Full Judgment Text
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CASE NO.:
Special Leave Petition (civil) 21000 of 1993
PETITIONER:
Delhi Development Authority
RESPONDENT:
Skipper Construction Co. (Pvt.) Ltd. & Ors.
DATE OF JUDGMENT: 13/11/2002
BENCH:
Umesh C. Banerjee & Shivaraj V. Patil.
JUDGMENT:
JUDGMENT
Banerjee, J.
M/s Skipper Constructions (P) Ltd. was incorporated on 14th
February, 1986 to undertake development and construction of
commercial and residential complexes. The activity is generally
financed from advances/deposits from prospective buyers.
Skipper has had five other associates : Skipper Tower Private
Limited; Skipper Builders Private Limited; Skipper Sales Private
Limited; Skipper Properties Private Limited; and Anand
Construction (Delhi) Private Limited.
The contextual facts depict that in an auction held on 8th
October, 1980 in respect of the plot of land in Jhandewalan, the bid
of Rs.982 lacs offered by Skipper Constructions was accepted by
the Delhi Development Authority (DDA herein). The Company
had deposited Rs.245.75 lacs on the date of auction and the
balance amount of Rs.736.25 lacs was required to be deposited
within 90 days. The records depict that the Company was able to
raise a sum of Rs.645.66 lacs from the flat owners in stages, out of
which Rs.583.25 lacs were paid to the DDA towards the cost of the
land. The DDA, however, had agreed to recover the balance
amount of Rs.398.75 lacs together with interest at the rate of 18%
per annum amounting to Rs.392.61 lacs accumulated up to the end
of year 1985 in five equal instalments in 2-1/2 years and delivered
possession of the land against bank guarantee for the like amount.
The Company accordingly approached the New Bank of India,
Tolstoy Marg Branch in January 1986 with the request for issuance
of bank guarantee of Rs.7.90 crores to be executed in favour of the
DDA. The said guarantee was required to be given as the cost of
land was not paid in full by the Company to the DDA. The
Company proposed to construct the flats on a portion of the
Jhandewalan Tower, New Delhi.
The facts further depict that on receipt of the letter dated
23rd January, 1986 from the Skipper Company, the Tolstoy Marg
Branch of New Bank of India recommended the facility of having
the bank guarantee sanctioned by charging 1% commission per
annum on diminishing balance of half yearly rests together with a
margin of 15% in the form of FDR main security by equitable
mortgage of property No.3, Aurangzeb Road, New Delhi and the
lien over unsold space in Jhandewalan Tower amounting to
Rs.676.09 lacs along with collateral security of counter guarantee
of the Company and personal guarantee of the Directors Tejwant
Singh and Harpreet Singh having net means of Rs.2,78,000/- and
Rs.2,51,706/- respectively.
The factual score further depicts that the application of the
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party for issue of guarantee was duly received by the Head Office
and after initial quibbles, the proposal was finally sanctioned by
the Board of New Bank of India and the limit was enhanced from
Rs.7.90 crores to Rs.8.70 crores.
The role played by the bank officials, however, did not find
favour with this Court and without much of a narration on the
factual score since the matter is kept pending in this Court for quite
some time, it would be worthwhile only to note that liberality in
advancement of loans and bank guarantees prompted this Court to
have the matter inquired into by a sitting Judge of the High Court.
Presently for our purpose, we are concerned with the Report
as detailed out by Justice Saharya, a former Judge of the Delhi
High Court and a former Chief Justice of Punjab and Haryana
High Court.
Significantly, however, the issue was examined by the two
Deputy Governors of the Reserve Bank of India relating to the
question on the issuance of the guarantee for and on behalf of
Skipper Constructions by the New Bank of India and Canara Bank.
The Report of the Governors stands out to be singularly singular in
its vagueness and we do think it fit, however, to put on record
relevant extracts of the same.
"6.25. In regard to the conspiracy, the persons
referred to represent different interests and
constituencies. There is no clear evidence that there
was any communication amongst them in the matter
nor was there any concerted action apparent. In fact,
there has been resistance with some of them at
different points of time, to the whole proposal. There
is, therefore, no evidence beyond a remote suspicion
of any conspiracy.
6.26. The question of loss to the banks is
extremely critical because neither malafides nor
personal gains have been established. Hence further
action can be supported only on the basis of
crystallisation of loss. The properties under dispute
are still under examination in the courts. PNB is
pursuing the matter in various judicial fora. At this
stage, therefore, it is not possible to assess whether a
loss would occur and if it occurs, what would be the
extent of loss.
6.27 Responsibility of the CMDs & Board
Directors
6.28 As regards the relative role of the persons
referred to, the matter has been dealt extensively in the
context of analysing the statements made by them.
The banks’ Boards as institutions have been found to
be not actively involved though the Board of New
Bank of India has a greater responsibility in the
matter. Hence personal responsibility cannot be fixed
in the case of seven (7) members of the Board referred
to viz. Smt. T.R. Sahni, S/Shri Sudarshan Lal, S.S.
Ranade, J.P. Awasthi, J.K. Sawhney, Dr. M.R.
Kotdawala and Shri D. Seetharama.
In respect of CMDs, the role of Canara Bank being a
participant rather than a lead bank, there is no
evidence to show that there was any act of omission
or commission on the part of late Shri B. Ratnakar in
this regard and E.C. would not hold him responsible.
The primary responsibility for initiating the case,
considering it, taking it repeatedly before the Board,
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getting it approved, following it up at the
implementation stage in whatever manner that
happened should squarely be placed on the then CMD
of the New Bank of India (viz. Shri R.C. Suneja).
However, action can justifiably be contemplated once
the loss to the bank is established and crystallized."
It is on the basis of the Report of the Deputy Governors of
the Reserve Bank of India that Canara Bank officials as well
wanted to put on record a clean chit to late Shri B. Ratnakar and
the only person in terms of the report of the Deputy Governors
responsible for financial irregularities seems to be R.C. Suneja.
The defence of Suneja, however, in the affidavit had been a
complete denial and a categoric denial as to the existence of any
procedural illegality neither any malfeasance or misfeasance stand
out to be noticed by the scrutiny of account by the two Deputy
Governors of the Reserve Bank of India. The Board itself
sanctioned guarantee upon proper inquiries being made and Mr.
Suneja is not the only person in the Board who was responsible for
the grant and it is in this context the Report stands contradicted by
Mr. Suneja recording therein that no individual responsibility can
be foisted on to the latter as otherwise it would be travesty of
justice and to seek a scapegoat in Mr. Suneja. We do find some
justification in such a statement why alone and not other
members of the Board including the representatives of the Reserve
Bank of India the answer seems to be delightfully vague in the
two Deputy Governors’ Report.
Saharya Commission did go into the issue and indicated in a
tabular column the norms required to be followed when a bank
guarantee is issued and the status in respect of its compliance.
A very significant finding in the report is to be found wherein
it is clear that the Board of Directors of the New Bank of India had
specifically declined on 13.3.1986 the proposal of giving Skipper a
bank guarantee and in fact that meeting was a follow-up of an
earlier Board meeting of 18.2.1986 where also the Board had not
been too enthusiastic about the proposal. However suddenly in
the meeting of 17.3.1986 the Skipper case rose from the dead like a
phoenix and the matter was reconsidered when the same was not
even on the agenda.
The report indicates further that there were several lacunae in
terms of supervision by intermediary authorities such as Regional
Office and also wrong forms were used in the transaction.
While inquiring into the role of the individual officers and
the members of Board the Commission comes to a finding that
there was complete lack of prudence on the part of the officials.
Further, the Commission comes to a definite finding after
discussing the role played by the various officers at different levels
in the hierarchy of the bank as follows :
"I have no hesitation to conclude that the transaction
from its very inception was unsafe. It was not
adequately secured. It was not profitable. It was,
therefore, not prudent for the two banks to get into it. I
have also no hesitation to conclude that the concerned
officials of the said two banks did not act diligently or
prudently in extending the facility to the Company."
In fine, the report concluded as below :
(a) that the two Banks granted the facility of Bank Guarantee in
violation of statutory norms as well as established practices
and procedures;
(b) that Mr. R.C. Suneja, Chairman-cum-Managing Director of
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the New Bank of India while holding public office in
fiduciary capacity was the prime functionary, who,
intentionally, fraudulently and to further the interests of the
Company played a major role in the grant of the facility
thereby defrauding the bank and causing it huge losses;
(c) that other functionaries of the New Bank of India as named in
Issue No.2 violated the established norms and procedure in
grant of the facility as well as non-fulfillment of the
conditions laid down in the Bank Guarantee;
(d) that Mr. B.R. Ratnakar, Chairman-cum-Managing Director,
Canara Bank, intentionally and with knowledge that sanction
of the proposal was neither in consonance with the norms nor
was it for the benefit and in the interest of the Bank, involved
the Bank in the transaction;
(e) that the other functionaries of the Canara Bank as named in
Issue No.2 directly assisted the Company to get participation
of Canara Bank in the unprofitable transaction and did not
ensure fulfillment of the conditions contained in the
guarantee;
(f) that it stands established that the two banks intentionally and
with full knowledge sacrificed all norms, caution, care and
prudence in granting the facility;
(g) that the concerned functionaries of the Reserve Bank of India
did not take due notice of the quarterly/half yearly reports
submitted by its nominee Directors and therefore due to their
inaction corrective steps could not be initiated within time;
(h) that because of the inaction of the senior functionaries of the
Department of Banking in dealing with the
allegations/complaints against Mr. R.C. Suneja, initiation of
corrective measures got delayed to a point when substantial
damages had already been caused; and
(i) that the manner of scrutiny of proposal of the Company, the
grant of the facility, the monitoring of the conditions of the
facility, inaction on the reports by the RBI Nominee Director
and inaction on the complaints made to Government
especially the one made by 28 sitting M.Ps. establishes that
things were "rotten" and stinking not only in the two Banks
but all over.
It is indeed essential to note that in spite of concluding that
there were in fact intentional acts on the part of the officials the
Commission did not, however, feel it expedient to note or quantify
the amount of misfeasance and malfeasance on the part of the
bank officials.
Incidentally, this Court in its decision pertaining to an issue
of more or less similar nature did hear the matter in great length in
the matter of proposal to reopen the quantum of punishment
imposed in the departmental inquiry held on certain officers of the
Delhi Development Authority who were connected with the land
of DDA allotted to Skipper Construction Company. It was
proposed to consider imposition of higher degree of punishment in
view of the role of those officers since the Court had no occasion
to examine whether the right punishments were awarded to the
officers in accordance with the known principles of law or whether
the punishment required any upward revision. It is in the light of
the above situation this Court by its order dated 17.11.2000 and
upon reliance to the Wednesbury principles stated the law to be as
below :
" . where administrative action is challenged
under Article 14 as being discriminatory equals are
treated unequally or unequals are treated equally, the
question is for the Constitutional Courts as primary
reviewing courts to consider correctness of the level of
discrimination applied and whether it is excessive and
whether it has a nexus with the objective intended to be
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achieved by the administrator. Here the court deals
with the merits of the balancing action of the
administrator and is, in essence, applying
"proportionality" and is primary reviewing authority.
But where an administrative action is challenged
as "arbitrary" under Article 14 on the basis of Royappa
(E.P. Royappa v. State of T.N. 1974(4) SCC 3) (as in
cases where punishments in disciplinary cases are
challenged), the question will be whether the
administrative order is "rational" or "reasonable" and
the test then is the Wednesbury test. The courts would
then be confined only to a secondary role and will only
have to see whether the administrator has done well in
his primary role, whether he has acted illegally or has
omitted relevant factors from consideration or has taken
irrelevant factors into consideration or whether his view
is one which no reasonable person could have taken. If
his action does not satisfy these rules, it is to be treated
as arbitrary. [In G.B. Mahajan v. Jalgaon Municipal
Council (1991 (3) SCC 91 at 111)] Venkatachaliah J.
(as he then was) pointed out that "reasonableness" of
the administrator under Article 14 in the context of
administrative law has to be judged from the stand
point of Wednesbury rules. In Tata Cellular v. Union
of India (1994 (6) SCC 651 at 679-80), Indian Express
Newspapers Bombay (P) Ltd. v. Union of India (1985
(1) SCC 641 at 691), Supreme Court Employees’
Welfare Assn. v. Union of India (1989 (4) SCC 187 at
241) and U.P. Financial Corpn. v. Gem Cap (India) (P)
Ltd. (1993 (2) SCC 299 at 307) while judging whether
the administrative action is "arbitrary" under Article 14
(i.e. otherwise then being discriminatory), this Court
has confined itself to a Wednesbury review always.
Thus, when administrative action is attacked as
discriminatory under Article 14, the principle of
primary review is for the courts by applying
proportionality. However, where administrative action
is questioned as "arbitrary:" under Article 14, the
principle of secondary review based on Wednesbury
principles applies.
Proportionality and punishments in service law
The principles explained in the last preceding
paragraph in respect of Article 14 are now to be applied
here where the question of "arbitrariness" of the order
of punishment is questioned under Article 14.
In this context, we shall only refer to these cases.
In Ranjit Thakur v. Union of India (1987 (4) SCC 611)
this Court referred to "proportionality" in quantum of
punishment but the Court observed that the punishment
was "shockingly" disproportionate to the misconduct
proved. In B.C. Chaturvedi v. Union of India (1995
(6) SCC 749) this Court stated that the Court will not
interfere unless the punishment awarded was one which
shocked the conscience of the court. Even then, the
court would remit the matter back to the authority and
would not normally substitute one punishment for the
other. However, in rare situations, the court could
award an alternative penalty. It was also so stated in
Ganayutham (Union of India v. Ganayutham 1997 (7)
SCC 463).
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Thus, from the above principles and decided cases,
it must be held that where an administrative decision
relating to punishment in disciplinary cases is
questioned as "arbitrary" under Article 14, the court is
confined to Wednesbury principles as a secondary
reviewing authority. The court will not apply
proportionality as a primary reviewing court because no
issue of fundamental freedoms nor of discrimination
under Article 14 applies in such a context. The court
while reviewing punishment and if it is satisfied that
Wednesbury principles are violated, it has normally to
remit the matter to the administrator for a fresh decision
as to the quantum of punishment. Only in rare cases
where there has been long delay in the time taken by
the disciplinary proceedings and in the time taken in the
courts, and such extreme or rare cases can the court
substitute its own view as to the quantum of
punishment."
In fine, however, this Court in the last noted decision of
which one of us (U.C. Banerjee, J.) was a party concluded :
"In the result, we do not propose to pursue the
matter further and we drop further proceedings. The
show-cause notice is disposed of accordingly."
The situation presently is slightly different. The
Administrative Authority did not feel it expedient to take any step
or steps as against the erring officials and discharged its obligation
by recording the above.
The Report of the Deputy Governors as regards the relative
role of persons who have in fact dealt with the matter is rather
significant. The clean chit has been made available to Smt. T.R.
Sahni, S/Shri Sudarshan Lal, S.S. Ranade, J.P. Awasthi, J.K.
Sawhney, Dr. M.R. Kotdawala and D. Seetharama and the CMD of
the New Bank of India has been found to be squarely responsible
for such a mess up and having irregularity obviously the decision
was not of one individual but of the body in its entirety. It is thus
extremely significant as to how the responsibility stands foisted on
to one individual rather than a body of persons who had taken up
on themselves to sanction the limit or for issuance of the guarantee.
We thus are not in a position to record our concurrence with report
of the Deputy Governors of the Reserve Bank of India. Undue
burden stands foisted on to one particular individual, whereas
others have not been assigned any role which runs counter
obviously to the entire banking practice. We are not trying to
exclude Mr. Suneja but he cannot be held to be the only
responsible officer for a transaction of this magnitude :
Incidentally, as noticed above, it is not the Managing Director only
who takes the decision but the Board itself and when that be the
usual practice, this anxiety to let off others does not stand to reason
and hence we find some justification in the criticism levelled by
the learned Advocate appearing for Mr. Suneja. It seems the two
Governors of the Reserve Bank of India have been proceeding
more on ethical value rather than practicability of the situation
ethical since in common and popular acceptation no one ought to
speak ill of a dead man. Canara Bank has been let off absolutely
free the only reason available that the latter is not a lead bank,
rather a participant bank : a participant bank thus can do no wrong
if that be the methodology of working of the banking structure of
the country it is a sad day for the entire banking industry. We,
however, refrain ourselves from making any further comments
thereon by reason of the proposed order, which we record
hereinbelow.
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Order
In our view, the matter requires a further look by a
functionary of the State for the purposes of ascertainment of the
quantum of loss suffered by the bank or banks by reason of
malfeasance and misfeasance of the concerned officials of the
public sector banks, in particular that of Canara Bank and New
Bank of India, irrespective of factum of death or retirement. The
matter in issue is to be dealt with and be considered by the Central
Vigilance Commission for the purposes aforesaid. We are aware
of the factum of there being a Report of the Central Vigilance
Commission, but unfortunately this Court had not had the privilege
of having a detailed Report in the matter by reason of certain
technicality. We do feel it expedient on that score to record that
the Central Vigilance Commission shall investigate the matter in
terms of this order as an independent agency of the country
without being inhibited by any restraint or any other Report or
Reports for the purposes of assessment of the situation. It is in
this context, however, that the Commission should also take note
of the Report of the Deputy Superintendent of Police, CBI, New
Delhi.
The observations made in this order are confined to the
disposal of the objection pertaining to Saharya Commission’s
Report being a part of I.A. No.56, which stands disposed of earlier.
They are not to be taken as any expression on merits affecting the
investigation to be made by the Central Vigilance Commission
pursuant to this order.
The Commission is however further directed to file a present
status Report pertaining to its earlier Report dated 1st July, 1992 by
Shri Harinder Singh, Director, Central Vigilance Commission,
bearing No.V25/BNK 19.
The Registry is directed to communicate this order to the
Central Vigilance Commission so as to enable the Commission to
complete the inquiry within a period of 18 months and file a
Report in a sealed cover before this Court.