IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 29.4.2009 CORAM THE HON'BLE MR.JUSTICE P.JYOTHIMANI AND THE HON'BLE MRS.JUSTICE ARUNA JAGADEESAN W.A.No.1451 of 2008 V.Arulkumar .. Appellant Vs. 1. Housing and Urban Development Corporation Limited (HUDCO) rep. by its Board of Directors/ Appellate Authority, through Chief Vigilance Officer HUDCO Bhavan, India Habited Centre Lodhi Road, New Delhi-110 003. 2. The Chairman-cum-Managing Director HUDCO, HUDCO Bhavan India Habited Centre Lodhi Road, New Delhi-110 003. .. Respondents PRAYERS: Against the order of the learned Single Judge dated 6.11.2008 made in W.P.No.35902 of 2005. Filed under Article 226 of the Constitution of India to issue a writ of Certiorarified Mandamus calling for the records comprised in proceedings, F.No.HUDCO/VIG-169 (VOL.I) 2000/332 on the file of the 1st Respondent/Appellate Authority dated 6.8.2005 confirming the order of the Second Respondent as made in proceedings F.No.HUDCO/VIG-169/2000/980 dated 9.3.2005 and quash the same and consequently direct the Respondents to extend all the attendant benefits to the petitioner. For Appellant : Mr.V.Ayyadurai For Respondents: Mr.M.Vaidyanathan https://hcservices.ecourts.gov.in/hcservices/ JUDGMENT P.JYOTHIMANI,J. The writ appeal is directed against the order of the learned Single Judge dated 6.11.2008 made in W.P.No.35902 of 2005, dismissing the writ petition. 2. The writ petitioner/appellant has joined the services of the second respondent on 7.3.1980 and ultimately, he became the Regional Chief on 13.5.1997, which post he was holding till March, 2004. During the year 1997-1998, the writ petitioner, as the Regional Chief, has recommended for sanction of Rs.7 Crores to M/s.Premier Housing and Industrial Enterprises Limited (in short, "the PHIEL"). It was based on his recommendation, the second respondent has disbursed the amount to said PHIEL. The loan was granted on the basis of bank guarantee offered by the Global Trust Bank, without any other security. On the basis that the recommendation given by the petitioner/appellant was not proper, a charge sheet was issued on 19.2.2002, for which the petitioner has submitted his explanation on 9.4.2002. 3. One Mr.K.C.Batra, one of the Executive Directors of the Housing and Urban Development Corporation Limited (in short, "the HUDCO") was appointed as an Inquiry Officer, who examined three witnesses and marked 15 documents. On the side of the delinquent officer one witness was examined and 16 documents were marked. Out of the five charges levelled against the petitioner, the Inquiry Officer found, in his report, that only Charge No.(3) stood proved. The copy of the report of the Inquiry Officer was furnished to the petitioner/appellant, for which the delinquent officer submitted his explanation in respect of charge No.(3), which was held proved by the Inquiry Officer. Thereafter, the Disciplinary Authority, taking a different view from that of the Inquiry Officer, passed an order on 9.3.2005, holding that all five charges levelled against the petitioner/ appellant stood proved and imposed the following punishment: (i) reduction to the lower post of Deputy Chief; (ii) reducing the basic pay by five increments in lower scale; and (iii) not to consider for promotion for the next two years. 4. It was against the said order of the Disciplinary Authority the delinquent officer approached the first respondent/Appellate https://hcservices.ecourts.gov.in/hcservices/ Authority, who, by an order dated 6.8.2005, has dismissed the appeal, as against which the writ petition came to be filed. 5. The learned Single Judge, having found that the charges levelled against the delinquent officer are grave in nature and relying upon the judgment of the Supreme Court in Union of India v. Vishwa Mohan, [1998] 4 SCC 310 wherein it was held that in the banking business absolute devotion, diligence, integrity and honesty need to be preserved by every bank employee, has held that the punishment imposed need not be interfered with. The learned Single Judge has also held that when the Disciplinary Authority differs from the view of the Inquiry Officer, it is not necessary to give further notice in cases where no prejudice is caused to the delinquent officer. 6.1. Mr.V.Ayyadurai, learned counsel appearing for the petitioner/appellant would submit that the law is well settled that in cases where the Disciplinary Authority differs from the view of the Inquiry Officer, a notice must be given the delinquent officer again, so as to enable him to give explanation about the proposal of the Disciplinary Authority to pass different orders other than the Inquiry Officer's finding. His contention is that the said principle is well established by hierarchy of judgments and in spite of that, the learned Single Judge, having quoted the said judgments, holding that this has been the consistent view taken by the Supreme Court, has only relied upon the judgment of the Supreme Court in Union of India v. Vishwa Mohan, referred supra, and held that inasmuch as the delinquent officer has filed an appeal to the first respondent against the order of the Disciplinary Authority, no prejudice has been caused to the delinquent officer. According to the learned counsel, when once such an issuance of further notice is a matter of right, the question of prejudice does not arise. 6.2. It is his further submission that even in the communication of the respondents, enclosing the report of the Inquiry Officer, asking the delinquent officer to give reply, there is nothing to disclose that the Disciplinary Authority has decided to differ from the report of the Inquiry Officer and therefore, there was no occasion for the delinquent officer to explain about the intended decision of the Disciplinary Authority to find the delinquent officer guilty in respect of all charges, even though in respect of four charges the petitioner/appellant was exonerated by the Inquiry Officer and therefore, there is a violation of the principles of natural justice and in such circumstances, the question of prejudice does not arise. 6.3. It is his further submission that in respect of the drafting of bank guarantee, it was the Law Officer of the second respondent, being an expert, who has prepared the same and therefore, https://hcservices.ecourts.gov.in/hcservices/ being a Regional Chief, the delinquent officer had to just believe and forward the same to the head office. Admittedly, the head office, after scrutiny, have accepted the issuance of bank guarantee and therefore, there is no dereliction of duty. 6.4. It is his further submission that in respect of the recommendation for loan, while the delinquent officer has called for opinion from seven banks about the loanee, only two banks have responded and the said opinions, which are in the form of financial reports by the Indian Bank, have been approved by the Finance Officer of the second respondent, who is also an expert in finance and the petitioner/appellant, being a Regional Chief, believing the said report has made a recommendation and therefore, according to the learned counsel, it was, at the most, an error of judgment and not an intentional dereliction. He would also submit that the learned Single Judge has not considered that the report of the Indian Bank, which was stated to be available in the Regional Office was only relied upon during the time of inquiry as an additional document, without furnishing a copy of the same to the delinquent officer. 6.5. It is his further submission that the other responsible officers of the second respondent, like the Law Officer, Finance Officer, etc., who are experts and who have given opinion about the solvency of the loanee and also drafted the bank guarantee were only awarded minor punishment of censure, while the delinquent officer has been imposed with one major punishment and two minor punishments and therefore, according to him, it is an official bias and the said act of the Disciplinary Authority and the first respondent/Appellate Authority is discriminatory in character. To substantiate the said contention reliance was placed on the decision of the Apex Court in Akhilesh Kumar Singh v. State of Jharkand and Others, [2008] 2 SCC 74. 6.6. It is his further submission that multiple punishments, viz., both major and minor punishments, have been simultaneously imposed on the delinquent officer by way of the order of punishment, and the same is not permissible. He would rely upon the judgment of the Supreme Court in Union of India and Another v. S.C.Parashar, [2006] 3 SCC 167 to substantiate his contention. 6.7. It is his further submission that even the Appellate Authority, namely the first respondent, has not considered any point raised by the delinquent officer and therefore, he would submit that the impugned order of the Disciplinary Authority is bad in law, by relying upon the judgment of the Supreme Court in Moni Shankar v. Union of India and Another, [2008] 3 SCC 484 and D.K.Yadav v. J.M.A.Industries Limited, [1993] 3 SCC 259. 6.8. He would submit that while the view expressed by the Supreme Court in Union of India v. Vishwa Mohan, referred supra, that https://hcservices.ecourts.gov.in/hcservices/ the employees of the bank should be very diligent and honest is indisputable, one has to see the legality of the disciplinary proceedings while applying the celebrated concept of law. 7.1. On the other hand, Mr.M.Vaidyanathan, learned counsel for the respondents, would submit that, being the Regional Chief, it is only the recommendation of the petitioner/appellant (delinquent officer), which was the basis for release of loan to the loanee and as far as the opinion of the Law Officer and the Finance Officer, who are subordinate to him, it was the duty of the delinquent officer to verify the correctness of such a report and in not verifying the same and granting of loan, the second respondent had to incur financial loss, since the amount of loan was very huge, namely Rs.7 Crores. 7.2. It is his submission that it is not as if the Inquiry Officer's report has not been furnished to the delinquent officer, who should have given explanation in respect of all charges. He would submit that the non issuance of notice for differing from the view of the Inquiry Officer is not fatal to the decision of the Disciplinary Authority, inasmuch as, admittedly, the delinquent officer had an opportunity to file an appeal before the first respondent, which was considered on merits and therefore, according to him, the petitioner/appellant had no grievance since no prejudice has been caused to him. He would rely upon the judgment of the Supreme Court in State Bank of India v. K.P.Narayanan Kutty, AIR 2003 SC 1100. 7.3. He would submit that it is because of the negligence on the part of the petitioner/appellant, the second respondent had to file a case before the Debt Recovery Tribunal against the loanee for recovery of the interest amount. 8. The fact that the petitioner/appellant was working as a Regional Chief of the second respondent and that on his recommendation loan was granted to PHIEL is not in dispute. It is also stated that the principal amount has been paid by the loanee to the second respondent and in respect of the recovery of interest, the Debt Recovery Tribunal proceedings are pending. 9. The charges which were framed against the delinquent officer are: "Charge-I: Shri V.Arul Kumar while working as Regional Chief, HUDCO Regional Officer, Chennai, had accepted the Bank Guarantee issued by Global Trust Bank on behalf of M/s.Premier Housing & Industrial Enterprises Ltd. as security for the working capital loan of Rs.700 lacs sanctioned by HUDCO in March 1998 with the limiting liability Clause introduced by Global Trust Bank as per RBI guidelines on the recommendations of Law Officer https://hcservices.ecourts.gov.in/hcservices/ without actually verifying the contents of the Bank Guarantee. The acceptability of the qualified Bank Guarantee resulted in non-realisation of interest at the time of revocation of Bank Guarantee. Shri V.Arul Kumar by the above acts has thus exhibited lack of devotion of duty, negligence in the performance of duty and acted in a manner prejudicial to the interest of HUDCO thereby violated Rules 4(1)(ii), 4 (2) and 5(5) of HUDCO Conduct, Discipline and Appeal Rules, 1976. Charge-II: Shri V.Arul Kumar while working as Regional Chief, HUDCO Regional Office, Chennai had given certification regarding the financial soundness of M/s.PHIEL without actually ascertaining the factual financial position. The draft appraisal report prepared by the Indian Bank clearly indicated that there were overdue payments to CANFIN Homes and HDFC which were not taken into consideration while evaluating the financial performance of the agency. Shri V.Arul Kumar, Regional Chief by the above acts has thus exhibited lack of devotion to duty, negligence in the performance of duty and acted in a manner prejudicial to the interest of HUDCO thereby violated Rules 4(1)(ii), 4(2) and 5(5) of HUDCO Conduct, Discipline and Appeal Rules, 1976. Charge-III: Shri V.Arul Kumar while working as Regional Chief, HUDCO Regional Office, Chennai, had not highlighted the position regarding default of M/s.PHIEL in the sanction note. There were specific instructions by the COD to check whether M/s.PHIEL had defaulted to any of the lending agencies in the past. Shri V.Arul Kumar while working as Regional Chief had verified that there was no default to any of the financial institutions by M/s.PHIEL and recommended sanction of the scheme. Shri V.Arul Kumar, Regional Chief by the above acts has thus exhibited lack of devotion to duty, negligence in the performance of duty and acted in a manner prejudicial to the interest of HUDCO thereby violated Rules 4(1)(ii), 4(2) and 5(5) of HUDCO Conduct, Discipline and Appeal Rules, 1976. Charge-IV: Shri V.Arul Kumar while working as Regional Chief, HUDCO Regional Office, Chennai, had violated the https://hcservices.ecourts.gov.in/hcservices/ guidelines approved by the Board for sanction of working capital loan of Rs.700 lakhs to M/s.PHIEL giving undue favour to the agency which has resulted in non- realisation of interest, penal interest @ 2.5% over and above the normal rate of interest causing a substantial loss to the Company. Shri V.Arul Kumar, Regional Chief by the above acts has thus exhibited lack of devotion to duty, negligence in the performance of duty and acted in a manner prejudicial to the interest of HUDCO thereby violated Rules 4(1)(ii), 4(2) and 5(5) of HUDCO Conduct, Discipline and Appeal Rules, 1976. Charge-V: Shri V.Arul Kumar while working as Regional Chief, HUDCO Regional Office, Chennai, had not complied with the decision taken by the COD in its 87th Meeting held on 24.2.1998 wherein it was decided that in case of default by the agency, the Bank Guarantee should be invoked promptly in the next following month. The agency went in default in June, 1998 but the proposal for revocation of Bank Guarantee was initiated only on 27th October, 1998, in violation of the directions of the COD that in the case of default by the agency, the Bank Guarantee should be revoked promptly in the next following month. HUDCO had to suffer substantial interest loss because of this. Shri V.Arul Kumar, Regional Chief by the above acts has thus exhibited lack of devotion to duty, negligence in the performance of duty and acted in a manner prejudicial to the interest of HUDCO thereby violated Rules 4(1)(ii), 4(2) and 5(5) of HUDCO Conduct, Discipline and Appeal Rules, 1976." The above said charges relate to grant of loan recommended by the petitioner/appellant in March, 1998. 10.1. The imputation regarding charge No.1 makes it clear that the Law Officer has prepared the Bank Guarantee as per the Reserve Bank of India guidelines and that was recommended by the delinquent officer without verifying the contents, which resulted in the inability of realisation of interest at the time of revocation of Bank Guarantee. 10.2. In respect of Charge No.2, regarding the certification of the financial soundness of PHIEL, the imputation states that apart from the draft appraisal report of the Indian Bank, indicating that there was some overdue payment by the loanee to CANFIN Homes and https://hcservices.ecourts.gov.in/hcservices/ HDFC, there was a report of the Karnataka Bank Limited and without verifying the same, the recommendation has been made by the delinquent officer. 10.3. In respect of Charge No.3, the imputation states about non highlighting of the position of PHIEL as per the instructions of the Committee of Directors and merely relying on the certificate of the Chartered Accountant from PHIEL stating that the company has no dues as default to any of the financial institutions. 10.4. In respect of Charge No.4 relating to non realisation of penal interest @ 2.5% over and above the normal rate, it is the imputation that the delinquent officer has violated the guidelines approved by the Board in the meeting held on 21.10.1997. 10.5. Likewise, in respect of Charge No.5, regarding the invoking of the Bank Guarantee, the decision taken by the Committee of Directors on 24.2.1998 is stated to have been violated. 11.1. In reply, the delinquent officer has stated that as far as the first charge is concerned, regarding the acceptance of the Bank Guarantee, the same was done as per the recommendation of the Law Officer and as an expert when such a report has been given by the Law Officer, it is not possible for the Regional Chief to go through each and every paper, line by line and find out any addition or omission and moreover, even during the legal inspection carried out by the SZO during October, 1999 nothing was commented on the modification of the Bank Guarantee format. 11.2. In respect of the second charge of certification regarding the financial soundness, it was the reply of the delinquent officer that when the first level officers like the Legal, Financial and Technical Officers have given their views, it is only a review of appraisal notes given by such officials which will be verified and the financial appraisal note put up by the Finance Officers has not disclosed the status report from the banks from which the reports were sought for. As per the financial performance report compiled, the loanee company was rated "P1" and "FA" by Crisil and they have been declaring dividend year after year and therefore, there was no occasion to doubt the financial prudence. 11.3. In respect of the third charge regarding the independent verification of the default by the agency, it was replied that the petitioner/appellant has followed the advice from the Head Quarters dated 15.12.1997 in respect of an identical project. He has stated that the Chartered Accountant issued a no default certificate and that the default of the agency to other financial institutions was not known to any one in the Regional Office. https://hcservices.ecourts.gov.in/hcservices/ 11.4. Likewise, in respect of Charge No.4, regarding the violation of guidelines / provisions in the sanction-cum-loan agreement, it has been his reply that the agreement cannot be read by the Regional Chief line by line, since the same has already been scrutinized by the Law Officer and the Finance Officer. 11.5. In respect of the last charge, namely delay in invoking the Bank Guarantee, beyond one month, it is stated that there was no delay on his part in invoking Bank Guarantee. 12.1. Mr.K.C.Batra, Executive Director of the second respondent, who was appointed as an Inquiry Officer, after conducting the inquiry, while dealing with each and every one of the charge, independently assessing the evidence adduced before him, has found that in respect of Charge No.1 that the Presenting Officer has not been able to bring out any action which can be said to have been taken by the delinquent officer in acceptance of the qualified Bank Guarantee. In fact, the witnesses have spoken clearly that the Bank Guarantee has been accepted by the Officials as found to be in order. The Inquiry Officer has held "The CO (Delinquent Officer) was functioning as the Regional Chief at Chennai Regional Office at that time and he was not expected to re-examine all legal documents de- novo after the concerned Law Officer had already recorded on file that all "Legal documentation formalities have been completed" and the bank guarantee received and "found to be in order"and also clearly recommended the release of the loan amount". Thus, the Inquiry Officer exonerated the delinquent officer from the first charge. 12.2. In respect of second charge, the Inquiry Officer found that the Presenting Officer was not able to bring out as to who was required to look into the draft appraisal report of the Indian Bank or evaluate the financial performance of the agency, but found that the Presenting Officer has brought out that the Assistant Finance Officer had appraised the scheme based on the financial position of the agency and concluded that the primary responsibility for evaluating the financial performance and financial soundness of the borrowing agency rests with P.W.3, Assistant Finance Officer and not with the delinquent officer and thus, exonerated the delinquent officer from the second charge. 12.3. In respect of the third charge, viz., not highlighting of the position regarding default of PHIEL in the sanction note, while the Inquiry Officer has categorically observed that "as such furnishing the current information regarding the borrowing agency's default to the other financial institutions was the responsibility of the finance discipline officer posted at Chennai Regional Office", however found that the delinquent officer has not examined all the financial documents himself and had sent his communication solely https://hcservices.ecourts.gov.in/hcservices/ based on the information provided to him and sending the said communication would tantamount to "wrong certification" and concluded that in respect of the said charge the delinquent officer was liable. 12.4. In respect of Charge No.4, it was specifically found that in the absence of specific mention in the sanction condition or communication received from the HUDCO, it cannot be concluded that the delinquent officer must necessarily obtain post dated cheques and exonerated the delinquent officer from the said charge. 12.5. Likewise, in respect of Charge No.5 regarding the delay in initiating the proposal for invoking the Bank Guarantee, the Inquiry Officer has found that it was only the Head Office which has conveyed the decision to the delinquent officer in the letter dated 28.4.1999 and therefore, the delinquent officer was exonerated from the said charge. 13. The said report of the Inquiry Officer was communicated to the petitioner/appellant by communication dated 16.8.2004, by the Deputy Chief (Vigilance). It is interesting to note that in the letter, by which the said Deputy Chief (Vigilance) has communicated the report of the Inquiry Officer, he has asked the petitioner/appellant to make his representation or submission, if any, to the Disciplinary Authority, viz., the Chairman-cum-Managing Director, HUDCO. A reading of the letter also makes it very clear that the Disciplinary Authority, on perusal of the report of the Inquiry Officer is in "tentative agreement" with the finding of the Inquiry Officer. The letter dated 16.8.2004 is as follows: "The Inquiry Officer appointed vide order dated 13.9.2002 has concluded the inquiry and sent the inquiry report to the Disciplinary Authority. The Disciplinary Authority has perused the IO's report and is in tentative agreement with the findings of the IO. A copy of the report of the IO is enclosed herewith. If you wish to make any representation or submission, you may do so in writing to the Disciplinary Authority i.e., CMD, HUDCO, within 15 days of the receipt of the letter. The Disciplinary Authority will take a final decision in the matter after considering your submission on the report of the IO." 14. Admittedly, this is the only letter which was enclosed along with the report of the Inquiry Officer. Apart from the fact that under this letter there is absolutely no reference that the Disciplinary Authority intends to differ from the report of the Inquiry Officer in respect of Charge Nos.1, 2, 4 and 5, it, in unequivocal terms, says that the Disciplinary Authority is in tentative agreement with the finding of the Inquiry Officer, which means that the Disciplinary Authority has informed the https://hcservices.ecourts.gov.in/hcservices/ petitioner/appellant that only in respect of Charge No.3, the Disciplinary Authority desires to proceed. It was in such view of the matter, normal prudence would show that the petitioner/appellant was called upon to given explanation only in respect of Charge No.3. In fact, the explanation submitted by the petitioner/appellant also makes it clear that he has submitted explanation only in respect of Charge No.3. 15.