The Karad Urban Co-Operative Bank ... vs Suresh Purushottam Khatavkar 13, ...
2002 Latest Caselaw 119 Bom

JUDGMENT

Nishita Mhatre, J.

1. The Karad Urban Co-operative Bank Limited by their Writ Petitions challenge the order of the Industrial Court dated 23rd April 1990 granting reinstatement with continuity of service but without back wages and imposing some lesser punishment rather than dismissal on the employees. The employees have challenged the orders of the Labour Court dismissing their applications under Sections 78 and 79 of the Bombay Industrial Relations Act, 1946 as well as the order in the Appeals filed by them for grant of back wages and imposing some minor punishment.

2. The facts giving rise to these Writ Petitions are as follows :-

The employees, namely, B.V.Patil in Writ Petition No.2953 of 1990, V.K.Walimbe in Writ Petition No.2954 of 1990, V.G.Deshpande in Writ Petition No.3139 of 1990, S.P.Khatavkar in Writ Petition No.3153 of 1990 were working as Branch Managers and S.D.Kulkarni in Writ Petition No.2964 of 1990 was working as an Accountant (hereinafter referred to as the "employees") in the different branches of Karad Union Co-operative Bank Limited (hereinafter referred to as the "Bank"). Most of them had risen in rank after being employed as Clerks with the Bank for several years. During the period between March 1980 and December 1982 these employees were working as Branch Managers or Accountant. It is the case of the Bank that all these employees had, in collusion duped the Bank of several lakhs of rupees in order to favour one Ajit P.Shah who was the customer of the Bank. It is the case of the Bank that these persons disbursed huge amounts to Ajit P.Shah without caring to obtain necessary documentation or security from him. Hundies presented by Ajit P.Shah were purchased by them, though previous Hundies presented by the said Shah were either dishonoured or were honoured much later. Cheque discounting facility was made available to the said Ajit P.Shah and amounts were disbursed to him on account of this facility and also against Hundies without ascertaining whether it was within the sanctioned limits. Further, loans were advanced and hypothecation of goods without obtaining the necessary documentation or ascertaining the location of the goods or the availability of the goods in the godown. These were the common allegations made against all the employees.

3. In respect of one B.V.Patil, there are further allegations that he had advanced loans on hypothecation of goods in a godown (while he was Branch Manager at Umbraj Branch) which was within the limits of Karad Branch to the very same Ajit P.Shah. Patil along with Khatavkar and Walimbe had obliged Ajit P.Shah by not caring to see that application forms were filled in properly and signed by the concerned person while opening the new bank accounts in their branches. No identification or specimen signature had been obtained nor was any declaration form obtained from said Shah.

4. In the case of S.P.Khatavkar, it is alleged that he had purchased a Hundi of M/s.Arvind Kumar & Company, at Talbhag branch without there being any sanction from the Board of Directors of the Bank. He had similarly sanctioned a loan to some other parties without the authority or sanction of the Board. He had further permitted cheque discounting facility although it was not sanctioned by the Board of Directors.

5. As far as V.G.Deshpande is concerned, the allegation against him is that he had allowed the Hundi limit granted to one firm to be used by another firm merely because the proprietor of the two companies was Shah. He had similarly disbursed loans and allowed cheque discounting facilities without the Boards sanction.

6. In the case of V.K.Walimbe, who was the Branch Manager at Ambad, the allegation is that he had been negligent while allowing new accounts to be opened in the name of Ajit P.Shah or his proprietary firms by not taking proper identification and the necessary declaration from him. He had also allowed Shah to use the cheque discounting facility and had paid monies against Hundies which were far in excess than what should have been disbursed to said Ajit P.Shah.

7. These facts came to light when the Board of Directors of the Bank directed that a second audit be made. In the earlier audit made by the Auditor, no such irregularities had been found by the Auditor. However, in the second audit based on the same records and documents, the Auditor has found the above irregularities.

8. The Bank, being convinced that all the five employees acting in collusion with each other as well as with Ajit P.Shah have defrauded the Bank of several lakhs of rupees therefore, issued memos to these employees. Not being satisfied with their replies, the Bank issued chargesheets to the said employees. On 22nd April 1982 an inquiry was held against the said employees. The Inquiry Officer held all these employees guilty of the misconduct alleged against them. The Inquiry Officer was of the view that the said employees have all exceeded their powers by accommodating certain parties and this had resulted in losses to the Bank. Based on the findings of the Inquiry Officer, the Bank dismissed all the five employees. Being aggrieved by the dismissal order, the employees filed separate applications under Sections 78 and 79 of the Bombay Industrial Relations Act, 1946. The inquiry conducted against the employees was held to be improper by the Labour Court. Appeals were preferred by the Bank to the Industrial Court which were dismissed. The Bank, therefore, preferred Writ Petitions in this Court. The said Writ Petitions were disposed of as the employees accepted the inquiry held against the employees as fair and proper. However, the findings of the Inquiry Officer were to be scrutinised and the Labour Court on that basis was expected to arrive at its conclusions in accordance with law. The Applications were, therefore, remanded for fresh hearing before the Labour Court. On remand, neither the employees nor the Bank led any oral evidence. Arguments were made on the basis of the documents of the inquiry proceedings filed before the Labour Court.

9. The Labour Court has painstakingly gone through the allegations against each employee and has considered the findings of the Inquiry Officer. The Labour Court has held that no fault could be found with the findings as they were not perverse and no other view was possible in the matter. He considered the fact that the misconducts alleged and proved against the employees were of an extremely serious nature and held that none of the employees deserved to be reinstated in service and, therefore, rejected the applications. Aggrieved by this order of the Labour Court, the employees filed Appeals under Section 84 of the Bombay Industrial Relations Act, 1947. The Industrial Court was of the view that it was not necessary for it to consider the "facts" and "figures" as the facts were not disputed. According to the Industrial Court, figures were not his concern, because the Co-operative Court was seized of the matter pertaining to the recovery proceedings. The Industrial Court was of the view that none of the employees were guilty of committing any fraud but all of them should be considered as being negligent in the discharge of their duties. He, therefore, imposed a lesser punishment. The Industrial Court reinstated all the employees with continuity of service but without back wages. In the case of S.D.Kulkarni, who was an Accountant in the Bank and B.V.Patil who was a Branch Manager, the Industrial Court was of the view that punishment of stoppage of three annual increments permanently would suffice. As regards Walimbe, Khatavkar and Deshpande, he imposed punishment of reversion for one year.

10. Being aggrieved by the order of the Industrial Court dated 23rd April 1990, the Bank has preferred Writ Petition Nos.2634 of 1990, 2683 of 1990, 2684 of 1990, 2684 of 1990 and 2690 of 1990 against the employees and the employees have preferred Writ Petition Nos.2953 of 1990, 2954 of 1990, 2964 of 1990, 3139 of 1990 and 3153 of 1990 challenging the orders of the Labour Court as well as the Industrial Court.

11. Simultaneously with the inquiry, the Bank had also instituted criminal proceedings against the employees and had also filed disputes before the Co-operative Court. The criminal action against some of the employees ended in conviction against which a Revision or an Appeal has been filed by them. The criminal action which ended in acquittal against some of the employees have been challenged by the Bank by filing Revision.

12. Mr.Naphade, learned Counsel for the Bank, urges that the Appellate Court i.e. the Industrial Court had completely erred while granting the employees reinstatement with some lesser punishment. He submits that the series of instances of which these employees have defaulted or were negligent indicates the element of dishonesty and the conscious breach of banking practices. He submits that the Industrial Court has completely lost sight of the fact that the transactions which led to action being taken against the employees palpably demonstrate that it was not mere negligence which caused actions to be initiated against them by the employer while setting aside the well reasoned order of the Labour Court. He further submits that reinstating such persons in the Bank would cause great prejudice to the Bank as in all probability they would resort to the same practice after being reinstated. He relies on the judgment of the Apex Court in the case Disciplinary Authority-cum Regional Manager and others vs. Nikunja Bihari Patnaik, and in the case of Janatha Bazar vs. Secretary, Sahakari Noukarara Sangha etc., 2000 III CLR 568. He also submits that the Co-operative Court has found that the Bank has been caused a loss of Rs.27 lakhs by the misfeasance of all these employees and, therefore, no lenient view could be taken in the matter. He submits that at any rate the Bank has no confidence in the employees any more and, therefore, they should not be reinstated.

13. Each of the learned Advocate appearing for the employees have submitted that the employees were in no way concerned with the loss caused to the Bank as they had acted in accordance with the instructions of the Board of Directors and, therefore, no action should have been taken against them. They have all submitted that the Labour Court has erred in accepting the findings of the Inquiry Officer when there was no material on record to indicate that the employees were guilty in any way or had acted in a manner prejudicial to the Banks interest while disbursing some amounts to the Banks customers.

14. Ms.Katdare, learned Advocate appearing for Patil, submits that at best he could be considered to have been negligent in discharge of his duties. She submits that Patil had been promoted as Branch Manager only a few months before the alleged misconduct on his part and, therefore, he was not aware of the duties of the Branch Manager. She further submits that no duties are prescribed and neither are the employees informed of the work they would have to perform as Branch Manager. She further submits that as Patil has been acquitted by the Appellate Court, he stands on a different footing from the rest of the employees. She further submits that Patils name figures in only one application filed before the Co-operative Court and, therefore, there is no question of him being guilty of the misconduct and dishonesty.

15. Mr.Bukhari, learned Advocate appearing for Kulkarni, submits that as the said Kulkarni was working as an Accountant, he could not have been considered to be equally responsible as the Branch Manager. He submits that the culpability of each employee has to be considered while imposing any punishment. He further submits that the Hundies were accepted by the past Branch Manager and the Managing Director and Kulkarni was in no way concerned with these transactions. He submits that accepting Hundies was not part of his duties and, therefore, the finding of the Inquiry Officer and the Labour Court that Kulkarni was in fact involved was perverse. He further submits that the losses, if any, which have been accrued to the Bank on account of cheque being dishonoured is not due to Kulkarni but on account of the inaction of the Branch Manager at Talbhag. He further submits that the findings of the Inquiry Officer in case of Kulkarni are perverse and, therefore, no action should be taken against him, more so, in view of the fact that he has already retired on 28th June 1993.

16. Mr.Karande, learned Advocate for Deshpande, submits that there is no material on record before either the Inquiry Officer or the Labour Court to show that there was breach of trust on the part of Deshpande. He submits that a sizeable amount has been recovered by the Bank and there is no claim in the Co-operative Court against Deshpande. The Criminal Court had also acquitted Deshpande and, therefore, it is his submission that the order of the Labour Court and the Industrial Court should be set aside and he should be granted reinstatement with full back wages and continuity of service.

17. In the case of Khatavkar, Mr.Bodake, learned Advocate representing him, submits that he was the Branch Manager at Talbhag branch on 1st August 1981 and the Passing Officer at the Gurwar Peth branch prior to that. He submits that Khatavkar had acted on instructions received from the Board of Directors and in fact had not over-stepped the sanctioned limit pertaining to Hundies. He further submits that despite outstanding amounts, Board of Directors had thought it fit to increase the sanction for cheque discounting facility as well as for the purchase of Hundies in the case of A.P.Shah and some of his firms and, therefore, the findings of the Labour Court and the Inquiry Officer are perverse.

18. Mr.Apte, learned Advocate representing Walimbe, submits that he has been considered to be negligent and, therefore, the punishment of denial of back wages and reversion of one year is to disproportionate a punishment. He further submits that Walimbe having retired, no action should be taken against him specially in view of the fact that he had acted on instructions received from the Managing Director.

19. Countering these submissions, Mr.Naphade submits that Khatavkar, who was the star in each of these cases, deserves no sympathy at all. He submits that there can be no misplaced sympathy when there is a breach of trust and misappropriation in a Bank which has been proved. The question of granting reinstatement does not arise in the case of any of these employees as, according to the Mr.Naphade, all of them had acted beyond their authority which itself was a breach of trust. He submits that the transaction in which the employees were involved could not be called errors of judgment but were in fact a deliberate attempt on the part of the employees acting in concert to defraud the Bank in order to oblige certain customers.

20. On going through the findings of the Industrial Court, I find that he has considered the judgment of the Labour Court cursorily. The Industrial Court has not at all considered in great detail, as the Labour Court has done the findings of the Inquiry Officer nor has he considered the fact that all these employees were acting in collusion with each other. To say that the employees were merely negligent is begging the question. All of them have in fact over a period of time acted in a manner which was far beyond their authority. They had allowed Ajit P.Shah and a couple of other customers to make withdrawals contrary to Banking rules and practice and have advanced huge amounts to them far in excess of their authority. Therefore, it could not be said that these employees were merely negligent and had no connection whatsoever with the losses incurred by the Bank. The submission of the learned Counsel for the employees that all of them had acted on the directions of the Board of Directors also cannot be sustained. There is nothing on record to show that in fact the Board had given instructions to these employees to allow them to sanction any loans or advances to some customers. A letter from the Managing Director has been brought on record showing the sanction limit. However, the Agent at Talbhag Branch and the Branch Manager at Guruwar Peth Branch were informed that the Hundi credit facility which had been extended to certain firms of which Ajit P.Shah was a proprietor. However, while extending this facility, they had been cautioned that Hundies worth Rupees six lakhs were outstanding against the firm of Ajit P.Shah at the Guruwar Peth Branch. Therefore, for the employees concerned to submit that they had extended the facilities on instructions from the Board of Directors also cannot be believed.

21. The Apex Court in Nikunja B. Patnaiks case (supra) had considered a similar case of a bank employee acting in breach of discipline and for acting beyond his authority. They have observed (vide paragraph 7) of the said judgment thus : "7.It may be mentioned that in the memorandum of charges, the aforesaid two regulations are said to have been violated by the respondent. Regulation 3 requires every officer/employee of the bank to take all possible steps to protect the interests of the bank and to discharge his duties with utmost integrity, honesty, devotion and diligence and to do nothing which is unbecoming of a bank officer. It requires the officer/employee to maintain good conduct and discipline and to act to the best of his judgment in performance of his official duties or in exercise of the powers conferred upon him. Breach of Regulation 3 is misconduct within the meaning of Regulation 24. The findings of the Inquiry Officer which have been accepted by the disciplinary authority, and which have not been disturbed by the High Court, clearly show that in a number of instances the respondent allowed overdrafts or passed cheques involving substantial amounts beyond his authority. True, it is that in some cases, no loss has resulted from such acts. It is also true that in some other instances such acts have yielded profit to the Bank but it is equally true that in some other instances, the funds of the Bank have been placed in jeopardy; the advances have become sticky and irrecoverable. It is not a single act; it is a course of action spreading over a sufficiently long period and involving a large number of transactions. In the case of a bank - for that matter, in the case of any other organisation - every officer/employee is supposed to act within the limits of the 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 organisation, 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 organisation and more particularly, a bank is dependent upon each of its employees and officers acting and operating within their allotted sphere. Acting beyond ones 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 overdrawals 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 characterises it - they are no less blameworthy. It is wrong to characterise them as errors of judgment. It is not suggested that the respondent being a Class I Officer was not aware of the limits of his authority or of his powers.. Indeed, Charge 9, which has been held established in full is to the effect that in spite of instructions by the Regional Office to stop such practice, the respondent continued to indulge in such acts. The Inquiry Officer has recorded a clear finding that the respondent did flout the said instructions and has thereby committed an act of disobedience of lawful orders. Similarly, Charge 8, which has also been established in full is to the effect that in spite of reminders, the respondent did not submit "Control Returns" to the Regional Office. We fail to understand how could all this be characterised as errors of judgment and not as misconduct as defined by the Regulations. We are of the opinion that the High Court has committed a clear error in holding that the aforesaid conduct of the respondent does not amount to misconduct or that it does not constitute violation of Regulations 3 and 24. "

22. Again in the case of Janatha Bazar (supra), the Apex Court has taken the view that the misconduct of misappropriation or breach of trust could not be rewarded or legalised by reinstatement in service with full or part of the back wages.

23. In the present case, it is sufficiently proved that all the employees are involved in the transactions which are set out against them in the chargesheet issued to them. They have acted hand in glove, against the banking practices, over a period of time which indicates that there is an element of dishonesty in their conduct. The submission of the learned Advocate for the employees that the internal Auditor himself has stated that no proper banking practices were followed by the Bank would not in any way absolve the employees of their responsibilities. A prudent banker would, in any event, check whether the customer has sufficient security before advancing loans. Disbursing amounts against goods on hypothecation without verifying the existence of the goods is also a transaction which no person would indulge in with the experience he is expected to acquire during the normal banking practice. To claim that the employees were not aware of their duties and, therefore, had no knowledge as to whether they were conducting the transactions in a proper manner or not is a lame excuse which cannot be countenanced. Merely because the amounts have been recovered to a certain extent also would not reduce the gravity of the misconduct committed by them.

24. For the aforesaid reasons, the order of the Industrial Court dated 23rd April 1990 is set aside and the order of the Labour Court dated 3rd April 1989 is confirmed.

25. Rules granted in Writ Petition Nos.2690 of 1990, 2634 of 1990, 2683 of 1990, 1684 of 1990 and 1685 of 1990 made absolute and Rules granted in Writ Petition Nos.2953 of 1990, 2954 of 1990, 2964 of 1990, 3139 of 1990 and 3153 of 1990 discharged. In the circumstances of the case, there shall be no order as to costs.

26.Issuance of certified copy expedited.