[Cites 6, Cited by 0]
Karnataka High Court
Central Bank Of India vs Smt Vanitha S Rao on 2 April, 2026
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WP No. 35848 of 2015
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 02ND DAY OF APRIL, 2026
BEFORE
THE HON'BLE MR. JUSTICE ANANT RAMANATH HEGDE
WRIT PETITION NO. 35848 OF 2015 (L-RES)
BETWEEN:
CENTRAL BANK OF INDIA,
REGIONAL OFFICE, 1st FLOOR,
SANTHOSH CINEMA COMPLEX,
KEMPEGOWDA ROAD,
BANGALORE-560 009,
REPRESENTED BY ITS,
DEPUTY REGIONAL MANAGER,
SRI K MANJUNATH.
...PETITIONER
(BY SRI SYED KASHIF ALI, ADVOCATE FOR
SRI. PRADEEP S SAWKAR.,ADVOCATE)
AND:
SMT VANITHA S RAO,
W/O SRI K SRINIVAS,
AGED ABOUT 61 YEARS,
Digitally
signed by C NO-U-1 GNAESH BLOCK,
HONNUR SAB "AI VENKATESHWARA",
Location: IV FLOOR, IST MAIN ROAD,
HIGH COURT
OF SESHADRIPURAM,
KARNATAKA BANGALORE-560 020.
...RESPONDENT
(BY SRI K SRINIVASA, ADVOCATE)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226
AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO
QUASH THE AWARD PASSED BY THE CENTRAL GOVERNMENT
INDUSTRIAL TRIBUNAL-CUM-LABOUR COURT, BANGALORE,
DTD.27.4.2015 IN C.R.NO.16/2010 [ANNEX-P] AND REJECT
THE ORDER OF REFERENCE HOLDING THAT THE BANK IS
JUSTIFIED IN IMPOSING THE PUNISHMENT OF DISMISSAL
FROM SERVICE.
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WP No. 35848 of 2015
THIS PETITION HAVING BEEN HEARD AND RESERVED
FOR ORDERS ON 10TH MARCH, 2026 AND COMING ON FOR
PRONOUNCEMENT THIS DAY, THE COURT PRONOUNCED THE
FOLLOWING:
CORAM: HON'BLE MR. JUSTICE ANANT RAMANATH HEGDE
CAV ORDER
This petition is filed assailing the award dated 27/04/2015
in C.R. No. 16/2010 passed by the Central Government
Industrial Tribunal-cum-Labour Court. In terms of the award,
the penalty of dismissal imposed on the respondent-employee
is set aside. Hence, the petitioner-employer is before this
Court.
2. The respondent was an employee of the petitioner-
Bank, and she joined the petitioner's Bank on 17.07.1978 as a
clerk. A disciplinary enquiry was initiated against the
respondent on certain charges. It is alleged that the
respondent had borrowed a loan of Rs.3,00,000/- from UCO
Bank on 28.02.2002 by mortgaging her property, and the
respondent had suppressed the fact that the said property was
already offered as security on 31.12.2001, for the loan availed
by her husband from Indian Bank.
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3. The further allegation is that, the same property
was mortgaged by depositing the original gift deed dated
22.12.2001, in the year 2004, to the loan availed by a third
party from The Grain Merchant's Co-operative Bank Ltd.
4. The petitioner also alleged that the respondent-
employee was required to obtain prior permission from the
Competent Authority while borrowing a loan from other
financial institutions, and same was not done and the
respondent cheated the financial institutions by fraudulently
mortgaging the property as security for different loans availed
by her and her relatives.
5. The charge memo dated 02.02.2007 issued to the
respondent refers to misconduct in terms of Paragraph No.
5(j) of the Memorandum of Settlement dated 10.04.2002.
6. The respondent disputed the charges. A domestic
enquiry was held, and the Enquiry Officer found that the
charges were proved and proposed the penalty of dismissal.
The Disciplinary Authority dismissed the respondent.
7. Aggrieved by the order of dismissal, the respondent
raised an industrial dispute. The Labour Court held that the
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WP No. 35848 of 2015
enquiry was fair and proper. Evidence was led on the plea of
victimization.
8. The Labour Court also recorded a finding that the
allegations are proved but concluded that the misconduct
under Section 5(j) of the Memorandum of Settlement dated
10.04.2002 was not established. Thus, the Labour Court set
aside the penalty of dismissal, directed reinstatement with full
back wages and all consequential benefits, along with
continuity of service.
9. Learned counsel appearing for the petitioner
submitted that the petitioner is a nationalised bank and the
respondent was its employee. Without disclosing the fact that
the property was already mortgaged in favour of other
financial institutions as a security for the loans borrowed by
her husband, the respondent also borrowed a loan in her own
name by offering the said property.
10. It is urged that the conduct of the respondent is
unbecoming of an employee of a bank, and it has tarnished
the image of the bank, and under Section 5(j) of the
Memorandum of Settlement dated 10.04.2002, it amounts to
misconduct on the part of the respondent.
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WP No. 35848 of 2015
11. It is also urged that the Labour Court, after having
recorded a finding that the charges were proved, could not
have interfered with the penalty of dismissal, as the scope for
interference is extremely limited unless it is established that
the penalty is disproportionate to the misconduct alleged.
12. The learned counsel for the petitioner placed
reliance on the judgment of the Apex Court in Disciplinary
Authority-cum-Regional Manager and Ors. vs. Nikunja
Bihari Patnaik1.
13. Learned counsel appearing for the respondent,
supporting the impugned award, contended that Paragraph
No. 5(j) of the settlement entered into between the
Management and the Union does not contemplate disciplinary
action in the situation brought before the Court.
14. It is further urged that, the respondent-employee
had borrowed loan from a bank and had offered guarantees to
two other banks for some loans, and has not caused any
financial loss to the petitioner-Bank, and the loan amount has
been repaid.
1
(1996) 9 SCC 69
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WP No. 35848 of 2015
15. It is urged that the transactions referred to in the
charge memo are outside the scope of employment; as such,
the petitioner-employer is not justified in holding the domestic
enquiry. It is also urged that the Rules and Regulations
applicable to the petitioner-Bank and the respondent did not
contemplate obtaining permission from the employer while
borrowing loans from other financial institutions.
16. The property belonged to the respondent, and she
had mortgaged the property in favour of financial institutions
which extended loan facilities to borrowers, and that cannot be
termed as misconduct on the part of the respondent is the
submission.
17. The Court has considered the contentions raised at
the Bar and perused the records.
18. The respondent has attained the age of
superannuation during the pendency of this petition. It is
noticed that Section 17B wages under the Industrial Disputes
Act, 1947 (Act, 1947), were granted from the date of the stay
order granted by this Court till the date of superannuation.
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WP No. 35848 of 2015
19. The finding of the Labour Court on the alleged
misconduct is as under:
"9.xxxxx
......Under these circumstances though the facts of
borrowing standing guarantee and committing default in
payment of the loans are proved being not disputed the
finding of the Enquiry Officer that charge of gross
misconduct as envisaged under Para 5(j) of the
Memorandum of Settlement is proved is baseless and
perverse. Under the circumstances, I have arrived at
conclusion that the findings of the Enquiry Officer the
charges of gross-misconduct levelled against the I Party
are proved are perverse and consequently the
punishment imposed by the Disciplinary Authority and
upheld by the Appellate Authority on such findings are
unsustainable."
20. Having recorded the findings that the respondent
had borrowed loans, offered the property as security, and
defaulted in repayment, the Labour Court directed reinstatement
on the premise that there is no misconduct on the part of the
employee.
21. On appreciation of the stand taken by the first
party/workman and the evidence led before the Labour Court,
there is no difficulty in holding that the first party-workman
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WP No. 35848 of 2015
borrowed money, stood as a guarantor, and also committed
default, and while borrowing money and offering the property as
security for the loan, the borrower/guarantor did not disclose
the fact that the property was offered as security for an earlier
loan transaction.
22. Thus, the question before the Court is, "Whether
the act/omission by the first party/workman amounts to
misconduct under Clause 5(j) of the Memorandum of Settlement
dated 10.04.2002 and is applicable to the respondent/
employee?"
23. The Clause 5(j) reads as under:
"5: By the expression 'gross misconduct' shall be meant
any of the following acts and omissions on the part of the
employee:
(a) xxx
(b) xxx
(j) doing any act prejudicial to the interest of the
bank or gross negligence or negligence involving or likely
to involve the bank in serious loss."
xxx
(Emphasis supplied)
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24. As already noticed, the petitioner-employer
contends that the act committed by the respondent-employee
is prejudicial to the interest of the bank on the premise that it
has seriously affected the goodwill of the bank, and the act is
unbecoming of a bank employee.
25. The respondent-employee contends that the
employee borrowed loans from a different bank, stood as a
guarantor for another bank, and now the entire amount is
recovered, and this act has not caused any prejudice to the
interest of the employer-bank and does not cause any serious
loss to the employer-bank.
26. The Labour Court has taken the view that the
aforementioned act does not amount to misconduct as defined
under Clause 5(j) of the terms of the settlement. As can be
seen from the award, it is noticed that the Labour Court has not
assigned reasons as to why such act or omission on the part of
the workman does not amount to misconduct.
27. In normal circumstances, the Court could have
referred the matter to the Labour Court to assign reasons as to
why the act of the employee does not amount to misconduct
under Clause 5(j) of the Memorandum of Settlement. However
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WP No. 35848 of 2015
the respondent has already attained the age of superannuation
such a course is not desirable.
28. The Labour Court has also held that the charge
levelled against the respondent-employee is not related to the
alleged failure to obtain permission of the employer before
availing the loan. The Court has perused the charges.
29. Charge-I is that the first party-employee, who
availed a loan of Rs. 3,00,000/- from UCO Bank on 28.02.2002
by mortgaging the flat and by giving an undertaking to UCO
Bank that she would produce the original gift deed dated
22.12.2001 and other related documents pertaining to the
mortgaged property, has not produced the original gift deed.
30. Charge-II is that the first party-employee extended
a personal guarantee in favour of UCO Bank on 31.12.2001 for
a credit facility of Rs.37 lakhs sanctioned to M/s.Urethane
India, a partnership firm run by her husband and sons, against
the security of property belonging to K. Srinivas, which also
includes the flat gifted to the first party-employee.
31. Charge-III is that the first party-employee availed a
mortgage loan of Rs.5,50,000/- on 26.04.2004 from Grain
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Merchants Co-operative Bank Limited against the deposit of the
original gift deed dated 22.12.2001.
32. Charge-IV is that the first party-employee stood as
a guarantor to the credit facility availed by M/s.Urethane India
from Indian Bank by creating an equitable mortgage of the
property covered under the gift deed dated 22.12.2001, which
was also offered as security to UCO Bank on 31.12.2001.
33. There is no difficulty in holding that the respondent-
employee had borrowed loans or stood as a guarantor by
mortgaging the same property. It is not the stand of the
employee that the property was mortgaged by disclosing earlier
charges and mortgage.
34. Thus, the charges that the same property was
offered as security to multiple loan transactions without
disclosing prior mortgage are in fact, established. That is also
the finding of the Labour Court.
35. The question that needs to be answered by the
Court is: "Whether the suppression of material facts by the
employee can be construed as an act of misconduct enabling
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the employer to hold a disciplinary enquiry and to impose a
penalty in terms of the settlement?"
36. It is to be noticed that the right to impose a penalty
on the respondent-employee after holding a disciplinary enquiry
is a right conferred on the employer, and the said right is
regulated in terms of the contract of employment and any other
terms agreed upon by the employer and the employee.
37. In the instant case, there is no difficulty in holding
that the petitioner-employer is asserting its right to hold a
disciplinary enquiry and impose a penalty under Clause 5(j) of
the settlement, which refers to acts prejudicial to the interest of
the bank or gross negligence involving or likely to involve the
bank in serious loss. There is no evidence as to the actual loss,
if any, caused to the bank. Whether the amount was repaid by
the time the penalty of dismissal was imposed is not
forthcoming. However, the Court is required to consider the
expression "likely to involve the bank in serious loss" found in
Clause 5(j) of the settlement.
38. In the context of the aforementioned expression in
Clause 5(j) of the settlement, there is no difficulty in holding
that the act of the respondent-employee in mortgaging a
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property already mortgaged as security for another transaction,
apparently without disclosing the earlier mortgage and loan
transaction, constitutes a potential loss to the bank. This aspect
has not been considered by the Labour Court. The Labour Court
recorded an erroneous finding that the act of the employee
does not amount to misconduct.
39. The Court is of the view that the said finding is
untenable and ex facie contrary to Clause 5(j) of the
settlement.
40. Now the question is, "Whether the respondent was
required to obtain permission from the employer before availing
loan from the third party and whether, misconduct is alleged in
this behalf?"
41. The relevant portion of the charge memo reads as
under:
"Mrs. Vanitha S. Rao has committed the acts of
misconduct as under:
01. She has not obtained prior permission from the
Competent Authority when she was borrowing
such huge loans from other financial institutions or
guaranteeing huge financial liabilities.
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02. She has cheated the said financial institutions by
fraudulently mortgaging the same property as
security for different loans availed by her and her
relatives.
03. She has defaulted the said financial institutions in
the capacity of borrower and guarantor."
42. At this juncture, it is also necessary to refer to
Central Bank of India Officer, Employees' (Conduct)
Regulations, 1976, (Regulations, 1976). Said Regulation
defines 'officer employee in Regulation 2(i). And the definition
of 'officer employee' reads as under:
"2. In these regulations unless the context
otherwise requires-
"x x x x
xxxx
xxxx
(i) "officer employee" means a person who holds a
supervisory, administrative or managerial post in the
bank or any other person who has been appointed and is
functioning as an officer of the bank, by whatever
designation called and includes a person whose services
are temporarily placed at the disposal of the Central
Government or a State Government or any other
Government undertaking or any other public sector bank
or the Reserve Bank of India or any other organisation,
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but shall not include casual, work charged or contingent
staff or the award staff;"
43. Relevant portion of Regulation No. 15 of
Regulations, 1976, reads as under:
"LENDING AND BORROWINGS:
15. No officer employee shall, in his individual
capacity:-
xxx
xxx
xxx
(v) guarantee in his private capacity the pecuniary
obligations of another person or agree to
indemnity in such capacity another person from
loss except with the previous permission of the
competent authority."
44. The definition of 'officer employee' includes persons
in supervisory, administrative, or managerial posts in the bank
or any other person appointed and functioning as an officer of
the bank other than casual worker, contingent staff or the
award staff. The expression 'award staff' though not defined
under the Regulations,1976, in the Indian Banking Industry it is
generally understood as 'clerical staff'. The respondent
admittedly was a clerical staff.
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45. Admittedly, the respondent has not obtained the
permission. However, Regulation No.15 does not impose any
mandate on the clerical staff to seek permission before
borrowing loan or standing as guarantee. Hence, there is no
misconduct for alleged violation of Regulation 15 as the said
Regulation does not bind the respondent.
46. However, as already noticed the misconduct is
established as the respondent has violated Clause 5(j) of the
settlement. And as already discussed, same amounts to
misconduct. The respondent being the bank employee should
have diligently followed the requirement of Clause 5(j) and
borrowing loan and standing as a guarantee on the strength of
property already mortgaged without disclosing the prior
mortgage is a serious misconduct.
47. The employer, under the settlement, is empowered
to impose the penalty of dismissal for such misconduct, and the
same was interfered with by the Labour Court on an erroneous
interpretation of Clause 5(j) of the settlement. This being the
position, the Court is of the view that the penalty of dismissal
could not have been interfered with by the Labour Court.
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48. It is submitted at the Bar that the respondent did
not opt for pension scheme and the service benefits payable to
the respondent is already paid and Section 17B wages are also
paid till the date of superannuation.
49. Though the petitioner succeeds, the petitioner shall
not claim refund of Section 17B wages from the respondent.
50. Hence the following:
ORDER
(i) Writ Petition is allowed.
(ii) The impugned Award dated 27/04/2015 in C.R.
No. 16/2010 passed by the Central
Government Industrial Tribunal-cum-Labour
Court is set-aside.
(iii) The order of dismissal dated 28.09.2007 is
confirmed.
Sd/-
(ANANT RAMANATH HEGDE)
JUDGE
GVP
