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CASE NO.: Appeal (civil)  3404 of 2008

PETITIONER: H.V. Nirmala

RESPONDENT: Karnataka State Financial Corporation & Ors

DATE OF JUDGMENT: 08/05/2008

BENCH: S.B. SINHA & P.P. NAOLEKAR

JUDGMENT: JUDGMENT                                     1

                                                           REPORTABLE

                  IN THE SUPREME COURT OF INDIA

                   CIVIL APPELLATE JURISDICTION

                CIVIL APPEAL NO.__3404______ OF 2008                   (Arising out of SLP (C) No. 14803 of 2006)

H.V. Nirmala                                             .... Appellant

                                  Versus

Karnataka State Financial Corporation & Ors.             .... Respondents

                             JUDGMENT

S.B. SINHA, J.

1.    Leave granted.

2.    Respondent-Corporation was constituted under the State Financial

Corporations Act, 1951 (1951 Act). Appellant was appointed as Trainee

Assistant Manager in the Corporation in June 1983. She was promoted and

posted as Branch Manager at Chikkaballapur Branch.             A disciplinary

proceeding was initiated against her in April, 1996. The imputation of

charges against her pertained to sanction and disbursal of amount of loan in

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four cases.   As many as four charges were framed against her.          The

disciplinary proceeding was initiated by the Managing Director of

Corporation, wherein one Sri B. Rudregowda, a legal advisor of the

company, was appointed as an Enquiry Officer on 4th July, 1996.

     A finding of guilt was arrived at by the said Enquiry Officer, a copy

whereof was made available to the appellant.            The records of the

disciplinary proceeding were placed before the Board of Directors of the

Corporation. By an order dated 9th June, 1998 a penalty of dismissal from

services was imposed upon her. Appellant preferred an appeal thereagainst

before the Board itself on or about 4th December, 1998. The said appeal was

treated to be a petition for review which by reason of an order dated 2nd

March, 1999 was dismissed. Aggrieved by and dissatisfied therewith, the

appellant filed a writ petition before the High Court of Karnataka at

Bangalore. By reason of a judgment and order dated 23rd June, 2005 a

learned Single Judge of the said Court dismissed the writ petition. An intra

court appeal was preferred thereagainst which has been dismissed by a

Division Bench of the said High Court by reason of the impugned judgment

and order dated 22nd February, 2006.

3.    Mr. Basava Prabhu S. Patil, learned counsel appearing on behalf of

the appellant, principally raised two contentions before us :-

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     i)     Having regard to clause (3) of Regulation 41 of Karnataka

            State Financial Corporation (Staff) Regulations, 1965 a Legal

            Advisor could not have been appointed as an Enquiry Officer;

            and

     ii)    In the absence of any provision in the Regulations unlike Rule

            13 of the Central Civil Service (Classification, Control and

            Appeal) Rules, 1965, the Managing Director of the Corporation

            could not have transferred the proceeding to the Board of

            Directors.

4.    Ms. Kiran Suri, learned counsel appearing on behalf of the

respondents, on the other hand, urged :-

     i)     Appointment of a Legal Advisor is permissible under clause (3)

            of Regulation 41 of the Regulations; and

      ii)   As a major penalty was proposed to be imposed, the Board of

            Directors only was the competent authority therefore in terms

            of the Regulations.

5.    Before adverting to the rival contentions of the parties as noticed

hereinbefore, we may notice that the terms and conditions of appointment

and service of the staff of the Corporation are governed by the 1951 Act and

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the Regulations framed thereunder known as Karnataka State Financial

Corporation (Staff) Regulations, 1965 (for short the Regulations).

6.    Officers of the Corporation are classified in three groups, namely

Class A; Class B and Class C. Appellant was a Category ‘A’ officer.

Chapter IV of the Regulations deals with conduct, discipline and appeals.

Regulation 26 deals with the liability of an employee to abide by the

Regulations and the orders.      Regulation 28 enjoins a duty upon the

employee to promote the interest of the Corporation. Regulation 41 deals

with penalties which reads as under :-

           "Without prejudice to the provisions of other             Regulations, an employee who commits a breach of the             rules or Regulations of the Corporation or who display             negligence, inefficiency or indolence, or who knowingly             does anything detrimental to the interests of the             Corporation or in conflict with its instructions, or             commits a breach of discipline or is guilty of any other             act of misconduct, shall be liable to the following             penalties :

(a)    censure;

(b)    delay or stoppage of increments or promotion including        stoppage at an efficiency bar, if any;

(c)    reduction to a lower post or grade or to a lower stage in the        time scale;

(d)    recovery from pay of the whole or part of any pecuniary loss        caused to the Corporation by negligence or breach of orders;

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(e)    dismissal.

            (2) No employee shall be subjected to the penalties              (a), (b), (c), (d) or (e) of sub-regulation (1) except by an              order in writing signed by an appropriate disciplinary              authority and no such order of the disciplinary authority              shall be passed without the charge or charges being              formulated in writing and given to the said employees 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 and read              to him. For this purpose the disciplinary authorities will              be as indicated at Appendix III of the (Staff)              Regulations, 1965 of KSFC.

                   Provided that the 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 a              Court of Law or Court Martial or where the employee              has absconded or where it is for any other reason              impracticable to communicate with him or where there is              difficulty in observing them and the requirements can be              waived without causing injustice to the employee in              every case, where all or any of the requirements of this              sub-regulation are waived, the reasons therefor shall be              recorded in writing.

            (3) The enquiry under this sub-regulation and the              procedure with the exception of the final order may be              delegated to an officer of the Corporation of a rank              above that of the employee against whom the charges              have been framed.

     We may, however, note that according to the respondents, clause (3)

of Regulation 41 in fact reads as under :-

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            "41(3). For the purpose of holding an enquiry into              Articles of charges, Disciplinary Authority may itself              hold an enquiry or appoint an Inquiring Authority for the              purpose from amongst the offices of the Corporation of              rank above that of the employee against whom the              charges have been framed or any authority as listed in              the panel approved for the purpose."

7.    Before proceeding further we may also notice the relevant portions of

Appendix III enumerating the functions of the appointing authority and the

disciplinary authority etc., which read :-

             Name of      Appointing Disciplinary Penalty  Appellate               Office       Authority               that can Authority                                       Authority    be                                                    imposed                 I.

               II.                 III                       IV                   Managing    a.b.    Board               Group ‘A’        Board       Director

                                          Board      c.d.e.   Board

8.    Appellant did not raise any objection in regard to the appointment of

the Enquiry Officer. He participated in the enquiry proceeding without any

demur whatsoever. A large number of witnesses were examined before the

Enquiry Officer.      They were cross-examined.         Appellant examined

witnesses on her own behalf.

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        Learned Single Judge as also the Division Bench of the High Court

opined that the appellant has failed to establish that any prejudice has been

caused to her by reason of appointment of a Legal Advisor as an Enquiry

Officer and as the appellant has participated in the enquiry proceeding, she

could not be permitted to raise the said contention.

9.       Mr. Patil, however, would submit that such a contention which goes

to the root of jurisdiction can be urged at any stage.

        We do not agree. Appointment of an incompetent enquiry officer

may not vitiate the entire proceeding. Such a right can be waived. In

relation thereto even the principle of Estoppel and Acquiescence would

apply.

10.      In State Bank of India vs. Ram Das : (2003) 12 SCC 474 this Court

held :

              "It is an established view of law that where a party                despite knowledge of the defect in the jurisdiction or                bias or malice of an arbitrator participated in the                proceedings without any kind of objection, by his                conduct it disentitles itself from raising such a question                in the subsequent proceedings. What we find is that the                appellant despite numerous opportunities made available                to it, although it was aware of the defect in the award of                the umpire, at no stage made out any case of bias against                the umpire. We, therefore, find that the appellant cannot                be permitted to raise the question of bias for the first                time before this Court."

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11.   There are questions and questions in regard to the jurisdictional

issues. An authority may lack inherent jurisdiction in which case the order

passed would be a nullity but he may commit a jurisdictional error while

exercising jurisdiction. The legal rights conferred upon the employees in

this behalf may be different under different statutes. A legal admission

under the common law is not debarred for acting as an enquiry officer.

Even in relation to applicability of the principles of natural justice, breaches

whereof would ordinarily render the decision nullity, the courts have been

applying the prejudice doctrine to uphold the validity thereof.

     We are, however, not unmindful of the legal principle laid down in

Vitarelli   vs. Seaton : (1959) 359 US 535 which has been noticed in

Ramana Dayaram Shetty vs. International Airport Authority : (1979) 3

SCC 489 stating :-

            "10. Now, there can be no doubt that what para (1) of              the notice prescribed was a condition of eligibility which              was required to be satisfied by every person submitting a              tender. The condition of eligibility was that the person              submitting a tender must be conducting or running a              registered IInd Class hotel or restaurant and he must              have at least 5 years’ experience as such and if he did not              satisfy this condition of eligibility, his tender would not              be eligible for consideration. This was the standard or              norm of eligibility laid down by Respondent 1 and since              the Respondents 4 did not satisfy this standard or norm,              it was not competent to Respondent 1 to entertain the              tender of Respondents 4. It is a well-settled rule of              administrative law that an executive authority must be              rigorously held to the standards by which it professes its

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            actions to be judged and it must scrupulously observe              those standards on pain of invalidation of an act in              violation of them. This rule was enunciated by Mr              Justice Frankfurter in Viteralli v. Saton1 where the              learned Judge said:                        "An executive agency must be rigorously held                    to the standards by which it professes its action to                    be judged .... Accordingly, if dismissal from                    employment is based on a defined procedure, even                    though generous beyond the requirements that                    bind such agency, that procedure must be                    scrupulously observed .... This judicially evolved                    rule of administrative law is now firmly                    established and, if I may add, rightly so. He that                    takes the procedural sword shall perish with the                    sword."

     But in the said decisions, applicability of the prejudice doctrine was

not considered being not necessary to do so. Jurisdictional issue should be

raised at the earliest possible opportunity. A disciplinary proceeding is not

a judicial proceeding. It is a domestic tribunal. There exists a distinction

between a domestic tribunal and a court. Appellant does not contend that

any procedure in holding the enquiry has been violated or that there was no

compliance of principles of natural justice.

12.   This Court in Union of India vs. S. Vinodh Kumar : (2007) 8 SCC

100 has held :-

            "18. It is also well settled that those candidates who had              taken part in the selection process knowing fully well the              procedure laid down therein were not entitled to question              the same."

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13.   Reliance has been placed by Mr. Patil on Central Bank of India vs. C.

Bernard : (1991) 1 SCC 319 wherein this Court in a case of disciplinary

enquiry allowed the plea of incompetence on the part of the disciplinary

authority to be raised for the first time before the High Court, stating :-

            "9.     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              contention belatedly raised before the High Court for the              first time and, therefore, the High Court was in error in              directing 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 merits. On the contrary, if one              were to go by the charge levelled 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              succeeds."                                                (Emphasis supplied)

     However, therein also all consequential benefits were not given. In

that case the Enquiry Officer had no jurisdiction at all. Even the defecto

doctrine could not be applied as he was not the holder of the office but

merely an ex-employee, who could not have been appointed as an Enquiry

Officer.

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14.      We may at this stage also notice two other decisions of this Court

whereupon reliance has been placed by Mr. Patil.

        In Union of India vs. Tulsiram Patel : (1985) 3 SCC 398 this Court

held :

           "57. The question came to be reconsidered by a larger             Bench of seven Judges in Moti Ram Deka case. While             referring to the judgment of the majority in Babu Ram             Upadhya case the Court observed as follows (at pp. 731-2):

              "What the said judgment has held is that while Article                310 provides for a tenure at pleasure of the President or                the Governor, Article 309 enables the Legislature or the                executive, as the case may be, to make any law or rule in                regard, inter alia, to conditions of service without                impinging upon the overriding power recognised under                Article 310. In other words, in exercising the power                conferred by Article 309, the extent of the pleasure                recognised by Article 310 cannot be affected, or                impaired. In fact, while stating the conclusions in the                form of propositions, the said judgment has observed                that the Parliament or the Legislature can make a law                regulating the conditions of service without affecting the                powers of the President or the Governor under Article                310 read with Article 311. It has also been stated at the                same place that the power to dismiss a public servant at                pleasure is outside the scope of Article 154 and,                therefore, cannot be delegated by the Governor to a                subordinate officer and can be exercised by him only in                the manner prescribed by the Constitution. In the                context, it would be clear that this latter observation is                not intended to lay down that a law cannot be made                under Article 309 or a rule cannot be framed under the                proviso to the said article prescribing the procedure by                which, and the authority by whom, the said pleasure can                be exercised. This observation which is mentioned as                proposition number (2) must be read along with the                subsequent propositions specified as (3), (4), (5) and (6).                The only point made is that whatever is done under                Article 309 must be subject to the pleasure prescribed by                Article 310."

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     In Rattan Lal Sharma vs. Managing Committee, Dr. Hari Ram (Co-

education) Higher Secondary School : (1993) 4 SCC 10 it was held :

               "But if the plea though not specifically raised before the                 subordinate tribunals or the administrative and quasi-                 judicial bodies, is raised before the High Court in the                 writ proceeding for the first time and the plea goes to the                 root of the question and is based on admitted and                 uncontroverted facts and does not require any further                 investigation into a question of fact, the High Court is                 not only justified in entertaining the plea but in the                 anxiety to do justice which is the paramount                 consideration of the court, it is only desirable that a                 litigant should not be shut out from raising such plea                 which goes to the root of the lis involved."

     The said decisions, to our mind, are not applicable to the fact of the

present case.

15.   Appellant himself has quoted the said Regulation which was

corrected merely upto 31st October, 1991. On the other hand, Ms. Suri has

produced the Regulation which is said to be applicable at the relevant point

of time, in terms whereof not only an officer of the Corporation but also any

authority as listed in the panel approved for the purpose could have been

appointed as an Enquiry Officer.

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     However, the Regulation, which was produced by Ms. Suri is

corrected upto 1st April, 2002, but it is not clear as to whether the necessary

amendment has been carried out prior to 14th July, 1996 or not. We hope

that the said assertion of the learned counsel is correct. We are, however, in

this case proceed on the basis that Regulation 41(3) remained unchanged

and according to learned counsel in terms of the Regulation which was

prevalent at the relevant point of time, an outsider could have been

appointed as the Enquiry Officer.

16.   In Central Bank of India (supra) also this Court held that an Enquiry

Officer need not be an officer of the Bank as even a third party can be

appointed an Enquiry Officer to enquire into the conduct of an employee.

What was, however, emphasised was that a non-official cannot act as a

disciplinary authority and pass an order of punishment against the

delinquent employee.     It is in that view of the matter it was held that a

retired employee could not act as a disciplinary authority.

17.   We may, however, notice that in a case of this nature where

appointment of the Enquiry Officer may have something to do only for

carrying out the procedural aspect of the mater, strict adherence to the Rules

may not be insisted upon.    Superior courts in a case of this nature may not

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permit such a question to be raised for the first time. (See - Sohan Singh

and others    vs. The General Manager, Ordnance Factory, Khamaraia,

Jabalpur and others : AIR 1981 SC 1862).

18.   Prejudice doctrine, in our opinion, may also be applied in such a

contingency. We, therefore, are of the opinion that the first contention of

Mr. Patil has no merit.

19.   Submission of Mr. Patil that the Managing Director could not have

directed the proceeding to be placed before the Board, in our opinion, has

equally no merit. Appointing authority of Class ‘A’ Officers is the Board.

Managing Director is the disciplinary authority only in respect of minor

punishments. When a major punishment is proposed to be imposed, the

Board of Directors alone will have the jurisdiction to consider the gravity of

the alleged misconduct so as to enable it to pass an appropriate order. It is

idle to contend that had Managing Director passed an order, an appeal could

have been preferred thereagainst. If the entire Board is the appropriate

authority for taking a decision, it is only that authority which was required

to take decision and not any other. (See Indian Airlines Ltd. vs. Prabha D,

Kanan : (2006) 11 SC 67).

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20.   For the said purpose an express provision in the Regulation was not

imperative. Managing Director of the Corporation initiated a proceeding

but he could not impose a major penalty and in that view of the matter he

will have the incidental power to place the findings of the Enquiry Officer

before the Board. Such an incidental power must be held to be existing with

all the statutory authorities. Absence of any Rule as is obtaining in Rule 13

of the CCS (CCA) Rules would not, in our opinion, vitiate the proceeding.

21.   For the reasons aforementioned the impugned judgment does not

warrant any interference. The appeal fails and is dismissed accordingly.

There shall, however, be no order as to costs.

                                            ................................J.                                                  ( S.B. SINHA )

                                            ................................J.                                                 (P.P. NAOLEKAR ) New Delhi May 8, 2008