Bombay High Court
Shri M.M. Yardi vs Bank Of India And Ors on 28 September, 2012
Bench: A.S. Oka
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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
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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.
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".
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)
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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
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
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
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
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.
ash 25 wp-2419.96
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
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
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,
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
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
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
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.
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."
(emphasis added)
ash 33 wp-2419.96
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)
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
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
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
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 )
