In Binani Zinc Employees Multipurpose Co-Operative Society Ltd. vs. Lizy Rajan (Writ Appeal No. 1315 of 2015, Kerala High Court, decided 15 November 2016), the Division Bench of Justices Antony Dominic and Shircy V. set aside the order of the Appellate Authority reinstating a dismissed co-operative society employee and substituted compensation of Rs. 2,00,000 in its place, finding the Appellate Authority's reasoning to be wholly perverse and inadequate.
Court and Bench
IN THE HIGH COURT OF KERALA AT ERNAKULAM
ANTONY DOMINIC & SHIRCY V., JJ.
Writ Appeal No. 1315 of 2015
Dated: 15th day of November, 2016
Against the Judgment in W.P.(C) 29933/2008 of the High Court of Kerala, dated 20.5.2015
Parties
The appellant is the Binani Zinc Employees Multipurpose Co-Operative Society Ltd., the employer. The first respondent is Lizy Rajan, the employee dismissed from service. The second respondent is the Appellate Authority under the Kerala Shops and Commercial Establishments Act, 1960.
Employment History and Dismissal
Lizy Rajan was initially engaged as a daily-rated employee from 1 June 1992 to 31 October 1994. She was then appointed as a Junior Assistant on a regular basis with effect from 3 November 1994. A domestic inquiry was initiated against her and the Enquiry Officer found her guilty of multiple charges of misconduct. On the strength of those findings, the disciplinary authority dismissed her from service with effect from 6 January 2001. There was no prior instance of misconduct or disciplinary action on record against her.
Charges and Enquiry Officer Findings
The Enquiry Officer examined six charges in detail. The principal findings were as follows:
On charge No. 5 -- fictitious payment of share amounts using forged signatures -- the Enquiry Officer concluded:
"From the above discussions, it is clear that the delinquent as cashier on 28.6.97, knowing that the signature of the concerned persons were forged in Ext. M59(a) to (d) and when there was sufficient reason to believe that the signature of members in Ext. M58(a) to (g) were forged as they were residing at far off places from the society having left from the service of the company, without satisfying herself as to the genuineness of the vouchers, conniving with the then Secretary, effected payment fictitiously as share amount repaid to them, as mentioned in both the vouchers and misutilised the amount thereof. The charge No. 5 is proved to this effect."
On charge No. 6 -- fraudulent misrepresentation and cheating -- the Enquiry Officer held that the charge stood fully established.
Charges 1 and 2 were found partially proved. There was also a finding of a strong case against the delinquent on tampering of records.
Appeal before the Appellate Authority
Lizy Rajan appealed to the Appellate Authority under Section 18 of the Kerala Shops and Commercial Establishments Act, 1960. By Ext. P1 order, the Appellate Authority set aside the dismissal and directed reinstatement with three-fourths backwages, or alternatively payment of Rs. 4,50,000 as compensation in lieu of reinstatement.
The Appellate Authority's reasoning on each charge was as follows:
- On charge No. 4 (misappropriation and fabrication): The delinquent had no personal gain, so the charge was not sustainable.
- On charge No. 5 (forged vouchers): The first respondent alone was not guilty; the society had not examined a shareholder to substantiate the forgery allegation.
- On charge No. 6 (clearance certificate): Loans were subsequently cleared, the society suffered no financial loss, so the respondent was absolved.
- On charge No. 1 (calculation of lesser interest): No deliberate attempt was found on the respondent's part.
- On charge No. 2 (tampering of records): The respondent was not in charge of the Secretary's functions on the relevant date (28.2.95), so the charge was not proved.
After entering these findings, the Appellate Authority concluded that the management's action in dismissing the respondent was without bona fides and without substantiating evidence, though it acknowledged negligence on her part. It set aside the dismissal and ordered reinstatement with three-fourths backwages, or compensation of Rs. 4,50,000.
Writ Petition before the Single Judge
The society filed W.P.(C) No. 29933/2008 challenging Ext. P1. The learned Single Judge dismissed the writ petition. Relying on Exts. P9 and P10 (earlier judgments of this court) and on Thodupuzha Taluk General Marketing Co-operative Society v. Michael Sebastian, 2010 (1) KLT 938, the Single Judge rejected the challenge to the competence of the Appellate Authority. The Single Judge also held that the findings of the Appellate Authority were not perverse and were based on legal evidence, and therefore did not warrant interference under Articles 226 and 227 of the Constitution. The society preferred this writ appeal.
Issues in the Writ Appeal
Two issues arose for consideration in the writ appeal:
- Whether the appeal filed by the first respondent before the second respondent (Appellate Authority) under Section 18 of the Kerala Shops Act was maintainable, having regard to the Larger Bench ruling in Chirayinkeezhu Service Co-operative Bank Ltd. v. Santhosh, 2015 (4) KLT 163 (L.B.).
- Even if maintainable, whether the Appellate Authority's reasoning for overturning the findings of the Enquiry Officer was perverse.
Maintainability of the Appeal
The appellant's primary argument was that, following the Larger Bench ruling in Chirayinkeezhu Service Co-operative Bank Ltd. (supra), service disputes of employees of co-operative societies are resolved exclusively under Section 69 of the Kerala Co-operative Societies Act, to the exclusion of all other statutory forums, including the Appellate Authority under Section 18 of the Shops Act. The Larger Bench had held that Section 69(1) uses a non obstante clause and the phrase "no court," expressing a clear legislative intent to exclude the jurisdiction of all other courts and adjudicatory forums in respect of service disputes of co-operative society employees.
The first respondent countered that the dismissal took effect from 6 January 2001 and the appeal was filed on 19 September 2002, well before the Larger Bench delivered its 2015 ruling in Chirayinkeezhu. She relied on Videocon International Limited v. Securities and Exchange Board of India, 2015 (4) SCC 33, arguing that appeal is a vested right and that proceedings which commenced in a competent forum must be permitted to continue in that forum even when the law later changes.
The Division Bench rejected this argument. Reading the Larger Bench judgment, the court observed that the Larger Bench had not changed the law: it had declared what Section 69, as originally enacted, had always meant. The non obstante clause and the exclusive adjudicatory scheme under Section 69 were always in force. The Videocon principle -- that a party has a vested right to continue proceedings in a forum that was competent on the date of institution of the lis -- could not apply where the forum in question had never had jurisdiction to begin with. The appeal before the Appellate Authority under the Shops Act was therefore without jurisdiction.
However, since both sides had argued the merits extensively and the Single Judge had decided the writ petition on the merits, the Division Bench proceeded to examine whether the Appellate Authority's order was in any event perverse.
Perversity of the Appellate Authority's Reasoning
Section 18 of the Kerala Shops and Commercial Establishments Act vests the Appellate Authority with powers akin to those of an Industrial Tribunal or Labour Court exercising jurisdiction under Section 11A of the Industrial Disputes Act. It may re-appreciate evidence, substitute the punishment, and arrive at its own conclusions. However, this power cannot be exercised in an arbitrary or whimsical manner. The reasons that persuaded the Appellate Authority to interfere with the disciplinary decision of the employer must appear in its order.
The Division Bench found Ext. P1 not merely laconic but also inadequate on every point on which the Appellate Authority interfered with the Enquiry Officer's findings.
Charge No. 5: Forgery of Signatures
The Enquiry Officer had concluded, after detailed examination of documentary and oral evidence, that the delinquent connived with the then Secretary and effected fictitious payments using vouchers bearing forged member signatures. The Appellate Authority overturned this by saying the first respondent alone was not guilty. The Division Bench held this conclusion was perverse. The Enquiry Officer's reasoning was based on the quality of evidence placed on record by the management, including testimony of witnesses and voluminous documents. The Appellate Authority disregarded that reasoning without properly referring to the evidence or the documents that the Enquiry Officer had specifically relied upon.
Charge No. 6: Clearance Certificate
The Appellate Authority absolved the first respondent from the charge of issuing a clearance certificate while loans remained outstanding, on the ground that the loans were subsequently cleared and the society suffered no financial loss. The Division Bench found this conclusion perverse. An employee's guilt in issuing a premature clearance certificate is not negated by the borrower's subsequent clearance of the loan. The charge concerns conduct at the time of issuing the certificate, not whether the society ultimately recovered its money.
Charge on Tampering of Records
The Enquiry Officer had found a strong case against the delinquent on the charge of tampering with records. The Appellate Authority overruled this finding without assigning any specific reason. This too was perverse under settled principles that interfering with a finding of fact in a domestic inquiry requires cogent reasoning grounded in the evidence before the inquiry.
General Principle
The Division Bench reiterated the well-established principle in domestic inquiry law: it is not the quantity of evidence that matters but its quality. Where the management examined witnesses and placed voluminous documentary evidence before the Enquiry Officer, and the Enquiry Officer accepted those materials in arriving at his findings, the Appellate Authority could not summarily discard those findings without engaging with the evidence or explaining what made it unreliable.
Reading Ext. P1 as a whole, the court concluded that the findings of the Appellate Authority were totally perverse. The judgment of the Single Judge confirming Ext. P1 was therefore also liable to be set aside.
Proportionality of Punishment
Even accepting that the Enquiry Officer's findings were valid, a further question arose as to whether outright dismissal was a proportionate punishment. The Division Bench took into account:
- The first respondent had worked in the society since 1992 with no prior disciplinary record.
- Many of the alleged misconducts were not proved, and charges 1 and 2 were only partially proved.
- She was employed as a cashier handling members' funds -- the proved misconducts (connivance in forged vouchers, issuance of clearance certificate while liability was outstanding) were serious given that responsibility.
- The long interval since her dismissal and the fact that she was close to retirement age made reinstatement unsuitable.
Balancing these factors, the court found that dismissal was disproportionate but reinstatement was also not an appropriate remedy given the proved loss of confidence, the passage of time, and the proximity to retirement. The court substituted compensation.
Decision and Orders
The Division Bench allowed the writ appeal. The judgment of the Single Judge, insofar as it confirmed Ext. P1, was set aside. In substitution, the court directed the Binani Zinc Employees Multipurpose Co-Operative Society Ltd. to pay Rs. 2,00,000 to Lizy Rajan as compensation, in full and final settlement of all her claims. This amount was to be paid within two months. In the event of non-payment, the first respondent was at liberty to recover the amount by invoking the Revenue Recovery Act. The writ appeal was disposed of with no order as to costs.
For further judgment notes on employee rights and co-operative society disputes, see the Criminal Law practice area and the Baldev Singh vs State of Punjab High Court ruling on related employment law questions.
Key Legal Principles
- Service disputes of employees of co-operative societies are governed exclusively by Section 69 of the Kerala Co-operative Societies Act, 1969, to the exclusion of the appellate forum under Section 18 of the Kerala Shops and Commercial Establishments Act, 1960, as declared by the Larger Bench in Chirayinkeezhu.
- An Appellate Authority exercising powers akin to an Industrial Tribunal under Section 11A of the Industrial Disputes Act must assign cogent reasons for interfering with findings of a domestic inquiry. A laconic or inadequate order that disregards evidence without engagement is perverse and liable to be set aside.
- In a domestic inquiry, it is the quality of evidence that matters, not its quantity. Legal evidence accepted by the Enquiry Officer cannot be summarily rejected by the Appellate Authority without addressing it.
- Subsequent clearance of a loan does not absolve an employee of the charge of issuing a premature or improper clearance certificate; guilt is assessed as of the date of the act, not its eventual consequences.
- Where dismissal is found disproportionate but loss of confidence and passage of time make reinstatement equally inappropriate, compensation is a permissible substitute.