Srikrishna, J.
1. This petition under Article 226 of the Constitution of India impugns the order dated September 10, 1997 made by the respondent Corporation, by which certain amounts of Provident Fund and Gratuity payable to the petitioner for the service rendered by him under the respondent Corporation have been withheld.
2. The respondent is a Corporation established under the State Financial Corporation and the petitioner was working as an employee in the service of the respondent Corporation from October 18, 1969. During his career, the petitioner started as a Junior Assistant and reached the rank of Assistant Manager by about the year 1995. On April 24, 1996 the petitioner was served with a charge, sheet which alleged that during his tenure as Branch Manager, during the period June 2, 1992 to May 19, 1995, one J.N. Dhage who was working as a clerk-cum-cashier in the Sholapur Branch had dishonestly and, fraudulently misappropriated cash amounting to Rs. 6,02,000/-, causing pecuniary loss to the respondent Corporation. It was alleged that this misappropriation arose on account of gross negligence and dereliction of duty on the part of the petitioner in exercising proper and effective control, supervision, verification and checking of the work of the said J.N. Dhage.
The petitioner denied the charges and a Disciplinary enquiry was initiated against the petitioner. An Enquiry Officer was appointed and the enquiry was proceeding for a considerable amount of time. In the meanwhile, the petitioner reached the age of superannuation and retired from service by office order made on May 28, 1997 effective from May 31, 1997. On June 5, 1997, the petitioner addressed a letter to the respondent Corporation informing it that as he has ceased to be an employee of the respondent Corporation, the respondent had no disciplinary jurisdiction over him and therefore the inquiry be dropped. By an order dated June 4, 1997, the Respondent Corporation rejected the request of the petitioner for termination of the inquiry and informed the petitioner that his retirement benefits like the Provident Fund and Gratuity are to be withheld as directed by the Board of Directors, since the decision of the departmental inquiry was pending. The inquiry was continued. The petitioner participated in the inquiry, though under protest. On August 7, 1997 the Inquiry Officer submitted his report and the petitioner was called upon to give his submissions. On August 18, 1997 the petitioner made his submissions in reply to the inquiry report. On September 10, 1997 the respondent Corporation made an order, holding that the charges levelled against the petitioner in the charge sheet dated April 24, 1996 stood proved as per the report of the Enquiry Officer dated August 7, 1997. The order held that the respondent Corporation had suffered pecuniary loss of Rs. 6,61,000/- as a result of gross negligence of the petitioner in not supervising effectively and checking the work of J.N. Dhage, clerk-cum-cashier, who had misappropriated the said amount. Consequent on this order, the petitioner was held not eligible for provident fund amount to the extent of Rs. 2,14,800/- being principal and interest contributed therefrom. It was also ordered that gratuity amount amounting to Rs. 1,43,900/-be withheld in terms of Regulation 7 of Payment of Gratuity Regulations, 1951. The petitioner applied for review-cum-revision of the said order dated September 10, 1997, but his application was rejected by the order dated January 27, 1998. Hence, this writ petition.
4. The petition raises a number of issues, but it is unnecessary to go into all of them as the petition is liable to be allowed on the issue whether the enquiry and consequential order could have been continued and made against the petitioner when he ceased to be an employee of the respondent Corporation consequent to the order of superannuation.
5. Learned counsel, Shri Sardessai, appearing for the petitioner brought to our attention the judgment of the Supreme Court in Bhagirathi Jena v. Board of Directors, O.S.F.C. and Ors. reported in : (1999)ILLJ1236SC . Incidentally this was also a case of an employee working in a State Financial Corporation. In this case the service regulations had not made any specific provision for deducting any amount from the provident fund consequent to misconduct determined in the departmental enquiry, nor was any provision made for continuance of departmental enquiry after superannuation. In view of the absence of such provision in the regulations, it was held that the Corporation had no legal authority to make any deduction in the retiral benefits of the appellant. There was also no provision for conducting a disciplinary enquiry after retirement of the appellant nor any provisions stating that in case misconduct is established, a deduction could be made from retiral benefits. The observations of the Supreme Court in paragraphs 6 & 7 at p. 1238 are relevant and are reproduced below:
6. 'It will be noticed from the abovesaid regulations that no specific provisions was made for deducting any amount from the provident fund consequent to any misconduct determined in the departmental enquiry nor was any provision made for continuance of departmental enquiry after superannuation.
7. In view of the absence of such provision in the abovesaid regulations, it must be held that the Corporation had no legal authority to make any reduction in the retiral benefits of the appellant. There is also no provision for conducting a disciplinary enquiry after retirement of the appellant and nor any provision stating that in case misconduct is established, a deduction could be made from retiral benefits. Once the appellant had retired from service on June 30, 1995, there was no authority vested in the Corporation for continuing the departmental enquiry even for the purpose of imposing any reduction in the retiral benefits payable to the appellant. In the absence of such authority, it must be held that the enquiry had lapsed and the appellant was entitled to full retiral benefits on retirement.'
6. Learned counsel Shri Sardessai contended that this judgment really clinches the issue and that, after the date of petitioner's superannuation i.e. May 31, 1997 the departmental inquiry could not have continued and any order made consequent thereupon must necessarily be held to be bad and quashed.
7. Shri Ramani appearing for the respondent however relied on two judgments of the Supreme Court to contend to the contrary. The first judgment relied upon by learned counsel Shri Ramani is the one in State of Uttar Pradesh v. Shri Brahm Datt Sharma and Anr. : [1987]2SCR444 and the second is State of Maharashtra v. M.H. Mazumdar : (1988)IILLJ62SC . The immediate thing that strikes us is that in both these cases the employer State Government had the power to continue the disciplinary enquiry beyond the period of retirement of the Government servants. In Muzumdar's case (supra) the Bombay Civil Services (Conduct, Discipline and Appeal) Rules, Rules 188 and 189 specifically contemplated withholding or withdrawing of pension or any part of it if the petitioner is found guilty of a misconduct while he was in service or 'after the completion of his service'. Hence, the Supreme Court was of the view that the State Government's power to reduce or withhold pension by taking proceedings against a Government servant, even after retirement is expressly preserved, which was not challenged. In the result, the view taken by the Supreme Court was that the disciplinary proceedings against the Government servant were validly taken in accordance with Rules 188 and 189.
8. In the other case of Brahm Datt Sharma (supra), the provisions of Uttar Pradesh Civil Service Regulations Act were applicable and Article 348-A provided that pension shall be granted subject to the conditions contained in the Regulations. Article 351-A empowered the Governor to withhold or withdraw pension or any part of it, whether permanently or for a specified period, and also to order recovery from pension of the whole or part of the pension for any pecuniary loss caused to the Government if the pensioner was found guilty in departmental or in judicial proceedings for any misconduct or negligence during his service. Article 470 vested powers in the Authority to take action in accordance with the rules for the reduction of pension and gratuity. If the service had not been thoroughly satisfactory the authority sanctioning the pension could make such reduction in the amount as it deemed proper. The Supreme Court interpreted this regulation and came to the conclusion that, on retirement, if the Government Servant's service is not satisfactory, the authority competent was empowered to make deductions in the pension as deemed fit. Thus, in both these cases, the issue in question was deduction in pension. We may at once point out that there is a difference between retirement pension and provident fund or gratuity. Provident fund and gratuity become payable to an employee after termination or retirement and are one time payment. Pension is payable to an employee for the past service rendered as liability of the employee. Consequently, the provisions in the Service Rules or Regulations provide that the pension shall be liable to be reduced or deducted if the employee is found guilty of any incident of grave misconduct and negligence, while he was in service, or even in the future grant of pension and its continuance to an employee depends upon the good conduct of the employee. Rendering satisfactory service and maintaining good conduct is a necessary condition for the grant and continuance of pension. Such a situation does not exist in the case of payment of provident fund and gratuity, particularly in the case before us.
9. We were appraised of the Staff Regulations styled as 'Bombay State Financial Corporation (Staff) Regulations, 1954' which deal with disciplinary matters. The learned counsel for the respondent cited Regulation Nos. 25, 26 and 40 and contended that these empower the respondent Corporation to withhold provident fund and gratuity. We are unable to read in these regulations any such power to take action after the employee has ceased to be in service. Regulation 40 empowers the Corporation to recover from the pay of the whole or part of any pecuniary loss caused to the Corporation by negligence or misconduct. Learned counsel Shri Ramani invited our attention to Payment of Gratuity Regulations, particularly Regulation No. 7. This regulation is relevant and reads as under:
'Notwithstanding anything contained in the foregoing Regulations, the Corporation may, while determining the amount of gratuity payable to an employee, take into account any financial loss caused to the Corporation by reason of inefficiency or misconduct of such employee and grant reduced amount of gratuity;
Provided that the difference between the amount of gratuity ordinarily admissible under the foregoing Regulations and the amount of gratuity so reduced shall not exceed the amount of the financial loss caused to the Corporation.'
10. Learned counsel Shri' Ramani contended that the Corporation has a right under these Regulations to deduct from the gratuity amount payable to the petitioner such amount not exceeding the financial loss to the Corporation caused on account of inefficiency of the petitioner. Can the power under Section 7 of the Gratuity Regulations be exercised to hold an employee guilty of misconduct without holding a disciplinary enquiry. Our answer is a categorical no. Regulation 7 can only be consequent to a disciplinary enquiry holding an employee guilty of misconduct. Second question is, whether the Corporation is entitled to continue the disciplinary enquiry beyond the date on which the employee cases to be in service. Neither in the Service Regulations nor in the Gratuity Regulations is there any provision that the disciplinary enquiry commenced while the employee was in service can be continued even after the cases to be in service. Learned counsel for the petitioner contends that the decision in Bhagirathi Jena's case (supra) applies to this case. Once the petitioner retired from his service on May 31, 1997, all proceedings held thereafter must therefore be held invalid. The continuation of the disciplinary enquiry after May 31, 1997, and the final order dated September 10, 1997 directing withholding of certain amounts of provident fund and gratuity payable to the petitioner are both illegal and unsustainable.
11. Learned Counsel Shri Ramani contended that the view we are taking would work to the prejudice of the public. He urges that there may well be a situation wherein an employee about to retire may commit defalcation and misappropriate a large amount and thereafter might be immune from action being taken by the respondent Corporation. This contention has no merit in our view. The solution to the situation contemplated by the learned counsel is two fold. First the respondent Corporation should suitably amend their Regulation so as to retain the power to continue the disciplinary enquiry once it has commenced, even after the retirement of the employee. Secondly the respondent Corporation has always the right to recover compensation from the misconducting employee for the loss caused to it by suing the employee under the law. We do not think the view we are taking is in any way prejudicial to public interest. In our view, the petitioner's case is squarely covered by the principle enunciated in Bhagirathi Jena's case (supra).
12. In the result, we allow the writ petition, quash the order dated September 10, 1997 and direct the respondent to pay the provident fund and gratuity amounts due to the petitioner but withheld from him. The aforesaid amounts shall be paid within a period of four weeks from today. Rule made absolute accordingly, with no order as to costs.