Supreme Court Upholds Dismissal in Bank Misappropriation Case: Deputy General Manager vs. Ajai Kumar Srivastava (2021)

Introduction

Date of the Judgment: 05 January 2021

Citation: (2021) INSC 1

Judges: L. Nageswara Rao, Hemant Gupta, Ajay Rastogi

Can a bank employee be dismissed for misconduct even if not all charges against them are proven? The Supreme Court of India recently addressed this question in a case involving a bank employee accused of misappropriating funds. The court examined the extent to which High Courts can interfere with disciplinary actions taken by departmental authorities. The bench comprised Justices L. Nageswara Rao, Hemant Gupta, and Ajay Rastogi, with the judgment authored by Justice Ajay Rastogi.

Case Background

The case revolves around Ajai Kumar Srivastava, who was employed as a Cashier/Clerk at the Mumfordganj Branch of the State Bank of India. He joined on December 7, 1981. On August 14, 1995, he was suspended following allegations of misconduct. A charge sheet dated April 11, 1996, detailed seven charges of misappropriation of funds. These charges alleged that Srivastava had made fraudulent credits to his accounts. Simultaneously, a criminal case was filed against him under Sections 420, 467, 468, 471 of the Indian Penal Code, 1860, along with Section 120-B of the same code, and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988.

Srivastava denied all charges in his reply dated May 8, 1996. An inquiry officer was appointed, and after conducting an inquiry, the officer submitted a report on May 22, 1999. The report concluded that Charge No. 1 was not proven, but Charges 2 to 7 were proven against Srivastava. The disciplinary authority, however, disagreed with the finding on Charge No. 1 and held it to be proven as well. This led to Srivastava’s dismissal from service on July 24, 1999.

Timeline

Course of Proceedings

The disciplinary authority, after reviewing the inquiry report, disagreed with the finding on Charge No. 1 and issued a show-cause notice to Srivastava. Despite Srivastava’s objections, the disciplinary authority confirmed the dismissal order. Srivastava then filed a departmental appeal, which was also dismissed. Subsequently, he challenged the dismissal before the High Court of Allahabad.

The learned Single Judge of the High Court focused on Charge No. 1, noting that the disciplinary authority’s disagreement caused prejudice to Srivastava. The High Court also opined that the disciplinary and appellate authorities had passed non-speaking orders violating the principles of natural justice. This view was affirmed by the Division Bench of the High Court in its judgment dated September 13, 2018.

Legal Framework

The disciplinary proceedings against Srivastava were conducted under the framework of the Sastry Award read with the Desai Award, as modified by the 12th Bipartite Settlement dated February 14, 1995, between the State Bank of India and the All India State Bank of India Staff Federation. Specifically, Para 521(5)(a) of the Sastry Award, along with Paras 18 and 28 of the Desai Award, were considered. These provisions outline the procedure for disciplinary actions against bank employees.

The court also considered principles of natural justice, which require that a person be given a fair opportunity to be heard before any adverse action is taken against them. The court also examined the scope of judicial review in disciplinary matters.

Arguments

Appellant’s Arguments (Bank):

• The appellant argued that the respondent was given a fair opportunity of hearing during the inquiry.
• The procedure prescribed under the disciplinary rules was followed and the enquiry was conducted by a competent authority.
• The findings of the enquiry officer and the disciplinary authority were supported by evidence.
• The disciplinary authority had recorded reasons for disagreeing with the enquiry officer’s finding on Charge No. 1, and the respondent had failed to provide any justification in response.
• The order of dismissal, based on Charges 2-7, was justified, and the High Court’s interference was unwarranted.
• The appellant relied on the judgments of the Supreme Court in State of Orissa and Others Vs. Bidyabhushan Mohapatra and P.D. Agrawal Vs. State Bank of India and Others, to argue that the dismissal order was valid.

Respondent’s Arguments (Ajai Kumar Srivastava):

• The respondent contended that the disciplinary authority did not independently examine the record of the enquiry and passed a non-speaking order.
• The disciplinary authority should have first served a note of disagreement on Charge No. 1 before examining the record independently.
• The procedure adopted by the disciplinary authority was a procedural error that caused great prejudice to the respondent.
• The respondent argued that the defect could not be cured by a post-decisional hearing.
• The respondent supported the High Court’s judgment, asserting that the disciplinary authority’s order was passed without due application of mind.

Issues Framed by the Supreme Court

The Supreme Court framed the following issues for consideration:

1. Whether the disciplinary authority was justified in disagreeing with the enquiry officer’s finding on Charge No. 1 without following the correct procedure.
2. Whether the High Court was correct in interfering with the disciplinary proceedings and setting aside the dismissal order.
3. Whether the disciplinary and appellate authorities had passed non-speaking orders without due application of mind.
4. Whether the dismissal order was valid based on the findings of guilt on Charges 2 to 7, even if Charge 1 was not proven by the enquiry officer.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court considered several authorities in its judgment, which are categorized below:

On the Scope of Judicial Review:

• State of Tamil Nadu Vs. T.V. Venugopalan, 1994(6) SCC 302 (Supreme Court of India)
• Government of T.N. and Another Vs. A. Rajapandian, 1995(1) SCC 216 (Supreme Court of India)
• B.C. Chaturvedi Vs. Union of India and Others, 1995(6) SCC 749 (Supreme Court of India)
• Himachal Pradesh State Electricity Board Limited Vs. Mahesh Dahiya, 2017(1) SCC 768 (Supreme Court of India)
• Pravin Kumar Vs. Union of India and Others, 2020(9) SCC 471 (Supreme Court of India)

On the Effect of Disagreement with Inquiry Officer’s Findings:

• State of Orissa and Others Vs. Bidyabhushan Mohapatra, AIR 1963 SC 779 (Supreme Court of India)
• P.D. Agrawal Vs. State Bank of India and Others, 2006(8) SCC 776 (Supreme Court of India)

On Severability of Charges:

• State of Orissa and Others Vs. Bidyabhushan Mohapatra, AIR 1963 SC 779 (Supreme Court of India)
• Binny Ltd. Vs. Workmen, 1972(3) SCC 806 (Supreme Court of India)
• Sawarn Singh and Another Vs. State of Punjab and Others, AIR 1976 SC 232 (Supreme Court of India)

Legal Provisions Considered:

• Para 521(5)(a) of the Sastry Award
• Paras 18 and 28 of the Desai Award
• 12th Bipartite Settlement dated 14th February, 1995 between the State Bank of India and All India State Bank of India Staff Federation

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• State of Orissa and Others Vs. Bidyabhushan Mohapatra [AIR 1963 SC 779]: *Cited to support the principle that if an order can be supported on any finding of substantial misconduct, the court will not interfere. Also used on principle of severability of charges.*
• P.D. Agrawal Vs. State Bank of India and Others [2006(8) SCC 776]: *Cited to support the disciplinary authority’s power to disagree with the enquiry officer’s findings, but with the caveat that proper procedure must be followed.*
• State of Tamil Nadu Vs. T.V. Venugopalan [1994(6) SCC 302], Government of T.N. and Another Vs. A. Rajapandian [1995(1) SCC 216], B.C. Chaturvedi Vs. Union of India and Others [1995(6) SCC 749], Himachal Pradesh State Electricity Board Limited Vs. Mahesh Dahiya [2017(1) SCC 768], and Pravin Kumar Vs. Union of India and Others [2020(9) SCC 471]: *These cases were cited to define the limits of judicial review in disciplinary matters, emphasizing that courts should not interfere with the merits of the decision but only with the decision-making process.*
• Binny Ltd. Vs. Workmen [1972(3) SCC 806]: *Cited to support the principle that a punishment can be sustained even if one of the charges is unsustainable.*
• Sawarn Singh and Another Vs. State of Punjab and Others [AIR 1976 SC 232]: *Cited to support the principle that an order can be sustained if the authority would have passed the order on the basis of relevant and existing grounds.*

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• Procedural Lapses: The Court acknowledged that the disciplinary authority had erred by not serving a note of disagreement to the respondent before reversing the inquiry officer’s finding on Charge No. 1. This was deemed a violation of natural justice.
• Severability of Charges: The Court emphasized that the charges against the respondent were severable. The fact that Charges 2 to 7 were proven and constituted grave misconduct was sufficient to uphold the dismissal, irrespective of the procedural lapse in Charge No. 1.
• Judicial Review Limits: The Court reiterated that the High Court’s role in judicial review is limited to examining the decision-making process and not the merits of the decision itself. The High Court had overstepped its bounds by re-evaluating the evidence and interfering with the penalty.
• Integrity in Banking: The Court underscored the importance of integrity and honesty in the banking sector, highlighting that any misconduct by bank employees could undermine public confidence.
• Evidence on Record: The Court noted that the enquiry officer’s report and the documents produced by the presenting officer were sufficient to establish Charges 2 to 7. The respondent had not produced any documents or witnesses in his defense.

Sentiment Analysis of Reasons Given by the Supreme Court:

Fact:Law Ratio:

Logical Reasoning:

The Court considered the arguments and authorities presented by both sides. It acknowledged the procedural lapse regarding Charge No. 1 but emphasized that the findings on Charges 2 to 7 were sufficient to justify the dismissal. The Court also clarified the limits of judicial review in disciplinary matters, stating that the High Court should not have interfered with the penalty based on its own assessment of the evidence.

The Court noted that the disciplinary and appellate authorities had considered the record of enquiry and the objections raised by the respondent before confirming the dismissal order. The Court also emphasized the importance of maintaining integrity in the banking sector.

The Supreme Court rejected the argument that the disciplinary authority had passed a non-speaking order. It noted that the authorities had provided brief reasons for their decisions, and they were not required to pass a detailed judgment.

The Court also emphasized that the findings of misconduct were based on documentary evidence, and the respondent had failed to produce any evidence in his defense. The Court concluded that the High Court had committed an error by interfering with the order of dismissal.

Key Takeaways

• Procedural Fairness: Disciplinary authorities must follow proper procedures, including serving a note of disagreement when reversing an inquiry officer’s findings.
• Severability of Charges: If multiple charges are leveled, and some are proven while others are not, a dismissal can still be valid if the proven charges are sufficient to warrant such action.
• Limits of Judicial Review: High Courts should not re-evaluate the evidence in disciplinary matters but should focus on the decision-making process.
• Importance of Integrity: The banking sector requires high standards of integrity and honesty from its employees, and any misconduct can lead to severe consequences.
• Evidence-Based Decisions: Disciplinary decisions must be based on evidence, and employees must actively participate in the inquiry process to defend themselves.

Potential Future Impact:

• This judgment reinforces the principle that disciplinary actions in service matters should be based on substantial evidence and due process, but also clarifies that minor procedural lapses may not invalidate the entire process if the core charges are proven.
• It provides guidance to High Courts on the limits of judicial review in disciplinary proceedings, emphasizing that courts should not act as appellate authorities.
• The judgment highlights the importance of maintaining integrity in the banking sector and serves as a reminder to bank employees about the consequences of misconduct.

Directions

The Supreme Court did not give any specific directions, other than setting aside the judgment of the High Court and upholding the dismissal order.

Development of Law

The ratio decidendi of this case is that a disciplinary authority can impose a penalty of dismissal based on some charges even if another charge is not proven, provided that the proven charges are sufficient to warrant such action. This judgment also clarifies the limits of judicial review in disciplinary matters, emphasizing that courts should not interfere with the merits of the decision but only with the decision-making process. The judgment reinforces the principle of severability of charges and the importance of maintaining integrity in the banking sector.

This case does not introduce any new principles of law but rather reinforces existing legal principles related to disciplinary proceedings and judicial review. It reaffirms the principles laid down in earlier judgments such as State of Orissa and Others Vs. Bidyabhushan Mohapatra and B.C. Chaturvedi Vs. Union of India and Others.

Conclusion

In conclusion, the Supreme Court allowed the appeals filed by the bank, setting aside the High Court’s judgment. The Court upheld the dismissal of Ajai Kumar Srivastava, emphasizing that while procedural fairness is essential, the proven charges of misconduct were sufficient to justify the dismissal. The judgment underscores the importance of integrity in the banking sector and clarifies the limits of judicial review in disciplinary matters.