LPA 493/2004 Page 1 of 26 * IN THE HIGH COURT OF DELHI AT NEW DELHI + LPA No. 493/2004 % Date of reserve: 07.11.2008 Date of decision: 28.11.2008 M.L. KALRA ……Appellant Through: Mr. Ashok Bhalla, Advocate Versus UNION OF INDIA & ANR. .....Respondents Through: Mr. Rajat Arora & Mr. M.K. Datta, Advocates CORAM: HON'BLE MR. JUSTICE SANJAY KISHAN KAUL HON’BLE MR. JUSTICE MOOL CHAND GARG 1. Whether the Reporters of local papers Yes may be allowed to see the judgment? 2. To be referred to Reporter or not? Yes 3. Whether the judgment should be Yes reported in the Digest? MOOL CHAND GARG, J. 1. The appellant has filed this Letters Patent Appeal aggrieved by the judgment of the learned Single Judge of this Court dismissing his Writ Petition No. 154/1994 vide order dated 23.2.2004. 2. The appellant who was employed as Deputy General Manager with New Bank of India (NBI) was awarded the punishment of dismissal from service by the Punjab National Bank (hereinafter referred to as LPA 493/2004 Page 2 of 26 respondent No.2) vide order dated 22.3.1996 after NBI was amalgamated with the said respondent. The punishment was imposed after one year of his superannuation on the basis of the charge sheet issued to him on 19.8.1993, i.e., after a period of six years alleging lapses on his part in having forwarded the loan proposal of M/s Kashipur Steels Private (Ltd.) (hereinafter referred to as the “Borrower”) sometime in 1987-88 when he was working as the Regional Head of NBI at Delhi. The appeal filed against the aforesaid order was also rejected by the Appellate Authority and thereafter, the writ petition assailing the punishment of dismissal and the order of appellate authority has also been dismissed by the impugned order. 3. It would be appropriate to take note of the brief factual matrix of the case, which is as under:- (i) The appellant was working as the Deputy General Manager in the Regional Office of New Bank of India (NBI) as its Regional Head, Delhi in the year 1987-88. (ii) On 2/4.11.1987, B/O Masjid Moth, New Delhi forwarded a loan proposal for sanction of Term Loan of Rs. 90 lacs and C.C. Limit of Rs.30 lacs in favour of the borrower company – for taking over a running mill. The said proposal was simultaneously received at the Regional Office as well as at the Head Office on 10.11.1987. (iii) The Regional Office upon the scrutiny of the loan proposal, raised certain queries vide letter dated 13.11.1987, which were replied by the Branch vide letter dated 14.11.1987, whereafter the Regional Office forwarded the proposal to the Head Office on 16.11.1987 along with the queries and reply given by the Branch. Since the Head Office LPA 493/2004 Page 3 of 26 had already assessed the loan proposal independently on the same day itself, the Head Office put up the loan proposal to Board of Directors for sanction, which was sanctioned by the Board on 25.11.1987. (iv) The borrower Company, however, could not avail of the sanctioned facilities and requested that the sanctioned credit facilities be allowed for taking over another company, which was already availing credit facilities from the Bank. This request was also allowed by the Head Office and the Board of Directors on 3.2.1988 and the Head Office conveyed the sanction on 11.2.1988. (v) The Branch, thereafter on 4.6.1988 recommended another proposal of the same borrower for the sanction of huge enhanced facilities i.e. T/L – Rs. 90 lacs, C.C. Limit – Rs. 80 lacs, Deferred Payment Guarantee (DPG) – Rs. 134.83 lacs. This was sanctioned by the CMD of the Bank on 20.8.1988 upon the recommendations of the Regional Office and the Head Office. The said sanction was conveyed by the Head Office vide letter dated 25.8.1988. The CMD of the Bank later on also relaxed vital terms of the sanction on 14.12.1988. It is not disputed that before enhancement of the credit facilities as aforesaid, the appellant stood transferred from the Regional Office in April, 1988 and therefore, had no role to play in enhancing the credit limits of the borrower. (vi) On 19.8.1993 i.e, after the lapse of 6 years, the successor Executive Director of NBI issued the charge sheet to the appellant alleging, inter alia, that the appellant had acted in a mechanical manner and at no time raised any objection to the loan proposal of the LPA 493/2004 Page 4 of 26 borrowing company sent on 16.11.1987 which contained various adverse features and as a result of his passive role, the Bank‟s interest to the tune of Rs. 393.75 lacs which was outstanding became doubtful of recovery. (vii) After the amalgamation of NBI with PNB, the Board of Directors of PNB resolved to lower the superannuation age of the appellant and accordingly after expiry of 3 months notice, the appellant was retired on 30.11.1994 i.e. about 1 year earlier from his normal date of superannuation in the erstwhile NBI. (viii) In the meanwhile, PNB continued the enquiry proceedings initiated against the appellant even after his retirement by invoking Regulation 20(3)(iii) of the Officers‟ Service Regulations. The Disciplinary Authority vide its order dated 22.3.1996 inflicted the punishment of dismissal upon him after one year of his superannuation from service of the Bank. The appeal filed by the appellant against it was rejected by the Appellate Authority on 6.3.1997. A writ petition filed against the said order has also been dismissed vide impugned order dated 23.2.2004. 4. Before us the appellant has assailed the impugned judgment delivered by the learned Single Judge as well as the initiation of disciplinary proceedings against him, including the punishment inflicted as wholly illegal, unsustainable, discriminatory and has prayed for quashing the same, inter alia, for the following amongst other reasons:- LPA 493/2004 Page 5 of 26 (i) The Higher Authorities were inclined to sanction the credit facilities in favour of the Borrower Company in violation of the norms. (ii) It is not the case that the Higher Authorities were ignorant about the alleged adverse features in the loan proposal which were well within their knowledge. This is evident from the deposition of SW-1, Shri Anil Mahajan, officer (management Witness) who was posted at the Head Office in Credit Department and had put up sanction note for subsequent enhancement of the credit facilities to the same borrower. (iii) The subsequent huge enhancement and relaxation of terms and conditions of sanction to which the appellant was not a party absolves the appellant of whatsoever was the responsibility. (iv) The loan proposal was independently assessed by the expert staff of Head Office and the recommendations of the appellant were merely a formality. The appellant is entitled for protection under exception Clause of Regulation 3 Sub-Regulation 3 of Conduct Regulations. (v) By alleging that the Appellant did not point out the adverse features, the then Executive Director had impliedly contended that the Board of Directors had illegally sanctioned the credit facilities. (vi) The appellant being subordinate to Board, could not have challenged the acts of the Board of Directors. Even otherwise, without challenging the acts of the LPA 493/2004 Page 6 of 26 Board of Directors including the nominee directors of RBI and Ministry of Finance, Government of India, no action could be taken against the appellant. (vii) The responsibility of the appellant being that of the recommending authority, if any, was to immediate higher authority and any third party cannot intervene or proceed against the recommending Authority, until and unless the said immediate superior authority makes a specific complaint against the recommending Authority. (viii) The then Dy. General Manager (Credit) at Head Office (later on promoted as GM Planning), the immediate superior officer never complained against the appellant. On the contrary, he stated that the then C.M.D. had waived crucial stipulations of sanction, due to which security was jeopardized. (ix) There was no concealment on the part of the appellant as whatever information was received by him, was forwarded to the Head Office. Even otherwise, the alleged concealment of information could not have affected the decision of the Board of Directors as subsequent enhancement was allowed in the face of disclosure of said information by the Branch. (x) After the transfer of appellant from the Regional Office in April 1988, the account was showing Health Code „A‟ (grading system in banks – implies good conduct of account). The account went bad due to substantial LPA 493/2004 Page 7 of 26 enhancement in the credit facilities and thereafter, relaxation in terms and conditions of sanction. (xi) Pursuant to recommending the loan proposal in 1987, the appellant vide office order dated 28.6.1990 was asked to perform the duties of General Manager by the then Executive Director of the Bank who was party to the sanction of credit facilities to the borrower meaning thereby the alleged lapses, if any, stood condoned. (xii) The Enquiry Officer acted with close mind and in his anxiety to prove the allegations against the appellant, failed to appreciate that the subsequent enhancement in credit facilities and relaxation in the terms of sanction had absolved the appellant from any responsibility whatsoever. (xiii) The Disciplinary Authority without taking into consideration the factual position and without appreciating that the appellant had ceased to be in the service, inflicted the severest punishment upon the appellant which was not at all commensurate with the gravity of alleged misconduct. The order of punishment “Dismissal from service, which shall be a disqualification for future employment” was passed by the Disciplinary Authority with mala fide intentions to deprive the appellant of his retiral benefits. (xiv) The Board of Directors (Appellate Authority) of Punjab National Bank (PNB) without ensuring the compliance of Regulation 17 of D&A Regulations and without deciding LPA 493/2004 Page 8 of 26 the various contentions raised by the appellant, mechanically passed resolution rejecting the appeal dated 9.5.1996 of the appellant, which resolution was communicated vide letter dated 6.3.1997. 5. The learned counsel for the appellant has also relied upon the following judgments:- 1. CBI vs. Duncans Agro Industries – (1996)5 SCC 591 2. Union of India & Ors vs. J Ahmed – (1997) 2 SCC 286 3. Vishwanath Mishra vs UPSC Tribunal Ors: (1985) 2 SLR 708 4. State of MP vs. Bani Singh JT 1990(2) SC 54 5. Lal Audhraj vs State of MP (1968) SLR 88 (DB) 6. State of Punjab vs. Bakhtawar Singh & Ors 1972 SLR 85 (SC) 7. R.P.Bhat vs. Union of India & Ors AIR 1986 SC 1040 8. A.L.Kalra vs. Project & Equipment Corp. – 1984 SCC (L&S) 497 9. Union of India & Ors vs. R.Reddappa & Anr – (1993) 4 SCC 269 The aforesaid judgments were also cited by the appellant before the learned Single Judge. 6. On the other hand, the respondents have supported the judgment delivered by the learned Single Judge by submitting that the charges were leveled against the appellant on account of serious lapses committed by him while recommending the loan proposal of the Borrower by misusing his position and having failed to safeguard the interest of the NBI. The Enquiry officer, who was the Commissioner for departmental enquiries under the Central Vigilance Commission, an independent authority, vide its report dated 01.08.1995 held that the charges against the appellant were proved and it was thereafter that LPA 493/2004 Page 9 of 26 the disciplinary authority vide orders dated 22.03.1996 imposed the punishment of “dismissal from service, which shall be a disqualification for future employment” upon the appellant. His appeal was dismissed by the Appellate Authority. 7. The respondents who contested the writ petition submitted that while scrutinizing the loan proposal, the Regional Office raised certain queries on the Branch vide its letter dated 13.11.1987, which were replied by the Branch on 14.11.1987. Even though the said reply was not satisfactory and the directions contained in the letter were also not met by the Branch Office; yet on 16.11.1987 the appellant recommended the loan proposal which was a serious lapse on his part and in this manner caused loss to the Bank. They have relied upon the following portion of his letter forwarding the proposal, where it was stated:- Shri Vinajy Rathi is an Executive Director of a Major Steel Furnace and Rolling Mills Complex situated in Ghaziabad. He is fully conversant with the latest technical developments which are taking place in the steel industry with particular relevance to its situation in and around North India. Based on the recommendations of the Senior Manager, we also recommend that the following facilities may please be sanctioned to the party on the under-noted terms and conditions:- xxx xxx xxx 8. It is submitted that merely because the appellant forwarded the proposal and the Board of Directors of NBI sanctioned the same, it cannot be said that the role played by the appellant was passive. It will also not absolve the appellant of his responsibilities. 9. It is also submitted that it is not that the appellant has been singled out but others have also been punishe`d for the irregularities in LPA 493/2004 Page 10 of 26 the account of the borrower. It is also submitted that in addition to the charges leveled against the appellant vide charge sheet dated 19.8.1993, there were 6 other charge sheets, which were initiated against the Appellant but were kept in abeyance due to the order of his dismissal. It has also been submitted that in the facts of the case and for the reasons given by the Learned Single Judge while disposing of the writ petition, it is not a case where this Court should exercise its power to interfere with the quantum of punishment. Reliance in this regard has been placed on the following cases: 1. Ramesh Chandra Sharma Vs. Punjab National Bank - 2007 II LLJ 245 2. V. Ramana Vs. A.P.S.R.T.C. – 2005 III LLJ 725 (S.C.) 3. Bharat Petroleum Corpn. Ltd. Vs. T. K. Raju – 2006 SCC (L&S) 480 4. Maharashtra State Seeds Corpn. Ltd. Vs. Hariprasad Drupadrao Jadhao – 2006 SCC (L&S) 587 5. U.P. State Road Transport Corporation, Dehradun Vs. Suresh Pal – 2006 SCC (L&S) 1905 10. We have heard the counsel for the parties and have also gone through the written submissions filed by them before us besides the record of this case. 11. It is the case of the respondents that they noticed the acts and omissions/lapses on the part of the appellant in forwarding the loan proposal later. However, they have not specified the point in time when the aforesaid lapses were detected. It is a matter of record that it LPA 493/2004 Page 11 of 26 is only after six years they served the charge sheet, which reads as under: ARTICLES OF CHARGE Shri M.L. Kalra, Officer on Special Duty (Accounts) during his tenure as Deputy General Manager, Regional Office, Delhi committed serious lapses/irregularities and acts of omission and/or commission, while recommending for sanction of facilities in favour of M/s Kashipur Steels Ltd., details as per statement of allegations as Annexure „B‟. Shri M.L. Kalra, is, therefore, charged as under, each charge being independent of the other. 1. He failed to ensure and protect the interest of the Bank. 2. He acted in a manner unbecoming of an Officer of the Bank. 3. He acted otherwise that in his best judgment while discharging his duties. The charges enlisted above constitute misconducts within the meaning of Regulation 3 read with Regulation 24 of New Bank of India Officer Employees‟ (Conduct) Regulations, 1982 and are punishable under Regulation 4 of New Bank of India Officer Employees‟ (Discipline and Appeal) Regulations, 1982. (G. NARAYANAN) EXECUTIVE DIRECTOR (DISCIPLINARY AUTHORITY) 12. In his reply to the charge sheet, the appellant denied the allegations and stated that he had not committed any misconduct and that the loan was sanctioned by the Head Office and the Board of Directors in a hurry. Their keenness was writ large inasmuch as on the same day when the proposal was sent by the Regional Office, the Head Office put up the proposal before the Board of Directors, who sanctioned the loan within a week or so. The appellant was only a junior officer and was not competent to overrule the Board. On his part, he had sent the proposal along with the queries raised by the Regional Office and the reply given by the Branch. Before us, he also relied upon the testimony of Anil Mahajan, who appeared as SW-1 during the enquiry. From the statement of this witness, it is apparent that the entire material was placed before the Board. LPA 493/2004 Page 12 of 26 13. It is also of importance to note that the proposal was sent on 16.11.87 to the Head Office who put up the proposal to the Board of Directors on 16.11.87 itself and on 25.11.1987 the Board of Directors sanctioned the loan without even taking into consideration the short comings if any in the proposal and violation of Banking guidelines. In this regard it is again not disputed that the proposal sent by the Regional Office was accompanied with the queries raised by the Regional Office as well as the replies sent by the branch. 14. It is also not in dispute that the request made by the same borrower for the sanction of enhanced cash credit limits and other facilities forwarded by the same branch when the appellant was no more in the regional office was accepted by the CMD without any role played by the appellant. Even the norms for grant of such facilities were also relaxed by the CMD of the bank. It is thereafter the party defaulted. The aforesaid facts do not form part of the Charge Sheet and have not been dealt with by the enquiry officer, disciplinary authority or by the Ld. Single Judge even though a reference to the same was made by the appellant in his reply to the charge sheet. It is also a matter of record that no action has been taken by the bank against the members of the Board of Directors or the CMD. 15. Before the writ court, the initiation of disciplinary proceedings against the appellant which resulted in the passing of an order dismissing the appellant from service after one year of his superannuation were assailed as wholly invalid ab initio, inter alia, on the following amongst other grounds;- i.e. LPA 493/2004 Page 13 of 26 (i) Inordinate delay in issuing the charge-sheet which caused serious prejudice to the appellant. It was contended that the loan was sanctioned during 1987- 88 and charge-sheet was issued in the year 1993. Delay was of 6 years which had caused prejudice. Reliance was placed upon the Judgment of the Apex Court reported in JT 1990 (2) SC 54, State of M.P.V. Bani Singh. (ii) The lapses alleged against the appellant did not constitute any misconduct. Reliance was placed on 1979 (2) SCC 286, Union of India Vs. J. Ahmad and 1985 (2) SLR 708, Vishwanath Mishra Vs. UPSC Tribunal. (iii) The loan was sanctioned by the Board of Directors of NBI. The appellant being a junior officer could not be charged for any misconduct. 1996 (5) SSC 591, C.B.I. Vs. Duncans Agro Industries was relied upon. In this regard it was also submitted: (a) Role alleged against the appellant was that of being passive which was not a misconduct and, therefore, the very charge sheet was required to be quashed and as a consequence thereof everything which emanated from the charge sheet or was a result thereof was to be quashed. (b) The loan proposal was sanctioned by the Board of Directors. The primary liability was of the sanctioning authority and without proceeding against the Directors no action could be taken against the appellant. (c) The appellant was only a recommending authority and his responsibility was, therefore, subjected to the decision of the immediate specified superior authority. Appellant‟s immediate superior authority made no complaint against him and therefore, no proceedings could be initiated against the appellant. (d) Appellant being the Regional Head merely forwarded the loan proposal. It was at the Head Office that the loan proposal was scrutinized and examined. It was put up to the Board of Directors. Thus, the appellant had no role in the sanctioning of the loan. (e) The charge-sheet was also served for the same set of facts upon Shri S.K. Abrol, the then Deputy LPA 493/2004 Page 14 of 26 General Manager (Credit) who in his defence never stated that he was misled by the appellant. (f) Senior Manager of the branch at Masjid Moth was the person at the grass-root level and it was he who was obliged to personally verify the correctness of the information supplied. Being at the Regional Office, appellant was only to ensure that the loan proposal was properly processed. He did so by letter dated 13.11.1987 addressed to the branch office which confirmed that all procedural requirements were complied with and necessary enquiries were made. (iv) That in between 1987-1988 when the proposal was sent and 19.8.1993 when charge-sheet was issued, appellant was promoted and, therefore, charges stood condoned. 1968 SLR 88, Lal Audhraj Vs. State of M.P. was relied upon. (v) That the Order of dismissal stated no reasons and as such it was a case of non-application of mind. 1972 SLR 85 (SC), State of Punjab Vs. Bakhtawar Singh and 1984 SCC (L&S) 497, A.L.Kalra Vs. Project & Equipment Corporation were relied upon. (vi) The Order rejecting appeal also stated no reasons. It was again a case of non-application of mind. AIR 1986 SC 1040, R.N.Bhatt Vs. Union of India and 1993 (4) SCC 269, Union of India Vs. R. Reddappa were relied upon. (vii) That the punishment imposed upon him was disproportionate. More so when the members of the Board were not even questioned on the issue. 16. The appellant has submitted that the learned single Judge has not appreciated the facts of this case in the correct perspective and has simply dittoed the line of reasoning given by the enquiry officer even though the role of the Board of Directors was not even analysed or discussed by the enquiry officer who were primarily responsible for having sanctioned the loan proposal despite alleged deficiencies, if any, which were within their notice in respect of the proposal and the replies received from the branch were forwarded along with the loan LPA 493/2004 Page 15 of 26 proposal by the appellant. The learned Single Judge has also ignored the enormous delay in initiating the proceedings against him and the punishment imposed which is highly disproportionate and discriminatory against him qua other officers who were posted in the same branch and who initiated the loan proposal. 17. Before the learned Single Judge, the learned counsel for the respondent-bank accepted that the loan proposal was sanctioned by the Board of Directors but this was justified on the ground of hierarchy of the banking system. It was stated that sanction of loan by the Board of Directors does not absolve the appellant from his responsibilities. However, neither any justification was furnished before the writ court nor it has been submitted before us as to why further facilities were sanctioned for the same party subsequently on the same facts when the appellant was not even the Regional Head and stood transferred. There is also no explanation as to why no action was taken against the Board members. 18. The learned Single Judge accepted the stand of the respondents by relying solely upon the report of the enquiry officer but without referring to the reasons for the extension of the loan facilities and by observing that the appellant had not criticized the findings of the enquiry officer, which is not so because the writ petition also assails the findings of the enquiry officer and the initiation of the enquiry itself including the disproportionality of the punishment and the role played by the Board of Directors in the whole