Supreme Court Clarifies Disciplinary Proceedings Against Retired Bank Employees: UCO Bank vs. M.B. Motwani (2023)

Date of the Judgment: 12 October 2023

Citation: 2023 INSC 908

Judges: Hima Kohli, J., Rajesh Bindal, J.

Can a bank continue disciplinary proceedings against an employee after retirement if only a show cause notice was issued before their retirement, but the chargesheet was issued after? The Supreme Court of India recently addressed this question in a case involving UCO Bank, clarifying the requirements for continuing disciplinary actions against retired employees. The core issue revolved around the interpretation of the bank’s service regulations and whether a chargesheet is necessary to deem a disciplinary proceeding pending before retirement. The judgment was delivered by a two-judge bench comprising Justice Hima Kohli and Justice Rajesh Bindal.

Case Background

M.B. Motwani was appointed as an Apprentice in UCO Bank in 1952. By 1974, he was promoted to Branch Manager at Moradabad and later transferred to Calcutta as an Assistant Manager. In 1976, he was promoted again and transferred to Bombay as a Senior Management Scale-IV Officer. Between 1988 and 1990, he served as an Assistant General Manager at the Bombay Main Branch. He was due to retire on 31 July 1991, after reaching superannuation age on 2 July 1991. An intimation notice for retirement was served on him on 7 May 1991.

On 17 June 1991, Motwani received a memo asking him to explain irregularities and lapses in certain accounts during his time at the Bombay Main Branch. He requested time and documents to respond. A fresh notice was served on 6 July 1991, and again, he sought time and documents. On 15 July 1991, the General Manager (Personnel) suspended him under Regulation 12 of the 1976 Regulations, ordering that he not be retired despite reaching superannuation, as per Regulation 20(3)(iii) of the 1979 Regulations.

Motwani’s appeal against the suspension was dismissed on 7 November 1991. A chargesheet was served on him on 10 December 1991, to which he replied, denying all allegations. His challenge to the suspension order via a Writ Petition was disposed of on 10 January 1992, with directions regarding the inquiry, but the suspension remained. On 3 March 1993, the Disciplinary Authority dismissed Motwani from service under Regulations 7(3) and 4-D of the 1976 Regulations. His statutory appeal was dismissed on 23 July 1993. He then challenged this dismissal in a Writ Petition before the High Court, which was allowed, leading to the present appeal by the bank before the Supreme Court.

Timeline:

Arguments

Appellant (UCO Bank)’s Arguments:

• The bank argued that the High Court incorrectly interpreted the 1979 Regulations.
• They contended that Regulation 20 of the 1979 Regulations allows action against a retired employee if a show cause notice was issued before retirement.
• The bank emphasized that the 1979 Regulations were amended in 1986, not 1993 as the High Court suggested.
• They cited a communication from the Ministry of Finance dated 01.07.1985, directing the amendment of Regulation 20, which was subsequently approved by the Reserve Bank of India and the Central Government.
• The bank relied on Regulation 20(3)(b) of the 1979 Regulations, stating that disciplinary proceedings are deemed pending if a show cause notice is issued before retirement.
• They argued that the High Court misconstrued the judgment in UCO Bank & Anr. v. Rajender Lal Capoor (2007) 6 SCC 694, which stated that proceedings are pending only upon issuance of a chargesheet. The bank argued that this ignored the plain language of Regulation 20.
• The bank also referred to Ramesh Chandra Sharma v. Punjab National Bank (2007) 8 SCALE 240, where the court gave full effect to similar regulations.
• They highlighted a conflict of opinion between the judgments in Canara Bank v. D.R.P. Sundharam, (2016) 12 SCC 724 and Chairman -cum -Managing Director, Mahanadi Coalfields Ltd. v. Rabindranath Choubey, (2020) 18 SCC 71, suggesting the matter should be referred to a larger bench.

Respondent (M.B. Motwani)’s Arguments:

• The respondent argued that the facts in Rajender Lal Capoor -I were different, as a chargesheet was issued while the employee was in service.
• They contended that the judgment in Mahanadi Coalfields was not relevant, as the chargesheet was issued during employment.
• The respondent submitted that the 1979 Regulations do not specify inquiry procedures or punishments. They argued that the 1976 Regulations must be used, which only allow for penalties regarding retiral benefits, not termination, for retired employees.
• They argued that even if the amendment to Regulation 20 of the 1979 Regulations was approved, it would only take effect after publication in the Official Gazette, as per Section 19(1) of the 1970 Act.
• The respondent cited B.K. Srinivasan v. State of Karnataka, (1987) 1 SCC 658 and Rajendra Agricultural University v. Ashok Kumar Prasad, (2010) 1 SCC 730 to support the argument that publication in the Official Gazette is mandatory.
• They referred to United Bank of India Officers Association v. United Bank of India, 1987 (1) LLJ 104, where the 1979 Regulations were struck down.
• The respondent also cited a letter from the Government of India dated 15.12.1988, instructing banks not to invoke Regulation 20 due to it being held ultra vires.
• They highlighted that M.B. Motwani had passed away on 30.12.2012 and that his retiral dues were not paid and requested for payment with interest due to the delay.

Submissions Table

Issues Framed by the Supreme Court

• Whether disciplinary proceedings against a bank employee can continue after retirement if only a show cause notice, and not a chargesheet, was issued before retirement?

Treatment of the Issue by the Court

Authorities

Cases:

• United Bank of India Officers Association v. United Bank of India, 1987 (1) LLJ 104: The Supreme Court of India had struck down the 1979 Regulations.
• B.K. Srinivasan v. State of Karnataka, (1987) 1 SCC 658: The Supreme Court of India, on the necessity of publication in the Official Gazette for amendments to take effect.
• UCO Bank & Anr. v. Rajender Lal Capoor (2007) 6 SCC 694 [Rajender Lal Capoor – I]: The Supreme Court of India held that disciplinary proceedings are initiated only when a chargesheet is issued, not merely a show cause notice.
• Ramesh Chandra Sharma v. Punjab National Bank (2007) 8 SCALE 240: The Supreme Court of India, where the court gave full effect to similar regulations.
• UCO Bank v. Rajinder Lal Capoor, (2008) 5 SCC 257 [Rajender Lal Capoor – II]: The Supreme Court of India, clarified that the 1979 Regulations apply only when disciplinary proceedings have been initiated by a chargesheet.
• Rajendra Agricultural University v. Ashok Kumar Prasad, (2010) 1 SCC 730: The Supreme Court of India, on the necessity of publication in the Official Gazette for amendments to take effect.
• Canara Bank v. D.R.P. Sundharam, (2016) 12 SCC 724: The Supreme Court of India, upheld the view that a chargesheet is necessary to continue disciplinary proceedings after retirement.
• Chairman -cum -Managing Director, Mahanadi Coalfields Ltd. v. Rabindranath Choubey, (2020) 18 SCC 71: The Supreme Court of India, expressed reservations about the view in Rajender Lal Capoor – I.

Legal Provisions:

• Regulation 12 of the United Commercial Bank Officer, Employees (Discipline and Appeal) Regulations, 1976: This regulation deals with the suspension of employees.
• Regulations 7(3) and 4-D of the United Commercial Bank Officer, Employees (Discipline and Appeal) Regulations, 1976: These regulations deal with the dismissal of employees from service.
• Regulation 20(3)(iii) of the United Commercial Bank Officer’s Service Regulations, 1979: This regulation pertains to the continuation of disciplinary proceedings against an employee after they have reached the age of superannuation.
• Section 19(1) of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970: This section deals with the publication of regulations in the Official Gazette.

Judgment

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to ensure that disciplinary proceedings against retired employees are conducted fairly and in accordance with established legal principles. The court emphasized the importance of a chargesheet as the formal initiation of disciplinary proceedings, aligning with previous rulings by larger benches. The court was also mindful of the procedural requirements, such as the need for publication of amendments in the Official Gazette, to ensure transparency and awareness among those affected by legal changes.

Fact:Law Ratio

The court’s reasoning was heavily based on legal interpretations and adherence to precedents, with a lesser emphasis on the specific facts of the case.

Logical Reasoning

Key Takeaways

• A chargesheet is mandatory to initiate disciplinary proceedings against a bank employee. A show cause notice is not sufficient to deem the proceedings pending before retirement.
• Disciplinary proceedings initiated after an employee’s retirement are not valid if a chargesheet was not issued before their retirement.
• Amendments to regulations must be published in the Official Gazette to be enforceable.
• Retired employees cannot be terminated from service; penalties are limited to retiral benefits.
• Banks must ensure that all service benefits due to employees are paid promptly, including interest for delays.

Directions

The Supreme Court directed the appellant bank to pay all service benefits due to the deceased employee, M.B. Motwani, along with interest at 7% per annum from the date of his retirement until the date of payment. This payment is to be made to his legal heirs within three months from the date of receipt of the judgment copy.

Development of Law

The ratio decidendi of this case is that a disciplinary proceeding against a bank employee is not deemed to be pending on the date of retirement unless a chargesheet has been issued before the date of retirement. This judgment reinforces the legal position established in previous cases, particularly Canara Bank v. D.R.P. Sundharam, and clarifies that a show cause notice is insufficient to continue disciplinary proceedings after retirement. This reaffirms that the initiation of disciplinary proceedings requires a formal chargesheet, not just a preliminary inquiry or show cause notice. The judgment also highlights the importance of procedural fairness and adherence to established legal principles in service law matters.

Conclusion

The Supreme Court dismissed the appeal by UCO Bank, affirming the High Court’s decision. The court reiterated that a chargesheet is a prerequisite for continuing disciplinary proceedings against a bank employee after retirement. The judgment emphasizes the importance of procedural fairness and adherence to legal precedents in service law matters. The bank was directed to pay all service benefits to the deceased employee’s legal heirs, along with interest, within three months.