K. Nagarajan vs. The Senior Divisional Manager

Facts

The petitioner, a Supervisor at a TASMAC shop, was directed to shift liquor bottles to a marriage hall due to a nationwide lockdown caused by COVID-19. Subsequently, the petitioner was informed of a stock deficit of Rs. 21,49,640/- and directed to pay this amount along with interest and GST, which he did on April 16, 2020. Thereafter, the second respondent issued an order demanding payment of a 50% penalty on the stock shortage amount, calculated as Rs. 12,68,288/-, along with 24% interest. This order was to be treated as a charge memo, requiring the petitioner to submit an explanation within three days, failing which disciplinary proceedings would be initiated. The petitioner filed a writ petition challenging this order.

Held

The Court held that the impugned order imposing a penalty of Rs. 12,68,288/- with GST and interest, and treating it as a charge memo, was unsustainable. The Court found that Rule 6(n) of the Code of Prevention and Detection of Fraudulent Acts in TASMAC mandates that a delinquent must be given an opportunity to make a representation against the proposed punishment before any punishment is imposed after charges are proved. The respondents failed to provide this opportunity of personal hearing to the petitioner. Instead, they directly imposed the recovery and directed payment within three days, threatening disciplinary action if not complied with. The Court reasoned that the respondents were supposed to provide an opportunity of hearing before passing any order of recovery. Therefore, the impugned order was set aside. The Court directed the respondents to issue a fresh show-cause notice to the petitioner as per the rules, providing an opportunity of hearing, and then initiate appropriate proceedings.

Key Issues

1. Whether the impugned order imposing a penalty of Rs. 12,68,288/- along with interest and treating it as a charge memo, without providing an opportunity of personal hearing, is sustainable in light of Rule 6(n) of the Code of Prevention and Detection of Fraudulent Acts in TASMAC? (Question of law and fact) Petitioner's contention: The petitioner argued that the respondents failed to provide an opportunity for personal hearing before imposing the penalty and treating the order as a charge memo, which is a mandatory procedural requirement under Rule 6(n) of the Code of Prevention and Detection of Fraudulent Acts in TASMAC. The petitioner contended that the impugned order directly imposed a recovery without affording him a chance to explain his position. Respondents' contention: The respondents argued that only a penalty was imposed, and the stock shortage amount was paid voluntarily by the petitioner. They stated that the penalty amount was to be paid within three days, after which appropriate orders would be considered. They did not explicitly address the procedural requirement of a personal hearing in their submissions.