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Employer May Invoke Civil Remedy To Recover Loss From Employee In Absence Of Specific Remedy In Employees Service Regulations: Allahabad HC

9 Sep 2019 11:28 AM GMT
Employer May Invoke Civil Remedy To Recover Loss From Employee In Absence Of Specific Remedy In Employees Service Regulations: Allahabad HC
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A full bench of the Allahabad High Court has held that in absence of a specific remedy in Employees' Service Regulations, an employer may invoke civil liability to recover the loss incurred by him due to the actions of an employee.

The bench of Justices Sudhir Agarwal, Manoj Misra, and Rajendra Kumar-IV were adjudicating upon inconsistencies in Regulation 84 of U.P. Co-Operative Societies Employees Service Regulations, 1975 (Regulations 1975) and Rule 83 of U.P. Co-operative Federation Limited Karmchari Seva Niyamawali, 1980 (Rules 1980).

While Regulation 84 of Regulations 1975 confers power upon competent authority to impose 'any one' of the punishments prescribed therein, Rule 83 of Rules 1980 on the other hand prescribes imposition of "any one or more" of the punishments prescribed in Rule 83.

In the backdrop of this case, the Appellant, Pancham Ram Yadav was working as a storekeeper with the Respondent, U.P. Co-Operative Federation Ltd. He was dismissed from services by the Respondent after a theft was committed in the godown where the Appellant was posted and it was found that the locks of the godown were not broken by the thieves. Apart from dismissal, the Respondent also passed direction for recovery of Rs. 2,69,130.14 from the Appellant.

The above order of dismissal and recovery was assailed by the Appellant whereby the court of first instance dismissed the Appellant's argument that two punishments could not have been awarded in view of Regulation 84 of Regulation 1975.

The court relied on Satya Narain Mishra v. Prabandh Nideshak & Anr., 2002 (1) AWC 582 wherein it was held that "In case bank employee who is found to have embezzled the amount, the public policy demands that apart from the punishment given by departmental authority, he be held responsible for the recovery of the pecuniary loss caused by the employee to the Bank. If an employee is held to be liable to only one of the punishments, it may become an incentive to misappropriate or embezzle a large amount and escape liability of such misappropriation or embezzlement".

Subsequently, the appeal titled "Pancham Ram Yadav v. The U.P. Co-Operative Federation Ltd." was filed through Advocate Chandan Kumar before a division bench of the high court which referred the matter to the full bench.


The court stated that harmonious construction of the two provisions was not possible given the evident contradiction in their language. "When Statute is specific, clear and categorical there is no reason that court must provide casus omissus and read something therein which legislating competent authority has chosen not to do", they said.

Thus, it was decided that only one of the two provisions could prevail and preference was given to Regulation 84 of Regulation 1975 in view of Virendra Kumar Gupta v. State of U.P. & Ors., 2015 (7) ADJ 19, where under it was held that Rules 1980 were subordinate to Regulation 1975 as they had been framed under Regulation 102 of Regulation 1975. "Such Rules have to be subordinate and subject to Regulation 1975 and cannot be allowed to travel beyond specific provisions contained in Regulations 1975", the bench said. Reliance was also placed on the Supreme Court judgment in U.P. State Cooperative Land Development Bank Ltd. v. Chandra Bhan Dubey & Ors., (1999) 1 SCC 741.

Interestingly, the verdict in Satya Narain Mishra v. Prabandh Nideshak & Anr. was set down however, the reasoning given by the single judge therein was held to be sound. In this regard, the court stated "…there cannot be any doubt that an employee, if found guilty of serious misconduct of embezzlement of public funds, he must be imposed major penalties of reduction in rank or dismissal or removal but, simultaneously, if such misconduct has also caused loss to the employer, one cannot have any doubt that punishment of recovery should also be imposed upon him so that such employee may not escape without making good the loss caused to the employer on account of misconduct. This object is very loud and must be given effect…"

In this view the court suggested that the punishment of dismissal may be maintained under Regulation 1975 and the recovery of money may be made under some other provision. "By virtue of departmental enquiry, once it is established that an employee has caused some loss to the employer, in our view, it will become a civil liability of such an employee to make good the loss caused to the employer or employer can claim discharge of such liability by employee by paying such amount, failing which, to proceed for recovery in any other manner as provided in law.

we make it clear that once siphoning off public funds or loss to the employer is proved and determined, such amount becomes civil liability of employee towards employer. Since it touched upon the business of employer, other remedies are also available to Co-operative Societies concerned to realize the said amount from employee."

The bench also requested the competent authority to amend Regulation 84 at the earliest to "avoid any injurious situation occurring to Co-operative Societies governed by Regulations, 1975 on account of lacuna in the drafting of Regulation 84 of Regulations, 1975 with regard to imposing of punishment".

The Respondent was represented by Advocates Ram Gopal Tripathi and V.C. Tripathi.

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