Retiral Benefits Can't Be Withheld Merely Due To Pending FIR; Loss Must Be Established In Departmental Proceedings: J&K&L High Court

The Court held that losses sought to be recovered must first be determined in departmental or judicial proceedings and that mere pendency of a criminal investigation does not furnish a legal basis for withholding retiral benefits.

The Court made these observations while hearing a writ petition filed by a retired General Manager of the Jammu and Kashmir Projects Construction Corporation Limited (JKPCC), challenging an enquiry report, recommendations made by the Managing Director of the Corporation and their subsequent approval by the Board of Directors whereby his retiral benefits were withheld.

The petitioner had also sought release of his unpaid salary and retirement dues which remained withheld following departmental proceedings and criminal investigations initiated against him.

A Bench of Justice Sanjay Dhar observed,

“Even though the employer is vested with a right to order recovery from the pension of any officer/official of any amount on account of losses found in judicial or departmental proceedings, which may have been caused to the employer by the negligence or fraud of a delinquent employee during his/her service, yet the same can be done only subject to conditions stipulated in Article 168-A of the J&K CSR and such losses must have been determined in departmental or judicial proceedings.”

Background:

The petitioner was promoted as Deputy General Manager of the respondent-Corporation and was later promoted as General Manager (Civil). He was subsequently entrusted with the charge of Managing Director on an in-charge basis, which arrangement was later confirmed by the Board of Directors. He superannuated from service while holding the post of General Manager.

While the petitioner was functioning as In-charge Managing Director, a fact-finding committee examined certain allegations concerning the affairs of the Corporation. Based upon the committee's report, a communication was addressed to the Crime Branch leading to registration of an FIR and filing of a charge-sheet before the Special Judge, Anti-Corruption. The petitioner was thereafter placed under suspension and a regular departmental enquiry was also initiated against him shortly before his retirement.

The enquiry officer ultimately returned findings against the petitioner relating to presentation of an allegedly incorrect agenda before the Board of Directors, issuance of a circular said to have benefited him and the issuance of a back-dated circular. According to the petitioner, despite the enquiry report recording that he had neither drawn salary attached to the post of Managing Director nor any charge allowance, recommendations were made for withholding his retiral benefits. The Board of Directors approved these recommendations and consequently gratuity, leave salary and salary dues remained withheld.

The respondents contended that the petitioner had been afforded adequate opportunity during the departmental enquiry and that the charges against him stood established. They further relied upon another FIR which remained under investigation and submitted that the action taken against the petitioner was justified in law.

Court's Observations:

The Court first noted that during the pendency of the writ petition, the petitioner had been discharged in the criminal case arising out of the earlier FIR and that the charge-sheet filed against him stood dismissed by the competent court. Consequently, there was no criminal charge-sheet pending against the petitioner before any court. The only remaining circumstance relied upon by the respondents was another FIR which was still under investigation, the court found.

The Court observed that even if the departmental enquiry was assumed to have been conducted in accordance with the prescribed procedure, the respondents could not continue withholding retiral benefits on the basis of a criminal case in which the petitioner already stood discharged. The Court noted that once the charge-sheet had been dismissed by the criminal court, the very basis on which the Board of Directors had approved withholding of retiral benefits ceased to exist.

Addressing the principal issue, the Court examined Article 168-A of the J&K CSR and explained the scope of the employer's power to recover losses from pensionary benefits. The Court observed that the provision permits such recovery only when losses caused by negligence or fraud have been established in judicial or departmental proceedings and subject to fulfilment of the conditions prescribed therein.

The Court specifically held,

“... The loss caused to the employer on account of negligence or fraud is required to be established either in the judicial or in the departmental proceedings.”

Examining the facts of the case, the Court found that it was not even the respondents' case that losses caused to the Corporation had been assessed in the departmental proceedings. Nor was it their case that the alleged acts and omissions of the petitioner had resulted in any financial loss to the Corporation. The Court noted that no determination of recoverable loss had been made in any departmental or judicial proceeding.

The Court further rejected the contention that pendency of an investigation could be treated as a judicial proceeding. In this regard, the Bench observed, “Mere pendency of the investigation, without there being a charge sheet laid before the court, cannot be termed as a judicial proceeding.”

The Court also took note of the admitted position that the petitioner had neither drawn the charge allowance nor received salary attached to the post of Managing Director. Consequently, the Court found that the alleged actions attributed to the petitioner had not resulted in any monetary benefit to him and had not been shown to have caused any loss to the Corporation.

Having examined the statutory framework and the factual position on record, the Court concluded that the respondents lacked authority to continue withholding either the retiral benefits or the unpaid salary of the petitioner merely because an FIR remained under investigation.

The Court thus allowed the writ petition and directed the respondents to release the petitioner's terminal benefits along with unpaid salary as expeditiously as possible, preferably within two months from the date a copy of the order is made available to them.

The Court further directed that in case of default, the amount due shall carry interest at the rate of 6% per annum from the date of filing of the petition till its realization.

Case Title: Vikar Mustafa Shonthu v. Union Territory of J&K and Others

Citation: 2026 LiveLaw (JKL)

Appearances

Petitioner: Syed Faisal Qadiri, Senior Advocate with Sikander Hayat Khan, Advocate

Respondents: M. M. Malik, Advocate

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