Full Judgment Text
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CASE NO.:
Appeal (civil) 971 of 2007
PETITIONER:
Ramesh Chandra Sharma
RESPONDENT:
Punjab National Bank & anr
DATE OF JUDGMENT: 18/05/2007
BENCH:
S. B. Sinha & Markandey Katju
JUDGMENT:
J U D G M E N T
WITH
CIVIL APPEAL NO. 975 OF 2007
S. B. SINHA, J.
1. These two appeals arising out of the common judgment and order
were taken up together for hearing and are being disposed of by this
common judgment.
2. Before embarking upon the question involved in these matters, we
may notice the fact of the matter.
3. Punjab National Bank (hereinafter referred to as the ’Bank’) is a
nationalized bank constituted under the Banking Companies (Acquisition
and Transfer of Undertakings) Act, 1970 (1970 Act). While Ramesh
Chandra Sharma (hereinafter referred to as the ’appellant’) was working in
the capacity of a Manager in the Bank’s Latouche Road, Kanpur Branch, a
disciplinary proceeding was drawn against him.
The following charges were levelled against him:
"ARTICLE -I
He acted negligently as also deliberately with
improper motive while granting credit facility to various
borrowers to the detriment of the interest of the Bank and
thereby exposed huge funds of the Bank to jeopardy.
ARTICLE-II
He did not discharge his duties with utmost
integrity by unauthorizedly associating outsiders through
which he affected disbursement of the loan to various
borrowers overlooking the fact that entire proceeds of the
loan has not been received by the borrowers.
ARTICLE-III
He did not ensure to keep limitation alive in
borrowal accounts, thereby exposing Bank’s funds to
jeopardy, as also incurred expenses beyond his vested
financial powers."
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Charge No. I was sub-divided into 24 sub-charges and Charge No. III was
sub-divided into two sub-charges. All these charges were proved. A
disciplinary proceeding was initiated in relation thereto.
4. The Enquiry Officer submitted a report to the Disciplinary Authority.
By an order dated 13.11.1997 the Disciplinary Authority while holding the
appellant guilty of the proved charges decided to impose upon him a major
penalty of dismissal from Bank’s service which shall ordinarily be a
disqualification for future employment in terms of clause 4(j) of Punjab
National Bank Officer Employees (Discipline & Appeals) Regulations,
1977. It was, however, stated that the terminal dues of the respondent would
be settled.
An appeal preferred thereagainst by the appellant was dismissed by
the Appellate Authority by an order dated 21.10.1998.
5. Aggrieved by and dissatisfied therewith the appellant filed a writ
petition before the High Court of Judicature of Allahabad.
One of the contentions in the writ petition was that the appellant
having allowed to superannuate on his reaching the age of superannuation on
31.1.1997, continuation of the disciplinary proceedings was bad in law. The
High Court negatived the said contention. In its judgment, reliance, inter
alia, was placed on a decision of this Court in Disciplinary Authority-cum-
Regional Manager and others vs. Nikunja Bihari Patnaik [1996 (9) SCC
69]. It was held thus:
"We must mention that Shri V.A. Mohta, the
learned counsel for the respondent, stated fairly
before us that it is not possible for him to sustain
the reasoning and approach of the High Court in
this case. His only submission was that having
regard to the age of the respondent (37 years) and
the facts and circumstances of the case, this Court
may substitute the punishment awarded to the
respondent by a lesser punishment. The learned
counsel suggested that any punishment other than
dismissal may be imposed by this Court. We
considered this request with the case it deserves,
but we regret that we are unable to accede to it.
The learned counsel for the Bank, Shri V.R.
Reddy, Additional Solicitor General, also stated,
on instructions of the Bank, that it is not possible
for the Bank to accommodate the respondent in its
service in view of his conduct."
6. Before the High Court, it appears, a copy of a Circular dated 5.3.1999
was placed for the purpose of raising a contention that the order of the
Appellate Authority would be relevant to determine the controversy even if
the same was issued subsequent to the order imposing punishment. The
High Court observed thus :
"In view of the above, it may be desirable
that the matter be remanded to the respondent
authorities to pass an appropriate order setting
aside the impugned orders. However, considering
the fact that the matter is pending since long and in
order to bring the litigation to an end and
considering the gravity of the charges and financial
loss suffered by the Bank, we substitute the order
of dismissal by the order of withholding all retiral
benefits as has been explained in the counter
affidavit. However, no recovery of the loss to the
Bank to the tune of Rs. 1, 14, 87,164.76 shall be
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made from him."
Both the parties, being aggrieved by the impugned judgment of the
High Court, are before us.
7. The questions which, in the facts and circumstances, arise for our
consideration are \026 (i) whether, in terms of the rules governing the terms
and conditions of services of the employees of the Bank, it was permissible
for it to continue the disciplinary proceedings despite the fact that the
respondent attained the age of superannuation; and (ii) whether the High
Court could have, in the facts and circumstances of the case, substituted the
punishment imposed by the Appointing Authority and the Appellate
Authority by its own.
8. Indisputably, Parliament enacted the Banking Companies (Acquisition
and Transfer of Undertaking) Act 1970. Sub-section (2) of Section 19
thereof empowers the Board of Directors of the Bank to make regulations.
In exercise of the said power read with Section 12 of the Act, the Board of
Directors of the Appellant - Bank in consultation with the Reserve Bank of
India and with the previous sanction of the Central Government made
regulations known as the ’Punjab National Bank Employees (Pension)
Regulations, 1995’.
9. Submissions of Mr. Pramit Saxena, learned counsel appearing on
behalf of the appellant, are that:
(i) the appellant having been permitted to retire from service,
continuation of disciplinary proceedings and subsequent
imposition of major punishment i.e. dismissal from service, is bad
in law; and
(ii) in any event, as the Disciplinary Authority clearly directed
payment of the terminal dues and the said order having been
upheld by the Appellate Authority, the High Court committed a
manifest error in passing the impugned judgment.
10. Submissions of Mr. Dhruv Mehta, learned counsel appearing on
behalf of the Bank, on the other hand, are :
(i) that Regulation 20 (3)(iii) of the 1977 Regulations permits
continuation of a disciplinary proceeding in terms whereof a legal
fiction has been created, and hence the disciplinary authority had
the requisite jurisdiction to impose an order of dismissal from
service; and
(ii) that the appellant is not entitled to the retirement benefits in terms
of Regulation 22 of the Pension Regulation which provides for
forfeiture of the entire past service of an employee and subsequent
disqualification for obtaining pensionary benefits, inter alia,
dismissal or removal from service.
(iii) When a punishment of dismissal from service is imposed under a
provision or statute, the delinquent officer loses his or her
pensionary benefits as the same stands forfeited, and does not
suffer from the doctrine of double jeopardy, as has been held in
Union of India and others vs. Subedar Ram Narain and others
[ 1998 (8) SCC 52] .
11. The question as to whether a departmental proceeding can continue
despite the delinquent officer’s reaching the age of superannuation would
depend upon the applicability of the extant rules. It may be true that the
question of imposition of dismissal of the delinquent officer from service
when he has already reached the age of superannuation would not ordinarily
arise. However, as the consequences of such an order is provided for in the
service rule, in our opinion, it would not be correct to contend that
imposition of such a punishment would be wholly impermissible in law.
Nikunja Bihari Patnaik (supra) is an authority for the proposition that
an officer of the bank cannot be allowed to flout the existing rules. In
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Nikunja Bihari Patnaik (supra) this Court held:
"In the case of a Bank - for that matter, in the case of any
otherorganization -every officer/employee is supposed
to act within the limits of his authority. If each officer/
employee is allowed to act beyond his authority, the
discipline of the organisation/bank will disappear; the
functioning of the Bank would become chaotic
and unmanageable. Each officer of the Bank cannot be
allowed to carve out his own little empire wherein he
dispenses favours and largesse. No organization, more
particularly, a Bank can function properly and effectively
if its officers and employees do not observe the
prescribed norms and discipline. Such indiscipline
cannot be condoned on the specious ground that it was
not actuated by ulterior motives or by extraneous
considerations. The very act of acting beyond authority
- that too a course of conduct spread over a sufficiently
long period and involving innumerable instances - is
by itself a misconduct. Such acts, if permitted, may
bring in profit in some cases but they may also lead to
huge losses. Such adventures are not given to the
employees of Banks which deal with public funds. If
what we hear about the reasons for the collapse of
Barings Bank is true, it is attributable to the acts of one
of its employees, Nick Leeson, a minor officer stationed
at Singapore, who was allowed by his superiors to act
far beyond his authority. As mentioned hereinbefore, the
very discipline of an organization and more particularly,
a Bank is dependent upon each of its employees and
officers acting and operating within their allotted sphere.
Acting beyond one’s authority is by itself a breach of
discipline and a breach of Regulation 3. It constitutes
misconduct within the meaning of Regulation 24. No
further proof of loss is really necessary though as a matter
of fact, in this case there are findings that several
advances and over-drawals allowed by the respondent
beyond his authority have become sticky and
irrecoverable. Just because, similar acts have fetched
some profit - huge profit, as the High Court characterizes
it - they are no less blameworthy. It is wrong to
characterize them as errors of judgment."
12. In this case also, the punishment of dismissal from service was
upheld.
The question, we may notice, came up for consideration before this
Court in State of U.P. vs. Bhram Datt Sharma [AIR 1987 SC 943], wherein
this Court while interpreting Regulation 470 of the Civil Services
Regulations in State of U.P. vs. Harihar Bhole Nath \026 2006 (11) SCALE
322, held as under:
"A plain reading of the regulation indicates
that full pension is not awarded as a matter of
course to a Govt. servant on his retirement instead,
it is awarded to him if his satisfactory service is
approved. If the service of a Govt. servant has not
been thoroughly satisfactory the authority
competent to sanction the pension is empowered to
make such reduction in the amount of pension as it
may think proper. Proviso to the regulation lays
down that no order regarding reduction in the
amount of pension shall be made without the
approval of the appointing authority. Though the
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Regulations do not expressly provide for affording
opportunity to the Govt. servant before order for
the reduction in the pension is issued, but the
principles of natural justice ordain that opportunity
of hearing must be afforded to the Govt. servant
before any order is passed. Article 311(2) is not
attracted, nonetheless the Govt. servant is entitled
to opportunity of hearing as the order of reduction
in pension affects his right to receive full pension.
It is no more in dispute that pension is not bounty;
instead it is a right to property earned by the Govt.
servant on his rendering satisfactory service to the
State."
The question, thus, as to whether continuation of a disciplinary proceeding
would be permissible or the employer will have to take recourse only to the
pension rules, in our opinion, would depend upon the terms and conditions
of the services of the employee and the power of the disciplinary authority
conferred by reason of a statute or statutory rules.
We have noticed hereinbefore that the Bank have made Regulations
which are statutory in nature. Regulation 20(3)(iii) of the said Regulations
reads thus:
"20 (3)(iii). The officer against whom
disciplinary proceedings have been initiated will
cease to be in service on the date of
superannuation but the disciplinary proceedings
will continue as if he was in service until the
proceedings are concluded and final order is
passed in respect thereof. The concerned officer
will not receive any pay and /or allowance after the
date of superannuation. He will also not be
entitled for the payment of retirement benefits till
the proceedings are completed and final order is
passed thereon except his own contribution to
CPF."
The said Regulation clearly envisages continuation of a disciplinary
proceeding despite the officer ceasing to be in service on the date of
superannuation. For the said purpose a legal fiction has been created
providing that the delinquent officer would be deemed to be in service until
the proceedings are concluded and final order is passed thereon. The said
Regulation being statutory in nature should be given full effect.
13. The effect of a legal fiction is well-known. When a legal fiction is
created under a statute, it must be given its full effect, as has been observed
in East End Dwellings Co. Ltd. vs. Finsbury Borough Council [1951 (2) All
E.R. 587] as under:
"If you are bidden to treat an imaginary state
of affairs as real, you must surely, unless
prohibited from doing so, also imagine as real the
consequences and incidents which, if the putative
state of affairs had in fact existed, must inevitably
have from or accompanied it. One of these in this
case is emancipation from the 1939 level of rents.
The statute says that you must imagine a certain
state of affairs; it does not say that having done so,
you must cause or permit your imagination to
boggle when it comes to the inevitable corollaries
of that state of affairs."
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14. The issue is, thus, no longer res integra, which as would be evident
from the ratio laid down by this Court from time to time.
In State Bank of India vs. C.B. Dhall [1998(2) SCC 544], it is held as
under:
"Under Rule 20-B disciplinary proceedings
if initiated against an employee before he retires
from service could be continued and concluded
even after his retirement and for the purpose of
conclusion of the disciplinary proceedings, the
employee is deemed to have continued in service
but for no other purpose."
In Harihar Bhole Nath (supra) upon considering Regulations 351-A
and 470 of the Civil Services Regulations, this Court following Bhram Datt
Sharma (supra) opined as under:
"The right to withhold or withdraw the
pension may arise in different situations. Two
different contingencies are clearly envisaged under
the Regulations, viz., if the pensioner is found
guilty of misconduct either in departmental
proceedings or in judicial proceedings. Although,
prima facie, the proviso appended to Regulation
351-A does not envisage continuation of the
proceedings, the same must be held to be existing
on a plain reading thereof. Regulations 351-A and
470 provide for a composite scheme; by
emphasizing that payment of pension is not
automatic and it can be withheld if the conditions
laid down therein are satisfied. Undoubtedly,
before an order of withholding the amount of
pension or a part thereof it is passed, the
procedures laid down under the statute are required
to be complied with. The procedural safeguards
must be kept in mind. Limitations of application
of the Rules again have to be borne in mind.
But the said Rules read with the Proviso and
the Explanation appended thereto construed in
their entirety clearly postulate that the proceeding
initiated before the delinquent officer reached his
age of superannuation would be valid."
This Court therein distinguished this decision in State of U.P.& Anr.
vs. Shri Krishna Pandey [AIR 1996 SC 1656], Bhagirathi Jena vs. Board of
Directors O.S.F.C & Ors.[1999(3) SCC 666] in the following terms:
"The High Court has placed strong reliance
on State of U.P. & Anr. vs. Shri Krishna Pandey
[AIR 1996 SC 1656], wherein the departmental
enquiry was initiated after the delinquent officer
reached his age of superannuation. Noticing Rule
351-A of the Civil Services Rules and that the
departmental proceeding was initiated after the
retirement of the employee, the same was held to
be impermissible in law. Although it was not
necessary to pronounce upon the construction of
Rule 351-A involving a case where a departmental
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proceeding was initiated prior to reaching of the
age of superannuation by the delinquent officer, it
was observed that as the officer had retired on 31st
March, 1987 and proceedings were initiated
against him on 12th April, 1991, proviso appended
to the Rule would be applicable.
Reliance has also been placed on Bhagirathi
Jena vs. Board of Directors, O.S.F.C. & Ors. [1999
(3) SCC 666], wherein this Court was concerned
with interpretation of Regulation 17 of the Orissa
State Financial Corporation Employees’ Provident
Fund Regulations, 1959".
To the same vein is the decision of this Court in State of U.P. & Ors. vs.
R.C. Misra [2007(4) SCALE 595].
We are, therefore, of the opinion that it was permissible for the Bank
to continue with the disciplinary proceedings relying on or on the basis of
Regulation 20(3)(iii) of the Punjab National Bank (Officers’) Service
Regulations, 1979.
15. It is true that the Disciplinary Authority in its order while imposing
punishment observed that the terminal dues of the appellant were to be
settled. It was merely an observation to take case of a contingency which
might arise. No positive direction was issued in that behalf and, thus, no
legal right thereby was created in favour of the appellant to obtain the retiral
benefits. What it meant thereby was that the law would take its own course.
16. We may also at this juncture notice the relevant provisions of the
Punjab National Bank Employees’(Pensions) Regulations, 1995. Regulation
22 of the said Regulation reads as under:
"22 (i)- Resignation or dismissal or removal
or termination of an employee from the services of
the Bank shall entail forfeiture of his entire past
service and consequently shall not qualify for
pensionary benefits."
Indisputably as a consequence of the order imposing the punishment
of dismissal from service the appellant would not have qualified for the
pensionary benefits. Our attention, however, has been drawn by Mr. Saxena
to Regulations 43 and 48 to contend that even for the purpose of withholding
pension, a specific order in that behalf by a competent authority was
required to be passed. Pension Regulation is meant to be applicable where
pension is required to be paid. It also provides for recovery of pecuniary
loss caused to the Bank from the pensionary benefits of the employee.
Regulations 43 and 48 of the Pension Regulation are as under:
"43. Withholding or withdrawal of pension. \026
The Competent Authority may, by order in
writing, withhold or withdraw a pension or a part
thereof, whether permanently or for a specified
period, if the pensioner is convicted of a serious
crime or criminal breach of trust or forgery of
acting fraudulently or is found guilty of grave
misconduct.
Provided that where a part of pension is
withheld or withdrawn, the amount of such
pension shall not be reduced below the minimum
pension per mensem payable under these
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regulations."
"48. Recovery of Pecuniary loss caused to the
Bank \026 (1) The Competent Authority may
withhold or withdraw a pension or a part thereof,
whether permanently or for a specified period and
order recovery from pension of the whole or part
of any pecuniary loss caused to the Bank if in any
departmental or judicial proceedings the pensioner
is found guilty of grave misconduct or negligence
or criminal breach of trust or forgery or acts done
fraudulently during the period of his service:
Provided that the Board shall be consulted before
any final orders are passed;
Provided further that departmental proceedings, if
instituted while the employee was in service, shall,
after the retirement of the employee, be deemed to
be proceedings under these regulations and shall
be continued and concluded by the authority by
which they were commenced in the same manner
as if the employee had continued in service;
(2) No departmental proceedings, if not instituted
while the employee was in service, shall be
instituted in respect of an event which took place
more than four years before such institution:
Provided that the disciplinary proceedings so
instituted shall be in accordance with the
procedure applicable to disciplinary proceedings in
relation to the employee during the period of his
service.
(3) Where the Competent Authority orders
recovery of pecuniary loss from the pension, the
recovery shall not ordinarily be made at a rate
exceeding one-third of the pension admissible on
the date of retirement of the employee:
Provided that where a part of pension is withheld
or withdrawn, the amount of pension drawn by a
pensioner shall not be less than the minimum
pension payable under these regulations."
17. Where a proceeding is initiated for withholding or withdrawal of
pension, Regulation 43 of the Pension Regulations would be attracted. But
provisions of the said Regulation if read in its entirety clearly go to show
that an officer would not qualify for pensinary benefits, if inter alia, he is
dismissed from services.
Regulation 48 empowers the Bank to recover pecuniary loss caused to
it from the pensionary benefits. Regulation 20(3)(iii) of the Discipline and
Appeal Regulations must be read in conjunction with the Pension
Regulations. Where the employees are pension optees, Regulation 48(1)
shall apply. In any event, if an officer is removed or dismissed from service
under Regulation 4 of the (Discipline & Appeal) Regulations, the Bank need
not take recourse to Regulation 48 of the Pension Regulations as Regulation
22 thereof would be attracted.
We are, therefore, of the opinion that the High Court committed a
manifest error in passing the impugned judgment.
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18. Moreover, it now a trite law that ordinarily the High Court should not
interfere with the quantum of punishment imposed by the Disciplinary
Authority. [See U.P.S.R.T.C. v. Ram Kishan Arora, 2007 (6) SCALE 721]
It has not been found by the High Court that the punishment imposed upon
the appellant was impermissible in law or wholly disproportionate to the
misconduct found to have been committed by the delinquent officer.
19. Our attention has been drawn to a decision of this Court in S.P.
Badrinath vs. Govt. of A.P. and others [2003(8) SCC 1]. This decision
has no application in this case, as we have noticed in the present case that
the acts of misconduct proved against the appellant were of grave nature.
20. The High Court itself has noticed a large number of decisions and
formed the opinion that the charges levelled against the delinquent officer
were of grave nature. A major punishment may be inflicted even where no
pecuniary loss was caused to the Bank by reason of the act of the delinquent
officer. In support of the aforementioned proposition of law, the High Court
opined:
"The charges leveled against the petitioner, which
were found proved upon enquiry, are quite serious
in nature. The petitioner had engaged himself in
reckless lending causing huge financial loss to the
Bank to the extent of Rs. 1,14,87,164.76. It also
shows that the petitioner had disbursed loan
through middlemen and demanded and received
illegal gratification from a borrower. We are of the
considered opinion that in such cases, the officers
of the Bank should not be permitted to continue in
service at all.
Once the employer has lost the confidence
in the employee and the bona fide loss of
confidence is affirmed, the order of punishment
must be considered to be immune from challenge,
for the reason that discharging the office of trust
and confidence requires absolute integrity. A
necessary implication which must be engrafted on
the contract of service is that the servant must
undertake to serve his master with good faith and
fidelity. In a case of loss of confidence,
reinstatement cannot be directed. Granting such an
employee the relief of reinstatement would be "an
act of misplaced sympathy which can find no
foundation in law or in equity." (Vide Air India
Corporation Bombay Vs. V.A. Ravellow, AIR
1972 SC 1343; The Binny Ltd. Vs. Their
Workmen, AIR 1973 SC 1403; Kamal Kishore
Lakshman Vs. Management of M/s. Pan American
World Airways Inc & Ors., AIR 1987 SC 229;
Francis Kalein & Co. Pvt. Ltd. Vs. Their
Workmen, AIR 1971 SC 2414; Regional Manager,
Rajasthan SRTC Vs. Sohan Lal, (2004) 8 SCC
218; and Bharat Heavy Electricals Ltd. Vs. M.
Chandrashekhar Reddy & Ors., 2005 AIR SCW
1232).
In Kanhaiyalal Agrawal & Ors. Vs. Factory
Manager, Gwaliar Sugar Co. Ltd., (2001) 9 SCC
609, the Hon’ble Supreme Court laid down the test
for loss of confidence to find out as to whether
there was bona fide loss of confidence in the
employee, observing that, (i) the workman is
holding the position of trust and confidence; (ii) by
abusing such position, he commits act which
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results in forfeiting the same; and (iii) to continue
him in service/establishment would be
embarrassing and inconvenient to the employer, or
would be detrimental to the discipline or security
of the establishment. Loss of confidence cannot be
subjective, based upon the mind of the
management. Objective facts which would lead to
a definite inference of apprehension in the mind of
the management, regarding trustworthiness or
reliability of the employee, must be alleged and
proved."
Reliance in this regard has also been placed by the High Court on the
decision of State Bank of India vs. Bela Bagchi [AIR 2005 SC 3272].
21. The High Court, however, in our opinion, posed unto itself a wrong
question of law that despite applicability of Regulation 20(3)(iii) of the
Punjab National Bank Officer Employees’ (Discipline and Appeal)
Regulations, 1977, the Bank exceeded its jurisdiction in continuing the
disciplinary proceedings after 31.1.1997 on which date the appellant reached
the age of superannuation.
22. For the reasons aforementioned, the appeal preferred by the appellant
must be dismissed and the one preferred by the Bank must be allowed.
Resultantly, Civil Appeal No. 971 of 2007 is dismissed and Civil Appeal
No. 975 of 2007 is allowed. However, in the facts and circumstances of the
case, there shall be no order as to costs.