Supreme Court modifies dismissal of Syndicate Bank manager for irregularities: B S N Prasad vs. The General Manager Personnel Syndicate Bank & Ors (2025) INSC 89 (21 January 2025)

Date of the Judgment: 21 January 2025
Citation: (2025) INSC 89
Judges: Abhay S. Oka, J. and Augustine George Masih, J.
Can a bank employee’s dismissal be justified even if the financial losses caused by their actions are recovered? The Supreme Court of India recently addressed this question in a case involving a branch manager of Syndicate Bank. The court examined whether the punishment of dismissal was proportionate to the established misconduct, considering the employee’s long, unblemished service record. The bench, consisting of Justices Abhay S. Oka and Augustine George Masih, delivered the judgment.

Case Background

The respondent, B S N Prasad, was employed as a clerk with Syndicate Bank and was later promoted to branch manager. He served as the branch manager of the Mudigubba branch from June 11, 2007, to November 3, 2008. An investigation was conducted against him, and a report was submitted on December 2, 2010. Following this, a chargesheet was issued to the respondent on October 17, 2011. The charges alleged that he had abused his position by making fictitious debits to crop insurance accounts and fraudulently withdrawing amounts through Syndicate Kisan Credit Cards (SKCC) accounts. It was also alleged that he had sanctioned a vehicle loan in violation of guidelines and misappropriated funds in collusion with others.

A disciplinary inquiry was conducted, and the inquiry officer concluded on March 15, 2012, that the charges were proven. The Disciplinary Authority dismissed the respondent from service on May 3, 2012. The Appellate Authority upheld the dismissal on March 30, 2013. Subsequently, the respondent was exonerated in criminal proceedings, leading him to request the bank to set aside his dismissal. When this was not done, he filed a writ petition. The Single Judge set aside the dismissal, citing a lack of adherence to natural justice principles. The Division Bench upheld this decision, noting a lack of evidence against the respondent.

Timeline

Course of Proceedings

The Single Judge of the High Court set aside the orders of the Disciplinary Authority and the Appellate Authority, citing that principles of natural justice were not followed during the inquiry. The court ordered the reinstatement of the respondent with all consequential benefits from the date of dismissal until his superannuation. The Division Bench upheld the Single Judge’s decision, stating that there was no evidence against the respondent.

Legal Framework

The case references the Syndicate Bank Officer Employees’ (Conduct) Regulations 1976, specifically Regulation 3(1) read with Regulation 24. These regulations pertain to the conduct expected of bank employees.

Regulation 3(1) states:
“Every officer employee shall, at all times, maintain absolute integrity and devotion to duty and do nothing which is unbecoming of a bank officer.”

Regulation 24 states:
“An officer employee shall not, in the performance of his official duties or in the exercise of the powers conferred on him, act otherwise than in his best judgment except when he is acting under the direction of his superior officer.”

Arguments

Appellants’ (Syndicate Bank) Arguments:

• The respondent admitted to the transactions in question during the vigilance investigation and disciplinary inquiry.
• The officer who conducted the preliminary inquiry was examined as a witness.
• There was no need to examine other witnesses as the case was based on admitted documentary evidence and customer statements.
• The respondent’s written communications accepted the allegations.
• There was adequate documentary evidence on record.
• Relying on B.C. Chaturvedi v. Union of India and Others [(1995) 6 SCC 749], they argued that a writ court cannot question the adequacy of evidence in disciplinary proceedings, only whether some evidence existed.
• Bank managers are expected to have high standards of honesty and conduct, referencing State Bank of India and Others v. Ramesh Dinkar Punde [(2006) 7 SCC 212].
• The respondent’s acquittal in the criminal case was irrelevant to the disciplinary inquiry, citing Manager, Reserve Bank of India, Bangalore v. S. Mani and Others [(2005) 5 SCC 100].
• The respondent was granted inspection of documents and cross-examined the vigilance officer.
• The fact that the respondent returned the money to customers proved misappropriation.

Respondent’s (B S N Prasad) Arguments:

• The total amount allegedly misappropriated was ₹1,10,000, and all amounts were recovered.
• A letter from the Deputy General Manager dated March 3, 2010, closed the issue, advising him to be more diligent. This meant disciplinary proceedings should not have been initiated.
• It was a case of no evidence, and the inquiry officer’s findings were incorrect.
• He had a clean record from 1985 to 2007, so there was no loss of confidence.
• Relying on Indian Airlines Limited v. Prabha D. Kanan [(2006) 11 SCC 67], and Roop Singh Negi v. Punjab National Bank and Others [(2009) 2 SCC 570], he argued that the High Court was correct in intervening when there was no evidence.
• The powers of the Disciplinary Authority must be exercised with propriety and fair play, referencing Pravin Kumar v. Union of India and Others [(2020) 9 SCC 471].

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section. However, the core issue revolved around whether the High Court was correct in interfering with the disciplinary proceedings and whether the punishment of dismissal was proportionate to the misconduct.

Treatment of the Issue by the Court

Authorities

Cases Relied Upon by the Court:

• B.C. Chaturvedi v. Union of India and Others [(1995) 6 SCC 749]: This case was cited to emphasize that a writ court cannot act as an appellate authority and re-appreciate the evidence in disciplinary proceedings. The court can only interfere if the inquiry was not conducted fairly or if the findings were based on no evidence. The Supreme Court followed this case to hold that the High Court had erred in interfering with the disciplinary proceedings.
• State Bank of India and Others v. Ramesh Dinkar Punde [(2006) 7 SCC 212]: This case was cited to highlight that bank officers are expected to maintain higher standards of honesty and integrity. The Supreme Court followed this case to emphasize the seriousness of the misconduct committed by the respondent.
• Manager, Reserve Bank of India, Bangalore v. S. Mani and Others [(2005) 5 SCC 100]: This case was cited to reiterate that an acquittal in a criminal case is not a ground to exonerate a delinquent in disciplinary proceedings. The Supreme Court followed this case to hold that the respondent’s acquittal in criminal case was not relevant in disciplinary proceedings.
• Damoh Panna Sagar Rural Regional Bank & Another v. Munn Lal Jain [(2005) 10 SCC 84]: This case was cited to emphasize that bank officers are expected to maintain a higher standard of honesty, integrity, and conduct. The Supreme Court followed this case to emphasize the seriousness of the misconduct committed by the respondent.
• Disciplinary Authority -cum-Regional Manager v. Nikunja Bihari Patnaik [(1996) 9 SCC 69]: This case was cited to highlight that acting beyond one’s authority is a breach of discipline and misconduct. The Supreme Court followed this case to emphasize the seriousness of the misconduct committed by the respondent.

Cases Relied Upon by the Respondent:

• Indian Airlines Limited v. Prabha D. Kanan [(2006) 11 SCC 67]: The respondent relied on this case to argue that the High Court was correct in intervening when there was no evidence. The Supreme Court distinguished this case and held that there was sufficient evidence against the respondent.
• Roop Singh Negi v. Punjab National Bank and Others [(2009) 2 SCC 570]: The respondent relied on this case to argue that the High Court was correct in intervening when there was no evidence. The Supreme Court distinguished this case and held that there was sufficient evidence against the respondent.
• Pravin Kumar v. Union of India and Others [(2020) 9 SCC 471]: The respondent relied on this case to argue that the powers of the Disciplinary Authority must be exercised with propriety and fair play. The Supreme Court considered this case but held that the penalty of dismissal was disproportionate and modified it.

Legal Provisions Considered by the Court:

• Regulation 3(1) of Syndicate Bank Officer Employees’ (Conduct) Regulations 1976: This regulation mandates that every officer employee shall maintain absolute integrity and devotion to duty. The Supreme Court considered this regulation to emphasize the high standards of conduct expected from bank employees.
• Regulation 24 of Syndicate Bank Officer Employees’ (Conduct) Regulations 1976: This regulation mandates that an officer employee shall not act otherwise than in his best judgment. The Supreme Court considered this regulation to emphasize the high standards of conduct expected from bank employees.
• Regulation 4 of the Syndicate Bank Officer Employees (Discipline and Appeal) Regulations, 1976: This regulation provides for minor and major penalties. The Supreme Court considered this regulation while modifying the penalty imposed on the respondent.

Judgment

How each authority was viewed by the Court?

• The Supreme Court relied on B.C. Chaturvedi v. Union of India and Others [(1995) 6 SCC 749]* to emphasize that the High Court should not have re-evaluated the evidence in the disciplinary proceedings.
• The Supreme Court used State Bank of India and Others v. Ramesh Dinkar Punde [(2006) 7 SCC 212]* to highlight that bank officers must maintain high standards of honesty and integrity.
• The Supreme Court cited Manager, Reserve Bank of India, Bangalore v. S. Mani and Others [(2005) 5 SCC 100]* to support its view that the criminal acquittal of the respondent was irrelevant to the disciplinary proceedings.
• The Supreme Court relied on Damoh Panna Sagar Rural Regional Bank & Another v. Munn Lal Jain [(2005) 10 SCC 84]* to emphasize the high standards of honesty and integrity expected from bank officers.
• The Supreme Court cited Disciplinary Authority -cum-Regional Manager v. Nikunja Bihari Patnaik [(1996) 9 SCC 69]* to support its view that acting beyond authority is a breach of discipline.
• The Supreme Court distinguished Indian Airlines Limited v. Prabha D. Kanan [(2006) 11 SCC 67]* and Roop Singh Negi v. Punjab National Bank and Others [(2009) 2 SCC 570]*, stating that there was sufficient evidence in the present case.
• The Supreme Court considered Pravin Kumar v. Union of India and Others [(2020) 9 SCC 471]* to modify the penalty, agreeing that the Disciplinary Authority’s powers must be exercised with propriety and fair play.

What weighed in the mind of the Court?

The Supreme Court’s decision was influenced by several factors. The Court acknowledged the seriousness of the misconduct, particularly given the high standards expected of bank managers. However, the Court also considered the respondent’s long, unblemished service record, the fact that all financial losses were recovered, and the respondent’s admission of his mistakes. The Court also noted the pressure under which the respondent was working. These factors led the Court to conclude that the penalty of dismissal was disproportionate.

The Court’s reasoning was a blend of factual considerations and legal principles. The factual aspects included the respondent’s service record, his admissions, and the recovery of losses. The legal aspects involved the standards of conduct expected from bank officers, the principles of natural justice, and the scope of judicial review in disciplinary matters. The Court balanced these elements to arrive at a just and equitable decision.

The court considered the arguments presented by both sides, the evidence on record, and the relevant legal principles to reach its decision. The court rejected the respondent’s argument that there was no evidence, noting the documentary evidence and the respondent’s own admissions. The court also rejected the argument that the disciplinary proceedings should not have been initiated, stating that the letter from the Deputy General Manager was merely advisory.

The court also considered the respondent’s long and unblemished service record, and the fact that the financial losses were recovered. These factors weighed heavily in the court’s decision to modify the penalty. The court emphasized that while the misconduct was serious, the penalty of dismissal was disproportionate given the circumstances.

The court’s decision was also influenced by the principles of proportionality and fair play. The court recognized that while disciplinary authorities have the power to impose penalties, these powers must be exercised fairly and proportionately.

The Supreme Court held that the High Court erred in setting aside the disciplinary proceedings. The Court stated that the High Court should not have re-appreciated the evidence, and that there was sufficient evidence to support the disciplinary authority’s findings. However, the Court also held that the penalty of dismissal was disproportionate, given the respondent’s long and unblemished service record and the fact that the financial losses were recovered.

The Supreme Court modified the penalty to a minor penalty, reducing the respondent to a lower stage in the time scale of pay for a period of one year, without cumulative effect and not adversely affecting his pension.

“Judicial review is not an appeal from a decision but a review of the manner in which the decision is made.”

“A bank officer is required to exercise higher standards of honesty and integrity. He deals with money of the depositors and the customers.”

“The very discipline of an organisation more particularly a bank is dependent upon each of its officers and officers acting and operating within their allotted sphere. Acting beyond one’s authority is by itself a breach of discipline and is a misconduct.”

Key Takeaways

• An acquittal in a criminal case does not automatically exonerate an employee in disciplinary proceedings.
• Writ courts should not re-appreciate evidence in disciplinary proceedings but can interfere if the inquiry was not fair or if the findings were based on no evidence.
• Bank officers are expected to maintain high standards of honesty and integrity.
• Disciplinary authorities must exercise their powers with proportionality and fair play.
• The penalty imposed should be proportionate to the misconduct, considering all relevant factors such as the employee’s service record and the circumstances of the case.

Directions

The Supreme Court directed that the respondent shall be subjected to a minor penalty under Regulation 4(e) of the Disciplinary Regulations by reducing him to a lower stage in the time scale of pay for a period of one year, without cumulative effect and not adversely affecting his pension. The Court also directed that necessary retiral dues, if any, be restored/paid to the respondent within four months.

Development of Law

The ratio decidendi of the case is that while the High Court was incorrect in interfering with the disciplinary proceedings, the penalty of dismissal was disproportionate, and a minor penalty was more appropriate. This case reinforces the principle that disciplinary authorities must exercise their powers with proportionality and fair play. It also clarifies the scope of judicial review in disciplinary matters, emphasizing that writ courts should not re-appreciate evidence but can intervene if the inquiry was unfair or if there was no evidence. The Supreme Court also reaffirmed the high standards of conduct expected from bank officers. This case also highlights that even if the financial losses were recovered, it does not mean that disciplinary proceedings are not warranted.

Conclusion

The Supreme Court partly allowed the appeal, setting aside the High Court’s judgment but modifying the penalty imposed on the respondent. The Court held that while the misconduct was serious, the penalty of dismissal was disproportionate given the respondent’s long and unblemished service record and the fact that the financial losses were recovered. The Court’s decision underscores the importance of proportionality in disciplinary proceedings and the need to balance the seriousness of the misconduct with other relevant factors.

Category:

Parent category: Service Law
Child category: Disciplinary Proceedings
Child category: Proportionality of Punishment
Parent category: Syndicate Bank Officer Employees’ (Conduct) Regulations 1976
Child category: Regulation 3(1), Syndicate Bank Officer Employees’ (Conduct) Regulations 1976
Child category: Regulation 24, Syndicate Bank Officer Employees’ (Conduct) Regulations 1976
Parent category: Syndicate Bank Officer Employees (Discipline and Appeal) Regulations, 1976
Child category: Regulation 4, Syndicate Bank Officer Employees (Discipline and Appeal) Regulations, 1976

FAQ

Q: Can a bank employee be dismissed even if the financial losses are recovered?
A: Yes, a bank employee can be dismissed even if the financial losses are recovered, as the misconduct itself is a breach of discipline. However, the punishment must be proportionate to the misconduct. In this case, the Supreme Court modified the dismissal to a minor penalty, considering the long and unblemished service record of the employee and the recovery of the losses.

Q: What is the role of a High Court in disciplinary proceedings?
A: A High Court cannot act as an appellate authority and re-appreciate the evidence. It can only interfere if the inquiry was not conducted fairly or if the findings were based on no evidence.

Q: What standards are expected of bank officers?
A: Bank officers are expected to maintain high standards of honesty, integrity, and conduct. They must act within their authority and not engage in any activity that could tarnish the image of the bank.

Q: What is the principle of proportionality in disciplinary proceedings?
A: The principle of proportionality means that the punishment imposed must be proportionate to the misconduct. The disciplinary authority must consider all relevant factors, such as the employee’s service record, the circumstances of the case, and the impact of the misconduct.

Q: Does an acquittal in a criminal case automatically exonerate an employee in disciplinary proceedings?
A: No, an acquittal in a criminal case does not automatically exonerate an employee in disciplinary proceedings. The standard of proof differs in these proceedings, and the disciplinary authority can take action based on the evidence available in the disciplinary inquiry.