A disciplinary penalty order must give reasons and conduct an enquiry when charges are factually denied.

The petitioners were employees of the respondent Department. During the intervening night of 23–24 August 2012, ₹99,756 was allegedly stolen from the locker at the Distribution Centre, Simariya, following which an FIR was registered and the stolen property was seized in the criminal proceedings.

A show-cause notice dated 6 August 2013 was issued to the petitioners, who submitted their replies. The disciplinary authority thereafter ordered recovery of ₹31,000 from their salaries on the ground that they were posted at the Distribution Centre on the date of the theft.

The petitioners challenged the order as non-speaking, unreasoned, and passed without proper consideration of their replies; they also disputed the competence of the authority that passed it.

The respondents contended that the replies had been considered and that the Executive Engineer possessed delegated supervisory powers under an order dated 8 October 1991.

1. Whether an order imposing recovery from the petitioners’ salaries is sustainable when it does not disclose consideration of their replies or provide reasons for rejecting their defence.

2. Whether, where factual allegations are denied by employees, a disciplinary enquiry is required even when the proposed punishment is treated as a minor penalty.

3. Whether the matter should be remitted to the competent disciplinary authority for fresh proceedings, including consideration of the principles governing recovery from retired employees.

The Court applied the principle in Kranti Associates (P) Ltd. v. Masood Ahmed Khan, (2010) 9 SCC 496, that every administrative or quasi-judicial order affecting rights must contain clear, cogent, and intelligible reasons, demonstrate application of mind, and facilitate judicial review.

It relied on O.K. Bharadwaj v. Union of India, which holds that even in proceedings involving a minor penalty, the employee must be given an opportunity to explain the charges and, where factual charges are denied, an enquiry must ordinarily be conducted as a minimum requirement of natural justice.

The Court also directed consideration of the principles in State of Punjab v. Rafiq Masih (Whitewasher), (2015) 4 SCC 334, concerning recovery from employees who have retired from service.

The impugned order merely imposed recovery and did not set out the defence raised in the replies or explain why that defence was rejected. The respondents’ assertion that the replies had been considered could not cure the defect apparent on the face of the order, since reasons must be recorded in the order itself.

Further, the allegation arising from the theft was factual and had to be dealt with in accordance with natural justice. Since the petitioners had been proceeded against on the basis of such allegations, the competent authority was required to conduct an appropriate enquiry if the charges were denied, notwithstanding that the recovery was characterised as a minor penalty.

The Court therefore found the order arbitrary and legally unsustainable, without finally adjudicating the disputed question of the Executive Engineer’s competence.

The matter was remitted to the disciplinary/competent authority to recommence the proceedings from the stage of receipt of the petitioners’ replies, conduct an appropriate enquiry in accordance with O.K. Bharadwaj, and pass a reasoned and speaking order within three months of receiving the certified copy of the judgment.

While reconsidering the matter, the authority was directed to apply the principles in Rafiq Masih regarding recovery from petitioners who had retired from service.