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PETITIONER: STATE BANK OF INDIA & OTHERS.

       Vs.

RESPONDENT: T.J. PAUL

DATE OF JUDGMENT:       04/05/1999

BENCH: M. Jagannadha Rao. & S.N. Phukan,

JUDGMENT:

M.JAGANNADHA RAO,J.

       Leave granted.

   This  appeal  is preferred by the State Bank  of  India, Bombay,  its Deputy Managing Director(Appellate  Authority), Bombay   and   the    Chief   General   Manager(Disciplinary Authority),  Madras  against  the judgment of  the  Division Bench  of the Madras High Court in W.A.  No.490 of 1998.  By that  judgment, the Division Bench confirmed the judgment of the  learned  Single Judge in O.P.  No.10222 of  1991  dated 7.1.1998.

   The brief facts of the case are as follows:

   The respondent joined service in the Bank of Cochin (the Bank has since been amalgamated with the State Bank of India w.e.f.  27.4.85) on 1.11.1996 and was promoted as an officer and  then  as  Manager of the Madras Branch of the  Bank  of Cochin.   The  disciplinary  action  initiated  against  him related  to  1977-1981  when he was working  as  Manager  at Madras.   On  25.8.81, he was transferred to  Calcutta.   He received  letters of commendation dated 10.3.83 and  16.4.84 and  his  Branch at Calcutta stood at No.1 in the matter  of mobilisation  of  advances.  It appears that  some  advances given  by  him  while working as Manager  at  Madras  during 1977-1981 could not be recovered and hence on 4.2.84, he was reposted  at  Madras  for  the  purpose  of  recovering  the advances.   The respondent made substantial recoveries after his  reposting  in Madras but he was suspended on  13.7.1984 and  served with a charge sheet on 18.9.1984 stating that he had  given  advances  unauthorisedly  without  discretionary power/prior permission /observing lending norms and that his actions  amounted  to  ‘serious misconduct’  which  involved financial  loss  and violation of Head Office  prescriptions with  vested  interest  and  causing wilful  damage  to  the interests  and  affairs of the Bank.  The respondent  denied the  charges  in  his reply dated  20.10.1984.   A  domestic inquiry  was  held  by  appointing an  Advocate  as  Inquiry Officer.   The respondent submitted his final explanation on 15.5.1985.   On  3.8.1985 the Inquiry Officer submitted  his report.    He  held  that   the  allegations  under   "items 1,5,7,8,9(A/c  No.  20/79, 50/80, 62/80, 63/80, 64/80, 2/81, 37/81;   10,11,12(a,b),  13,14 (A/c 99, 137, 168, 183,  299, 405  & S.  Item Nos.  554 & 518);  15,16,17(b), 18, 19,  20, 21,  22, 23 (a,b,g,i,k,m), 24 & 25(9)" were not proved.   He

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further   said   that  so  far   as  the   remaining   items 2,3,4,6,9(A/c  18/81,  MTL 1/80), 12,14(A/c 123, 199, 397  & 432),  17(a),  23(c,d,e,f,h,j,l,n) were concerned, the  main irregularity  found was that there was no proper sanction or ratification from the Head Office.  (Item 25 is a summary of the items).

   He  accepted by referring to the evidence of AW1 and AW2 (Inspectors  of  Branches)  that there was  a  practice,  in certain  Branches, of giving advances without sanction  from the  Head  Office (as seen from Exhibits B6, B10 to  B15  of Head  Office) and in such cases subsequent ratification  was granted  to such advances given without sanction.  He stated that  Exhibits  B18 to B22 were the letters of  appreciation received by the respondent from the Department to the effect that his performance was ‘best’.  He found, in favour of the officer  and  in rejection of the language employed  in  the charge- memo as follows:

             "In the circumstances, no reasonable  man               would  be  able  to  conclude  that,   in               connection  with the  said  transactions,               Sri  Paul acted with vested interest  and               with  the  intention  of  causing  wilful               damage  and financial loss to  the  Bank.               He   might   have   allowed   the    said               transactions  with the good intention  of               developing  the business of the Bank  and               also with a bonafide belief that the said               transactions  would  be ratified  by  the               Head Office in the normal course."

   To  the  above extent, the finding is in favour  of  the respondent.

   He  further  concluded  in favour of the  respondent  as follows:

             "My  conclusion is that, in the light  of               the  evidence adduced before me, it would               be wrong to allege that Sri Paul had  any               intention  to  cause  wilful  damage   or               financial loss to the Bank as regards the               said transactions."

   Having held in favour of the respondent as stated above, the  Inquiry  Officer  however  gave   a  finding  of  gross negligence  against  the  respondent in the  matter  of  not obtaining sufficient securities, as follows:

             "As regards the transactions mentioned as               items  23(d,f,h,j,n) in Ext. A3,  it  has               been  stated that Sri Paul has failed  to               take  sufficient  security for  the  said               transactions.   In this regard, there  is               gross negligence on the part of Sri  Paul               and he has acted in violation of the Head               Office instructions."

   He then referred to item 25 which related to 19 advances (the  9th party was given loan not during the tenure of  the

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respondent)  and  said  that Mr.Paul  was  transferred  from Calcutta to Madras in February 1984 to enable him to recover the  advances he had given earlier during 1977-1981 and that if  he  were  not  suspended in July  1984,  he  would  have recovered  ‘substantial’  amounts.  The Inquiry  Officer  in that connection observed as follows:

             "If  Sri  Paul  had  not  been  suspended               abruptly,  he  would have  been  able  to               persuade  the parties concerned to  remit               more amounts.  After having deprived(him)               of  such  an  opportunity,  it  would  be               unjust  to throw the entire blame on  Sri               Paul  as  regards  the  outstandings   in               question."

   On  these findings, the Disciplinary authority issued  a second  notice  on  22.1.1986 proposing  ‘dismissal  without notice’.   The  said letter stated that the Inquiry  Officer had held charges 23(d,f,h,g,n) proved and held him guilty of ‘gross negligence’ and also guilty of ‘violation of the Head office  instructions’.  The disciplinary authority then said that  having regard to the report, evidence and defences and the gravity of charges proved, and the fact that his actions had  jeopardised  the Bank’s interests, he was proposing  to impose  the  punishment of ‘dismissal without  notice.   The respondent  submitted  his  reply to the above  proposal  on 18.2.1986.   Thereafter,  the disciplinary authority  passed orders   of  ‘dismissal  from   service  without   notice’on 20.3.1986.

   The  appellate  authority  modified the  said  order  on 30.7.87  from  dismissal without notice to removal.   It  is necessary  to  refer  to it in some detail.   The  appellate authority initially observed:

             "Though,   allegations   of    malafides,               corrupt practices etc. were absent in the               charge sheet served on the appelant...."

   He, however, stated that the respondent had exceeded his powers   while  sanctioning  advances   and  acted   without restraint  thereby jeopardising the Bank’s interest.  He did not  obtain  prior  approval/sanction/ratification  of  Head office.   The unauthorised advances were upto Rs.44.71 lakhs and  resulted  in  substantial  loss of  Rs.16  lakhs.   The appellate   authority   then  accepted   the   practice   of instructions of Head Office as follows:

            "It may be true that the Managers of  the               Bank  of Cochin branches were given  oral               orders/instructions  for disbursement  of               loans by the Head Office functionaries." L.......T.......T.......T.......T.......T.......T.......T..J

but  observed  that  such  advances  sanctioned  under  oral orders/instructions  should  be  got  ratified/approved  and failure  to do so could be cause of disciplinary action.  It was  observed  that  the respondent could not  rely  on  the practice  in Bank of Cochin.  He had acted against the  Head Office instructions.  The absence of seeking sanction raised ‘doubts  on  his  plea of bonafide action’.   The  appellate authority  admitted  that the respondent was posted back  at

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Madras  for  effecting recoveries.  He also referred  to  an order  of  a lesser punishment passed by the then  Chairman, Bank of Cochin(reduction in rank) which was not communicated to the officer.  This was not given effect to by the Bank of Cochin  as the Bank came under moratorium and the order  had no  validity.   He  said that no doubt, the  respondent  had received  certificates of appreciation earlier for his  good work,  but these letters would not mitigate the magnitude of the lapses because the evidence proved ‘gross negligence and actions  in  violation  of Head Office  instructions’.   The appellate authority observed:

             "It may be true that in the interests  of               giving  speedy  financial  assistance  to               important  and deserving  borrowers,  the               Managers in Bank of Cochin were sometimes               given  oral instructions by  Head  Office               functionaries."

but  this will not help in view of Bank’s instructions dated 11.4.1978  against such loans for which ratification was not obtained.  Nor was there proof of oral instructions.  As the officer  was  one whose ‘integrity’ was not in doubt and  he was  relatively  young, it was a fit case for modifying  the order  of ‘dismissal’ into one of ‘removal from service’  in terms  of  Rule  49(g) of State Bank of  India  (Supervisory Staff)  Rules.   Removal  was to take effect  from  date  of dismissal. L...I...T.......T.......T.......T.......T.......T.......T..J

   The  above orders were questioned in writ petition.  The learned  Single Judge while allowing the writ petition  held that  the finding of the inquiry officer on item 23 was that no  financial  loss was proved and if it was a case  of  not taking  adequate  ‘security’  from the loaners  and  in  not obtaining  ratification  as  per Head  office  instructions, these  charges  were  not  sufficient  -  in  view  of  Rule 22(vi)(c) and (d) read with sub- rule (vii) - for imposing a penalty of dismissal or removal.  Only a minor penalty could be  imposed.   As per inquiry Officer’s report there was  no actual  loss  caused  by reason of any act of  the  employee wilfully  done.   There  was no evidence of  financial  loss adduced  before  the Inquiry Officer.  The finding that  the respondent  jeopardised  Bank’s  interest was  based  on  no evidence.  Penalty must have been only for minor misconduct. The  SBI Rules were not applicable since misconduct  alleged related to the period of service in the Bank of Cochin.  The learned  Judge  observed that ‘punishment of removal’  could not  have  been imposed as it was not one of the  enumerated punishments under Bank of Cochin Rules.

   The  writ  petition was allowed, the impugned order  was quashed.   It  was,  however, observed that the  Bank  could impose  punishment for minor misconduct as per Rules of Bank of  Cochin.  The Writ Appeal preferred by the State Bank  of India  was dismissed for the same reasons and the respondent was  directed to be reinstated with backwages, promotion and all  other  monetary benefits like salary, increments,  etc. The Bank could impose penalty for minor misconduct.

   It  is  against this judgment that this appeal has  been preferred  by  the State Bank of India.  In this  appeal  we have heard the submissions of learned senior counsel for the Bank,  Sri T.R.  Andhyarujina and of learned senior  counsel

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for the respondent, Sri P.P.  Rao.

   We  shall first refer to the Rules which are  applicable to  the facts of the case and regarding the applicability of which  there is no dispute.  These are contained in the Bank of  Cochin Service Code.  Chapter VII deals with  Discipline and  Disciplinary  action.   Para 22  (iv)  defines  ‘gross- misconduct’.   We  shall refer to the relevant sub-  clauses (h) and (l).  They read as follows:

             "Para  22(iv): By the  expression  ‘gross               misconduct’  shall  be meant any  of  the               following  acts  and of omission  on  the               part of an employee:

             (a) to (g)...............................

             (h)      wilful    insubordination     or               disobedience of any lawful and reasonable               order ofthe Management/or of a superior

             (i) to (k)..............................

             (l)    doing any act prejudicial  to  the               interests   of   the   bank,   or   gross               negligence  or  negligence  involving  or               likely  to  involve the Bank  in  serious               loss."

   As  to the punishments for ‘gross misconduct’, they  are enumerated in para 22(v) and read as follows:

             "Para 22(v): an employee found guilty  of               gross misconduct may:

             (a)   be dismissed without notice, or

             (b)  be warned or censured, or have  an                    adverse remark entered against him, or

             (c)  be fined, or

             (d)  have his  increment  stopped/basic                    pay reduced, or

             (e)  have his misconduct condoned and be                    merely discharged from service."

   It  is  also  necessary to refer to  the  definition  of ‘minor  misconduct’  in  para  22(vi)  and  the  punishments therefor  in para (vii).  They read as follows to the extent relevant for the case.

             "Para 22(vi): In the expression9n  ‘minor               misconduct’  shall  be meant any  of  the               following acts and omissions on the  part               of an employee:

             (a)   ...................................

             (b)   ...................................

             (c)    neglect  of  work,  negligence  in               performing duties;

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             (d)    breach of any rule of business  of               the  Bank or instruction for  running  of               any department;

             (e) to (j) ..............................

             (k)     the   employee,   especially   an               officer,  acting  on oral  or  telephonic               instructions  from  the  Chief  Executive               Officer or other officers should get  the               same confirmed in writing the same day or               the  day  next.   The  employee  will  be               estopped  from  making the plea  of  oral               instructions for his acts which have  not               been confirmed.               (l)    every employee shall be deemed  to               have  the  knowledge of  all  the  rules,               regulations, direction, and  instructions               issued by the bank from time to time, for               transacting any business of the bank, and               for  administration of the bank,  and  in               particular  he  shall be deemed  to  have               complete  knowledge of the memorandum  of               Instructions   of   the  bank   and   all               amendments  thereto issued from  time  to               time, the usual safeguard and precautions               to be taken with regard to bank’s advance               and  custody  of  securities,  rules   of               documentation    and    maintenance    of               customers   accounts   etc.   and   shall               strictly  confirm  to and abide  by  such               rules,      regulations,       procedure,               directions,  and  instructions  including               the provisions of this Code.

             (m)   ...................................

             (n)   ................................"

   Para  22(vii)  enumerates  the   punishments  for  minor misconduct as follows:

             "Para  22(vii): An employee found  guilty               of minor misconduct may:

             (a)   be warned or censured; or

             (b)    have  an  adverse  remark  entered               against him; or

             (c)    have his increment stopped  for  a               period not longer than six months; or

             (d)   have his misconduct condoned."

   It  will, in our opinion, be sufficient to consider  the case  in  the light of the order of the appellate  authority but at the same time keeping the observations of the Inquiry Officer and the Disciplinary authority in mind.

   The  appellate  authority  held   that  ‘allegations  of malafides,  corrupt practices etc.  were absent but that the respondent  "exceeded his powers while sanctioning  advances and  acted without restraint thereby jeopardising the Bank’s

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interest,  that  even if oral instructions were  given  they should  be got ratified.  Hence respondent could not rely on the  practice  in  Bank of Cochin.  The absence  of  seeking sanction  raised  a doubt about his bonafides.  His  actions were contrary to Bank’s instructions dated 11.4.1978.  There was  no  proof  of oral instructions of  Head  Office.   The Officer  did not obtain prior approval/sanction/ratification of  the Head office.  The unauthorised advances upto Rs.44.7 lakhs  resulted  in substantial loss upto Rs.16 lakhs.   The good certificates obtained did not mitigate the magnitude of the  lapses and the evidence proved ‘grossed negligence  and actions  in violation of Head office instructions’.  But the respondent’s integrity was not in doubt.

   Learned   senior   counsel  for   the   appellant,   Sri T.R.Andhyarujina contended that proof of serious loss is not necessary  and  likelihood  of loss is sufficient  and  this aspect was ignored by the High Court.

   On the other hand, learned senior counsel for respondent Sri  P.P.Rao contended that the inquiry officer did not give any finding of serious financial loss.

   Taking  up the definition of ‘gross misconduct’ in  para 22(iv), it is obvious that clause (h) does not apply because the  charge is not one of insubordination or disobedience of specific  orders of any superior officer.  Coming to  clause (l)  of para 22(iv), the doing of any act prejudicial to the interests  of  the bank, or gross negligence  or  negligence involving  or likely to involve the Bank in serious loss  is gross misconduct.  In other words likelihood of serious loss coupled  with  negligence  is sufficient to bring  the  case within  gross misconduct.  The Inquiry Officer’s finding  of ‘gross  misconduct’ on the ground of not obtaining  adequate security  is,  therefore, correct and cannot be said  to  be based on no evidence as held by the High Court.  This can be contrasted  with para 22(vi)(c) under minor misconduct which deals  with ‘neglect of work and negligence in performing of duties’.   In our view, the contention of the learned senior counsel   for  the  appellants   Sri  T.R.Andhyarujina   is, therefore, entitled to be accepted.

   The  contention  of the learned senior counsel  for  the respondent  ignores  the  fact  that  ‘gross  negligence  or negligence likely to involve the Bank in serious loss’ would come  under  major  misconduct within  para  22(iv)(l).   As stated  above,  even  assuming  that   there  is  no   gross negligence,   simple  negligence  will   come  under   major misconduct  if  accompanied by ‘likelihood’ of serious  loss and this is clear from para 22(iv)(l).  Hence the finding of the  Inquiry  Officer regarding gross misconduct is  correct and  could  not have been set aside by the High Court.   The findings of the Inquiry Officer clearly bring the case under ‘major  misconduct’.   As  held in  Disciplinary  Authority- cum-Regional  Manager vs.  Nikunja Bihari Patnaik [1996  (9) SCC 69], proof of loss is not necessary.

   We  are, therefore, of the view that the High Court  was not  correct  in  holding that the findings of  the  Inquiry Officer  or of the disciplinary or appellate authorities did not  justify a finding of ‘major misconduct’ on the basis of para 22(iv)(a)(l).

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   But  this  does  not conclude the matter.   The  learned senior  counsel for the respondent Sri P.P.  Rao is right in contending that the appellate authority, once it came to the conclusion   that  the  punishment  of  dismissal  was   not warranted  in  the  facts  of the case, it  could  not  have awarded the punishment of ‘removal’ which was not one of the enumerated  penalties  under  para 22(v) of the  Rules.   In fact, the learned Single Judge also adverted to this aspect. If  one  reads the order of the appellate authority,  it  is clear  that  the  said authority went by Rule 49(g)  of  the State  Bank of India (Supervising Staff) Service Rules which admittedly,  is not applicable to charges pertaining to  the period 1977-1981 when the Rules of Cochin Bank applied.  The amalgamation  of  the Bank of Cochin with the State Bank  of India  took place only on 27.4.85.  It may be that the Rules of  the  State  Bank of India provided for a  punishment  of removal,  but in the Rules relating to penalties for  ‘major misconduct’  in  para 22(v) of the Rules applicable  to  the employees  of the Bank of Cochin, removal is not one of  the enumerated  punishments  which could be imposed.   The  said punishment  is  not the same thing as "condoning  misconduct and  merely  discharging from service" as provided  in  para 22(v)(e) of the said Rules.

   Learned   senior   counsel  for   the   appellants   Sri T.R.Andhyarujina  tried  to  submit that  if  the  appellate authority  decided  not to dismiss the respondent, it  still had inherent power to award a punishment of ‘removal’, which was  lesser  in severity.  Learned senior counsel  contended that  the  discretion  of the authorities to award  such  an appropriate  punishment could not be interfered with in view of  the  decision  of  this  court in  Union  of  India  vs. Ganayutham  [1997 (7) SCC 463].  In our view, this  decision is  not applicable to the facts of the case.  Here the Court is  not  interfering  with  the punishment  awarded  by  the employer  on the ground that in the opinion of the Court the punishment awarded is disproportionate to the gravity of the misconduct.  Here, the gradation of the punishments has been fixed by the rules themselves, namely, the Rules of the Bank of  Cochin  and  the  Court is  merely  insisting  that  the authority  is  confined to the limits of its  discretion  as restricted  by the Rules.  Inasmuch as the Rules of the Bank of Cochin have enumerated and listed out the punishments for ‘major  misconduct’, we are of the view that the  punishment of  ‘removal’  could not have been imposed by the  appellate authority  and all that was permissible for the Bank was  to confine  itself  to one or the other punishments  for  major misconduct enumerated in para 22(v) of the rules, other than dismissal  without  notice.   This conclusion of  ours  also requires  the  setting aside of the punishment of  ‘removal’ that  was awarded by the appellate authority.  Now the other punishments  enumerated  under  para 22(v) are  ‘warning  or censure  or  adverse  remark being entered;   or  fine;   or stoppage  of increments/reduction of basic pay or to condone the  misconduct  and  merely discharge  from  service.   The setting  aside  of  the removal by the High  Court  and  the relief  of  consequential benefits is thus  sustained.   The matter has, therefore, to go back to the appellate authority for considering imposition of one of the other punishment in para 22(v) other than dismissal without notice.

   In  the  result  the  setting  aside  of  the  order  of

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‘removal’  as  done by the High Court is sustained  and  the directions  to pay him the backwages, grant such  promotions and   monetary  benefits  by   way  of  salary,   promotion, increments,  etc.   as granted by the High Court  will  also remain.   There  will,  however, be a  modification  of  the orders of the learned Single Judge and of the Division Bench to  the extent, namely, that the matter will go back to  the appellate authority for considering which of the punishments other than ‘dismissal without notice’ under para 22(v) could be  imposed on the respondent.  We direct accordingly.   The benefits  above  referred to as directed by the  High  Court shall  be computed and paid to the respondent in  accordance with  the  relevant rules within 3 months from the  date  of receipt  of  a  copy of this order.

   The  appeal  is partly allowed to the  extent  indicated above.  There will be no order as to costs.