The charge sheet was issued to Sharma, who was at odds with the previous BJP-led government in the state, on Friday.
"The Gujarat Government has charge sheeted retired IPS officer Kuldeep Sharma as he had not surrendered the unused grants during when he was the MD of GSWDC in the year 2010-11, nor had he submitted to the state government any information about these grants," Minister of State (MoS) for Home Rajnikant Patel told PTI.
The 1976-batch IPS officer had moved the court after his performance in Annual Confidential Reports (ACRs) was downgraded and he was denied promotion.
According to sources, the state government had issued the first charge sheet to Sharma in November last year, but it made amendments in it and reissued it.
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"As he had already retired by then, the government took Union Government's permission to issue him the amended charge sheet," sources said.
As per the norms, an IPS officer can be served with the charge sheet by the state government if he or she is in service, but after retirement, only the Centre has the power to charge sheet the former officers, they added.
Sharma was then transferred to the Bureau of Police Research and Development (BPR&D) under the Union Home Ministry on April 19, 2011. The unspent grants were later surrendered by his successor, said the sources.
The ex-IPS officer's brother, Pradeep Sharma, who was an IAS officer, was also at loggerheads with the previous BJP government. He was booked in an alleged money-laundering case against him by Enforcement Directorate (ED). He was charged by the state's Anti-Corruption Bureau for allegedly accepting a bribe of Rs 29 lakh from a private company, when he was Collector of Kutch.