Handling Misappropriation: Can We Deduct from Security Deposits and Salaries if Staff Absconds?

Sir, our sales staff perform door-to-door collection of EMI and deposit the same with the branch on the same day. They have a TAB instrument for the collection of EMI and disbursement of loans. Since the instrument is costly, they keep a nominal amount as a security deposit for the same with us.

If the staff misappropriates the money and absconds, can we adjust the amount from the security deposit and the salary payable to him? What will be the recourse if the misappropriation comes to light after he has left the organization?

Adjusting company money from security deposits and salary

Adjusting company money from the security deposit and salary payable is the recourse the company may ultimately take. If misappropriation of company funds comes to light, proceed to initiate disciplinary proceedings. Conduct a domestic inquiry and award punishment; until such time, suspend all amounts payable to him by the company.

Legal action after inquiry

If the asset value of the company is higher than the amount payable to the employee (security deposit, salaries, payment of allowances, etc.), what will you do? Once the inquiry is completed and you obtain a report from the Enquiry Officer, you can proceed to initiate legal action or file a suit in the appropriate Court of Law for the recovery of the amount with penal interest.

I agree with P. Radhakrishnan Nair. You cannot adjust the amount, which you refer to as misappropriated, from the security deposit and salary due unilaterally. You claim that the staff has misappropriated funds, but you must prove it. You need to provide the staff with an opportunity to be heard by following the principle of natural justice.

Our audit team has conducted an inquiry and provided a detailed report outlining the amount misappropriated. Subsequently, we discussed this matter in our disciplinary committee meeting. However, the employee has absconded, and we are unable to recover the misappropriated amount from them.

In our industry, it is not uncommon for employees to leave their jobs without notice or serving the required notice period. Given the current situation, what recourse do we have now?

Thank you.

Internal Inquiry Procedures

Enquiries by the Audit Committee, Disciplinary Committee, etc., are only internal inquiries. It is good to collect their findings/report and document it. However, you need to initiate a domestic inquiry by appointing an Inquiry Officer (a registered legal practitioner) and seek his report as well. There are a few procedures to follow before initiating a domestic inquiry.

Handling Non-Participation in Inquiries

If the delinquent employee does not turn up to participate in the inquiry procedure, you can hold the inquiry ex-parte (this decision is to be made by the Inquiry Officer).

Thank you.

Audit vs. Disciplinary Inquiry

Audit (tallying, investigating, etc.) is different and can never be equated with the disciplinary inquiry consisting of a prima facie preliminary inquiry and/or final domestic inquiry.

Since you allege that the said employee is absconding with the instrument issued to him by his employer, you must proceed with issuing him a proper show-cause/charge sheet alleging theft of the company's property (the instrument). Post the same charge sheet in a closed envelope, by registered post AD, at his present postal address and permanent home address as per the company's records, asking him to explain why disciplinary action, including punishment, should not be taken for his misconduct. You may also inform him that an FIR would be lodged against him for the said theft and hold a domestic inquiry before punishment is awarded.

The practices or precedents you quoted are not the law or above the law; hence, proceed as prescribed in the laws. Make haste slowly.

Regards, Kritarth Consulting, 18.7.2020

The entire amount can be adjusted against any money payable to the staff member or if he has deposited security. However, legal formalities need to be completed to prove that he has swindled the money.