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We are an NBFC having branches across more than one state . Recently we have found out that the Area Manager (AM) and Branch Manager (BM )of a particular branch have jointly opened a private limited company with them as directors in Feb 2021. The nature of activity of the company is mentioned as social service.

One of our employment agreement reads as under:
"The Employee shall devote his / her entire working time, energy, and attention exclusively to his
Duties in connection with our company and its Business, and shall not take up employment or
engagement, either full time and or part time and neither directly or indirectly, with any other
Person while in employment with our company , nor shall the Employee accept compensation in
Any form from any outside party for any actions performed on behalf of our company without
The express written permission of our company ".

Based on this we have issued show cause notice to the BM seeking explanation . In reply he has mentioned that
1) it is an NGO & was a past of his personal movement
2) he is not physically connected to the company
3) out of good faith he has provided document for registration purpose
4) he has since resigned from that company
5) the company is not active as on date .

We are yet to issue notice to AM . He has already resigned and left the organisation but his F&F is yet to be settled .
The BM has given resignation after replying to our show cause notice . He is on notice period now .

In ROC site the company is shown as active and the resignation of BM from the NGO company is not registered in ROC .

We want to write back to him stating that he is guilty of double employment, even though the company may be NGO, or non functional or he is not earning any income from it etc etc and we want to terminate the BM.

1) Can some one one please provide me with a suitable draft reply for the same ?

2) Whether one show cause notice is enough to terminate a person or is there any further formalities ???

3) Also can we with hold the f&f ?

4) Are they still eligible for Gratuity ? ( both have served our organization for more than 5 years)

From India, Mumbai
Dinesh Divekar

Dear member,

You have discovered dual employment by two employees of your organisation. One of them is the Area Manager (AM). Another is the Branch Manager. While the former has left the organisation, the latter is about to leave.

Yes, taking up second employment could be misconduct. However, with their resignations at hand, I do not think there is a need to pursue this case. Even if you issue a show-cause notice, what will you achieve? Issue of the show-cause and receiving their replies will be an infructuous exercise.

As far as payment of gratuity is concerned, both the employees are perfectly eligible to receive the gratuity. Even if you had awarded them punishment for the misconduct, they still would have become eligible to get the gratuity. Provisions of Payment of Gratuity Act, 1972 are independent of the normal misconduct of the employees. You can withhold gratuity only in cases of actions of moral turpitude like arson, destruction of the property of the employer etc.


Dinesh Divekar

From India, Bangalore
Thanks for your response Mr. Divekar.
Our Audit & Risk team have conducted investigation and found the following:
1) Both employees are promoting the recruitment for this new venture they have started. The AM who has exited has started recruting our existing employees from the branches which he was handling in our organisation
2) Not only the above, he has also challenged our company that he will slowly take all the employees out of these branches to his company
3) the whatsapp chat of the BM who is serving notice period shows variuos message between thia AM, other BM and field level employees who have been actively involved in formation of this new venture since beginning
4) The AM concerned has threatened the present AM of dire consiquences if we conduct further enquiry
5) the portfolio of the region during the tenure of this exited AM is now in NPA
6) field level enquiry with customers have revealed that the visit of the employee for collection of EMI was irregular. Whereas the AM used to give report that EMI was not coming due to lack of economic activity and earning due to Corona.

Under the above circumstances do we still have to let go the employee as suggested by you, sir?

From India, Mumbai
Dinesh Divekar

Dear member,

You have given elaboration through six points. Let me comment against each.

Point No 1: - It is not misconduct as such.

Point No 2: - Let him challenge. He can snatch your employees but not necessarily your customers. The customers always remain loyal to the company and not to the individual. At the same time, make efforts to retain the existing employees.

Point No 3: - Here lies a catch. If he was promoting a personal business insidiously, how it was discovered? Secondly, do you have standing orders? If yes, have you listed "diverting business to the rival company" as misconduct? If yes, then you can take action against the employee.

Point No 4: - Let the management give moral support to the current AM. No need to bother about such sterile threats.

Point No 5: - Making portfolio NPA cannot be misconduct.

Point No 6: - If AM was providing false information, it is called a misrepresentation of facts. Action can be taken against him.

On the strength of enquiry by "Audit & Risk Team", I recommend you order the domestic enquiry. Direct both the employees to depose before the enquiry. Write them clearly that unless the enquiry is completed, their FnF will be held in abeyance. If the misconduct is proved in the enquiry, then you are free to take action which will be the recovery of the losses caused to the company. If they fail to depose before the enquiry, and if you have inconvertible proof of their misconduct, then your company may go ahead and file a police complaint. Possibly a police complaint could mellow them down.


Dinesh Divekar

From India, Bangalore

Two persons are involved in the above cited case who are charged with infringement of laws/rules, or accused persons, (Area Manager (AM) and Branch Manager (BM). AM has already made his final exit from your company. BM is on the way to his final exit.In such a scenario, it is felt that there is no significance in conducting a domestic enquiry and initiate disciplinary proceedings against accused persons. If their deeds and acts have damaged you financially, then you can proceed against them legally in the Court of Law. Similarly, it is observed that one of the accused has threatened your company employee of dire consequences - this act of the accused person can not be agreed to and his act shall fall under IPC section and your company should file a Police case against the accused person.
From India, Aizawl
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