Dismissed

R.Veeraraghavan v. State Bank of India

Madras HC1 Aug 2024WA/717/2021

Case brief

AI extract

What is this about?

Writ appeal against dismissal of a bank officer who recommended housing loans that became NPA. The court held the misconduct fell under the SBI conduct rules, that a procedural lapse on two severable charges caused no prejudice, and that punishment was proportionate; the appeal was dismissed.

What the court decided

AI extract

R.Veeraraghavan Vs State Bank of India — Service and Employment | Madras HC (2024)

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W.A.No.717 of 2021

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IN THE HIGH COURT OF JUDICATURE AT MADRAS

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RESERVED ON : 22.07.2024

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PRONOUNCED ON : 01.08.2024 CORAM

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THE HONOURABLE MR. JUSTICE S.M.SUBRAMANIAM and THE HONOURABLE MR. JUSTICE C.KUMARAPPAN

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R.Veeraraghavan ... Appellant

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Vs.

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1.State Bank Of India, Rep By Its Chief General Manager, Chennai Local Head Office, No.16, College Lane, Aparna Complex, Nungambakkam, Chennai-600006.

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2.The General Manager (Net Work-1), (Disciplinary Authority) State Bank Of India, No. 16 College Lane, Chennai Local Head Office, Aparna Complex, Nungambakkam, Chennai-600006. 3.The Deputy General Manager (B And O), Network-I, Zone-I, State Bank Of India, 86 Rajaji Salai, Chennai-600001. ... Respondents

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Prayer :- Writ Appeal filed under Clause 15 of Letters Patent, praying to set

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aside the impugned order passed in W.P. No. 16246/2014 dated 07/12/2020 and thereby allow the Writ Appeal.

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For Appellant : Mr.R.Abdul Mubeen

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For Respondents : Mr.S.Ravindran, Senior Counsel For Mr.S.Bazeer Ahamed

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J U D G E M E N T

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S.M.SUBRAMANIAM, J.

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The intra Court appeal on hand has been instituted challenging the common order pronounced on 07.12.2020 in W.P.No.16246 of 2014.

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FACTS OF THE CASE:

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The writ petitioner is the appellant before us. The appellant joined

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the services of the State Bank of India in the Award Staff Cadre as Clerkcum-Typist-cum-Cashier on 17.11.1988 at Thatchur Branch. He was promoted to the Officer's Cadre as JMG-I in 2004. He was posted to State Bank of India, Thiruvallur Branch.

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A charge memorandum was issued on 13.10.2011 framing 19

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charges. The nature of the charges are regarding sanctioning of loans en

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masse, without adhering to the procedures contemplated under the Banking Rules. Broadly, the allegations in the charge memorandum would reveal that the appellant's failure to cross check the estimates with Bank's approved valuer; failure to exercise due diligence and a track record of builder before recommending housing loan; failure to conduct pre-sanctioned survey in respect of 30 accounts; failure to verify salaries certificate/salary slips submitted by the borrowers before recommending 29 housing loans; failure to appraise/ assess housing loans proposals before recommending in respect of 17 accounts; failure to evaluate borrower's repaying capacity as the NMI (Net Monthly Income) of the borrowers were inflated to get higher quantum of loan, failure to adhere to EMI / NMI ratio, failure to verify correlation between agreement to sale and sale deed, as the amount mentioned in the sale agreement is more than the sale deed; failure to ensure submission of controlled return to Chief Manager in respect of five accounts; failure to get administrative clearance in respect of housing loans to Chief Manager Rajagopal's daughter; recommending 3 housing loans to borrowers residing in Chennai and projects also at Chennai.

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The above acts are likely to cause loss of Rupees 4.20 Crores as 57

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of 75 loans have become NPA (Non-Performing Assets). By way of an additional counter, the respondent / Bank, before the Writ Court has stated that at the time of issuance of charge sheet to the appellant, the estimated loss in respect of 75 loans disbursed in the Thiruvallur Branch, for which the petitioner was held responsible, was about Rs.4,20,00,000/-, as provided under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, certain loans were taken over by assets reconstruction companies. Still, as on date, the loss / NPA (Non-Performing Assets) in respect of the above loan transactions is at Rs.2,57,493.60/-. It is unlikely that there will be any drastic reduction in the said outstanding amount in the forcible future.

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With reference to the above charge sheet, served along with the statement of allegations, the appellant submitted his written defence statement and thereafter, an inquiry was conducted. The Inquiry Officer conducted inquiry by affording an opportunity to the parties. Inquiry report was submitted on 19.07.2012. Further, an opportunity was provided to the delinquent Officer to submit his objections on the findings in the inquiry report. Thereafter, the Disciplinary Authority passed a final order of removal from service in proceeding dated 15.10.2012. The appeal filed by the https://www.mhc.tn.gov.in/judis 4/50

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appellant before the appellate authority was rejected on 08.02.2014.

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Thereafter, the writ petition was instituted.

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ARGUMENTS ON BEHALF OF THE APPELLANT:

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Mr.R.Abdul Mubeen, learned counsel appearing on behalf of the appellant would raise six grounds :

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“(1) Whether the charges framed against the appellant attributes to motive or misconduct as mandated under the SBIOSR, Rules 1992.

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(2) Whether there was procedural irregularity in conducting the disciplinary proceedings violative of Rules 68 (6) of the SBIOSR, Rules 1992 (Common Proceedings)

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(3) Whether the failure of the Appointing Authority to afford an opportunity to the appellant before disagreeing with the findings of the enquiry authority in respect of certain charges amounts to violation of principal of Nature Justice as required under the State Bank of India Manual on Discipline and Disciplinary proceedings.

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(4) Whether the major penalty of "removal from service" is disproportionate to the charges.

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(5) Whether inordinate and unexplained delay in passing the order dated 08.02.2014 by the Appellate Authority manifests bias.

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(6) Whether the Authority has failed to exercise parity in punishment in respect of the appellant vis-à-vis similarly placed delinquents by the orders dated 26.12.2012 and 13.01.2013.”

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To substantiate the above grounds, Mr.R.Abdul Mubeen would contend that no motive attributed against the appellant for recommending the loan applications. Article of charges, furnished to the appellant, does not contain the nature of misconduct and the violations of Service Rules. In this context, relying on the rules relating to discipline, Mr.R.Abdul Mubeen pointed out the misconduct enumerated under the said rules. The statement of allegations in the charge memorandum are not falling under any of the misconduct as stipulated under the rules and therefore, the very charges are untenable.

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It is contended that the disciplinary proceedings were conducted in compliance with the Rules of Natural Justice and as per the service manual. No adequate opportunity was afforded to the appellant as contemplated under

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Rule 68(2)(XVII) of the State Bank of India Officers' Service Rules, 1992 manual. No witnesses are examined by the Presenting Officer, which would vitiate the entire inquiry. Mere documents, in such nature of charges, are insufficient, since the borrowers are third parties and they must be examined as witnesses in the departmental inquiry. Since no witness was examined by the Presenting Officer, the entire disciplinary proceeding stands vitiated.

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In respect of Charge Nos.11 and 17, the Inquiry Officer and the Disciplinary Authority have held that Charge No.11 has been “partly proved”. However, the Appellate Authority has held that Charge No.11 has been “proved”. In respect of Charge No.17, the Inquiry Officer and the Disciplinary Authority held the charge as “proved”, but the Appellate Authority has not given any finding nor held the charge to be either proved, partly proved or not proved. In the event of deviating the findings of the Inquiry Officer, the Disciplinary Authority or the Appellate Authority are bound to assign reason, issue show cause notice and to afford an opportunity to the delinquent Officer. Such an opportunity was not granted to the appellant.

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In this regard, the learned counsel for the appellant relied on the judgement of the Hon'ble Supreme Court of India, in the case of State Bank of India and Others vs. K.P.Narayanan Kutty¹ and the decision of the Full Bench in the case of Punjab National Bank and Others ss. Kunj Behari Mishra² .

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Regarding the quantum of punishment, Mr.R.Abdul Mubeen would contend that it is grossly disproportionate, since the charges are relating to certain procedural lapses and no motive have been attributed even in the charge memorandum. With reference to the similar nature of charges against one Mr.M.Kannan and Mr.A.Subramanian in other transactions, the Bank has imposed lesser punishments. Therefore, major penalty of removal from service is disproportionate to gravity of the charges proved against the appellant. There is further an inordinate and unexplained delay in passing the order dated 08.02.2014 by appellate authority. When the manual contemplates six months time limit, the Authority has taken more than one year to pass a final order in the appeal. Therefore, on that ground also, the writ appeal is to be considered.

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1 (2003) 2 SCC 449

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2 (1998) 7SCC 84

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Finally, it is contended that similarly placed persons are discriminated and in respect of similar charges regarding other transactions in some other branch, the Bank has imposed lesser punishment. Therefore, they have not maintained consistency and uniformity in imposing penalty on its employees. The appellant was discriminated and on that ground also, the punishment is to be construed as excess. Mr.Abdul Mubeen, learned counsel would further contend that instead of conducting joint inquiry, the Bank has conducted separate inquiry against the appellant and the Chief Manager Mr.M.Rajagopal.

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REPLY BY THE RESPONDENTS:

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Mr.S.Ravindran, learned Senior Counsel, assisted by Mr.S.Bazeer

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Ahamed, learned counsel for the respondents, would strenuously oppose by stating that the charges are not as simple as being put forth by the appellant herein. The charges are serious in nature and not a mere procedural lapses. Gross violation of Rules and Banking Regulations are established. Though it appears as if the appellant has innocently recommended 75 loan applications to a builder in a single project, 57 loans became NPA (Non-Profitable Asset).

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Serious violations were identified and financial loss to the Bank was established. However, in respect of other cases of Mr.M.Kannan and Mr.A.Subramanian, there was no financial loss to the Bank and the Authorities have considered various aspects, since the disciplinary proceedings are distinct and different.

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The disciplinary proceedings are distinct and different in each case. The appellant cannot compare the case of Mr.M.Kannan and Mr.A.Subramanian, where there is no financial loss to the Bank. More so, comparison in disciplinary matters and quantum of punishment is improper, since the authority competent considered various factors, while imposing penalty under the Service Rules. The ground raised by the appellant that joint inquiry has not been conducted by the Disciplinary Authority is untenable, since the appellant herein was the Recommending Officer and the other person is the Chief Manager of the Bank. Both of them disowned their responsibility and accountability and therefore, the Bank was in a position to ascertain the irregularities and illegalities independently with reference to the charges framed against the Officers.

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The explanatory notes for the memorandum of charges, filed by the

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respondents, are useful to understand the nature of violations enumerated on

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charge memorandum:

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Charge No.	Charge		Related instructions / provisions
Charge No.1	He failed to to follow norms recommendin housing loan mentioned statement allegations No.1)	adhere KYC while g 17 s (as in of item	Master Circular on Home Loans (Page No. 22) *25. Papers/Documents to be obtained along* *with loan application.* 25.1. Applicable for all applicants : List of papers/documents applicable to all applicants: • ... • 3 Passport size photographs • Proof of identify (photo copies of Voters ID card/ Passport/Driving licence/IT PAN card) • Proof of residence (photo copies of recent Telephone Bills/ Electricity Bill/ Property tax receipt/ Passport/ Voters ID card) • Proof of business address for non-salaried individuals
			(Note: These form KYC documents as per Bank's instructions in terms of RBI Master Circular on KY? No. DBOD.AML.BC.12/14.01.001/ 2008-09 dated 01.07.2008)

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Charge No.	Charge	Related instructions / provisions
Charge No.2	He failed to compile Opinion Report and Asset and Liability statements before recommending 75 housing loans (as mentioned in Statement of Allegations item No.2).	Master Circular on Home Loans (Page No. 75) *25. Papers/Documents to be obtained along* *with loan application.* 25.1. Applicable for all applicants: List of papers/ documents applicable to all applicants: ... • Personal Assets and Liabilities statement on Bank's standard format (Annexure/HL- B) (Note: The Annexure HL-B contains two parts - In the first part, details of immovable properties and liquid assets are to be declared by the applicants and in the Second Part, Brief Opinion Report compiled by the Deputy Manager & Branch Manager has to be provided, certifying that after perusal of the relative documents and on discreet enquiries made, the borrower is a person of integrity and has capacity to repay the loan and also Networth of the borrower/guarantor is to be calculated and provided and it is to be certified that his/her Networth is good for the loan amount and therefore, he/she has capacity to stand as Borrower/Guarantor.)
Charge No.3	He failed to cross- check with the Bank's approved Valuer the estimates submitted bythe	Master Circular on Home Loans (Page No. 23-24, 43) Clause 25.6. Property documents: Estimate / Valuation Report from approved

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Charge No.	Charge		Related instructions / provisions
	borrowers in al cases (as menti in Statement Allegations No.3).	l the oned of item	valuers in respect of the property to be financed (wherever applicable) 25.7. Other documents: Valuation report from empanelled valuer as per the standard format approved by the LHO concerned. 37.1. Asset Valuation Policy for IHLs: Construction of new dwelling unit: Valuation of land plus project cost i.e. stage-wise estimated expenditure obtained from the empanelled architect / engineer irrespective of the loan amount. Loan disbursement to be made in accordance with the stage of construction.
Charge No.4	He failed exercise diligence and in assessing track record o builder, viz., M.R. Foundati proprietary con before recommending housing loans mentioned Statement Allegations No.4).	to due care the f the M/s. on, a cern (as in of Item	Master Circular on Home Loans (Page No. 26-27) *26. Pre-sanction survey* On receipt of completed Home Loan application and required documents, pre- sanction survey should be carried out as under: Builder (to establish the genuineness, track record and reputation in terms of timely completion of quality projects) a. With a few other reputed builders in the area b. With a few of the owners of their completed projects to ascertain quality of construction, timely delivery and conveyance of ownership rights to thepurchasers, anylitigation/dispute

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Charge No.	Charge		Related instructions / provisions
			on ownership issues.. c. With the concerned industry body i.e. Chamber of Housing Industry/Builder's Forum etc.
			d. With the Builder's bankers Property proposed to bepurchased
Charge No.5	He failed to con pre-sanction surveys be recommending housing loans respect of accounts mentioned Statement Allegations No.5).	duct fore in 30 (as in of item	Master Circular on Home Loans (Page No. 26-27) *26. Pre-sanction survey* On receipt of completed Home Loan application and required documents, pre- sanction survey should be carried out as under: Place: Residence of borrower a. Identify the borrower based on the proof of identification b. Identify the borrower's address on the basis of proof of residence. c. Educational qualifications d. Ascertain period of stay in the current residence e. Whether owned/company leased/rented. If rented, ascertain monthly rent being paid f. Ascertain whether he/she has a credit card and name of the card issuer

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Charge No.	Charge	Related instructions / provisions
		g. Educational qualification of spouse and children (except minor children). If spouse/children are employed, name of the organization, designation, experience and salary h. Number of school going children i. Number of other dependent relatives staying with the borrower j. Discreet local enquiries with neighbours, opinion makers etc. to ascertain antecedents, credentials of the borrower k. Whether he/she owns a car and/or two- wheeler in his/spouse's name. The vehicle number and name of the owner may be recorded and the name of financiers, if any. l. Sanctioning Authority may make enquiries with the applicant's bankers, if he deems it necessary Place: Residence of guarantor
		Procedures enlisted a to c above to be followed
		Place: Office/work place of borrower (discreet enquiries to Ascertain antecedents and credentials of the borrower)
		a. In case of salaried applicants - with colleagues, salary disbursement authority (also with a view to confirmgenuineness of salary

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Charge No.	Charge	Related instructions / provisions
		certificate) b. In case of self-employed/ businessmen/ professionals - with another firm engaged in the same line of activity, one or two firm(s) in the neighbourhood/ concerned industry body. Place: Builder (to establish the genuineness, track record and reputation in terms of timely completion of quality projects) a. With a few other reputed builders in the area b. With a few of the owners of their completed projects to ascertain quality of construction, timely delivery and conveyance of ownership rights to the purchasers, any litigation/dispute ownership issues. on c. With the concerned industry body i.e. Chamber of Housing Industry/Builder's Forum etc.
		d. With the Builder's bankers Property proposed to be purchased a. Independent and surprise visit to be made to the property. b. Identify the property based on details in title documents. c. Landmarks for reaching and identification of the property to be recorded

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Charge No.		Charge	Related instructions / provisions
			d. Accessibility/approachability i.e. all modes of transport/car/two wheeler only/others e. Ensure that proper access is available to the property i.e. roads etc. f. Comments on the locality i.e. whether residential/commercial/underdeveloped/ trouble prone. g. Comment whether the area is posh/upper middle class/middle class/lower middle class/slum area
			h. Discreet enquiries with the owners/occupants of neighbouring houses in respect of the ownership of the property, information on any pending disputes/litigation etc. i. Ensure that the property is kept in good and tenantable condition. j. Ascertain whether the property is rented out and, if so, for how long and the rentals p.m.
			Whether leased to an institution for occupation of its employees or rented out to an individual/business concerns
Charge No.6	He the Cert slips the the they	failed to verify Salary ificate/Salary submitted by borrowers with originals, as were bogus/	Master Circular on Home Loans (Page No. 26-27) *26. Pre-sanction survey* On receipt of completed Home Loan application and required documents,pre-

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Charge No.	Charge	Related instructions / provisions
	fabricated, before recommending 29 housing loans (as mentioned in Statement of Allegations item No.6).	sanction survey should be carried out as under: Office/work place of borrower (discreet enquiries to Ascertain antecedents and credentials of the borrower) a. In case of salaried applicants - with colleagues, salary disbursement authority (also with a view to confirm genuineness of salary certificate)
		45.6In view of the present liquidity conditions and a slowdown in residential real estate market, operating units are advised to guard against use of proxy customers by the small time builders for raising funds through Banks' Home Loans.Non-adherence to KYC guidelines, non- verification of salary particulars and Income Tax returns, disbursement of loan instalment without verifying the stage of construction and without express authority from the borrower, disbursement of loan on the basis of debit confirmation signed by the builder instead of the borrower are some of the lapses on part of the operating staff that have helped the unscrupulous builders in duping the Bank.
Charge No.7	He failed appraise/assess the housing loan proposals before recommending in respect of 17 accounts (as	Master Circular on Home Loans (Page the No. 23) 26. 3. Sanction-Appraisal of the loan should be made in terms of extant instructions within the stipulated Tum Around Time (TAT).

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Charge No.	Charge	Related instructions / provisions
	mentioned in Statement of Allegations item No.7).
Charge No.8	He failed to evaluate borrowers' repaying capacity while recommending housing loans as the NMI of the borrowers were artificially inflated either by the borrower themselves or by the builder, to get a higher quantum of loan (as mentioned in Statement of Allegations item No.8).	Master Circular on Home Loans (Page No. 6-8) *4. Eligible Income for arriving at maximum* *loan amount* 4.1. In addition to the applicant's income, Income of spouse/children/parents/siblings may be considered for arriving at maximum loan amount subject to Conditions.. 4.2 Other Income 4.2.1 Regular income from all sources can be considered to arrive at the total eligible loan amount, provided the sanctioning authority is satisfied about the proof of the income... 5. Net Monthly Income (NMI) / Net Annual Income (NAI)-Explanations: 5.1. Salaried persons: NMI means monthly income net of all statutory deductions. (Note: Salary slips were fabricated inflating the income of the borrowers based on which higher loan amounts were sanctioned.)
Charge No.9	He failed to adhere to EMI/NMI ratio as per extant instructions before recommending	Master Circular on Home Loans (Page No. 8-9) *6. EMI/NMI Ratio*

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Charge No.	Charge	Related instructions / provisions
	loans (as mentioned in Statement of Allegations item No.9).	Based on income-wise graded ratio as under: EMI/NMI ratio Net Annual Income Upto Rs.2 lacs - 40% Above Rs.2 to 5 lacs - 50% Above Rs.5 lacs - 55% Increase upto 5% in the above ratios may be permitted by the controller of the Branch/ RACPC, which processes the loan application, depending on the family size and availability of disposable surplus income. Equated Monthly Installment (EMI) for the purpose of computing the EMI/NMI ratio will include all EMIS towards existing loans and the proposed loan, therefore existing EMIs should not be deducted from Gross Monthly Income for the purpose of computation of NMI.
Charge No.10	He failed to verify co- relation between the agreement to sale and the sale deed before recommending the housing loans, as the amount mentioned in the sale agreement is more than the sale deed. The margin requirement was met out by this inflated sale amount bythe borrowers in	Master Circular on Home Loans (Page No. 5) 3. Maximum Loan Amount: 3.1. For purchase / construction of a new house/flat: Project cost plus registration charges / stamp duty / insurance premium (both fire and life) less stipulated margin revised from time to time. (Note: Branches should ensure that the purchase price in the Agreement to Sale is incorporated as the value of the property in the Sale Deed registered in case of financingof

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Charge No.	Charge	Related instructions / provisions
	respect of 41 accounts (as mentioned in Statement of Allegations item No.10)	purchase of plot as well. Inflated sale price in sale agreement results in sanctioning of more loan amount and the excess loan amount than the real purchase price is used as margin money.)
Charge No.11	He failed to ensure submission of control returns by the Chief Manager in respect of 5 account Wherever submitted, the queries raised by the controllers were unanswered (as mentioned in Statement of Allegations item No. 11).	Master Circular on Home Loans (Page No. 23) Clause 26.5. Control Report-Control Report should be submitted in the standard format enclosed at Annexure / HL-AE with a view to ensuring uniformity in reporting of sanctions.
Charge No.12	He failed to ensure that the construction agreement between the builder and the borrowers were executed before recommending housing loans in respect of 47 accounts (as mentioned in Statement of Allegations item No.12).	(Note: Where loan is granted for construction of new dwelling houses, apart from sale agreement, Construction Agreement is also to be there between the Builder and the borrower based on which only sanction is to be granted. This form property document for loan appraisal.)
Charge	He failed to ensure	Master Circular on Home Loans(Page No.

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Charge No.	Charge	Related instructions / provisions
No.13	that the disbursements were made stage-wise as per the progress of construction and also as and per the relevant cost estimates before disbursement in respect of all the loans (as mentioned in Statement of Allegations item No.13).	23-24, 43) 27.1. ...To safeguard the Bank's interest to prevent misuse of funds, disbursements should be made only in phases correlating to the actual progress made in the construction, e.g. at stages like completion of plinth, construction of lintel level, completion of roof, etc. as per the sanctioned plan, before effecting disbursements. Certificate from the engineer/ architect confirming stage-wise completion of the house/ flat should be obtained and kept on record. Details of site inspection should be recorded under the signature of authorized official/employee of the Bank, and disbursement should be made onlyat the borrowers request in writing.
Charge No.17	He failed to ensure obtention of administrative clearance from the controlling authority in respect of the Housing Loan to the Chief Manager's daughter, recommended by him and sanctioned by the Chief Manager Shri M. Rajagopal at the branch (as mentioned in Statement of Allegations item No.17).	SBI Officers' Service Rules, 1992 Rules 52. (3) (ii)Save and except against specified security or in cases as may otherwise be specified by the Central Board from time to time and subject to clause (i) above,no officer shall grant on behalf of the Bank any loan or advance to- (a) a relative of his; (b) an individual in respect of whom a relative is a partner or guarantor; (c) a Joint Hindu Family in which a relative is a member; (d) a firm in which a relative is a partner, manager or guarantor; and (e) a company in which a relative holds substantial interest or is interested as director, manager or guarantor. (Note: As such, Administrative clearance is obtained while granting loan to any of the relatives of the officials.)

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Charge No.	Charge	Related instructions / provisions
Charge No.18	He also recommended 3 housing loans to borrowers residing in Chennai with projects also at Chennai, where RACPC is already functioning and who are alone authorized to sanction loans at Chennai (as mentioned in Statement of Allegations item No. 18).	(Note: RACPCs are specialized cells for sanction of Home Loans and Car Loans. Where ever RACPCs are established, RACPCs alone can sanction home loans for purchase of properties within their services areas.)

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Mr.S.Ravindran, learned Senior counsel, relied on the judgement of

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the Hon'ble Supreme Court in the case of Disciplinary Authority-cumRegional Manager and Others vs. Nikunja Bihari Patnaik³ , wherein, the Hon'ble Supreme Court made the following observations;

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“ 7. It may be mentioned that in the memorandum of charges, the aforesaid two regulations are said to have been violated by the respondent. Regulation 3 requires every officer/employee of the bank to take all possible

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3 (1996) 9 SCC 69

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steps to protect the interests of the bank and to discharge his duties with utmost integrity, honesty, devotion and diligence and to do nothing which is unbecoming of a bank officer. It requires the officer/employee to maintain good conduct and discipline and to act to the best of his judgment in performance of his official duties or in exercise of the powers conferred upon him. Breach of Regulation 3 is ‘misconduct’ within the meaning of Regulation 24. The findings of the Inquiry Officer which have been accepted by the disciplinary authority, and which have not been disturbed by the High Court, clearly show that in a number of instances the respondent allowed overdrafts or passed cheques involving substantial amounts beyond his authority. True, it is that in some cases, no loss has resulted from such acts. It is also true that in some other instances such acts have yielded profit to the Bank but it is equally true that in some other instances, the funds of the Bank have been placed in jeopardy; the advances have become sticky and irrecoverable. It is not a single act; it is a course of action spreading over a sufficiently long period and involving a large number of transactions. In the case of a bank — for that matter, in the case of any other organisation —

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every officer/employee is supposed to act within the limits of his authority. If each officer/employee is allowed to act beyond his authority, the discipline of the organisation/bank will disappear; the functioning of the bank would become chaotic and unmanageable. Each officer of the bank cannot be allowed to carve out his own little empire wherein he dispenses favours and largesse. No organisation, more particularly, a bank can function properly and effectively if its officers and employees do not observe the prescribed norms and discipline. Such indiscipline cannot be condoned on the specious ground that it was not actuated by ulterior motives or by extraneous considerations. The very act of acting beyond authority — that too a course of conduct spread over a sufficiently long period and involving innumerable instances — is by itself a misconduct. Such acts, if permitted, may bring in profit in some cases but they may also lead to huge losses. Such adventures are not given to the employees of banks which deal with public funds. If what we hear about the reasons for the collapse of Barings Bank is true, it is attributable to the acts of one of its employees, Nick Leeson, a minor officer stationed at Singapore, who was allowed by his superiors to act far beyond his authority. As

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mentioned hereinbefore, the very discipline of an organisation and more particularly, a bank is dependent upon each of its employees and officers acting and operating within their allotted sphere. Acting beyond one's authority is by itself a breach of discipline and a breach of Regulation 3. It constitutes misconduct within the meaning of Regulation 24. No further proof of loss is really necessary though as a matter of fact, in this case there are findings that several advances and overdrawals allowed by the respondent beyond his authority have become sticky and irrecoverable. Just because, similar acts have fetched some profit — huge profit, as the High Court characterises it — they are no less blameworthy. It is wrong to characterise them as errors of judgment. It is not suggested that the respondent being a Class I Officer was not aware of the limits of his authority or of his powers. Indeed, Charge 9, which has been held established in full is to the effect that in spite of instructions by the Regional Office to stop such practice, the respondent continued to indulge in such acts. The Inquiry Officer has recorded a clear finding that the respondent did flout the said instructions and has thereby committed an act of disobedience of lawful orders. Similarly, Charge 8,

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which has also been established in full is to the effect that in spite of reminders, the respondent did not submit “Control Returns” to the Regional Office. We fail to understand how could all this be characterised as errors of judgment and not as misconduct as defined by the Regulations. We are of the opinion that the High Court has committed a clear error in holding that the aforesaid conduct of the respondent does not amount to misconduct or that it does not constitute violation of Regulations 3 and 24.”

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Importantly, the appellant has raised a ground that Charge Nos.10 and 11 were held as partly proved by the Inquiring Authority and held as proved by the Disciplinary Authority and the Appellate Authority. Charge No.11 is held as partly proved by the Inquiring Authority and the Disciplinary Authority and held as proved by the Appellate Authority. However, no further opportunity along with the reasons are furnished to the appellant and therefore, the disciplinary proceedings are to be set aside.

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There is no controversy in respect of all other charges except the said two charges. In respect of the two charges, the Appellate Authority has

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taken a different view and deviated from the findings of the Inquiring Authority and the Disciplinary Authority. In such circumstances, undoubtedly, the Appellate Authority ought to have assigned reason for deviating the findings of the Inquiring Authority and Disciplinary Authority and afforded an opportunity to the delinquent Officer. Whenever, the Disciplinary Authority or the Appellate Authority have taken a decision to deviate the findings of the Inquiring Authority, then show cause notice must be issued to the delinquent Officer, assigning reasons, enabling him to submit further objections on the reasons stipulated for deviating the findings of the Inquiring Authority. Though, such an opportunity, in respect of Charge Nos.10 and 11 are not provided to the delinquent Officer, the said procedural defect would not vitiate the entire disciplinary proceedings and the said principle has been well settled by the Three Judges Bench of the Hon'ble Supreme court of India in the case of the Deputy General Manager

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(Appellate Authority) and Others vs. Ajai Kumar Srivastava⁴ .

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31. It was later revisited by the disciplinary authority and apart from the note of disagreement in reference to Charge 1, the disciplinary authority accepted the finding of fact recorded by the enquiry officer in his report for Charges 2 to 7 and with its

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prima facie opinion, called upon the respondent to submit his explanation and after affording an opportunity of hearing and dealing with the objections raised by the respondent in his written reply expressed its brief reasons while upholding the finding recorded by the enquiry officer in his report and confirmed its opinion of inflicting penalty of dismissal from service by order dated 24-7-1999 and the appellate authority also later revisited on the appeal being preferred and after assigning reasons confirmed the finding of fact in upholding the order of penalty inflicted upon the respondent delinquent.

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32. The submission which persuaded the High Court in the impugned judgment [SBI v. Ajai Kumar Srivastava, 2018 SCC OnLine All 5987] is basically for two reasons:

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32.1. Firstly, before the finding of disagreement being recorded by the disciplinary authority in reference to Charge 1, fair opportunity of hearing was not afforded to the respondent delinquent and that has caused prejudice to him.

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32.2. Secondly, the disciplinary authority/appellate authority has not examined the record of disciplinary enquiry independently and passed a non-speaking order without due

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application of mind and this is what prevailed upon the High Court in the impugned judgment [SBI v. Ajai Kumar Srivastava, 2018 SCC OnLine All 5987] in setting aside the penalty inflicted upon the respondent delinquent.

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33. The submission which was made in regard to the note of disagreement not being served upon the respondent delinquent as to Charge 1 is concerned, this Court does find substance to hold that the disciplinary authority on receiving the report of enquiry, if was not in agreement with the finding recorded by the enquiry officer, was under an obligation to record its reasons of disagreement and call upon the delinquent for his explanation in the first place before recording his finding of guilt and undisputedly the procedure as prescribed by law was not followed and that has caused prejudice to the respondent and indeed it was in violation of the principles of natural justice. We are of the considered view that so far as the finding of guilt recorded by the disciplinary authority in reference to Charge 1 is concerned, that could not be held to be justified in holding him guilty.”

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Applying the above ratio laid down by the Apex Court, these two

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charges are severable from other charges. Even after severing the above two charges, this Court is of the considered opinion that other serious charges against the delinquent Officer are held proved by the Inquiring Authority, which was accepted by the Disciplinary Authority and the Appellate Authority. More so, the deviation of the Appellate Authority in respect of the above two charges have not caused any prejudice to the delinquent Officer, since other 17 charges, which all are serious, are held proved and confirmed by the Disciplinary Authority and the Appellate Authority.

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We have considered the facts independently and the findings of the learned Single Judge in the impugned writ order. The learned Single Judge elaborately considered all these aspects and pertinently, scope of power of judicial review in disciplinary matters are elaborately considered. The documentary evidence, standard of proof, conduct of two officers blaming each other in disciplinary matters, continuation of inquiry after retirement, the concept of likelihood of financial loss to the bank, NPA (Non-Performing Assets) at Rs.2,57,493.60/- and the vigilance manual and the regulations are elaborately discussed by the Writ Court in a holistic manner and the Writ Court formed an opinion that the quantum of punishment is not

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disproportionate.

LEGAL POSITION:

This Court thought fit to consider the legal principles emerged in disciplinary matters through various judgments. We have deliberated in view of certain ambiguities prevailing in disciplinary matters, while dealing with the writ proceedings before the High Court. The scope of judicial review in disciplinary matters, the procedures to be followed in the context of the right of the charged officials are of paramount importance.

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Basically certain discrepancies in the evidence in disciplinary matters will not make it a case of no evidence. Generally in exercise of judicial review, the Courts must restrict its review to determine;

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(i) Whether the rules of natural justice have been complied with;

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(ii) Whether the finding of misconduct is based on some evidence;

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(iii) Whether the Statutory rules governing the conduct of the

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disciplinary enquiry have been observed;

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(iv) Whether the finding of the disciplinary authority suffer from

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perversity;

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(v) Whether the penalty is disproportionate to the proven misconduct.

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In the case of State of Rajasthan and Others vs. Heem Singh⁵ , the

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Apex Court considered the principles of preponderance of probabilities and judicial review over disciplinary matters, as under;

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“ H. On a “preponderance of probabilities”

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32. In M. Siddiq (Ram Janmabhumi Temple5 J.) v. Suresh Das [M. Siddiq (Ram Janmabhumi Temple-5 J.) v. Suresh Das, (2020) 1 SCC 1] , a Constitution Bench of this Court has described the standard of “preponderance of probabilities” in the following terms : (SCC pp. 540-41, paras 72021)

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“720. The court in a civil trial applies a standard of proof governed by a preponderance of probabilities. This standard is also described sometimes as a balance of probability or the preponderance of the evidence. Phipson on Evidence formulates the standard succinctly : If therefore, the evidence is such that the court can say ‘we think it more probable than not’, the burden is discharged, but if the probabilities are equal, it is not. [Phipson on Evidence] In Miller v. Minister of Pensions [Miller v. Minister of Pensions, (1947) 2 All ER 372] , Lord Denning, J.

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5 (2021) 12 SCC 569

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(as the Master of Rolls then was) defined the doctrine of the balance or preponderance of probabilities in the following terms : (All ER p. 373 H)

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‘(1) … It need not reach certainty, but it must carry a high degree of probability. Proof beyond reasonable doubt does not mean proof beyond the shadow of doubt. The law would fail to protect the community if it admitted fanciful possibilities to deflect the course of justice. If the evidence is so strong against a man as to leave only a remote possibility in his favour which can be dismissed with the sentence, “of course it is possible, but not in the least probable” the case is proved beyond reasonable doubt, but nothing short of that will suffice.’

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721. The law recognises that within the standard of preponderance of probabilities, there could be different degrees of probability. This was succinctly summarised by Denning, L.J. In Bater v. Bater [Bater v. Bater, 1951 P 35 (CA)] , where he formulated the principle thus : (p. 37)

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“… So also in civil cases, the case must be proved by a preponderance of probability, but there may be degrees of probability within that standard. The degree depends on the subject-matter.” ”

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I. Judicial review over disciplinary matters

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34. We have to now assess as to whether in arriving at its findings the High Court has transgressed the limitations on its power of judicial review. In Moni Shankar v. Union of India [Moni Shankar v. Union of India, (2008) 3 SCC 484 : (2008) 1 SCC (L&S) 819] , a two-Judge Bench of this Court had to assess whether the Central Administrative Tribunal had exceeded its power of judicial review by overturning the findings of a departmental enquiry by reappreciating the evidence. In regard to the scope of judicial review, the Court held thus : (SCC p. 492, para 17)

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“17. The departmental proceeding is a quasi-judicial one. Although the provisions of the Evidence Act are not applicable in the said proceeding, principles of natural justice are required to be complied with. The courts exercising power of judicial review are entitled to consider as to whether while inferring commission of misconduct on the part of a delinquent officer relevant piece of evidence has been taken into consideration and irrelevant facts have been excluded therefrom. Inference on facts must be based on evidence which meet the requirements of legal principles. The Tribunal was,

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thus, entitled to arrive at its own conclusion on the premise that the evidence adduced by the Department, even if it is taken on its face value to be correct in its entirety, meet the requirements of burden of proof, namely, preponderance of probability. If on such evidence, the test of the doctrine of proportionality has not been satisfied, the Tribunal was within its domain to interfere. We must place on record that the doctrine of unreasonableness is giving way to the doctrine of proportionality. (See State of U.P. v. Sheo Shanker Lal Srivastava [State of U.P. v. Sheo Shanker Lal Srivastava, (2006) 3 SCC 276 : 2006 SCC (L&S) 521] and Coimbatore District Central Coop. Bank v. Employees Assn. [Coimbatore District Central Coop. Bank v. Employees Assn., (2007) 4 SCC 669 : (2007) 2 SCC (L&S) 68] )”

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In the case of Union of India and Others vs. Dalbir Singh⁶ , the

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Apex Court carved out principles on disciplinary proceedings as under;

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“ 20. A three-Judge Bench of this Court in State of Haryana v. Rattan Singh [State of Haryana v. Rattan Singh, (1977) 2 SCC 491 : 1977 SCC (L&S) 298] was dealing with the issue of nonexamination of passengers when the allegation against the conductor was non-issuance of the

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6 (2021) 11 SCC 321

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tickets. This Court held that in a domestic enquiry, strict and sophisticated rules of evidence under the Indian Evidence Act may not apply and that all materials which are logically probative for a prudent mind are permissible. There is no allergy to hearsay evidence provided it has reasonable nexus and credibility. This Court held as under :

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“ 4. It is well settled that in a domestic enquiry the strict and sophisticated rules of evidence under the Indian Evidence Act may not apply. All materials which are logically probative for a prudent mind are permissible. There is no allergy to hearsay evidence provided it has reasonable nexus and credibility. It is true that departmental authorities and Administrative Tribunals must be careful in evaluating such material and should not glibly swallow what is strictly speaking not relevant under the Indian Evidence Act.”

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21. This Court in Union of India v. P.

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Gunasekaran [Union of India v. P. Gunasekaran, (2015) 2 SCC 610 : (2015) 1 SCC (L&S) 554] had laid down the broad parameters for the exercise of jurisdiction of judicial review. The Court held as under : (SCC pp. 616-17, paras 12-13)

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“12. Despite the well-settled position, it is painfully disturbing to note that the High Court has acted as an appellate authority in the

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disciplinary proceedings, reappreciating even the

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evidence before the enquiry officer. The finding on Charge I was accepted by the disciplinary authority

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and was also endorsed by the Central Administrative Tribunal. In disciplinary proceedings, the High Court is not and cannot act as a second court of first appeal. The High Court, in exercise of its powers under Articles 226/227 of the Constitution of India, shall not venture into reappreciation of the evidence. The High Court can only see whether:

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(a) the enquiry is held by a competent authority;

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(b) the enquiry is held according to the procedure prescribed in that behalf;

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(c) there is violation of the principles of natural justice in conducting the proceedings;

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(d) the authorities have disabled themselves from reaching a fair conclusion by some considerations extraneous to the evidence and merits of the case;

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(e) the authorities have allowed themselves to be influenced by irrelevant or extraneous considerations;

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(f) the conclusion, on the very face of it, is so wholly arbitrary and capricious that no reasonable person could ever have arrived at such conclusion;

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(g) the disciplinary authority had erroneously failed to admit the admissible and material evidence;

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(h) the disciplinary authority had erroneously admitted inadmissible evidence which influenced the finding;

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(i) the finding of fact is based on no evidence.

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13. Under Articles 226/227 of the Constitution of India, the High Court shall not:

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(i) reappreciate the evidence;

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(ii) interfere with the conclusions in the enquiry, in case the same has been conducted in accordance with law;

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(iii) go into the adequacy of the evidence;

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(iv) go into the reliability of the evidence;

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(v) interfere, if there be some legal evidence on which findings can be based;

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(vi) correct the error of fact however grave it may appear to be;

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(vii) go into the proportionality of punishment unless it shocks its conscience.”

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22. In another judgment reported as B.C. Chaturvedi v. Union of India [B.C. Chaturvedi v. Union of India, (1995) 6 SCC 749 : 1996 SCC (L&S) 80] , it was held that the power of judicial

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review is meant to ensure that the individual receives fair treatment and not to ensure that the conclusion which the authority reaches is necessarily correct in the eye of the court. The judicial review is not an appeal from a decision but a review of the manner in which the decision is made. The Court is to examine as to whether the enquiry was held by a competent officer or whether rules of natural justice are complied with. This Court held as under : (SCC pp. 759-60, paras 12-13)

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“12. Judicial review is not an appeal from a decision but a review of the manner in which the decision is made. Power of judicial review is meant to ensure that the individual receives fair treatment and not to ensure that the conclusion which the authority reaches is necessarily correct in the eye of the court. When an enquiry is conducted on charges of misconduct by a public servant, the Court/Tribunal is concerned to determine whether the enquiry was held by a competent officer or whether rules of natural justice are complied with. Whether the findings or conclusions are based on some evidence, the authority entrusted with the power to hold enquiry has jurisdiction, power and authority to reach a finding of fact or conclusion.

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But that finding must be based on some evidence. Neither the technical rules of the Evidence Act nor of proof of fact or evidence as defined therein, apply to disciplinary proceeding. When the authority accepts that evidence and conclusion receives support therefrom, the disciplinary authority is entitled to hold that the delinquent officer is guilty of the charge. The Court/Tribunal in its power of judicial review does not act as appellate authority to reappreciate the evidence and to arrive at its own independent findings on the evidence. The Court/Tribunal may interfere where the authority held the proceedings against the delinquent officer in a manner inconsistent with the rules of natural justice or in violation of statutory rules prescribing the mode of enquiry or where the conclusion or finding reached by the disciplinary authority is based on no evidence. If the conclusion or finding be such as no reasonable person would have ever reached, the Court/Tribunal may interfere with the conclusion or the finding, and mould the relief so as to make it appropriate to the facts of each case.

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13. The disciplinary authority is the sole judge of facts. Where appeal is presented, the appellate authority has coextensive power to

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reappreciate the evidence or the nature of punishment. In a disciplinary enquiry, the strict proof of legal evidence and findings on that evidence are not relevant. Adequacy of evidence or reliability of evidence cannot be permitted to be canvassed before the Court/Tribunal. In Union of India v. H.C. Goel [Union of India v. H.C. Goel, (1964) 4 SCR 718 : AIR 1964 SC 364] this Court held at p. 728 that if the conclusion, upon consideration of the evidence reached by the disciplinary authority, is perverse or suffers from patent error on the face of the record or based on no evidence at all, a writ of certiorari could be issued.”

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In the case of Union of India and Others vs. Subrata Nath⁷ , the Apex Court held as follows;

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“ 15. It is well settled that courts ought to refrain from interfering with findings of facts recorded in a departmental inquiry except in circumstances where such findings are patently perverse or grossly incompatible with the evidence on record, based on no evidence. However, if principles of natural justice have been violated or

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7 2022 Live Law (SC) 998

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the statutory regulations have not been adhered to or there are malafides attributable to the Disciplinary Authority, then the courts can certainly interfere.

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16. In the above context, following are the observations made by a three-Judges Bench of this Court in B.C.Chatruvedi (supra):

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12. ........... The Court/Tribunal in its power of judicial review does not act as appellate authority to reappreciate the evidence and to arrive at its own independent findings on the evidence. The Court/Tribunal may interfere where the authority held the proceedings against the delinquent officer in a manner inconsistent with the rules of natural justice or in violation of statutory rules prescribing the mode of inquiry or where the conclusion or finding reached by the disciplinary authority is based on no evidence. If the conclusion or finding be such as no reasonable person would have ever reached, the Court/Tribunal may interfere with the conclusion or the finding, and mould the relief so as to make it appropriate to the facts of each case.

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13. The disciplinary authority is the sole judge of facts. Where appeal is presented, the appellate authority has coextensive power to

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reappreciate the evidence or the nature of punishment. In a disciplinary inquiry, the strict proof of legal evidence and findings on that evidence are not relevant. Adequacy of evidence or reliability of evidence cannot be permitted to be canvassed before the Court/Tribunal. ”

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To sum up the legal position, being fact finding authorities, both

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the Disciplinary Authority and the Appellate Authority are vested with exclusive power to examine the evidence forming part of the inquiry report. On finding the evidence to be adequate and reliable during the departmental inquiry, the Disciplinary Authority has the discretion to impose appropriate punishment on the delinquent employee keeping in mind the gravity of the misconduct. However, in exercise of powers of judicial review, the High Court or for that matter, the Tribunal cannot ordinarily reappreciate the evidence to arrive at its own conclusion in respect of the penalty imposed unless and until the punishment imposed is so disproportionate to the offence that it would shock the conscience of the High Court/Tribunal or is found to be flawed for other reasons, as enumerated in P. Gunasekaran (supra) .

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DISCUSSIONS:

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In grounds of appeal, the appellant has mainly raised that there is no motive attributed and that the procedural lapses cannot be construed as a misconduct under the Service Rules. In this context, we have carefully considered the rule position chapter XI of State Bank of India Officers' Service Rules, 1992 Section 1 speaks about general observance of good conduct discipline and integrity, diligence and fidelity etc., Clause 50(3) and Clause 50(4) reads as under;

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“ 50. (3) No officer shall, in the performance

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of his official duties or in the exercise of powers conferred on him, act otherwise than in his best judgment except when he is acting under the direction of his officer superior. Provided wherever such directions are oral in nature the same shall be confirmed in writing by his superior officer.

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50. (4) Every officer shall, at all times, take all possible steps to ensure and protect the interests of the Bank and discharge his duties with utmost integrity, honesty, devotion and diligence and do nothing which is unbecoming of an officer.”

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The above definition would be sufficient to form an opinion that

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the grounds raised by the appellant that the lapses are not falling under the Conduct Rules is incorrect. The charges are squarely falling under the above clauses in the State Bank of India Officer's Service Rules. Therefore, the said ground failed. Regarding the joint inquiry, the Authorities found that the Chief Manager has acted independently by sanctioning the 75 loans out of which 57 loans became NPA (Non-Performing Assets). The appellant herein recommended the loan and the duties and responsibilities of the Recommending Authority is different, since all the preliminary inquiries are to be made by the Recommending Officer in accordance with the Banking Rules. More so, conducting inquiry separately would not cause any prejudice to the delinquent Officers. The Disciplinary Authority in such nature of cases has taken a decision regarding conduct of inquiry, either jointly or separately. Though the inquiry is conducted separately, adequate opportunities were afforded to the delinquent Officer. Therefore, no prejudice is caused to the delinquent Officer and thus, the said ground is unacceptable.

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Regarding proportionality, proved 17 out of 19 charges are to be taken into consideration, since in respect of two charges, the findings of the Inquiring Authority and the Disciplinary Authority were deviated by the

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Appellate Authority. Excluding those two charges, the other proved charges are serious in nature and caused huge financial loss to the State Bank of India. The manner in which 75 loans are sanctioned in one building project to a builder and out of 75 loans, 57 loans became NPA would be sufficient that the loans were not sanctioned by following the due process as contemplated under the Banking Rules and Regulations.

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Therefore, this Court do not find any disproportionality in the

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quantum of punishment imposed. Mere delay in disposing of the appeal by the Appellate Authority by itself would not vitiate the entire disciplinary proceedings. The time limit fixed in disposing of the appeal by the Appellate Authority is directory and not mandatory.

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The other ground regarding the lesser punishment imposed on similarly placed delinquents, the facts are unconnected with the charges framed against the appellant and the Chief Manager Mr.M.Rajagopal. In respect of dereliction, lapses, negligence, violation of Banking Rules in sanctioning the loan are to be inquired independently with reference to the financial loss and seriousness involved. Uniformity in quantum of

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punishment is to be measured, if it is a case of co-delinquents. In the relied on cases, Mr.M.Kannan and Mr.A.Subramanian are not co-delinquents along with the appellant. Charges and transactions against them are totally different. Therefore, comparison is unacceptable. The writ court has elaborately considered all these factual aspects as well as the legal grounds raised between the parties and dismissed the writ petition.

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Hence, we do not find any infirmity or perversity in respect of the findings made in the writ order impugned and therefore stands confirmed. Consequently, the Writ Appeal is dismissed. However, there shall be no order as to costs.

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(S.M.S.J.,) (C.K.J.,) 01.08.2024

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Index : Yes/No Internet: Yes/No Speaking order/Non-Speaking order Neutral Citation : Yes/No (Sha/jeni)

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1.The Chief General Manager, State Bank Of India, Chennai Local Head Office, No. 16 College Lane, Aparna Complex, Nungambakkam, Chennai-600006. 2.The General Manager (Net Work-1), (Disciplinary Authority) State Bank Of India, No. 16 College Lane, Chennai Local Head Office, Aparna Complex, Nungambakkam, Chennai-600006.

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3.The Deputy General Manager (B And O), Network-I, Zone-I, State Bank Of India, 86 Rajaji Salai, Chennai-600001.

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