Learn Finnish: Kaikki huomasivat maisterin palauttaneen gradun. - Everyone noticed that the master had returned the master's thesis.

This uses the past active referative construction (partisiippirakenne), which compresses an että (that) clause into a single phrase. The person doing the action (maisteri) is put into the genitive case (maisterin), and the verb (palauttaa) becomes a past active participle with an -en ending (palauttaneen).

How would you say this sentence using a normal että clause?

It would be: Kaikki huomasivat, että maisteri oli palauttanut gradun. The referative construction you see in this sentence is simply a more formal, compact way of expressing this exact same meaning.

Why is the word palauttaneen used instead of just palauttanut?

The standard past active participle is palauttanut. However, to form the referative construction, you must add the genitive suffix -n to the participle. When adding this suffix, the -ut ending of the participle always changes to -ee-, which gives you palauttaneen.

Why is gradun in the genitive/accusative case here?