.
Again the petitioner submits that in fact as evidenced by
Exts.P19 & P20, 84 similarly situated senior managers, who
were found to have over-valued properties, were not
proceeded against at all and their retirement benefits were
ordered to be released after deducting a part of the loss
caused to the 1st respondent on account of the over-
valuation, therefrom. The petitioner also alleges malafides
on the part of the 4th respondent in initiating the
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disciplinary action. According to him, the petitioner was
second in the seniority list of Senior Managers and the 4th
respondent wanted a person lower down in the seniority list
to be promoted over the seniors, for which purpose he
deliberately instituted the disciplinary proceedings against
the petitioner as also the first person in the seniority list.
The first person in the seniority list challenged the same in
W.P.(C) No.34691/2004, in which the disciplinary
proceedings were quashed. He further submits that the
malafides is clear from the fact that in Ext.R3 (c), the
Managing Director was directed to give a proposal for
reinstatement of the petitioner, which he never did and did
not even communicate Ext.R3 (c) to the petitioner.
According to the petitioner the Manging Director
deliberately did not communicate Ext.R3 (c) to the
petitioner so as to keep the petitioner away from service.
According to the counsel for the petitioner from the above
facts coupled with the fact that in the entire history of the
1st respondent, no officer was ever proceeded against for
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over-valuation of property would lead to the irresistible
inference that the entire disciplinary proceedings against
the petitioner was actuated by malafides on the pat of the
4th respondent.
4. Therefore the petitioner submits that the entire
disciplinary proceedings against him is liable to be quashed
and he should be directed to be given all benefits due to him
till he attained superannuation on 30.09.2001.
5. With the help of the counter affidavit filed by the
4th respondent on behalf of all the respondents, the
respondents would deny the allegations of the petitioner.
According to the respondents, it was the duty of the
Manager to value the property offered as security after
identifying the property properly. They submit that the
petitioner himself had admitted that he committed a grave
error in identifying the property and consequently in the
valuation itself. According to them, the fact that the
petitioner himself admits that he blindly trusted the
subscriber, would go to show that there was collusion by
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showing an inflated value for the property so as to enable
the subscriber to get the auction amount of the chitty on the
security of a property the market value of which was far
below the amounts due from the subscriber. Therefore,
according to them, collusion between the subscriber and
the petitioner is clearly evident, which only has been found
by the Enquiry Officer. They contend that, even assuming
that collusion could not be proved, gross negligence, which
is one of the misconducts enumerated in the Standing
Orders, has clearly been proved, for which itself the
petitioner is liable to be imposed with the penalty of
removal from service. They therefore argue for sustaining
the impugned orders.
6. I have considered rival contentions in detail. At
the outset I am of the opinion that it was not proper, if not
illegal, for the respondent to pass Ext.P-21 order, when the
original petition was part heard by a learned Single Judge of
this court. From the records of this case I find that the
original petition was posted for hearing on 26.03.2008 on
O.P. No.38956 of 2001
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which date it was directed to be posted for hearing on top of
the list on 31.03.2008. The same again came up on
03.04.2008. On that date, the matter was part heard and
was posted to 26.05.2008 after vacation. It is after those
proceedings, Ext.P21 order was passed on 20.05.2008. Of
course the learned counsel for the respondents would
submit that in the course of arguments on 03.04.2008 it was
noticed that Ext.R3 (c) was not a final order in the appeal
filed by the petitioner and therefore the Board of Directors
was expected to pass a final order in his appeal. It is under
the said circumstances that Ext.P-21 final order was passed.
But after having taken a stand in their counter affidavit that
Ext.R3 (c) order was the order passed in the appeal, which
was passed as early as on 07.03.2000, they could not have
passed further orders without first informing this court.
I also note that the 4th respondent has not properly denied
the averment of the petitioner that Ext.R3 (c) was not
communicated to the petitioner. They have not also given
any satisfactory explanation for the change of mind in
O.P. No.38956 of 2001
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passing Ext.P-21 order on 09.05.2008 contrary to Ext.R3
(c), after more than 8 years, that too without
communicating Ext.R3 (c) to the petitioner and ascertaining
from him as to whether he is agreeable for the course of
action suggested therein.
7. Ext.P2 is the memo of charges, which contains
three charges and reads as follows:
“1. That you had with ulterior motive cheating the company, over
valued the above property for Rs.7.5 lakhs, and the forced sale
value was arrived at Rs.5/- lakhs and thus flushed out company
funds to outsiders.
2. That you in collusion with the owner of the property and with
malafide intention reported vide Ref. No.(1) above that there was
a cartable road providing direct access to the property, which was
not actually existed at the time of your visit to the property.
3. That you had also reported vide reference cited (1) above, that
there were 75 number of arecanut trees and 100 numbers coconut
trees in the property. But, in fact, no such improvements were
existing in the property.”
The serious charge therein was that the petitioner and the
owner of the property had colluded with each other for
overvaluing the property with the intention of cheating the
company. But in Ext.P8 enquiry report, I do not find that the
enquiry officer has referred to any evidence in support of
the finding that the petitioner was guilty of any collusion
O.P. No.38956 of 2001
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with the subscriber, pursuant to which, the petitioner has
overvalued the property to help the subscriber. In fact the
finding of the enquiry officer itself is thus: “Delinquent
might have over valued the property in order to please the
party for reasons best known to him”. From this sentence it
is abundantly clear that there was no evidence whatsoever
to find that the petitioner had overvalued the property in
collusion with the subscriber. In fact, there was no
reference in the enquiry report to any deposition by any of
the management’s witnesses or to any other material on
record to the effect that there was collusion between the
petitioner and the subscriber. As such, the finding of the
enquiry officer as noted above is clearly without any
evidence in support of the same. As such, that finding was
based on no evidence and therefore, it is totally perverse. In
fact in the arguments advanced by the respondents, they
have emphasised the fact that the petitioner had noted 100
coconut trees and 50 arecanut trees in the property and
also a cartable road to the property, which were not present
O.P. No.38956 of 2001
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in the reports of the Village Officer, who submitted Ext.R3
(b) report, and the officer of the 1st respondent who
conducted an inspection in this respect. In this context, I
find an interesting circumstance. In Ext.P2 charge memo,
report from the Deputy Tahsildar dated 30.12.1997 is relied
upon and in the third charge, they have stated that “in fact
no such improvements were existing in the property”.
Strangely, in Ext.P7, which is the report of the Deputy
Tahsildar referred to in the charge memo, he has not dealt
with the improvements in the property or the valuation of
the property. He has not stated anything whatsoever
regarding trees in the property. On the other hand, he has
stated therein that in the auction conducted on the
particular day, although five persons were present to take
part in the auction, in spite of the upset price having been
reduced to Rs.3,75,000/- from Rs.5,00,000/-, none of them
participated in the auction. He specifically stated that their
non-participation was because they knew about the
valuation of the Village Officer as Rs.45,000/-. Ext.R3(b)
O.P. No.38956 of 2001
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report of the Village Officer has not even been brought on
record in the enquiry. The Village Officer was not examined
as a witness also in the enquiry. It is interesting to note that
in Ext.R3(b) report of the Village Officer, he refers to 24
coconut plants, having age of 4 years and 30 cashew trees
of 5 years of age. But MW5-Mohanrajan, who is stated to
have inspected the property, reported that there were 50
numbers of plantains, 5 cashew trees and 50 arecanut
plants. As such, I doubt very much whether all these
persons were able to identify the particular property
properly. The tenor of the petitioner’s reply is to the effect
that he blindly trusted the subscriber as regards the
identity of the property and he valued the property he
actually inspected. Of course, the petitioner should have
identified the property with the help of an independent
authority as well, apart from the subscriber, failure to do
which certainly is a fault on his part. But that does not lead
to any inference to the effect that he had done it
deliberately in collusion with the subscriber, to help the
O.P. No.38956 of 2001
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subscriber in any manner. On the other hand, because of
contradictory reports of various persons regarding the
improvements available in the property, I am inclined to
infer that it was very difficult to identify the property. In
this connection, I note that in the enquiry proceedings
themselves, the management witnesses candidly admitted
that there are no guidelines issued by the 1st respondent
regarding the procedure to be adopted while valuing a
property for the purpose of accepting the same as security.
In fact, the petitioner claims to have done more than 1000
such valuations and this is only time the petitioner was
accused of over valuation or under valuation. On the other
hand, in Ext.P18 Board resolution it is specifically accepted
thus:
’16. To consider the release of the withheld terminal benefits of
the retired employees.
The Board considered the proposals submitted and recognized the
fact that Officers performing their duties and engaged in business
development may end up with some of the loans or chitty prize money
sanctioned by them becoming bad or doubtful debts. The Board also
recognized the fact that t Manager doing active business may commit
errors in judgment while valuing property in a few number of cases,
resulting in over valuation of varying degrees. The Board asked the
Managing Director to devise a system for assessing such cases and report
O.P. No.38956 of 2001
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the same to the Board. The Board came to a conclusion that if the
amount involved in such bad and doubtful cases, does not exceed 5% of
the principal amount of the liabilities of loans and chitties sanctioned, the
terminal benefits of the related Managers may be disbursed completely.
Thus the Board resolved as follows:
Resolution No.3593
“Resolved to authorise the Managing Director to devise a system
consisting of two suitable Managers in each region to assess the loans
and chitty payments made by each Manager, under the respective
Regional Manager with in the last year before his retirement and to
disburse his terminal benefits if the bad and doubtful debts arising due to
over valuation, errors in assessing the customers etc. does not exceed
5% of the total liabilities involved in the loans and chitty payments
sanctioned by the concerned Manager.
Also resolved to entrust the Managing Director to make such
assessments on the following lines:
a. To reassess the pending/sticky loans/chitty payments, revalue the
properties along with the approved valuer and put up to vetting
committee of Regional Managers and to Senior Managers
concerned with remarks such as variations in valuation, reasons
for the same etc.
b. A two tier vetting committee system for assessing the over
valuations and other irregularities, decided to be implemented by
the Board in their Meeting No.336 conducted on 18.08.2004
(Resolution No.3565) should be implemented forthwith.
The above decision taken by the Board with slight modifications, is given
below for further clarity.
Resolution No.3594
“The Board finally resolved that the vetting committee at Regional
level consisting of Regional Manager and two suitable and competent
Senior Managers at his discretion will get the related property valued by
one of Senior Manager in the committee or Regional Manager himself,
along with an approved valuer and assess the extent of defects and
deficiencies in valuation related to the liability and also the volume of
doubtful debts and send the report to the Head Office vetting committee,
consisting of Finance Manager and Business Manager who will make the
final assessment and submit their detailed report to the Managing
Director. Managing Director, in turn, will review and submit the same to
the Board for their decision.”
O.P. No.38956 of 2001
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The above resolution/decision is communicated for information and
immediate further action. Action taken in this regard may be intimated to
the undersigned at the earliest.’
Coupled with the fact that in Exts.P18, P19 and P20, almost
84 such cases of over-valuation by various officers of the 1st
respondent have been noted and all of them have been
condoned, would go to show that the respondents
themselves were experiencing considerable difficulties in
properly valuing the properties without any guidelines and
expert assistance for the purpose. In such circumstances, I
am of opinion that even assuming that the petitioner was
guilty of negligence in identifying the property, that is not
serious enough to warrant the extreme punishment of
dismissal from service. As such, the punishment imposed on
the petitioner is certainly shockingly disproportionate to the
gravity of the alleged misconduct, even if committed by the
petitioner.
8. In fact, the Board themselves was of the very
same opinion going by Ext.R3(c) resolution adopted by the
Board, which has been quoted above. Ext. R3 (c) shows
O.P. No.38956 of 2001
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that the very intention of the Board was to reinstate the
petitioner in service, after obtaining an indemnity bond
from the petitioner to compensate the loss caused to the
company amounting to Rs.2,30,000/-. The respondents have
not been able to satisfy me that the 3rd respondent had
communicated Ext.R3(c) to the petitioner, which itself is a
very serious lapse on the part of the 3rd respondent. On the
other hand, it would give credence to the allegation of the
petitioner that the 4th respondent who was the then
Managing Director had some ulterior designs in the matter.
There was absolutely no reason whatsoever for the 3rd
respondent not to communicate Ext.R3(c) to the petitioner,
which if done, the petitioner could have availed of the
benefit granted to him by the Board of Directors, which
obviously the 4th respondent did not do. Apparently till the
petitioner attained superannuation on 30.9.2001, nothing
was done by the 4th respondent pursuant to Ext.R3(c)
resolution adopted by the Board. It is strange to note that
the Board of Directors, instead of taking the 4th respondent
O.P. No.38956 of 2001
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to task for having failed to comply with the resolution of the
Board, has decided to dismiss the appeal itself by Ext.P21
order, that too, almost eight years after Ext.R3(c)
resolution. I am at a loss to understand why the Board of
Directors after first deciding to take a lenient view to pass
Ext.R3(c), after 8 long years, despite the petitioner making
a specific averment in the original petition that Ext.R3(c)
was not communicated to him, without denying the same,
went on to dismiss the petitioner’s appeal on the ground
that the amount was not realised from the mortgagor,
instead of making an enquiry as to why Ext.R3(c) was not
communicated to the petitioner.
9. I note the submission of the learned counsel for
the 1st respondent that at the time of passing Ext.P21 order,
the 4th respondent was not the Managing Director. By my
above findings I mean only that in the next meeting of the
Board after Ext.R3 (c) the Board ought to have noticed that
the direction to the 4th respondent in Ext.R3(c) was not
complied with and the 4th respondent should have been
O.P. No.38956 of 2001
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taken to task for not complying with Ext.R3 (c) resolution
within a reasonable time. Having not done so it was
improper for the Board to dismiss the petitioner’s appeal
without further reference to him. In such circumstances, I
am of opinion that the impugned punishment imposed on
the petitioner is liable to be interfered with. Accordingly, I
quash Exts.P8 and P12. But since the petitioner has already
crossed the age of superannuation on 30.9.2001, the relief
of reinstatement cannot be given to him. But I direct that
the petitioner would be deemed to have continued in service
without any punishment till he attained the age of
superannuation on 30.9.2001. Consequently, he would be
entitled to all retirement benefits due to him as if he had
retired from service on 30.9.2001 on attaining the age of
superannuation. However, I am not inclined to award the
petitioner full backwages in view of the fact that he is at
least guilty of some negligence in the matter, although the
same is not serious enough to warrant the punishment of
dismissal from service. Accordingly, I direct that the
O.P. No.38956 of 2001
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petitioner be paid 35% of the wages as backwages. But I
make it clear that the respondents can recover from the
backwages, Rs.2,30,000/-, which is the loss caused to the 1st
respondent on account of the negligence of the petitioner.
However, as and when the amounts are realised by the 1st
respondent from the subscriber, the amount shall be
reimbursed to the petitioner. But even if the backwages are
not sufficient to cover the said amount of Rs.2,30,000/- , no
further proceedings shall be taken against the petitioner for
recovery of the balance.
The original petition is allowed as above.
S. SIRI JAGAN
JUDGE
shg/sdk+