One Imam in my place retired because of sickness. Since his retirement he does not want go to the near-by mosque to perform daily prayers because he claims that the person who leads prayer does not recite Al Fatiha properly. The real Imam leads the Friday prayer. The retired Imam after performing the daily prayer in that mosque will repeat the prayer at home because he claims that prayer was not valid. What was Islamic view about this situation?

Praise be to Allah, the Lord of the Worlds; and blessings and peace be upon our Prophet Muhammad and upon all his Family and Companions.
Reciting the Qur'an should be done in the way Qur'an should be read. The Qur'an's letters and words should be uttered as revealed. Therefore, the Qur'an reader should learn to read the Qur'an in the appropriate way. This can be done by studying with the experts in reciting the Qur'an. If the person neglects this and reads the Qur'an making mistakes in Al Fatiha that change the meaning, he commits a sin and his prayer is invalid. But if the person does not neglect studying the Qur'an in the appropriate way yet makes some mistakes, his prayer (alone or as an Imam of similar or persons of less knowledge in reading the Qur'an) is valid.
Allah Says (interpretation of meaning): {Allâh burdens not a person beyond his scope. }[2:286]
The Prophet said: "Refrain from what I forbid you and do what I command you to the best of your ability and capacity".[Reported by Imams Al-Bukhari and Muslim]
As for his praying as Imam of people who can read the Qur'an better than himself, this has two different rules depending on the mistakes he commits.
First, if the person makes mistakes that are obvious and changes the meaning, like saying while reading Al Fatiha: "Anaamtu" or "Anaamty" instead of "Anaamta", such a person should not lead the prayer as Imam if there is another man who can read better. The prayer he leads is invalid because the mistake is in Al Fatiha.
Second, if the mistake in Al Fatiha does not change the meaning (like saying "Rabb-UL-Alamin" instead of saying: "Rabb-IL-Al Al amin") the prayer is not nullified. So, whoever makes this kind of mistake can lead the prayer as Imam even if someone behind him can read the Qur'an better. It is more appropriate, however for the one who reads the Qur'an better to lead the prayer because the Prophet said: "….And the one who has the most right to be Imam is the one who is the most versed in the Qur'an". That means the one who has memorized more of the Qur'an. Moreover, mistakes in the Tajweed (manner of articulating) does not influence the rules of Imama (leading the prayer) since mistakes in any Qur'an other than Al Fatiha, do not nullify the prayer.
We conclude from the above that the retired Imam, you mentioned in your question, should advise the actual Imam in a good way about his mistakes and teach him how to correct them. On the other hand, the retired Imam should pray behind the actual Imam and avoid disturbing people who are praying in congregation.
If this retired Imam fails to help him correct his mistakes, the actual Imam is excused. And the rule regarding his mistakes depends on one of the two situations explained earlier.
Allah knows best.