1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITIOIN NO.15 OF 1995 Shri M.B. Motwani, ) Adult, Indian Inhabitant, of Bombay, ) Residing at 13, Seeta Sadan, 259, ) Sion Road (West), Bombay400 022. ).. Petitioner Vs. 1. UCO Bank, ) formerly known as United ) Commercial Bank, constituted ) and functioning under the provisions ) of Banking (Acquisition and ) Transfer of Undertakings) Act 5 of ) 1970 as amended by Banking Laws ) Amendment Act 1985 having its ) Head Office at 10, B.T.M. Sarani ) Road, Calcutta 700 001 and having ) its Zonal Office at 2nd Floor, Mafatlal ) Centre, Nariman Point, ) Bombay – 400 021. ) 2. Competent Authority, ) (General Manager) UCO Bank, ) Head Office, Calcutta, ) C/o. Zonal Office, Mafatlal Centre, ) Bombay 400 021. ) 3. Shri S.V. Prabhu, ) Assistant General manager, ) UCO Bank, Nariman Point Branch, ) Mafatlal Centre, 1st Floor, ) Bombay 400 021. ) 2 4. Shri S.V. Ramanathan, ) Divisional Manager, UCO Bank, ) Divisional Office, Mafatlal Centre, ) 2nd Floor, Nariman Point, ) Blombay - 400 021. ) 5. Reserve Bank of India, ) Department of Banking Operations ) And Development, New Administrative) Building, Mint Road, Bombay. ) 6. Central Vigilance Commission, ) Ayakar Bhavan, Maharishi Karve ) Road, Bombay 400 020. ) 7. Government of India, ) Ministry of Finance, ) Department of Banking, ) Ayakar Bhavan, Maharishi Karve ) Road, Bombay – 400 020. ).. Respondents -- Shri G.K. Masand for the Petitioner. Shri Karl Tamboli along with Sachin Pandey i/by D.H. Law Associates for Respondent No.1. -- CORAM : SWATANTER KUMAR, C.J. & A.M.KHANWILKAR, J JUDGMENT RESERVED ON : 20TH JULY, 2009 JUDGMENT PRONOUNCED ON : 30TH JULY, 2009 3 JUDGMENT : ( PER SWATANTER KUMAR, CHIEF JUSTICE ) The Petitioner was appointed as a Apprentice Officer in United Commercial Bank, (hereinafter referred to as the “Bank”) in the year 1952. In the year 1974, he was posted as Branch Manager at Moradabad Branch, U.P., whereafter he was transferred to Calcutta Main Branch as an Assistant Manager. During this period, the Petitioner claims to have served in different places including Mumbai and other important places. In the year 1976, the Petitioner was posted back to Mumbai and was promoted as Senior Management Scale No.IV Officer and was posted as Inspector of Branches with Headquarters at Mumbai. During 1988 to 1990, the Petitioner served as Assistant General Manager at Bombay Main Branch, D.N. Road, Mumbai. On 2nd July, 1991, the Petitioner attained the age of superannuation of 60 years and was due to retire on 1st August, 1991. He was served with an intimation notice for retirement on 7th May, 1991, which is annexed at Exhibit-A to the Writ Petition. The same reads as under:- 4 “UCO BANK Personal Department, E.R.Cell, Post Box No.12, Old Court House Street, Calcutta – 1. Ref. No. PER-M/ER/91/147 7th May, 1991 Mr. M.B. Motwani, A.G.M., (PFM No.3672), UCO BANK, Zonal Office, Bombay. Dear Sir, We find that you will be completing 60 years/58 years of age on 2.7.1991 in accordance with Regulation 19(1) of the UCO Bank (Officers’) Service Regulations, 1979 you are due to retire on the last day of July, 1991 i.e. 31.7.1991. Your retirement from the Bank’s Service will, therefore, take effect from 1.8.1991 and you will be relieved accordingly. Please send your applications for settlement of your Provident Fund and Gratuity Dues after your retirement, addressed separately to the Trustees of UCO Bank Employees’ Gratuity Fund through your branch/office. Yours faithfully, Sd/- General Manager.” 2. However, on 17th June, 1991, the Petitioner was served with a Memo requiring him to explain irregularities and lapses 5 relating to the opening and operation of certain accounts with the main branch during his tenure as head of the Branch, and on account of the alleged acts of omission and commission on the part of the Petitioner, the account became sticky and a sum of Rs.1.30 lacs remained outstanding against the party from April, 1991. The Petitioner was sanctioned a leave from 21st June, 1991 to 29th June, 1991 by the letter dated 18th June, 1991 whereafter the Petitioner on 20th June, 1991 acknowledged the receipt of the Memo and prayed for grant of further time which was granted. The Petitioner also made a request for inspection of the relevant files at the Zonal Office and at the head office. Certain memos were also served upon the Petitioner including the Memo dated 6th July, 1991 in relation to different accounts of the bank. The Petitioner again demanded inspection vide his letter dated 9th July, 1991 which was not provided to the Petitioner but another Memo dated 9th July, 1991 was served upon the Petitioner. The General Manager (Personnel) vide his letter dated 15th July, 1991 while exercising power of the Competent Authority under Regulation 12 of the United Commercial Bank Officer, Employees (Discipline and Appeal) Regulations, 1976, passed an order of suspension against the Petitioner. The said order 6 of suspension, Exhibit-L to the Petition, was to take effect forthwith. Exhibit-L to the Petition which reads as under:- “UCO Bank, Personnel Department, Head Office: 12, Old Court House Street, Calcutta 700 001. Date : 15th July, 1991 O R D E R WHEREAS certain serious irregularities have been noticed in the following accounts in which credit facilities were sanctioned by Shri M.B. Motwani while he was functioning as Assistant General Manager incharge of D.N. Road (Bombay) Branch of the Bank, viz. 1) M/s. Dipika Fabrics Pvt. Ltd. 2) M/s. Sunil Corporation 3) M/s. Hemakute Industrial Investment Co. Ltd. AND WHEREAS explanation has been called for from Shri M.B. Motwani regarding the lapses noticed in handling of the aforesaid accounts by Shri M.B. Motwani and till date his explanation has not been received. AND WHEREAS Shri M.B. Motwani is due to retire from the service of the Bank with effect from 1st August, 1991. 7 AND WHEREAS considering the seriousness of the irregularities it is found necessary and expedient to initiate disciplinary action against Shri M.B. Motwani by issuance of charge-sheet. AND WHEREAS pending completion of the Departmental Inquiry, it is necessary to ensure that Shri M.B. Motwani is continued in services of the Bank and hence it is found necessary and expedient to place him under suspension both considering the seriousness of the irregularities and also his likely retirement from the service of the bank. Now, therefore, in exercise of the powers conferred on the undersigned by UCO Bank Officer Employees, (Discipline & Appeal ) Regulations, 1976, I hereby place Shri M.B. Motwani under suspension with immediate effect under regulation 12 of the said Regulations. During the period of his suspension, Shri M.B. Motwani will be entitled to subsistence allowance as per rules applicable to him. Further, Shri Motwani’s head quarters during the period of suspension will be Bombay and he shall not leave the headquarter without prior permission of the Competent Authority. In terms of regulation 20(3)(c) of UCO Bank Officers’ Service Regulations, 1979, it is hereby ordered that Shri M.B. Motwani shall not retire from the Bank’s service with effect from 1st August, 1991 notwithstanding that he completes the age of superannuation as on that date. Sd/- GENERAL MANAGER (Personnel) Competent Authority, 8 To, Shri M.B. Motwani, Asstt. General Manager, UCO Bank, Zonal Office, BOMBAY. c.c. to : D.G.M. Zonal Office, Bombay.” 3. According to the Petitioner, the order of suspension was passed in a mechanical manner without any proper application of mind. Against the order of suspension, the Petitioner filed an Appeal before the Appellate Authority under the said Regulations and the Appellate Authority vide its order dated 7th November, 1991 rejected the said Appeal. This order, in fact, was served upon the Petitioner on 7th December, 1991. 4. A charge sheet, which was primarily biased, was served upon the Petitioner on 10th December, 1991, and the Petitioner was called upon to face domestic enquiry. After seeking some extension, the Petitioner filed reply to the charge sheet denying articles of charges and giving his explanation for the accounts mentioned in the charge sheet. According to the Petitioner, all these allegations were 9 baseless. 5. Being aggrieved by these orders of the Respondent Bank, the Petitioner was compelled to file a Writ Petition being Writ Petition No.3667 of 1991 challenging the order of suspension. The said Writ Petition came up for hearing before the Court and vide order dated 10th January, 1991, the same was disposed of while issuing certain directions. Relevant part of the order reads as under: “Coram: K.Sukumaran & Dr.B.P. Saraf, JJ Friday, 10th January, ‘92. P.C. 1. The Petitioner challenges an order of suspension passed against him. The close proximity of that order to the normal date of superannuation, and other circumstances are projected to characterise the order of suspension as totally denuded of jurisdiction and justification. On an advertance to the relevant materials, we are not satisfied that the order of suspension, which has been affirmed in appeal by the appellate authority, should be interfered with by us in these proceedings, and at this stage. We decline that prayer. 2. The subsidiary grievances of the Petition however, may merit some consideration. It was submitted that the petitioner should be given the facility of inspection of relevant files and accounts. 10 This is a requirement of natural justice. Counsel for the Respondents did not resist that request. The petitioner will be permitted to have such inspection which shall be afforded by the Respondent-Bank. Both sides shall adopt a responsive and cooperative attitude in the matter. 3. The petitioner prayed for further 15 days time to submit his detailed explanation on the basis of materials that will be collected from the inspection of files and accounts. That request is also not resisted. The petitioner will be provided an opportunity to submit his detailed explanation within 15 days of the date of completion of inspection, as afforded by us earlier. 4. The third request is about necessity to have the enquiry denovo. That request is made in the background of the conduct of enquiry in the meanwhile. If the petitioner is to be afforded facility of inspection of files and accounts, and the opportunity to have a detailed explanation in relation to the allegation of misconduct, then it would automatically mean that the enquiry is to be conducted afresh. We direct that the enquiry shall be so conducted afresh after complying with the directions indicated above. We trust that this will satisfy legitimate requirements of the petitioner without causing any obstruction to the enquiry visualised by the Respondents. This writ petition is disposed of with the above directions.” 6. It is averred by the Petitioner that there were certain facts and documents which could not be brought to the notice of the Court at the relevant time specifically that the the Supreme Court in 11 the case of United Bank of India Officers’ Association v. Abhaykant Jha Ors. struck down Regulation No.20 of the said Regulations of 1979 by its judgment dated 1st August, 1986. However, the Bank had intended to substitute Regulation No.20. A departmental inquiry had been proceeded vide order dated 15th January, 1992. The Chairman and the Managing Director of the Bank, in exercise of the powers conferred on him by Regulation No.5 of the Officers Service Regulations, 1976 appointed the General Manager (Service and Investment) Head Office to function as Disciplinary Authority over the Petitioner in place of General Manager (Officiating Personnel). 7. In pursuance to Respondent No.1’s communication, inspection of the files of four accounts at Mumbai Main Branch was started. It is further case of the Petitioner that the order of the Court in Writ Petition No.3667 of 1991 was not followed by the Respondents. Contrary to the said order, without furnishing documents to the Petitioner, a departmental inquiry was proceeded and vide order dated 31st January, 1992, while referring to the order of the High Court, it was stated that de-novo inquiry will be conducted against the Petitioner. The Petitioner was not paid 12 subsistence allowance nor was he provided inspection of the files. The de novo inquiry was again conducted in an arbitrary manner and without providing specific inspection of files to the Petitioner. Finally, vide order dated 3rd March, 1993, the Disciplinary Authority awarded penalty for each of the articles of charges levelled against the Petitioner stating that the same has been proved and an order of dismissal for each of the charges would ordinarily act as a disqualification for future employment. The order of dismissal of the Petitioner reads as under:- “EXHIBIT Z-4 UCO BANk PERSONNEL DEPARTMENT HEAD OFFICE 12, OLD COURT HOUSE STREET, CALCUTTA-700001 Date : 3rd March, 1993 Ref. No._________ O R D E R In the matter of disciplinary proceedings initiated against Shri M.B. Motwani, P.E.M. No.3672, former Asstt. General Manager, Zonal Office, Bombay in respect of charge sheet dated 7.12.1991 issued to him. ----- 13 Departmental proceedings were initiated against Shri Motwani for having committed serious irregularities in the advance protfolio while he was functioning as Asstt. General Manager at D.N. Road, (Bombay) branch from 11.1.1988 to 25.1.1990. A Charge-sheet dated 7.12. 1991 was issued to Shri Motwani and subsequently an enquiry was ordered into the charges levelled against him, vide the said charge-sheet by appointing Enquiry Officer and Presenting Officer on 17.12.1991. Initially the enquiry was concluded by the Enquiry Officer but before the Disciplinary Authority could pass appropriate orders, Shri Motwani filed a writ petition in Bombay High Court on 23.12.1992 whereafter the Hon’ble Court Directed the bank on 10.1.1992 to hold the enqiry afresh. Accordingly, the enquiry had to be held denovo. I observe that Shri Motwani was allowed repeated opportunities to participate in the enquiry but, for reasons b est known to him, he chose not to attend the enquiry proceedings which therefore had to be held exparte by the Enquiry Officer. After conclusion of the enquiry, the Enquiry Officer submitted his report and findings dated 9.4.1992, a copy of which was forwarded to Shri Motwani on 20.8.1992 for making his submissions/ representation. Shri Motwani made his submissions and asked for copies of exhibits vide his letter dated 18.9.1992. Thereafter management exhibits produced in the enquiry were forwarded to Shri Motwani on 16.11.1992 for his comments on the same. Shri Motwani has replied on 23.11.1992. I have carefully examined the charge-sheet dated 7.12.1991 issued to Shri Motwani, his reply dated 16.12.1991 to the said charge-sheet, the Enquiry Officer’s report and findings, the statements made by 14 Shri Motwani on the Enquiry Officer’s report and all other papers/documents relevant to the case. My observations are noted hereunder. The charges levelled against Shir Motwani are stated as follows: 1. Shri Motwani sanctioned credit facilities to various parties without due processing in violation of rules and in a malafide manner. He thus failed to discharge his duties with utmost integrity and honesty which is violative of Regulation 3 of UCO Bank Officer Employees’ (Conduct) Regulation, 1976 as amended. 2. Shri Motwani sanctioned credit racitlities far in excess of his sanctioning powers. He thus abused his official position and powers and acted in a manner violative or Regulation 3 of UCO Banki Officer Employees (Conduct) Regulations, 1976, as amended. 3. Shri Motwani acted in a manner which has resulted in the Bank being exposed to huge loss of money. The total amount of exposure to risk of loss detected till now is Rs.2,25,25,972.87 exclusive of interest in the following accounts: 1. Dipika Fabricks (p) Ltd. Rs.1,29,69,972.87 2. Mayur Industrial Corpon Rs. 17,13,000.00 3. Hemakute Industrial Rs. 44,06,000.00 Investment Co. Ltd. 4. Vishal Gems. Rs. 34,37,000.00 ------------------------- Rs.2,25,25,972.87 ------------------------- 15 He failed to ensure and protect the interests of the Bank which is violative of Regulation 3 of UCO Bank Officer Employees’ Regulations, 1976, as amended. 4. Shri Motwani concealed from Head Office materials facts about a party while recommending certain credit facilities in its favour. He committed breach of faith in the performance of his duties. He thus acted in a manner unbecoming of a Bank Officer which is violative of Regulation 3 of UCO Bank Officer Employees’ (Conduct) Regulations, 1976, as amended. As regard to Charge No.1, it has been established in the enquiry that Shri Motwani did not obtain adequate confidential report regarding a number of parties who were sanctioned credit facilities, such as Cash Credit, Bills Purchased and Letter of Credit. Credit report were also not obtained on the drawees of usance bills submitted by different parties, although such bills were purchased by him. In fact, some of the drawees of the bills were not engaged in business at the relevant time as they were under lockout for several years. Shri Motwani has contended that credit facilities were granted to different parties by him within his sanctioning powers and these were informed to Zonal Office, Bombay as well as Head Office, Calcutta, who did not raise any objection and, therefore his action can be construed as having been ratified. Further, he has claimed that in credit reports prepared jointly by Sr. Manager and Chief Cashier of the branch, parties 16 were shown as respectable persons having good commercial reputation and good financial resources. This argument cannot be accepted, as Shri Motwani being a Senior Officer of the Bank and holding overall charge of a branch, is expected to make himself aware about the credit worthiness of the parties while sanctioning/disbursing advances to them, so that Bank’s interests are protected. The fact that large amounts were advanced to different parties without verifying the credentials or their financial statements or obtaining confidential reports about the Directors of the Companies who were granted advances clearly proves that Shri Motwani acted with malafide intentions, and without proper processing of proposals and in violation of rules. Relating to Charge No.2, it is established from documentary evidence that Shri Motwani exceeded his powers in sanctioning credit facilities to different parties. He purchased bills amounting to Rs.99.33 lacs in the account of M/s. Dipika Fabrics Pvt. Ltd. And even though bills amounting to Rs.39.36 lacs were overdue, he continued to purchase further bills in the said account. Besides, he sanctioned bills purchase limit of Rs.30.00 lacs and Rs.40.00 lacs to M/s. Hemakute Industrial Investment Co. and Vishal Gems respectively which were beyond his sanctioning powers. Shri Motwani claims that, after sanctioning bills purchase limit to M/s.Vishal Gems, papers were forwarded to Head Officer for confirmation but he was not directed to stop or suspend the limit. The argument of Shri Motwani can not absolve him from the irregularity committed by him in extending the bills purchase facility to the parties against the interests of the Bank. It is thus clear that he abused that he abused his official position and financial vested in him. As to Charge No.3, Shri Motwani did not ensure 17 adequate security from the parties who were granted credit facilities and/or arrange for creation of charge on security offered by the parties. Equitable mortgage on properties of borrowers were not created before disbursement of credit facilities to them, though creation on such equitable mortgage was one of the stipulations for sanction of such credit facilities. Moreover, he continued purchasing bills offered by parties, though payment for earlier bills purchased were not fothcoming. He also did not initiate steps for taking possession of the goods covered under the bills or informing the Transport Companies to note Bank’s lien on the goods. It has also been established that large suns of Bank’s money were exposed to risk while disbursing under this purchase limit, guarantee limit and letters of credit enquiry and analysis of the financial and other books of the parties. Shri Motwani’s contention in this regard is that the officers at lower levels working under him were required to comply with the sanction stipulation, such as creation of equitable mortgage and they were responsible for the entire procedural and routine work of the Department. According to him, the Asstt. General Manager of a branch cannot be responsible for procedural lapses. This argument of Shri Motwani is not at all acceptable, since the credit facilities were granted to various parties at the branch by him and when he was in overall control of the branch. It was his duty to ensure that credit facilities were granted as per sanction norms and within banking rules, which he failed to do. I therefore hold that he failed to ensure and protect the interest of the Bank and his actions resulted in the Bank being exposed to huge loss of money. Documents produced in the equity show that Shri Motwani while recommending credit facilities in favour of a particular party, did not disclose material information that quite a large number of bills of the 18 party purchased remained overdue and in fact fave wrong/misleading information that none of the bills of the party purchased was returned unpaid. He thus committed breach of faith in the performance of his duties as alleged in Charge No.4. Shri Motwani has claimed that he has retired from the Bank’s service with effect from 1.8.1991 and that it is beyond the competence of the Bank to initiate action after his retirement. This contention of Shri Motwani is not acceptable as vide order dated 15.7.1991 he has been informed that he will retire from the Bank’s service with effect from 1.8.1991. After careful examination of the matter in entirety, I am of the opinion that Shri Motwani had indulged in serious irregularities and had embarked on a spree of granting huge credit facilities to different parties without caring for the Bank’s interest and with malafide intentions Shri Motwani, being a senior officer of the Bank, was expected to be prudent/careful in handling the advances portfolio, but he failed to do so as is clearly evident from the enquiry and the documents produced therein. The seriousness of the irregularities committed by Shri Motwani deserves a deterrent punishment. Accordingly, in exercise of the powers vested in me as Disciplinary Authority and in terms of Regulations 7(3) read with 4(h) of the UCO Bank Officer Employees (Discipline & Appeal ) Regulations, 1976, I award Shri Motwani the folliwng penalities for each of the charges is levelled against him, vide the said charge-sheet, and proved in the enquiry: Charge No.1 Shri M.B. Motwani is dismissed from the Bank’s service which shall ordinarily be a disqualification for future employment. 19 Charge No.2 Shri M.B. Motwani is dismissed from the Bank’s service which shall ordinarily be a disqualification for future employment. Charge No.3 Shri M.B. Motwani is dismissed from the Bank’s service which shall ordinarily be a disqualification for future employment. Charge No.4 Shri M.B. Motwani is dismissed from the Bank’s service which shall ordinarily be a disqualification for future employment. Sd/- General Manager (Personnel) Disciplinary Authority.” According to the Petitioner, this order would debar him from future employment. 8. Being aggrieved by the said order, he also preferred an appeal before the Appellate Authority. Since the said appeal was not taken up for hearing for a considerable time, the Petitioner wrote various letters. Finally the appeal was heard and rejected on 23rd July, 1997 vide Order Exhibit – Z-6. It is this order, along with 20 other two orders, the Petitioner has challenged in the present Writ Petition. 9. The legality, correctness of the order imposing penalty and the order of Appellate Authority has been challenged in the present Writ Petition, inter alia, but primarily on the following grounds : (a) Regulation 20(3)(iii)(c) of the Regulations suffers from serious infirmities and is ultra vires and in any case the provisions thereof could not have been invoked against the Petitioner in the facts and circumstances of the case. Furthermore, the exercise of power under the said Regulation is arbitrary and without proper application of mind. (b) The entire departmental proceedings are vitiated for non-payment of the subsistence allowance during the relevant period and in terms of Regulation 14(4)