Holding

An employee acquitted of criminal charges is entitled to full salary as subsistence allowance from the date of acquittal until dismissal, per clause 5(a)(iii) of the Third Bipartite Settlement.

Summary

The respondent, a clerk of Andhra Bank, was suspended pending departmental action and later faced criminal charges under Sections 409 and 436 of the Indian Penal Code. He was convicted by a trial court but acquitted on appeal; however, a departmental enquiry continued for several years, culminating in his dismissal. The respondent filed a writ petition seeking full salary as subsistence allowance under clause 5(a)(iii) of the Third Bipartite Settlement, arguing that his acquittal ended the relevance of the criminal investigation. The Bank contended that because an outside agency (police) had initially decided to prosecute, the employee was not entitled to full pay during the subsequent departmental proceedings. The Supreme Court examined the three categories of cases under the Settlement and held that once the employee is acquitted, the effect of the agency’s decision to prosecute ceases, and the employee is entitled to full pay as subsistence allowance from the date of acquittal until dismissal. Accordingly, the appeal was dismissed.

Issues considered

What amount of subsistence allowance is payable to an employee under suspension when criminal prosecution ends in acquittal but departmental enquiry continues?
Does the involvement of an outside agency that initially decided to prosecute affect entitlement to full pay after acquittal?
Can the period of suspension be treated as indivisible for purposes of calculating subsistence allowance?
How should clause 5(a)(iii) of the Third Bipartite Settlement be interpreted in cases of criminal prosecution followed by departmental enquiry?

Legislation cited

Indian Penal Code, 1860s. 409, s. 436
Industrial Disputes Act, 1947s. 18

Subjects

subsistence allowancesuspensiondepartmental enquirycriminal acquittalThird Bipartite Settlementservice lawbank employeeindustrial disputeIndian Penal Code

Judgment

ANDHRA BANK A
v.
W.T. SESHACHALAM

JANUARY 5, 2004

[BRIJESH KUMAR AND ARUN KUMAR, JJ.] B

Service Law:

Subsistence allowance-Third Bipartite Seulement as applicable to Bank
employees-Entitlement to-Bank employee suspended on charges of criminal C
misappropriation-Criminal case ended in acquittal of the employee-But
departmental enquiry against the employee continued for years-Subsequently
employee's services terminated-Employee not responsible for prolonging the
enquiry-Held: Employee entitled to ji11/ salary as subsistence allowance from
the date of acquittal till date of dismissal in terms of para 5(a){iii) of Third D
Bipartite Seltlement-lndustrial Disputes Act, 1947, S. 18.

The respondent was employed as a clerk in the appellant-Bank and
was placed under suspension pending regular departmental action.
Subsequently a charge sheet was filed against the respondent under Section
409/436 of the Penal Code, 1860. The respondent was convicted by the E
trial court but acquitted by the appellate court. After the acquittal of the

- respondent, an enquiry officer was appointed to hold an enquiry into the
de11artmental proceedings, which continued for seven years and concluded
in the respondent's dismissal.

The respondent filed a writ petition before the High Court with a F
., prayer for payment of full salary as subsistence allowance in view of
Clause S(a)(iii) of the Third Bipartite Settlement. The High Court held
that the respondent was entitled to full salary as subsistence allowance
from the _date of acquittal till the date of dismissal. The High Court also
held that the respondent was not responsible for prolonging the enquiry. G
Hence the appeal.

On behalf of the appellant, it was contended that where enquiry was
• '1 entrusted to an outside agency and it was decided to prosecute the
respondent he would not be entitled to full salary as subsistence allowance

145 H
146 SUPREME COURT REPORTS [200.f] I S.C.R.

A even though the respondent was acquitted by the appellate court; and that
the order of suspension and. the period following thereafter was one single
indivisible period of suspension and it could not be compartmentalized as
a period of suspension during the criminal case or the departmental action.

The following question arose before the Court:
B
"What amount, the appellant was liable to pay as subsistence
allowance to the respondent during the period he remained under
suspension., in the light of the provisions as contained in the Sastry Award,
Desai Award and the Third Bipartite Settlement on the subject as well as
the rules of the bank?"
c
Dismissing the appeal, the Court

HELD: I.I. From a perusal of para 5 of the Third Bipartite
Settlement, it is apparent that some special significance has been attached
D where the enquiry is made by an outside agency and the case where it is
not by an outsided agency. The other factor, which has been kept in
consideration is the suspension during the departmental enquiry or the
criminal prosecution. (151-GI

1.2. From a reading of para 5 as a whole, three types of cases are
E culled out. One where an outside agency may not be involved in the
investigation. In that event for the first three months I/3rd of the pay and
allowances would be payable as suspension allowance whereafter it would
be increased to one-half of the pay and allowances and after one year full
pay and allowances provided enquiry is not delayed for the reasons
attributable to the workman concerned. The next category of cases would
-
F be where inl'estigation is clone by an outside agency and the said agency
comes to a conclusion not to prosecute the employee. In such a situation,
the workman would be entitled to full pay and allowances after six months
from the date of receipt of the report of the agency. The latter part as
contained in Clause (a) (iii) of para 5 would cover cases of criminal nature.
G This distinction is in view of the fact that investigation is not entrusted to
outside agency namely, police and CBI for the departmental proceedings.
Such cases would be covered by Clause (a)(i), (ii) and the first part of
Clause (a) (iii). It is for the prosecution in a criminal case that investigation
is entrusted to the outside agency, namely the police or CBI. Therefore, :r· .
the latter part of Clause (a)(iii) relates to investigation for the purpose of
H criminal prosecution. Even in such cases full pay and allowances are
ANDHRA BANK v. W.T. SESHACHALAM 147
"t payable as subsistence allowance where the outside agency comes to a A
conclusion not to prosecute the employee. That is to say, in such an event
they are at par in the matter of payment of subsistence allowance, as the
employees in the departmental proceeding. 1152-F-H; 153-A-Bl

2. A person who is prosecuted criminally but ultimately acquitted
of the criminal charges cannot be placed in a worse position in the matter B
of subsistence allowance as compared to those, where the outside agency

• itself had concluded not to prosecute. After acquittal, clout of criminal
prosecution comes to an end and in case only departmental proceedings
continue or remain pending or initiated thereafter, they would be guided
only by the provisions applicable, for departmental proceedings in the
matters relating to payment of subsistence allowance. The conclusion of c
the investigating agency to prosecute, would lose its effect or relevance
on acquittal in the criminal case. (153-C-D)

3. I. The suspension order was passed during pendency of "regular
departmental action"; in the meantime prosecution was launched after
D
investigation by outside agency which failed, but the departmental action
continued (or years thereafter. The enquiry officer was appointed for the
"~ departmental proceedings after the acquittal of the respondent. To make
the "conclusion of the outside agency to prosecute" as the basis for not
paying full amount as suspension allowance indefinitely during all the
period of departmental proceedings even after the criminal prosecution E
ended in acquittal much earlier, will amount to subjecting an acquitted
~
person of the rigours of provisions which are applicable in the matters
relating to criminal cases. 1154-C-E)

3.2. It cannot be said that due to subsequent acquittal the workman
could be entitled for full pay and allowances as subsistence allowance F
•• during the pendency of the criminal case but for the period beyond the
date when the acquittal was recorded and suspension continued because
of the regular departmental action it cannot be said that the same
prO\•ision will continue to be applicable which was applicable during the
period of criminal prosecution. 1154-E-FI G
4. The position relating to departmental proceedings and the
.... '-;
proceedings taken after the investigating agency coming to a conclusion
not to prosecute which entitles the workman to full pay and allowances
as subsistence allowance after one year, will also be applicable where in
the intervening period criminal prosecut.ion was launched after H
x
148 SUPREME COURT REPORTS (2004) I S.C.R.

A investigation by an outside agen.:y ending in acquittal but departmental 't "---

proceedings continued/started or thereafter. In such cases, the workman
would be entitled for full pay and allowance as subsistence allowance.
(156-B-CI

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5456 of2002.
B
From the Judgment and Order dated 25.9.200 I of the Madras High
Court in Crl. W.A. No. 2151 of 2000.

Altaf Ahmad, Additional Solicitor General and P.P. Singh for the
Appellant.
c
Ambrish Kumar for the Respondent.

The Judgment of the Court was delivered by

BRIJESH KUMAR, J. The point involved in this appeal is short and
D relates to the question as to what amount, the appellant is liable to pay as
subsistence allowance to the respondent during the period he remained under
suspension, in the light of the provisions as contained in the Sastry Award,
Desai Award and the Bipartite Agreement on the subject as well as the rules 'II
of the bank. The learned single Judge held that the respondent was entitled
to full salary as subsistence allowance right with effect from 1.6.1991 in
E accordance with para 17.14 of the Third Bipartite settlement. On appeal
before the Division Bench it was held that the respondent would though be
entitled to thi: amount of full salary as subsistence allowance but from
10.3.1994 to 14.7.2001, the date on which the respondent was dismissed
from service.
F
The respondent was employed as a clerk in the appellant Andhra Bank
and was working as cashier at Chennai. On 21.5.1990 a fire broke in the cash ..
cabin in connection whereof it appears a police report was also lodged on •
1.6.1990. The petitioner was placed under suspension during the "regular
departmental action" .
.G
A charge-sheet was. filed· against the respondent in the criminal case
under Section 409/436 of the Indian Penal Code in July, 1993. A charge
memo was issued to the respondent by the appellant on 29.12.1993. The ~

,,.-' ""--
respondent was convicted by the Trial Court by order dated 25.1.1994. The
appeal of the respondent was, however, allowed and his conviction and
H sentence was set aside by the appellate Court by order dated 10.3.1994. After
r ANDllRA BANK v. W.T. SESHACHALAM [BRIJESH KUMAR, J.] 149

the acquittal of the respondent an enquiry officer was appointed on 13.9.1994 'A
to hold an enquiry into the departmental proceedings.

The respondent filed a writ petition no. 9730 of 1995 with a prayer for
payment of full salary as subsistence allowance in view of clause 5(a)(iii) of
the Third Bipartite settlement. As indicated earlier, the learned single Judge
allowed the writ petition holding that the respondent was entitled to full B
salary as subsistence allowance with effect from 01.06.1991. The appeal
preferred against the said order by the bank remained unsuccessful and it was
held that the respondent was entitled to full salary as subsistence allowance
but with effect from 10.3.1994 to 14.07.01. The learned single Judge found
that in view of clause 5 of Bipartite Agreement, para 17.14 alone would be. C
applicable to the petitioner's case. It also did not accept the case of the
appellant that the respondent was responsible for prolonging the enquiry. The
Division Bench in appeal upheld the above findings.

We may now peruse the relevant provisions as it regards to payment of
subsistence allowance. Para 557 of the Sastry Award provides as under : D
"557. Having considered the matter in all its aspects, we think that
suspension allowance should be granted on the following scale:-
(I) For the first three months one-third of the pay and allowances
which the workman would have but for the suspension; E
(2) Thereafter, where the enquiry is departmental by the bank, one-
half of the pay and allowances for the succeeding months. Where
the enquiry is by an outside agency, one-third of the pay and
allowances for the next three months and thereafter one-half for
the succeeding months until the enquiry is over."
F
Clause 17.14 of the Desai Award is to the following effect:-

"17.14. I make an award in connection with this item in terms similar
to those contained in paragraph 557 of the Sastry Award quoted
above."
G
Thereafter, it appears that Third Bipartite Agreement dated 9.9.1983 was
entered into by which paragraph 557 of the Sastry Award and Clause 17.14
of the Desai Award were pa11ially modified. Para 5 of the Bipartite agreement
reads as under :

"5. Subsistence Allowance: H
150 SUPREME COURT REPORTS [2004] I S.C.R.

A In partial modification of paragraph 557 of the Sastry Award and
paragraph 17.14 of the Desai Award, the following provisions shall
apply in regard to payment of subsistence allowance to workmen
under suspension in respect of the banks listed in Schedule 1.

(a) Where the investigation is not entru>ted to or taken up by an
B outside agency (i.e. Police/CBI), subsistence allowance will be
payable at the following rates:
(i) For the first 3 months 1/3 of the pay and allowances which the j
workman would have got but for the suspension.
(ii) Thereafter half of the pay and allowances.
c (iii) Afref one year, full pay and allowances if the enquiry is not
delayed for reasons attributable to the concerned workman or
any of his representatives. Where the investigation is done by an
outside agency and the said agency has come to the conclusion
not to prosecute the employee, full pay and allowances will be
D payable after 6 months from the date of receipt of report of such
agency, or one year after suspension, whichever is later and in
the event the enquiry is not delayed for reasons attributable to
the workman or any of his representative."

So far the position as regards payment of subsistence allowance in the Service
E Conditions of the Bank, is concerned it is provided as follows:

"I. Subsistence allowance during the period of suspension should be
granted on the following scale:

A. Where the enquiry is departmental by the bank:
F
(I) where the investigation is not entrusted to, or taken up by an
outside agency (i.e., Police/ CBI):
..
(a) for the first three months of suspension one-third of the pay and
allowances which the workman would have got but for the
G suspension.
(b) fur the period of suspension, if any, thereafter, one-half of the
pay and allowances which the workman would have got but for
the suspension provided that after one year of suspension full
pay and allowances will be payable if the enquiry is not delayed
for reasons attributable to the concerned w·~rkman or any of his
H
ANDHRABANK v. W.T. SESHACHALAM [BRl.IESH KUMAR, J.] 151

representatives. A
(2) Where the investigation is done by an outside agency (i.e., Police/
C.B.I.), and such investigation is followed by a departmental enquiry
by the bank and not by prosecution:

(a) for the first three months of the suspension one-third of the pay _ B
and allowances which the workman would have got but for the
suspension;
(b) for the period of suspension, if any, thereafter, one-half of the
pay and allowances which the workman would have got but for
the suspension;
c
Provided that full pay and allowances will be payable after six
months from the date of receipt of report of the investigating agency
that it has come to the conclusion not to prosecute the employee or
one year after the date of suspension, whichever is later;

And provided further that the enquiry is not delayed for reason D
attributable to the concerned workman or any of his representatives.

B. Where the enquiry is held by an outside agency including a trial
in a criminal Court (irrespective of whether the enquiry/trial is preceded
by an investigation by an outside agency (i.e. Police/C.B.I.) or not:
E
(a) for the first six months of the suspension one-third of the pay and
allowances which the workman would have got but for the
suspension;
(b) for the period of suspension, if any, thereafter, one-half of the
pay and allowances which the workman would have got but for F
the suspension, until the enquiry is over."

From a perusal of the provisions quoted above it is apparent that some
special significance has been attached where the enquiry is made by an
outside agency and the case where it is not by an outside agency. It then
appears that the other factor which has been kept in consideration is the G
suspension during the departmental enquiry or the criminal prosecution. Since
the Sastry Award and Desai Award have been modified by para 5 of the
Third Bipartite agreement it would be appropriate to consider the same. Clause
.' ·-.,c· (a) of para 5 provides where investigation is not entrusted to or taken up by
an outside agency i.e. police/CBI the subsistence allowance will be 1/3 of the
pay for the first three months thereafter one-half of the pay and allowances. H
152 SUPREME COURT REPORTS (2004] I S.C.R.

A Sub-clause (iii) of clause (a) then provides for full pay and allowances as
subsistence allowance after one year provided enquiry is not delayed for the
reasons attributable to the workman. The claim of the respondent is based on
this first part of sut-clause (iii) of clause (a) of para 5. It is submitted that
clear finding has been recorded by the High Court that no delay was caused
B by the respondent. Then we find that the latter part of sub-clause (iii) of
clause (a) of para 5 provides that where investigation is by an outside agency
and the said agency has come to conclusion not to prosecute the employee,
full pay and allowances will be payable after six months from the date of the
repo11 of such agency or one year after suspension whichever is later, provided
the enquiry is not delayed by reasons attributable to the workman.
c Learned counsel for the appellant has laid much emphasis on the fact
that where enquiry is entrusted to an outside agency and it is decided to
prosecute an employee he would not be entitled to full salary and allowances
as suspension allowance. In the present case, it is submitted that enquiry was
conducted by an outside agency and a conclusion was also arrived at to
D prosecute the respondent. As a matter of fact, he was prosecuted and also
convicted by the Trial Court though acquitted in appeal. Therefore, throughout
the period of suspension even after conclusion of the trial and acquittal he
would be discntit.led for full pay and allowances as subsistence allowance
during the period covered by departmental proceedings alone, merely by
E reason of the fact that after investigation by an outside agency it had decided
to prosecute the employee. We, however, feel unable to accede to the said
contention. From a reading of para 5 as a whole, three types of cases are
culled out. One where an outside agency may not be involved in the
investigation. In that event for the first three mo~ths I/3 of the pay and
allowances would be payable as suspension allowat}ce whereafter it would be
F increased to one-half of the pay and allowances ind , after one year full pay
and allowances provided enquiry is not delayed/for the reasons attributable
to the workman concerned. The next catego!1); of cases would be where
investigation is done by an outside agency ar)d the said agency comes to a
conclusion not to prosecute the employee. In :s.uch a situation the workman
G would be entitled to full pay and allowances after six months from the date
of receipt of the report of the agency. The latter part as contained in sub-
clause (iii) of clause (a) of para 5 would cover cases of criminal nature. We
find this distinction in view of the fact, that investigation is not entrusted to
outside agency namely, police and CBI for the depa11mental proceedings.
Such cases, in our view, would be covered by clause (a) (i), (ii) and the first
.JI pat1 of sub-clause (iii). It is for prosecution in a criminal case that investigation
ANDHRA BANK v. W.T. SESHACHALAM [BR!JESH KUMAR, J.] 153
.., is entrusted to the outside agency, namely the police or CBI. Therefore, we A
are of the opinion that the later part of sub-clause (iii) relates to investigation
for the purpose of criminal prosecution. Even in such cases full pay and
allowances are payable as subsistence allowance where the outside agency
comes to a conclusion to not to prosecute the employee. That is to say, in
such an event they are at par in the matter of payment of subsistence allowance,
as the employees in the departmental proceeding. B

' We do not find anything further provided in sub-clause (iii) of para 5.
That is to say where the outside investigating agency comes to a conclusion
to prosecute and launches such prosecution. In any case, in our view, a
person who is prosecuted criminally but ultimately acquitted of the criminal
c
charges cannot be placed in a worse position in the matter of subsistence
allowance as compared to those, where the outside agency itself had concluded
not to prosecute. After acquittal, clout of criminal prosecution comes to an
end and in case only departmental proceedings continue or remain pending
or initiated thereafter, they would be guided only by the provisions applicable,
for departmental proceedings in the matters relating to payment of subsistence D
allowance. The conclusion of the investigating agency to prosecute, would
lose its effect or relevance on acquittal in the criminal case.
-~
In the present case as about the factual position, we find that the order
dated 1.6.1990 provides for suspension of the respondent pending regular
departmental action. Criminal trial cannot be termed as departmental action. E
The charge-sheet was submitted in the criminal case in July, 1993 and in the
departmental proceedings, a charge sheet was issued on 29.12.1993. The
criminal case ended in acquittal ultimately by order dated I 0.3.1994 passed
in appeal. It was six months thereafter that an enquiry officer was appointed
to conduct the departmental proceedings. The departmental action was F
-'!'
contemplated/initiated against the respondent as a result of which suspension
\ order was passed on 1.6.1990. Charge-sheet having been issued on 29.12.1993
the departmental action continued till it ended in 14. 7.2001 when the
departmental proceedings concluded in dismissal of the respondent. During
this period from l.6.1990 to 14.7.2001 there has been overlapping period of
criminal proceedings which came to an end on I 0.3.1994. G

Learned counsel for the appellant submits that order of suspension and
' " the period following thereafter is one single indivisible period of suspension
as envisaged under the relevant provisions. It cannot be compartmentalized
as period of suspension during criminal 'case or the departmental action. It is
H
154 SUPREME COURT REPORTS [2004] I S.C.R.

A submitted that once an outside agency is involved in investigating into the
matter which takes a decision to prosecute, the same position would continue
irrespective of the fact that the subsequent period may not be covered by any
criminal prosecution or it may be only covered by departmental action. But,
as indicated earli~~r, it is difficult to accept this argument because the payment
of subsistence allowance has been made subject to different conditions in
B which the factors which are relevant are where the investigation is by an
outside agency i.e. the police or CBI which obviously, be for criminal
prosecution and the other category of cases are those where outside agency
is not involved. Such cases would of course be for the purpose of departmental
action. The suspension order, in the case inhand was passed during pendency
'
C of''regular departmental action", in the meantime prosecution was launched
after investigation by outside agency which failed, but the departmental action
continued for years thereafter. The enquiry officer was appointed for the
departmental proceedings after acquittal of the respondent. To make the
"conclusion of the outside agency to prosecute" as the basis for not paying
full amount as suspension allowance indefinitely during all the period of
D departmental proceedings even after the criminal prosecution ended in acquittal
much earlier, will amount to subjecting an acquitted person of the rigours of
provisions which are applicable in the matters relating to criminal cases.
Learned counsel for the appellant submits that the result of the prosecution
is immaterial. To this extent the argument cannot be faulted with. It cannot
E be said nor it is anybody's case that due to subsequent acquittal the workman
would be entitled for full pay and allowances as subsistence allowance during
pendency of criminal case but for the period beyond the date when acquittal
was recorded and suspension continued because of the regu far departmental
action it cannot be said that the same provision will continue to be applicable
which was applicable during the period of criminal prosecution.
F
Learned counsel for the appellant submits that his contention is also
fortified by the service rules applicable in such matters and has placed reliance >

upon para B of rule I which reads as under :

"B. Where the enquiry is held by an outside agency including a trial
G in a criminal Court (irrespective of whether the enquiry/trial i.s preceded
by an investigation by an outside agency (i.e. Police/C.B.I.) or not:

(a) for the first six months of the suspension one-third of the pay
and allowances which the workman would have got but for the
suspension;
H
ANDHRA BANK v. W.T. SESHACHALAM [BRIJESH KUMAR, J.) 155
,. (b) for the period of suspension, if any, thereafter, one-half of the A
pay and allowances which the workman would have got but for
the suspension, until the enquiry is over."

The above provision takes care of only criminal prosecution. The learned
counsel for the respondent has drawn our attention to Para A of rule I which
is quoted below : B
"A. Where the enquiry is departmental by the bank:
·~
(I) where the investigation is not entrusted to, or taken up by an
outside agency (i.e., Police/ CBI):
(a) for the first three months of suspension one-third of the pay and c
allowances which the workman would have got but for the
suspension.
_,
(b) for the period of suspension, if any, thereafter, one-half of the
pay and allowances which the workman would have got but for
the suspension provided that after one year of suspension full D
pay and allowances will be payable if the enquiry is not delayed
for reasons attributable to the concerned workman or any of his
,.... representatives.
(2) Where the investigation is done by an outside agency (i.e., Police/
C.B.1.), and such investigation is followed by a departmental enquiry E
by the bank and not by prosecution:
(a) for the first three months of the suspension one-third of the pay
and allowances which the workman would have got but for the
suspension;
F
(b) for the period of suspension, if any, thereafter, one-half of the
.,, pay and allowances which the workman would have got but for
). the suspension;

Provided that full pay and allowances will be payable after six
months from the date of receipt of report of the investigating agency G
that it has come to the conclusion not to prosecute the employee or
..,. one year after the date of suspension, whichever is later;

' ....,, And provided further that the enquiry is not delayed for reason
attributable to the concerned workman or any of his representatives."

.~
H
156 SUPREME COURT REPORTS (2004] I S.C.R.

A It is rightly pointed out by the learned counsel for the respondent that
para A of rule I includes the provision of para 5 of the bipartite agreement.
Clause (I) ofpart (A) of rule I apparently relates to the departmental action
and clause (2) where the investigation is by an outside agency, namely the
police or the CBI. In our view, the position relating to departmental proceedings
B and the proceedings taken after investigating agency coming to a conclusion
not to prosecute which entitles the workman to full NY and allowances as
subsistence allowance after one year, will also be appflcable where in the
intervening period criminal prosecution was launched after investigation by
an outside agency ending in acquittal but departmental proceedings continued/
started or thereafter. In such cases the workman would be entitled for full pay
C and allowances as suspension allowance. The interpretation as suggested on
behalfofthe appellant to subject the employee to the rigours of rules pertaining
to payment of subsistence allowance which apply where the criminal
prosecution is decided to be launched, even for the period after the acquittal
during departmental action, would be self-contradictory and against the obvious
meaning emerging out of the provisions discussed above.
D
We, therefore, find no merit in the appeal and it is accordingly dismissed.

Costs easy.

v.s.s. Appeal dismissed.

r,