Hi,
was there any departmental enquiry conducted, any FIR lodged following the enquiry?
If not ,
1. During the suspension period and the pending enquiry period the employee should get his salary
2. The retirement will be effective as scheduled and the employer cannot stop the retirement benefits, like PF, gratuity and pension even if the enquiry established the employe guilty of the allegations levelled against him.
3. Yes the employee can take legal steps depending on the nature of the allegations, enquiry and how it was conducted, how it affected him in his personal , society life.
His options are, file defamation, sue for damages ask for compensation., if there was an FIR lodged and proceeded in the court and the employee was acquitted free of charges , then he can lodge complaint under CR.PC provisions to prosecute the employer.