Supreme Court settles procedure for Disciplinary Authority disagreement with Enquiry Officer in service law cases: S.P. Malhotra vs. Punjab National Bank (2013) INSC 451 (4 July 2013)

Date of the Judgment: 4 July 2013
Citation: (2013) INSC 451
Judges: Dr. B.S. Chauhan and S.A. Bobde, JJ.
Can a disciplinary authority impose punishment by disagreeing with the findings of the Enquiry Officer without giving the delinquent employee a chance to respond? The Supreme Court of India addressed this critical question in a service law matter. This case clarifies the procedure when a disciplinary authority differs with the Enquiry Officer’s report. The judgment was delivered by a two-judge bench comprising Justices Dr. B.S. Chauhan and S.A. Bobde.

Case Background

In 1969, S.P. Malhotra, the appellant, joined Punjab National Bank as a Clerk/Cashier. He was promoted to Accountant in 1977 and then to Assistant Manager in 1981. In November 1982, the bank suspended him due to alleged misconduct. A charge sheet dated 7 February 1983, listed four charges against him.

The charges included: (i) tampering with official records, (ii) unauthorized business against the bank’s interest, (iii) misusing his position to benefit relatives and friends, and (iv) concealing facts from authorities. The appellant denied these charges in his reply in July 1983, stating that the Branch Manager had sanctioned all loans and advances. Unsatisfied with the reply, the Disciplinary Authority appointed an Enquiry Officer.

The Enquiry Officer submitted a report on 27 February 1985, exonerating the appellant on all charges. However, the Disciplinary Authority disagreed with the findings on charges (i) and (iv). Consequently, on 27 April 1985, the Disciplinary Authority dismissed the appellant from service.

The appellant’s appeal was dismissed on 14 August 1985, and his review petition was dismissed on 19 August 1987. Subsequently, the appellant filed a writ petition before the High Court of Punjab and Haryana at Chandigarh.

Timeline

Course of Proceedings

The High Court of Punjab and Haryana at Chandigarh initially ruled in favor of the appellant. The learned Single Judge held that the Disciplinary Authority should have provided reasons for disagreeing with the Enquiry Officer’s findings. The Single Judge also stated that the Disciplinary Authority should have given the appellant an opportunity to respond before imposing punishment. However, the Division Bench reversed this decision. The Division Bench stated that since the punishment was imposed before the judgment in Managing Director, ECIL, Hyderabad, etc.etc. v. B. Karunakar etc.etc., AIR 1994 SC 1074, there was no requirement to issue a second show cause notice. The Supreme Court then heard the matter.

Legal Framework

The case references Regulation 17 of the Punjab National Bank Officers/Employees (Discipline and Appeal) Regulations 1977, which deals with appeals against disciplinary actions. Regulation 18 of the same regulations pertains to review petitions. The Supreme Court also considered principles of natural justice, which require that a person should be given an opportunity to be heard before any adverse action is taken against them.

Arguments

Appellant’s Arguments:

• The appellant argued that the Division Bench incorrectly applied the law.
• The appellant submitted that the judgment in ECIL (supra) did not apply to this case.
• The appellant contended that the case was squarely covered by the judgment in Punjab National Bank & Ors. v. Kunj Behari Misra , AIR 1998 SC 2713.
• The appellant argued that the learned Single Judge had correctly applied the ratio of Kunj Behari Misra (supra).

Respondent’s Arguments:

• The respondent argued that there was no requirement to serve the recorded reasons for disagreement to the delinquent.
• The respondent submitted that this was because the decision was taken before the judgment in ECIL (supra) on 20 November 1990.
• The respondent contended that no interference was required in the appeal.

Issues Framed by the Supreme Court

The Supreme Court identified the following issues:

1. Whether the Disciplinary Authority is required to issue a second show cause notice to the delinquent before imposing punishment?
2. Whether the Disciplinary Authority is required to serve a copy of the reasons recorded for disagreeing with the Enquiry Officer’s findings?

Treatment of the Issue by the Court

Authorities

The Supreme Court relied on the following authorities:

• Institute of Chartered Accountants of India v. L.K. Ratna, AIR 1987 SC 71: This case was relied upon by the court in Kunj Behari Misra (supra).
• Managing Director, ECIL, Hyderabad, etc.etc. v. B. Karunakar etc.etc., AIR 1994 SC 1074: This case dealt with the requirement of a second show cause notice. The court clarified that this case did not apply to the issue of disagreement with the Enquiry Officer’s report.
• Punjab National Bank & Ors. v. Kunj Behari Misra, AIR 1998 SC 2713: This case was the primary authority for the court’s decision. It held that the Disciplinary Authority must provide reasons for disagreement to the delinquent.
• Yoginath D. Bagde v. State of Maharashtra & Anr., AIR 1999 SC 3734: This case approved and followed the ratio in Kunj Behari Misra (supra).
• State Bank of India & Ors. v. K.P. Narayanan Kutty, AIR 2003 SC 1100: This case also approved and followed the ratio in Kunj Behari Misra (supra).
• Canara Bank & Ors. v. Shri Debasis Das & Ors., AIR 2003 SC 2041: This case explained the ratio of Kunj Behari Misra (supra).
• J.A. Naiksatam v. Prothonotary and Senior Master, High Court of Bombay & Ors., AIR 2005 SC 1218: This case approved and followed the ratio in Kunj Behari Misra (supra).
• P.D. Agrawal v. State Bank of India & Ors., AIR 2006 SC 2064: This case approved and followed the ratio in Kunj Behari Misra (supra).
• Ranjit Singh v. Union of India & Ors., AIR 2006 SC 3685: This case approved and followed the ratio in Kunj Behari Misra (supra).

Judgment

The Supreme Court emphasized that the case was squarely covered by the judgment in Punjab National Bank & Ors. v. Kunj Behari Misra, AIR 1998 SC 2713. The court stated that when a Disciplinary Authority disagrees with the Enquiry Officer’s findings, it must record reasons for disagreement. The Disciplinary Authority must also communicate these reasons to the delinquent and seek their response. Only after considering the response can the Disciplinary Authority pass an order of punishment.

The court also observed that not providing the reasons for disagreement causes prejudice to the delinquent. The court held that this issue is different from the issue in ECIL (supra), which dealt with the requirement of a second show cause notice before imposing punishment.

What weighed in the mind of the Court?

The Supreme Court’s decision was heavily influenced by the principles of natural justice. The court emphasized that the delinquent employee has a right to be heard before any adverse action is taken against them. The court also noted that the judgment in Kunj Behari Misra (supra) clearly established the procedure to be followed when a Disciplinary Authority disagrees with the Enquiry Officer’s findings. The court’s reasoning focused on ensuring fairness and transparency in disciplinary proceedings.

The court’s reasoning followed a logical progression, as illustrated below:

The court rejected the argument that the judgment in ECIL (supra) applied to the present case. The court clarified that ECIL (supra) dealt with the issue of a second show cause notice, whereas the present case dealt with the issue of disagreement with the Enquiry Officer’s findings. The court emphasized that the principles of natural justice require that the delinquent employee be given an opportunity to respond to the reasons for disagreement before any punishment is imposed.

The Supreme Court quoted the following from Kunj Behari Misra (supra):

“19. The result of the aforesaid discussion would be that the principles of natural justice have to be read into Regulation 7(2). As a result thereof, whenever the disciplinary authority disagrees with the enquiry authority on any article of charge, then before it records its own findings on such charge, it must record its tentative reasons for such disagreement and give to the delinquent officer an opportunity to represent before it records its findings. The report of the enquiry officer containing its findings will have to be conveyed and the delinquent officer will have an opportunity to persuade the disciplinary authority to accept the favourable conclusion of the enquiry officer. The principles of natural justice, as we have already observed, require the authority which has to take a final decision and can impose a penalty, to give an opportunity to the officer charged of misconduct to file a representation before the disciplinary authority records its findings on the charges framed against the officer.”

The Court further held as under:

“21. Both the respondents superannuated on 31-12-1983. During the pendency of these appeals, Misra died on 6-1-1995 and his legal representatives were brought on record. More than 14 years have elapsed since the delinquent officers had superannuated. It will, therefore, not be in the interest of justice that at this stage the cases should be remanded to the disciplinary authority for the start of another innings.”

The court also observed that the learned Single Judge had correctly applied the law and that the Division Bench had erred in reversing the Single Judge’s order.

Key Takeaways

• When a Disciplinary Authority disagrees with the Enquiry Officer’s findings, it must record reasons for disagreement.
• The Disciplinary Authority must communicate these reasons to the delinquent employee.
• The delinquent employee must be given an opportunity to respond before any punishment is imposed.
• This ruling ensures fairness and transparency in disciplinary proceedings.

Directions

The Supreme Court set aside the judgment of the Division Bench and restored the judgment of the learned Single Judge. The court directed that the appellant be treated as having retired on the date of superannuation, and all terminal benefits should be paid to him. However, no salary was to be paid for the period when he did not work.

Development of Law

The ratio decidendi of this case is that the principles of natural justice require that a delinquent employee must be given an opportunity to respond to the reasons for disagreement by the Disciplinary Authority with the Enquiry Officer’s findings. This case reinforces the legal position established in Kunj Behari Misra (supra) and clarifies that the judgment in ECIL (supra) does not apply to this specific issue.

Conclusion

The Supreme Court allowed the appeal, emphasizing the importance of following the principles of natural justice in disciplinary proceedings. The court reiterated that when a Disciplinary Authority disagrees with the findings of the Enquiry Officer, it must provide reasons for disagreement, communicate these reasons to the delinquent, and seek their response before imposing any punishment. This judgment ensures a fair and transparent process for employees facing disciplinary actions.