Surcharge proceedings under Section 87 of Tamil Nadu Co-operative Societies Act, 1983, are maintainable against retired employees for recovery of financial loss; prior contrary observations held obiter dicta.

ORDER :

1. This Larger Bench has been constituted on the basis of a reference made by the learned Single Judge of this Court [G.R. Swaminathan, J.] vide order dated 03.01.2024, to answer the issue as to whether surcharge proceedings could be initiated against a retired employee. The said reference was made in view of the observations contained in paragraphs 28 and 29 of the Larger Bench (comprising three Judges) of this Court in S. Andiyannan v. The Joint Registrar, Co-operative Societies and another,  2015 (3) L.W. 513.

2. In S. Andiyannan's case, the Full Bench of this Court adjudicated upon the following questions:

“1. Whether the disciplinary proceedings initiated against an employee of a co-operative society, governed by the Tamil Nadu Co-operative Societies Act, 1983, could be continued even after retirement of the said employee?

2. Whether Section 87 of the Tamil Nadu Co-operative Societies Act, 1983, could be considered as an enabling provision empowered the disciplinary authority to continue the disciplinary proceedings even after the retirement of the employee?”

3. While answering the reference, the Full Bench held that disciplinary proceedings cannot be continued against the concerned employee after his retirement. Such proceedings are bad in law in the absence of any service rules or bye-laws permitting their continuation. As regards the second question of law, the Full Bench held that ‘surcharge’ proceedings are not penal in nature, as they are concerned only with the recovery of money or property, or any part thereof, along with interest, from the retired employee in lieu of the financial loss caused by the concerned employee. The Full Bench further held that Section 87 of the Tamil Nadu Co-operative Societies Act, 1983 is not an enabling provision permitting a Co-operative Society to continue disciplinary proceedings against an erring employee, after retirement. In fact, the Full Bench answered the reference to the extent that only disciplinary proceedings are impermissible after the retirement of an employee. The question of initiation of surcharge proceedings was not directly adjudicated upon. However, in paragraphs 27 and 28, while making certain observations, the Full Bench recorded that surcharge proceedings cannot be initiated against a retired employee. This observation has led to confusion, resulting in the constitution of this Bench to determine whether surcharge proceedings can be initiated against a retired employee.

4. Mr.H.Arumugam, learned counsel appearing for the petitioner, fairly submitted that, insofar as the question of law is concerned, the language employed in Section 87 of the Tamil Nadu Co-operative Societies Act is clear and unambiguous, and that the said provision makes it evident that surcharge proceedings can be initiated even against former employees, provided such proceedings are commenced within the time stipulated under the Act. He further submitted that the observations made in paragraphs 28 and 29 of the Full Bench judgment in S. Andiyannan’s case are, at best, attributable to clerical errors, and may be construed as obiter dicta, which are not binding.

5. Mr.M.Ajmalkhan, learned Additional Advocate General appearing for the first respondent, submitted t