REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL Nos.7437-7438 OF 2021

THE SECRETARY,

LOCAL SELF GOVERNMENT

DEPARTMENT & ORS. ETC. …Appellants

Versus

K. CHANDRAN ETC. …Respondents

With

CIVIL APPEAL No.7440/2021

CIVIL APPEAL No.7441/2021

J U D G M E N T

SANJAY KISHAN KAUL, J.

1.On the conviction in a criminal case for violation of integrity

norms in performance of official duties and an appeal pending before the

High Court, is the employee still entitled to the release of his Death-cum-

Retirement Gratuity (for short ‘DCRG’) is the moot point arising for

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consideration in the present appeals. We are, in fact, examining a Full

Bench judgment of the Kerala High Court which resolved the conflict of

view of the Division Benches and ruled in favour of the employees. The

controversy having been set down, the Government of Kerala, which is

naturally aggrieved by the decision of the Full Bench is before us on the

aforesaid issue.

Factual Background:

2.In the main appeal before us, the question of law is the same but

the facts differ in the two cases of the two employees.

3.(A) K. Chandran, the respondent in the appeal was working as

Village Extension Officer, Noolaphuza. In the course of his employment

the 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 received

Rs.500 as bribe from one K.K. Mohanan. Mr. Chandran was suspended

from 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 working

as the General Extension Officer in Wayanad.

4.The Inquiry Commissioner and Special Judge, Kozhikode

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convicted 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 was

registered as Crl. A. No.6053/2013. The appeal was admitted and the

sentence was suspended in the meantime.

5.K. Chandran submitted a request before the Accountant General to

release his DCRG in 2014. On not receiving a favourable response, he

filed an application numbered O.A.(EKM) No.104/2014 before the

Kerala Administrative Tribunal (for short ‘KAT’), which dismissed his

application on 09.12.2014 on the ground that judicial proceedings had

been concluded and K. Chandran had been convicted. The issue which

arose pertained to the intent and purport of Rule 3A of Part III of the

Kerala Service Rules (for short ‘KSR’), which was stated to require the

outcome of departmental or judicial proceedings to be concluded for the

release of DCRG. Thus, if the criminal case went against K. Chandran, it

had to be withheld or otherwise it had to be released. It was opined that

K. Chandran being a convict and that too for receiving a bribe, could not

claim entitlement to the DCRG and, thus, accepting his application

3

would defeat the very purpose of the Rule.

6.(B) D. Alexander, another respondent in this matter allegedly

committed an offence punishable under Section 120B of the Indian Penal

Code, 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 a

vigilance case was initiated against him. He was suspended from service

on 28.11.2003 and was reinstated in service on 29.03.2004. He retired

from service on 30.04.2004 on superannuation while working as the

Taluk Supply Officer of Mukundapuram, Irinjalakuda.

7.The Inquiry Commissioner and Special Judge, Thrissur convicted

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

pending the disposal of the appeal which is still pending before the High

Court of Kerala.

8.D. Alexander was also aggrieved by the non-issuance of the

DCRG and, thus, filed O.A. No.300 of 2015 before the KAT.

9.He submitted that the DCRG can only be withheld only until the

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proceedings against an employee are concluded. The vigilance case

against him had already been concluded in terms of the judgment dated

11.07.2014. The KAT, however, observed that the pensionary claims of

D. Alexander had been duly admitted but only provisional pension was

granted to him since a vigilance inquiry was pending against him at the

time of retirement.

10.It was opined that the appeal instituted by D. Alexander was not

capable of being treated as a proceeding against him and therefore, no

judicial proceedings were pending against him. The KAT directed the

State to release the DCRG and other pensionary benefits of D. Alexander

without any delay, within a period of three months from the date of

receipt of the order.

11.We thus set forth the factual matrix of the two cases wherein

different conclusions were reached on the interpretation of the rules. We

may also note here that the Government of Kerala had issued specific

guidelines on 27.03.2002 directing the authorities to finalise

departmental action or vigilance inquiries within one year of the

retirement. That period expired a long time ago. Thus, there is no issue

here of any future departmental proceedings being initiated irrespective

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of the results of the criminal appeals. The result of the appeals or any

proceeding arising further would determine the fate of the respondents

insofar as the charge against them is concerned. The only issue, thus, to

be examined by the High Court was whether pending criminal appeal,

and with the sentence being suspended, could the DCRG be directed to

be released on the construction of the applicable rules.

12.In the two factual matrices referred to, K. Chandran approached

the High Court of Kerala in O.P.(KAT) No.78/2015 seeking to set aside

the order and requiring the disbursement of DCRG within a fixed time,

while the State in the latter matter of D. Alexander approached the High

Court of Kerala in O.P.(KAT) No.428/2019 for setting aside of the relief

which had been granted to the employee.

13.In view of there being a divergence of opinion, the Division Bench

considered it appropriate to refer the matter to a larger Bench as the two

applications before the KAT had produced different results.

The High Court proceedings:

14.The State of Kerala sought to advance a plea that normally there

cannot be any proceedings continued against a Government servant after

retirement as the employer-employee relationship does not subsist.

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However, Rule 3 in the KSR deems continuation of service in the case of

a delinquent servant even after superannuation if any departmental or

judicial proceedings are initiated, for the limited purpose of their

finalisation. A punishment under Rule 3 could be for grave misconduct

or negligence which may also lead to dismissal. In the event of an order

of dismissal being passed, even after retirement, the Government servant

would 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 servant flowing

from service rules. As a consequence, any action could only be taken

against pension and not against DCRG. There was contended to be no

enabling provision allowing automatic forfeiture of DCRG on conviction

in a criminal proceedings and hence it cannot be withheld even if the

proceedings culminate adversely against the employee.

16.The High Court in terms of the impugned judgment dated

08.09.2020 opined in favour of the respondent-employees. Rule 3 of the

KSR was read as empowering the Government to punish the delinquent

employee by withholding, withdrawing or reducing, for a specified

period or permanently, the pension payable or to order recovery for any

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pecuniary loss, but again only from the pension. The same could not be

done from the DCRG. Rule 3A of the KSR was opined to be only

tailored towards the effective implementation of Rule 3 and could not

have any separate or distinct consequences. Rule 3A having two parts, it

was opined that the first part dealt with certain conditions on the

disbursal of pension in the cases of a continuing proceeding while the

second part allowed DCRG or gratuity to be withheld until the

conclusion of the proceedings. The second part was held to have an

unnecessary penalising effect on an employee while proceedings are

pending and would have onerous consequences if the proceedings ended

in exoneration. This was so as the provision did not contemplate any

modality for recompensation if the DCRG is paid after a long period of

time.

17.The High Court also referred to Ruling Nos. 2 & 3 under Rule 3 of

the KSR providing that the disciplinary authority was only empowered to

reach a finding and the ultimate action could only be taken by the Public

Service Commission. The conclusion, thus, sought to be drawn was that

it showed that the Government was conscious of the deleterious effect of

withholding of pension on an employee. Note 2 to Rule 3 provided that

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the word ‘pension’ did not include DCRG and, thus, liabilities could be

recovered from DCRG only after giving the employee a reasonable

opportunity to explain. Ruling 3 clarified that consent was not necessary

from the employee before recovering the same and only a

communication of such liability was necessary.

18.In view of the aforesaid, it was held that the recovery under Rule 3

could only be against pension and not DCRG, and Rule 3A insofar as it

permitted DCRG to be withheld was struck down.

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”

xxxx xxxx xxxx xxxx

“3 The Government reserve to themselves the right of

withholding or withdrawing a pension or any part of it, whether

permanently or for a specified period, and the right of ordering the

recovery from a pension of the whole or part of any pecuniary

loss caused to government if in a departmental or judicial

proceeding, the pensioner is found guilty of grave misconduct or

negligence during the period of his service, including service

rendered upon re-employment after retirement:

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Provided that –

(a) such departmental proceeding, if instituted while the employee

was in service, whether before his retirement or during his re-

employment, shall after the final retirement of the employee, be

deemed to be a proceeding under this rule and shall be continued

and concluded by the authority by which it was commenced in the

same manner as if the employee had continued in service;

(b) such departmental proceeding, if not instituted while the

employee was in service, whether before his retirement or during

his 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 more

than four years before such institution; and

(iii) shall be conducted by such authority and in such place as the

Government may direct and in accordance with the procedure

applicable to departmental proceeding in which an order of

dismissal from service could be made in relation to the employee

during his service;

(c) no such judicial proceedings, if not instituted while the

employee was in service whether before his retirement or during

his reemployment, shall be instituted, save with the sanction of

the Government, in respect of a cause of action which arose or an

event which took place more than four years before such

institution and;

(d) The public Service Commission shall be consulted before final

orders are passed.

Explanation: - For the purpose of this rule –

(a) a departmental proceeding shall be deemed to be instituted on

the date on which the statement of charges is issued to the

employee or pensioner or if the employees has been placed under

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suspension 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 the

complaint or report of police officer on which the Magistrate

takes cognizance, is made, and

(ii) in the case of a civil proceeding, on the date of presentation of

the plaint in the Court.

Note1.- As soon as proceedings of the nature referred to in this

rule are instituted the authority which institutes such proceedings

should without delay intimate the fact to the Audit Officer. The

amount of pension withheld under this rule should not ordinarily

exceed one–third of the pension originally sanctioned. In fixing

the amount of pension to be so withheld regard should be had to

the consideration whether the amount of the pension left to the

pensioner in any case would be adequate for his maintenance.

Note2.- The word ‘pension’ used in this rule does not include

death-cum-retirement-gratuity. Liabilities fixed against an

employee 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 the

employee or pensioner concerned a reasonable opportunity to

explain.

Note-3 The liabilities of an employee should be quantified either

before or after retirement and intimated to him before retirement

within a period of three years on becoming pensioner. The

liabilities of pensioner should be quantified and intimated to him.

RULING No. 1

Amounts due from a Government employee or pensioner to

Government Companies, Local Bodies, Co-operative Societies,

etc., though not treated as Government dues may be recovered

from the death-cum-retirement gratuity payable to him with his

consent in writing.

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RULING No. 2

According to proviso (a) under this rule, departmental

proceedings, if instituted while the employee was in service,

whether before his retirement or during his reemployment, shall

after the final retirement of the employee be deemed to be a

proceeding under this rule and shall be continued and concluded

by the authority by which it was commenced in the same manner

as if the employee had continued in service. A doubt was raised as

to whether in the case of an employee whose case falls within the

purview of the proviso and proceedings against whom were

instituted by an authority subordinate to Government, order for

withdrawal/ withholding of pension can be passed by the

subordinate authority on the conclusion of the proceedings. The

function of the Disciplinary Authority is only to reach a finding

on the charge and to 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 3 the Government will serve the person concerned

with a show-cause notice specifying the action proposed to be

taken under this rule and the person concerned will be required to

submit his reply to the show-cause notice within such time as may

be specified by the Government. The Government will consider

the reply in consultation with the Public Service commission and

pass necessary orders in the name of the Governor.

The above procedure in regard to the issue of show-cause notice

will also apply to a case where the Governor functions as the

Disciplinary Authority.

RULING No.3

The note 2 above does not mean that the employee’s or

pensioner’s consent should be obtained for recovering the

liabilities from the death-cum-retirement gratuity payable to him.

What it contemplated is only a communication of such liabilities

to him so as to enable him to submit his explanation before the

recovery is effected. It should be specifically stated in the

communication that if no reply is received within 30 days of its

issue, it will be presumed that the employee or pensioner has no

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explanation to offer and that further action will be taken on that

basis.

3-A. (a) Where any departmental or judicial proceedings is

instituted under Rule 3 or where a departmental proceeding is

continued under clause (a) of the proviso thereto, against an

employee who has retired on attaining the age of compulsory

retirement or otherwise he shall be paid during the period

commencing from the date of his retirement to the date on which,

upon conclusion of such proceeding final orders are passed, a

provisional pension not exceeding the maximum pension which

would have been admissible on the basis of his qualifying service

up to the date of retirement, or if he was under suspension on the

date of retirement up to the date immediately preceding the date

on which he was placed under suspension, but no gratuity or

death-cum-retirement gratuity shall be paid to him until the

conclusion of such proceeding and the issue of final orders

thereon.

(b) Payment of provisional pension made under clause (a) shall be

adjusted against the final retirement benefits sanctioned to such

employee upon conclusion of the aforesaid proceeding, but no

recovery shall be made where the pension finally sanctioned is

less than the provisional pension or the pension is reduced or

withheld either permanently or for a specified period.

Note:- The grant of pension under this rule shall not prejudice

operation of Rule 59 when final pension is sanctioned upon

conclusion of the proceeding.”

The Appellant’s submissions:

20.Learned counsel for the appellant contended that Rule 3 reserves

with the Government the right to withhold or withdraw pension and the

proviso stipulates that if such departmental proceedings are instituted

13

while an employee was in service, they are to be deemed to be

proceedings under this Rule even post retirement. Note 2 to Rule 3 of

the KSR states that the liabilities against an employee or pensioner can

be recovered from the DCRG without any departmental or judicial

proceedings but after giving such a person a reasonable opportunity to

explain. Thus, DCRG can be utilised to compensate the losses of the

department. Ruling 1 to Rule 3 states that the amounts due from a

Government employee or pensioner may be recovered though not treated

as Government dues. It was, thus, contended that Rule 3 allows recovery

of amounts due to the Government from DCRG even as recovery from

pension is restricted so as to enable the pensioner to maintain themselves.

21.Rule 3A was contended to be applicable to departmental/judicial

proceedings which had not concluded. Thus, it provided for payment of

provisional pension to an employee and was independent of what has

been observed in Rule 3. His contention was that the High Court

proceeded on a wrong premise that Rule 3A was only for effective

implementation of Rule 3.

22.A reference was also made to Clause 303A(4) of the Kerala

Financial Code, Volume I, which provides that a loss sustained by the

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Government can be recovered from the DCRG. The relevant portion

reads as under:

“General principles and procedure for fixing and enforcing

responsibility for losses

303A. The following general principles should be followed in

enforcing the personal responsibility of the Government servant

or servants concerned for a loss sustained by the Government

through fraud or negligence on his part or on the part of any

other Government servant to the extent be contributed to the

loss by his own action or negligence and of any person for a

loss sustained by the Government on account of a criminal

offence committed by him:—”

xxxx xxxx xxxx xxxx

“(4). (a) In cases where a competent authority holds that a

Government servant is responsible for a loss sustained by the

Government and orders that any amount should be recovered

from him and he is about to retire from service, the amount

should be recovered as far as possible by deduction from the

last pay and allowances or leave salary due to him. If the

amount due to Government exceeds the amount payable to the

Government servant, the excess shall be recovered from his

claim for death-cum-retirement-gratuity after giving the officer

a reasonable opportunity to explain. If the amount proposed to

be recovered exceeds the death-cum-retirement-gratuity, the

excess over death-cum-retirement-gratuity can be recovered

from the arrears of pension, if any, due to the officer if written

consent is obtained from him as pension (as distinct from

death-cum-retirement-gratuity) enjoys the protection of the

‘Pension Act’. A written consent is valid only to the extent it

covers the amount of pension earned by him till the date of

such written consent.

(b) If, however, the liabilities could not be finalised but could

15

be estimated at the time of retirement, either the estimated

amount of the outstanding dues plus 25 per cent thereof should

be withheld from death-cum-retirement-gratuity or a surety

bond or cash deposit not exceeding the estimated amount of the

outstanding dues plus 25 per cent thereof should be accepted

before releasing pension and death-cum-retirement gratuity.

(c) If disciplinary proceedings are being continued against an

officer under the Service Rules on the date of retirement, only a

provisional pension should be sanctioned to him withholding

however, the entire death-cum-retirement-gratuity due to him.

(d) In cases where the liabilities could not be estimated the

pension and death-cum-retirement-gratuity will be released

provisionally after withholding from the death-cum-retirement

gratuity the amount noted below:

(1) Officers in charge of cash

or stores

The full amount of death-cum-

retirement gratuity.

(2) Gazetted Officers other

than those in (1) above

10 per cent of the death-cum-

retirement gratuity or Rs.

2,000 whichever is higher.

(3) Non-Gazetted Officers

other than (1)

10 per cent of the death-cum-

retirement gratuity or Rs. 600

whichever is higher

In all cases where the liabilities could not be assessed and fixed

before retirement of the Government servants, efforts should be

made to assess and adjust the recoverable dues within a period

of one year from the date of retirement of the Government

servant concerned. If in any case, the liability could not be

assessed and adjusted within one year, the amount withheld

from the death-cum-retirement gratuity or the surety bond or

cash deposit accepted under paragraph (c) or (d) above will be

released. Disciplinary action shall be taken against the officers

16

responsible for the failure to assess and adjust the liabilities

within the prescribed period.

(e) If in any case the amount withheld from the death-cum-

retirement gratuity or the cash deposit, or the surety bond taken

from the officer is not adequate to cover the liabilities finally

fixed, action should be taken against him under the Service

Rules to make up the loss by withholding, withdrawing or

effecting recoveries from the pensions sanctioned. If action

under the Service Rules is not possible due to the expiry of the

time limit prescribed for such action or due to any other reason,

the retired officer will be proceeded against through a Civil

Court for recovering the pecuniary loss caused to Government.

(f) When a retired Government servant whose pension has

already been sanctioned is held to have caused a loss to the

Government by fraud or negligence while in service and it

appears likely that the amount could be recovered by bringing a

suit against him, the matter should be reported to the

Government for orders. If in any particular case, it is not found

feasible to take action against a retired Government servant in

regard to a loss sustained by the Government on account of any

fraud or negligence found to have been committed by him

while in service, this should not be made an excuse for

absolving any other Government servants who are also

responsible for the loss and are still in service. Similarly, the

fact that it is not possible to fix responsibility on the officials

who initiated or acquiesced in the initiation of any irregularity

resulting in loss to Government will not exonerate those who

subsequently acquiesced in the continuation of the irregularity.

It is the duty of all Government officials to look after the

financial interests of Government and Government will hold

their officers responsible for such irregularities, not only those

who originated them but also those who subsequently permitted

their continuance.”

23.In view of the aforesaid provision, it was contended that Rule 3A

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is necessary for temporary forfeiture of DCRG during pendency of

departmental proceedings. Another contention sought to be raised was

that Section 4(6)(b) of the Payment of Gratuity Act, 1972 (hereinafter

referred to as the ‘Gratuity Act’) enables forfeiture of gratuity if the

service of an employee has been terminated. Thus, unless a provision for

forfeiture of DCRG during pendency of proceedings is maintained, no

forfeiture at all can be effected after the disciplinary proceedings are

complete and the observations of the High Court would render Section

4(6)(b) otiose. The relevant provision reads as under:

“4. Payment of gratuity. – (1) Gratuity shall be payable to an

employee on the termination of his employment after he has

rendered 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:”

xxxx xxxx xxxx xxxx

“(6) Notwithstanding anything contained in sub-section (1), -

(a) the gratuity of an employee, whose services have been

terminated for any act, wilful omission or negligence causing

any damage or loss to, or destruction of, property belonging to

the employer, shall be forfeited to the extent of the damage or

loss so caused.

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

partially forfeited] -

(i) if the services of such employee have been terminated for

his riotous or disorderly conduct or any other act of violence on

his part, or

(ii) if the services of such employee have been terminated for

any act which constitutes an offence involving moral turpitude,

provided that such offence is committed by him in the course of

his employment.”

24.Learned counsel for the appellant submitted that the issue was

really no more res integra in view of the judgment of this Court in

Chairman-cum-Managing Director, Mahanadi Coalfields v.

Rabindranath Choubey

1

opining that an employer can withhold payment

of gratuity even after retirement due to pendency of disciplinary

proceedings until the same are concluded and that the High Court had

incorrectly distinguished the judgment on the ground that the KSR did

not have a provision for recovery of gratuity.

The Respondent’s submissions:

25.Learned counsel for the respondent, on the other hand defended

the High Court’s judgment and submitted that Chairman-cum-

1

 (2020) 18 SCC 71 

19

Managing Director, Mahanadi Coalfields

2

of this Court interpreted the

provisions of the Conduct, Discipline and Appeal Rules, 1978, which are

the rules of a private company and provided for withholding of gratuity.

The KSR stood on a different footing and did not empower the

Government to withhold or recover any amount from the DCRG. Further,

the Gratuity Act did not apply to Government employees of the State. In

this behalf a reference was made to the definition of “employee” under

Section 2(e) of the Gratuity Act, which reads as under:

“2. Definitions.—In this Act, unless the context otherwise

requires, -”

xxxx xxxx xxxx xxxx

“(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, [and whether or not such

person is employed in a managerial or administrative capacity,

but does not include any such person who holds a post under

the Central Government or a State Government and is governed

by any other Act or by any rules providing for payment of

gratuity].

26.It was submitted that there is a specific exclusion of a person who

holds the post under the Central or a State Government and is governed

2

 (supra)

20

by any other Act or by any rules providing for payment of gratuity.

Our View:

27.We have given thought to the matter and find it difficult to sustain

the judgment of the High Court on the interpretation of the Rules.

28.We must keep in mind the very objectives of holding back pension

or the DCRG. One can be to recover the amounts found due from the

delinquent employee of any nature whatsoever after appropriate notice

and proceedings. The second eventuality is if an employee is dismissed

from service. It can hardly be doubted that in the second eventuality of

the dismissal from service the employee would lose all retirement

benefits.

29.In the present case separate departmental proceedings have not

been concluded within the given timeframe. The State in its wisdom has

deemed it appropriate to await the outcome of the criminal proceedings.

The result of this would mean that the State would still be empowered to

dismiss an employee from service based on the conviction in the criminal

case. The State cannot have an opportunity to have separate disciplinary

proceedings even if the acquittal takes place. If this were the intention,

the departmental proceedings should have been concluded in the

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stipulated time. We are conscious of the fact that a mere acquittal in a

criminal case would not imply that no action can be taken in

departmental proceedings. However, the choice was with the State

Government as to whether they would like to hold separate departmental

proceedings or go by the final view of the criminal court, the latter is

naturally based not on preponderance of probabilities but on proof

beyond reasonable doubt. It is the latter course which the State has

followed. Thus, an employee’s entitlement to all benefits and the right

not to be now dismissed from service all inure if the criminal proceedings

conclude in favour of the employee. However, were these proceedings to

be concluded against the employee and the conviction upheld it cannot

be said that the department would still be required to pay all the

retirement benefits. The department can also pass an order of dismissal

based solely on the criminal conviction.

30.The aforesaid being the position, the question is as to what should

be done in the hiatus period as per the Rules.

31.The KSR do provide for a provisional pension so that the

economic sustenance requirements of an employee are taken care of.

The provisional pension cannot be more than the actual pension. It is

22

nobody’s case that the respondents-employees are not getting provisional

pension. Note 1 to Rule 3 clarifies that even if the pension is finally

withheld, ordinarily the withheld portion should not be more than 1/3

rd

of

the pension originally sanctioned, as the issue of sustainability comes to

the fore. However, there is no such limitation on the DCRG. The

important aspect is whether Rule 3A is to be construed in the context of

Rule 3 or should be read independently of itself. The High Court seeks

to take a view that Rule 3A is in a sense assisting Rule 3 and does not

have any independent existence.

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

33.Rule 1 to Part III of the KSR begins with the entitlement of

pension of all employees to whom the service rules apply. Rule 2

stipulates that future good conduct shall be an implied condition of every

grant of a pension and there is entitlement to withhold or withdraw a

pension or part thereof whether permanently or for a specified period. In

terms of Rule 2(b), where a pensioner is convicted of a serious crime by

a court of law, action under clause (a) shall be taken in the light of the

judgment of the court relating to such conviction. In the facts of the case

it can hardly be said that the conviction on the ground of corruption

23

would not be classified as a serious crime for a person holding a public

post. In terms of clause (c) of Rule 2, in case of prima facie guilt of

grave misconduct, a procedure has been prescribed to be followed, which

includes as per clause (d) of Rule 2 consultation with the Public Service

Commission. It is after the aforesaid Rules that Rule 3 commences

where the Government reserves to themselves the right to withhold or

withdraw a pension or any part of it, whether permanently or for a

specified period, and all its ramifications. Certain protective provisions

have been made even in that eventuality. This provision is applicable to

pension is clarified by Note 2, as it is stipulated that the word ‘pension’

would not include DCRG. Thus, DCRG and pension have been dealt

with as separate aspects. The three Notes are followed then by Rulings 1,

2, & 3.

34.However, Note 2 provides that the liabilities fixed against an

employee or a pensioner can be recovered from DCRG without the

departmental/judicial proceedings referred to in this Rule but after giving

an employee or pensioner concerned a reasonable opportunity to explain.

If any part of DCRG was not supposed to be available for recovery of

amounts, there would be no reason of inclusion of this aspect of DCRG

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in Note 2 and a view to the contrary would make the latter part of Note 2

otiose.

35.The aforesaid Note 2 is further clarified by Ruling No. 3, which

stipulates that Note 2 does not mean that the employee’s or pensioner’s

consent should be obtained for recovering the liabilities from DCRG.

What has been contemplated is only a communication of such liabilities

to him so as to enable him to submit his explanation. Thus, this Ruling

No.3 also deals with the DCRG. It is thereafter that Rule 3A starts which

refers to the grant of provisional pension not exceeding the maximum

pension which would have been admissible on retirement where

departmental or judicial proceedings have been initiated under Rule 3. It

is clearly stipulated that no gratuity or DCRG shall be paid to him until

the conclusion of such proceedings and the issuance of final order

thereof.

36.The High Court, in our view, has introduced a new legislation by

undertaking the exercise of reading down. We do believe that there is

absolutely no need to do so when the language of the rule is so clear

conveying its intended meaning without any ambiguity.

37.We are, thus, of the view that Rule 3A cannot be read in isolation

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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 as they

provide for the treatment of the DCRG in case of disciplinary or judicial

proceedings pending at the stage of retirement. Even in the absence of

these proceedings in certain eventualities the amounts can be recovered

from the DCRG.

38.We are of the view that the principle as enunciated in Chairman-

cum-Managing Director, Mahanadi Coalfields

3

would apply even

though it is in the context of a different set of Rules. It would be suffice

to reproduce paragraphs 11 & 11.2 and 46 & 47 of the said judgment as

under:

“11. Once it is held that a major penalty which includes the

dismissal from service can be imposed, even after the employee

has attained the age of superannuation and/or was permitted to

retire on attaining the age of superannuation, provided the

disciplinary proceedings were initiated while the employee was in

service, subsection 6 of Section 4 of the Payment of Gratuity Act

shall be attracted and the amount of gratuity can be withheld till

the disciplinary proceedings are concluded.”

.... .... .... ....

“11.2. It is required to be noted that in the present case the

disciplinary proceedings were initiated against the respondent

employee for very serious allegations of misconduct alleging

dishonestly causing coal stock shortages amounting to Rs.31.65

crores and thereby causing substantial loss to the employer.

3

 (supra)

26

Therefore, if such a charge is proved and punishment of dismissal

is given thereon, the provisions of subsection 6 of Section 4 of the

Payment of Gratuity Act would be attracted and it would be

within the discretion of the appellantemployer to forfeit the

gratuity payable to the respondent. Therefore, the appellant-

employer has a right to withhold the payment of gratuity during

the pendency of the disciplinary proceedings.”

.... .... .... ....

“46. Several service benefits would depend upon the outcome of

the inquiry, such as concerning the period during which inquiry

remained pending. It would be against the public policy to permit

an employee to go scotfree after collecting various service

benefits to which he would not be entitled, and the event of

superannuation cannot come to his rescue and would amount to

condonation of guilt. Because of the legal fiction provided under

the rules, it can be completed in the same manner as if the

employee had remained in service after superannuation, and

appropriate punishment can be imposed. Various provisions of the

Gratuity Act discussed above do not come in the way of

departmental inquiry and as provided in Section 4(6) and Rule

34.3 in case of dismissal gratuity can be forfeited wholly or

partially, and the loss can also be recovered. An inquiry can be

continued as provided under the relevant service rules as it is not

provided in the Payment of Gratuity Act, 1972 that inquiry shall

come to an end as soon as the employee attains the age of

superannuation. We reiterate that the Act does not deal with the

matter of disciplinary inquiry, it contemplates recovery from or

forfeiture of gratuity wholly or partially as per misconduct

committed and does not deal with punishments to be imposed and

does not supersede the Rules 34.2 and 34.3 of the CDA Rules.

The mandate of Section 4(6) of recovery of loss provided under

Section 4(6)(a) and forfeiture of gratuity wholly or partially under

Section 4(6)(b) is furthered by the Rules 34.2 and 34.3. If there

cannot be any dismissal after superannuation, intendment of the

provisions of Section 4(6) would be defeated. The provisions of

section 4(1) and 4(6) of Payment of Gratuity Act, 1972 have to be

given purposive interpretation, and no way interdict holding of

the departmental inquiry and punishment to be imposed is not the

subject matter dealt with under the Act.

27

47. Thus considering the provisions of Rules 34.2 and 34.3 of the

CDA Rules, the inquiry can be continued given the deeming

fiction in the same manner as if the employee had continued in

service and appropriate punishment, including that of dismissal

can be imposed apart from the forfeiture of the gratuity wholly or

partially including the recovery of the pecuniary loss as the case

may be.”

39.We also believe that it is a very restrictive view to disburse DCRG

on account of the proceedings against a pensioner coming to an end, even

where a conviction has arisen. This is especially so where the convicted

person has availed of the remedy of appeal. An appeal is a continuation

of the proceedings in trial and would be, thus, a continuation of judicial

proceedings. For example, if no appeal had been filed, can it be said that

despite conviction in the criminal case, the State is without authority of

forfeiting the DCRG or pension for that matter? If it is not so, as we

believe, then the pendency of the appeal cannot disentitle the State from

withholding the DCRG, considering that it is a hiatus period within

which certain arrangements have to be made which would be dependent

on the outcome of the appeal.

40.Learned counsel for the respondent did seek to contend before us

that if the appeals are pending over a long period of time it should not

prejudice the respondents. That is a matter for them to take up before the

28

High Court for disposal of the appeals, which are undoubtedly quite old.

41.We have aforesaid also clarified that there is no question of any

other departmental proceedings arising independently against the

respondents, as the conclusion of the criminal proceedings would entitle

the State to pass appropriate orders based solely on the result of the

aforesaid proceedings.

Conclusion:

42.We are, thus, of the view that the impugned judgment of the Full

Bench of the Kerala High Court cannot be sustained, and it cannot be

opined that the DCRG would have to be released to the respondents

pending consideration of the criminal appeal.

43.The impugned judgment is set aside and the appeals are

accordingly allowed leaving the parties to bear their own costs.

………………………J.

[Sanjay Kishan Kaul]

....……………………J.

[M.M. Sundresh]

New Delhi.

March 15, 2022.

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