Supreme Court Clarifies Disciplinary Proceedings Amidst Criminal Trials in Bank Employee Case

Date of the Judgment: 03 October 2023

Citation: 2023 INSC 868

Judges: Hrishikesh Roy, J., Sanjay Karol, J.

Can a disciplinary proceeding against a bank employee continue when a criminal trial is ongoing for the same misconduct? The Supreme Court of India recently addressed this question, clarifying the interplay between departmental inquiries and criminal trials. The Court examined whether a clause in a Memorandum of Settlement (MoS) mandated a stay on disciplinary proceedings during a criminal trial and if an acquittal in a criminal trial automatically exonerates an employee in departmental proceedings. This judgment, authored by Justice Sanjay Karol, provides crucial guidance on how these parallel proceedings should be managed.

Case Background

The respondent, P. Zadenga, was an Assistant at the State Bank of India’s Dawrpui Branch, Aizawl. In 1996, complaints were filed against him by government retailers alleging that their challan deposits were not entered into the cash receipt scroll. Additionally, a complaint was lodged regarding a retailer using a fake challan. Following these complaints, three FIRs were registered against Zadenga, and he was arrested but later released on bail.

The bank initiated disciplinary proceedings against Zadenga on December 8, 1999, alleging that he had received money for deposits but failed to deposit them into the respective accounts. Specifically, it was alleged that on April 19, 1996, he received Rs. 61,908, and similar incidents on February 21, 1995, involving Rs. 24,640 and Rs. 27,412. Zadenga argued that the disciplinary proceedings should be dropped or stayed due to the pending criminal cases arising from the same set of transactions. However, the bank continued the proceedings, and after an inquiry, he was dismissed from service on March 28, 2003. His departmental appeal was dismissed on August 16, 2004.

Timeline

Course of Proceedings

The delinquent employee filed a Writ Petition (Civil) No. 12 of 2005 before the Gauhati High Court, questioning whether the disciplinary proceedings should have been stayed due to the Memorandum of Settlement (MoS) dated April 10, 2002. The High Court noted that the Shastri Award, as confirmed by the Desai Award, ceased to exist after the MoS was signed. The court observed that Clause 4 of the MoS was clear and unambiguous, stating that disciplinary proceedings should not be conducted while criminal proceedings are ongoing. The High Court allowed the writ petition, setting aside the dismissal order. The Division Bench upheld the order of the learned Single Judge, confirming the setting aside of the disciplinary proceedings.

Legal Framework

The central legal issue revolves around the interpretation of Clause 4 of the Memorandum of Settlement (MoS) dated April 10, 2002, which states:

“If after steps have been taken to prosecute an employee or get him prosecuted, for an offence, he is not put on trial within a year of the commission of the office, the management may then deal with him as if he had committed an act of “gross misconduct” or of “minor misconduct”, as defined below; provided that if the authority which was to start prosecution proceedings refuses to do so or comes to the conclusion that there is no case for prosecution it shall be open to the management to proceed against the employee under the provisions set out below in Clauses 11 and 12 infra relating to discharge, but he shall out below in Clauses 11 and 12 infra relating to discharge, but he shall be deemed to have been on duty during the period of suspension, if any, and shall be entitled to the full wages and allowances and to all other privileges for such period. In the event of the management deciding, after enquiry, not to continue him in service, he shall be liable only for termination with three months’ pay and allowances in lieu of notice as provided in Clause 3 above. If within the pendency of the proceedings thus instituted is put on trial, such proceedings shall be stayed pending the completion of the trial, after which the provisions mentioned in Clause 3 above shall apply.”

The Supreme Court also considered previous judgments on the interplay between departmental and criminal proceedings, particularly regarding the circumstances under which disciplinary proceedings should be stayed.

Arguments

Arguments of the Appellant Bank:

• The initiation of departmental proceedings alongside a criminal trial does not automatically warrant a stay unless a complex question of law is involved.
• An acquittal in a criminal trial does not prevent the employer from initiating departmental proceedings based on the same misconduct.
• Non-compliance with a bipartite agreement does not automatically render a disciplinary action void.

Arguments of the Delinquent Employee:

• The disciplinary proceedings violated the bipartite agreement, which carries the force of law.
• The employee was acquitted in two out of three criminal trials, which should have resulted in the closure of disciplinary proceedings.
• The disciplinary action was initiated belatedly and was intended to harass the employee.

Issues Framed by the Supreme Court

1. Does clause 4 of the Memorandum of Settlement dated 10th April 2002 create a bar on departmental proceedings continuing when the person subjected thereto is being tried before a criminal court for offences of the same origin?
2. Does acquittal in some of the connected proceedings entail a benefit in the surviving proceedings? Further, inuring a right upon the delinquent employee of automatic discharge in disciplinary proceedings?

Treatment of the Issue by the Court

Authorities

Cases Relied Upon by the Court:

Legal Provisions Considered by the Court:

• Clause 4 of the Memorandum of Settlement (MoS) dated 10th April 2002

Judgment

How each authority was viewed by the Court:

• State Bank of India & Ors. v. Neelam Nag [(2016) 9 SCC 491]*: The Court relied on this case to interpret Clause 4 of the MoS, emphasizing that it does not prohibit disciplinary proceedings indefinitely.
• State of Rajasthan v. B.K. Meena and Ors. [(1996) 6 SCC 417]*: The Court used this case to support the view that there is no legal bar on simultaneous proceedings, but staying disciplinary proceedings is a matter of discretion.
• M. Paul Anthony v. Bharat Gold Mines Ltd. [(1999) 3 SCC 679]*: The Court referred to this case to outline principles for handling simultaneous departmental and criminal proceedings, emphasizing that stay is not automatic.
• Karnataka Power Transmission Corpn. Ltd. v. C. Nagaraju [(2019) 10 SCC 367]*: The Court referred to this case to reiterate the principles laid down in M. Paul Anthony.
• Nelson Motis v. Union of India [(1992) 4 SCC 711]*: The Court used this case to highlight that an acquittal in criminal proceedings does not conclude departmental proceedings.
• Ajit Kumar Nag v. Indian Oil Corpn. Ltd. [(2005) 7 SCC 764]*: The Court cited this case to clarify that criminal and departmental proceedings are entirely different.
• State of Karnataka v. Umesh [(2022) 6 SCC 563]*: The Court quoted this case to support the view that criminal and departmental proceedings are distinct.
• United Commercial Bank & Ors. v. P.C. Kakkar [(2003) 4 SCC 364]*: The Court used this case to reiterate that acquittal in a criminal case does not determine the commission of misconduct.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the interpretation of Clause 4 of the MoS and the established legal position that departmental and criminal proceedings are distinct. The Court emphasized that the MoS does not mandate a complete stay on disciplinary proceedings and that the completion of a criminal trial must be within a reasonable time frame. The Court also noted that the delinquent employee did not raise the issue of the MoS in his initial response to the disciplinary proceedings.

The Court’s decision was more influenced by the legal principles and the interpretation of the MoS than by the specific facts of the case.

The Court considered the arguments of both sides, but ultimately relied on the interpretation of Clause 4 of the MoS and the established legal principle that departmental and criminal proceedings are distinct. The Court emphasized that the stay of disciplinary proceedings is not automatic and is only to be considered for a reasonable period.

The Court also noted that the delinquent employee did not raise the issue of the MoS in his initial response to the disciplinary proceedings, which further weakened his case.

“In the plain language of Clause 4, in our opinion, it is not a stipulation to prohibit the institution and continuation of disciplinary proceedings, much less indefinitely, merely because of the pendency of a criminal case against the delinquent employee.”

“The term “completion of the trial” thereat, must be construed as completion of the trial within a reasonable time-frame.”

“Acquittal by a criminal court would not debar an employer from exercising the power to conduct departmental proceedings in accordance with the rules and regulations.”

Key Takeaways

• Clause 4 of the Memorandum of Settlement does not impose a complete bar on departmental proceedings during a criminal trial.
• The stay of disciplinary proceedings is discretionary and should only be for a reasonable period.
• Acquittal in criminal proceedings does not automatically result in the exoneration of an employee in departmental proceedings.
• Departmental and criminal proceedings are distinct, with different objectives and standards of proof.
• Employees must raise all relevant objections, including reliance on agreements, at the earliest opportunity.

Directions

The Supreme Court set aside the judgment and order of the High Court and restored the dismissal order of the delinquent employee passed by the bank.

Development of Law

The ratio decidendi of the case is that Clause 4 of the Memorandum of Settlement does not create a complete bar on departmental proceedings during a criminal trial, and the stay of such proceedings is not automatic but discretionary. This judgment reinforces the established legal position that departmental and criminal proceedings are distinct and that an acquittal in a criminal case does not automatically exonerate an employee in departmental proceedings. There is no change in the previous position of law.

Conclusion

The Supreme Court’s judgment in State Bank of India v. P. Zadenga clarifies that disciplinary proceedings against a bank employee can continue even when a criminal trial is ongoing for the same misconduct. The Court held that Clause 4 of the Memorandum of Settlement does not mandate a complete stay on departmental proceedings and that an acquittal in a criminal trial does not automatically exonerate an employee in disciplinary proceedings. This decision reinforces the distinction between departmental and criminal proceedings and provides important guidance for employers and employees in similar situations.