JUDGMENT
D.Y. Chandrachud, J.
1. The employee in the present case, the first respondent in Writ Petition No. 1520 of 1997 filed by the employer, was a Special Assistant in the service of the Union Bank of India. A chargesheet dated 6th July, 1984 was issued to him, in which a disciplinary enquiry into a charge of misconduct was proposed to be held. The charge against the first respondent was that while in the employment of the Bank, he had fraudulently enrolled 84 members in the guise of floating a Co-operative Housing Society. As the Chief Promoter, the first respondent was alleged to have collected an amount of Rs. 7.20 lakhs by cheques and in excess of Rs. 1 lakh in cash over a period of 6 years. (These members who were enrolled, it is common ground, were employees of the Bank). The chargesheet recited that
false assurances were given to the members to the effect that the clearance of
the Government of Maharashtra had been received by the first respondent and
on these assurances amounts were collected from the proposed members of
the Co-operative Society. Since no progress was achieved in the fulfilment of
the object of the Society, the members requested the first respondent for a
refund of their moneys and complained that despite their request, the moneys
had not been refunded. One of the members of the Society Smt. V.J.
D’Souza (who is, it is common ground, an employee of the Union Bank) was
issued a cheque drawn on the Nariman Point Branch of the petitioner-Bank,
which was jointly signed by the first respondent and by the co-promoter of
the Society, Shri K.A. Sirur. On three occasions the cheque was returned
unpaid for want of sufficient balance in the account. A Joint Savings Bank
Account was maintained at the Nariman Point Branch of the petitioner Bank
into which the collections from the Members were deposited. Out of a total
amount of Rs. 4.87 lakhs collected by the first respondent, an amount of
Rs. 2.82 lakhs was unaccounted and the account which was maintained at the
Nariman Point Branch of the Bank showed a balance of only Rs. 5/-. The
second charge against the first respondent was that he had entered into a
business in the name and style of M/s Harish Industries having its office at
170/133, Bombay Talkies Compound, Malad (West) and that he had invested
the moneys which had been fraudulently collected from the members of the
proposed Society in the said business. The first respondent was accordingly
charged with having committed gross misconduct consisting of (i) cheating;
(ii) misappropriation; (iii) entering into and carrying on business without
obtaining permission from the Bank; (iv) acting in a manner prejudicial to the
interest of the Bank; and (v) issuing cheques without sufficient balance in the
Account.
2. The disciplinary enquiry which was held against the first respondent culminated in a finding of the Enquiry Officer that the charges against the first respondent were proved. On 15th September, 1984, the penalty of dismissal came to be imposed upon the first respondent. The departmental appeal preferred by the first respondent was rejected. The appropriate Government, in the present case, the Central Government, upon a demand made by the workman made a Reference to adjudication under Section 10 of the Industrial Disputes Act, 1947 of the dispute raised by the first respondent in regard to the order of dismissal from service that was passed against him.
3. Before the Central Government Industrial Tribunal the submission which was urged on behalf of the workman was that the charge of misconduct was outside the purview of the disciplinary jurisdiction of the petitioner-Bank since the action complained of did not relate to the course of employment or arise out of the discharge of the duties of the workman concerned. The Industrial Tribunal by its award dated 20th December, 1994 accepted that submission and came to the conclusion that the action of the employer in dismissing the first respondent from service was not justified. On behalf of
the employer, it was sought to be submitted before the Industrial Tribunal that in the present case, the first respondent had invited the employees of the Bank by a general circular which was issued by him to make their contributions towards the proposed Co-operative Society in pursuance of which a large number of employees had in fact, made their contribution. Similarly, the fact that the first respondent had opened an account with the Bank in which the moneys which were collected had been deposited; and that the first respondent had issued a cheque from the account which had not been honoured and had been returned on three occasions, was sought to be urged as grounds in support of the submission that there was in the present case a sufficient nexus between the act of misconduct and the employment of the first respondent with the Bank. These submissions were rejected in the Part-I Award of the Industrial Tribunal. In the Part-II Award dated 8th July, 1995, the Industrial Tribunal considered the question as to whether the first respondent was entitled to the relief of reinstatement and back wages which he had prayed. In its Part-II Award, the Tribunal has come to the conclusion that the first respondent was employed in a Banking Institution and Banking being a sensitive industry, the acts complained of against the first respondent were serious enough not to warrant an order of reinstatement or for that matter, of back wages. The Industrial Tribunal noted that it was common ground that even until date an amount of Rs. 1.80 lakhs had not still been refunded by the first respondent to his colleagues the employees of the Bank -from whom moneys were collected for the ostensible purpose of floating a Co-operative Housing Society which would give them a residential flat each. The Tribunal noted that the first respondent has collected a huge amount; that he had failed to get the Society registered and residential flats constructed and, in the process had failed to return the moneys which had been received by him. In these circumstances, the Tribunal was of the view that this was an exceptional case in which the relief of reinstatement should be refused.
4. Before going into the merits of the submissions which have been urged on behalf of the contesting parties, it would be necessary to have regard to the broad contours of the facts in the present case which form the basis of the allegation of misconduct. On 18th July, 1978, a circular was issued by the first respondent to all the members of the staff of the Union Bank of India claiming himself to be a convener of a proposed Co-operative Housing Society of the employees of the Bank, Details therein were sought to be furnished of the land, its location, amenities, of the specifications of the flats which would be constructed, the cost of the flats and the basis of allotment. The circular concluded by stating that the members of the staff should contact the first respondent for booking a flat on any working day in the Accounts Department of the Central Office of the Petitioner-Bank at Nariman Point, Mumbai. A further circular dated 11th September, 1978 was thereafter addressed by the first respondent to the members of the staff of the Bank informing them of the steps which had been taken towards the acquisition of
the land and the implementation of the objects of the proposed Society. One of the items on the agenda for the meeting which was proposed by the first respondent was to discuss “matters regarding housing loan facility available from the bank and the details of the repayment schedule”.
5. There is no dispute about the fact that the first respondent as the promoter of the proposed Housing Society induced other members of the staff to part with moneys as their contribution towards the membership of the Cooperative Society. There is similarly no dispute about the fact that an account in respect of the proposed Co-operative Society was opened by the first respondent in the Nariman Point Branch of the petitioner-Bank through which various transactions took place. The first respondent was pressed by his co-workmen to refund the moneys which had been collected by him since there was no sign of any building being constructed or of the flats which had been promised by him. On 23rd February, 1983, a cheque drawn on the Nariman Point Branch of the Bank was issued to an employee of the Bank, Mrs. V.J. D’Souza by the first respondent jointly with one K.A. Sirur, a co-promoter and the said cheque came to be dishonoured on presentation. After it was dishonoured on 9th March, 1983, it was re-presented on 12th April, 1983 after which it was once again dishonoured. On 16th November, 1983 a show cause notice was issued to the first respondent informing him of the aforesaid fact and drawing his attention to the fact that the issuance of the cheque or withdrawal without keeping a sufficient balance in the account was a misconduct under the Rules of the Bank. The first respondent replied to the aforesaid letter. On 5th January, 1984, the first respondent was placed under suspension. On 31st May, 1984 a complaint was received from three employees of the Bank recording that the employees of the Bank had paid amounts ranging from Rs. 10,000/- to Rs. 19,000/- partly by cheques and partly in cash to the first respondent and that the repayment of their moneys was not forthcoming despite requests made to that effect to the first respondent. The fact that the cheques which had been issued by the first respondent were dishonoured had also been placed on record. On 18th June, 1984, the co-promoter who had associated himself with the first respondent addressed a letter, inter alia, claiming that the sole responsibility for the cash dealings in relation to the Co-operative Society was of the first respondent. In the said letter, a reference was made to the fact that the first respondent had since commenced a business in which he and his wife were partners. As stated earlier, a chargesheet then followed which resulted in a disciplinary enquiry and the imposition of the penalty of dismissal from service.
6. Before the Industrial Tribunal the submission which was urged on behalf of the first respondent which has found acceptance in the Part-I Award dated 20th December, 1994, was to the effect that the act which constituted a misconduct could not form the subject matter of the exercise of disciplinary jurisdiction by the Bank and that, therefore, imposition of the penalty of dismissal by the Bank was not justified. In accepting this submission, the
Tribunal has relied upon a judgment of the Supreme Court in Indian Express & Chronicle Press v. M.C. Kapur, 1974 II LLJ 240 and of a Division Bench of this Court in Nandita B. Palekar v. Y.S. Kasbekar and Ors., 1985 Mh.L.J. 405 = 1985 II LLJ 336, While investigating into the question of whether the award of the Tribunal was justified, it would be necessary to make a reference to these two decisions and to consider the position in law, In the Indian Express case (supra), the respondent was an office bearer of an Employees Co-operative Credit Society set up by the employees of the Indian Express Group of Newspapers. On a complaint by the President of the Cooperative Society, the management had issued a charge-sheet against the workman alleging that he had misappropriated the funds of the Society, prepared false cash memos, falsified accounts of the society, refused to account for certain moneys and had failed to hand over charge as a treasurer even after he resigned from the society. The charge against the workman was of theft, fraud or dishonesty in connection with the company’s business or property, riotous or disorderly behaviour during working hours at the establishment or any act subversive of discipline. The Industrial Tribunal came to the conclusion that the Employees Co-operative Society was an altogether independent concern or organization and that the employer had no financial or other interest in it, nor did it have any control over its management, functioning or finance. In appeal, the Supreme Court held that the learned Counsel appearing on behalf of the employer had been unable to bring the charges which were prepared against the workman or the findings of the Enquiry Officer under the relevant clause of the Standing Orders. The Court noted that there was no merit in the charge of riotous or disorderly behaviour during the working hours and that the only other provision of the Standing Orders which could conceivably apply was that the workman had committed an act subversive of discipline. The Supreme Court held that the charges against the workman did not relate in any manner to the question of discipline. In these circumstances, the appeal against the award of the Tribunal came to be rejected. Insofar as the judgment of the Division Bench of this Court in Palekar’s case (supra) is concerned, disciplinary proceedings were sought to be initiated against a Senior Clerk of the Maharashtra Housing Board to whom a tenement had been allotted under a Housing Scheme for breach of an undertaking furnished at the time of allotment to the effect that he would not sublet the premises without the consent of the Board. The tenement in that case was not allotted to the workman in his capacity as an employee of the Board and tenements, it is common ground, were allotted by the Board also to other eligible applicants. In these circumstances, a Division Bench held that a breach of the undertaking would invite the consequences that were prescribed by the Housing Board for cancellation of allotment and eviction of the allottee but there was no specific rule of conduct or discipline under which it would also constitute a misconduct under the service rules.
The observations of the Division Bench in para 10 of the judgment are relevant to the controversy in this case :
“10. Misconduct is something more than mere breach of a term of the agreement or the rule. It must ordinarily be something which must impinge upon the conduct expected of an employee with reference to or in discharge of his duties as an employee or violation of a condition subject to which he was conferred a benefit as an employee or the violation of a special obligation imposed upon him as a condition for the conferment of a privilege upon him or must be something related to discipline. We, however, hasten to add that we do not lay down as a general rule that misconduct for which disciplinary action could be taken must always be in the discharge of his duties in the course of employment; conduct outside the employment may have a bearing on the employment and may constitute sufficient reason under Rule 33. for inflicting one of the penalties stated therein.”
In this context a reference may also be made to the decision of a Division Bench of this Court in S.O. Tiwari and Ors. v. Central Railway, 1960 (1) LLJ 167. The Court was considering a writ petition by employees of the Central Government who sought to impugn the initiation of disciplinary proceedings against them. The charge in the said case related to the conduct of the three petitioner-workmen as office bearers of a Consumer Co-operative Society of Central Railway employees. A disciplinary enquiry was sought to be held in pursuance of the rules made under Section 241 of the Government of India Act, 1935 which were continued in force by Article 313 of the Constitution. Under Rule 1706 of Chapter XVII a railway servant was liable to be dismissed from service, inter alia, in the case of “serious misconduct”. The Division Bench held that “there can be serious misconduct on the part of a railway servant during working hours and during the course of his employment. But, that does not necessarily mean that there can be no misconduct or serious misconduct outside the working hours or outside the course of his employment”. The Division Bench then proceeded to give illustrations and one of these was :
“(i) if the act or conduct is prejudicial or likely to be prejudicial to the interests of the master or the reputation of the master.” Since the disciplinary proceeding was still to be proceeded with, the Division Bench of this Court dismissed the petition but, while doing so observed that whether the conduct of the workmen is such as to be prejudicial to the interest of the Central Railway “depends on the proof or disproof of certain facts such as the nature and degree of the interest of the Central Railway in the society.” In other words, the judgment of the Division Bench of this Court does visualize a situation that an act of an employee or workman which is strictly speaking not an act which is done in the course of his employment, may yet
involve a sufficient nexus with the employment of the employee so as to sustain a recourse to the disciplinary jurisdiction by the employer.
7. In order that the employer can invoke the disciplinary jurisdiction, it is necessary in each case to consider whether there is a nexus or connection between the act which constitutes the misconduct and the employment of the workman. A classical case of misconduct, if one may use that expression, is where the act of misconduct is committed during the course of working hours within the precincts of the establishment in relation to the business or activities of the employer. An employee who assaults a co-worker in the precincts of the place of work during the working hours will, therefore, legitimately fall with the purview of the disciplinary jurisdiction. The cases which pose a difficulty, often arise wherein the act which is complained of as constituting a misconduct is not committed within the precincts of the employer’s property or during the working hours and in all such cases, the question does arise as to whether the act arose out of a private dispute between those who were parties to it, unconnected with the employment with the employer or whether it bore a nexus with the contract of employment. In Glaxo Laboratories (I) Ltd. v. Presiding Officer, Meerut, 1983 Lab.I.C. 1909, a Bench of three learned Judge of the Supreme Court, therefore, held that even where the Standing Order is phrased in a wide language, “it would nonetheless be necessary to establish causal connection between the misconduct and the employment” (at page 1917 p. 17). The Supreme Court in the course of its judgment, referred to the earlier judgments of the Court on the subject including the decision in Mulchandani Electrical and Radio Industries Ltd. v. The Workmen, . In Mulchandani, the misconduct which was alleged was that the delinquent workman while travelling in a train between Thana and Mulund assaulted another workman who was on his way home. The Supreme Court held, while construing a Standing Order which dealt with the commission of any act subversive of discipline or good behaviour within the premises or precincts of the establishment that these words refer not to the place where the act which is subversive of discipline or good behaviour is committed but where the consequence of such an act manifests itself. In the circumstances, the Supreme Court was of the view that an act wherever committed, if it has the effect of subverting discipline or good behaviour within the premises or precincts of the establishment, would amount to a misconduct under the relevant Standing Order.
8. These decisions of the Supreme Court as well as of this Court, therefore, emphasise that in every case it is necessary to consider whether the act which is complained of is one with which the employer has no connection whatsoever or is one which bears a causal relationship or nexus with ,the contract of employment. If the act which is complained of has been committed by the employee completely disassociated from his character as an employee as was the case in the decision of this Court in Palekar, the
employer would have no jurisdiction to initiate disciplinary proceedings. Contrariwise, if the activity in relation to which the act which is the foundation of misconduct is committed bears sufficient nexus with the business or activity of the employer, the disciplinary jurisdiction can well extend to deal with such an act.
9. In the present case the admitted facts are that the first respondent was a Special Assistant working with the Union Bank of India. The first respondent solicited the membership exclusively of employees of the Bank to become members of a Co-operative Society which was being floated by him. As the Circular dated 11th September, 1978 would show, the discussion took place on the prospect of availing of a housing loan facility from the Bank itself. Indeed, in para 2 of the statement of claim which was filed before the Industrial Tribunal, the first respondent has admitted that he tried to promote a housing society at Andheri as the proposal appeared to be very viable because of the fact that a housing loan facility was easily available to every staff member who was in need of accommodation. The account which was opened by the first respondent in the name of the proposed society was with the Nariman Point Branch of the Bank. The moneys which were collected by the first respondent were credited to that account from which disbursements were made. The cheques which were drawn from the aforesaid account, and it is on record that one of such cheques had admittedly been dishonoured on three occasions. The learned counsel appearing on behalf of the Bank has also invited the attention of the Court to the notes of evidence recorded in which the witness of the Bank deposed to the fact that the higher rate of interest which is available to the members of the staff of the Bank was credited to the account which was opened by the first respondent. These circumstances are sufficient to establish a causal connection between the act of misconduct of the first respondent with the employment with Bank. The Court would also have to be conscious in a case such as the present of the fact that a distinction will have to be made between the affairs of an ordinary employer and a case where the employer happens to be a Banking or financial institution. A Bank or financial Institution as employer cannot be unmindful of the impact of the financial activities of the employees of the Bank upon the reputation of the Bank and the integrity of its business. In the present case, moneys were collected from employees of the Bank. An account was opened with the Bank through which all transactions were routed. The availability of a housing loan facility was offered as an inducement to the employees to contribute. The cheque drawn on an account with the bank was dishonoured. Financial activities including financial misadventures by employees of a Bank or financial institution do have a serious bearing upon the business of the Bank and seriously affect the business reputation credibility and public faith in the business of the Bank. Therefore, in the present case there can be absolutely no doubt about the fact that the act of misconduct which was complained of and which was the subject matter of the disciplinary enquiry was one which was
prejudicial to the interest of Bank within the meaning of Clause 19(5)(j) of the Bipartite Settlement between Indian Banks Association and Their workmen on the basis of which the chargesheet was initiated. Gross misconduct is defined by Clause (j) as 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.
10. The Industrial Tribunal has accepted the contention of the first respondent in the present case on the basis of reasons which with respect, are unsustainable. The Industrial Tribunal has proceeded on the basis that the present case involved similar allegations as those before the Supreme Court in Indian Express and Chronicle Press v. M.C. Kapur, 1974 II LLJ 240. The judgment of the Supreme Court has already been referred to earlier and it would be more than apparent that the facts in the said case were completely different from those in the present case. The workman who was sought to be proceeded against in the case which was decided by the Supreme Court was a Treasurer of a Co-operative Credit Society of employees. The Tribunal had held in that case that there was absolutely no financial or other interest of the employer with the Co-operative Society. These facts are clearly distinguishable from the present case where as already noted earlier there were sufficient circumstances which show that the acts which were complained of bore a nexus with the employment with the petitioner-Bank. The Tribunal has rejected the contention that the act which was complained against the first respondent was prejudicial to the interest of the Bank with the following observations:
“I fail to see how in this case before me the delinquent employee could be said to have done any act prejudicial to the interest of the bank or gross negligence or negligence involving or likely to involve the bank in serious loss. All that he could say was that reputation of the bank was involved because it would result in loss of confidence. I find that it is a far stretched argument and cannot be accepted to bring present delinquent in the net. In support he submitted that a cheque issued in favour of Smt. D’Souza for sum of Rs. 19,051/- on Nariman Point Branch bounced back for want of sufficient balance. I do not see how this would help the bank to contend that he committed misconduct. For this act if advised the bank can take suitable steps.”
With respect, these observations of the Tribunal are not reflective of the correct position in law. The financial dealings of the first respondent in relation to the affairs of the Co-operative Society clearly involved the bank and its facilitative mechanism including the opening of accounts, deposit and withdrawal of moneys and the drawal of cheques. Therefore, a clear case has been made out that the act of misconduct would prejudicially affect the reputation and interest of the Bank.
11. Apart from these circumstances, reference may now be made to the second charge which was levelled against the first respondent. That charge was to the effect that the first respondent has started a business in the name and style of M/s Harish Industries in which the moneys which had been fraudulently collected from the members of the proposed Co-operative Society had been invested. It may be noted that under Clause (a) of para 19.5 of the Bipartite Settlements, misconduct is defined to mean “engaging in any trade or business outside the scope of his duties except with the written permission of the bank”. In the present case, the Bank had placed on record before the Enquiry Officer a letter dated 14th July, 1984 of the Bhandari Cooperative Bank Ltd., Goregaon in which it was stated that Current Account No. 1083 had been opened in the aforesaid Bank in the name of M/s Harish Industries of which the petitioner and his wife Smt. Sumathi K. Salian were partners. During the course of his cross-examination before the Enquiry Officer, the first respondent was cross-examined with reference to the aforesaid document which was furnished by the Bhandari Co-operative Bank Ltd. The first respondent did not deny that he had opened the Bank Account but furnished an explanation that his son was working with the owner of M/s Harish Industries. The explanation of the first respondent was that since the owner of M/s Harish Industries did not have any Current Account in any Bank in the name of his concern, therefore, when he received two cheques for encashment in the name of his concern, the petitioner had opened an account in the name of M/s Harish Industries for the purposes of encashing those two cheques. The Tribunal has essentially held against the petitioner-Bank in respect to the second charge on the ground that an opportunity to cross-examine the official of the Bhandari Co-operative Bank Ltd. was not afforded to the first respondent. I am of the view that this does not make any difference to the present case because the fact that the first respondent had opened an account in the name of M/s Harish Industries was admitted by the first respondent himself during the course of his cross-examination. The only question was as to whether the explanation which was sought to be tendered by the first respondent should be accepted. The explanation of the first respondent was entirely farfetched and it was one which was impossible for a reasonable body of persons to accept. In these circumstances, the Part-I Award of the Tribunal even as regards the second head of misconduct, in my view, is clearly erroneous and suffers from an error on the face of record. Admittedly, no permission of the Bank was obtained by the first respondent.
12. In its Part-II award, the Tribunal has proceeded on the basis that the penalty imposed by the petitioner-Bank of dismissal from service upon the first respondent was not justified. Even on that basis, the Tribunal has declined to grant relief to the first respondent by holding that having regard to the facts and circumstances of the case this is an exceptional case where reinstatement in service was not called for. It must be noted at this stage that the written statement of the employer was amended before the Tribunal, after
the Part-I award and a specific plea was taken by the bank to the effect that this was a case where the first respondent had misappropriated the funds which he had collected and that the Bank, therefore, could not have in its employment such a workman. The bank has, therefore, specifically raised a plea that the workman should not be reinstated in service and no back wages should be awarded to him. The Tribunal noted that the first respondent had induced a large number of his colleagues to part with their hard earned money for the purpose of floating a co-operative housing society which would provide them with residential accommodation. Having collected a huge amount, the first respondent had failed to get the society registered and to construct the flats. An amount of Rs. 1.8 lakhs had not still been repaid to the co-workmen. Having regard to all these circumstances and having regard to the fact that the petitioner is a Banking Institution, the Tribunal in my view correctly came to the conclusion that a case for reinstatement had not been made out. Though I have held that the view which has been taken by the Industrial Tribunal in the Part-I Award is unsustainable. I am of the view that in any case, the ultimate conclusion which has been arrived at by the Tribunal in its Part-II Award is sustainable and correct. The decision of the Tribunal not to grant the first respondent any relief did not call for interference in the exercise of the jurisdiction of this Court under Article 226 of the Constitution. No other consequential submission has been urged on behalf of the workman by the learned Counsel.
13. In the circumstances, writ petition No. 1520 of 1997 filed by the Bank is made absolute in terms of prayer Clause (a). Writ Petition No. 2038 of 1997 filed by the workman shall stand dismissed. In the circumstances of the case there shall be no order as to costs.