W.P.(C)13664/2009 Page 1 of 20 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C).13664/2009 Date of Reserve: 26.08.2010 Date of Pronouncement :31.08.2010 UNION OF INDIA & ORS. ..... Petitioners Through: Ms.Jyoti Singh, Adv. with Mr.Ankur Chhibber, Adv. VERSUS H.L. GULATI .... Respondents Through: Mr.E.J.Varghese, Advocate CORAM: HON'BLE MR. JUSTICE PRADEEP NANDRAJOG HON'BLE MR. JUSTICE MOOL CHAND GARG 1. Whether reporters of Local papers may be allowed to see the judgment? 2. To be referred to the reporter or not? 3. Whether the judgment should be reported in the Digest? : MOOL CHAND GARG, J 1. The respondent, who was working as Senior Accounts Officer was issued a notice on 01.01.1998 calling upon him to submit his explanation to the notice. Reply furnished was found not satisfactory and hence a charge sheet was issued to him on 07.07.1998 under Rule 14 of the CCS(CCA) Rules for a major penalty whereby following articles of charges were framed against him: “Article I That the said Shri H.L.Gulati, SAO while functioning as Sr. Accounts Officer-in-Charge „M‟ Section during the period 16.10.92 to 15.10.94 in the Office of CDA (HQRs), New Delhi, failed to discharge his duties effectively as provided for in Appendix I to Defence Accounts Department Office Manual Part I, which led to authorization of payment against 36 fraudulent claims as listed in Encl.I, to the tune of Rs. 42.24 lakhs approximately. Thus the said H.L.Gulati, SAO failed to maintain devotion to duty, conducted himself W.P.(C)13664/2009 Page 2 of 20 in a manner unbecoming of a Govt. servant and failed to take all possible steps to ensure the integrity and devotion to duty of all Govt. servants for the time being under his control and authority, thereby violating the provisions of Rule 3(1)(ii), 3(1)(iii) and 3(2)(i) of CCS (Conduct) Rules, 1964. Article II That during the aforesaid period and while functioning in the aforesaid office the said H.L.Gulati, SAO failed to detect that (i) fraudulent claims had been floated against fake sanctions purported to have been issued by Ministry of Defence/DGOS, (ii) the contingent bills had not been preferred by the officers of DGOS authorized to do so and (iii) appropriate procurement procedure relevant to the value of stores procured had not been followed. Thus the said H.L.Gulati, SAO, failed to maintain devotion to duty, conducted himself in a manner unbecoming of a Govt. servant and failed in the performance of his official duties in the exercise of powers conferred on him, thereby violating the provisions of Rule 3(1)(ii), 3(1)(iii) and 3(2)(ii) of CCS (Conduct) Rules, 1964. Article III That during the aforesaid period and while functioning in the aforesaid office the said H.L.Gulati, SAO authorized the payments of the 36 fraudulent claims to the tune of Rs. 42.24 lakhs approximately, as officer-in-charge „M‟ Section although the expenditure as per the fake sanctions was debitable to the Revenue Head “Ordnance stores” and did not fall within the purview of „M‟ Section as per Chapter VIII of OM Part XII and even without getting the local purchase bills noted in Accounts Section as required vide para 437 OM Part II Vol. I. Thus the said H.L. Gulati, SAO failed to maintain devotion to duty, conducted himself in a manner unbecoming of a Govt. servant and failed to take all possible steps to ensure integrity and devotion to duty of all Govt. servants for the time being under his control and authority, thereby violating the provisions of Rule 33(1)(ii), 3(1)(iii) and 3(2)(i) of CCS (Conduct) Rules, 1964. Article IV That the said Shri H.L.Gulati, SAO while functioning as Sr. Accounts Officer-in-Charge „M‟ Section during the period W.P.(C)13664/2009 Page 3 of 20 16.10.92 to 15.10.94 in the Office of CDA (HQrs), New Delhi, passed 36 fraudulent claims amounting to Rs. 42.24 lakhs approximately. Though the concerned bills related to Store Section, these were processed and passed for payment in the „M‟ Section and without following the prescribed procedures. The above act of Shri H.L.Gulati resulted in fraudulent payment to the tune of Rs. 42.24 lakhs approximately to the alleged suppliers and caused pecuniary loss to the Govt. The above act indicates complicity with the alleged suppliers and also exhibits failure on the part of Shri Gulati to maintain absolute integrity. Thus the said H.L.Gulati, SAO failed to maintain absolute integrity and conducted in a manner unbecoming of a Govt. servant thereby violating the provisions of Rule 3(1)(i) and (iii) of CCS (Conduct) Rules, 1964.” 2. The respondent was also proceeded criminally vide FIR dated 20.05.1998 registered against him under Sections 120B/420/468/471/477A IPC & u/s 13(2) read with 13 (1)(d) of Prevention of Corruption Act, 1988. Of course, in the said case the respondent was discharged as no evidence was found against him. Yet the respondent who retired on superannuation was called upon to face an inquiry as per Rule 9(i) of CCS (Pension) Rules, 1972. However, as per the report of the Enquiry Officer the allegations against the respondent with regard to authorization of 36 fraudulent claims, non-following of the procedure by floating against fake sanctions, non-noting of purchase bills in the accounts section and non-following of the procedure, are instances of failure in maintaining absolutely integrity and conducting in a manner unbecoming of a government servant. The Enquiry officer, on the analysis of the evidence led before him concluded as follows: “Article –I Marginally proved Article-II Partially proved. Article-III Partially proved. Article-IV Not proved.” 3. However, the President of India after considering the representations by the respondent pursuant to a show cause notice W.P.(C)13664/2009 Page 4 of 20 given by the competent authority, imposed penalty of permanently withholding 50% monthly pension and gratuity after recording that the charges established against the respondent constituted a grave misconduct, vide its order dated 30.11.2005. The said order was assailed by the respondent before the Central Administrative Tribunal, Principal Bench, New Delhi (hereinafter referred to as „the Tribunal‟) vide O.A. No.1675/2008. 4. The Tribunal vide order dated 13.04.2009 relying upon a judgment of the Tribunal in O.A.No.110/2005 in T.P.Venugopalanan Vs. UOI & Ors. held that it is a condition precedent to exercise powers under Rule 9(1) of the Pension Rules that there must be a finding in the inquiry report that the pensioner has committed any grave misconduct or grave negligence in discharge of his duties. The Tribunal has observed that: “…..on perusal of the enquiry report, we find that the charges of integrity, unbecoming of government servant and other severe charges have not been established. It is also not established that the act of the applicant is such which has led to loss to the government. However, what has been held proved against the applicant is only with regard to procedural irregularities without any culpability. Against the charge of non-following of the rules on a few instances, past practice has been followed and no finding either of grave misconduct or grave negligence has been recorded in the enquiry report. In view of the facts and circumstances of the case and from scanning of the enquiry report, we are of the considered view that the condition precedent for recording of such a finding in the enquiry proceedings has not been fulfilled. It is only the President who has recorded such a finding on its own, but the Rule 9(1) stipulates that such a finding is to be recorded in the disciplinary proceedings, which is conspicuously missing. As such, when a finding of grave misconduct and grave negligence, being condition precedent under the relevant rules which has not been recorded, the imposition of penalty is not only against the dicta in D.V. Kapoors case (supra) but the issue involved in the case in hand is fully covered by Venugopalans case W.P.(C)13664/2009 Page 5 of 20 (supra). Hence, the penalty imposed upon the applicant is without jurisdiction and nullity in law.” 5. Aggrieved by the aforesaid order, the petitioner has approached this Court. It has been submitted that in this case, the charges leveled against the respondent were proved before the inquiry officer. The gravamen of the charges leveled against the respondent goes to show that the respondent who was only supposed to deal with miscellaneous and contingent bills of „M‟ Section, in total disregard of the provisions of Office Manuals, has processed the payments of 36 contingent bills to the tune of Rs. 42.24 lakhs viz. Ex.P/1/1 to Ex.P/1/36 all debitable to Major Head 110 – stores for which he had no authority. The bulk of the expenditure which „M‟ section is authorized to make payments for is to be booked to Minor Head 800-Other expenditure as per classification Handbook of Defence Services Receipt & charges. Any expenditure to be booked to Major Head 110 – Stores is a deviation from what is described in the Manual and the „M‟ section was not competent to do so. Thus, the charged officer failed to ensure that there was no unauthorized deviation from the procedure prescribed for Accounting & Auditing proving the charge that the charged officer failed to effectively discharge the general duties of A.O. 6. Para 431 A of OM Part II Vol.I specifies the types & nature of bills supposed to be dealt with in „M‟ Section. Para 434 – 438 of OM Pt.II Vol.I deal with contingent & miscellaneous charges. Para 435(i) states that in case of contingent charges, it will be seen that the charges are of a kind normally incurred on account of office or other contingencies and that they are not of an unusual or extraordinary nature. Certain types of charges under contingent and miscellaneous charges have been mentioned such as recurring charges, charges for non-official publications (including newspaper), charges for railway time tables & Indian Postal & telegraph guides, printing, binding & stationery charges, charges for liveries & warm clothing for class IV W.P.(C)13664/2009 Page 6 of 20 servants, Telephone bills. Para 438 stipulates a procedure for miscellaneous non-recurring charges, without elaborating the nature and type of charges. However, taking into account para 435(i), it may be concluded that the contingent expenditure should not be unusual or extraordinary nature. 7. On examination it is found that following stores have been purchased through Ex.P/1/1 to Ex.P/1/36 & Ex.P/A/1/1 to Ex.P/A/1/19:- Document Stores Purchased Financial Value (Rs.) P/A/1/1 Fire Proof Cabinet 64,900.00 P/A/1/2 Fire Proof Cabinet & S.L.Printer 56,990.00 P/A/1/3 Single Colour Offset Printing Machine 9,85,000.00 P/A/1/4 Laser Printer 65,000.00 P/A/1/5 RAM/HDD/Floppy Disk 1.2 & 1.44 MB 40,0000.00 P/A/1/6 Fire Proof Cabinet 64,800.00 P/A/1/7 Binding Machine 72,600.00 P/A/1/8 Micro Transcrtoer and PSU 73,986.00 P/A/1/9 Laminating & Shredding Machine 68,420.00 P/A/1/10 Modem Card 73,400.00 P/A/1/11 Upgradation of Notebook computer 73,400.00 P/A/1/12 Notebook computer 74,500.00 P/A/1/13 Laminating Machine & Dictaphone 73,700.00 P/A/1/14 Binding Machine 72,600.00 P/A/1/15 Paper Shredding Machine 65,520.00 P/A/1/16 Micro Transcrtoer & OHP 70,920.00 P/A/1/17 PPC MAX-102 & OHP 74,885.00 P/A/1/18 Modem Card 73,400.00 P/A/1/19 Video Projection Equipment 22,47,850.00 P/1/1 Cosmed K2, PMR Elect System & Lemcompact Laser Equipment 18,00,000.00 P/1/2 Paper Shredding Machine 65,520.00 P/1/3 Binding Machine 72,600.00 P/1/4 Micro transcrtoer & OHP 70,920.00 P/1/5 SL Printer 73,350.00 P/1/6 UPS-1KVA & VCR 5311 66,000.00 P/1/7 Super Digisync C-Monitor, Genset Portable 1500 VA, P A L Card 74,000.00 P/1/8 Micro Transcroter & OHP 70,920.00 P/1/9 Storage Cabinets 65,790.00 P/1/10 Paper Shredding Machine 65,520.00 P/1/11 PPC MAX 102 64,565.00 P/1/12 Air Conditioner, L&T Dotmatrix printer 73,000.00 P/1/13 Upgradation of Pentium Compatible Mother Board 73,000.00 P/1/14 Pentium Processor in lieu of 80486 Dx- Processor 74,000.00 P/1/15 Graphic Scanner, Toner Cartridge for Laser Printer 73,200.00 W.P.(C)13664/2009 Page 7 of 20 P/1/16 Video Recoding Camera, Floppy Disc Drive & Floppy Diskette 1.2 MB & 1.44 MB 73,000.00 P/1/17 Richo Fax 8010 & 7005 60,000.00 P/1/18 Richo Fax 9020 60,000.00 P/1/19 Richo Fax 9020 60,000.00 P/1/20 Richo Fax 8010 72,000.00 P/1/21 Micro Transcroter & OHP 70,920.00 P/1/22 Binding Machines 72,600.00 P/1/23 PPC MAX 102 & Paper Shredding Machine 74,965.00 P/1/24 Storage Cabinets 65,790.00 P/1/25 SL Printer 73,350.00 P/1/26 Binding Machine 72,600.00 P/1/27 Micro Transcroter & OHP 70,920.00 P/1/28 Paper Shredding Machine 65,520.00 P/1/29 Dictaphone & Laminating Machine 73,700.00 P/1/30 Intercom Set & OHP 70,404.00 P/1/31 PPC MAX 102 66,000.00 P/1/32 Power Supply Unit 69,930.00 P/1/33 PPC MAX 102 66,000.00 P/1/34 Power Supply Unit 69,930.00 P/1/35 Intercom Set & OHP 70,404.00 P/1/36 Dictaphone & Laminating Machine 73,700.00 8. The Enquiry Officer has observed that all the aforesaid stores purchased were unusual or extraordinary in nature and cannot be covered under any of the provisions of 431 A. Hence, the bills should not have been processed in „M‟ Section. 9. Relying upon the aforesaid, learned counsel for the petitioner submits that in the present case, the sanction of bills by the charged official which were debitable to Major Head 110-Stores for which the charged official had no authority and taking into consideration the amount which have been sanctioned, it is apparent that the respondent was guilty of committing grave misconduct and thereby putting the petitioner to a great loss. It is thus submitted that in the present case, the order passed by the Tribunal is contrary to law and hence unsustainable. The punishment imposed upon the respondent was fully justified but has been wrongly interfered with by the Tribunal. 10. On the other hand, the learned counsel for the respondent has tried to justify the judgment of the Tribunal relying upon the case of W.P.(C)13664/2009 Page 8 of 20 T.P.Venugopalanan which appears to have been given in different facts and which are not similar to the facts in hand. A scrutiny of the said judgment shows that the charged officer, who was similarly placed and working as a senior Accounts officer in the CDA, was charge-sheeted on two grounds, namely, i) that bills were passed without verifying the signatures and that the companies in whose favour the bills were raised were fictitious. ii) that the bills passed were without authority inasmuch as the bills did not relate to the miscellaneous section to which the respondent belonged. Respondent had the power under office Manual Part-II, Chapter 6 to deal with the payments falling within the miscellaneous section only. Respondent acted beyond his authority and sanctioned the payment of purchases. As regards the bills cleared by the charged officer in that case without authority were in fact cleared by the Government of India, Ministry of Defence. Therefore, the responsibility for non-process of the bills or non-grant of sanction of the bills in the said case laid with the Ministry. Regarding the second charge that he did not verify the signatures, it was held by the Court that he was not an expert. 11. The said judgment does not come to the rescue of the respondent in the peculiar facts of the case in hand wherein the respondent himself was the sanctioning and verifying authority. 12. The inquiry officer in the instant case, with regard to Article I of the charge has observed that the charged officer while functioning as SAO in „M‟ Section during the period 16.10.1992 to 15.10.1994 in the office of CDA (HQrs.), New Delhi has failed to discharge his duties effectively as provided for in Appendix I to OM Pt.I which led to W.P.(C)13664/2009 Page 9 of 20 authorization of payment against 36 fraudulent claims to the tune of of Rs.42.24 lakhs approximately is proved only marginally. 13. As regards Article II of the charge it has been observed that Sh.H.L.Gulati, SAO while functioning in „M‟ Section of CDA (HQrs.) during the period 16.10.1992 to 15.10.1994 failed to detect that:- 1) Fraudulent claims have been floated against fake sanctions purported to have been issued by Min. of Defence partially proved 2) The contingent bills have not been preferred by officers of DGOS authorized to do so is not proved. 3) The appropriate procurement procedure relevant to the value of stores procured has not been followed is proved. 14. As regards Article III, Inquiry officer has observed that the said Shri H.L. Gulati, SAO failed to maintain devotion to duty, conducted himself in a manner unbecoming of a Govt. Servant & failed to take all possible steps to ensure the integrity and devotion to duty of all Govt. Servants for the time being under his control & authority, thereby violating the provisions of Rules 3(1)(ii), 3(1)(iii) & 3(2)(i) of CCS (Conduct) Rules, 1964. 15. As regards Article IV the inquiry officer observed that first part of the charge is not proved. The second part of the charge that the act of Shri. H.L. Gulati, SAO indicates complicity with the alleged suppliers and also exhibits failure on the part of Shri H.L. Gulati, SAO to maintain absolute integrity is not proved. Hence the Article IV of charge is not proved. 16. Based upon the representation made by the respondent to a show cause notice, the disciplinary authority vide its order dated 30.11.2005 observed that the finding given by the Enquiry Officer proves that the respondent was guilty of grave misconduct. On that basis, it was decided to impose a penalty of permanently withholding of 50% monthly pension and gratuity. Some of the observation made W.P.(C)13664/2009 Page 10 of 20 in the order dated 30.11.2005, which are relevant and explain the process of reasoning reached by the competent authority in passing the impugned order is as hereunder: “7. WHEREAS, after careful consideration of the pleas advanced by Shri H.L.Gulati, SAO (Retd.) in his representation dated 07.03.2004 in the light of the record of disciplinary proceedings and evidence on record, the findings of the President are as under in seriatim. (i) The Inquiry Officer while analyzing the evidence under Article of Charge-I has recorded that “not only the CO had failed to put his own endorsement, he has also failed in ensuring endorsement by auditors/ AAO about verification of specimen signatures on the bills, leaving a doubt whether the auditors/ AAO/SAO had verified the specimen signatures”. As rightly observed by the Inquiry Officer, the verification of specimen signatures is an important check. The Charged Official being Officer in charge of section, while processing the bills he was responsible for ensuring that (a) the specimen signatures of the sanctioning authorities was verified by his subordinates and (b) on endorsement in token of having done so was made on the bills by his subordinates as required under Appendix 1 (B) of Office Manual Part-I. By stating that there was no practice of endorsing “SS Verified”, he cannot absolve himself of the charge. As regards his request for verification of paid vouchers in respect of payments made to the Director of Accounts, Cabinet Secretariat, the same cannot be acceded to at this juncture, since the said vouchers did not form part of the exhibits in the Departmental inquiry. As such the same would amount to placing reliance on new evidence without affording opportunity to the prosecution. In view of the foregoing, the contentions of the Charged Official at para 6 (i) to (v) are not tenable. (ii) The Charged official is expected to carry out proper scrutiny of sanctions as distinct from detailed audit. A proper scrutiny of sanctions would have revealed that out of four sanctions issued in April 94, for the financial year 1993-94 two were issued on 05.04.1994 one sanction was issued on 21.04.1994 and the third sanction was issued on 22.04.1994. The above sanctions did not mention that they were ex-post facto sanctions;. Thus the sanctions were defective. Besides this, it is well known that I&B Cell W.P.(C)13664/2009 Page 11 of 20 is not responsible for any procurement on behalf of the DGOS. Had a proper scrutiny of the sanctions done the defect in the sanctions could have been easily detected which could have averted the fraudulent payment. Therefore, his contention at 6 (vi) is not acceptable. (iii) Notwithstanding the fact that the sanctions issued by the Ministry are not required to be audited, before passing the bills for payment, it is to be checked that the conditions and procedure stipulated in sanctions has been followed scrupulously before passing the relevant bills for payment which is distinct from the audit of sanctions. The sanctions stipulated that the prescribed procedure for procurement of stores would be followed. However, the supply orders did not contain any of the standard clauses like payment terms, Liquidated Damages, Inspection etc. All these deficiencies should have led the Charged Official to raise queries, which could have facilitated in detection of the fraud. However, the Charged Official as the Officer in- Charge of „M‟ section failed to detect that proper procurement procedure was not followed. Therefore, his request as contained in para 6 (vii) and (viii) above for dropping the Article-II cannot be acceded to. (iv) The points raised by the CO have already been considered by the Inquiry Officer while analyzing the evidence under Article of Charge-III. The Code head 415/01 being locally controlled head, the bills under the above head are required to be admitted for payment after getting the same noted in Account section irrespective of the fact that prior sanction has been obtained from DGOS/GOI in terms of para 155 A (X) of Office Manual Part- II, Volume I, to ensure availability of funds before releasing payments. In view of the above, the charge that the Charged Official failed to get the bills noted in the Accounts Section stands proved. Therefore, his contention at para 6(ix) to (xi) are not tenable. (v) His submissions regarding non-production of documents are ill conceived. He was shown all the available documents. In fact the Charged Official submitted three list of documents over a period of ten months from 4/99 1/2000. Due to the absence of the Charged Official for the inquiry on number of occasions, the inquiry was prolonged. He was only trying to shift the blame for the delay. Regarding submission of report to the CVC by the Disciplinary Authority being internal matter, is W.P.(C)13664/2009 Page 12 of 20 not relevant to the issue. Therefore, his objections at para 6 (xii) are rejected. (vi) As regards his prayer at para 6(xiii) for exonerating him from the charges the same cannot be acceded to, for the reasons recorded at pre-paras. 8. WHEREAS, the President in exercise of powers conferred on him under Rule 9 of the Central Civil Service (Pensions) Rules, 1972, in consultation with the Union Public Service Commission, has perused records of the disciplinary case. A copy of the UPSC‟s letter bearing confidential No. F.3/381/04-SI dated 02.09.2005 is enclosed. The President accepts advice of the commission contained in para 12 of the UPSC‟s letter dated 02.09.2005 for the reasons recorded in Paras 4 to 11 therein. 9. AND WHEREAS, the President in the light of the above observation and findings and after taking into account all relevant aspects as contained in record of the case, is satisfied that the charges which were established against Shri H.L.Gulati, SAO (REtd.) constitutes a a grave misconduct. Therefore, the President considers that ends of justice would be met if 50% (Fifty percent) of the pension admissible to Shri H.L.Gulati, SAO (Retd.) is withheld on permanent basis and 50% of gratuity is withheld. 10. NOW, THEREFORE, the President hereby imposes the penalty of withholding of 50% (Fifty percent) of amount of monthly pension on permanent basis and 50% of gratuity on Shri H.L.Gulati, SAO (Retd.) with immediate effect. The President further orders that the balance 50% of gratuity may be released to H.L. Gulati, SAO (Retd.), if not required otherwise. BY ORDER AND IN THE NAME OF THE PRESIDENT. (Rozy Agarwal) Deputy Controller General of Defence Accounts (Admin.)” 17. The Tribunal while setting aside the aforesaid order has primarily proceeded on the assumption that to attract Rule 9, the report of the inquiry officer must hold that it is a case of a grave misconduct or negligence or the memorandum issued by the W.P.(C)13664/2009 Page 13 of 20 disciplinary authority seeking the response to the report of the inquiry officer or the note of disagreement must allege that it was a case of grave misconduct or negligence or that it was sufficient that the order levying penalty so records. Rule 9