Full Judgment Text
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PETITIONER:
STATE BANK OF INDIA & OTHERS.
Vs.
RESPONDENT:
T.J. PAUL
DATE OF JUDGMENT: 04/05/1999
BENCH:
M. Jagannadha Rao. & S.N. Phukan,
JUDGMENT:
M.JAGANNADHA RAO,J.
Leave granted.
This appeal is preferred by the State Bank of India,
Bombay, its Deputy Managing Director(Appellate Authority),
Bombay and the Chief General Manager(Disciplinary
Authority), Madras against the judgment of the Division
Bench of the Madras High Court in W.A. No.490 of 1998. By
that judgment, the Division Bench confirmed the judgment of
the learned Single Judge in O.P. No.10222 of 1991 dated
7.1.1998.
The brief facts of the case are as follows:
The respondent joined service in the Bank of Cochin (the
Bank has since been amalgamated with the State Bank of India
w.e.f. 27.4.85) on 1.11.1996 and was promoted as an officer
and then as Manager of the Madras Branch of the Bank of
Cochin. The disciplinary action initiated against him
related to 1977-1981 when he was working as Manager at
Madras. On 25.8.81, he was transferred to Calcutta. He
received letters of commendation dated 10.3.83 and 16.4.84
and his Branch at Calcutta stood at No.1 in the matter of
mobilisation of advances. It appears that some advances
given by him while working as Manager at Madras during
1977-1981 could not be recovered and hence on 4.2.84, he was
reposted at Madras for the purpose of recovering the
advances. The respondent made substantial recoveries after
his reposting in Madras but he was suspended on 13.7.1984
and served with a charge sheet on 18.9.1984 stating that he
had given advances unauthorisedly without discretionary
power/prior permission /observing lending norms and that his
actions amounted to ‘serious misconduct’ which involved
financial loss and violation of Head Office prescriptions
with vested interest and causing wilful damage to the
interests and affairs of the Bank. The respondent denied
the charges in his reply dated 20.10.1984. A domestic
inquiry was held by appointing an Advocate as Inquiry
Officer. The respondent submitted his final explanation on
15.5.1985. On 3.8.1985 the Inquiry Officer submitted his
report. He held that the allegations under "items
1,5,7,8,9(A/c No. 20/79, 50/80, 62/80, 63/80, 64/80, 2/81,
37/81; 10,11,12(a,b), 13,14 (A/c 99, 137, 168, 183, 299,
405 & S. Item Nos. 554 & 518); 15,16,17(b), 18, 19, 20,
21, 22, 23 (a,b,g,i,k,m), 24 & 25(9)" were not proved. He
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further said that so far as the remaining items
2,3,4,6,9(A/c 18/81, MTL 1/80), 12,14(A/c 123, 199, 397 &
432), 17(a), 23(c,d,e,f,h,j,l,n) were concerned, the main
irregularity found was that there was no proper sanction or
ratification from the Head Office. (Item 25 is a summary of
the items).
He accepted by referring to the evidence of AW1 and AW2
(Inspectors of Branches) that there was a practice, in
certain Branches, of giving advances without sanction from
the Head Office (as seen from Exhibits B6, B10 to B15 of
Head Office) and in such cases subsequent ratification was
granted to such advances given without sanction. He stated
that Exhibits B18 to B22 were the letters of appreciation
received by the respondent from the Department to the effect
that his performance was ‘best’. He found, in favour of the
officer and in rejection of the language employed in the
charge- memo as follows:
"In the circumstances, no reasonable man
would be able to conclude that, in
connection with the said transactions,
Sri Paul acted with vested interest and
with the intention of causing wilful
damage and financial loss to the Bank.
He might have allowed the said
transactions with the good intention of
developing the business of the Bank and
also with a bonafide belief that the said
transactions would be ratified by the
Head Office in the normal course."
To the above extent, the finding is in favour of the
respondent.
He further concluded in favour of the respondent as
follows:
"My conclusion is that, in the light of
the evidence adduced before me, it would
be wrong to allege that Sri Paul had any
intention to cause wilful damage or
financial loss to the Bank as regards the
said transactions."
Having held in favour of the respondent as stated above,
the Inquiry Officer however gave a finding of gross
negligence against the respondent in the matter of not
obtaining sufficient securities, as follows:
"As regards the transactions mentioned as
items 23(d,f,h,j,n) in Ext. A3, it has
been stated that Sri Paul has failed to
take sufficient security for the said
transactions. In this regard, there is
gross negligence on the part of Sri Paul
and he has acted in violation of the Head
Office instructions."
He then referred to item 25 which related to 19 advances
(the 9th party was given loan not during the tenure of the
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respondent) and said that Mr.Paul was transferred from
Calcutta to Madras in February 1984 to enable him to recover
the advances he had given earlier during 1977-1981 and that
if he were not suspended in July 1984, he would have
recovered ‘substantial’ amounts. The Inquiry Officer in
that connection observed as follows:
"If Sri Paul had not been suspended
abruptly, he would have been able to
persuade the parties concerned to remit
more amounts. After having deprived(him)
of such an opportunity, it would be
unjust to throw the entire blame on Sri
Paul as regards the outstandings in
question."
On these findings, the Disciplinary authority issued a
second notice on 22.1.1986 proposing ‘dismissal without
notice’. The said letter stated that the Inquiry Officer
had held charges 23(d,f,h,g,n) proved and held him guilty of
‘gross negligence’ and also guilty of ‘violation of the Head
office instructions’. The disciplinary authority then said
that having regard to the report, evidence and defences and
the gravity of charges proved, and the fact that his actions
had jeopardised the Bank’s interests, he was proposing to
impose the punishment of ‘dismissal without notice. The
respondent submitted his reply to the above proposal on
18.2.1986. Thereafter, the disciplinary authority passed
orders of ‘dismissal from service without notice’on
20.3.1986.
The appellate authority modified the said order on
30.7.87 from dismissal without notice to removal. It is
necessary to refer to it in some detail. The appellate
authority initially observed:
"Though, allegations of malafides,
corrupt practices etc. were absent in the
charge sheet served on the appelant...."
He, however, stated that the respondent had exceeded his
powers while sanctioning advances and acted without
restraint thereby jeopardising the Bank’s interest. He did
not obtain prior approval/sanction/ratification of Head
office. The unauthorised advances were upto Rs.44.71 lakhs
and resulted in substantial loss of Rs.16 lakhs. The
appellate authority then accepted the practice of
instructions of Head Office as follows:
"It may be true that the Managers of the
Bank of Cochin branches were given oral
orders/instructions for disbursement of
loans by the Head Office functionaries."
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but observed that such advances sanctioned under oral
orders/instructions should be got ratified/approved and
failure to do so could be cause of disciplinary action. It
was observed that the respondent could not rely on the
practice in Bank of Cochin. He had acted against the Head
Office instructions. The absence of seeking sanction raised
‘doubts on his plea of bonafide action’. The appellate
authority admitted that the respondent was posted back at
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Madras for effecting recoveries. He also referred to an
order of a lesser punishment passed by the then Chairman,
Bank of Cochin(reduction in rank) which was not communicated
to the officer. This was not given effect to by the Bank of
Cochin as the Bank came under moratorium and the order had
no validity. He said that no doubt, the respondent had
received certificates of appreciation earlier for his good
work, but these letters would not mitigate the magnitude of
the lapses because the evidence proved ‘gross negligence and
actions in violation of Head Office instructions’. The
appellate authority observed:
"It may be true that in the interests of
giving speedy financial assistance to
important and deserving borrowers, the
Managers in Bank of Cochin were sometimes
given oral instructions by Head Office
functionaries."
but this will not help in view of Bank’s instructions dated
11.4.1978 against such loans for which ratification was not
obtained. Nor was there proof of oral instructions. As the
officer was one whose ‘integrity’ was not in doubt and he
was relatively young, it was a fit case for modifying the
order of ‘dismissal’ into one of ‘removal from service’ in
terms of Rule 49(g) of State Bank of India (Supervisory
Staff) Rules. Removal was to take effect from date of
dismissal.
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The above orders were questioned in writ petition. The
learned Single Judge while allowing the writ petition held
that the finding of the inquiry officer on item 23 was that
no financial loss was proved and if it was a case of not
taking adequate ‘security’ from the loaners and in not
obtaining ratification as per Head office instructions,
these charges were not sufficient - in view of Rule
22(vi)(c) and (d) read with sub- rule (vii) - for imposing a
penalty of dismissal or removal. Only a minor penalty could
be imposed. As per inquiry Officer’s report there was no
actual loss caused by reason of any act of the employee
wilfully done. There was no evidence of financial loss
adduced before the Inquiry Officer. The finding that the
respondent jeopardised Bank’s interest was based on no
evidence. Penalty must have been only for minor misconduct.
The SBI Rules were not applicable since misconduct alleged
related to the period of service in the Bank of Cochin. The
learned Judge observed that ‘punishment of removal’ could
not have been imposed as it was not one of the enumerated
punishments under Bank of Cochin Rules.
The writ petition was allowed, the impugned order was
quashed. It was, however, observed that the Bank could
impose punishment for minor misconduct as per Rules of Bank
of Cochin. The Writ Appeal preferred by the State Bank of
India was dismissed for the same reasons and the respondent
was directed to be reinstated with backwages, promotion and
all other monetary benefits like salary, increments, etc.
The Bank could impose penalty for minor misconduct.
It is against this judgment that this appeal has been
preferred by the State Bank of India. In this appeal we
have heard the submissions of learned senior counsel for the
Bank, Sri T.R. Andhyarujina and of learned senior counsel
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for the respondent, Sri P.P. Rao.
We shall first refer to the Rules which are applicable
to the facts of the case and regarding the applicability of
which there is no dispute. These are contained in the Bank
of Cochin Service Code. Chapter VII deals with Discipline
and Disciplinary action. Para 22 (iv) defines ‘gross-
misconduct’. We shall refer to the relevant sub- clauses
(h) and (l). They read as follows:
"Para 22(iv): By the expression ‘gross
misconduct’ shall be meant any of the
following acts and of omission on the
part of an employee:
(a) to (g)...............................
(h) wilful insubordination or
disobedience of any lawful and reasonable
order ofthe Management/or of a superior
(i) to (k)..............................
(l) doing any act prejudicial to the
interests of the bank, or gross
negligence or negligence involving or
likely to involve the Bank in serious
loss."
As to the punishments for ‘gross misconduct’, they are
enumerated in para 22(v) and read as follows:
"Para 22(v): an employee found guilty of
gross misconduct may:
(a) be dismissed without notice, or
(b) be warned or censured, or have an
adverse remark entered against him, or
(c) be fined, or
(d) have his increment stopped/basic
pay reduced, or
(e) have his misconduct condoned and be
merely discharged from service."
It is also necessary to refer to the definition of
‘minor misconduct’ in para 22(vi) and the punishments
therefor in para (vii). They read as follows to the extent
relevant for the case.
"Para 22(vi): In the expression9n ‘minor
misconduct’ shall be meant any of the
following acts and omissions on the part
of an employee:
(a) ...................................
(b) ...................................
(c) neglect of work, negligence in
performing duties;
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(d) breach of any rule of business of
the Bank or instruction for running of
any department;
(e) to (j) ..............................
(k) the employee, especially an
officer, acting on oral or telephonic
instructions from the Chief Executive
Officer or other officers should get the
same confirmed in writing the same day or
the day next. The employee will be
estopped from making the plea of oral
instructions for his acts which have not
been confirmed.
(l) every employee shall be deemed to
have the knowledge of all the rules,
regulations, direction, and instructions
issued by the bank from time to time, for
transacting any business of the bank, and
for administration of the bank, and in
particular he shall be deemed to have
complete knowledge of the memorandum of
Instructions of the bank and all
amendments thereto issued from time to
time, the usual safeguard and precautions
to be taken with regard to bank’s advance
and custody of securities, rules of
documentation and maintenance of
customers accounts etc. and shall
strictly confirm to and abide by such
rules, regulations, procedure,
directions, and instructions including
the provisions of this Code.
(m) ...................................
(n) ................................"
Para 22(vii) enumerates the punishments for minor
misconduct as follows:
"Para 22(vii): An employee found guilty
of minor misconduct may:
(a) be warned or censured; or
(b) have an adverse remark entered
against him; or
(c) have his increment stopped for a
period not longer than six months; or
(d) have his misconduct condoned."
It will, in our opinion, be sufficient to consider the
case in the light of the order of the appellate authority
but at the same time keeping the observations of the Inquiry
Officer and the Disciplinary authority in mind.
The appellate authority held that ‘allegations of
malafides, corrupt practices etc. were absent but that the
respondent "exceeded his powers while sanctioning advances
and acted without restraint thereby jeopardising the Bank’s
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interest, that even if oral instructions were given they
should be got ratified. Hence respondent could not rely on
the practice in Bank of Cochin. The absence of seeking
sanction raised a doubt about his bonafides. His actions
were contrary to Bank’s instructions dated 11.4.1978. There
was no proof of oral instructions of Head Office. The
Officer did not obtain prior approval/sanction/ratification
of the Head office. The unauthorised advances upto Rs.44.7
lakhs resulted in substantial loss upto Rs.16 lakhs. The
good certificates obtained did not mitigate the magnitude of
the lapses and the evidence proved ‘grossed negligence and
actions in violation of Head office instructions’. But the
respondent’s integrity was not in doubt.
Learned senior counsel for the appellant, Sri
T.R.Andhyarujina contended that proof of serious loss is not
necessary and likelihood of loss is sufficient and this
aspect was ignored by the High Court.
On the other hand, learned senior counsel for respondent
Sri P.P.Rao contended that the inquiry officer did not give
any finding of serious financial loss.
Taking up the definition of ‘gross misconduct’ in para
22(iv), it is obvious that clause (h) does not apply because
the charge is not one of insubordination or disobedience of
specific orders of any superior officer. Coming to clause
(l) of para 22(iv), the doing of any act prejudicial to the
interests of the bank, or gross negligence or negligence
involving or likely to involve the Bank in serious loss is
gross misconduct. In other words likelihood of serious loss
coupled with negligence is sufficient to bring the case
within gross misconduct. The Inquiry Officer’s finding of
‘gross misconduct’ on the ground of not obtaining adequate
security is, therefore, correct and cannot be said to be
based on no evidence as held by the High Court. This can be
contrasted with para 22(vi)(c) under minor misconduct which
deals with ‘neglect of work and negligence in performing of
duties’. In our view, the contention of the learned senior
counsel for the appellants Sri T.R.Andhyarujina is,
therefore, entitled to be accepted.
The contention of the learned senior counsel for the
respondent ignores the fact that ‘gross negligence or
negligence likely to involve the Bank in serious loss’ would
come under major misconduct within para 22(iv)(l). As
stated above, even assuming that there is no gross
negligence, simple negligence will come under major
misconduct if accompanied by ‘likelihood’ of serious loss
and this is clear from para 22(iv)(l). Hence the finding of
the Inquiry Officer regarding gross misconduct is correct
and could not have been set aside by the High Court. The
findings of the Inquiry Officer clearly bring the case under
‘major misconduct’. As held in Disciplinary Authority-
cum-Regional Manager vs. Nikunja Bihari Patnaik [1996 (9)
SCC 69], proof of loss is not necessary.
We are, therefore, of the view that the High Court was
not correct in holding that the findings of the Inquiry
Officer or of the disciplinary or appellate authorities did
not justify a finding of ‘major misconduct’ on the basis of
para 22(iv)(a)(l).
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But this does not conclude the matter. The learned
senior counsel for the respondent Sri P.P. Rao is right in
contending that the appellate authority, once it came to the
conclusion that the punishment of dismissal was not
warranted in the facts of the case, it could not have
awarded the punishment of ‘removal’ which was not one of the
enumerated penalties under para 22(v) of the Rules. In
fact, the learned Single Judge also adverted to this aspect.
If one reads the order of the appellate authority, it is
clear that the said authority went by Rule 49(g) of the
State Bank of India (Supervising Staff) Service Rules which
admittedly, is not applicable to charges pertaining to the
period 1977-1981 when the Rules of Cochin Bank applied. The
amalgamation of the Bank of Cochin with the State Bank of
India took place only on 27.4.85. It may be that the Rules
of the State Bank of India provided for a punishment of
removal, but in the Rules relating to penalties for ‘major
misconduct’ in para 22(v) of the Rules applicable to the
employees of the Bank of Cochin, removal is not one of the
enumerated punishments which could be imposed. The said
punishment is not the same thing as "condoning misconduct
and merely discharging from service" as provided in para
22(v)(e) of the said Rules.
Learned senior counsel for the appellants Sri
T.R.Andhyarujina tried to submit that if the appellate
authority decided not to dismiss the respondent, it still
had inherent power to award a punishment of ‘removal’, which
was lesser in severity. Learned senior counsel contended
that the discretion of the authorities to award such an
appropriate punishment could not be interfered with in view
of the decision of this court in Union of India vs.
Ganayutham [1997 (7) SCC 463]. In our view, this decision
is not applicable to the facts of the case. Here the Court
is not interfering with the punishment awarded by the
employer on the ground that in the opinion of the Court the
punishment awarded is disproportionate to the gravity of the
misconduct. Here, the gradation of the punishments has been
fixed by the rules themselves, namely, the Rules of the Bank
of Cochin and the Court is merely insisting that the
authority is confined to the limits of its discretion as
restricted by the Rules. Inasmuch as the Rules of the Bank
of Cochin have enumerated and listed out the punishments for
‘major misconduct’, we are of the view that the punishment
of ‘removal’ could not have been imposed by the appellate
authority and all that was permissible for the Bank was to
confine itself to one or the other punishments for major
misconduct enumerated in para 22(v) of the rules, other than
dismissal without notice. This conclusion of ours also
requires the setting aside of the punishment of ‘removal’
that was awarded by the appellate authority. Now the other
punishments enumerated under para 22(v) are ‘warning or
censure or adverse remark being entered; or fine; or
stoppage of increments/reduction of basic pay or to condone
the misconduct and merely discharge from service. The
setting aside of the removal by the High Court and the
relief of consequential benefits is thus sustained. The
matter has, therefore, to go back to the appellate authority
for considering imposition of one of the other punishment in
para 22(v) other than dismissal without notice.
In the result the setting aside of the order of
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‘removal’ as done by the High Court is sustained and the
directions to pay him the backwages, grant such promotions
and monetary benefits by way of salary, promotion,
increments, etc. as granted by the High Court will also
remain. There will, however, be a modification of the
orders of the learned Single Judge and of the Division Bench
to the extent, namely, that the matter will go back to the
appellate authority for considering which of the punishments
other than ‘dismissal without notice’ under para 22(v) could
be imposed on the respondent. We direct accordingly. The
benefits above referred to as directed by the High Court
shall be computed and paid to the respondent in accordance
with the relevant rules within 3 months from the date of
receipt of a copy of this order.
The appeal is partly allowed to the extent indicated
above. There will be no order as to costs.