*THE HONOURABLE SRI JUSTICE L.NARASIMHA REDDY +Writ Petition No.26396 of 1999 %08.07.2010 #Y.Sundara Babu ..Petitioner Vs. $ Andhra Bank rep. By its Chairman & Managing Director and others. ..Respondents. !Counsel for the petitioner : Sri W.B.Srinivas ^Counsel for the Respondents : Sri K.Laxmi Narasimha <Gist : >Head Note: ?Cases Referred: THE HON’BLE MR JUSTICE L. NARASIMHA REDDY Writ Petition No.26396 of 1999 ORDER: The petitioner joined the service of the Andhra Bank, the 1st respondent herein, as a Company Secretary, in the year 1976, in Selection Grade-IV. Thereafter, he was promoted as Assistant General Manager, in 1981, and as Deputy General Manager, in 1986. The Management of the 1st respondent - Bank has incorporated Andhra Bank Financial Services Limited (for short ‘the Financial Services’) in 1991. The petitioner was appointed as the Managing Director thereof. Through proceedings, dated 05.09.1992, he was repatriated to the parent organization. He was scheduled to retire from service, on 30.09.1994. However, the 1st respondent initiated disciplinary action against him, vide proceedings, dated 25.07.1994. He was informed that the proceedings would continue, even after he retires from service. The petitioner was placed under suspension through proceedings, dated 06.11.1992. W.P.No.15057 of 1992 was filed against the same. During the pendency of the writ petition, a charge sheet, dated 24.06.1993, was served upon the petitioner. Through order, dated 14.07.1993, this Court allowed the writ petition and had set aside the order of suspension. In a writ appeal filed against it, the order passed in the writ petition was modified to the effect that the petitioner shall remain under suspension, till he attains the age of superannuation. An Enquiry Officer was appointed, through the Central Vigilance Commission. After the petitioner attained the age of superannuation, on 30.09.1994, payment of subsisting allowance was stopped, and the disciplinary proceedings were continued. The charge sheet, dated 24.06.1993, contained 11 charges. However, through letter, dated 11.11.1993, the petitioner was informed that the enquiry shall be confined to charge Nos.6, 9, 10 and 11 (for short ‘the charges’). Domestic enquiry was conducted and the Enquiry Officer submitted a report, dated 27.02.1998, holding that the charges, are proved. The findings of the Enquiry Officer were accepted by the 2nd respondent, the disciplinary authority. The petitioner was served with a show cause notice, enclosing copy of the report. The petitioner raised certain objections, against the findings recorded by the Enquiry Officer. Taking the same into account, the 3rd respondent passed order, dated 31.03.1999, imposing the punishment of dismissal from service. It was also mentioned that, the entire period of suspension, i.e. from 06.11.1992, till the date of his retirement, shall not be treated as on duty, and that he shall not be eligible, to be paid the difference of salary, or other service benefits. Aggrieved by the order, dated 31.03.1999, passed by the 3rd respondent, the petitioner filed an appeal before the Appellate Authority. The appeal was rejected through order, dated 24.07.1999. Hence, this Writ Petition. The petitioner contends that the disciplinary proceedings initiated against him are without any legal authority and basis, and are contrary to the Andhra Bank Officer Employees’ (Conduct) Regulations, 1981 (for short ‘the Regulations’). He contends that the allegations, levelled against him, are, in relation to his service in the Financial Services and the said Authority did not even communicate its displeasure, much less any charges, touching upon his functioning, as the Managing Director thereof. He further contends that, even assuming that there is any proof that the charges against him are proved, they do not attract Regulation 3(i). On behalf of respondents, a detailed counter-affidavit is filed. It is stated that the petitioner has resorted to acts of serious mismanagement, leading to loss of hundreds of crores of rupees in the Financial Services. It is urged that the Financial Services, is the subsidiary and sister organization of the 1st respondent and any acts and omissions on the part of the petitioner in his service in the Financial Services, does constitute the basis for disciplinary action by the parent organization i.e the 1st respondent herein. It is also pleaded that the proceedings were initiated, against the petitioner, strictly in accordance with the relevant provisions and settled principles of law, and that the impugned proceedings cannot be questioned by invoking the extraordinary jurisdiction of this Court. Sri W.B.Srinivas, learned counsel for the petitioner, submits that the 1st respondent, on the one hand, and the Financial Services, on the other hand, are two different legal entities and independent organizations and the 2nd respondent has no authority to initiate proceedings against the petitioner for the alleged acts and omissions, during his service in the Financial Services. He contends that the 2nd respondent is not at all competent under the Regulations, as they stood at the relevant point of time, to initiate the proceedings against the petitioner. It is also pleaded that the charges levelled against the petitioner are vague and general in nature and conclusions were based upon just inferences. Learned counsel submits that the petitioner had unblemished service through out his career, and when he was about to reap benefits of his long service, the 2nd respondent initiated the proceedings, almost as a measure of vindictiveness. Sri K.Laxmi Narasimha, learned counsel for the respondents, on the other hand, submits that the charges levelled against the petitioner are serious in nature and the impugned orders are passed, after following the prescribed procedure. He contends that this Court cannot sit as an appellate authority over matters of such nature. He further contends that the management of the 1st respondent itself managed the affairs of the Financial Services and there was hardly any functional, or organizational, difference between the two. It is also his case that the acts and omissions on the part of the petitioner resulted in huge financial loss and the punishment imposed against him cannot be said to be shockingly disproportionate, or without jurisdiction. The 1st respondent is a Nationalized Bank. It obviously wanted to undertake Financial Services. Such an activity was not permissible for a banking company, in view of the restrictions placed by the Reserve Bank of India. Therefore, the management of the bank has brought into existence the Financial Services in the year 1991. By that time, the petitioner was working as a Deputy General Manager in the Bank. Obviously, on account of his long experience and managerial background of the petitioner, he was appointed as the first Managing Director of the Financial Services. It appears that some of the ventures and deals undertaken by the Financial Services, faced rough weather and the same resulted in dwindling of the expected returns. The assignment of the petitioner in Financial Services was brought to an end on 05.09.1992, and he was repatriated to the parent organization i.e. the 1st respondent. Two months thereafter, the petitioner was placed under suspension in contemplation of disciplinary proceedings. A charge sheet containing 11 charges was served upon the petitioner on 24.06.1993. Thereafter, the enquiry was confined to four charges, namely, 6, 9, 10 and 11. On account of the gravity of the matter and the implications involved therein, an Enquiry Officer in consultation with the Central Vigilance Commissioner was appointed. The Enquiry Officer conducted detailed enquiry and submitted a report holding that all the four charges are proved. Taking the same into account, the 2nd respondent passed an order dismissing the petitioner from service. That order was confirmed by the Appellate Authority. This Court conscious of its limitations as to interference with the disciplinary proceedings initiated by the State and its instrumentalities, against its employees. If the charges are framed by a competent authority, and the enquiry is held in accordance with law, this Court would be loathe to interfere with the findings, unless they are patently perverse, or are based absolutely on no evidence. So is the case with the punishment, which a disciplinary authority may inflict upon a delinquent employee. Almost absolute freedom and liberty is conceded the disciplinary authority to impose such punishment, as is warranted to protect the interests of the organization. It is only in extreme cases where the punishment imposed is unconscionably disproportionate that this Court would examine the feasibility to review the matter. In the instant case, the grievance of the petitioner is not much against the findings on the charges, on merits, or the punishment, imposed on the basis thereof. The contentions advanced on his behalf go to the very root of the matter. The first is that none of the acts and omissions alleged in the charges against the petitioner relate to his services in the 1st respondent – Bank, and without exception, they are referable to his tenure in the Financial Services. It is urged that when the latter did not even point out any lapses, against the petitioner, there is absolutely no basis for the respondents to initiate disciplinary proceedings. The second plea is that the 2nd respondent has no jurisdiction to initiate disciplinary proceedings against the petitioner. It is common that Officers and employees of one organization are deputed to work in other organizations. Such an arrangement can be between State and Central Governments, Government and Public Sector Undertakings and other specialized agencies among each other. This becomes necessary either when the expert services are needed for a limited time, or at the inception of an organization, which needs an experienced personnel, to start with. The petitioner came to be deputed to Financial Services at its inception. There is no denial of the fact that the Financial Services is an independent body, incorporate under the Companies Act. The parent organization of an official would always retain control upon its employees, even for the period, during which he is under deputation to another organization. If any acts of indiscipline on the part of the employee on deputation are noticed, basically it is for the borrowing organization to initiate proceedings, either in the form of framing of charges, or informing the same to the parent organization. Much, however, would depend upon the text of regulations governing the conditions of services of the employees in the respective organizations. Whether for initiation of proceedings by itself, or for communicating the relevant facts to the parent department for necessary action, it is only the borrowing organization that is better suited for the purpose. It alone can be expected to know the acts and omissions, of the employee, on deputation and the consequences thereof. The 1st respondent is indeed conscious of the parameters involved in matters of this nature. It also sometimes borrows the services of employees of Government or of other organizations on deputation. Regulation 16 of the Andhra Bank Employees’ (Discipline and Appeal) Regulations, 1981 (for short ‘the Discipline and Appeal Regulations’), would throw light on this aspect. It reads as under: “16. Employees on deputation from the Central Government, State Government etc.: (1) Where an order of suspension is made or disciplinary proceeding is taken against an officer employee, who is on deputation to the bank from the Central Government or the State Government, or Reserve Bank of India or another public sector bank, or banking company or a Public financial institution or an institution wholly or substantially owned by the Reserve Bank of India or a public financial institution or Public undertaking, or a local authority, the authority lending his services (hereinafter referred to as the “Lending Authority”) shall forthwith be informed of the circumstances leading to the order of his suspension, or the commencement of the disciplinary proceedings, as the case may be. (2) In the light of the findings in the disciplinary proceedings taken against the officer employee:- (a) if the Disciplinary Authority is of the opinion that any of the minor penalties should be imposed on him, it may pass such orders on the case as it deems necessary after consultation with the Lending Authority: Provided that in the event of a difference of opinion between the Disciplinary Authority and the Lending Authority, the services of the employee shall be placed at the disposal of the Lending Authority. (b) if the Disciplinary Authority is of the opinion that any of the major penalties should be imposed on him, it should replace his services at the disposal of the Lending Authority and transmit to it the proceedings of the enquiry for such action as it deems necessary. (3) If the officer employee submits an appeal against an order imposing a minor penalty on him under Clause (a) of sub-regulation (2), it will be disposed of after consultation with the Lending Authority; Provided that if there is a difference of opinion between the Appellate Authority and the Lending Authority, the services of the officer employee shall be placed at the disposal of the Lending Authority, and the proceedings of the case shall be transmitted to that authority for such action as it deems necessary.” From this, it becomes clear that an independent action by the borrowing organization, or at least communication from it, is necessary, to enable the lending organization, to initiate proceedings against the employee sent on deputation. In the instant case, no mention was made to any communication from the Financial Services in any part of the proceedings, and in particular the charge sheet. The contents of the charges are referable to the services rendered by the petitioner in the Financial Services. The text of the charge reads as under: “6. Even though M/s. Fairgrowth Financial Services Limited. Sri H.P.Dalal and Sri V.B.Desai with whom the funds of Andhra Bank Financial Services Limited were deployed, did not honour their commitments and committed defaults from May, 1992 and 27.08.1992 and deliberately utilized these funds for repayment of the earlier ICDs which had matured and which should have in the normal course been paid from the funds realized from the counter parties. The amounts accepted as ICDs include 7 ICDs aggregating Rs.23.57 crores accepted between 2.7.1992 and 27.8.1992 knowingly or having reason to believe that it would not be possible to repay these ICDs on maturity and after it had come to light that Fairgrowth Financial Services Limited had delivered forged securities to the Andhra Bank Financial Services Limited. You have also accepted funds aggregating Rs.28.45 crores under PMS in 8 cases after May, 1992 and these funds were also utilized for repaying certain outstanding liabilities in ICDs which had matured. 9. You have arranged finance of Rs.2.00 crores to Sri N.krishna Mohan ostensibly from Sri H.P.Dalal. The following irregularities are noticed in the transaction. a) there is no correspondence/document whatsoever from either Sri N.krishna Mohan or Sri H.P.Dalal authorizing ABFSL to be the intermediary in the above transaction, or from Sri H.P.Dalal appointing ABFSL as his Trustee to hold the securities offered by Sri Krishna Mohan and others. b) you have neither obtained the proposal nor the documents from Sri N.krishna Mohan for the finance arranged. c) you did not inform the custodian – tha ABFSL was holding securities on behalf of Sri H.P. Dalal, a notified person, as was required of you. 10. ABFSL subscribed to 9% HUDCO Bonds of the face value of Rs.30.00 crores on 19.2.1992. These Bonds were later sold to M/s Standard Chartered Bank on 24.2.1992. Subsequently, when HUDCO sent the half-yearly interest warrant for Rs.1.35 crores towards the above subscription, you have instructed the concerned officer to collect the same and utilize the funds to pay to M/s Tamilnadu Newsprint & Paper Limited, Madras to liquidate the dues of ABFSL to them. On account of your above action, ABFSL is likely to be liable for conversion. 11. You purchased two Maruti 1000 CC cars under Taxi quota to offer them on lease with only on proposal for leasing on hand. As a result, one of the cars could not be leased out for want of a proposal. Your above action has resulted in blocking of funds of Andhra Bank Financial Services Limited without any return. The fact that one of the cars could not be leased out and was available at your residence was not informed either to the Board of ABFSL or to your successor till 24.9.1992. In fact, you have not properly handed over the charge of ABFSL to the next man namely, Sri C.V.Siva Prasad, the then officer on Special Duty.” Neither in the preamble of the charge sheet nor in the text of the charges it is mentioned that they are framed on the information furnished by the Financial Services. The origination of the charges from the Financial Services becomes necessary, because the petitioner would have an opportunity to appraise the authority, of the relevant facts and circumstances. Though a detailed enquiry was held on the basis of the charges, there was hardly any opportunity, or scope, for the petitioner to confront the persons who have the first hand information about the charges. It is urged on behalf of the respondents that the Financial Services is only a subsidiary organization of the 1st respondent and it is competent for the latter, to initiate proceedings, vis-à-vis the events that take place in the former. It is difficult to accept this contention. The 1st respondent is an independent statutory body and a Nationalized Bank. The Financial Services, on the other hand, is a body incorporate having its own legal entity. The mere fact that the same Board of Management administers both of them, does not make any difference, in this regard. Even otherwise, the basis of the charges is Regulation 3(i) of the Regulations and it was specifically mentioned in the preamble of the charge sheet. That is the only provision that was invoked in the charge sheet and it reads as under: “3.General: (1) Every officer employee shall, at all times take all possible steps to ensure and protect the interest of the Bank and discharge his duties with utmost integrity, honesty, devotion and diligence and do nothing which is unbecoming of an officer employee. (2) Every officer employee shall maintain good conduct and discipline and show courtesy and attention to all persons in all transactions and negotiations. (3) No officer employee shall, in the performance 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 official superior. Provided wherever such directions are oral in nature the same shall be confirmed in writing by his superior official. (4) Every officer employee shall take all possible steps to ensure the integrity and devotion to duty of all persons for the time being under his control and authority.” From a perusal of this, it becomes clear that the acts and omissions attributed to an employee, against whom the provision is invoked, must have resulted in his failure to protect the interests of the 1st respondent. It was not even alleged that the interests of the 1st respondent have suffered any jeopardy, on account of the charges alleged against the petitioner or that he failed to protect the same. Even if the charges or the findings thereon are taken on their face value, at the most, they can be said to have resulted in failure to protect the interests of the Financial Services. Viewed from any angle, the very initiation of proceedings against the petitioner, cannot be sustained in law. The second question is about the competence of the General Manager of the 1st respondent to initiate proceedings. Schedule, which indicates the categories of Officers, who are competent to act as disciplinary, appellate and review authorities, vis-à-vis different categories of employees, is appended to the Discipline and Appeal Regulations. According to this, the General Manager is designated as Disciplinary Authority against the Officers of the rank of Assistant General Managers. Admittedly, the petitioner was functioning as Deputy General Manager. It appears that the Rules have been subsequently amended. The respondents have not specifically denied the allegations of the petitioner that at the relevant point of time, the General Manager was not the competent authority to initiate the proceedings against the Deputy General Manager. Therefore, the 2nd respondent did not have the jurisdiction to initiate the proceedings against the petitioner. Another factor, which needs to be taken into account, is that the proceedings are initiated, against the petitioner, at the fag end of his service, and it was not even alleged that he has resorted to any acts for his personal gain or that he has misappropriated any funds. The very business of the Financial Services is speculative in nature. Ups and downs, in such an activity, are not uncommon. An investment with one organization may yield good dividends, whereas investment with others may prove to be not so profitable. It is too difficult to define objectively, the manner in which such activities can be undertaken. Though the experience and shrewdness of a decision making authority may be important, the other factors, particularly in the volatile field of investment and speculation, cannot be ignored. Further, the only result of setting aside the disciplinary proceedings, against the petitioner, would be that, he would get the return of service rendered and contribution made over the decades. For the foregoing reasons, the Writ Petition is allowed, and the impugned proceedings are set aside. It is, however, directed that the petitioner shall not be entitled for the difference of pay for the period between the date of suspension, till the date of his superannuation, but that period shall count for other purposes. There shall be no order as costs. _____________________ L. NARASIMHA REDDY, J. Dt.08.07.2010. L.R. copy to be marked. GJ