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CASE NO.: Appeal (civil)  8258 of 2004

PETITIONER: Damoh Panna Sagar Rural Regional Bank & Anr.

RESPONDENT: Munna Lal Jain

DATE OF JUDGMENT: 16/12/2004

BENCH: ARIJIT PASAYAT & S.H. KAPADIA

JUDGMENT: J U D G M E N T

(Arising out of S.L.P.(C) 19412/2004)

ARIJIT PASAYAT, J.

       Leave granted.

       Damoh Panna Sagar, Rural Regional Bank- the appellant no.1  (hereinafter referred to as the ’employer’) calls in question legality  of the judgment rendered by a Division Bench of the Madhya Pradesh High  Court at Jabalpur directing the Board of Directors of the employer Bank  (in short the ’Board’) to reconsider the matter and pass any punishment  other than dismissal, removal or termination of the respondent \026 Munna  Lal Jain (hereinafter referred to as the ’employee’).   

Background facts in a nutshell are as follows :

       On the allegation that while temporarily functioning as the  Branch manager of Kabra Branch, the respondent-employee withdrew a sum  of Rs.25,000/- unauthorisedly and such act amounted to misconduct  warranting serious penalty.  Because of such unauthorized withdrawal,  charges were framed against him by charge sheet dated 14.10.1992  alleging that he had withdrawn a sum of Rs.25,000/- on 6.5.1992 for his  personal use.  The respondent-employee filed his explanation.  Though  not disputing the factum of withdrawal, plea was taken by him that  during the relevant period condition of his wife had deteriorated and  required immediate surgical interference.  He had informed about  withdrawal to the Head Office at Damoh. The explanation was not  accepted, an enquiry officer was appointed who submitted his report on  20.7.1993 holding that the employee was guilty of the charges. The  disciplinary authority concurred with the findings of the Enquiry  Officer and after following the formalities i.e. issuance of show-cause  notice, passed the order of removal. In appeal the said order of  removal was maintained. Against the aforesaid order the employee  preferred Writ Petition No. 2719 of 1995.  Learned Single Judge held  that the charges levelled have been duly brought home, but remitted the  matter to the appellate authority for re-consideration with regard to  the quantum of punishment.  Pursuant to the direction, the matter was  again considered by the Board and it was held that the order of removal  did not require reconsideration. Employee filed a Writ Petition (W.P.  No. 4812 of 1998). Learned Single Judge, who heard the matter, held  that the Board had not considered the matter from all angles keeping in

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view the observations made in the earlier order dated 13.5.1998.  Direction was given to the Board to re-consider the penalty of removal.   The matter was again re-considered and the Board refused to interfere  with the quantum of punishment. The said order was assailed in Writ  Petition No. 5236 of 2000. Learned Single judge declined to interfere  on the ground that the charges had been proved and the Board had passed  a detailed order.  Learned Single Judge further held that the factum of  illness of the wife had not been proved as no documents had been filed.                  The matter was carried in a Letters Patent Appeal before the  Division Bench.  It was stand of the employee before the Division Bench  that the money was withdrawn because of an emergency and he had some of  money in his Provident Fund account.  In any event, the money had been  deposited in the bank with 24% interest which was much higher than the  rate of interest that is payable on loan availed without security i.e.  overdraft.  

In response, it was submitted by the learned counsel appearing  for the employer, that there was no scope for interference with the  quantum of punishment.   

The High Court observed that ordinarily the High Court should not  interfere with the order of learned Single Judge. It, however, noticed  that the amount has been repaid with 24% interest.  It was observed  that though adequate material was not placed to establish the wife’s  illness that could not be a ground to uphold the punishment of removal,  particularly when he had paid back the amount with 24% interest.  There  was no allegation that earlier he had committed any kind of  delinquency.  It was noted that antecedents do not play positive role  in all cases, but in certain cases they cannot be totally ignored.   Reference was made to decision of this Court in Kailash Nath Gupta v.  Enquiry Officer (R.K. Rai) Allahabad Bank and others (AIR 2003 SC  1377).  It was also observed that in the said case this Court has taken  note of the fact that a sum of       Rs.46,000/-has already been repaid  and no loss was caused to the bank.  Though factual matrix was noticed  to be different, yet it was held that the Branch Manager in a difficult  situation had withdrawn the money and repaid with 24% interest.  There  was no loss caused.  Again the High Court observed that it hastened to  add that it was not its view that unless there is any loss there cannot  be any misconduct.  Ultimately it was concluded that this was a fit  case where the Board should be compassionate and gracious enough to  reconsider employee’s case to pass any other punishment other than  dismissal, removal or termination.  It was held that there was  irregularity but not such an irregularity as to attract the punishment  of removal.  It was also indicated that even if lesser punishment is  awarded the employee would not be entitled to any kind of back wages.

       In support of the appeal, learned counsel for the appellant  submitted that the High Court’s judgment is full of contradictions.  Having accepted that there was practically no scope of interference  with the quantum of punishment, yet on irrelevant considerations High  Court directed that punishment of removal, termination or dismissal  should not be passed.  The scope for interference with quantum of  punishment has been highlighted by this Court in many cases and this is  a case where no interference was called for.  It has been found as a  fact that the defence taken by the employee was false. Though he  claimed that the amount was withdrawn on 9.5.1992, in fact it was  withdrawn on 6.5.1992.  There was no evidence adduced regarding the  wife’s ailment.

       In response, learned counsel for the respondent-employee  submitted that the appeal was not maintainable and the appeal was  really unnecessary one.  Ordinarily this Court should not interfere in  service matters by appreciating evidence. The respondent-employee had  intimated the head office about the withdrawal which is bonafide and he

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had repaid the amount with 24% interest. The scope of interference with quantum of punishment has been the  subject-matter of various decisions of this Court.  Such interference  cannot be a routine matter.

Lord Greene said in 1948 in the famous Wednesbury case (1948 (1)  KB 223) that when a statute gave discretion to an administrator to take  a decision, the scope of judicial review would remain limited.  He said  that interference was not permissible unless one or the other of the  following conditions was satisfied, namely the order was contrary to  law, or relevant factors were not considered, or irrelevant factors  were considered; or the decision was one which no reasonable person  could have taken.  These principles were consistently followed in the  UK and in India to judge the validity of administrative action.  It is  equally well known that in 1983, Lord Diplock in Council for Civil  Services Union v. Minister of Civil Service [(1983) 1 AC 768] (called  the CCSU case) summarized the principles of judicial review of  administrative action as based upon one or other of the following viz.,  illegality, procedural irregularity and irrationality.  He, however,  opined that "proportionality" was a "future possibility".

In Om Kumar and Ors. v. Union of India (2001 (2) SCC 386), this  Court observed, inter alia, as follows:   

       "The principle originated in Prussia in the  nineteenth century and has since been adopted in  Germany, France and other European countries.  The  European Court of Justice at Luxembourg and the  European Court of Human Rights at Strasbourg have  applied the principle while judging the validity of  administrative action.  But even long before that,  the Indian Supreme Court has applied the principle of  "proportionality" to legislative action since 1950,  as stated in detail below.                    

       By "proportionality", we mean the question  whether, while regulating exercise of fundamental  rights, the appropriate or least-restrictive choice  of measures has been made by the legislature or the  administrator so as to achieve the object of the  legislation or the purpose of the administrative  order, as the case may be.  Under the principle, the  court will see that the legislature and the  administrative authority "maintain a proper balance  between the adverse effects which the legislation or  the administrative order may have on the rights,  liberties or interests of persons keeping in mind the  purpose which they were intended to serve".  The  legislature and the administrative authority are,  however, given an area of discretion or a range of  choices but as to whether the choice made infringes  the rights excessively or not is for the court. That  is what is meant by proportionality.

xxx             xxx             xxx             xxx             xxx

                The development of the principle of "strict  scrutiny" or "proportionality" in administrative law  in England is, however, recent. Administrative action  was traditionally being tested on Wednesbury grounds.   But in the last few years, administrative action  affecting the freedom of expression or liberty has  been declared invalid in several cases applying the

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principle of "strict scrutiny".  In the case of these  freedoms, Wednesbury principles are no longer  applied.  The courts in England could not expressly  apply proportionality in the absence of the  convention but tried to safeguard the rights  zealously by treating the said rights as basic to the  common law and the courts then applied the strict  scrutiny test.  In the Spycatcher case Attorney  General v. Guardian Newspapers Ltd. (No.2) (1990) 1  AC 109 (at pp. 283-284), Lord Goff stated that there  was no inconsistency between the convention and the  common law.  In Derbyshire County Council v. Times  Newspapers Ltd. (1993) AC 534, Lord Keith treated  freedom of expression as part of common law.   Recently, in R. v. Secy. Of State for Home Deptt., ex  p. Simms (1999) 3 All ER 400 (HL), the right of a  prisoner to grant an interview to a journalist was  upheld treating the right as part of the common law.   Lord Hobhouse held that the policy of the  administrator was disproportionate.  The need for a  more intense and anxious judicial scrutiny in  administrative decisions which engage fundamental  human rights was re-emphasised in in R. v. Lord  Saville ex p (1999) 4 All ER 860 (CA), at pp.870,872)  . In all these cases, the English Courts applied the  "strict scrutiny" test rather than describe the test  as one of "proportionality".  But, in any event, in  respect of these rights "Wednesbury" rule has ceased  to apply.

       However, the principle of "strict scrutiny" or  "proportionality" and primary review came to be  explained in R. v. Secy. of State for the Home Deptt.  ex p Brind (1991) 1 AC 696.  That case related to  directions given by the Home Secretary under the  Broadcasting Act, 1981 requiring BBC and IBA to  refrain from broadcasting certain matters through  persons who represented organizations which were  proscribed under legislation concerning the  prevention of terrorism.  The extent of prohibition  was linked with the direct statement made by the  members of the organizations.  It did not however,  for example, preclude the broadcasting by such  persons through the medium of a film, provided there  was a "voice-over" account, paraphrasing what they  said.  The applicant’s claim was based directly on  the European Convention of Human Rights. Lord Bridge  noticed that the Convention rights were not still  expressly engrafted into English law but stated that  freedom of expression was basic to the Common law and  that, even in the absence of the Convention, English  Courts could go into the question (see p. 748-49).

".....whether the Secretary of State, in the  exercise of his discretion, could reasonably  impose the restriction he has imposed on the  broadcasting organisations"

and that the courts were

"not perfectly entitled to start from the  premise that any restriction of the right to  freedom of expression requires to be justified  and nothing less than an important public  interest will be sufficient to justify it".

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Lord Templeman also said in the above case that the  courts could go into the question whether a  reasonable minister could reasonably have concluded  that the interference with this freedom was  justifiable.  He said that "in terms of the  Convention" any such interference must be both  necessary and proportionate (ibid pp. 750-51).

       In the famous passage, the seeds of the  principle of primary and secondary review by courts  were planted in the administrative law by Lord Bridge  in the Brind case (1991) 1 AC 696.  Where Convention  rights were in question the courts could exercise a  right of primary review.  However, the courts would  exercise a right of secondary review based only on  Wednesbury principles in cases not affecting the  rights under the Convention.  Adverting to cases  where fundamental freedoms were not invoked and where  administrative action was questioned, it was said  that the courts were then confined only to a  secondary review while the primary decision would be  with the administrator. Lord Bridge explained the  primary and secondary review as follows:

       "The primary judgment as to whether the  particular competing public interest justifying  the particular restriction imposed falls to be  made by the Secretary of State to whom  Parliament has entrusted the discretion.  But,  we are entitled to exercise a secondary  judgment by asking whether a reasonable  Secretary of State, on the material before him,  could reasonably make the primary judgment."

       But where an administrative action is  challenged as "arbitrary" under Article 14 on the  basis of Royappa (1974) 4 SCC 3 (as in cases where  punishments in disciplinary cases are challenged),  the question will be whether the administrative order  is "rational" or "reasonable" and the test then is  the Wednesbury test.  The courts would then be  confined only to a secondary role and will only have  to see whether the administrator has done well in his  primary role, whether he has acted illegally or has  omitted relevant factors from consideration or has  taken irrelevant factors into consideration or  whether his view is one which no reasonable person  could have taken.  If his action does not satisfy  these rules, it is to be treated as arbitrary. In  G.B. Mahajan v. Jalgaon Municipal Council (1991) 3  SCC 91 at p. 111 Venkatachaliah, J. (as he then was)  pointed out that "reasonableness" of the  administrator under Article 14 in the context of  administrative law has to be judged from the stand  point of Wednesbury rules. In Tata Cellular v. Union  of India (1994) 6 SCC 651 at pp. 679-80), Indian  Express Newspapers Bombay (P) Ltd. v. Union of India  (1985) 1 SCC 641 at p.691), Supreme Court Employees’  Welfare Assn. V. Union of India (1989) 4 SCC 187 at  p. 241) and U.P. Financial Corpn. V. Gem Cap(India)  (P) Ltd. (1993) 2 SCC 299 at p. 307) while judging  whether the administrative action is "arbitrary"  under Article 14 (i.e. otherwise then being  discriminatory), this Court has confined itself to a

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Wednesbury review always.

       The principles explained in the last preceding  paragraph in respect of Article 14 are now to be  applied here where the question of "arbitrariness" of  the order of punishment is questioned under Article  14.

xxx             xxx             xxx             xxx             xxx

       Thus, from the above principles and decided  cases, it must be held that where an administrative  decision relating to punishment in disciplinary cases  is questioned as "arbitrary" under Article 14, the  court is confined to Wednesbury principles as a  secondary reviewing authority.  The court will not  apply proportionality as a primary reviewing court  because no issue of fundamental freedoms nor of  discrimination under Article 14 applies in such a  context.  The court while reviewing punishment and if  it is satisfied that Wednesbury principles are  violated, it has normally to remit the matter to the  administrator for a fresh decision as to the quantum  of punishment.  Only in rare cases where there has  been long delay in the time taken by the disciplinary  proceedings and in the time taken in the courts, and  such extreme or rare cases can the court substitute  its own view as to the quantum of punishment."                                      

In B.C. Chaturvedi v. Union of India and Ors. (1995 [6] SCC 749)  it was observed:

"A review of the above legal position would  establish that the disciplinary authority, and on  appeal the appellate authority, being fact-finding  authorities have exclusive power to consider the  evidence with a view to maintain discipline.  They  are invested with the discretion to impose  appropriate punishment keeping in view the magnitude  or gravity of the misconduct.  The High  Court/Tribunal, while exercising the power of  judicial review, cannot normally substitute its own  conclusion on penalty and impose some other penalty.  If the punishment imposed by the disciplinary  authority or the appellate authority shocks the  conscience of the High Court/Tribunal, it would  appropriately mould the relief, either directing the  disciplinary/appellate authority to reconsider the  penalty imposed, or to shorten the litigation, it may  itself, in exceptional and rare cases, impose  appropriate punishment with cogent reasons in support  thereof."

In Union of India and Anr. v. G. Ganayutham (1997 [7] SCC 463),  this Court summed up the position relating to proportionality in  paragraphs 31 and 32, which read as follows:

"The current position of proportionality in  administrative law in England and India can be  summarized as follows:

(1) To judge the validity of any

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administrative order or statutory discretion,  normally the Wednesbury test is to be applied  to find out if the decision was illegal or  suffered from procedural improprieties or was  one which no sensible decision-maker could, on  the material before him and within the  framework of the law, have arrived at.  The  court would consider whether relevant matters  had not been taken into account or whether  irrelevant matters had been taken into account  or whether the action was not bona fide.  The  court would also consider whether the decision  was absurd or perverse. The court would not  however go into the correctness of the choice  made by the administrator amongst the various  alternatives open to him.  Nor could the court  substitute its decision to that of the  administrator.  This is the Wednesbury (1948 1  KB 223) test.

(2) The court would not interfere with  the administrator’s decision unless it was  illegal or suffered from procedural impropriety  or was irrational \026 in the sense that it was in  outrageous defiance of logic or moral  standards.  The possibility of other tests,  including proportionality being brought into  English administrative law in future is not  ruled out.  These are the CCSU (1985 AC 374)  principles.   (3)(a) As per Bugdaycay (1987 AC 514),  Brind (1991 (1) AC 696) and Smith (1996 (1) All  ER 257) as long as the Convention is not  incorporated into English law, the English  courts merely exercise a secondary judgment to  find out if the decision-maker could have, on  the material before him, arrived at the primary  judgment in the manner he has done.

(3)(b) If the Convention is incorporated  in England making available the principle of  proportionality, then the English courts will  render primary judgment on the validity of the  administrative action and find out if the  restriction is disproportionate or excessive or  is not based upon a fair balancing of the  fundamental freedom and the need for the  restriction thereupon.

(4)(a) The position in our country, in  administrative law, where no fundamental  freedoms as aforesaid are involved, is that the  courts/tribunals will only play a secondary  role while the primary judgment as to  reasonableness will remain with the executive  or administrative authority.  The secondary  judgment of the court is to be based on  Wednesbury and CCSU principles as stated by  Lord Greene and Lord Diplock respectively to  find if the executive or administrative  authority has reasonably arrived at his  decision as the primary authority.   

(4)(b) Whether in the case of

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administrative or executive action affecting  fundamental freedoms, the courts in our country  will apply the principle of "proportionality"  and assume a primary role, is left open, to be  decided in an appropriate case where such  action is alleged to offend fundamental  freedoms. It will be then necessary to decide  whether the courts will have a primary role  only if the freedoms under Articles 19, 21 etc.  are involved and not for Article 14.

       Finally, we come to the present case.  It is  not contended before us that any fundamental freedom  is affected.  We need not therefore go into the  question of "proportionality".  There is no  contention that the punishment imposed is illegal or  vitiated by procedural impropriety.  As to  "irrationality", there is no finding by the Tribunal  that the decision is one which no sensible person who  weighed the pros and cons could have arrived at nor  is there a finding, based on material, that the  punishment is in "outrageous" defiance of logic.  Neither Wednesbury nor CCSU tests are satisfied.  We  have still to explain "Ranjit Thakur (1987 [4] SCC  611)".

The common thread running through in all these decisions is that  the Court should not interfere with the administrator’s decision unless  it was illogical or suffers from procedural impropriety or was shocking  to the conscience of the Court, in the sense that it was in defiance of  logic or moral standards.  In view of what has been stated in the  Wednesbury’s case (supra) the Court would not go into the correctness  of the choice made by the administrator open to him and the Court  should not  substitute its decision to that of the administrator. The  scope of judicial review is limited to the deficiency in decision- making process and not the decision.   

To put differently unless the punishment imposed by the  Disciplinary Authority or the Appellate Authority shocks the conscience  of the Court/Tribunal, there is no scope for interference.  Further to  shorten litigations it may, in exceptional and rare cases, impose  appropriate punishment by recording cogent reasons in support thereof.   In a normal course if the punishment imposed is shockingly  disproportionate it would be appropriate to direct the Disciplinary  Authority or the Appellate Authority to reconsider the penalty imposed.

In the case at hand the High Court did not record any reason as  to how and why it found the punishment shockingly disproportionate.  Even there is no discussion on this aspect.   

A Bank officer is required to exercise higher standards of  honesty and integrity.  He deals with money of the depositors and the  customers. Every officer/employee of the Bank is required to take all  possible steps to protect the interests of the Bank and to discharge  his duties with utmost integrity, honesty, devotion and diligence and  to do nothing which is unbecoming of a Bank officer. Good conduct and  discipline are inseparable from the functioning of every  officer/employee of the Bank. As was observed by this Court in  Disciplinary Authority-cum-Regional Manager v. Nikunja Bihari Patnaik  (1996 (9) SCC 69), it is no defence available to say that there was no  loss or profit resulted in case, when the officer/employee acted  without authority. The very discipline of an organization more

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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. The  charges against the employee were not casual in nature and were  serious. These aspects do not appear to have been kept in view by the  High Court.      

It needs no emphasis that when a Court feels that the punishment  is shockingly disproportionate, it must record reasons for coming to  such a conclusion. Mere expression that the punishment is shockingly  disproportionate would not meet the requirement of law. Even in respect  of administrative orders Lord Denning M.R. in Breen v. Amalgamated  Engineering Union (1971 (1) All E.R. 1148) observed "The giving of  reasons is one of the fundamentals of good administration". In  Alexander Machinery (Dudley) Ltd. v. Crabtree (1974 LCR 120) it was  observed: "Failure to give reasons amounts to denial of justice".  Reasons are live links between the mind of the decision taker to the  controversy in question and the decision or conclusion arrived at".  Reasons substitute subjectivity by objectivity. The emphasis on  recording reasons is that if the decision reveals the "inscrutable face  of the sphinx", it can, by its silence, render it virtually impossible  for the Courts to perform their appellate function or exercise the  power of judicial review in adjudging the validity of the decision.  Right to reason is an indispensable part of a sound judicial system.   Another rationale is that the affected party can know why the decision  has gone against him. One of the salutary requirements of natural  justice is spelling out reasons for the order made, in other words, a  speaking out. The "inscrutable face of a sphinx" is ordinarily  incongruous with a judicial or quasi-judicial performance.

These aspects were highlighted in Chairman and Managing Director,  United Commercial Bank and Others v. P.C. Kakkar (2003 (4) SCC 364).

       In the case at hand, the High Court’s judgment is full of ifs and  buts.  There is no definite finding recorded that the punishment is  suffering from any infirmity.  No basis has been indicated to direct  re-consideration of the quantum of punishment.  It is to be noted that  the respondent had miserably failed to prove bonafides. Though he took  the stand that he had informed the head office about the withdrawal, no  material was placed before any of the authorities to prove it.  It is  to be noted that on the basis of material on record, it was concluded  that the withdrawal was on 6.5.1992 and not on 9.5.1992 as was claimed.  The respondent-employee has withdrawn a sum of Rs.20,000/- from the  account of bank with the State Bank of India on 6.5.1992 and had  withdrawn a further sum of Rs.5,000/- from the cash.

       Above being the position the impugned judgment of the High Court  cannot be maintained and the same is set aside.  The Writ Petition  filed by the respondent-employee, stands dismissed.

       The appeal is allowed.  No costs.