REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURIS    DICTION

Civil Appeal No. 1804  of 2020 (Arising out of SLP (C) No. 5142 of 2020 (D No 10865/2019)

Life Insurance Corporation of India                             ....Appellant

Versus

Mukesh Poonamchand Shah                               .... Respondent

J U D G M E N T  

Dr Dhananjaya Y Chandrachud, J

1 Leave granted.

2 The present appeal arises from a judgment of a Division Bench of the High

Court of Gujarat dated 10 April 2018. The Division Bench, in a Letters Patent Appeal

arising from an order  of  a learned Single Judge dated 11 July  2017,  allowed the

respondent, who had instituted proceedings under Article 226 of the Constitution, to

respond to a notice to show cause issued by the appellant under Regulation 39(4) of

the  Life  Insurance  Corporation  of  India  (Staff)   Regulations  19601.  However,  the

appellant was directed not to issue final orders during the pendency of the appeal filed

1 “1960 Regulations” 1

by  the  respondent  against  his  conviction  for  offences  under  the  Prevention  of

Corruption Act 19882 and the Indian Penal Code 18603.

3 The respondent was appointed as a Probationary Development Officer by the

appellant on 27 September 1990. His services were confirmed on 4 December 1991.

On 16 February 1996, a charge-sheet was served on the respondent containing the

following allegations:  

“i. That, you introduced 2 proposal no.s 7377 and 7529 on the lives of Shri PS Vyas and Shri RP Mehta through the agency, which resulted in issuance of policy for sum assured of Rs 10,00,000/-; ii.  That,  you  certified  as  true  a  Fake  School  Leaving Certificate dated 13.07.1974 issued by the City High School, Raipur, Ahmedabad submitted the same as evidence of age along with the proposals for Life Insurance on the lives of the aforesaid Shri PS Vyas and Shri RP Mehta; iii.  That,  you  submitted  a  Moral  Hazard  Report  dated 14.12.1990 in form No 3251recommending acceptance of the said  proposals  without  making  independent  and  discreet inquiries and without satisfying about the genuineness of the proposals as required to be done before the submission of the proposals; iv. That, it has been revealed that the proposers Shri PS Vyas and Shri RP Mehta are non-existent persons.”

4 A disciplinary enquiry was convened in which the respondent participated. The

inquiry  officer,  in  his  report  dated  17  April  1997,  noted  that  the  respondent  had

unconditionally accepted the charges. The charges against the respondent were held

to be proven. On 16 June 1997, a notice to show cause was issued to the respondent,

asking him to explain as to why a penalty of reducing his basic pay to the minimum of

the  time  scale  under  Regulation  39(1)(d)  of  the  1960  Regulations  should  not  be

imposed upon him. The respondent submitted his response. By an order dated 15

July 1997, the disciplinary committee held the respondent guilty of misconduct and

imposed the penalty of reducing his basic pay to the minimum of the time scale.  

2 “Prevention of Corruption Act” 3 “Penal Code”

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5 A Criminal prosecution4 was instituted by the Central Bureau of Investigation5

against the respondent and two other employees of the appellant before the Court of

the Special Judge, CBI, Ahmedabad. The respondent was prosecuted for offences

under Sections 13(1)(d) and 13(2) of the Prevention of Corruption Act and Section

120B read with Sections 420, 467, 468 and 471 of the Penal Code. On 28 July 2014,

the  respondent  was  convicted  of  all  the  offences  and sentenced to  two  years  of

rigorous  imprisonment  along  with  a  fine  of  ₹ 5,000  per  offence.  The  respondent

preferred  a  criminal  appeal6 before  the  High  Court  of  Gujarat  challenging  his

conviction. The appeal is pending before the High Court.  On 21 August 2014, the

respondent filed an application7 before the High Court for suspension of his sentence.

By  an order  dated 21  August  2014,  a  learned  Single  Judge issued the  following

directions:

“3.  Considering the question of  sentence within  which the appeal is not likely to be heard, it  is not in the interest of justice to ask the applicant to be in jail during the pendency of the appeal. 4. Under the circumstances, the judgment dated 28.07.2014 passed by Special Judge, Ahmedabad, in Special Case No 27 of 1993 shall remain under suspension till  final hearing and disposal of the appeal. The applicant is ordered to be enlarged  on  bail  on  his  executing  a  fresh  bail  bond  and surety  in  the  sum  of  Rs.5,000/-  each  (Rupees  Five Thousand only) to the satisfaction of the Trial Court on the following terms and conditions that the applicant: (a)  Shall  not  take  undue  advantage  of  liberty  or  misuse liberty;  (b)  Shall  surrender passport,  if  any,  before the concerned police authority; (c) Shall not leave territory of India without prior permission of the Trial Court;”

4 CBI Special Case No 27 of 1993 5 “CBI” 6 CA no 1024 of 2014 7 Criminal Miscellaneous Application no 1301 of 2014

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6 On 23 June 2017, the appellant issued a notice to show to the respondent

under Regulation 39(4)(i) of the 1960 Regulations proposing to impose the penalty of

removal from service in view of his conviction by the Special Judge, CBI. The notice to

show cause was challenged by the respondent in a Special Civil Application8 before

the High Court of Gujarat. A learned Single Judge by a judgment dated 11 July 2017

dismissed the application holding that:

(i) The notice of termination was based on the conviction of the respondent by

the Special Judge for offences under the Prevention of Corruption Act and

the Penal Code and no question of double jeopardy arose; and (ii) Though  the  sentence  of  the  respondent  was  suspended  during  the

pendency of the criminal appeal, the conviction still stood.  

7 In  a  Letters  Patent  Appeal  filed  by  the  respondent,  the  Division  Bench

restrained  the  appellant  from  passing  final  orders  on  the  notice  to  show  cause

pending  disposal  of  the criminal  appeal.  The appellant  preferred a  Special  Leave

Petition before this Court under Article 136 of the Constitution against the judgment of

the Division Bench which has given rise to the present appeal.

8 Assailing the judgment of the Division Bench of the High Court,  Mr Gautam

Narayan, learned counsel appearing on behalf of the appellant submitted that:

(i) In  terms  of  the  provisions  contained  in  Regulation  39(4)  of  the  1960

Regulations,  the  appellant  is  entitled  to  proceed  against  the  respondent

upon his conviction on a criminal charge;

(ii) No question of double jeopardy that attracts the provisions of Article 20(2) of

the  Constitution  can  arise  in  a  situation  where  the  service  regulations

8 Special Civil Application no 12855 of 2017 4

empower the employer to proceed against the employee upon his conviction

on a criminal charge;

(iii) The High Court by directing the appellant from refraining from taking any

action against the respondent pending the disposal of the criminal appeal

has erroneously interfered with the exercise of the disciplinary jurisdiction of

the appellant; and

(iv) The order of the learned Single Judge dated 21 August 2014 did not stay or

suspend  the  conviction  of  the  respondent  pending  the  disposal  of  the

criminal appeal but only suspended the sentence as a result of which the

conviction has not been obliterated or effaced.  

In this context, reliance was placed on the decisions of this Court in (i) Dy Director of

Collegiate Education (Admn) v S Nagoor Meera9, (ii) K C Sareen v CBI10, and (iii)

State of Haryana v Balwant Singh11.  

9 On the other hand, Mr Harin P Raval, learned Senior Counsel appearing on

behalf of the respondent submitted before this Court on 10 January 2020 that there

was a delay of  257 days in  filing  the Special  Leave Petition which had not  been

satisfactorily explained. This Court allowed the appellant to file an additional affidavit

setting out the reasons for delay. An additional affidavit  was filed by the appellant

explaining that the appellant had initially, in terms of the view of its western zonal

office, sought to move the CBI authorities for expediting the disposal of the criminal

appeal.  However,  the  empaneled  local  advocate  had  opined  that  there  was  no

provision of law under which the appellant could be allowed to join as a party in the

criminal appeal. The affidavit refers to the steps taken by the appellant thereafter to

9 (1995) 3 SCC 377 10 (2001) 6 SCC 584 11 (2003) 3 SCC 362

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pursue the available remedies against the judgment of  the High Court  before this

Court.  We are of  the view that sufficient cause for condoning the delay has been

made out. The delay is accordingly condoned.

10 Responding to the submissions of  the appellant,  Mr Harin P Raval,  learned

Senior Counsel for the respondent submitted that:  

(i) Originally, in the course of the disciplinary proceedings, the respondent was

proceeded against under Regulation 39(1) (a to g) of the 1960 Regulations;    

(ii) The underlying  facts  on the  basis  of  which  the disciplinary  enquiry  was

instituted and the criminal prosecution took place are identical;

(iii) The appellant having imposed a penalty in the course of  the disciplinary

proceedings by reducing the respondent’s basic pay to the minimum of the

time scale has exhausted its disciplinary jurisdiction and is not entitled to

issue a fresh notice to show cause for removal from service;  

(iv) Regulation 39(4) dispenses with the requirement of a notice to show cause

and an opportunity to defend. Recourse to the above power can be taken

only when the employer has not exercised its disciplinary jurisdiction under

clauses (1) and (2) of Regulation 39; and

(v) There has been an unexplained delay on the part of the appellant in issuing

a notice to show cause.

11 The respondent has been convicted and sentenced to two years of rigorous

imprisonment by the Special Judge, CBI for offences under Sections 420, 467, 468,

and 471 read with Section 120B of the Penal Code, and Sections 13(1)(d) and 13(2)

of the Prevention of Corruption Act. By the order of the learned Single Judge dated 21

August 2014, the conviction of the respondent has not been stayed and it is only the

sentence which has been suspended. The law on this point is well settled. While the

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court hearing a criminal appeal does have the power to suspend the conviction in

appropriate cases, this is an exceptional power which can be exercised only when the

attention of the court is drawn to the consequences which may ensue if the conviction

is not stayed. A criminal miscellaneous application12 was filed by the respondent for

the grant of bail pending disposal of the criminal appeal. Significantly, in the special

civil application which was instituted before the High Court of Gujarat, the respondent

himself  understood  the  order  of  the  Single  Judge  as  having  only  suspended  his

sentence and not as having stayed the conviction. The pleading of the respondent in

that regard is as follows:

“The  petitioner  submits  that  vide  order  dated  21.08.,2014 passed in Criminal Misc. Application No 13091 of 2014, the sentence of the petitioner was suspended and the petitioner was ordered to be enlarged on bail on executing a fresh bail bond of Rs.5000/-.”

That apart, on a reading of the order of the Single Judge, it is evident that only the

sentence of imprisonment was suspended. Paragraphs 3 and 4 of the order of the

learned Single Judge, as mentioned in the earlier part of this judgment, must be read

together. Hence, it  is not possible to accede to the plea that the conviction of the

respondent remains stayed pending the disposal of the appeal.

12 The appellant exercised its disciplinary jurisdiction while proceeding against the

respondent and after a disciplinary enquiry imposed a penalty of a reduction of his

basic pay to the minimum of the scale. The 1960 Regulations determine the terms

and conditions of service of the employees of the Life Insurance Corporation of India.

Chapter  III  of  the  1960 Regulations  provides  for  conduct,  discipline  and appeals.

12 Criminal Miscellaneous Application no 13019 of 2014 7

Regulation  39  deals  with  penalties  and  the  relevant  portion  for  our  purposes  is

extracted below:  

“39.  Penalties. -  (1)  Without  prejudice  to  the  provisions  of other regulations, [any one or more of] the following penalties for good and sufficient reasons, and as hereinafter provided, be  imposed [by  the  disciplinary  authority  specified  in Schedule-I] on  an  employee  who  commits  a  breach  of regulations  of  the  Corporation,  or  who  display  negligence, inefficiency  or  indolence  or  who  knowingly  does  anything detrimental  to  the interest  of  the Corporation,  or  conflicting with the instructions or who commits a breach of discipline, or is guilty of any other act prejudicial to good conduct - (a) Censure; (b) Withholding of one or more increments either permanently or for a specified period; (c) recovery from pay or such other amount as may be due to him of the whole or part of any pecuniary loss caused to the Corporation by negligence or breach of order; (d) reduction to a lower service, or post, or to a lower time scale, or to a lower stage in a time-scale; (e) compulsory retirement; (f) removal from service which shall not be a disqualification for future employment; (g) dismissal. (2) No order imposing on an employee any of the penalties specified in clauses (b) to (g) of sub-regulation (1) supra, shall be passed by the disciplinary authority specified in Schedule I without the charge or charges being communicated to him in writing  and  without  his  having  been  given  a  reasonable opportunity  of  defending  himself  against  such  charge  or charges and of showing cause against the action proposed to be taken against him. (3) The disciplinary authority empowered to impose any of the penalties, (b),  (c),  (d),  (e),  (f)  or  (g) may itself  enquire into such of the charges as are not admitted or if it considers it necessary so to do, appoint a board of enquiry or an enquiry officer for the purpose. (4) Notwithstanding anything contained in sub-regulations (1) and (2) above - (i)  where  a  penalty  is  imposed  on  an  employee  on  the grounds  of  conduct  which  had  led  to  a  conviction  on  a criminal charge; or (ii) where the authority concerned is satisfied, for reasons to be recorded in writing, that it is not reasonably practicable to follow the procedure prescribed in this regulation; or (iii)  where  an  employee  has  abandoned  his  post,  the disciplinary authority may consider the circumstances of the case and pass such orders thereon as it deems fit.”

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13 Regulation 39(1) of the 1960 Regulations deals with the penalties which can be

imposed  upon  an  employee  who  is  found  guilty  of  misconduct.  Regulation  39(2)

mandates compliance with the principles of  natural  justice in  terms of  providing a

reasonable  opportunity  to  the  employee  to  defend  the  charges.  Regulation  39(4)

operates with a non-obstante clause. In terms of Regulation 39(4)(i), “where a penalty

is imposed on an employee on the grounds of conduct which had led to a conviction

on a criminal charge”, the appellant is independently entitled to take steps against the

employee. It is in pursuance of the above provision that a notice to show cause was

issued to the respondent. The penalty which was imposed on the disciplinary enquiry

was for an act of misconduct. The notice which has been issued under Regulation

39(4) is for the conviction on a criminal charge. The former does not foreclose the

latter.  

14 The position in this regard was elaborated upon in a judgment of a two judge

Bench decision of this Court in  Dy Director of Collegiate Education (Admn)  v S

Nagoor Meera13, where Justice B P Jeevan Reddy speaking for the Court held:  

“8. ... taking proceedings for and passing orders of dismissal, removal  or reduction in rank of  a government servant  who has been convicted by a criminal court is not barred merely because the sentence or order is suspended by the appellate court  or  on  the  ground  that  the  said  government  servant- accused has been released on bail pending the appeal.”

This Court specifically disapproved of the view of the Tribunal that until the appeal

against the conviction was disposed of, action under clause(a) of the second proviso

to Article 311(2) was not permissible. The Court held:  

13 (1995) 3 SCC 377 9

“10. What  is  really  relevant  thus  is  the  conduct  of  the government  servant  which  has  led  to  his  conviction  on  a criminal charge. Now, in this case, the respondent has been found guilty of corruption by a criminal court.  Until  the said conviction is set aside by the appellate or other higher court, it may not  be advisable to  retain  such person in  service.  As stated above, if he succeeds in appeal or other proceeding, the matter can always be reviewed in such a manner that he suffers no prejudice.”

This view has been reiterated in another two judge Bench decision of this Court in K C

Sareen v CBI14. Justice K T Thomas, speaking for the Court, held:

“12. ...When a public servant who is convicted of corruption is allowed to continue to hold public office, it would impair the morale  of  the  other  persons  manning  such  office,  and consequently that would erode the already shrunk confidence of the people in such public institutions besides demoralising the  other  honest  public  servants  who  would  either  be  the colleagues or subordinates of the convicted person. If honest public servants are compelled to take orders from proclaimed corrupt  officers  on  account  of  the  suspension  of  the conviction,  the fallout  would be one of  shaking the system itself...”

15 In State of Haryana v Balwant Singh15, the respondent, who was an employee

of a public transport corporation, caused a death as a result of his rash and negligent

driving. The Corporation had to suffer an award of the Motor Accident Claims Tribunal.

Following the disciplinary enquiry, the employee was subjected to a punishment of a

reduction of pay to the minimum of the time scale of a driver for four years. On the

conviction of the employee for offences under Sections 279, 337, 338 and 304A of the

Penal Code, his services were terminated. On this set of facts, a two judge Bench of

this Court, speaking through Justice Shivaraj V Patil, rejected the argument based on

the principle of double jeopardy and held:  

14 (2001) 6 SCC 584 15 (2003) 3 SCC 362

10

“7…  there  was  no  question  of  the  respondent  suffering  a double jeopardy. The aid of Article 20(2) of the Constitution of India was wrongly taken. Article 20(2) of the Constitution of India does not get attracted to the facts of the present case...”

The Court held that when a major penalty was proposed to be imposed on the ground

of the conduct of the employee which had led to conviction on a criminal charge, it

was not necessary to take recourse of the provisions of Rules 7(1) and (2) of the

Haryana Civil Services (Punishment and Appeal) Rules 1987 relating to the convening

of an inquiry in which a reasonable opportunity of showing cause would have to be

given.  

16 The decision in Lt Governor, Delhi v HC Narinder Singh16, relied upon by the

respondent, is clearly distinguishable. Unlike the present case, where the respondent

was convicted of various criminal offences and subsequently, a notice to show cause

was issued,  in  HC Narinder  Singh there  was  no conviction  based on a  criminal

charge. In the present case, following the conviction of the respondent by the Special

Judge CBI, the appellant was acting within jurisdiction in issuing a notice to show

cause under Regulation 39(4) of the 1960 Regulations. The learned single judge was

correct in dismissing the special civil application filed by the respondent challenging

the notice to show cause issued by the appellant. The judgment of the Division Bench

restraining  the  appellant  from  taking  a  final  decision  on  the  show  cause  notice

pending the disposal of the criminal appeal has no valid basis in law.  

17 We accordingly allow the appeal and set aside the impugned judgment and

order of the Division Bench dated 10 April 2018. As a consequence, we confirm the

16 (2004) 13 SCC 342 11

order and judgment of the learned single judge dismissing the Special Civil Application

filed by the respondent. There shall be no order as to costs.  

…………...…...….......………………........J.                                                                  [Dr Dhananjaya Y Chandrachud]

…..…..…....…........……………….…........J.                           [Hemant Gupta]

 New Delhi;  February 25, 2020

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