Supreme Court Faults UCO Bank's Attempt To Stall Employee's VRS By Issuing Show Cause Notice

The Supreme Court on Tuesday (April 7) observed that an employer cannot prevent an employee from taking voluntary retirement merely by issuing a show-cause notice, without formally initiating disciplinary proceedings and refusing permission within the prescribed notice period.

A bench of Justice J.K. Maheshwari and Justice Vijay Bishnoi was dealing with a case where a bank employee was served a show-cause notice while his application for voluntary retirement was pending. Although a decision on the VRS request was required within three months, the bank failed to take any such decision and instead issued a show-cause notice regarding certain transactions, without initiating formal disciplinary proceedings.

The respondent employee had submitted a notice for voluntary retirement on October 4, 2010, under the UCO Bank (Employees') Pension Regulations, 1995, which required a three-month notice period. This period expired on January 4, 2011.

During this time, the bank issued a show-cause notice in November 2010 seeking an explanation regarding certain transactions. However, no formal disciplinary proceedings were initiated, nor was any decision refusing voluntary retirement communicated within the notice period.

It was only months later, in June 2011, that the bank attempted to refuse the retirement. Subsequently, in March 2012, it issued a chargesheet and proceeded to dismiss the employee from service.

The Chhattisgarh High Court decided in favour of the respondent, affirming that he had validly retired before any disciplinary proceedings were initiated against him, prompting the bank to appeal before the Supreme Court.

Affirming the High Court's decision, the judgment authored by Justice Maheshwari held that the bank's show-cause notice did not reflect any intention to initiate disciplinary proceedings against the respondent so as to deny voluntary retirement. Consequently, since the bank failed to refuse permission within the prescribed period, the voluntary retirement took effect automatically.

“…the (VRS) request if not refused within the period specified in the notice or withheld, the deemed approval of voluntary retirement would be effective on expiry of notice period.”, the court observed, after referring to the Bank's pension regulations.

“…the existence of such a show cause notice itself is not sufficient without refusal by competent authority to stop the automatic operation of the notice of voluntary retirement. In absence, the notice of voluntary retirement would take its course. In the present case, no such order of refusal or order of withholding was passed by the competent authority within the stipulated period. The notice of voluntary retirement, therefore, became effective automatically by efflux of time upon the expiry of the three-month period on 04.01.2011. This Court, accordingly, finds no infirmity in the view taken by the High Court, which is liable to be upheld.”, the court added.

Since the employee's voluntary retirement had already taken effect by January 2011, the Court held that the employer-employee relationship had come to an end before the chargesheet was issued in March 2012.

As a result, the subsequent disciplinary proceedings and the dismissal order were declared without jurisdiction and invalid.

The appeal was dismissed, and the High Court's direction to the Appellant to grant retiral benefits was upheld.

Headnote

Service Law – Voluntary Retirement – Interplay between Pension Regulations and Service Regulations – Deemed Acceptance – The Supreme Court held that under Regulation 29(2) of the UCO Bank (Employees') Pension Regulations, 1995, a notice for voluntary retirement becomes effective automatically upon the expiry of the notice period unless the appointing authority specifically refuses to grant permission before such expiry - Supreme Court clarified that while Regulation 20(3) of the Service Regulations creates an embargo on leaving service during the pendency of disciplinary proceedings, these provisions must be read harmoniously - If the competent authority fails to pass a positive order of refusal within the notice period, the voluntary retirement takes effect ipso facto by efflux of time. [Paras 17 - 26, 43]

Service Law – Disciplinary Proceedings – Meaning of "Pending" – Effect of Show Cause Notice – Supreme Court observed that for a show-cause notice to trigger the "deemed pendency" of disciplinary proceedings under Regulation 20(3)(ii) of the Service Regulations, it must clearly indicate an intention to institute disciplinary action - A mere request for an explanation regarding alleged irregularities, stating that "further course of action will be taken" in the absence of a reply, does not constitute the institution of disciplinary proceedings. [Paras 36, 37]

Service Law – Retrospective Refusal – Held, that a communication refusing voluntary retirement made after the expiry of the notice period and after the employee has already ceased work cannot be given retrospective effect to undo a retirement that has already become effective by operation of law - any chargesheet issued or dismissal order passed after the date of such deemed retirement is illegal and without jurisdiction. [Relied on Dinesh Chandra Sangma v. State of Assam (1977) 4 SCC 441; B.J. Shelat v. State of Gujarat (1978) 2 SCC 202; State of Haryana v. S.K. Singhal (1999) 4 SCC 293; Tek Chand v. Dile Ram (2001) 3 SCC 290; UCO Bank v. Rajinder Lal Capoor (2007) 6 SCC 694 & (2008) 5 SCC 257; Paras 30 - 45]

Cause Title: UCO BANK & ORS. VERSUS SK SHRIVASTAVA (with connected case)

Click here to download judgment

Appearance:

Amicus Curiae Mr. Gaurav Agarwal, Sr. Adv.

For Appellant(s) : Mr. Brijesh Kumar Tamber, AOR Mr. Vinay Singh Bisht, Adv. Mr. Prateek Kushwaha, Adv. Ms. Arani Mukherjee, Adv. Mr. Yashu Rustagi, Adv. Mr. Sahas Bhasin, Adv. Mr. Vaibhav Dayma, Adv.

For Respondent(s) : Respondent-in-person