Six years after a former Dhanlaxmi Bank officer moved a Kerala court challenging the bank’s decision to sack him abruptly just nine months ahead of his superannuation, the court has ruled that the banker’s termination in 2015 wasn’t sustainable in law and has ordered the lender to compensate the former employee.
The court ordered the bank to pay Rs 30 lakh in compensation to the banker, PV Mohanan, with 6 percent interest from the date of termination, aside from his legal expenses. The order was passed by the Thrissur Additional Sub Court. In its order, the court, however, said the bank doesn’t need to pay pension and leave encashment benefits to Mohanan. The former banker said he would move the High Court challenging this decision. In that event, the bank, too, may file a counter case.
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Mohanan, a former senior manager in the bank’s recovery department, was sacked in June 2015, allegedly for his involvement in trade union activities, without being served a show-cause notice. He approached a court challenging the bank’s decision. The case went on for six years amid repeated postponements. Back in 2015, Mohanan’s sacking had resulted in protests by employees, who had demanded his reinstatement. However, the Thrissur-based bank had sought to fight the case in court.
Mohanan said the court’s ruling calling his termination unsustainable was welcome and so was the compensation. However, he added, he would challenge the court’s decision to deny his pension and leave encashment benefits in the High Court.
“I am planning for an appeal before the High Court to correct this anomalous position,” Mohanan said. A top official of Dhanlaxmi Bank, who did not want to be identified, said the bank would counter the appeal if Mohanan moves the High Court on the pension issue.
Mohanan joined Dhanlaxmi Bank in 1977 as a clerk and was promoted to the officer cadre in January 1984. Later, he was promoted to scale 3 but didn’t opt for further promotions due to his involvement in trade union activities, according to the former banker. The top official at Dhanlaxmi Bank, quoted above, said the bank is willing to settle the compensation as directed by the Court but not the pension and leave encashment amount.
Sudden dismissal
After the court’s verdict, Mohanan told Moneycontrol he was sacked on 11 June, 2015, while he was at work at his desk. An HR officer had walked over and served the termination notice without any explanation, he said.
“The Head HR came in person to my office and handed over the letter to me. It may be the first instance of shocking and insulting retrenchment,” said Mohanan.
Though the bank’s letter of termination did not say why he was being sacked, everyone knew what had gotten the lender upset over Mohanan. The then management was unhappy with his involvement in trade union activities. Notably, Mohanan was a performing officer who won recognition from his superiors for his good performance, including the model branch manager award for three consecutive years.
When his service was terminated, Mohanan was acting as the General Secretary of the Dhanlaxmi Bank Officers Organisation and the Kerala State President and National Senior Vice President of the All India Bank Officers Confederation. An explanation given by Mohanan to the bank wasn’t factored in.
The termination notice served to Mohanan by the HR department said his services were no longer required by the bank and were terminated forthwith. Mohanan had served Dhanlaxmi Bank for 38 years in various capacities.
He was sacked under Clause 14 under Chapter 4 of the Dhanlaxmi Bank Officers service regulations, which empowered the bank to terminate any officer by paying three months of emoluments. The court, however, ruled that the clause is void under Section 23 of the Contract Act.
What the Court said
Delivering its verdict, the court said there is not even a hint that the plaintiff’s explanation was being sought to ascertain the reasons for termination. “No other letter is seen issued to the plaintiff intimating that his explanation is not satisfactory. Yet, despite this, after the plaintiff gave his reply, his services were abruptly terminated under the guise of a simple termination. A grosser illustration of the violation of the principles of natural justice is difficult to envisage,” said the Court.
Further, the court observed that the services of an employee of 37 years cannot be terminated “at the sweet will and pleasure of the employer” by giving three months’ salary. “If such a course is adopted, the result would be strange and startling, namely, that each and every employee of the bank … (is) liable to be summarily dispensed with merely by notice (payment) of salary in lieu thereof.
The court added that the penalty imposed on the plaintiff was whimsical and the decision terminating his services opposed the principles of natural justice and public policy.
Bank's senior-level woes
Although Mohanan’s legal battle is a separate and individual case, Dhanlaxmi Bank has had a long history of premature exits at the senior management level and Board level in recent years. Shareholders had ousted former CEO Sunil Gurbaxani in September 2020. In the past, the bank had seen clashes between top officials and powerful shareholders that often led to senior-level exits.
Later, in an interview, Gurbaxani had said: “The deeper governance issues in the bank need surgery and not a bandage. Issues that have been chronic for many years, the exit of many previous officials, including MDs and a part-time chairman, speaks of the seriousness of the lack of governance and deserves investigation.”
A case is ongoing in the Kerala High Court where a group of former directors has challenged the bank’s decision not to award them board seats. As far as the financials are concerned, the bank reported a profit in the March quarter but its capital adequacy ratio (CAR) and operating expense trends validate the concerns of shareholders.
In the March quarter, the bank reported a decline in its capital adequacy ratio to 13 percent from 14.5 percent a year ago. Operating expenses rose to Rs 397 crore from Rs 366 crore, marking an increase of about 9 percent. Provisions more than doubled to Rs 97 crore from Rs 43 crore. Going by the cash flow statement as of March, total cash flows declined to Rs 735.84 crore from Rs 985 crore in the year-ago period.
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