Dear Seema,
In fist place, If the employees has the disciplinary issues, why do you want to retain him, its always better to relieve such employees. These employees create negative environment, they not only do mess but also make others to do.
2ndly, if the employee has done some misconduct or damages, you have right to charge the amount in the lieu of the damages made by him and relieve him. or terminate him.
In my point of view, it is pointless to retain an employee who may become thread to the company.
Correct me if i am wrong.