* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ LPA No. 493/2004
% Date of reserve: 07.11.2008
Date of decision: 28.11.2008
M.L. KALRA ......Appellant
Through: Mr. Ashok Bhalla, Advocate
Versus
UNION OF INDIA & ANR. .....Respondents
Through: Mr. Rajat Arora & Mr. M.K. Datta, Advocates
CORAM:
HON'BLE MR. JUSTICE SANJAY KISHAN KAUL
HON'BLE MR. JUSTICE MOOL CHAND GARG
1. Whether the Reporters of local papers Yes
may be allowed to see the judgment?
2. To be referred to Reporter or not? Yes
3. Whether the judgment should be Yes
reported in the Digest?
MOOL CHAND GARG, J.
1. The appellant has filed this Letters Patent Appeal aggrieved by
the judgment of the learned Single Judge of this Court dismissing his
Writ Petition No. 154/1994 vide order dated 23.2.2004.
2. The appellant who was employed as Deputy General Manager
with New Bank of India (NBI) was awarded the punishment of dismissal
from service by the Punjab National Bank (hereinafter referred to as
LPA 493/2004 Page 1 of 26
respondent No.2) vide order dated 22.3.1996 after NBI was
amalgamated with the said respondent. The punishment was imposed
after one year of his superannuation on the basis of the charge sheet
issued to him on 19.8.1993, i.e., after a period of six years alleging
lapses on his part in having forwarded the loan proposal of M/s
Kashipur Steels Private (Ltd.) (hereinafter referred to as the
“Borrower”) sometime in 1987-88 when he was working as the
Regional Head of NBI at Delhi. The appeal filed against the aforesaid
order was also rejected by the Appellate Authority and thereafter, the
writ petition assailing the punishment of dismissal and the order of
appellate authority has also been dismissed by the impugned order.
3. It would be appropriate to take note of the brief factual matrix of
the case, which is as under:-
(i) The appellant was working as the Deputy General Manager in the
Regional Office of New Bank of India (NBI) as its Regional Head, Delhi
in the year 1987-88.
(ii) On 2/4.11.1987, B/O Masjid Moth, New Delhi forwarded a loan
proposal for sanction of Term Loan of Rs. 90 lacs and C.C. Limit of
Rs.30 lacs in favour of the borrower company – for taking over a
running mill. The said proposal was simultaneously received at the
Regional Office as well as at the Head Office on 10.11.1987.
(iii) The Regional Office upon the scrutiny of the loan proposal,
raised certain queries vide letter dated 13.11.1987, which were replied
by the Branch vide letter dated 14.11.1987, whereafter the Regional
Office forwarded the proposal to the Head Office on 16.11.1987 along
with the queries and reply given by the Branch. Since the Head Office
LPA 493/2004 Page 2 of 26
had already assessed the loan proposal independently on the same
day itself, the Head Office put up the loan proposal to Board of
Directors for sanction, which was sanctioned by the Board on
25.11.1987.
(iv) The borrower Company, however, could not avail of the
sanctioned facilities and requested that the sanctioned credit facilities
be allowed for taking over another company, which was already
availing credit facilities from the Bank. This request was also allowed
by the Head Office and the Board of Directors on 3.2.1988 and the
Head Office conveyed the sanction on 11.2.1988.
(v) The Branch, thereafter on 4.6.1988 recommended another
proposal of the same borrower for the sanction of huge enhanced
facilities i.e. T/L – Rs. 90 lacs, C.C. Limit – Rs. 80 lacs, Deferred
Payment Guarantee (DPG) – Rs. 134.83 lacs. This was sanctioned by
the CMD of the Bank on 20.8.1988 upon the recommendations of the
Regional Office and the Head Office. The said sanction was conveyed
by the Head Office vide letter dated 25.8.1988. The CMD of the Bank
later on also relaxed vital terms of the sanction on 14.12.1988. It is
not disputed that before enhancement of the credit facilities as
aforesaid, the appellant stood transferred from the Regional Office in
April, 1988 and therefore, had no role to play in enhancing the credit
limits of the borrower.
(vi) On 19.8.1993 i.e, after the lapse of 6 years, the successor
Executive Director of NBI issued the charge sheet to the appellant
alleging, inter alia, that the appellant had acted in a mechanical
manner and at no time raised any objection to the loan proposal of the
LPA 493/2004 Page 3 of 26
borrowing company sent on 16.11.1987 which contained various
adverse features and as a result of his passive role, the Bank‟s interest
to the tune of Rs. 393.75 lacs which was outstanding became doubtful
of recovery.
(vii) After the amalgamation of NBI with PNB, the Board of Directors
of PNB resolved to lower the superannuation age of the appellant and
accordingly after expiry of 3 months notice, the appellant was retired
on 30.11.1994 i.e. about 1 year earlier from his normal date of
superannuation in the erstwhile NBI.
(viii) In the meanwhile, PNB continued the enquiry proceedings
initiated against the appellant even after his retirement by invoking
Regulation 20(3)(iii) of the Officers‟ Service Regulations. The
Disciplinary Authority vide its order dated 22.3.1996 inflicted the
punishment of dismissal upon him after one year of his superannuation
from service of the Bank. The appeal filed by the appellant against it
was rejected by the Appellate Authority on 6.3.1997. A writ petition
filed against the said order has also been dismissed vide impugned
order dated 23.2.2004.
4. Before us the appellant has assailed the impugned judgment
delivered by the learned Single Judge as well as the initiation of
disciplinary proceedings against him, including the punishment
inflicted as wholly illegal, unsustainable, discriminatory and has prayed
for quashing the same, inter alia, for the following amongst other
reasons:-
LPA 493/2004 Page 4 of 26
(i) The Higher Authorities were inclined to sanction the
credit facilities in favour of the Borrower Company in
violation of the norms.
(ii) It is not the case that the Higher Authorities were
ignorant about the alleged adverse features in the loan
proposal which were well within their knowledge. This is
evident from the deposition of SW-1, Shri Anil Mahajan,
officer (management Witness) who was posted at the
Head Office in Credit Department and had put up
sanction note for subsequent enhancement of the credit
facilities to the same borrower.
(iii) The subsequent huge enhancement and relaxation of
terms and conditions of sanction to which the appellant
was not a party absolves the appellant of whatsoever
was the responsibility.
(iv) The loan proposal was independently assessed by the
expert staff of Head Office and the recommendations of
the appellant were merely a formality. The appellant is
entitled for protection under exception Clause of
Regulation 3 Sub-Regulation 3 of Conduct Regulations.
(v) By alleging that the Appellant did not point out the
adverse features, the then Executive Director had
impliedly contended that the Board of Directors had
illegally sanctioned the credit facilities.
(vi) The appellant being subordinate to Board, could not
have challenged the acts of the Board of Directors.
Even otherwise, without challenging the acts of the
LPA 493/2004 Page 5 of 26
Board of Directors including the nominee directors of
RBI and Ministry of Finance, Government of India, no
action could be taken against the appellant.
(vii) The responsibility of the appellant being that of the
recommending authority, if any, was to immediate
higher authority and any third party cannot intervene or
proceed against the recommending Authority, until and
unless the said immediate superior authority makes a
specific complaint against the recommending Authority.
(viii) The then Dy. General Manager (Credit) at Head Office
(later on promoted as GM Planning), the immediate
superior officer never complained against the appellant.
On the contrary, he stated that the then C.M.D. had
waived crucial stipulations of sanction, due to which
security was jeopardized.
(ix) There was no concealment on the part of the appellant
as whatever information was received by him, was
forwarded to the Head Office. Even otherwise, the
alleged concealment of information could not have
affected the decision of the Board of Directors as
subsequent enhancement was allowed in the face of
disclosure of said information by the Branch.
(x) After the transfer of appellant from the Regional Office
in April 1988, the account was showing Health Code „A‟
(grading system in banks – implies good conduct of
account). The account went bad due to substantial
LPA 493/2004 Page 6 of 26
enhancement in the credit facilities and thereafter,
relaxation in terms and conditions of sanction.
(xi) Pursuant to recommending the loan proposal in 1987,
the appellant vide office order dated 28.6.1990 was
asked to perform the duties of General Manager by the
then Executive Director of the Bank who was party to
the sanction of credit facilities to the borrower meaning
thereby the alleged lapses, if any, stood condoned.
(xii) The Enquiry Officer acted with close mind and in his
anxiety to prove the allegations against the appellant,
failed to appreciate that the subsequent enhancement
in credit facilities and relaxation in the terms of sanction
had absolved the appellant from any responsibility
whatsoever.
(xiii) The Disciplinary Authority without taking into
consideration the factual position and without
appreciating that the appellant had ceased to be in the
service, inflicted the severest punishment upon the
appellant which was not at all commensurate with the
gravity of alleged misconduct. The order of punishment
“Dismissal from service, which shall be a disqualification
for future employment” was passed by the Disciplinary
Authority with mala fide intentions to deprive the
appellant of his retiral benefits.
(xiv) The Board of Directors (Appellate Authority) of Punjab
National Bank (PNB) without ensuring the compliance of
Regulation 17 of D&A Regulations and without deciding
LPA 493/2004 Page 7 of 26
the various contentions raised by the appellant,
mechanically passed resolution rejecting the appeal
dated 9.5.1996 of the appellant, which resolution was
communicated vide letter dated 6.3.1997.
5. The learned counsel for the appellant has also relied upon the
following judgments:-
1. CBI vs. Duncans Agro Industries – (1996)5 SCC 591
2. Union of India & Ors vs. J Ahmed – (1997) 2 SCC 286
3. Vishwanath Mishra vs UPSC Tribunal Ors: (1985) 2 SLR 708
4. State of MP vs. Bani Singh JT 1990(2) SC 54
5. Lal Audhraj vs State of MP (1968) SLR 88 (DB)
6. State of Punjab vs. Bakhtawar Singh & Ors 1972 SLR 85 (SC)
7. R.P.Bhat vs. Union of India & Ors AIR 1986 SC 1040
8. A.L.Kalra vs. Project & Equipment Corp. – 1984 SCC (L&S) 497
9. Union of India & Ors vs. R.Reddappa & Anr – (1993) 4 SCC 269
The aforesaid judgments were also cited by the appellant before
the learned Single Judge.
6. On the other hand, the respondents have supported the
judgment delivered by the learned Single Judge by submitting that the
charges were leveled against the appellant on account of serious
lapses committed by him while recommending the loan proposal of the
Borrower by misusing his position and having failed to safeguard the
interest of the NBI. The Enquiry officer, who was the Commissioner for
departmental enquiries under the Central Vigilance Commission, an
independent authority, vide its report dated 01.08.1995 held that the
charges against the appellant were proved and it was thereafter that
LPA 493/2004 Page 8 of 26
the disciplinary authority vide orders dated 22.03.1996 imposed the
punishment of “dismissal from service, which shall be a disqualification
for future employment” upon the appellant. His appeal was dismissed
by the Appellate Authority.
7. The respondents who contested the writ petition submitted that
while scrutinizing the loan proposal, the Regional Office raised certain
queries on the Branch vide its letter dated 13.11.1987, which were
replied by the Branch on 14.11.1987. Even though the said reply was
not satisfactory and the directions contained in the letter were also not
met by the Branch Office; yet on 16.11.1987 the appellant
recommended the loan proposal which was a serious lapse on his part
and in this manner caused loss to the Bank. They have relied upon the
following portion of his letter forwarding the proposal, where it was
stated:-
Shri Vinajy Rathi is an Executive Director of a Major Steel
Furnace and Rolling Mills Complex situated in Ghaziabad.
He is fully conversant with the latest technical
developments which are taking place in the steel
industry with particular relevance to its situation in and
around North India.
Based on the recommendations of the Senior Manager,
we also recommend that the following facilities may
please be sanctioned to the party on the under-noted
terms and conditions:-
xxx xxx xxx
8. It is submitted that merely because the appellant forwarded the
proposal and the Board of Directors of NBI sanctioned the same, it
cannot be said that the role played by the appellant was passive. It
will also not absolve the appellant of his responsibilities.
9. It is also submitted that it is not that the appellant has been
singled out but others have also been punishe`d for the irregularities in
LPA 493/2004 Page 9 of 26
the account of the borrower. It is also submitted that in addition to the
charges leveled against the appellant vide charge sheet dated
19.8.1993, there were 6 other charge sheets, which were initiated
against the Appellant but were kept in abeyance due to the order of his
dismissal. It has also been submitted that in the facts of the case and
for the reasons given by the Learned Single Judge while disposing of
the writ petition, it is not a case where this Court should exercise its
power to interfere with the quantum of punishment. Reliance in this
regard has been placed on the following cases:
1. Ramesh Chandra Sharma Vs. Punjab National Bank – 2007
II LLJ 245
2. V. Ramana Vs. A.P.S.R.T.C. – 2005 III LLJ 725 (S.C.)
3. Bharat Petroleum Corpn. Ltd. Vs. T. K. Raju – 2006 SCC
(L&S) 480
4. Maharashtra State Seeds Corpn. Ltd. Vs. Hariprasad
Drupadrao Jadhao – 2006 SCC (L&S) 587
5. U.P. State Road Transport Corporation, Dehradun Vs.
Suresh Pal – 2006 SCC (L&S) 1905
10. We have heard the counsel for the parties and have also gone
through the written submissions filed by them before us besides the
record of this case.
11. It is the case of the respondents that they noticed the acts and
omissions/lapses on the part of the appellant in forwarding the loan
proposal later. However, they have not specified the point in time
when the aforesaid lapses were detected. It is a matter of record that it
LPA 493/2004 Page 10 of 26
is only after six years they served the charge sheet, which reads as
under:
ARTICLES OF CHARGE
Shri M.L. Kalra, Officer on Special Duty (Accounts) during his tenure as Deputy
General Manager, Regional Office, Delhi committed serious lapses/irregularities
and acts of omission and/or commission, while recommending for sanction of
facilities in favour of M/s Kashipur Steels Ltd., details as per statement of
allegations as Annexure „B‟. Shri M.L. Kalra, is, therefore, charged as under,
each charge being independent of the other.
1. He failed to ensure and protect the interest of the Bank.
2. He acted in a manner unbecoming of an Officer of the Bank.
3. He acted otherwise that in his best judgment while discharging his
duties.
The charges enlisted above constitute misconducts within the meaning of
Regulation 3 read with Regulation 24 of New Bank of India Officer Employees‟
(Conduct) Regulations, 1982 and are punishable under Regulation 4 of New
Bank of India Officer Employees‟ (Discipline and Appeal) Regulations, 1982.
(G. NARAYANAN)
EXECUTIVE DIRECTOR
(DISCIPLINARY AUTHORITY)
12. In his reply to the charge sheet, the appellant denied the
allegations and stated that he had not committed any misconduct and
that the loan was sanctioned by the Head Office and the Board of
Directors in a hurry. Their keenness was writ large inasmuch as on the
same day when the proposal was sent by the Regional Office, the Head
Office put up the proposal before the Board of Directors, who
sanctioned the loan within a week or so. The appellant was only a
junior officer and was not competent to overrule the Board. On his
part, he had sent the proposal along with the queries raised by the
Regional Office and the reply given by the Branch. Before us, he also
relied upon the testimony of Anil Mahajan, who appeared as SW-1
during the enquiry. From the statement of this witness, it is apparent
that the entire material was placed before the Board.
LPA 493/2004 Page 11 of 26
13. It is also of importance to note that the proposal was sent on
16.11.87 to the Head Office who put up the proposal to the Board of
Directors on 16.11.87 itself and on 25.11.1987 the Board of Directors
sanctioned the loan without even taking into consideration the short
comings if any in the proposal and violation of Banking guidelines. In
this regard it is again not disputed that the proposal sent by the
Regional Office was accompanied with the queries raised by the
Regional Office as well as the replies sent by the branch.
14. It is also not in dispute that the request made by the same
borrower for the sanction of enhanced cash credit limits and other
facilities forwarded by the same branch when the appellant was no
more in the regional office was accepted by the CMD without any role
played by the appellant. Even the norms for grant of such facilities
were also relaxed by the CMD of the bank. It is thereafter the party
defaulted. The aforesaid facts do not form part of the Charge Sheet
and have not been dealt with by the enquiry officer, disciplinary
authority or by the Ld. Single Judge even though a reference to the
same was made by the appellant in his reply to the charge sheet. It is
also a matter of record that no action has been taken by the bank
against the members of the Board of Directors or the CMD.
15. Before the writ court, the initiation of disciplinary proceedings
against the appellant which resulted in the passing of an order
dismissing the appellant from service after one year of his
superannuation were assailed as wholly invalid ab initio, inter alia, on
the following amongst other grounds;- i.e.
LPA 493/2004 Page 12 of 26
(i) Inordinate delay in issuing the charge-sheet which
caused serious prejudice to the appellant. It was
contended that the loan was sanctioned during 1987-
88 and charge-sheet was issued in the year 1993.
Delay was of 6 years which had caused prejudice.
Reliance was placed upon the Judgment of the Apex
Court reported in JT 1990 (2) SC 54, State of M.P.V.
Bani Singh.
(ii) The lapses alleged against the appellant did not
constitute any misconduct. Reliance was placed on
1979 (2) SCC 286, Union of India Vs. J. Ahmad and
1985 (2) SLR 708, Vishwanath Mishra Vs. UPSC
Tribunal.
(iii) The loan was sanctioned by the Board of Directors of
NBI. The appellant being a junior officer could not be
charged for any misconduct. 1996 (5) SSC 591, C.B.I.
Vs. Duncans Agro Industries was relied upon. In
this regard it was also submitted:
(a) Role alleged against the appellant was that of
being passive which was not a misconduct and,
therefore, the very charge sheet was required to
be quashed and as a consequence thereof
everything which emanated from the charge
sheet or was a result thereof was to be quashed.
(b) The loan proposal was sanctioned by the Board
of Directors. The primary liability was of the
sanctioning authority and without proceeding
against the Directors no action could be taken
against the appellant.
(c) The appellant was only a recommending
authority and his responsibility was, therefore,
subjected to the decision of the immediate
specified superior authority. Appellant‟s
immediate superior authority made no complaint
against him and therefore, no proceedings could
be initiated against the appellant.
(d) Appellant being the Regional Head merely
forwarded the loan proposal. It was at the Head
Office that the loan proposal was scrutinized and
examined. It was put up to the Board of
Directors. Thus, the appellant had no role in the
sanctioning of the loan.
(e) The charge-sheet was also served for the same
set of facts upon Shri S.K. Abrol, the then Deputy
LPA 493/2004 Page 13 of 26
General Manager (Credit) who in his defence
never stated that he was misled by the
appellant.
(f) Senior Manager of the branch at Masjid Moth was
the person at the grass-root level and it was he
who was obliged to personally verify the
correctness of the information supplied. Being
at the Regional Office, appellant was only to
ensure that the loan proposal was properly
processed. He did so by letter dated 13.11.1987
addressed to the branch office which confirmed
that all procedural requirements were complied
with and necessary enquiries were made.
(iv) That in between 1987-1988 when the proposal was
sent and 19.8.1993 when charge-sheet was issued,
appellant was promoted and, therefore, charges stood
condoned. 1968 SLR 88, Lal Audhraj Vs. State of
M.P. was relied upon.
(v) That the Order of dismissal stated no reasons and as
such it was a case of non-application of mind. 1972
SLR 85 (SC), State of Punjab Vs. Bakhtawar Singh
and 1984 SCC (L&S) 497, A.L.Kalra Vs. Project &
Equipment Corporation were relied upon.
(vi) The Order rejecting appeal also stated no reasons. It
was again a case of non-application of mind. AIR 1986
SC 1040, R.N.Bhatt Vs. Union of India and 1993 (4)
SCC 269, Union of India Vs. R. Reddappa were
relied upon.
(vii) That the punishment imposed upon him was
disproportionate. More so when the members of the
Board were not even questioned on the issue.
16. The appellant has submitted that the learned single Judge has
not appreciated the facts of this case in the correct perspective and
has simply dittoed the line of reasoning given by the enquiry officer
even though the role of the Board of Directors was not even analysed
or discussed by the enquiry officer who were primarily responsible for
having sanctioned the loan proposal despite alleged deficiencies, if
any, which were within their notice in respect of the proposal and the
replies received from the branch were forwarded along with the loan
LPA 493/2004 Page 14 of 26
proposal by the appellant. The learned Single Judge has also ignored
the enormous delay in initiating the proceedings against him and the
punishment imposed which is highly disproportionate and
discriminatory against him qua other officers who were posted in the
same branch and who initiated the loan proposal.
17. Before the learned Single Judge, the learned counsel for the
respondent-bank accepted that the loan proposal was sanctioned by
the Board of Directors but this was justified on the ground of hierarchy
of the banking system. It was stated that sanction of loan by the Board
of Directors does not absolve the appellant from his responsibilities.
However, neither any justification was furnished before the writ court
nor it has been submitted before us as to why further facilities were
sanctioned for the same party subsequently on the same facts when
the appellant was not even the Regional Head and stood transferred.
There is also no explanation as to why no action was taken against the
Board members.
18. The learned Single Judge accepted the stand of the respondents
by relying solely upon the report of the enquiry officer but without
referring to the reasons for the extension of the loan facilities and by
observing that the appellant had not criticized the findings of the
enquiry officer, which is not so because the writ petition also assails
the findings of the enquiry officer and the initiation of the enquiry itself
including the disproportionality of the punishment and the role played
by the Board of Directors in the whole episode.
19. The learned Single Judge has also not appreciated the delay of 6
years in issuing the charge sheet in the correct perspective even
LPA 493/2004 Page 15 of 26
though the learned Judge has relied upon the judgment of a Division
Bench of this Court delivered on 29.10.2003 in LPA No. 39/1999, i.e.,
the case of DDA Vs. D.P. BAMBAH, which lays down the legal
position in respect of an action brought seeking quashing of a charge-
sheet and inordinate delay in completion of the disciplinary enquiry
which have been crystallized as under:-
(i) Unless the statutory rules prescribe a period of limitation
for initiating disciplinary proceedings, there is no period
of limitation for initiating the disciplinary proceedings;
(ii) Since delay in initiating disciplinary proceedings or
concluding the same are likely to cause prejudice to the
charged employee, courts would be entitled to intervene
and grant appropriate relief where an action is brought;
(iii) If bona fide and reasonable explanation for delay is
brought on record by the disciplinary authority, in the
absence of any special equity, the court would not
intervene in the matter;
(iv) While considering these factors the court has to consider
that speedy trial is a part of the facet of a fair procedure
to which every delinquent is entitled to vis-à-vis the
handicap which the department may be suffering in the
initiation of the proceedings. Balancing all the factors, it
has to be considered whether prejudice to the defence on
account of delay is made out and the delay is fatal, in the
sense, that the delinquent is unable to effectively defend
himself on account of delay.
(v) In considering the factual matrix, the court would
ordinarily lean against preventing trial of the delinquent
who is facing grave charges on the mere ground of delay.
Quashing would not be ordered solely because of lapse of
time between the date of commission of the offence and
the date of service of the charge sheet unless, of course,
the right of defence is found to be denied as a
consequence of delay.
(vi) It is for the delinquent officer to show the prejudice
caused or deprivation of fair trial because of the delay.
(vii) The sword of Damocles cannot be allowed to be kept
hanging over the head of an employee and every
employee is entitled to claim that the disciplinary enquiry
should be completed against him within reasonable time.
Speedy trial is undoubtedly a part of reasonableness in
every disciplinary enquiry.
LPA 493/2004 Page 16 of 26
20. However, the impugned judgment does not specify as to why the
principles mentioned above were not applicable in the present case
despite the fact that the appellant was charge sheeted after 6 years of
sending the proposal and none of the Board members were even
questioned about their role for their lapses in accepting the proposal
and sanctioning further credit facilities to the same borrower.
21. At this stage, reference can also be made to the enquiry report
which does not mention anything about the circumstances leading to
enhancement of further credit limits in 1988 or in respect of the
violation of the circulars which have been referred to by the appellant
in his reply and which were very much within the knowledge of
ED/CMD/Board, for not granting sanction of loan for taking up the
shares of other companies. In para 40 of the report it has been
observed:-
As per Bank circular dated 3.1.1984, the bank was to
refrain from granting loan for taking up of shares of
other companies. The CO has stated that the circular
was within the knowledge of the HO officials as well as
ED/CMD/Board and yet they did not raise any objection
to the proposal.
22. It is nobody‟s case that the Board of Directors were not
competent to have returned the proposal or to have insisted upon
following the circulars and other guidelines for the sanction of such
facilities to the Borrower. This also lends support to the contentions
urged by the appellant that the lapses alleged against him did not
constitute misconduct on his part. However, the ld. Single Judge
observed that the charges leveled and proved against him showed that
he acted otherwise than as per his best judgment while discharging his
duties and therefore, committed an act of omission and commission
LPA 493/2004 Page 17 of 26
which resulted in sanction of loan facilities in favour of the Borrower,
whereby the bank lost over a crore of rupees, without appreciating that
the initial loan facilities were increased subsequently when even the
appellant was not in the Regional Office and it is only thereafter, the
borrower became a sick unit. The Learned Single Judge also misread
the judgment delivered in the case of J. Ahmad (supra) relied upon
by the appellant, wherein it has been held:-
There may be negligence in performance
of duty and a lapse in performance of duty
or error of judgment in evaluating the
developing situation may be negligence in
discharge of duty but would not constitute
misconduct unless the consequences
directly attributable to negligence would
be such as to be irreparable or the
resultant damage would be indicative of
negligence and the degree of culpability
may indicate the grossness of the
negligence.
23. A very important aspect is the role played by the Board of
Directors with respect to the loan proposal in the form of queries raised
and reply received from the branch. Instead of returning the proposal
and giving the directions to meet out the deficiencies the members of
the Board even enhanced the loan facilities to a great extent just after
few months even when the appellant was not in the Regional Office
having been transferred from there in April, 2008. This gives credence
to the stand of the appellant, that it was the H.O./CMD/Board of
Directors who were more interested in extending loan facilities to the
borrower and the proposal forwarded to them by the Regional Office
was nothing else but complying with the directions of the Head Office
to forward the proposal as early as possible. This aspect has simply
been ignored.
LPA 493/2004 Page 18 of 26
24. A perusal of the deposition made by Shri Anil Mahajan, who
appeared as SW-1 before the enquiry officer, reveals that the entire
material i.e. the queries raised by the Branch on the Regional Office
with respect to the loan proposal as well as the reply of the Branch was
very much placed before the Board of Directors when the initial loan
proposal was sanctioned by the Board on 5th November, 1987. This
witness has also stated that there were legal complications in respect
of EISL and it was all the more necessary to obtain legal opinion and
search report in respect of the assets of EISL before recommending the
proposal. However, the Board of Directors had not taken any such
action. They have also not returned the proposal to the Branch for
doing the needful. The witness also stated that as per exhibit S-14
permission from DDA for mortgaging the property has not yet been
obtained, which is essential for creating a mortgage. Despite that the
loan was sanctioned by the Board of Directors. Similarly, as per the
statement given by him the permission from the Central Government
under Section 372 of the Company Act for taking over more than 30%
shares of another company was also not obtained even though the
loan was sought for that purpose, yet the Board has not taken any
action on the proposal. At point „f‟ of the proposal, the group affiliation
of the Borrower with Rathi Group of Industries was mentioned while
recommending the proposal which clearly revealed group affiliation of
the borrower with the Rathi Group of industries. The name of
guarantor given as P.R. Rathi also clarifies that aspect, yet the
appellant has been blamed for having not disclosed the necessary
particulars. These aspects have also not been taken note of by the
learned Single Judge while passing the impugned judgment. In these
LPA 493/2004 Page 19 of 26
circumstances, it cannot be said that it was the misconduct committed
by the appellant, as alleged.
25. Vide our order dated 15.10.2008, we called upon learned counsel
for the respondents to obtain instructions as to whether they were
willing to consider reduction in punishment imposed upon the
appellant in view of our order dated 18.09.2008. The background for
passing this order was the submission made by the appellant regarding
enhancement of loan facilities to the same party subsequently in the
circumstances as aforesaid for which the appellant was not to be
blamed and which is the reason for the party becoming a defaulter.
This aspect is also clear from our order dated 15.10.2008. Both the
orders are reproduced hereunder for the sake of reference :
Order dated 18.09.2008
Arguments concluded.
Learned counsel for the parties seek time to file a
short synopsis of the submissions.
Learned counsel for the respondents also seeks
some time to obtain instructions whether in the given
peculiar facts and circumstances of the case, more
importantly what is recorded at page 207 and the
petitioner having attained superannuation prior to the
proceedings (petitioner in now no more), the punishment
of dismissal from service can be converted to one
discharge from service with retiremental benefits to put an
end to the litigation.
List for directions on 15.10.2008
Order dated 15.10.2008
Learned counsel for the parties have filed their
respective synopsis along with citations. Learned counsel
for the respondents states that he has obtained instruction
that the respondents are not willing to consider any
reduction in punishment as observed in order dated
18.09.2008.
Learned counsel for the respondent to produce the
record of the process pursuant to order dt. 18.09.2008.
Learned counsel for the respondents further states that his
synopsis does not incorporate the aspect of subsequent
enhancement of the loan. Admittedly, the appellant was
not a party to the enhancement of loan and thus it should
be stated whether any disciplinary action was taken
against the officers who enhanced the loan as also the
process followed for such enhancement of loan.
LPA 493/2004 Page 20 of 26
Learned counsel for the respondents seeks time to
file further synopsis on this aspect and produce the
records.
List for directions on 7.11.2008.
26. In their response to our aforesaid directions, the respondents
have given no explanation as to why the loan facilities were extended
to the same party whose initial loan proposal was defective. Similarly,
no explanation has been furnished as to why no action has been taken
against any of the members of the Board who sanctioned the loan
proposal earlier or who were a party to the enhancement of the loan
facilities to the same Borrower. The only disclosure made is about
the action taken against some other officers of the bank who were
posted in the Branch and who have not been awarded the punishment
of dismissal which only shows that the respondents have tried to make
the appellant a scapegoat for the omissions and commissions of the
members of the Board of Directors of NBI, who from the circumstances
appeared more keen to sanction the loan proposals even though it had
deficiencies and the proposal was contrary to the guidelines, circulars
of the bank itself, which was within the knowledge of the Board
members.
27. The learned Single Judge had also rejected the submissions of
the appellant that the punishment imposed upon the appellant was
disproportionate by upholding the order of Disciplinary Authority
without appreciating that the penalty of dismissal was inflicted upon
the appellant after 1 year of his superannuation and by making it
specific that the said punishment would be a disqualification for his
future employment. This also deprived the appellant of his retiral
benefits even though no action has been taken by the respondents
LPA 493/2004 Page 21 of 26
against the concerned Board members or the CMD, who, in fact, were
responsible for sanctioning the loan facilities and for further enhancing
the credit limits.
28. As per the disclosure made by the respondents in their additional
affidavit, the persons who were posted in the branch and were
responsible for forwarding the proposal have been awarded lesser
punishments and have not been dismissed from service. The Board of
Directors were simply kept out of the investigation and thus, no action
was ever proposed against them.
29. We have also gone through the judgments cited by both the
parties and are satisfied that the impugned judgment passed by the
learned Single Judge cannot be sustained for the following reasons :-
(i) It was the Board of Directors of NBI who were in a hurry and
keen to sanction the loan facilities to the borrower. This is
apparent inasmuch as the loan proposal which was forwarded
by the Regional Officer to the Head Office on 16.11.1987 was
put up before the Board of Directors on the same day by the
Head Office and was sanctioned by the Board on 25.11.1987.
(ii) The Board of Directors, who were the sanctioning authority
while scrutinizing the loan proposal were duty bound to have
taken note of the deficiencies, if any, and to return the
proposal back to the Regional Office, if it was not acceptable
but they have not done so. In these circumstances, it is
apparent that the role played by the appellant was only a
passive role and not an active role.
LPA 493/2004 Page 22 of 26
(iii) Moreover, the CMD also sanctioned further enhancement of
credit facilities and loan facilities to the same party on
20.08.1988, which were much higher on the basis of a
proposal given by the Branch on 04.06.1988 when the
petitioner was not even the Regional Head. Not only the
facilities were extended but even the norms were relaxed.
(iv) The charge sheet was served upon the appellant on
19.08.1993 after a lapse of 6 years without any explanation.
(v) On the date of inflicting the punishment of dismissal the
Appellant stood superannuated one year before by virtue of
an action taken by the Bank which acquired New Bank of India
after its amalgamation to lower down the superannuation age
of Appellant after giving a notice of 3 months. Yet they
continued inquiry proceedings by invoking Regulation
20(d)(iii) of Officers‟ Service Regulations for no rhyme or
reason despite the promotion of the appellant subsequent to
the release of the first loan to the borrower.
(vi) The punishment imposed upon the appellant of dismissal from
service after one year of superannuation with a rider that the
said punishment would be a disqualification for his future
employment smacks of mala fide and is unsustainable, more
so when no action has been taken against the members of the
Board, who apparently were responsible for creating a
situation which made the bank suffer a loss by extention of
facilities further in 1988. In this regard, it has also come on
record that after the sanction of the first loan the account of
LPA 493/2004 Page 23 of 26
the borrower had „A‟ grading and it is only after the
enhancement of loan it became the defaulter‟s account.
(vii) Despite opportunity granted, the respondents have failed to
explain as to what action they have taken against the Board
of Directors. In fact, disclosure made by them in having taken
action against the Branch Officers who floated the loan also
goes to show that they have discriminated against the
appellant in respect of the punishment order to those officers.
The chart submitted by the respondents in this regard is
reproduced hereunder:
Name Designation Charge Sheet Punishment
Date
Sh. J K Nagpal Sr. Manager 14.7.94 Reduction of salary by
one stage in pay scale
in which he is placed
for a period of one year
with further direction
that he will not earn
any increment of pay
during the period of
such reduction and on
the expiry of such
period the reduction
will have the effect of
postponing the future
increment of pay.
S K Ahuja Sr. Manager 14.07.1994 The disciplinary
proceedings have been
kept in abeyance in
view of his dismissal in
connection with the
charge sheet dated
20.04.1993.
K Poornam D.G.M. 12.07.1994 Minor penalty of
Censure
SK Abrol G.M. 19.08.1993 Major Penalty of
reversion to next lower
grade.
(viii) The aforesaid officers were in fact junior officers of the
appellant and were actually responsible for having forwarded
the loan proposal. Their role was more serious and active
LPA 493/2004 Page 24 of 26
than that of the appellant, who simply forwarded the proposal
along with the queries raised and reply received.
(ix) The submissions made on behalf of the respondents in their
written submissions that the punishment of dismissal is also
justified on account of pendency of six other charges against
him, which are dated 10.4.1992, 14.8.1992, 5.3.1994,
14.12.1994, 12.1.1995 and 24.03.1995 is again of no
consequence because there was no impediment on the part of
the respondents to have tried the appellant in respect of the
aforesaid charges when they tried the appellant for the
charge sheet served upon him on 19.8.1993, which as stated
above was itself issued after six years. These charge sheets
could not have been issued to the appellant being highly
belated and thus cannot support the plea of the respondents
that the punishment of dismissal is justified.
(x) The judgment delivered by the Learned Single Judge has
ignored all these facts including the judgments cited before it
in their correct perspective.
30. We, therefore, issue a writ of certiorari quashing the disciplinary
proceedings taken by the respondents against the appellant right from
serving the charge sheet, the report of the enquiry officer, the
punishment of dismissal awarded to him, the order of the appellate
authority. The judgment of the learned Single Judge is also set aside.
Directions are issued to the respondents to treat the appellant in
service till the date of his superannuation and to release all his retiral
benefits to his legal representatives within a period of three months
from today, as the appellant has already died.
LPA 493/2004 Page 25 of 26
31. The appeal is accordingly allowed, leaving parties to bear their
own costs.
MOOL CHANG GARG, J
SANJAY KISHAN KAUL, J
NOVEMBER 28, 2008
ag/dc
LPA 493/2004 Page 26 of 26