Pay reduction penalties remain valid post-superannuation in disciplinary proceedings initiated during the employee’s service.

The appellant, an officer of the Punjab and Sind Bank, was served a charge sheet on 30.09.2011 regarding irregularities in loan disbursements

On the same day, the appellant superannuated from service

Despite his retirement, the bank continued disciplinary proceedings under the Punjab and Sind Bank Officers’ Service Regulations, 1982.

On 15.06.2013, the Disciplinary Authority found Charge No. 2 (failure to ensure end-use of loan) partly proved and imposed a punishment of reduction by three stages in the time scale of pay on a permanent basis

The Appellate Authority upheld this on 19.04.2014

A Single Judge of the High Court set aside the punishment, holding that only penalties under the Pension Regulations, 1995, could be imposed post-retirement

However, the Division Bench reversed this decision, ruling that Service Regulations permitted the continuation and conclusion of proceedings initiated prior to retirement

1. Whether, post-retirement, the punishment of reduction of three stages in the scale of pay was permissible under the Service Regulations, or if action was restricted to the Pension Regulations.

2. Whether there was any perversity or infirmity in the inquiry report and disciplinary orders, and whether such grounds could be raised if not pressed before the High Court.

Regulation 20(3)(iii) of the Punjab and Sind Bank Officers’ Service Regulations, 1982, which creates a legal fiction that an officer against whom proceedings were initiated prior to superannuation remains in service until the proceedings are concluded

Chairman-Cum-Managing Director, Mahanadi Coalfields Limited v. Rabindranath Choubey (2020) 18 SCC 71, which established that disciplinary proceedings initiated during service can be brought to a logical conclusion, including the imposition of major penalties like dismissal, post-retirement

Ramesh Chandra Sharma v. Punjab National Bank (2007) 9 SCC 15, confirming that statutory service regulations and pension regulations must be read in conjunction to give effect to the legal fiction of continued service

The Court first addressed the merits, noting that the appellant failed to challenge the factual finding that huge cash withdrawals were permitted without supporting bills, which evidenced a failure to ensure the "end-use" of the loan

The Court emphasized that bank officers hold positions of trust, and any financial irregularity—even without proof of actual loss—constitutes serious misconduct

Regarding the legality of the punishment, the Court held that Regulation 20(3)(iii) provides a clear mandate for proceedings to continue as if the officer were still in service

While the appellant argued that only the Pension Regulations (allowing for withholding/recovery of pension) applied, the Court reasoned that since pension is computed based on the "salary last drawn or payable," a punishment reducing the pay scale "relates back" to the date of superannuation and is practically implementable

The Court distinguished Prabhakar Sadashiv Karvade on the grounds that in that case, the charge sheet was served after retirement, whereas here, the proceedings were initiated during service

It held that disciplinary proceedings initiated prior to retirement can be concluded post-superannuation under the Service Regulations due to the legal fiction of continued service

The Court specifically ruled that the punishment of reduction in pay scale is permissible and implementable post-retirement as it directly affects the computation of the appellant's pensionary benefits

No perversity was found in the inquiry report, and the punishment was held not to be shockingly disproportionate