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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO.2419 OF 1996
Mr. M. M. Yardi, )
Residing at 'Sneh Prabhat', )
37/7, Prabhat Road, Pune - 411 004. ).. Petitioner
Vs
1. Bank of India, )
a Banking Company incorporation )
under the Banking Companies
ig )
(Acquisition and Transfer of )
Undertakings) Act, 1970, and )
having its Head Office at Express )
Towers, Nariman Point, )
Bombay - 400 021. )
2. The General manager and )
Disciplinary Authority, )
Bank of India, having his office at )
Express Towers, Nariman Point, )
Bombay - 400 021. )
3. Executive Director and Appellate )
Authority, Bank of India, )
having his office at Express Towers, )
Nariman Point, Bombay 400 021. ).. Respondents
-
Shri Arshad Shaikh along with Shri S.G. Udeshi, Shri Mahesh Londhe
and Shri Darshan Ashar i/by M/s. Sanjay Udeshi & Co. for the
Petitioner.
Shri R.S. Pai along with Shri Hemant Telkar i/by M/s. Haresh Mehta &
Co. for the Respondents.
--
CORAM : A.S. OKA & SHRIHARI P. DAVARE, JJ
DATE ON WHICH THE JUDGMENT IS RESERVED : JULY 19, 2012
DATE ON WHICH THE JUDGMENT IS PRONOUNCED : SEPTEMBER 28, 2012.
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( Pronounced by A.S. Oka, J at Bombay in accordance with Rule 1(i) of
Chapter XI of the Bombay High Court, Appellate Side Rules, 1960 as
Justice Shrihari P. Davare is sitting at Aurangabad.)
JUDGMENT ( Per A.S. Oka, J )
. The Petitioner was posted as the Zonal Manager of Bank of India (first Respondent ). Initially, the Petitioner was posted in M.P.
Zone. Thereafter, he was transferred to Pune Zone. On 20 th November, 1991, the first Respondent Bank issued a letter to the Petitioner. In the said letter, allegations were made against the Petitioner as regards illegalities and irregularities in the credit facilities granted to Choudhary Group of companies. It is alleged that the Petitioner's son was associated with the borrowing companies. It was alleged that undue favours were shown by the Petitioner to Choudhary Group at each and every stage, right from the end of the year 1986 upto August, 1990 without adhering to sound principles of lending and thereby putting the bank's funds to the tune of Rs.4.35 crores in jeopardy. The comments of the Petitioner were invited on what was set out in the said letter. The Petitioner by reply dated 14th February, 1992 addressed to Shri P.S. Santhanam, General Manager of the first Respondent, submitted his comments and denied the allegations made against him.
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2. The charge sheet dated 31st December, 1992 was issued to the Petitioner alleging that the Petitioner has breached the Regulations 3(1) and 5(3) of the Bank of India Officer Employees' (Conduct) Regulations, 1976 ( hereinafter referred to as "the Conduct Regulations"). Along with the charge sheet, statement of allegations was also issued. The Petitioner filed a reply dated 12 th March, 1993 dealing with the allegations in the charge sheet and statement of allegations annexed to the charge sheet. The Enqury Officer after holding an inquiry came to the conclusion that certain charges were proved. The Enquiry Officer held that out of Charge No.I, Charge A(i), A(ii)(b), A(ii)(c), A(ii)(d), A(ii)(e), A(iv), B(i) and C were proved. The Charges A(ii)(a), A(iii), A(v) and B(ii) out of the Charge I were held as not proved. He held that Clauses (i) and (iii) out of Charge No.II and even Charge No.III were established, but the clause (ii) of Charge No.II was not proved. The report was submitted on 25 th October, 1994. Prior to that on 31st August, 1994, the Petitioner retired as the Deputy General Manager by superannuation. The first Respondent Bank issued an order dated 12th August, 1994 informing the Petitioner that the disciplinary proceedings would continue as if the Petitioner was in service until final order was passed. Retiral benefits of the Petitioner were withheld till passing of the final order. The Petitioner made representation against the report of the Disciplinary Authority. The second Respondent by an order dated 23 rd February, 1995 awarded ::: Downloaded on - 02/08/2016 16:43:13 ::: ash 4 wp-2419.96 punishment of dismissal and disqualified the Petitioner from future employment. The 2nd Respondent as the Disciplinary Authority did not agree with the findings of the Enquiry Officer on two charges. The Petitioner preferred an Appeal against the said order before the Appellate Authority. By an order dated 25 th May, 1995, the Appeal was dismissed. On 22nd November, 1995, a show cause notice was issued to the Petitioner by the first Respondent calling upon the Petitioner to show cause as to why the entire gratuity payable to him should not be adjusted against the loss suffered by the first Respondent Bank . On 14th December, 1995, the Petitioner replied to the show cause notice.
The present Petition was filed on 26 th February, 1996 for challenging the orders of Disciplinary Authority as well as the Appellate Authority.
After filing of the Petition, the Petitioner received the order dated 22 nd February, 1996 passed by the concerned Authority of the first Respondent. By the said order, the entire gratuity payable to the Petitioner under the Bank of India Gratuity Funds Rules as well as the entire amount standing against the Employers' Contribution in his provident fund under the Bank of India Provident Fund Rules was adjusted against the loss allegedly suffered by the Bank aggregating to Rs.4.35 crores approximately. It is alleged that the loss was caused as a result of misconduct committed by the Petitioner. The Petition was amended for incorporating the challenge to the said order dated 22 nd February, 1996.
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3. We may note here that the Civil Application No.1844 of 2001 was filed by the Petitioner for contending that substantial part of the amounts which have been allegedly jeopardized due to misconduct on the part of the Petitioner have been recovered. Reliance was placed on various documents which are annexed to the said Civil Application for contending that as per the compromise entered into in the suit filed in the Court at Indore, a total sum of Rs.7,92,07,000/-has been recovered from the borrower companies and the respective accounts were closed. In the Reply to the Civil Application, the First Respondent Bank did not dispute the compromise, but stated that the Bank was required to sacrifice a sum of Rs.863.24 Lakhs by way of compromise. The Petitioner filed an additional affidavit dated 29 th July, 2002 in which it was alleged that the first Respondent has recovered an amount of Rs.9,78,28,000/- from the defaulting borrowers.
4. The Respondents have filed reply dated 23 rd July, 2001 for opposing the Petition. We may also note that the Civil Application No.231 of 2010 has been filed by the Petitioner for amending the Petition for incorporating additional grounds of challenge in the Petition.
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5. The learned counsel appearing for the Petitioner has taken us through the material averments in the Petition and annexures to the Petition. He has made submissions on the basis of the additional grounds sought to be added by way of Civil Application.
6. Learned counsel appearing for the Petitioner urged that the allegation against the Petitioner is of committing breach of Regulations 3(1) and 5(3) of the Conduct Regulations. He submitted that the breach of Regulation 3(1), is not a misconduct. He relied upon the decision of the Apex Court in A.L. Kalra v. The Project and Equipment Corporation of India Ltd., (AIR 1984 SC 1361). He pointed out that there is nothing on record to show that the Petitioner granted any facility to any Undertaking or Company in which any member of his family was employed. Learned counsel submitted that the Account of Choudhary Builders Private Limited was already opened in a branch at Indore prior to the date on which the Petitioner took a charge of M.P.
Zone as its Zonal Manager. He pointed out the hierarchy of the officers of the first Respondent Bank. He pointed out that there are Joint Zonal Managers and Regional Managers working under the Zonal Manager.
He pointed out that apart from the limit of Rs.15 lakhs earlier sanctioned to the Choudhary Builders Private Limited, the Regional Manager sanctioned overdraft facility of Rs.25 lakhs. He pointed out that contrary to the allegations in the charge sheet, there was no ::: Downloaded on - 02/08/2016 16:43:13 ::: ash 7 wp-2419.96 proposal sent to the head office by the Indore Branch on 17 th November, 1986 for sanction of the facility to the tune of Rs 100/-Lacs as rightly found by the Disciplinary Authority. As regards the allegation of sanction of additional limit of Rs.25 lakhs by the Petitioner, he submitted that the Petitioner sanctioned the said additional limit after the proposal was duly scrutinized and processed by the concerned Department of Zonal Office. He submitted that a sanction was granted by him subject to securing the amount by equitable mortgage of a portion of the Company's property with 50% margin. He submitted that the Petitioner acted on the recommendation of the Regional Manager. He pointed out another allegation that the Petitioner had sanctioned the over limit of Rs.15 lakhs to the aforesaid Company for a period of 90 days from 24th July, 1987. It is alleged that the Petitioner personally called the Branch Manager Shri Bergaley and instructed him to disburse the said limit. He submitted that though objection may have raised to a sanction of additional limit of Rs.25 lakhs by the Petitioner by the head office, there was no restraint on the disbursement put by the head office. He submitted that the allegation that the Petitioner instructed to Shri Bergaley to immediately disburse the over limit of the amount of Rs.15 lakhs is not substantiated from the statement of the said officer. He pointed out that recommending the extension of period of over limit cannot amount to misconduct as it was a routine business decision taken by the Petitioner well within his ::: Downloaded on - 02/08/2016 16:43:13 ::: ash 8 wp-2419.96 powers considering the temporary liquidity problem faced by the borrowers .
7. The leaned counsel for the Petitioner submitted that the allegation that the Petitioner sanctioned purchase of three cheques amounting to Rs.5 Lakhs on 13 th November, 1987 cannot amount to misconduct as the said sanction was made on the recommendations of the Branch Manager in presence of the Regional Manager. He submitted that as regards grant of LC facility of Rs.50 Lakhs, the recommendation was made by the Advance Department of Zonal Office and by the Joint Zonal Manager. He submitted that the facility was not availed of by the borrowers was revalidated by succeeding Zonal Manager and was availed nine months after the Petitioner ceased to be in the Zone. He pointed out the material allegation regarding showing of undue favour in relation to the Account of M/s. Venkatesh Food Private Limited and M/s.Choudhary Industrial and Investment Private Limited. He pointed out that as regards the allegation in respect of Venkatesh Food Private Limited, the Inquiry Officer held that the charge was not proved. As regards the allegation pertaining to the Account of M/s. Choudhary Industrial and Investment Private Limited, the learned counsel for the Petitioner pointed out that initial limit of facility of Rs.61.15 lakhs under the deferred payment scheme was sanctioned subject to stipulation of releasing the amount after creation of ::: Downloaded on - 02/08/2016 16:43:13 ::: ash 9 wp-2419.96 equitable mortgage and 10% margin. He stated that the limit was enhanced by the Joint Zonal Manager to Rs.71.15 lakhs. He submitted that in the statement of allegations in the Articles of Charge, it is noted that it was the Joint Zonal Manager who waived condition of margin and mortgage. He pointed out that as regards the allegation of showing undue favour in respect of the Account of M/s. F.S. Kerr and Co. Pvt. Ltd., the Inquiry Officer has accepted only a part of the charge.
He submitted that proposal of the party was processed and recommended by the Deputy Zonal Manger. He submitted that the allegation regarding instruction to Panvel Branch to open LC and enhance the limit was not substantiated.
8. His further submission is that the Appellate Authority has not done its duty and nothing has been considered by the Appellate Authority. On this aspect, the learned counsel relied upon a decision of the Apex Court in the case of Chairman, Disciplinary Authority, Rani Lakshmi Bai Kshetriya Gramin Bank Vs. Jagdish Sharan Varshney & Others (2009 II CLR 828). He submitted that the order of the Appellate Authority hardly contains any reasons. He submitted that the manner in which the Appellate Authority has decided the Appeal shows that there is a complete non-application of mind. He submitted that by making such a cryptic order, the Appellate Authority has failed to perform his duty.
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9. He submitted that in any case, in the charge, there was no allegation of causing loss of any specific amount to the first Respondent Bank on account of alleged misconduct on the part of the Petitioner.
He submitted that the only allegation is that an amount of Rs.437 Lakhs was likely to be jeopardized. He submitted that there is no adjudication made either by the Disciplinary Authority or by the Appellate Authority on the question whether any loss was actually caused of a specific amount due to the acts of the Petitioner and no finding has been recorded on this aspect by both the Authorities. He pointed out that in fact there was an amicable settlement between the Bank and the borrowers and a substantial amount exceeding a sum of Rs.4.37 crores has been recovered by the Bank during the pendency of this Petition. He submitted that in absence of any finding recorded by any Authorities regarding actual loss caused to the first Respondent, the gratuity and contribution of the first Respondent to the provident fund could not have been adjusted against the alleged loss. He relied upon the various decisions in this behalf.
10. Learned counsel appearing for the Respondents submitted that the Petitioner was holding a very responsible post of Zonal Manager. He submitted that detailed findings have been recorded by the Inquiry Officer as well as the Disciplinary Authority. He submitted ::: Downloaded on - 02/08/2016 16:43:13 ::: ash 11 wp-2419.96 that as far as the Appellate Authority is concerned, the order of the Appellate Authority shows that the said Authority has considered the entire material against the Petitioner in the inquiry and has expressed general agreement that the findings recorded in the order appealed against. Inviting our attention to the Regulation No.24 of the Conduct Regulations, he submitted that the breach of any provision of the Regulation is made misconduct. He submitted that an inference can be drawn on the basis of the findings of the Inquiry Officer as well as the Appellate Authority that the huge monetary loss was suffered by the first Respondent. He submitted that the Petitioner cannot take benefit of the settlement arrived at between the first Respondent and the borrowers in the compelling circumstances. By way of settlement, a substantial amount of claim was required to be given up by the first Respondent. He submitted that the Writ Court cannot interfere with the factual findings recorded by both the Authorities especially in this Petition arising out of disciplinary proceedings against a high ranking bank officer against whom the allegations of serious misconduct have been established. He, therefore, submitted that no interference is called for. He submitted that the action of withholding the retiral benefits and especially the gratuity and adjusting the same against the amount due and payable to the Bank is lawful as the Authority found that the huge monetory loss was caused to the first Respondent by the Petitioner due to misconduct on his part. He urged that if this Court is ::: Downloaded on - 02/08/2016 16:43:13 ::: ash 12 wp-2419.96 not inclined to accept this submission, as done by this Court in one of the cases, only a part of the amount be ordered to be released to the Petitioner.
11. We have given careful consideration to the submissions.
We have perused the averments made in the Petition and the annexures to the Petition. It will be necessary to make a reference to the findings recorded by the Inquiry Officer. The following charges have been held as established by the Inquiry Officer.
(i) When proposal for sanction of Rs.100 lakhs to M/s. Choudhary Builders Private Limited was pending at the head office of the Bank for consideration, it was not proper on the part of the Petitioner to suggest to the Regional Manager for granting ad-hoc limit and to subsequently sanction the overdraft of Rs.25 lakhs on 23rd December, 1986 while camping at Indore obviating rquirement of getting full sanction from the Head Office;
(ii) Though the Head Office on 24th February 1987 made adverse observations, the Petitioner did not bother to reply till 15 th October and during the said period, he continued to finance the said company.
(iii) On 24th July the Petitioner sanctioned over draft limit of 15 lacs for a period of 90 days even without getting a written application from the borrower though the main proposal for Rs100 Lacs was not sanctioned by the head office.
(iv) While the Petitioner was camping in a Hotel at Indore, he called Branch Manager Shri ::: Downloaded on - 02/08/2016 16:43:13 ::: ash 13 wp-2419.96 Bergaley and asked him to disburse an amount of Rs.15 Lacs to the borrowers, but he did not oblige.
(v) The Petitioner accorded his approval for the extention of the overdraft limit period by ignoring the adverse remark based on the fact that the outstanding in the account of the company was more than Rs 66/- lacs. The Petitioner extended period of repayment of over limit of Rs 15 Lacs from time to time even after noticing that the said Company was facing critical liquidity crisis;
(vi) Though the Petitioner was aware that the said Company was facing critical liquidity crisis and though the head office had not sanctioned the proposal for grant of facility of Rs.100 lakhs, the Petitioner sanctioned non-
borrowing LC having limit of Rs.50 lakhs on 9th February, 1988 only few days before he was transferred from M.P Zone ;
(vii) While camping at Indore, the Petitioner sanctioned overdraft having a limit of Rs.25 lakhs on 10th April, 1997 to M/s. Venkatesh Food Private Limited, a sister concern of Choudhary Builders Private Limited without getting a detailed regular proposal;
(viii) The Petitioner sanctioned R.71.50 lakhs under the deferred payment guarantee scheme to Choudhary Industrial and Investment Private Limited with a stipulation that the amount should be released after creating equitable mortgage of a part of the Company's property and obtaining 10% margin as security cover. The amount was released without creation of equitable mortgage and without obtaining 10% margin.
(ix) An account of M/s. F.S. Kerr Private Limited, a sister concern of Choudhary Builders Pvt Ltd was open at Panvel Branch at 3rd November, 1988 after the Petitioner was ::: Downloaded on - 02/08/2016 16:43:13 ::: ash 14 wp-2419.96 transferred as the Zonal Manager, Pune and on the same date, a sum of Rs.14 lakhs was released to the said Company as per the direction of the Petitioner though he was fully aware of the unsatifactory position of the acconts of Choudhari group at Indore;
(v) On the instructions of the Petitioner, the Panvel Branch open LC for Rs.19.96 lakhs of the said company. When the request of the Company for enhancement of the limit of LC was pending, the Company directly approached the Petitioner for sanction of one more LC of Rs.27 lakhs. On a handwritten application, without getting comments from any Authority, the Petitioner sanctioned the same. Despite unsatisfactory conduct of the account of the Company, the Petitioner sanctioned Rs.35 lakhs as LC limit at the time of review proposal. Though it was pointed out to the Petitioner by the Regional Manager about unsatisfactory conduct of the accounts of the said Company, the Petitioner accorded sanction on 7th September, 1989. Guarantee limit of Rs.75 lakhs was sanctioned by the Petitioner to the said Company for securing the sub-contract from Kirrik Nixon Company amounting to Rs.7 crores. It was found that the guarantee of Rs.50 lakhs plus Rs.25 lakhs was issued by the first Respondent Bank in favour of the said Company for a period of two years without getting approval of the head office.
(vi) The Petitioner granted various Advances/facilities to M/s. Choudhary Group to the tune of Rs.4.35 lakhs thereby jeopardising Bank's interest. It was found that the Petitioner's son Sandip Yardi, a qualified Architecture, was closely associated with M/s. Choudhary Builders Private Limited, Indore. The Inquiry Officer held that the charge of favourably sanctioning facilities to the group of Companies to the tune of Rs.4.35 lakhs thereby jeopardising the Bank's interest was established.
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12. On the basis of the report of the Inquiry Officer, a notice was issued to the Petitioner to file a reply. The Disciplinary Authority only to some extent did not agree with the findings recorded by the Enquiry Officer by observing that there was no evidence to show that the proposal for sanction of Rs.100 Lakhs was pending in the head office. The Disciplinary Authority held that on the proposal for sanction of Rs.100 Lakhs, the Petitioner gave "in principle" sanction ,but did not ensure that the proposal was forwarded to the Head Office for sanction.
The Disciplinary Authority held that without forwarding the proposal to the head office, the Petitioner went on sanctioning regular/ad hoc/ temporary facilities. The Petitioner did not perform his duty of forwarding proposal to the head office. The Disciplinary Authority has also held that there is nothing on record to establish that the Petitioner granted financial facilities to the group of Companies by reason of his son's association with the said group. The major penalty of dismissal from the service was imposed on the Petitioner which was to operate as disqualification for future employment.
13. Thus, the Disciplinary Authority accepted the report and conclusions of the Inquiry Officer except as regards the two findings recorded by the Inquiry Officer. We have pointed out that the Appellate Authority by the order dated 25th May, 1995 dismissed the ::: Downloaded on - 02/08/2016 16:43:13 ::: ash 16 wp-2419.96 Appeal preferred by the Petitioner.
14. As far as the scope of interference in a Petition under Article 226 of the Constitution of India is concerned, the law is well settled. In the case of State Bank of India v. Ram Lal Bhaskar & Another, [(2011)10 SCC 249]. In paragraph 13, the Apex Court has observed thus:
"13. Thus, in a proceeding under Article 226 of the Constitution, the High Court does not sit as an appellate authority over the findings of the disciplinary authority and so long as the findings of the disciplinary authority are supported by some evidence the High Court does not reappreciate the evidence and come to a different and independent finding on the evidence. This position of law has been reiterated in several decisions by this Court which we need not refer to, and yet by the impugned judgment the High Court has reappreciated the evidence and arrived at the conclusion that the findings recorded by the enquiry officer are not substantiated by any material on record and the allegations levelled against Respondent No.1 do not constitute any misconduct and that Respondent 1 was not guilty of any misconduct."
(Emphasis added) The Apex Court referred to its earlier decision in the case of State of Andhra Pradesh v. S. Sri Rama Rao (AIR 1963 SC 1723). The principle laid down by the Apex Court in the said decision is that in a proceeding under Article 226 of the Constitution of India, the High Court is only concerned with the fact whether the inquiry is held by an Authority ::: Downloaded on - 02/08/2016 16:43:13 ::: ash 17 wp-2419.96 competent in that behalf and in accordance with the procedure prescribed in that behalf. The High Court is concerned with the question whether the rules of natural justice are followed and whether there was some evidence before the Authority entrusted with the duty to hold inquiry which evidence may reasonably support the conclusion that the delinquent officer is guilty of the charge. It is not the function of the High Court in a Petition under Article 226 of the Constitution of India to review the evidence and to arrive at an independent finding on the consideration of evidence.
15. We are dealing with the case where the Petitioner was a Zonal Manager of the nationalized bank. The Apex Court in the case of State Bank of India v. S.N. Goyal, [(2008)8 SCC 92} has observed that a bank survives on the trust of its customers and constituents and, therefore, the position of a Manager of the Bank is a matter of great trust. It is further held that the employees of the category of Managers are expected to act with an absolute integrity and honesty in handling the funds of the customers and/or borrowers of the Bank.
16. We are also dealing with the order of the Appellate Authority. The learned counsel appearing for the Petitioner has relied upon a decision of the Full Bench of this Court in the case of Anil Amrut Atre v. District and Sessions Judge, Aurangabad & Another (2002 III ::: Downloaded on - 02/08/2016 16:43:13 ::: ash 18 wp-2419.96 CLR 341). In Paragraphs 22, 23 and 24, the Division Bench held thus:
"22. From the above observations, it is clear that according to the Division Bench, the Maharashtra Rules nowhere provides for hearing to be given in an appeal. Likewise, they do not provide for points to be considered in an appeal. They do not enjoin recording to reasons or communication of orders in appeal to the appellant. In the absence of specific and express provisions, it was not necessary to give personal hearing to the appellant or to pass a reasoned order, concluded the Division Bench.23.
With respect, we are unable to agree with the above observations of Division Bench. Apart from the fact that the decision in the Supreme Court in R.P. Bhatt has not been understood and applied in its correct perspective, the Division Bench was not right in observing that the Maharashtra Rules did not provide for consideration. We have already extracted the relevant part of Rule 23 of the Rules as also the relevant Rules of the Central Civil Services (Classification, Control and Appeal) Rules, 1965, which came to be considered in R.P. Bhatt is also the Railway Servants (Discipline and Appeal) Rules, 1968 which came up for consideration in Ram Chander. The Maharashtra Rule is almost similar to both the Rules. In all the three Rules, the expression 'consider' is used. It was, therefore, obligatory on the part of the Appellate Authority to consider the relevant facts and circumstances. Again, clause (a) of the Central Civil Services (Classification, Control and Appeal) Rules, 1965, as well as the Railway Servants (Discipline and Appeal) Rules, 1968 enjoined the Appellate Authority to consider whether the provision of the Rule "has been complied with", whereas in the Maharashtra Rules, it is "has been followed".::: Downloaded on - 02/08/2016 16:43:13 :::
ash 19 wp-2419.96 "24. In our opinion, the mandate of law and direction of the Supreme Court would be applicable with equal force to Maharashtra Rules also. It was, therefore, the duty of the Appellate Authority to consider whether the procedure laid down in the Rules "has been followed", i.e. "has been complied with".
17. We may also make a note of the decision of the Apex Court in the case of Chairman, Disciplinary Authority, Rani Lakshmi Bai Kshetriya Gramin Bank. Vs. Jagdish Sharan Varshney & Others (2009 II CLR 828). The Apex Court dealt with an argument that an order of affirmation by the Appellate Authority need not contain any reasons.
While dealing with this argument, in Paragraph 8, the Apex Court held thus:
"8. In our opinion, an order of affirmation need not contain as elaborate reasons as an order of reversal, but that does not mean that the order of affirmation need not contain any reasons whatsoever. In fact, the said decision in Prabhu Dayal Grover's case (supra) has itself stated that the appellate order should disclose application of mind. Whether there was an application of mind or not can only be disclosed by some reasons, at least in brief, so that one can know whether the appellate authority has applied its mind while affirming the order of the disciplinary authority. The view we are taking was also taken by this Court in Divisional Forest Officer v. Madhusudan Rao, 2008 II CLR 31 : JT 2008(2) SC 253 (vide para 19), and in Madhya Pradesh Industries Ltd. v. Union of India, AIR 1966 SC 671, Siemens Engineering & Manufacturing Co. Ltd. v. Union of India, AIR 1976 SC 1785 (vide para
6), etc."
(Emphasis added) ::: Downloaded on - 02/08/2016 16:43:13 ::: ash 20 wp-2419.96 In Paragraph 11 of the Judgment, the Apex Court referred to its earlier decision in the case of S.N. Mukherjee v. Union of India [(1990)4 SCC 594]. The Apex Court observed that what is held in the said decision means that the order of affirmation need not contain an elaborate reasoning as contained in the order of the original Authority. In the context of the law laid down as set out in earlier paragraphs, this Court will have to deal with the submissions made by the learned counsel appearing for the Petitioner on the orders of the Disciplinary Authority and the Appellate Authority.
18. As we have noted earlier, at the relevant time, the Petitioner was posted as a Zonal Manager. The allegation against the Petitioner is of a commission of various irregularities and illegalities while sanctioning and/or releasing and/or approving grant of facilities to Choudhary Group and its associated Companies. It is true that the Disciplinary Authority found that the allegation against the Petitioner that he indulged in misconduct as a result of association of his son with the group Companies has not been established.
19. Therefore, it will be necessary to make a reference to the findings recorded by the Inquiry Officer as well as the order passed by ::: Downloaded on - 02/08/2016 16:43:13 ::: ash 21 wp-2419.96 the Disciplinary Authority. The first allegation forming part of Article I of the Charge is that the Petitioner unduly favoured and accommodated M/s. Choudhary Builders Private Limited by hurriedly sanctioning various facilities without adhering to the accepted banking norms at the cost of risking the bank's funds to serious jeopardy. The first allegation is as regards the sanction of overdraft limit of Rs.25 lakhs on 23rd December, 1986 when the proposal for sanction of Rs.100 lakhs was pending for consideration of the head office. The Inquiry Officer has referred to a letter addressed by the Petitioner to the Regional Manager in which there is a reference to the pendency of the proposal to grant working capital of Rs.100 lakhs. The Inquiry Officer, therefore, observed that when the said proposal was pending, it was not proper on the part of the Petitioner to suggest the Regional Manager by the aforesaid letter to sanction ad hoc limit of Rs.25 lakhs. At this stage, we may note that the Disciplinary Authority has held that there was a proposal prepared by the branch office with the assistance of the officers of the Regional Office after the Petitioner agreed in principle on 12th November, 1986 to sanction Rs.100 lakhs to the said borrower.
The Disciplinary Authority while disagreeing with the finding of the Inquiry Officer that the proposal was pending in the head office to the knowledge of the Petitioner held that without forwarding the proposal to the head office, the Petitioner went on sanctioning ad hoc limit. The Disciplinary Authority observed that as the Petitioner himself had given ::: Downloaded on - 02/08/2016 16:43:13 ::: ash 22 wp-2419.96 in principal sanction for Rs.100 lakhs, it was his responsibility to forward the said proposal to the head office. Therefore, what is found by the Disciplinary Authority and the Inquiry officer is that though the proposal for sanction of Rs.100 lakhs was not approved, it was not appropriate on the part of the Petitioner to suggest the Regional manager for granting ad hoc limit of Rs.25 lakhs on 23 rd December, 1986. The Inquiry Officer has recorded a finding that he sanctioned overlimit of Rs.15 lakhs on 24 th July, 1987 to the said borrower Company for a period of 90 days while the Petitioner was camping at Indore. This sanction was made without any formal application by the borrower and the Petitioner directed the Regional Manager to obtain a suitable application. The Inquiry Officer, therefore, found that when the proposal for sanction of Rs.100 lakhs was not approved, the Petitioner ought not to have sanctioned over-limit of Rs.15 lakhs. This finding has been confirmed by the Disciplinary Authority.
20. The Inquiry Officer observed that on 24 th July, 1987, the Petitioner called the Branch Manager Shri N.C. Bergaley to the Hotel Shreemaya where the Petitioner was camping and informed him to sanction over-limit of Rs.15 lakhs to the borrowers and further instructed him to disburse the amount immediately. Though the Petitioner denied the said allegation and contended that the letter of sanction of Rs.15 lakhs was sent by the C&IC Department of Zonal ::: Downloaded on - 02/08/2016 16:43:13 ::: ash 23 wp-2419.96 Office by post which was received 4 or 5 days after the same was sanctioned, the Inquiry Officer has considered the statement of Shri Bergaley who confirmed that he was called to the Hotel Shreemaya by the Petitioner and asked him to disburse the amount. The Inquiry Officer found that, Shri Bergaley did not oblige the Petitioner and disbursed the amount only after receiving a regular order of sanction.
Thus, this part of the charge forming part of Clause (a)(ii) of Article-I has been held as proved.
21. The allegation against the Petitioner is that on 28 th October, 1987, the said borrower approached the Branch for extending the facility of overlimit of Rs.15 lakhs by a further period of 120 days. The said proposal was forwarded to the Regional Office by the Branch Office. The concerned officer of C&IC Department of Zonal Office had put up adverse note on the said proposal. Notwithstanding the said adverse note, on 21 st November, 1987, the Petitioner extended the period of over-limit till 31st December, 1987. Subsequently, the borrower directly approached the Petitioner on 6 th February, 1988 and requested for further extension by a period of 90 days. On the very date, the Petitioner granted further extension till 31 st March, 1988. The Inquiry Officer has observed that the Petitioner accepted before him that the facility of over limit business was extended as per the specific request of the borrower which was recommended by the Regional ::: Downloaded on - 02/08/2016 16:43:13 ::: ash 24 wp-2419.96 Manager. In the proposal forwarded by the Branch, it was stated that the balance outstanding in the Company's Account as on 3 rd November, 1987 was more than Rs.64 lakhs. The Branch Manager recorded that the head office was not happy with the over limit which was granted and the period of 120 days was too long. The Inquiry Officer found that inspite of the adverse comments on the file, the Petitioner granted extension and, therefore, the said charge was held as established.
22. The Inquiry Officer dealt with Sub-clause (iv) of Clause (a) of Article-I of the Charge. The said charge is regarding sanction of non-
borrowing LC limit of Rs.50 lakhs to the said borrower on 9 th February, 1988 just 4 days prior to the date on which he was relieved from M.P.
Zone and transferred to Pune Zone. The explanation offered by the Petitioner before the Inquiry Officer was that the observations of the head office were of routine nature. On perusal of the record, the Inquiry Officer found that on 9th February, 1988, the Petitioner sanctioned a credit facility for inland Letter of Credit of Rs.50 lakhs to the borrower fully knowing that the financial condition of the borrower Company was not satisfactory. The Inquiry Officer found that the head office was unhappy about the sanction of earlier ad hoc limit of Rs.25 lakhs by the Petitioner. The finding of the Inquiry Officer is that just 4 days before the Petitioner was to be relieved from the charge, hurriedly the decision was taken by the Petitioner.
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23. The Inquiry Officer has examined the charges against the Petitioner as regards M/s. Venkatesh Foods Private Limited. When the Petitioner was camping at Indore, an application was made by the said Company itself on 10th April, 1987. He sanctioned overdraft limit of Rs.25 lakhs without even getting a regular proposal prepared. The contention of the Petitioner appears to be that in the application itself, there is a reference to the earlier discussion with the Regional Manager and the joint Zonal Manager who had agreed in principle to consider the said request. The Inquiry Officer observed that if that be so, the Petitioner ought to have written the words "Yes" or "confirmed" instead of sanctioning the proposal.
24. The Inquiry Officer has also examined Clause (c) of Article-
I which related to the Account of M/s.Choudhary Industrial and Investments Private Limited. The allegation is regarding sanction of Rs.71.15 lakhs under the Deferred Payment Guarantee Scheme. There was a stipulation that the amount should be released only after creating equitable mortgage of a property of the borrower Company and after obtaining 10% margin as the security cover. The allegation is that the amount was disbursed though neither equitable mortgage was created nor 10% margin was obtained. It is alleged that the said requirement were subsequently waived by the Petitioner. The result was that the entire amount was not at all secured. The Inquiry Officer on perusal of ::: Downloaded on - 02/08/2016 16:43:13 ::: ash 26 wp-2419.96 the documents found that initial limit of Rs.61.50 lakhs was sanctioned by the Petitioner and on 24th August, 1987, a revised proposal was submitted for enhancing the facility upto Rs.71.15 lakhs. On the proposal, it was brought to the notice of the Petitioner by the branch that the borrower had not complied with the terms and conditions including the condition of creation of mortgage of its property worth Rs.13.50 lakhs. Notwithstanding this adverse remark by the branch, the Petitioner sanctioned additional limit of Rs.9.65 lakhs on 3 rd February, 1988 without ensuring creation of equitable mortgage, therefore, the said charge has been established.
25. Thereafter, the Inquiry Officer dealt with Article II of the Charge which deals with the facilities granted to M/s. F.S. Kerr & Co.
Private Limited. The said Company opened the account with the first Respondent Bank at Panvel Branch on 3 rd November, 1988. On the same date, a sum of Rs.14 lakhs was released by the Petitioner to the said Company though the Petitioner was aware that all the accounts of the said Company at Indore were out of order. The Petitioner transferred from M.P. Zone to Pune Zone on 3 rd November, 1988. It is pointed out by the Inquiry Officer that a proposal was submitted by the said Company on 8th October, 1988 which was favourably recommended by the Deputy Zonal Manager who had noted that 100% shares of the said Company M/s. F.S. Kerr Private Limited were held by ::: Downloaded on - 02/08/2016 16:43:13 ::: ash 27 wp-2419.96 Choudhary family Indore. The Inquiry Officer found that as the Petitioner was in M.P. Zone till February, 1988, he had knowledge about the unsatisfactory financial position of Choudhary Group at Indore.
Therefore, he should not have approved the proposal on 3 rd November, 1988 by sanctioning cash credit of Rs.15 lakhs and LC of Rs.20 lakhs.
26. The Inquiry Officer dealt with another allegation as regards M/s. F.S. Kerr & Co. Private Limited. This was regarding sanctioning of loan of Rs.25 lakhs on 27th July, 1989. After considering the entire material on record, the Inquiry Officer came to the conclusion that this charge is not established.
27. The third charge as far as M/s. F.S. Kerr & Co. Private Limited is concerned, the Inquiry Officer referred to the request made by the said Company for enhancement of LC limit upto Rs.50 lakhs from Rs.20 lakhs sanctioned on 13th July, 1989. When the request for enhancement of Rs.50 lakhs was pending, an application was made directly to the Petitioner on 10 th August, 1989 for sanction of one more LC for Rs.27 lakhs. It was an handwritten application, and without securing comments from any Authority, the Petitioner sanctioned the same. There was a review proposal dated 25 th August, 1989 for sanction of LC of Rs.35 lakhs and Inland Guarantee of Rs.75 lakhs.
There was a dissenting note put up by the Joint Zonal Manager, Pune, ::: Downloaded on - 02/08/2016 16:43:13 ::: ash 28 wp-2419.96 and the Regional Manager, Indore, based on the unsatisfactory operation of the Accounts of the group of Companies. Notwithstanding the dissenting note, the Petitioner sanctioned the same on 7 th September, 1989. The Petitioner issued guarantee in favour of M/s.
Ashwini Estate Private Limited to enable the borrower Company to avail mobilization advance of Rs.25 lakhs from the said M/s. Ashiwini Estate Private Limited. However, the said Company paid only a sum of Rs.47.04 lakhs to the borrower Company. The said amount was diverted by the borrower Company to its sister concern M/s. Chetak Construction Limited at Indore. The Inquiry Officer has considered the contention that the guarantee of Rs.75 lakhs was not issued by him.
The Inquiry Officer observed that the guarantee was issued on the basis of sanction given by the Petitioner for guarantee limit of Rs.75 lakhs.
Thus, this charge was held as established.
28. Article III was regarding the allegation that in discharge of his duties, the Petitioner knowingly granted or authorised grant of various advances or banking facilities to Choudhary Group of Companies to the tune of Rs.435 lakhs thereby jeopardizing the bank's interest. Further allegation is that the Petitioner's son was associated with the said Choudhary Group. The charge based on the association of the Petitioner's son with the said Choudhary Group was held as established by the Inquiry Officer. However, the Disciplinary Authority ::: Downloaded on - 02/08/2016 16:43:13 ::: ash 29 wp-2419.96 has disagreed with the said finding. However, the Disciplinary Authority agreed with the finding that the Petitioner has jeopardized the Bank's interest to the tune of Rs.435 lakhs. Perusal of the findings of the Inquiry Officer shows that the evidence, both oral and documentary, has been considered threadbare and the findings have been arrived at. The findings read as a whole show that the Petitioner who was a senior and high ranking officer of a nationalized bank acted contrary to sound banking norms thereby jeopardising the interests of the bank. Fact that subsequently, by way of compromise, the bank received some amount will not affect the findings of misconduct. Even the order of the Disciplinary Authority shows application of mind as the two findings of the Inquiry Officer have not been accepted by the Disciplinary Authority.
29. A submission was canvassed that the Appellate Authority has not done its duty as there are no reasons recorded in its order.
Paragraph 2 of the order of the Appellate Authority shows that an opportunity of being heard to the Petitioner was provided to the Petitioner. In Paragraph 3 which consists of 13 sub-paragraphs, the contentions raised by the Petitioner have been summarized therein. In paragraph 4, the said contentions have been considered. The Appellate Authority has held that as the Petitioner himself in principle sanctioned the loan of Rs.100 lakhs, it was his primary responsibility to ::: Downloaded on - 02/08/2016 16:43:13 ::: ash 30 wp-2419.96 forward the proposal to the head office for consideration. The contention of the Petitioner that the proposal was not pending before the head office and, therefore, he is not responsible for the same is negatived by observing that it was a duty of the petitioner to ensure that the proposal goes before the head office. The Appellate Authority has referred to the adverse observations of the head office which were received by the Zonal Office on 24th February, 1987 and which were not replied till 15th July, 1987. In between the two dates, the Appellate Authority found that the borrower was financed to the tune of Rs.1.15 crores under various limits and facilities. The Appellate Authority has also considered the dissenting note put up by the Joint Zonal Manager of Pune as well as M.P. Zone as regards the Account of M/s. F.S. Kerr & Company.
30. As held by the Apex Court in the case of Chairman, Disciplinary Authority, Rani Lakshmi Bai Kshetriya Gramin Bank (supra), the order of affirmation of the Appellate Court must contain some reasons at least in brief to show that the Appellate authority has applied its mind. The Appellate Authority need not write an elaborate reasoning as contained in the original order of the Disciplinary Authority and while confirming the order of the Disciplinary Authority, brief reasons can be assigned. As we have pointed out earlier, in Paragraph 3 of the order of the Appellate Authority, the contentions of ::: Downloaded on - 02/08/2016 16:43:13 ::: ash 31 wp-2419.96 the Petitioner have been summarized elaborately. In Paragraph 4 thereof, brief reasons have been set out by the Appellate Authority which clearly show application of mind on the part of the Appellate Authority.
31. In this Petition under Article 226 of the Constitution of India, we are concerned with the decision making process and not the merits of the decision. Careful perusal of the order of the Inquiry Officer and the Disciplinary Authority shows that the entire relevant material has been considered by the said Authorities. It is not a case of no evidence against the Petitioner. The evidence was documentary evidence. The order of the Appellate Authority shows application of mind and reasons have been assigned for concurring with the view taken by the Disciplinary Authority.
32. Another submission made was that a breach of Regulation No.3 of the Conduct Regulations by itself does not amount to misconduct. We may note the Regulation 24 of the Conduct Regulations which reads thus:-
"24. Acts of Misconduct :
A breach of any of the provisions of these regulations shall be deemed to constitute a misconduct punishable under the Bank of India (Discipline and Appeal) Regulations, 1976.::: Downloaded on - 02/08/2016 16:43:13 :::
ash 32 wp-2419.96 Sub-Regulation (1) of Regulation 3 reads thus:-
"3(1) Every officer employee shall, at all times take all possible steps to ensure and protect the interests of the Bank and discharge his duties with utmost integrity, honesty, devotion and diligence and do nothing which is unbecoming of a Bank Officer."
33. A submission was canvassed on the basis of the decision of the Apex Court in the case of A.L. Kalra (supra). The said decision has been explained in subsequent decisions of the Apex Court. In fact, in the case of Bharat Petroleum Corporation Limited and Others v. T.K.
Rau, [(2006)3 SCC 143], in paragraphs 13 and 14, the Apex Court has observed thus:-
"13. On more than one occasion, different courts have taken pains to explain that Kalra, AIR 1984 SC 1361, does not lay down any inflexible rule. (See Probodh Kumar Bhowmick v. University of Calcutta, (1994)2 Cal LJ 456, Tara Chand v. Union of India, CWP No.5552 of 2000, Secy. To Govt. v. A.C.J. Britto, (1997)3 SCC 387, and Noratanmal Chouraria v. M.R. Murli, (2004)5 SCC 689).
14. In the aforementioned situation, the High Court in our opinion committed a manifest error in relying upon Kalra and Glaxo, as we have noticed hereinbefore, that the respondent was not charged in terms of [Rule 4 of Part II of ] the Rules alone. He was charged for violation of several other clauses of the Rules. The High Court, therefore, was not correct in coming to the conclusion that as some of the charges were vague and indefinite, thus, no punishment could have been imposed on the basis thereof."
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34. In the present case, apart from the fact that the Regulation No.24 makes breach of Regulation No.3(1) as misconduct, elaborate charges have been set out in the charge sheet. The Petitioner was holding a very high office of Zonal Manager. The allegation against the Petitioner is that without forwarding proposal for sanction of facility of Rs.100 lakhs to the head office, the Petitioner went on sanctioning various ad hoc limits to the borrowers. In case of sanction of certain facilities, regular procedure was bypassed. The dissenting notes of other high ranking officers have been completely ignored. The facilities sanctioned are to the tune of lacs of rupees. No doubt, it is contended that subsequently there was a settlement between the first Respondent Bank and the borrowers but the fact remains that the first Respondent was driven to file a litigations as the amount to the tune of lacs of rupees remained outstanding. Looking to the amounts involved and the nature of the misconduct which is held as proved, the punishment of dismissal cannot be said to be disproportionate.
Therefore, in exercise of writ jurisdiction under Article 226 of the Constitution of India, we are unable to interfere with the order of the Disciplinary Authority as well as the Appellate Authority.
35. The second part of the challenge is to the communication dated 22nd February, 1996 issued by the General Manager (Personnel) ::: Downloaded on - 02/08/2016 16:43:13 ::: ash 34 wp-2419.96 by which it was directed that the entire gratuity payable to the Petitioner under the Bank of India Gratuity Funds Rules and the entire amount standing against the employer's contribution in the Provident Fund under the Bank of India Provident Fund Rules will be adjusted against the loss suffered by the Bank aggregating to Rs.4.35 crores. In short, the Petitioner was deprived of the said amounts.
36. Prior to that a show cause notice was issued on 24 th November, 1995 in which it was alleged that as a result of commissions and omissions proved against the Petitioner, the first Respondent Bank would suffer loss to the tune of Rs.4.35 crores. As far as gratuity is concerned, the relevant provision is Sub-section (6) of Section 4 of the Payment of Gratuity Act, 1972 which reads thus:-
"4(6) Notwithstanding anything contained in sub-
section (I),
(a) the gratuity of an employee, whose services have been terminated for any act, wilful omission or negligence causing any damage or loss to, or destruction of, property belonging to the employer, shall be forfeited to the extent of the damage or loss so caused.
(b) the gratuity payable to an employee [may be wholly or partially forfeited]
(i) if the services of such employee have been terminated for his riotous or disorderly conduct or any other act of violence on his part; or ::: Downloaded on - 02/08/2016 16:43:13 ::: ash 35 wp-2419.96
(ii) if the services of such employee have been terminated for any act which constitutes an offence involving moral turpitude, provided that such offence is committed by him in the course of his employment."
37. The clause (b) will not apply in the present case. Under Clause (a) of Sub-section (6) of Section 4 of the Payment of Gratuity Act, the gratuity of an employee, whose services have been terminated for any act or wilful omission or negligence causing any damage or loss to the employer shall be forfeited to the extent of loss or damage so caused. It must be established that a damage or loss has been caused to the employer. As regards the provident fund, the rule is that when a member is dismissed for misconduct causing financial loss to the Bank, the employer's contribution can be adjusted towards loss.
38. We may note here that even in the Articles of Charge, it is alleged that the Petitioner granted/sanctioned advances or facilities in various Accounts pertaining to Choudhary Group to the tune of Rs.435 lakhs thereby jeopardizing bank's interest. There is no allegation that actual loss of a particular amount was caused to the first Respondent.
In the report of the Inquiry Officer, there is no finding recorded that a loss of any particular amount was caused due to the misconduct on the part of the Petitioner and it is merely stated that by sanctioning the facilities to the borrowers to the tune of Rs.435 lakhs, the Petitioner has ::: Downloaded on - 02/08/2016 16:43:13 ::: ash 36 wp-2419.96 jeopardized the interest of the Bank. Perusal of the order of the Disciplinary Authority shows that there is no positive finding recorded that the loss was caused to the extent of a particular amount. Even the Appellate Authority has not recorded any such finding. The impugned order dated 22nd February, 1986 proceeds on the assumption that the loss suffered by the Bank was to the tune of Rs.4.35 crores. In the cryptic order dated 22nd February, 1996, no reasons are assigned or grounds are stated for coming to the said conclusion.
39. The decision of this Court in the case of Ramchandra Joshi Vs. Bank of Baroda [(2010) (IV) LLJ-199 Bom HC ], it is held thus:
"13. In the facts of the present case, we find that there is a clear finding that the respondent employer has suffered a loss to the extent of nearly Rs.149 lacs."
Hence the said decision will not help the Respondents.
39. On the contrary, there is material on record to show that subsequently there is a settlement between the first Respondent and the borrowers and the first Respondent has recovered a sum of more than Rs.8 Crores. Thus, the gratuity and the contribution of the employer to the provident fund could not have been adjusted against the alleged loss caused to the Bank in as much as there is no finding recorded by ::: Downloaded on - 02/08/2016 16:43:13 ::: ash 37 wp-2419.96 any authority quantifying the actual loss. Therefore, the submission of the Respondents that only a part of the amount be ordered to be released cannot be accepted. In absence of any finding regarding loss being actually caused to the first Respondent, the order dated 22 nd February, 1996 is completely unsustainable. To that extent, the Petition will have to be allowed.
40. Hence, we pass the following order:-
(a) All Prayers except prayer (bb) of the Petition are rejected;
(b) The rule is made absolute in terms of prayer clause (bb);
(c ) The amounts withheld shall be paid to the Petitioner within a period of three months from today.
(d) Civil Application No.1844 of 2001 and Civil Application No.231 of 2010 do not survive and the same are disposed of.
( SHRIHARI P. DAVARE , J ) ( A.S. OKA, J )
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