Penalty enhancement and recovery cannot be imposed suo motu without statutory authority and reasoned consideration.

The petitioner, an Officer in MMGS-II of the erstwhile Sri Satavahana Grameena Bank, was served with a charge-sheet dated 08.05.2000 alleging service irregularities.

Following a departmental enquiry, the disciplinary authority imposed the penalty of reduction of increment for three years without cumulative effect by order dated 08.06.2005.

Thereafter, the Bank’s Board of Directors suo motu reconsidered the matter and, pursuant to its resolution dated 07.12.2005, issued proceedings dated 13.12.2005 proposing recovery of ₹10.78 lakhs from the petitioner’s salary.

The petitioner submitted an explanation on 21.12.2005, but the respondents allegedly commenced monthly recovery of ₹2,480 without passing an order considering that explanation.

Whether the Board of Directors could suo motu enhance the punishment imposed by the disciplinary authority and direct recovery of ₹10.78 lakhs in the absence of a demonstrated statutory or regulatory provision conferring such power?

Whether the respondents could commence recovery without considering the petitioner’s explanation and passing a reasoned and speaking order?

Whether the impugned recovery amounted to an impermissible second or enhanced punishment after the disciplinary proceedings had concluded?

The Court held that the power to impose or enhance a disciplinary penalty must arise from the applicable statute or service regulations and must be exercised in the prescribed manner.

Relying on D. Subhash Chandra Bose Babu v. Andhra Pradesh State Electricity Board, 1995 SCC OnLine AP 738, and Makeshwar Nath Srivastava v. State of Bihar, (1971) 1 SCC 662, the Court applied the principle that an appellate or revisional authority cannot, absent enabling authority, place an employee in a worse position by imposing a higher penalty.

The Court also applied the rule that a statutory authority must act within the four corners of the governing law and in the manner prescribed by it, as recognised in Bhavnagar University v. Palitana Sugar Mill (P) Ltd., (2003) 2 SCC 111.

Further, relying on the principles of reasoned decision-making and judicial review reflected in Chandra Singh v. State of Rajasthan, (2003) 6 SCC 545, the Court held that the authority had to independently consider the employee’s defence and record cogent reasons; reasons could not be supplied subsequently through affidavits.

The disciplinary proceedings had already culminated in the penalty imposed on 08.06.2005. The Board thereafter reopened the matter suo motu and proposed a substantially more onerous consequence—recovery of ₹10.78 lakhs—without placing before the Court any specific statutory or regulatory provision authorising such enhancement.

Even assuming that such power existed, the Board was required to explain why the original penalty was inadequate and why the circumstances justified the enhanced punishment.

The petitioner’s explanation dated 21.12.2005 was not considered through a reasoned order, yet salary recoveries were commenced. A mere opportunity to submit a show-cause explanation was insufficient because natural justice required meaningful consideration of the defence and a speaking decision.

The Court therefore found the recovery proceedings procedurally invalid and indicative of arbitrary exercise of power.

The writ petition was partly allowed; proceedings No. F/DP/CVO/F3/50 dated 13.12.2005 were set aside, and the respondents were directed to refund all amounts, if any, recovered from the petitioner’s salary.

No order as to costs was made, and pending miscellaneous petitions were closed.