The Calcutta Tramways Company (CTC) has illegally spent Rs 27 crore deducted from the salaries of its 5,600 employees as contributions to a co-operative fund over four-and-a-half years, an offence as serious as an employer defaulting on provident fund deposits.

Calcutta High Court on Monday asked the state-run company to deposit Rs 27 crore with the West Bengal State Co-operative Credit Society by June 30 and file an affidavit within February 5, providing details of where the money went.

"The employees have a legitimate claim over the money they had earned and the company's management is bound to pay the amount to them," Justice I.P. Mukerji said.

The order was in response to a petition by members of the Calcutta Tramways Company Employees' Co-operative Society Ltd in mid-2014.

Contributions to the co-operative fund are around seven per cent of an employee's basic salary. The amount is meant to be deposited with the credit society so that employees get loans whenever they require them, based on individual eligibility. An employee gets back the corpus accumulated over the service period with 9 per cent interest at the time of retirement.

Legal experts said the CTC management's failure to deposit the money deducted from the salaries of its workforce with the co-operative credit society was tantamount to a violation of statutory obligations. "Had the entity been a private employer, an offence like this would invite a jail term," said lawyer and Congress leader Arunava Ghosh, who is representing the petitioners.

Under section 59 of the West Bengal Co-operative Societies Act of 2006, an employer who deducts an amount from an employees' wages as contributions to a co-operative society has to "pay the amount to the society within 15 days of the date of deduction".

If the employer defaults in making the deposit, "he/she shall be liable to make the payment to the co-operative society together with interest at 12 per cent per annum".

The rule book also states that "the entire amount shall be recoverable from the employer or the drawing and disbursing officer by the co-operative society.... and such amount shall rank in priority in respect of the liability of the employer or drawing and disbursing officer as wages in arrear".

The fourth schedule of the act says that failure of the employer to make deductions and payment under section 59 would be liable for "imprisonment for a term which may extend to six months or fine which may extend to Rs 1,000 or both".

Lawyer Ghosh had said while filing the petition last year that the company had no authority to retain the amount it had deducted from employees' salaries for any purpose.

On Monday, Justice Mukerji asked CTC managing director Nilanjan Shandilya to file an affidavit stating his views on the employees' contention.

The state government provides an annual subsidy of Rs 120 crore to the CTC, which includes around 75 per cent of the salaries of the 5,000-odd employees along with pension and other benefits. Sources in the tram company said the annual outgo on salaries is around Rs 13 crore, of which around Rs 10 crore comes from the government. It is supposed to earn the rest of the amount.

"It is obvious that the CTC didn't earn enough after deducting operational costs to pay even 25 per cent of the salaries of the employees," a senior officer in the transport department said. "So it decided to tap contributions to the employees' co-operative to make up for the shortfall, based on the assumption that it would deposit the money back once revenues became better."

The CTC is the only state-owned transport company that has so far leased out its depots to augment its earnings. The company is projected to earn Rs 200 crore by leasing out surplus land.

In an affidavit submitted on Monday, managing director Shandilya admitted that the company had failed to deposit employee contributions to the co-operative fund. Advocate Saptangshu Basu, appearing on behalf of the managing director, said: "Only 75 per cent of the salaries of the tramways employees is paid by the government. The remaining 25 per cent amount, which amounts to Rs 3.8 crore, the company has to pay. The company cannot even realise operational costs from (tram and bus) traffic. It has no other source of income. So the amount deducted from the salaries could not be deposited."

The lawyer requested the judge for an order directing the state government to release more funds to the CTC.

The petitioners' counsel told the court: "The employees demand that the company pay (to the credit society) at least 50 per cent of the total amount deducted from their salaries with immediate effect."

Lawyer Ghosh read out statistics from official documents to prove the extent of the default. "From mid-2011 till November 30, 2015, the company did not deposit a sum of Rs 27,96,95,000 with the appropriate department. As a result of this, the employees would lose money in terms of dividends. What will the government do at the time of their retirement?" he said.

Advocate Basu didn't dispute the figures but said the CTC was in no position to deposit the money with the co-operative society.

Justice Mukerji declined to give time beyond June 30, besides seeking a detailed explanation from the CTC for not being able to transfer the contributions of its employees to their co-operative accounts for so long.