REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 657        OF 2012 (Arising out of SLP(C) No.21192 of 2007)

Burdwan Central Cooperative   Bank Ltd. & Anr. … Appellants   

Vs.

Asim Chatterjee & Ors.  … Respondents

J U D G M E N T

ALTAMAS KABIR, J.

1. Leave granted.

2. The short point for decision in this Appeal is  

whether an employer can take disciplinary action

against an employee in regard to acts purported to  

have been done by him in his previous employment in  

an affiliated society.

3. The Respondent No.1 herein was an employee of  

Raipur Krishi Unnayan Samity (hereinafter referred  

to  as  “the  Samity”),  a  cooperative  society  

affiliated to the Burdwan Central Cooperative Bank,  

the Appellant herein. Under its Recruitment Rules,  

the Bank was entitled to recruit people from the  

affiliated societies through a regular recruitment  

process.  In the recruitment process held in 1997,  

the Bank appointed the Respondent No.1 as a Grade  

III  Staff  of  the  Bank  by  an  appointment  letter  

dated 8th September, 1997.  On being offered the  

said  appointment,  the  Respondent  No.1  left  the  

services of the Samity where he was working and  

joined the Bank pursuant to the appointment letter  

issued to him.

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4. While the Respondent No.1 was serving in the  

Bank,  the  Assistant  Registrar,  Cooperative  

Societies, Burdwan-I, lodged a complaint with the  

Bank  that  during  an  enquiry  conducted  by  the  

Registrar  of  Cooperative  Societies,  it  had  

transpired that the Respondent No.1 had committed  

various financial irregularities in maintaining the  

accounts of the Samity.  In view of the above, the  

Assistant  Registrar  recommended  that  action  be  

taken against him.   

5. On the basis of the said complaint, the Bank  

issued a charge-sheet to the Respondent No.1 on 2nd  

February, 2000.  Although, according to the Bank,  

the said Respondent admitted his guilt in his reply  

to  the  charge-sheet,  a  full-fledged  enquiry  was  

held by the Bank by appointing an Enquiry Officer  

and  affording  the  Respondent  No.1  adequate  

opportunity to defend himself, since according to  

him,  he  had  been  forced  to  sign  a  letter  of  

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confession.   On  conclusion  of  the  disciplinary  

proceedings,  the  Enquiry  Officer  found  the  

Respondent  No.1  guilty  of  the  charges  brought  

against him.  On the basis of the Enquiry Report,  

the Bank through its Chief Executive Officer, being  

the Disciplinary Authority of the Respondent No.1,  

passed an order of dismissal on 8th May, 2000.  It  

appears that neither a copy of the Enquiry Report  

nor the second show-cause notice was served upon  

the Respondent No.1.  

6. Aggrieved  by  the  order  of  the  Disciplinary  

Authority,  the  Respondent  No.1  filed  a  Writ  

Petition challenging the order of dismissal.  The  

learned Single Judge who heard the matter, allowed  

the  Writ  Petition  by  holding  that  the  dismissal  

order had been passed by the Bank with the mala  

fide  intention  of  getting  rid  of  the  Respondent  

No.1.  The learned Judge held that the Bank had no  

authority to proceed against the Respondent No.1 on  

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the allegation of defalcation of the funds of the  

Samity  at  a  point  of  time  when  he  was  not  an  

employee of the Bank.  In addition, the learned  

Judge  held  that  the  order  of  the  Disciplinary  

Authority was vitiated as the Respondent No.1 was  

not served with a copy of the Enquiry Report, nor  

was any opportunity given to him by way of a second  

show-cause notice to offer his explanation thereto.  

7. The Bank preferred First Misc. Appeal No.301 of  

2005  against  the  aforesaid  order,  wherein  the  

attention of the Division Bench was drawn to the  

provisions of the West Bengal Cooperative Rules,  

1987, wherein it has been stipulated that any mis-

appropriation  of  the  employer’s  business  or  

property  would  come  within  the  mischief  of  

“misconduct”.  It was urged on behalf of the Bank  

that since the Samity was affiliated to the Bank,  

defalcation  of  the  funds  of  the  Samity  would  

attract  the  definition  of  “misconduct”  and  the  

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Respondent  No.1  had  been  rightly  proceeded  with  

departmentally.  It  was,  however,  admitted  before  

the Division Bench that the Bank had dismissed the  

Respondent No.1 without affording him an adequate  

opportunity  of  explaining  his  version  on  the  

findings of the enquiry by serving him a copy of  

the Enquiry Report as well as the second show-cause  

notice.

8. On  the  submissions  made  on  behalf  of  the  

parties,  the  Division  Bench  affirmed  the  view  

expressed by the learned Single Judge that the Bank  

could  not  have  proceeded  against  the  Respondent  

No.1 in respect of an illegality and/or misconduct  

which had allegedly been committed when he was not  

an  employee  of  the  Bank.   Accordingly,  without  

commenting on the findings of the learned Single  

Judge with regard to the allegations of mala fide  

and/or biased attitude on the part of the Bank, the  

Division Bench held that the Bank was not entitled  

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to proceed against the Respondent No.1 in law and  

disposed of the Appeal accordingly.   

9. As indicated hereinbefore, the present Appeal  

is directed against the said judgment and order of  

the Calcutta High Court.

10. Mr. Tarun Kumar Ray, learned senior advocate  

appearing for the Appellant-Bank, urged that the  

Respondent No.1 had not been prejudiced in any way  

on  account  of  non-supply  of  the  report  of  the  

Enquiry Officer or in the absence of a second show-

cause  notice,  as  was  earlier  envisaged  under  

Article  311(2)  of  the  Constitution  prior  to  its  

amendment by the 42nd Constitutional Amendment Act,  

1976.  Mr. Ray submitted that as had been held by  

this Court in  Managing Director, E.C.I.L. vs.  B.  

Karunakar [(1993)  4  SCC  727],  the  order  of  

reinstatement for non-furnishing of Enquiry Report  

to  the  concerned  employee  would  depend  on  the  

extent of prejudice caused to him and could not be  

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ordered as a matter of course.  It was, however,  

mentioned that a copy of the Enquiry Report, if not  

served earlier, should be provided to the employee  

before arguments were allowed to be advanced and  

thereafter the court should apply its judicial mind  

before setting aside the punishment on a finding  

that  prejudice  has  been  caused  to  the  concerned  

employee.  The Court held further that this was the  

minimum compliance of the rules of natural justice  

while awarding major penalties.  

11. In support of his contention that even though  

the  Respondent  No.1  was  not  under  the  

administrative control of the Appellant when the  

alleged  irregularity  was  perpetrated,  the  

Appellant-Bank  was  still  entitled  to  commence  

disciplinary  proceedings  against  him,   Mr.  Ray  

referred  to  the  decision  of  this  Court  in  S.  

Govinda  Menon vs.  Union  of  India [(1967)  2  SCR  

566]. In the said decision this Court had held that  

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even  if  an  employee  was  not  subject  to  the  

administrative control of the Government when he  

was  functioning  as  Commissioner,  his  acts  or  

omissions as Commissioner could form the subject  

matter  of  disciplinary  proceedings,  provided  the  

act  or  omission  reflected  on  his  reputation  for  

integrity or devotion to duty as a member of the  

service.

12. Mr. Ray urged that in the instant case there  

was  no  prejudice  caused  to  the  Respondent  No.1  

either  by  the  non-service  of  the  report  of  the  

Enquiry Officer or by the non-issuance  of a second  

show-cause  notice,  which  merited  interference  by  

the High Court with the decision to terminate the  

services  of  Respondent  No.1.   Mr.  Ray  submitted  

that in B. Karunakar’s case (supra) it had been  

held that the failure to provide the Enquiry Report  

was  not  fatal  to  the  disciplinary  proceedings  

which could be re-commenced from the stage prior to  

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arguments, after supply of a copy of the Enquiry  

Officer’s report which resulted in the termination  

of the services of the Respondent No.1.  Mr. Ray  

further submitted that since no prejudice had been  

caused to the Respondent, in the above-mentioned  

circumstances the decision of the High Court to set  

aside the said Respondent’s order of termination  

was not warranted in law and the judgments of both  

the  learned  Single  Judge  and  the  Division  Bench  

were, therefore, liable to be set aside.

13. On the other hand, Mr. Gupta appearing for the  

Respondent No. 1 submitted that the learned Single  

Judge had rightly arrived at the conclusion that  

the dismissal of the Respondent No.1 was tainted  

with malafides on the part of the Bank to get rid  

of  him.  Mr.  Gupta  also  contended  that  the  High  

Court had rightly held that the dismissal of the  

Respondent  on  the  basis  of  an  allegation  of  

defalcation of the funds of the Samity, when he was  

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not  even  an  employee  of  the  Bank,  was  wholly  

without jurisdiction, as he was not answerable to  

the  Bank  for  whatever  allegations  that  may  have  

been made against him in his previous employment  

under the Raipur Krishi Unnayan Samity, which was a  

co-operative society affiliated to the Appellant-

Bank.  Mr.  Gupta  further  submitted  that  in  the  

absence  of  employer-employee  relationship  at  the  

time when the alleged defalcation is said to have  

been  committed,  the  Appellant  co-operative  Bank  

ought not to have proceeded against the Respondent  

No.1 in disciplinary proceedings, and, thereafter,  

dismissed him from service. Mr.Gupta submitted that  

the order of the learned Single Judge, as well as  

that of the Division Bench, was based on a correct  

appreciation  of  the  law  and  did  not  merit  

interference in the appeal.

14. Having  carefully  considered  the  submissions  

made on behalf of the respective parties and having  

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regard to the fact that the Respondent No.1 was an  

employee  of  the  Samity,  which  was  a  cooperative  

society  affiliated  to  the  Appellant  Cooperative  

Bank herein, there was a link between the previous  

employment  of  the  Respondent  No.1  and  his  

subsequent  appointment  under  the  Appellant-Bank.  

It  has  to  be  kept  in  mind  that  under  its  

Recruitment Rules, the Appellant-Bank was entitled  

to  recruit  people  from  the  affiliated  societies  

through  a  regular  recruitment  process.  

Accordingly, even though the Respondent No.1 was  

employed by a different Cooperative Society, the  

same had a link with the Appellant-Cooperative Bank  

on  the  basis  whereof  the  Respondent  No.1  was  

appointed by the Appellant-Bank on 8th September,  

1997.   

15. There  is  no  denial  of  the  fact  that  the  

Respondent  No.1  came  to  be  appointed  by  the  

Appellant-Bank on a temporary basis as a Grade-III  

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employee in the quota reserved for the employees of  

Primary  Cooperative  Societies  affiliated  to  the  

District Central Cooperative Bank in terms of Rule  

69(2)(b) of the West Bengal Co-operative Societies  

Rules, 1987.  The provisions of Rule 69(2)(b) of  

the 1987 Rules, which are relevant in this case,  

provides as follows :

“69. Minimum paid staff to be employed by  a  co-operative  society,  their  respective  essential qualifications and procedure of  their  employment  and  the  conditions  of  their service –  (1) xxx xxx xxx xxx

(2) The posts shall be filled up in the  following manner :-

(a) ………; (b) not more than twenty-five percent of  the sanctioned posts in the establishment  of  an  apex  or  central  society  shall  be  filled up by promotion of fit and suitable  employees of the societies affiliated to  it; (c) …………; (d) ……………; (e) ……………….”

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16. In keeping with the above, the Appellant-Bank  

appointed  the  Respondent  No.1  against  the  quota  

reserved for the employees of Primary Cooperative  

Societies  affiliated  to  the  Respondent-Bank  in  

terms of Rule 69(2)(b) of the 1987 Rules.  Mr. Ray  

appears to be correct in his contention that in  

view  of  the  above  link  between  the  Primary  

Cooperative  Society  and  the  Appellant-Bank,  even  

though  the  Respondent  No.1  was  not  under  the  

administrative control of the Appellant-Bank when  

he  allegedly  committed  various  financial  

irregularities,  the  Appellant-Bank  was  still  

entitled  to  commence  disciplinary  proceedings  

against  him  in  view  of  his  past  conduct.   The  

decision of this Court in S. Govinda Menon’s  case  

(supra),  cited  by  Mr.  Ray,  also  has  a  direct  

bearing on the facts of this case, where, although  

the  Respondent  No.1  was  not  under  the  

administrative control of the Appellant-Bank, prior  

to his service with the Bank, his previous conduct  

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was a blot on his integrity and devotion to duty as  

a member of the service.  Since no prejudice had  

been  caused  to  the  Respondent  No.1  by  the  non-

supply  of  the  Enquiry  Officer’s  report  or  the  

second show-cause notice under Article 311(2) of  

the Constitution, the Respondent No.1 had little  

scope  to  contend  that  the  principles  of  natural  

justice had been violated which had vitiated the  

proceedings.

17. However,  there  is  one  aspect  of  the  matter  

which cannot be ignored.  In  B. Karunakar’s case  

(supra), despite holding that non-supply of a copy  

of  the  report  of  the  Inquiry  Officer  to  the  

employee facing a disciplinary proceeding, amounts  

to denial of natural justice, in the later part of  

the judgment it was observed that whether in fact,  

prejudice  has  been  caused  to  the  employee  on  

account of non-furnishing of a copy of the inquiry  

report has to be considered in the facts of each  

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case.  It was observed that where the furnishing of  

the inquiry report would not make any difference to  

the ultimate outcome of the matter, it would be a  

perversion  of  justice  to  allow  the  concerned  

employee  to  resume  his  duties  and  to  get  all  

consequential benefits.  It was also observed that  

in the event the Inquiry Officer’s report had not  

been furnished to the employee in the disciplinary  

proceedings,  a  copy  of  the  same  should  be  made  

available to him to enable him to explain as to  

what prejudice had been caused to him on account of  

non-supply of the report.  It was held that the  

order  of  punishment  should  not  be  set  aside  

mechanically on the ground that the copy of the  

inquiry  report  had  not  been  supplied  to  the  

employee.  This is, in fact, a case where the order  

of  punishment  had  been  passed  against  the  

Respondent  No.1  on  allegations  of  financial  

irregularity.   Such  an  allegation  would  require  

serious consideration as to whether the services of  

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an employee against whom such allegations have been  

raised should be retained in the service of the  

Bank.  Since a Bank acts in a fiduciary capacity in  

regard to people’s investments, the very legitimacy  

of  the  banking  system  depends  on  the  complete  

integrity  of  its  employees.   As  indicated  

hereinbefore,  there  is  a  live-link  between  the  

Respondent No.1’s performance as an employee of the  

Samity, which was affiliated to the Bank, and if  

the Bank was of the view that his services could  

not  be  retained  on  account  of  his  previous  

misdemeanor, it is then that the second part of B.  

Karunakar’s case (supra) becomes attracted and it  

becomes necessary for the court to examine whether  

any prejudice has been caused to the employee or  

not before punishment is awarded to him.  It is not  

as if the Bank with an ulterior motive or a hidden  

agenda dismissed the Respondent No.1 from service,  

in  fact,  he  was  selected  and  appointed  in  the  

Appellant-Bank  on  account  of  his  merit  and  

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performance at the time of interview.  It cannot be  

said  that  the  Bank  harboured  any  ill-feeling  

towards  the  Respondent  No.1  which  ultimately  

resulted in the order of dismissal passed on 8th  

May, 2010.  We, therefore, repeat that since no  

prejudice has been caused to the Respondent No.1 by  

the non-supply of the Inquiry Officer’s report, the  

said Respondent had little scope to contend that  

the disciplinary proceedings had been vitiated on  

account of such non-supply.              

18. In  the  above  circumstances,  we  cannot  agree  

with the view taken by the learned Single Judge, as  

affirmed by the Division Bench of the High Court,  

that  the  Appellant-Bank  had  no  jurisdiction  to  

proceed  against  the  Respondent  No.1  by  way  of  

disciplinary  proceedings  in  regard  to  the  

allegations of defalcation made against him while  

he was employed under the Co-operative Samity which  

was an affiliate of the Appellant-Bank.  The other  

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decision cited by Mr. Ray in  S. Govinda Menon’s  

case (supra) also makes it abundantly clear that  

even though the Respondent No.1 may not have been  

under the direct administrative control of the Bank  

at the relevant point of time when the defalcation  

is alleged to have taken place, on account of the  

affiliation of the Samity with the Bank under the  

provisions  of  the  West  Bengal  Co-operative  

Societies  Rules,  1987,  the  Appellant-Bank  had  

jurisdiction  over  the  Respondent  No.1  after  he  

joined the employment of the Appellant-Bank.  In  

the instant case, since the question of integrity  

in  managing  the  accounts  of  the  Samity  is  in  

question,  it  was  but  natural  for  the  Bank  to  

proceed departmentally against the Respondent No.1  

after coming to learn of the allegations which have  

been made against him.    

19. In our view, both the learned Single Judge and  

the  Division  Bench  of  the  High  Court  were  not  

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justified in interfering with the action taken by  

the disciplinary authorities of the Bank and their  

findings are liable to be set aside.  The appeal,  

therefore, succeeds and is allowed.  The orders of  

the learned Single Judge and the Division Bench of  

the High Court, are set aside. The decision taken  

by the Bank in dismissing the Respondent No.1 from  

service is restored.  

20. There will be no order as to costs.

…………………………………………J.                              (ALTAMAS KABIR)

…………………………………………J.                              (CYRIAC JOSEPH)

New Delhi Dated: 18.01.2012

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