Conviction Under Section 138 NI Act Doesn’t Imply Moral Turpitude: Madras High Court Quashes Order Stopping Retired Cop’s Pension

Madurai Bench of the Madras High Court held that a conviction under Section 138 of the Negotiable Instruments Act, 1881—arising from a cheque bounce case—cannot be deemed an offence involving moral turpitude or grave misconduct justifying the stoppage of pension under Rule 8 of the Tamil Nadu Pension Rules, 1978. Justice K. Kumaresh Babu quashed the impugned departmental order and directed the restoration of pension along with arrears.

“Section 138 NI Act Arises from Contractual Disputes, Not from Offences of Moral Depravity”: Court Finds No Justification to Withhold Pension

The petitioner, a retired police official, had been convicted in multiple cheque dishonour cases under Section 138 of the NI Act. Relying on this conviction, the authorities invoked Rule 8 of the Tamil Nadu Pension Rules, 1978, which stipulates that pension may be withheld or withdrawn if a pensioner’s conduct is not found to be good.

However, the Court clarified that mere conviction under Section 138 does not automatically establish moral turpitude or a lack of good conduct under pension rules. The Court observed:

“Section 138 of the Negotiable Instruments Act arises out of a contractual dispute between the parties. Involvement cannot be said to be an offence which affects the conduct of the person. Such conduct cannot also be implied to affect his good conduct.”

The ruling reinforces the settled position that moral turpitude entails dishonesty, fraud, or conduct violating accepted standards of morality—not technical or commercial defaults like cheque bouncing.

Department Withdrew Pension Without Hearing: Court Terms It a Violation of Natural Justice

Not only was the pension stopped based on an irrelevant legal ground, but it was also done without affording the petitioner any opportunity of hearing. The Court held that such action is contrary to the basic principles of natural justice, stating:

“Pension had been stopped without offering an opportunity to the petitioner… Therefore, there is a violation of natural justice. Action is unsustainable in law.”

This procedural lapse alone, the Court emphasized, rendered the order legally untenable, regardless of the merits of the allegations.

Conviction Under Section 138 Cannot Be Equated With “Grave Misconduct”: Court Reiterates Binding Precedent

Referring to its earlier judgment in W.P.(MD) No. 5002 of 2024, decided on 05.09.2024, the Court found that the issue was no longer res integra. In that case, the Madras High Court had already held that a conviction under Section 138 NI Act does not amount to misconduct involving moral turpitude. Justice Kumaresh Babu, agreeing with that decision, noted:

“This Court finds no reason to differ with the view taken by the learned Judge in the aforesaid judgment to hold that the petitioner’s conduct can be said to be not good to deny the pension.”

This consistent judicial view strengthens protections for retired government servants from arbitrary denial of post-retirement benefits based on irrelevant criminal convictions that arise from commercial disputes.

Government’s Argument That “No Enquiry Was Needed” Rejected

The Government Pleader had argued that since the conviction was admitted and undisputed, no separate departmental enquiry was required before taking action under Rule 8. However, the Court squarely rejected this contention, holding that even if a conviction is established, it must be relevant to the standards of “good conduct” required by the pension rules. A mechanical application of Rule 8 without assessing the nature of the offence or following due process violates both statutory intent and constitutional safeguards.

Pension to Be Restored With Arrears Within 12 Weeks

Quashing the impugned order dated 07.07.2025, the High Court issued clear directions:

“The respondents are directed to release the pension to the petitioner and also pay the arrears of pension, if any, within a period of twelve weeks from the date of receipt of copy of this order.”

The judgment in Srinivasan v. Director, Treasury and Accounts Dept. underscores a vital principle in service and pension jurisprudence: not every conviction equates to misconduct under service rules. A conviction under Section 138 of the NI Act, which stems from a financial default or commercial liability, does not carry the stigma of moral turpitude and cannot justify the stoppage of pension, especially without observing procedural fairness.

By reaffirming that administrative actions must be proportionate, relevant, and just, the Court has once again fortified the legal framework protecting retirees from arbitrary and unjust deprivation of their hard-earned post-service benefits.

Date of Decision: 13 October 2025