REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.     940          OF 2009 (Arising out of SLP (C) No. 7529 of 2006)

CHAIRMAN, GANGA YAMUNA GRAMIN  BANK & ORS.     … APPELLANTS

VERSUS

DEVI SAHAI     … RESPONDENT  

J U D G M E N T

S.B. SINHA, J.

1. Leave granted.

2. Appellant  is  a  bank  constituted  and  incorporated  under  the

Regional Rural Banks Act, 1976 (for short, “the Act”). Section 30 thereof

provides for a regulation making power.   

On  or  about  13.5.1980,  the  Government  of  India  circulated  the

model  (staff  service)  regulations  for  the  officers/employees  of  the

Regional Rural Bank for adoption/approval by their respective Board of

Directors.  The Board of Directors of the Appellant- Bank in exercise of

its  powers  conferred  upon  it  under  Section  30  of  the  Act  after

consultation  with the  State  Bank of  India  (sponsor  bank)  and Reserve

Bank of India and with the previous sanction of the Central Government

framed regulations known as “Ganga Yamuna Gramin Bank Staff Service

Regulations, 1985” laying down the terms and conditions of service of its

employees.  Some of the relevant provisions of the said Regulations are

as under:

“10.(2)(a) The Bank may terminate the services of           an

(i) Officer  after  giving  him  three  month’s  notice  of emolument in lieu thereof.

(ii) Employee  after  giving  him  one  month’s  notice  or emoluments in lieu thereof.

(30)(1)  PENALTIES— Without  prejudice  to  the  provisions  of

other  regulations,  an  officer  or  employee  who commits  a breach of  these regulations  or  who displays  negligence,  inefficiency or  indolence, or who knowingly does anything detrimental to the interests of the Bank or in conflict with its instructions  or  who  commits  a  breach  of discipline  or  is  guilty  of  any  other  act  of misconduct  shall  be  liable  to  the  following penalties---

(a) reprimand; (b) delay or stoppage of increments or promotion; (c) degradation to a lower post or grade to a lower stage

in his incremental scale; (d) recovery  from  pay  of  the  whole  or  part  of  any

pecuniary loss  caused to  the  Bank  by the  officer  or employee;

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(e) Removal  from  service  which  shall  not  be  a disqualification for future employment;

(f) Dismissal.

(2) No officer or employee shall be subjected to the penalties referred to in clause (b), (c), (d), (e)  or  (f)  of  sub-regulation  (1)  except  by  an order in writing signed by the Chairman and no such order  shall  be passed  without  the charge being  formulated  in  writing  and  given  to  the said officer  or  employee so that  he shall  have reasonable  opportunity  to  answer  them  in writing  or  in  person,  as  he prefers  and  in  the latter  case his  defence shall  be taken down in writing as read to him.

Provided  that  requirements  of  this  sub- regulation may be waived.  If the facts  on the basis of which action is to be taken have been established in the court of law or court martial where the officer or employee has absconded or where  it  is  for  any  reason  impracticable  to communicate  with  him  or  where  there  is difficulty  in  observing  them  and  the requirements can be waived and the reasons for so doing shall be recorded in writing.”

3. The Act was amended by Act No. 1 of 1988 which came into force

with effect from 28.9.1988 in terms whereof ‘National Bank’ was defined

in Section 2(ca), to mean:

“(ca) “National  Bank”  means  the  National Bank  for  Agriculture  and  Rural  Development established  under  Section  3  of  the  National Bank  for  Agriculture  and  Rural  Development Act, 1981.”

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4. However, even prior thereto ‘National Bank for Agricultural and

Rural  Development  (NABARD)’  being  the  National  Bank,  which

although had nothing to  do  with  statutory functioning of  the  Regional

Rural  Banks,  allegedly,  on  requests  made  by  Board  of  Directors  of

several regional banks issued guidelines, stating:

“We have been receiving a number of references from  Chairmen  of  RRBs  requesting  us  for guidance  on  disciplinary  procedure  to  be adopted by RRBs for disciplinary action against their staff.  In order to meet the demands of the Chairman of RRBs, we have prepared a set of guidelines on the above subject with the help of our  Legal  Department  and  representative  of some  sponsor  banks/RRBs.   A  copy  of  the manual is enclosed for your guidance.”

Relevant portion of the said guidelines are as follows:

“…..The  penalty  prescribed  in  sub-regulation (1)  can  be  imposed  only  after  following  the procedure as laid down in the regulation strictly in  accordance  with  the  principles  of  natural justice.  Broadly stated in a case of disciplinary action, those principles require that:

i) there  is  good  and  sufficient  reason  for formulating the charges; ii) The  charge-sheeted  official  knows precisely what the charges are against him and the grounds on which these have been based; iii) the  employee  is  given  reasonable opportunity  to  show cause  against  the  penalty prescribed to be imposed on him.”

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5. Indisputably, on or about 6.8.1996, an explanation was sought for

from the respondent for alleged acts of misconduct  committed by him.

He submitted his reply to the show cause notice but the same was not

found satisfactory by the competent authority.  On or about 25.2.1997, a

charge-sheet  was issued to  him.  An Inquiry Officer  was  appointed to

conduct  a  departmental  inquiry.   In  spite  of  several

notices/advertisements  published  in  the  newspaper,  respondent  did  not

attend  the  departmental  inquiry.   The  Inquiry  Officer  conducted  the

inquiry ex parte and submitted his report holding the charges as proved.

The Disciplinary Authority by its  letter  dated 18.6.1998 forwarded the

report  of the  Inquiry officer  to the  respondent  and called upon him to

submit his comments, if any, within one week from the date of receipt of

that  letter.   As the  respondent  did  not  do  so within  that  time, he  was

granted another opportunity by letters dated 11.07.1998 and 29.07.2008.

The  Disciplinary  Authority  thereafter  imposed  a  penalty  of  dismissal

upon him by order dated 28.9.1998.   

Some of  the  charges  held  proved  against  the  respondent  are  as

under:-

i) Respondent sanctioned a demand loan for himself, from time

to time – without obtaining sanction, contrary to the rules of

the Bank.  Thus misusing his powers as Branch Manager for

his personal interest;

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ii) To  achieve  the  target  of  the  Branch,  he  started  making

window  dressing  by  first  crediting  and  later  debiting  the

amount, of the account holders, without their request;

iii) Bank amount was misutilized.  He received the cash amount,

but did not deposit the same, instead he purchased NSC in

his name, and thereafter took demand loan against the said

NSC.  

iv) He left  the  cash,  under  the  custody of  a  clerk/cashier;  he

entrusted the master key to the said clerk, thereby failing to

discharge his duties.

v) He  left  the  place  of  his  duty  without  permission  of  the

competent authority.

vi) He  sanctioned  crop  loan  to  16  debtors,  however  did  not

allow them to withdraw the amount till closure of financial

year, to achieve the target.

vii) Complaint was received that he was demanding bribe.

viii) Complaint was also made that he fraudulently withdrew an

amount from the saving account of a customer.

6. An appeal was preferred thereagainst.  In the said Memo of Appeal,

no plea was raised by him that a second show cause notice was required

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to  be  issued.   He  also  did  not  make  any  reference  to  the  NABARD

guidelines; he also did not say that any prejudice has been caused to him.

On or about 8.7.1999, the Appellate Authority dismissed the said

appeal.  He filed a writ petition thereagainst.  However, in the meanwhile,

he filed a review petition against the order of the Appellate Authority. By

an order dated 17.7.2001, the writ petition was dismissed in view of the

pendency of the review petition.  By an order dated 21.8.2001, the review

petition was dismissed.  He filed another writ petition on 14.11.2002 for

quashing  the  order  of  dismissal  dated  28.9.1998  passed  by  the

Disciplinary Authority  as  also  the  order  dated  8.7.1999  passed  by the

Appellate  Authority,  which  by  reason  of  the  impugned  judgment  and

order  dated  30.12.2003  was  allowed.  A  review  petition  filed  by  the

appellant  –  Bank  thereagainst  has  been  dismissed  by  an  order  dated

1.3.2006.   

Appellant is, thus, before us.

7. Mr.  Sanjay  Kapur,  learned  counsel  appearing  on  behalf  of  the

appellant would contend that the High Court committed a serious error in

passing the impugned judgment in holding that the guidelines issued by

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NABARD were mandatory in character and non-compliance thereof had

resulted in rendering the order of dismissal void.  

8. Mr.  Anand  Prakash  Srivastava,  learned  counsel  appearing  on

behalf of the respondent, on the other hand, would not only support the

impugned judgment but also contend that the procedure laid down in the

said guidelines have been followed in the cases of the other employees

and, thus, there was absolutely no reason as to why the same could not be

implemented in the case of the appellant.  

9. Indisputably, Appellant has been constituted under the Act.  It has

a  regulation  making  power.   Regulations  framed  by  it  subject  to  the

compliance of the statutory mandate contained in Section 30 of the Act

have  statutory  force.   The  provisions  of  the  Act  and  the  Service

Regulations made by the appellant, therefore, form self-contained Code.

Indisputably, at a point of time when NABARD issued guidelines, it had

nothing to do with the functionings of the Regional Rural Banks.  Act

No.1 of 1988, in terms whereof the ‘National Bank’ was defined and in

terms whereof instead of consulting the Reserve Bank of India for the

purpose  of  making  regulation  in  terms  of  Section  30  of  the  Act,

NABARD was required to be consulted, came into force only with effect

from 28.9.1988.    

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10. Concededly again, the guidelines issued by NABARD laying down

the  procedure  to  be  adopted  for  disciplinary  action  in  Regional  Rural

Banks were made part of the Regulations.  Even after coming into force

of Act No.1 of 1988, regulations were not amended.  Issuance of second

show cause notice for the purpose of obtaining the views of delinquent

officer in regard to quantum of punishment is not a part of the common

law principles of natural justice.  Such a provision could be laid down by

reason  of  a  statute.   The  respondent  does  not  enjoy  any status.   The

service  conditions  of  employees  of  Regional  Rural  Banks  are  not

protected in terms of Article 311(2) of the Constitution of India.   

11. The validity or otherwise of the regulations framed by appellant is

not  in  question.   In  any  event,  respondent  did  not  participate  in  the

inquiry.   

The  learned  counsel,  however,  submitted  that  a  situation  was

created by transferring the respondent to Uttar Kashi as a result whereof

he could not participate in the inquiry.  It is stated before us that such a

contention  has  been  raised  in  the  writ  petition.    A copy  of  the  writ

petition has not been placed before us.  We are not aware as to whether

such a contention has been raised in the writ petition as from the perusal

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of  the  order  passed  by the  High  court  it  does  not  appear  that  such  a

contention had been raised.  In any event, respondent does not show how

he was prejudiced.   He was supplied  with a copy of  the report  of  the

Inquiry Officer.  He even did not submit any reply thereto.  As indicated

hereinbefore, notices had not only been published asking the respondent

to take part in the disciplinary proceedings but also chance after chance

had been given to him to respond to the report of the Inquiry Officer. We,

therefore, are of the opinion that the NABARD guidelines having been

issued only for the guidance of the Regional Rural Banks, the same was

not  mandatory  in  character  and  in  any  event  respondent  was  not

prejudiced by reason of non-compliance thereof.  

In Bank of India vs. Apurba Kumar Saha [(1994) 2 SCC 615], this

Court opined as under:

“4. Having regard to the arguments addressed by learned Counsel on both sides we have gone through  the  papers  and  seen  that  the  High Court's  view  that  there  was  violation  of principles  of  natural  justice,  in  conducting  the disciplinary proceedings against the respondent, was  wholly  unjustified.  The  records  of  the disciplinary  proceedings  show  that  the respondent  had  avoided  filing  of  the  written explanation  for  the  charges  of  misconduct levelled against  him and also had for no valid reason refused to participate in the disciplinary proceedings. A Bank employee who had refused to avail of the opportunities provided to him in a disciplinary  proceeding  of  defending  himself against the charges of misconduct involving his

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integrity and dishonesty, cannot be permitted to complain  later  that  he  had  been  denied  a reasonable opportunity of defending himself of the  charges  levelled  against  him  and  the disciplinary proceeding  conducted  against  him by the Bank-employer had resulted in violation of principles of natural justice of fair hearing.”

12. We, therefore, are of the opinion that the High Court committed a

serious  error  in  passing  the  impugned  judgment.  It  is  set  aside

accordingly.  However, as it is stated before us that the respondent had

raised several  other contentions  before the High Court,  we remand the

matter to the High court for consideration of all other contentions raised

by the respondent.   In  the facts  and circumstances  of  the  case,  as  the

disciplinary proceeding  against  the  respondent  had  been  initiated  long

time back, we would request the High Court to consider the desirability of

disposing of the matter at the earliest possible opportunity and preferably

within six months from the date of communication of this Court’s order.  

13. The  appeal  is  allowed  with  the  aforementioned  directions.

However, in the facts  and circumstances of the case, there shall  be no

order as to costs.  

……………………………….J. [S.B. Sinha]

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..…………………………..…J.     [Dr. Mukundakam Sharma]

New Delhi; FEBRUARY 12, 2009

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