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PETITIONER: THE STATE BANK OF INDIA

       Vs.

RESPONDENT: SHRI C.B. DHALL

DATE OF JUDGMENT:       11/12/1997

BENCH: SUJATA V. MANOHAR, D.P. WADHWA

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T D.P. Wadhwa, J.      This appeal  by the State Bank of India (for short, the ’Bank’ or  ’State Bank’)  arises out  of the  judgment dated August 22, 1983 of learned single Judge of the High Court of Delhi. The  reasons for  the judgment  were given  by  order dated September 2, 1983. The impugned judgment was delivered on a  writ petition  filed by  the respondent,  C.B.  Dhall. Dhall had  challenged the  Order of the Central Board of the State Bank  dated June 4, 1980 by which it was resolved that "the sanction  to retire  you be  withheld  and  the  Bank’s contribution to your provident fund Account amounting to Rs. 24006-49 be  forfeited" which  decision was  communicated to Dhall by  letter dated  July 16,  1980 of  the Chief General Manager of  the  Bank.  The  High  Court  allowed  the  writ petition and  quashed the Resolution of the Central Board as well as the Communication by which it was conveyed to Dhall. The High  Court further  ordered that  the  Bank  shall  pay within six weeks to Dhall the following amounts:      "1. The  entire arrears  of pension      in  regard   to  the   pension  and      gratuity fund rules with interest @      6% per annum.      2. Pension  will be  paid in future      in  accordance   with  the   rules.      Pension will  be  computed  on  the      basis of full pay during the period      of suspension.      3.  The   provident  Fund   (Bank’s      contribution   which    has    been      withheld) with  interest  according      to the  Rules after  deducting  the      admitted sum  of Rs.  10,000/- P.F.      and  the   interest  up-to-date  on      payment according to the Rules will      be calculated first. Thereafter the      admitted  amount  of  Rs.  10,000/-      will  be  deducted  therefrom.  The      balance  shall   be  paid   to  the      petitioner.

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    4. The  petitioner  shall  also  be      entitled to  such other  retirement      benefits as  are admissible  to him      according  to  the  service  rules,      have already not been given to him.      5. Petitioner will also be entitled      to  full  pay  for  the  period  of      suspension and  the bank  shall pay      the sum after deducting such amount      as has  been paid to him during the      period  of  suspension  by  way  of      subsistence allowance or otherwise.      6. The petitioner shall be entitled      to his costs.      Counsel’s fee for Rs. 50/-.      Dhall was  appointed as Cashier in the Imperial Bank of India in  July 1939  and was  confirmed to  this post  after completion of  his period  of probation  of  one  year.  The Imperial Bank  of India  was constituted  under the Imperial Bank of India Act, 1920 which was repealed by the State Bank of India  Act, 1955 by which the State Bank was constituted. Services of  Dhall were taken over by the State Bank and the existing Services  Rules, Pension  Fund Rules  and provident Fund Rules of the Imperial Bank of India were adopted by the State Bank  in respect  of these  employees. This  was under Section 7  of the State Bank of India Act which, in relevant part, is as under:      "7. Transfer of service of existing      officers  and   employees  of   the      Imperial Bank  to the  State  Bank-      (1)   "Every   officer   or   other      employee  of   the  Imperial   Bank      (excepting  the  managing  director      the deputy  managing  director  and      other directors)  in the employment      of the  Imperial  bank  immediately      before the  appointed day  shall on      and from  the appointed day, become      an officer  or other  employee,  as      the case may be, of the state Bank,      and shall  hold his  tenure, at the      same remuneration and upon the same      terms and  conditions and  with the      same rights  and privileges  as  to      pension, gratuity and other matters      as he  would have  held the same on      the   appointed    day    if    the      undertaking of  the  Imperial  Bank      had not  vested in  the State Bank,      and shall  continue to do so unless      and until  his  employment  in  the      State Bank  is terminated  or until      his    remuneration,    terms    or      conditions are  duly altered by the      State Bank.      (2)................................      .....      (3)................................      ..............      (4)................................      ...............      (5)................................      ................      (6)................................      ................"

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    In July 1956, Dhall was promoted as Head Cashier by the State Bank of India. The State Bank of India (Sub-Accountant & Head Cashiers) Service Rules came into force on January 1, 1959. Under these Rules, the age of super annuation for head Cashier was  55 years  but w.e.f.  April 1,  1967, this  was increased to  58 years.  Dhall was  due to retire on May 28, 1970 after  completing  30  years  of  pensionable  service. However, the competent authority granted extension to him of his service  by seven years up to & including 30th June 1977 on which  date Dhall  was to  completed 58 years of his age. While in  he extended period of service, Dhall was suspended on account  of certain  allegations against him of fraud and defalcation of funds while posted at Agra.      On November  24, 1975  Dhall was served with the Charge Sheet. The  charges laid  under this  Charge sheet were many and some  of these  were (1)  shortage of admitted by Dhall, thus, admitting  his negligence  and responsibility therefor collaterally; (2)  shortage in  cash to  the tune  of Rs. 1, 000/- on  September 25, 1972; (3) exchanging mutilated noted for he  denomination of  Rs. 5,  Rs. 20  and Rs. 100 without approval of  the joint  custodian. The Reserve Bank of India had intimated the Bank that mutilated notes to the extent of Rs. 55,000/-  were irregularly  exchanged and  that this was borne out by the inspection of the currency at the branch at Agra held  on August  11, 1976 which pertained to the period when Dhall  was the  head Cashier.  Enquiry proceedings were initiated against Dhall. Dhall completed 58 years of his age on June  30, 1977.  However, due to the pendency of enquiry, he was given two years extension.      Report of the enquiry officer was submitted on June 15, 1979 which  was placed before the disciplinary Authority who found Dhall  guilty of  most of the charges levelled against him. Extended period of Service of Dhall expired on June 17, 1979 on  his attaining  the age of 60 years. On November 22, 1979, he was intimated and given show cause notice as to why Bank’s contribution  to the  provident fund  should  not  be forfeited as  he was liable to the Bank to the extent of Rs. 37458/83 and  further why  sanction to his retirement be not withheld under Rule 11 of the Imperial Bank of India Pension and Guarantee Fund Rules and Regulations. Reply of Dhall was considered and  the  Central  Board  of  the  Bank  directed forfeiting of  Bank’s contribution  amounting to Rs.24006/49 from the  provident fund.  Dhall was also told that sanction to retire  him was  withheld under  Rule 11 of the Rules and Regulations  of  the  pension  and  Guarantee  Fund  by  the competent authority.  The result was that Dhall was deprived of pension  and Bank’s  contribution to  his provident fund. The show  cause notice  and the  decision of  the  Bank  are reproduced hereunder as:      "State Bank of India,      Local Head Office,      P.O. Box No. 398,      11, Sansad Marg      New Delhi.      Disciplinary Action Cell      No. DAC/79/RL/1336      Dated 22nd Nov. 1979.      Dear Sir,      With     reference      to      the      correspondence  resting  with  your      letter dated  29th  June  1976,  in      reply  to   the  statement  of  the      charges served  on you, in terms of      out letter  No.  R.  IV/8990  dated      24th November  1975 and  subsequent

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    departmental enquiry  held  against      you, we  have perused  the findings      of the  enquiry authority vis-a-vis      the proceedings  of the enquiry and      "held you guilty of charges Nos. 1,      2, 4,  5,  6,  7,  7a,  9,  10  and      partially charge No.3.      2. With  reference to  your  letter      dated 1st  August, 1979  as charges      proved against  are grave  and  you      attained the age of 60 years on the      30th June, 1979 and ceased to be in      the service  of the  Bank from that      date, you  are hereby  required  to      show  cause  -  why  recommendation      should not  be made  to Local Board      to withhold  the sanction  of  your      withhold  the   sanction  of   your      retirement and  pension in the term      of Rule  11 of the Imperial Bank of      India Pension  and  Guarantee  Fund      rules. Please also show cause as to      why the bank’s contribution towards      the  provident   Fund  may  not  be      forfeited as  you are liable to the      bank   to   the   extend   to   Rs.      37,458/83.      3. Your reply in this regard should      reach the undersigned within 7 days      of the  receipt of  this letter  by      you. Otherwise  it will be presumed      that you  have nothing to submit in      this regard  as  we  shall  proceed      accordingly.                Yours faithfully."                     Sd/-                "State Bank of India,                Local Head Office,                P.O. Box No. 398,                11, Sansad Marg,                New Delhi.      No. DAC      Disciplinary action Cell      Agra Branch           Shri C.B. DHALL OFFICER GDE II           H/Cashier - Under suspension.           With  ref.   to  your  written      statement dated 11.2.80, be advised      considered   by    the    Executive      committee of  the Central  Board at      its meeting  held on  4.6.80 and it      is resolved  that the  sanction  to      retire  you  be  withheld  and  the      bank’s contribution  to your P.Fund      a/c  amount  to  Rs.  24,006/49  be      forfeited.      2. Therefore our tentative decision      conveyed to  you  vide  letter  No.      DAC/79/R-V/1336 dated 23rd Nov. ’79      is confirmed.           Sd/- Chief General Manager"      When the  decision was  communicated to  Dhall,  he  as noted  above,   filed  the  writ  petition  challenging  the decision of  the Bank.  The  High  Court  allowed  the  writ petition in  terms mentioned  above. Special  leave petition

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filed  by   the  Bank  against  the  impugned  judgment  was admitted.  On   October  28,  1983,  the  Court  passed  the following order:      "Special   leave    granted.    The      appellant however  undertakes  that      even  in   the  event   of  success      nothing will  be recovered from the      respondent. The  judgment in appeal      will not  be treated as a precedent      for any  other  case.  Four  weeks’      time is granted for payment.      Will be  listed for  final  hearing      along  with   SLP  No.  431/81  (CA      9943/83)."      It may  be noted  that  SLP  (C)  No.  431/81  (CA  No. 2141/80) entitled  State Bank  of India  vs. A.N. Gupta etc. has since  been decided and judgment is reported in 1997 (6) SCALE 303.      In A.N.  Gupta’s case,  this court considered the scope of Rule 11 of the Rules and Regulations of the Imperial Bank of India  Pension and  Guarantee Fund  and Rule  20  of  the Imperial Bank of India Employees provident Fund Rules. These Rules and  Rule 18  of the  Imperial Bank of India Employees Provident Fund Rules are as under:      (1)  The  Imperial  Bank  of  India      Employees  Pension   and  Guarantee      Fund (Rules and Regulations)      "The retirement  of all officers of      the Bank  shall be  subject to  the      sanction of the Executive Committee      of   the    Central   Board.    The      retirement of  all other  employees      of the Bank shall be subject to the      sanction of the Executive Committee      or the  Local Board  concerned with      their employment.  Any  officer  or      other employee  who shall leave the      service   without    sanction,   as      required by this rule shall forfeit      all  claim   upon  the   fund   for      pension."      (2)  The  Imperial  Bank  of  India      Employees Provident Fund Rules      "18.  If   any  member   shall   be      dismissed from  the service  of the      Bank for  any fault  or other cause      justifying dismissal,  he shall not      be  entitled   to  receive,  unless      permitted to do so by the trustees,      the sums contributed. Provided that      when any member is so dismissed any      amount  due   under   a   liability      incurred by  the member to the Bank      (not exceeding in any case the sums      so  contributed  by  the  Bank  and      interest thereon)  shall be paid by      the trustees to the Bank out of the      sum standing  to the  credit of the      member’s account.      20.  When   a  member   resigns  or      retires from  the  service  of  the      Bank he shall, if he has served the      bank for  a period of five years or      more  (including   service  in  the      Presidency Banks),  be entitled  to

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    receive the  balance at  his credit      in the fund. Provided that when any      member resigning  or retiring  from      the service  of the Bank is under a      liability incurred  by him  to  the      Bank,    the     trustees    shall,      irrespective of the duration of his      service, pay to the Bank out of the      balance at  his credit  in the fund      any amount  due by  him to the Bank      (not exceeding in any case the sums      contributed  by  the  Bank  to  his      account  in   the  fund   and   any      interest credited to his account on      the sums so contributed)."      This Court  held that Rule 11 had no application in the case of the employees governed by the Imperial Bank of India Pension  and   Guarantee  Fund  Rules  who  had  retired  on attaining the age of superannuation. The Court did not agree with  the   submission  of  the  Bank  that  sanctioning  of retirement must  be understood  as  sanctioning  of  service which in  term must be understood as approval of service. It was observed  that proceedings  in the  garb of disciplinary proceedings could  not be  permitted after  an employee  had ceased to  be in  the service  of the  Bank as Service Rules then in  force applicable  to such employees did not provide for continuation  of disciplinary proceedings after the date of superannuation and that sanction of the Bank was required only if  the retirement  of an  employee was  by  any  other method except  superannuation. As  regards Rule  20  of  the Imperial bank  of India Employees Provident Fund Rules, this Court took  this view that this Rule would become applicable only if  an employee  retiring from  the service of the Bank was under  a liability  incurred by  him to  the Bank and in that case,  trustees administering  the provident Fund could pay to  the bank  from balance to the credit of the employee in the  Fund any  amount due  by him  to the bank. The Court observed that  there was  nothing on  record to  show if any liability was  incurred by  any of the respondents and if so what were the amounts and then said as under:      " In  this view of the matter we do      not think it is necessary for us to      go into  the question as to whether      the  term   "liability  incurred  "      means only  such  liability  as  is      either not  disputed or established      by due process. Can it be said that      this term  would also  include  any      liability that  may be  alleged  by      the bank?  In  any  case  the  bank      should   at   least   prima   facie      establish that  any  liability  has      been incurred  by the  employee for      which  it  can  lay  claim  to  the      provident Fund  of the employee. We      cannot accept  the  proposition  on      behalf  of   the  Bank   that   the      trustees  should   be  allowed   to      withhold  the  provident  Fund  due      till they  have had  an opportunity      to have  established and determined      the amount,  if any,  due from  the      respondents to  the Bank. We are of      the view  that the  respondents are      entitled to  the Provident Fund due

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    to  them  in  accordance  with  the      provident Fund  Rules as  it cannot      be  said  that  they  incurred  any      liability."      This Court  did not  approve the  view expressed by the Andhra Pradesh  high Court  in T.  Narsiah vs. State Bank of India & Ors. [1978 (2) LLJ 173]    wherein  the  High  Court was of  the view  that enquiry could also be made against an employee after  his  retirement  on  attaining  the  age  of superannuation. This  Court said  that  by  giving  such  an interpretation to Rule 11, the High Court had, in fact, lent validity to disciplinary proceeding against an employee even after his  superannuation for  which  no  provision  existed either in  the relevant   Pension  Rules or  in the relevant Service Rules  and when  the High  Court had itself observed that an  enquiry even if initiated during the service period of the  employee could not be continued after his retirement on superannuation.  In coming to the conclusion that Rule 11 would not  be applicable  when an  employee superannuates on his attaining  the age  of retirement, this Court considered various relevant  pension Rules  and Service  Rules  of  the Imperial Bank.      Later on  it would  appear Rule 228 was inserted in the Imperial Bank  of India  Pension and  Guarantee  fund  Rules which postulates  continuance  of  disciplinary  proceedings even after  an employee ceases to be in Bank’s service. This Rule 22B  (to be  read as  Rule 22A  as per  the  additional affidavit filed  by the  bank) came  into force  with effect from June  25, 1987 and would, therefore, be not relevant in the present case.      The question  then arises what are the Rules of service applicable in  the case of Dhall. Mr. Dogra, learned counsel for the  Bank, submitted  that Rules  20A and 20B which were inserted in  the State  Bank of  India  (Supervising  Staff) Service Rules,  1975 (for  short "Service  Rules") would  be answer to  that. Rules  20A and  20B  were  introduced  with effect from April 1,1977 and are as under:      "20A. Notwithstanding  anything  to      the contrary  in  these  rules,  no      employee who  has ceased  to be  in      the Bank’s service by the operation      of ,  or by  virtue of,  any  rule,      shall be  deemed  to  have  retired      form the  Bank’s   service for  the      purpose for  the Imperial  Bank  of      India   Employees’    Pension   and      Guarantee Fund  Rules or  the State      Bank of  India  Employees’  Pension      Fund Rules unless such cessation of      service  has   been  sanctioned  as      retirement  for   the  purpose   of      either of  the  said  pension  fund      rules as may be applicable to him.      20B.    In     Case    disciplinary      proceedings under  these rules have      been initiated  against an employee      before  he  ceases  to  be  in  the      Bank’s service by the operation of,      or  by  virtue  of,  any  of  these      rules, the disciplinary proceedings      may,  at   the  discretion  of  the      Managing Director, be continued and      concluded by the authority by which      the proceedings  were initiated  in      the  manner  provided  for  the  in

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    these  rules  as  if  the  employee      continues  to  be  in  service,  so      however, that he shall be deemed to      be in  service only for the purpose      of the  continuance and  conclusion      of such proceedings."      We asked  Mr. Dogra  if the services of Dhall, the Head Cashier, were  governed by  the State  Bank of  India  (Sub- Accountants and  Head Cashiers)  Service  Rules  as  Rule  2 therein provided  that the  Rules shall  apply to  all  Sub- Accountants and  head Cashiers who are in the service of the Bank as  such on  January 1, 1959 and to all Sub-Accountants and Head  Cashiers  appointed  thereafter.  Mr.  Dogra  with reference to  the additional  affidavit filed  by  the  Bank submitted that State Bank of India (sub-Accountants and head Cashiers) Service  Rules, 1959  were no  longer in  force as they were  repealed in  terms of Rule 2(1) of the State Bank of India  Supervising Staff  (Service Rules),  of the  State Bank of  India Supervising Staff (Service Rules), 1975. Said Rule 2(1)  states that  the Service  Rules which  came  into force with  effect from  July  1,1975  shall  apply  to  all officers/staff officers  and senior  staff officers  in  the Bank other  than persons who were in the service of the Bank on June  30,1955 either as officers or as assistants. It was submitted by  Mr. Dogra that Dhall was a Cashier on June 30, 1955 and was not an officer. he was also not an Assistant to be  governed   by  the   Rules  governing  the  services  of Assistants in  the Bank.  Dhall was promoted as head Cashier in July  1956 under  Rule 3(p)  of the  Service Rules.  head Cashier is  a person  appointed on  the terms and conditions applicable to officers Grade ii and as per the definition of officer under  Rule 3(j), officer means an officer Grade II. Dhall would,  therefore, be  an officer  under  the  Service Rules,  State   bank  of  India  (Sub-Accountants  and  Head Cashiers) Service Rules, 1959 would, therefore, be no longer in force  as these  would deem to have been repealed by Rule 2(1) of  the Service  Rules which  states that these Service Rules shall apply to all officers, staff officers and Senior Staff Officers  in the  bank other  than persons who were in the service  of the  Bank on  the 30th  June, 1955 either as officers or  as Assistants.  Consequently,  Dhall  would  be governed by  Rules 20A  and 20B  of the  Service Rules which came into effect from April 1,1977.      There is  no dispute  that the employees who are in the service of  the Bank as on 30th June, 1955 would continue to be governed  by the Imperial Bank of India Rules relating to pension and  provident Fund and those joining the Bank after this data  by the  Rules of  the State  bank of India framed under Section  50 of  the State  bank of  India Act. In this connection we may also refer to Rule 21 of the Service Rules of 1975 which is as under:      " 21.  Unless Otherwise directed by      the  Appointing   Authority,  every      employee   shall    as   from   the      commencement of  his service  as an      officer become a member of-      (a)  the   State  bank   of   India      Employees Provident  Fund, if he is      not already  a member  of that Fund      or  the   Imperial  bank  of  India      Employee’s Provident Fund:      (b)  the   State  Bank   Of   India      Employees’ pension  Fund, if  he is      not already  a member  of that Fund      or  the   imperial  bank  of  India

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    Employees’  Pension  and  Guarantee      Fund  or   the   bank   of   Bombay      Officers’  pensions  and  Guarantee      Fund or  the bank of Madras pension      and Gratuity Fund:      and shall  subscribed and  agree to      be bound  by  the  rules  of  those      Funds.      Provided that  if his  age at   the      time of commencement of his service      as Officer  is below  21  years  he      shall become  a member of the State      bank of  India  Employees’  Pension      Fund on  attaining the  age  of  21      years  and  on  becoming  a  member      shall subscribe  and  agree  to  be      bound by  the rules  of that Fund."      Rules 20-A  and 20-B  of the  Service Rules  have  been framed under Section 43 of the State Bank of India Act. This section is as under:      "43.   State   bank   may   appoint      officers any  other employees-  (1)      The State  bank  may  appoint  such      number of  officers,  advisers  and      employees as it considers necessary      or  desirable   for  the  efficient      performance of  its functions,  and      determine the  terms and conditions      of their appointment and service.      (2)  The   officers,  advisers  and      employees of  the State  Bank shall      exercise such  powers  and  perform      such duties lies may, by general or      special  order   be  entrusted   or      delegated to  them by  the  Central      Board."      Section 43  empowered the  State bank  to determine the terms and  conditions of  the appointment and service of its officers  and   employees.  These   officers  and  employees exercise such  powers and  perform such  duties  as  may  be entrusted or  delegated to  them by the Central board of the State Bank.  Section 50  of the  State  Bank  of  India  Act empowers the  Central Board  to make regulations but Section 43 is  independent of Section 50, we hold that Service Rules had been  framed by  the  State  bank  in  exercise  of  its statutory powers under Section 43 of the State Bank of India Rules.      Rules 20-A and 20-B have now made a material difference to the  applicability of  Rule  11  of  the  pension  Rules. However, the  case of  A.N. Gupta (Supra) is distinguishable as these  Rules, 20-A  and 20-B,  came into  existence  only w.e.f. March  31, 1977. Under Rule 20-A retirement under the Pension Fund Rules has now to be sanctioned by the competent authority. Under this Rule, retirement would mean retirement on superannuation or any other type of retirement.      Under Rule  20-B disciplinary  proceedings if initiated against an  employee before he retires from service could be continued and  concluded even  after his  retirement and for the purpose  of conclusion  of the disciplinary proceedings, the employees is deemed to have continued in service but for no other  purpose. After  the disciplinary  proceedings, the employee is  deemed to have continued  in service but for no other  purpose.  After  the  disciplinary  proceedings  were concluded, the  State Bank  directed that  (1)  sanction  of Dhall to  retire be  withheld and (2) Bank’s contribution to

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his provident  fund accounts  be forfeited. Under Rule 10 of the Pension Fund Rules, and employee dismissed from the Bank Service for  willful neglect  or  fraud  shall  forfeit  all claims upon  the  fund  for  pension.  Dhall  has  not  been dismissed from  service through  he was charged with willful neglect  and   fraud.   The   question   that   arises   for consideration is  what is  the effect  of the  direction the State bank  that sanction  to retire  of Dhall  be withheld. Here cessation  of service  of Dhall  on retirement  has not been sanctioned  accordingly as per the last portion of Rule 11 of  the pension Fund he forfeits all claims upon the Fund for pension.      But then  applicability  of  his  Rule  11  has  to  be contrasted with  Rule 10. It is only if an employee has been dismissed from  service that he forfeits all claims upon the fund for  pension and  so would  appear to  be the effect of Rule 11.  Under Rule 7, an employee has right of property in the pension  fund to  the extent  of his  contribution  made thereof with  interest thereon.  It would, therefore, appear to us  that when  the Rules talk of forfeiture of all claims upon the  fund for  pension that  would only mean the Bank’s contribution and  the interest accruing thereon. These Rules cannot  be   extended  to   forfeit  event   eh   employee’s contribution to  the pension  fund and the interest accruing thereon. However,  after the introduction of Rule 5-A in the pension Fund  Rules w.e.f. April 1, 1968, there is not to be any contribution by employee to the pension fund.      Coming to  the provident  Fund Rules,  Rule 18  applies when an  employee is dismissed from service which is not the case here.  It is  under Rule  20  that  an  amount  of  Rs. 24,006,49  has   been  forfeited   which   is   the   Bank’s contribution to  the provident  fund account of Dhall. This, the State  Bank is  entitled to  forfeit under  Rule 20. The amount has  been arrived at after due enquiry and represents the liability  incurred by Dhall to the Bank. Accordingly we hold  that  Dhall  was  rightly  proceeded  against  in  the disciplinary proceedings  and the  State bank was within its authority to  impose the  penalty as  conveyed to  Dhall  by letter dated  July 16,  1980 of the Chief General Manager of the State Bank.      We, therefore, uphold the impugned judgment of the High Court to  the extent  that Dhall  would be  entitled to  his contribution, if  any, to  the pension  Found along with the interest accrued thereon. The impugned judgment in all other respects is  set aside.  However, in  view  of  the  interim orders made  on October  28, 1983,  no  further  orders  are required in this appeal.