Disciplinary Proceedings Against Employees of Societies and other Autonomous Establishments

Saji Koduvath, Advocate, Kottayam.

Contents
•• 1. SUSPENSION
•• 2. DISCIPLINARY SUB-COMMITTEE
•• 3. FACT-FINDING ENQUIRY
•• 4. “SHOW-CAUSE NOTICE”
•• 5. CHARGES
•• 6. ENQUIRY
•• 7. PUNISHMENT
•• 8. APPEAL

Introduction

Indian courts consistently apply fundamental common law principles and natural justice to disciplinary proceedings against employees of societies and autonomous institutions. In Kerala, these general standards are statutorily embodied in Rule 198 of the Kerala Co-operative Societies Rules, 1969. The key procedural requirements governing such actions, structured with reference to Rule 198, are outlined below.

SUSPENSION

Who has to suspend an employee ?

  • An authority competent to appoint the employee has to suspend him.
  • Usually, the Managing Committee is the appointing authority. When the Managing Committee has taken a decision, it can be issued by the President or the Secretary of the committee.
  • President’s Role: In urgent situations requiring immediate preventive action, the President may issue a suspension order in anticipation of subsequent ratification by the Managing Committee.  The President has general control over the affairs of the Society, as the chief executive of the Committee.
    • See: Prasanth Maroli v. Kannur Primary Co-operative Agricultural & Rural Development Bank Ltd. 2008 (4) KLT 451; 2008 (4) KHC 240);  Chandrikamma v. Assistant Registrar (General), Co-operative Societies, 2000 (3) KLT 940.
  • The bye-laws of the society may expressly confer disciplinary/ suspension power on the President or exclusively on the Committee. It has to be honoured.
Rule 198(6) of the Kerala Co-operative Societies Rules, 1969 provides as under:
“An authority competent to appoint an employee may suspend him pending enquiry into serious charges against such employee.”

What should be the period of suspension?

  • The period of suspension should be kept as brief as possible to ensure fairness and prevent unnecessary hardship.
Rule 198(6) of the Kerala Co-operative Societies Rules is the relevant provision.  It reads:
“No employee shall however be kept under suspension for a period exceeding six months at a time. In no case an employee shall be kept under suspension for a continuous period exceeding one year without the prior approval of the Registrar.”

Is the suspended employee entitled to a subsistence allowance?

  • Yes. Because suspension is not a punishment.
Rule 198(6) of the Kerala Rules further reads: 
“An employee under suspension shall be entitled to subsistence allowance payable under the Kerala Payment of Subsistence Allowance Act, 1972 (27 of 1973).”

Is suspension a part of enquiry?

  • No. Suspension and enquiry are independent legal matters. It is not a step within the enquiry itself.

Is suspension a punishment?

  • No. Suspension is purely a temporary administrative measure to ensure a fair enquiry.

Can a suspended employee be reinstated pending an enquiry?

  • Yes. A suspended employee can be taken back into service pending an enquiry by revoking the suspension order if the competent authority later finds that continued suspension is unnecessary.

What are the grounds for revoking suspension?

  • ‘In the absence of any likelihood of the respondent to interfere with the enquiry or tampering with the evidence keeping the employee under suspension is unwarranted and cannot be justified.’ This principle is stated in K.K. Chandramathi v. Vadakkumpad Service Co-operative Bank Ltd., 1998 (2) KLT SN 37.

Who can revoke the suspension?

  • The same authority competent to suspend—normally the Managing Committee—may revoke the suspension and permit the employee to rejoin duty.

Can such employee be posted elsewhere?

Yes.

  • The Society may:
    • revoke the suspension;
    • assign the employee to another seat/branch/section;
    • restrict access to records connected with the enquiry; or
    • require the employee not to interfere with witnesses or documents.
  • Such arrangements are often adopted where the employee’s presence is not likely to prejudice the enquiry.

DISCIPLINARY SUB-COMMITTEE

Why is a Disciplinary Sub-Committee formed?

  • Ensuring a Genuine Right of Appeal: If the full Managing Committee were to conduct the initial inquiry or directly impose punishment, an employee would have no independent, unbiased body left to hear an appeal. Separating the initial disciplinary authority from the appellate body ensures that the Managing Committee can function as an impartial tribunal during the appeal stage.
  • Separation of Roles: Having a smaller, dedicated standing body to handle charge memos and inquiries prevents the members who judge the final appeal from having prejudged the facts or actively participated in the original penalty decision (nemo judex in causa sua).
The disciplinary sub-committee, envisaged under Rule 198(2A), is ordinarily to be constituted as a standing body, and it is not constituted on a case-to-case basis (Mattanur Co-Operative Rural Bank Ltd. v. The Co-Operative Arbitration Court (FB), 2023-5 KLT 312; 2023 KHC (Online) 541).

How many members can be included in a Disciplinary Sub-Committee?

  • The total number of sub-committee members must be kept low enough so that when they abstain or recuse themselves from hearing an appeal, the remaining members of the Managing Committee (Managing Committee members minus (-) Sub-Committee members) still form a clear majority to hear the appeal without institutional bias.
Rule 198 (2A) reads:
“The committee of a society shall constitute a disciplinary sub-committee consisting of not more than three of its members, of whom one shall be designated as Chairman ….”

Can the Disciplinary Sub-Committee suspend an employee?

  • No. Only the authority competent to appoint the employee (Management) holds the power to issue a suspension order.
  • Role of the Sub-Committee: The scope and authority of a Disciplinary Sub-Committee are strictly limited to issuing charge memos and inquiring into charges.
Rule 198(6) says –
“… an authority competent to appoint an employee may suspend him pending enquiry into serious charges.”

Can the President of the Society be the President of the Disciplinary Committee?

  • Better not to be. This is for the reason that the Appeal is to the Managing Committee, chaired by the President.
Rule 198 (2A) further reads:
“….. but the President of the committee of the society shall not be a member in the disciplinary sub-committee”.

Duties of Disciplinary Sub-Committee

  • The Full Bench in Mattanur Co-Operative Rural Bank Ltd. v. The Co-Operative Arbitration Court, 2023-5 KLT 312; 2023 KHC (Online) 541, has now made it clear that the Disciplinary Sub-Committee has a substantial statutory role. It can:
    • 1. inquire into the charges;
    • 2. issue the memo of charges;
    • 3. engage an external agency;
    • 4. conduct or arrange the disciplinary enquiry.

Can those (already constituted) Sub-Committee members participate in the Managing Committee’s decision to suspend?

  • No harm. Ordinarily, they should not participate (or vote) in the Managing Committee’s decision on suspension if they are acting as members of the Disciplinary Sub-Committee.

Can a member of the Disciplinary Sub-Committee participate in the Managing Committee in the disciplinary-action-decision-making process?

  • Being a member of the Managing Committee he does not, by itself, disqualify from attending a Managing Committee meeting.
  • But participating in the enquiry as a member of the Disciplinary Sub-Committee and then participating in the decision-making process concerning the same disciplinary matter raises a serious issue of institutional bias / nemo judex in causa sua.
  • This is particularly strong where the Sub-Committee has already formed an opinion regarding the charges or recommended disciplinary action.

PRELIMINARY FACT-FINDING ENQUIRY

Can there be a preliminary fact-finding enquiry before issuing a formal charge sheet?

  • Yes, it can be. It is not legally required. Such a procedure is not in Rule 198. Still, it may be useful, particularly where the facts are uncertain.
  • It is only a fact-finding exercise to decide whether further action is warranted. It does not legally bind the employee or formally start disciplinary proceedings. It is for the limited purpose of ascertaining the veracity of the allegation against the employee. (Girijan Co-operative Corporation Limited, Andhra Pradesh v. K. Satyanarayana Rao, S.B. Sinha, Deepak Verma, JJ., 2010-15 SCC 322; 2010 KHC 5107)
  • In this action, the employee is not entitled to a formal hearing.

Can the preliminary fact-finding enquiry be done by the Disciplinary Sub-Committee

  • It is not a full-fledged ‘fact-finding’ procedure. It should not be done in a way so that it may cast prejudice to the minds of persons who may be associated with the ‘enquiry’ done after issuing a Charge Memo.
  • Therefore, it is proper to conduct the preliminary fact-finding enquiry through persons other than the members of the Disciplinary Sub-Committee.

Should opportunity be given to the employee to make his representation on the preliminary fact-finding enquiry report?

  • Not at all necessary. It is not even an ‘enquiry’ in its full sense.

SEPARATE “SHOW-CAUSE NOTICE” BEFORE ISSUING THE CHARGE-SHEET

Should there be a separate “show-cause notice” before issuing the charge-sheet?

  • Not necessary.  A separate “show-cause notice” before issuing the charge-sheet is not required in every case. Such a procedure is not in Rule 198.
  • But it is useful and may be a fair procedure to ask the employee to explain why disciplinary action should not be initiated, particularly where the facts are uncertain.

CHARGES

Is it necessary to issue Memo of Charges in disciplinary actions?

  • Yes.
Rule 198(2) reads:
“(2) No kind of punishment shall be awarded to an employee unless he has been informed in writing of the grounds on which it is proposed to take action against and he has been afforded an opportunity including a personal hearing to defend himself. ….”

What should be the contents of a Charge Sheet?

  • The grounds on which it is proposed to take action against the employee.
Rule 198(2) itself requires –
It should be capable of affording an opportunity to understand the matters upon which actions are taken against him and defend himself.

Who has to issue Memo of charges in disciplinary actions?

  • Memos of charges in disciplinary actions can be issued by the
    • disciplinary sub-committee or
    • the managing committee.
    • (Mattanur Co-Operative Rural Bank Ltd. v. The Co-Operative Arbitration Court (FB), 2023-5 KLT 312; 2023 KHC (Online) 541, analysing the Kerala Cooperative Societies Rule 198).
  • It is desirable to be done by a sub-committee – so that it may not cast prejudice to the minds of persons (other managing committee members) who may be associated with the ‘appeal decision’ that may be arisen in future.

Time of issue of Memo of charges?

  • Before starting enquiry.

Should an explanation be sought for from the employee when a Memo of charges is issued?

  • Yes, though not mandatory. It is not so specifically stated in the Kerala Co-operative Societies Rules. If the employee admits the guilt, it may not be necessary, in the circumstances of the matter, to conduct an enquiry even.

Purpose of issuing a charge-sheet

  • It is a mandatory requirement apart from complying natural-justince.
Rule 198(2) provides — No kind punishment unless the employee has been informed in writing of the grounds on which it is proposed to take action against.
  • Therefore, it is clear that the purpose of a charge sheet is precisely to tell the employee what he is required to meet. See: Saralakumari P.V. v. President, Kottayam Co-operative Urban Bank Ltd.

Should the charges be specific?

  • A vague allegation such as “you committed serious irregularities” is different from a charge identifying the particular act, date, transaction, document and rule allegedly violated. Vague charge is defective.

Whether the omission to make a charge-sheet (or improper charge sheet), vitiates the entire disciplinary proceeding?

  • Yes. The absence of a charge-sheet/memo of charges before that enquiry is a serious procedural defect and can vitiate the enquiry. Framing of the charge-sheet is the first step taken for holding enquiry into the allegations on the decision taken to initiate disciplinary proceedings. See:
    • Union of India v. K.V. Jankiraman, AIR 1991 SC 2010,
    • Union of India v. Anil Kumar Sarkar, 2013 (4) SCC 161, and
    • State of Andhra Pradesh v. C.H. Gandhi, 2013 (5) SCC 111.

ENQUIRY

Who has to enquire into the charges?

A sub-committee of the Managing Committee, or an outside agency like an Enquiry Officer. Usually an Advocate is appointed.

Rule 198(2B) reads as under:
“The disciplinary sub-committee so constituted shall inquire into the charges against the employee either by themselves or by engaging an external agency.”

Can an advocate can be engaged as an external agency/enquiry officer for the disciplinary enquiry?

  • Yes, an advocate can be engaged as an external agency/enquiry officer for the disciplinary enquiry.

Who has to appoint the advocate/enquiry officer?

  • The Managing Committee, if no specific By-law provision.
Rule 198(2B) provides:
“The disciplinary sub-committee so constituted shall inquire into the charges against the employee either by themselves or by engaging an external agency.”

Can the Managing Committee appoint the Advocate?

  • If the By-law does not provide anything as to this matter, the Managing Committee has to appoint the Advocate.
In view of Rule 198(2B), the Managing Committee should not simply bypass the Sub-Committee and appoint an Advocate to conduct the Rule 198 enquiry unless there is some separate statutory authority for doing so (such as a by-law provision).

Should there be a presenting Officer for Management?  

  • Yes. Normally it will be the Secretary of the Society.

What are the duties of a presenting Officer for Management?

  • Inspect documents or places;
  • collect evidence;
  • investigate particular factual matters for the Management;
  • submit sworn statement before the enquiry officer by himself or arrange a competent person or persons for the same.

Should the Sub-Committee analyse and adopt the findings (if they agree) of the advocate’s report?

  • Yes. If the advocate is engaged as the external agency, it should not be mechanically adopted the Committee or Sub-committee. It must consider the report, the materials/evidence relied upon, and the employee’s explanation/ objections, if any, and then arrive at its own independent finding on each charge.

Is the Advocate’s report the ultimate finding of disciplinary action?

  • No. The advocate’s report is not itself the disciplinary decision. The external agency (advocate) only conducts the enquiry. The advocate’s report is therefore a report/ recommendation arising from the enquiry; it does not automatically become the final finding of the statutory disciplinary authority.
Rule 198(2B) says that the Disciplinary Sub-Committee shall inquire into the charges “either by themselves or by engaging an external agency.”
  • The Disciplinary Sub-Committee is required to independently consider the enquiry report, the evidence on record and the defence of the delinquent employee, apply its own mind to each charge, and record its independent finding as to whether the charge has been proved.
  • A mechanical acceptance of the external agency’s report, without independent consideration and a reasoned finding by the competent disciplinary authority, would be vulnerable to under Rule 198.

Should opportunity be given to the employee to make his representation on the enquiry report and on the proposed finding of guilt/punishment?

  • Desirable; not mandatory under the Rules.

Must the employee receive the Advocate’s enquiry report?

  • If the disciplinary authority relies upon the report, the employee should ordinarily be furnished the report and given an opportunity to make a representation before the final decision.

Can the disciplinary authority disagree with the Enquiry Officer?

  • Yes—but the procedure becomes important. If the disciplinary authority proposes to disagree with a finding favourable to the employee, the employee should ordinarily be informed of the proposed disagreement and allowed to respond before the finding is finally recorded.

Should the findings be confined to the charges?

  • The authority should not punish the employee for an allegation which was never made a charge and on which no opportunity of defence was given.

Can a charge be held proved merely because the employee did not disprove it?

  • The disciplinary authority must assess the material establishing the misconduct; it should not simply reverse the burden onto the employee.

What is the standard of proof?

  • A departmental/co-operative disciplinary proceeding is generally governed by the preponderance of probabilities, rather than proof beyond a reasonable doubt. But the finding still has to be based on evidence/material on record.

PUNISHMENT

Who should impose the punishment?

  • The sub-committee, if so appointed. A sub-committee is desirable – for providing an appeal to the Managing Committee.
  • Under the Kerala Co-operative Societies Rules, 1969, it is a matter that depends upon the employee’s category as shown in the table in Rule 198(3). It reads as under:
Rank of the employeeAuthority competent to impose
 Penalties under (a) to (c)Penalties under (d) to (h)
Secretary /Manager or other Chief Executive Officer and all employees holding posts higher than that of Sr. Clerk/Sr. Assistant/I Grade Assistant/Equivalent other employees with same or identical scale of pay      President /Chairman    Sub-Committee/ Executive Committee  
All other employeesSecretary /Manager or other Chief Executive Officer.President
  • Where the relevant penalty is one that the Disciplinary Sub-Committee is competent to impose under Rule 198(3), the Sub-Committee may impose it in the categories specified in Rule 198(3).
  • Where the Managing Committee is the competent penalty authority, however, the Sub-Committee’s role is different: it conducts the enquiry and records its findings, and the competent authority thereafter deals with the penalty in accordance with Rule 198.

Should opportunity be given to the delinquent to say his part as regards the proposed punishment?

  • Yes.
Rule 198(2) requires the employee to be informed in writing of the grounds on which action is proposed and given an opportunity, including personal hearing, to defend himself.

Should there be ‘Show-Cause Notice’ for Punishment

  • Yes. It is to comply doctrine of natutal-justice. “Communication of Enquiry Report and Opportunity to Submit Representation Against the Findings and Proposed Penalty” is desirable rather than: “Show-Cause Notice for Punishment”.

Is the Managing Committee the disciplinary/penalty authority?

  • If a Sub committee, No. The Managing Committee has to act as the appellate authority.
Under Rule 198(4), the Managing Committee is the appellate authority.
  • The President is the competent penalty authority for certain lower-level employees under the table in Rule 198(3), and the Executive Committee/Board was the appellate authority.
  • The Managing Committee cannot and should not subsequently “approve” or “confirm” the punishment if the Sub-Committee is the designated penalty authority.

What must the final punishment order contain?

  • It should ideally contain:
  • charges,
  • employee’s defence,
  • enquiry findings,
  • consideration of objections to the report,
  • independent findings of the competent authority,
  • reasons for accepting/rejecting material contentions,
  • finding on each charge,
  • reasons relevant to the penalty,
  • penalty imposed,
  • right of appeal and appellate authority.

Should the punishment be proportionate?

  • Even if misconduct is proved, the proportionality of the penalty can be challenged in appropriate circumstances.

APPEAL

Who is the appeal authority?

  • Usually, the Managing Committee is the appellate authority. It is so under Rule 198(4). It provides as under:
Rank of the employeeAuthority competent to impose
 Penalties under (a) to (c)Penalties under (d) to (h)
Secretary /Manager or other Chief Executive Officer and all employees holding posts higher than that of Sr. Clerk/Sr. Assistant/I Grade Assistant/Equivalent other employees with same or identical scale of pay  Executive Committee or Board of Management      Board of Management    
All other employeesPresidentExecutive  Committee/ Board of Management

Can members of the Disciplinary Sub-Committee subsequently participate in the Managing Committee’s decision on appeal?

  • Not Desirable. This raises the bias/nemo judex issue, especially if those members have already considered the evidence and formed an opinion about guilt.

End Notes:

Rule 198 of the Kerala Co-operative Societies Rules

Rule 198. Disciplinary action.— (1) Any member of the establishment of a cooperative Society may, for good and sufficient reasons, be punished by imposing any of the following penalties, namely:

  • (a) Censure;
  • (b) Fine (in the case of employees in the last grade);
  • (c) Withholding of increments with or without cumulative effect.
  • (d) Withholding of promotion;
  • (e) Recovery from pay of the whole or part of any pecuniary loss caused to the society, by negligences or breach of orders or otherwise;
  • (f) Reduction to a lower rank;
  • (g) Compulsory retirement;
  • (h) Dismissal from service.

(2) No kind of punishment shall be awarded to an employee unless he has been informed in writing of the grounds on which it is proposed to take action against and he has been afforded an opportunity including a personal hearing to defend himself. Every order awarding punishment shall be communicated to the employee concerned in writing stating the grounds on which the punishment has been awarded.

 (2A) The committee of a society shall constitute a disciplinary sub-committee consisting of not more than three of its members, of whom one shall be designated as Chairman, but the President of the committee of the society shall not be a member in the disciplinary sub-committee.

(2B) The disciplinary sub-committee so constituted shall inquire into the charges against the employee either by themselves or by engaging an external agency.

 (3) The authority competent to impose the various penalties on different categories of employees shall be as shown in the table below:

Rank of the employeeAuthority competent to impose
 Penalties under (a) to (c)Penalties under (d) to (h)
Secretary /Manager or other Chief Executive Officer and all employees holding posts higher than that of Sr. Clerk/Sr. Assistant/I Grade Assistant/Equivalent other employees with same or identical scale of pay      President /Chairman    Sub-Committee/Executive Committee  
All other employeesSecretary /Manager or other Chief Executive Officer.President

(4) An appeal shall lie against every order imposing a penalty to the competent appellate authority, shown in the table below:-

Secretary /Manager or other Chief Executive Officer and all employees holding posts higher than that of Sr. Clerk/Sr. Assistant/I Grade Assistant/Equivalent other employees with same or identical scale of pay      Executive Committee or Board of Management          Board of Management Executive      
All other employeesPresidentCommittee/Board of Management

 (5) No appeal shall be entertained if it is not preferred within a period of three months from the date of the order imposing the penalty. Provided that where the penalties are imposed on employee by an administrator or an administrative committee, such employees can file appeal before the forthcoming elected committee and in such cases the restriction of three months shall not be applicable.

 (6) An authority competent to appoint an employee may suspend him pending enquiry into serious charges against such employee. No employee shall however be kept under suspension for a period exceeding six months at a time. In no case an employee shall be kept under suspension for a continuous period exceeding one year without the prior approval of the Registrar. An employee under suspension shall be entitled to subsistence allowance payable under the Kerala Payment of Subsistence Allowance Act, 1972 (27 of 1973).

 Provided that an employee not coming under the purview of the Kerala Payment of Subsistence Allowance Act, 1972 (27 of 1973) shall be entitled to subsistence allowance at the rate admissible to State Government Employees as prescribed under the Kerala Service Rules.

 (7) In the event of any pendancy of disciplinary proceedings against any employee of a co-operative society or any co-operative institution pursuant to any charge of grave misconduct, irregularity, corruption or other charge involving moral turpitude, no retirement benefits shall be sanctioned to such employee or retired employee and in case of sanctioning of any retirement benefits to any such employee or retired employee, the name and designation of the sanctioning authority together with the reason for such sanctioning shall be recorded by the sanctioning authority by himself and such authority shall be held responsible for any loss to the society owing to such sanctioning of retirement benefits if found that such sanctioning was unwarranted.

 (8) In respect of all employees save the Chief Executive Officer of a society, no retirement benefits shall be sanctioned and disbursed until after the due issuance of a nonliability certificate by the Chief Executive Officer and approval of the same by the committee of the society within thirty days from the date of retirement of such employee. In the event of the retirement of the Chief Executive Officer, the non-liability certificate shall be issued by the committee of the Society. For any loss to the society due to the non-adherence of the forgoing procedure, the Chief Executive Officer along with the committee of the society shall be held responsible collectively and severally in respect of the issuance of Non-liability Certificate to any employee other than the Chief Executive Officer and the members of the committee shall be held collectively and severally responsible for the issuance of Non-liability Certificate to the Chief Executive Officer.”

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