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PETITIONER: CENTRAL BANK OF INDIA

       Vs.

RESPONDENT: C. BERNARD

DATE OF JUDGMENT09/10/1990

BENCH: AHMADI, A.M. (J) BENCH: AHMADI, A.M. (J) PANDIAN, S.R. (J) REDDY, K. JAYACHANDRA (J)

CITATION:  1990 SCR  Supl. (2) 196  1991 SCC  (1) 319  JT 1990 (4)   142        1990 SCALE  (2)704

ACT:     Labour  Law--Bank   Employee---Chargesheet--Departmental Enquiry--Bank  Official  appointed as  Enquiry  Officer  and Disciplinary     Authority--Superannuation    of     Enquiry Officer--Continuance and conclusion of Enquiry after  super- annuation  and imposition of punishment-Held  Enquiry  Offi- cer’s order is incompetent and without jurisdiction--Absence of  bias  prejudice  or mala fides of  the  Enquiry  Officer cannot  cure the defect as to his competence--De facto  doc- trine held inapplicable.

HEADNOTE:     The  respondent, a bank employee, was chargesheeted  for claiming  L.F.C. on the basis of fake travel  receipts.  The Bank  appointed  one of its officers as Enquiry  Officer  as well as Disciplinary Authority who conducted the  departmen- tal  enquiry  against the respondent.  However,  during  the pendency  of  the enquiry the Enquiry Officer  retired  from service.  Notwithstanding  his retirement  from  service  he proceeded  with the enquiry and concluded the  same  against the  respondent. The respondent participated in the  enquiry without raising any objection against the continuance of the said  Enquiry by the said Enquiry Officer. After  giving  an opportunity to the respondent to be heard on the question of punishment  the Enquiry Officer/Disciplinary  Authority  im- posed  the punishment of discharge. The respondent  fried  a departmental  appeal  which was dismissed.  Thereafter,  the respondent filed a writ petition in the High Court challeng- ing  the  order of discharge on the ground  that  the  order passed by the Enquiry Officer was without jurisdiction.     A single judge of the High Court allowed the Writ  Peti- tion, quashed the order of punishment with all consequential benefits to the respondent on the ground that after  retire- ment  the  Enquiry Officer was nobody in  the  hierarchy  of authorities to impose punishment on the  delinquent-employee and hence his order imposing punishment was incompetent  and without jurisdiction.     Against the order of the single judge the Bank preferred a  Letter Patent Appeal before a Division Bench of the  High Court which was dismissed. 197

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   In  appeal to this Court it was contended on  behalf  of the  appellant  Bank; (i) that the decision of  the  Enquiry Officer  could  be saved on the basis of de  facto  doctrine because (a) his initial appointment being valid his  actions and  decisions  could not be invalidated by  his  subsequent retirement  since  he continued to function as  a  de  facto Enquiry  Officer;  (b) even otherwise the  Bank  could  have appointed a non-official as Enquiry Officer; (ii) that since the High Court quashed the punishment not on merits but on a mere  technicality,  it erred in directing  payment  of  all consequential  benefits to the respondent; and  (iii)  since the respondent submitted to the jurisdiction of the  Enquiry Officer  and  there was no prejudice caused to  him  he  was estopped from raising the contention as to the competence or jurisdiction  of the Enquiry Officer for the first  time  in the Writ Petition. Allowing the appeal in part, this Court,     HELD: 1. The de facto doctrine has to requisites,  name- ly, (i) the possession of the office and the performance  of the duties attached thereto, and (ii) colour of title,  that is,  apparent  right to the office and acquiescence  in  the possession thereof by the public. According to this doctrine the acts of officers de facto performed within the sphere of their  assumed  official authority, in the interest  of  the public or third parties and not for their own interest,  are generally  held valid and binding as if they were  performed by  de jure officers. This doctrine can be invoked in  cases where there is an appointment to office which is  defective; but  notwithstanding the defect to the title of the  office, the  decisions made by such a de facto officer clothed  with the  powers and functions of the office would be as  effica- cious  as those made by a de jure officer. The  same  would, however,  not  be  true of a total intruder  or  usurper  of office. The doctrine envisages that acts performed de  facto by  officers  within  the scope of  their  assumed  official authority  are  to be regarded. as binding as if  they  were performed  by officers de jure. While the de facto  doctrine saves official acts done by an officer whose appointment  is found  to be defective the private parties to  a  litigation are  precluded from challenging the appointment in any  col- lateral  proceedings. But the doctrine does not come to  the rescue of an intruder or usurper or a total stranger to  the office.  Obviously the doctrine can have no  application  to the case of a person who is not the holder of an office  but is  merely a bank employee, for that matter an  ex-employee. [202E-F; 203BF-G; 204A-C]     1.1 In the instant case, the Enquiry Officer can  hardly be described as a person occupying or being in possession of an  office to which certain duties affecting the members  of the general public can be 198 said  to  be attached. Therefore in the  facts  and  circum- stances  of  this  case the de facto doctrine  can  have  no application. [203H; 204A; 201G]     Pulin  Behari  Das v. King Emperor,  [1911-12]  16  Cal. Weekly  Notes 1105; Immedisetti Ramkrishnaiah Sons v.  State of Andhra Pradesh, A.I.R. 1976 A.P. 193; Jai Kumar v. State, [1968]  All. L.J. 877; Gokaraju Rangaraju v. State of  A.P., [1981] 3 S.C.R. 474; referred to. Abbe de Fountaine decided in 143 1; cited.     1.2  An  Enquiry Officer need not be an officer  of  the bank: even a third party can be appointed an Enquiry Officer to enquire into the conduct of an employee. But there can be no  doubt that a non-official cannot act as  a  Disciplinary Authority and pass an order of punishment against the delin-

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quent employee. Therefore, where punishment is imposed by  a person who has no authority to do so the very foundation  on which  the edifice is built collapses and with and it  fails the entire edifice. It is a case more or less akin to a case tried by court lacking in inherent jurisdiction. Absence  of bias,  prejudice or mala fides, is of no consequence so  far as  the  question of competence of the  Enquiry  Officer  is concerned. [202B; 204D-E]     Saran  Motors (P.) Ltd. v. Vishwanath & Anr.,  [1964]  2 L.L.J. 139; referred to.     Delhi Cloth and General Mills Co. Ltd. v. Labour  Court, Tis Hazari & Ors., [1970] 1 L.L.J. 23; Held inapplicable.     2. In the instant case, the impugned order of punishment was  quashed not because the merits of the case so  demanded but  because the technical plea of  incompetence  succeeded. Therefore, the High Court was right in quashing the impugned order  of punishment but having regard to the special  facts and  circumstances of the case, it should not  have  ordered payment  of  ’all consequential benefits’ flowing  from  the declaration  that  the impugned order was bad  in  law.  The order  of the High Court is modified to the extent that  the respondent  will be paid 50% of the  consequential  benefits and  not  all the consequential benefits.  Except  for  this modification,  the rest of the order of the High Court  will stand. [205E-G]

JUDGMENT:     CIVIL  APPELLATE JURISDICTION: Civil Appeal No. 3071  of 1988. ? 199     From the Judgment and Order dated 8.4.1988 of the Karna- taka High Court in Writ Appeal No. 563 of 1988.     Narayana  B. Shetye, D.N. Misra and O.C. Mathur for  the Appellant. S.R. Bhatt for the Respondent. The Judgment of the Court was delivered by     AHMADI,  J.  The  short question which  arises  in  this appeal by special leave is whether the departmental  enquiry entrusted to and conducted by a Bank official stands vitiat- ed  if the said official proceeds with the enquiry and  con- cludes the same after his superannuation. during the penden- cy of the enquiry? The High Court of Karnataka has held that such an enquiry is incompetent and without jurisdiction and, therefore,  null  and void. The facts giving  rise  to  this appeal, briefly stated, are as under:     The  respondent C. Bernard while serving as a  Relieving Head  Cashier in the K.G. Road Branch of the Bank in  Banga- lore  city availed of 15 days leave from April 17,  1978  to May 1, 1978 and was allowed an advance of Rs.2,500 on April, 1978  under LFC to be adjusted later on his  submitting  the LFC  Bill. He submitted a bill for Rs.2,800 on May  5,  1978 along  with  a stamped cash receipt purported to  have  been issued  by M/s. Shri Manju Travels of Bangalore and  claimed reimbursement for the same. The said bill was passed by  the bank on May 15, 1978 but subsequent investigations  revealed that the firm of M/s. Shri Manju Travels was a spurious  one which  indulged in issuing fake travel  receipts.  Thereupon the  respondent was served with a Memo dated August 1,  1978 by the Divisional office of the Bank calling for his  expla- nation. A letter was also addressed on the same day to  M/s. Shri Manju Travels, Bangalore requesting them to furnish the details of the persons who traveled and the amounts received

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by  the said firm. No reply was received from the said  firm but the respondent sent a reply on August 10, 1978 which was not  found  to be satisfactory. Some  correspondence  ensued between the respondent and the appellant in this  connection but finally the respondent was served with the  charge-sheet dated October 12, 1978 which was followed by a  departmental enquiry.  It  is  not necessary to go into  the  details  in regard  to  proceedings at the departmental enquiry  but  it would be sufficient to state that the respondent participat- ed in the departmental enquiry till it was completed by  the enquiry officer Shri U.B. Menon. 200     Paragraph  9.14 of the Memorandum of Bi-partite  Settle- ment  dated  October 19, 1966 empowers the  Chief  Executive Officer,  etc., of he Bank to decide which officer(s)  would be empowered to hold enquiry and take disciplinary action in the  case of each office or establishment. Accordingly  Shri U.B. Menon, Special Officer, was appointed an Enquiry  Offi- cer under the Chief Executive Officer’s Order dated  January 9, 1979, which reads as under: "Pursuant to the powers vested in the Executive Director  by the  Chairman and Managing Director of the Bank, as per  his office  Order dated 20th December, 1978, authorising him  to appoint Enquiry Officers and Appellate Authorities under the provisions of Chapter 19 of the Bi-partite Settlement  dated 19th  October, 1966, the undersigned is pleased  to  appoint Shri  U.B.  Menon, Special Officer, to work  as  an  Enquiry Officer, to hold and conduct departmental enquiries  against the  members of the staff governed by the provisions of  the Award  and  Bi-partite  Settlement, and  to  pass  necessary orders under the provisions of Chapter 19 of the  Bi-partite Settlement dated 19th October, 1966." By a subsequent circular dated January 17, 1979 all  offices of  the Bank were informed about the appointment. Shri  U.B. Menon was intimated about the same by the Assistant  General Manager’s  letter dated January 23, 1979. The  said  Enquiry Officer  conducted  the  departmental  enquiry  against  the respondent. However, during the pendency of the departmental enquiry  he retired from service on January 31,  1979.  Not- withstanding  his retirement he continued to function as  an Enquiry  Officer and concluded the enquiry against  the  re- spondent by the end of 1979. He then gave an opportunity  to the respondent to be heard on the question of punishment and then  passed the impugned order of discharge on January  14, 1980.  The  respondent’s departmental appeal was  also  dis- missed  on June 17, 1980. The respondent did not  raise  any objection against the continuance of the enquiry by the said Shri U.B. Menon at any time during the pendency and till the disposal  of the departmental appeal preferred by him.  Suf- fice  it to say that he raised this objection for the  first time  in Writ Petition No. 18 140 of 1980 filed against  the impugned order of discharge in the High Court.     A  learned Single judge of the High Court by  his  order dated  January 18, 1988 came to the conclusion that  on  the retirement  of  Shri  U.B.  Menon  ’he  was  nobody  in  the hierarchy of authorities’ to impose 201 punishment  on the respondent and hence the  order  imposing punishment was clearly incompetent and without jurisdiction. The argument that since the impugned order of discharge  got merged  in the appellate order, the initial defect, if  any, stood  removed,  was repelled by the learned  Judge  on  the ground that ’as the original order was without  jurisdiction or competence, there was nothing for the Appellate Authority to  confirm’. The learned Single Judge,  therefore,  allowed

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the writ petition, quashed the impugned order of  punishment and  directed that the respondent be paid all  consequential benefits.  The appellant preferred a Letters  Patent  Appeal against  the  said order of the learned  Single  Judge.  The Division  Bench  of the High Court which  heard  the  appeal dismissed  it by a one line order: ’no ground for  interfer- ence is made out’. It is against this order that the  appel- lant has approached this Court under Art. 136 of the Consti- tution.     Shri  Narain Shetye, the learned counsel for the  appel- lant  strongly urged that the High, Court ought not to  have permitted  the  respondent  to question  the  competence  or jurisdiction of Shri U.B. Menon to act as an Enquiry Officer as well as a Disciplinary Authority after his superannuation since he had participated in the enquiry throughout  without a  demur.  According to him, by conduct the  respondent  was estopped  from raising such a contention for the first  time in a writ petition, more so because he had submitted to  the jurisdiction  of Shri U.B. Menon and there was no  prejudice caused  on  him on that account. Lastly, he  submitted  that even  otherwise  the appellant could have appointed  a  non- official  as an Enquiry Officer and therefore  his  decision could be saved on the de facto doctrine.     Taking  the last submission first we think that  in  the facts  and circumstances of this case the de facto  doctrine can  have no application. Under paragraph 19.14 of  the  by- parties  agreement the Chief Executive Officer was  entitled to  decide  which  officer should be empowered  to  hold  an enquiry  and  take disciplinary action in the case  of  each office or establishment. Under this paragraph only an  offi- cer  of the bank could be empowered to hold an  enquiry  and take disciplinary action against a delinquent. The names  of officers  so empowered were required to be published on  the bank’s  notice board. Accordingly, Shri U.B. Menon  was  ap- pointed  an  Enquiry  Officer/Disciplinary  Authority  under paragraph  19.14  of the bi-partite agreement while  he  was still  in service. It is indeed surprising that  an  officer who  was due to retire within a few days only was chosen  to act as an Enquiry Officer and Disciplinary Authority by  the order  dated January 9, 1979. Shri U.B. Menon was  intimated about his appoint- 202 ment by the letter of January 23, r979, i.e., hardly a  week before  his  superannuation on January 31, 1979.  After  his retirement  from service he proceeded with the  enquiry  and concluded  it  by the end of 1979. The respondent  was  then served  with a second show cause notice on the  question  of punishment  and thereafter the impugned order  of  discharge was  passed  on January 14, 1980. There is  nothing  on  the record  to  show that any formal decision was taken  by  the appellant to continue the services of Shri U.B. Menon as  an official of the bank. Shri Shetty is right when he  contends that an Enquiry Officer need not be an officer of the  bank; even  a third party can be appointed as Enquiry  Officer  to enquire  into the conduct of an employee. See: Saran  Motors (P)  Ltd. v. Vishwanath & Anr., [1964] 2 LLJ 139. But  there can  be no doubt that a non-official cannot act as a  Disci- plinary  Authority and pass an order of  punishment  against the  delinquent-employee.  It is for this  reason  that  the learned  Single  Judge of the High Court  observed  that  on retirement  Shri U.B. Menon was nobody in the  hierarchy  of authorities  to  impose  punishment on  the  delinquent.  He therefore,  held  that the order of punishment  was  clearly incompetent  and without jurisdiction. The  learned  counsel for the appellant submitted that since the initial  appoint-

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ment of Shri U.B. Menon was valid, his actions and decisions could  not  be  invalidated by  his  subsequent  retirement. According  to  him he continued to function  as  an  Enquiry Officer  de facto and hence his actions and  decisions  were saved. The de facto doctrine has two requisites, namely, (i) the  possession  of the office and the  performance  of  the duties attached thereto, and (ii) colour of title, that  is, apparent right to the office and acquiescence in the posses- sion  thereof by the public. According to this doctrine  the acts  of  officers de facto performed within the  sphere  of their  assumed  official authority, in the interest  of  the public or third parties and not for their own interest,  are generally  held valid and binding as if they were  performed by de jure officers. This doctrine dates back to the case of Abbe de Fontaine decided way back in 1431 to which reference was made by Sir Asutosh Mookerjee, 3. in Pulin Behari Das v. King  Emperor,  [1911-12] 16 Calcutta Weekly Notes  1105  at 1120.  Mookerjee,  J. held that as the  complaint  was  made after  complying with section 196, Criminal Procedure  Code, by  the  order of or under authority from  Local  Government which was de facto, the proceedings were valid. On the  same principle  it was further held that the Court  of  Sessions, assuming  it  was not the holder of a de  jure  office,  was actually in possession of it under the colour of title which indicated the acquiescence of the public in its actions  and hence  its authority could not be collaterally impeached  in the proceedings arising from the conviction of Pulin and his co-accused. Again, in Immedisetti Ramkrishnaiah Sons 203 v.  State of Andhra Pradesh, AIR 1976 A.P. 193, the  Govern- ment  nominated  nine persons on a  Market  Committee  which nomination  was later set aside by the High Court.  However, before  the High Court pronounced its judgment,  the  Market Committee had functioned as if it had been properly  consti- tuted. Between the date of its constitution and the date  of the  High  Court decision it had  taken  several  decisions, issued notifications, etc., which were the subject-matter of challenge on the ground that its constitution was ab  initio bad in law. Chinnappa Reddy, J. relying on the  observations of Mookerjee, J., in Pulin’s case concluded that the acts of the Market Committee de facto performed within the scope  of its  assumed  official  authority, in the  interest  of  the public  or  third persons and not for his  own  benefit  are generally as valid and binding as if they were performed  by a  de jure Committee. The Allahabad High Court in Jai  Kumar v.  State, [1968] All. L.J. 877 upheld the judgments of  the District Judges whose appointments were later struck down by this Court on the principle that the acts of officers defac- to  are  not to be questioned because of the want  of  legal authority  except by some direct proceeding  instituted  for the  purpose by the State or by someone claiming the  office de jure, or except when the person himself attempts to build up some right, or claim some privilege or benefit by  reason of  being  the officer which he claims to be. In  all  other cases, the acts of an officer de facto are valid and  effec- tual,  while he is suffered to retain the office, as  though he were an officer by right and the same legal  consequences will flow from them for the protection of the public and  of the third parties. This Court in Gokaraju Rangaraju v. State of  A.P., [1981] 3 SCR 474=AIR 1981 SC 1473 was required  to consider  the question of the effect of the  declaration  of this Court holding the appointment of an Additional Sessions Judge  invalid on judgments pronounced by him prior to  such declaration.  This Court observed that the defacto  doctrine is rounded on good sense, sound policy and practical experi-

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ence.  It is aimed at the prevention of public  and  private mischief and the protection of public and private  interest. It  avoids endless confusion and needless chaos. It,  there- fore,  seems clear to us that the de facto doctrine  can  be invoked  in  cases where there is an appointment  to  office which  is defective; but notwithstanding the defect  to  the title  of the office, the decisions made by such a de  facto officer clothed with the powers and functions of the  office would be as efficacious as those made by a de jure  officer. The same would, however, not be true of a total intruder  or usurper of office.     In our view, the submission of Shri Shetty based on  the defacto  doctrine is clearly misconceived. Shri  U.B.  Menon can  hardly be  described as a person occupying or being  in possession of an office to 204 which  certain duties affecting the members of  the  general public can be said to be attached. The de facto doctrine, as explained earlier, envisages that acts performed de facto by officers within the scope of their assumed official authori- ty  are to be regarded as binding as if they were  performed by  officers  de  jure. While the de  facto  doctrine  saves official acts done by an officer whose appointment is  found to  be  defective the private parties to  a  litigation  are precluded from challenging the appointment in any collateral proceedings. But the doctrine does not come to the rescue of an  intruder or usurper or a total stranger to  the  office. Obviously  the doctrine can have no application to the  case of a person who is not the holder of an office but is merely a bank employee, for that matter an ex-employee. We,  there- fore, see no merit in this contention’.     True  it  is that the respondent did not  attribute  any bias  or mala fides to the Enquiry Officer nor did  he  com- plain that he was in any manner prejudiced on account of the said Enquiry Officer conducting he domestic enquiry but that will  not cure the defect as to his compensence. Where  pun- ishment is imposed by a person who has no authority     do so the very foundation on which the edifice is  built collapses and with and it fails the entire edifice. It is  a case more or less akin to a case tried by a court lacking in inherent  jurisdiction.  We, are, therefore, of  he  opinion that  absence  of bias, prejudice or mala fides,  is  of  no consequence  so  far as the question of competence  is  con- cerned.  The  cases which were cited at the  bar  (i)  Delhi Cloth  and  General  Mills Co., Ltd. v.  Labour  Court,  Tis Hazari  &  Ors.,  [1970] 1 LLJ 23  and  (ii)  Saran  Motors, (supra)  also have no application to the special  facts  and circumstances of this case.     Shri  Shetye next submitted that if a third  party  non- official can validly be appointed an Enquiry Officer, though not  Disciplinary Authority, his report upto the stage  pre- ceding  the issuance of a second ,how-cause notice could  be saved  because both sides to the proceedings had not  raised any objection to the continuance of the enquiry by the  said Enquiry  Officer and therefore the High Court ought to  have remitted the matter to the competent Disciplinary  Authority to take a fresh decision based on the report of the  Enquiry Officer.  To  put it differently, according to  the  learned counsel  for the appellant, the High Court should  have  re- manded the matter with a direction that the competent Disci- plinary Authority will proceed to dispose of the  departmen- tal  enquiry from the stage of the report submitted  by  the Enquiry  Officer. We would have considered it  necessary  to examine  this submission had the delinquent not  retired  in the  meantime on August 21, 1986. The High Court  pronounced

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its Judgment thereafter 205 on  January 18, 1988. No useful purpose, therefore,  can  be served by adopting the procedure suggested by Shri Shetye as the  respondent had admittedly retired from service in  1986 and  if  the order imposing punishment is quashed  he  would ordinarily have to be paid his wages etc., upto the date  of his  retirement.  We, therefore, do not think that,  in  the facts  and circumstances of this case, the course  suggested by Shri Shetye can be usefully adopted.     Lastly,  Shri  Shetye submitted that in  any  event  the respondent  succeeded  in getting the  order  of  punishment quashed  on a mere technicality and that too on the  conten- tion  belatedly raised before the High Court for  the  first time and, therefore, the High Court was in error in  direct- ing payment of all consequential benefits. We think there is merit in this contention. If the objection was raised at the earliest possible opportunity before the Enquiry Officer the appellant could have taken steps to remedy the situation  by appointing  a competent officer to enquire into the  charges before  the  respondent’s  retirement from  service.  It  is equally  true that the penalty has not been quashed on  mer- its.  On the contrary, if one were to go by the  charge  le- velled against the respondent and the reply thereto one  may carry the impression that the respondent had made the  claim on  the  basis of the fake receipt; whether  the  respondent himself  was duped or not would be a different  matter.  The fact, however, remains that the impugned order of punishment has  to  be quashed not because the merits of  the  case  so demand  but because the technical plea of incompetence  suc- ceeds.  In  the  circumstances, we think that  the  ends  of justice would be met if instead of directing ’all consequen- tial  benefits’ the appellant is ordered to pay ’50% of  the consequential  benefits’  to which the respondent  would  be entitled on superannuation. For the above reasons, we are of the  opinion that the High Court was right in  quashing  the impugned  order of punishment but we think having regard  to the special facts and circumstances pointed out earlier,  it should not have ordered payment of ’all consequential  bene- fits’  flowing from the declaration that the impugned  order was bad in law. We, therefore, modify this part of the order by  substituting  the words fifty percent’ in place  of  the word  ’all’  in  the penultimate paragraph  of  the  learned Single  Judge’s order. To put the matter beyond the pale  of doubt we clarify that the respondent will be paid 50% of the consequential  benefits and not all the consequential  bene- fits. Except for this modification, the rest of the order of the High Court will stand. The appeal will stand allowed  to the above extent but, in the facts and circumstances of this case, we think the parties should be directed to bear  their own costs. T.N.A.                       Appeal allowed partly. 206