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REPORTABLE

  IN THE SUPREME COURT OF INDIA   CIVIL APPELLATE JURISDICTION

CIVIL APPEAL  NO.2265 OF 2011

CHAMOLI DISTRICT CO-OPERATIVE BANK LTD. THROUGH ITS SECRETARY/MAHAPRANDHAK & ANR.            APPELLANT(S)

                               VERSUS   RAGHUNATH SINGH RANA & ORS.                         RESPONDENT(S)

J U D G M E N T ASHOK BHUSHAN, J.

1. This appeal has been filed against the order dated 01.12.2010 of the Division Bench of the High Court of Uttrakhand by which judgment, the writ petition filed by the respondent – Raghunath Singh  Rana has  been disposed  of after  quashing the  dismissal order dated 01.02.2002.  Aggrieved by the judgment, the Chamoli District Co-operative Ltd., is in appeal before this Court.  

The short facts necessary for deciding this appeal are:  the Chamoli District Co-operative Bank Ltd. (hereinafter referred to as  ‘the  appellant/Bank’)  is  a  District  Co-operative  Bank registered  under  the  U.P.  Co-operative  Societies  Act,  1965 (hereinafter  referred to  as ‘the  Act’).  The Raghunath  Singh Rana,  respondent  No.1  (hereinafter  referred  to  as  ‘the employee/Respondent No.1’) at the relevant time, was working as a Branch Manager at Ghat Branch of the Chamoli District. A charge

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sheet dated 03.07.1992 was issued to the employee leveling 19 charges against him. The employee/respondent No.1 was asked to reply upto 3rd August, 1992. There was allegation against the employee/respondent No.1 that he made payments to the bearers of cheques  without its  prior collection  and made  payment to  the bearer of the cheque, causing loss to the appellant/Bank. Further charges were that he had not taken any action against the persons concerned and had thus committed serious irregularities. Another set of charges were imputation that the respondent–employee has issued overdrafts/loans  against the provision of the Act.

2. The  employee/respondent  No.1  submitted  a  reply  on 31.07.1992  denying  the  allegations.  On  05.8.1992,  an  Inquiry Officer was appointed to conduct the inquiry. The Inquiry Officer also submitted a report on 21.09.1992. The employee/respondent No.1 was placed under suspension by order dated 21.10.1992. No further steps were taken on the inquiry report dated 21.09.1992. However, a fresh charge sheet containing the charges which were levelled in the charge sheet dated 03.07.1992 as well as six additional  charges  was  issued  on  16.01.1993.  The employee/respondent No.1 submitted a reply dated 04.02.1993 to the charge sheet denying the allegations. After submission of the reply by the employee/respondent No.1, a show-cause notice was issued to the petitioner by the District Co-operative Bank Ltd. dated 04.05.1993 asking the employee/respondent No.1 to submit a reply,  failing  which  action  under  Regulation  84  of  the  U.P. Co-operative Societies Employees Service Regulations Act, 1975

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was to be taken. The Disciplinary Authority passed a Resolution dated  11.07.2000  that  charges  against  the  employee/respondent No.1  have  been  proved  and  further  action  to  be  taken.  The Disciplinary Authority passed an order on 01.02.2002, dismissing the employee/respondent No.1 with immediate effect. Aggrieved by dismissal  order,  writ  petition  was  filed  by  the employee-respondent  No.1  praying  for  quashing  the  order  dated 01.02.2002 with further prayer that employee/respondent No.1 be reinstated in service with full back wages and salary.

3. The employee/respondent No.1's case in the writ petition was  that after  receipt of  the charge  sheet dated  18.01.1993, reply  was  submitted  by  the  employee  but  without  holding  an inquiry, the Disciplinary Authority took a decision to dismiss the petition.  No Inquiry have been held as provided by statutory regulations, hence, the entire proceedings are liable to be set aside.

4. The appellant-Bank filed a counter affidavit in the writ petition. In the counter affidavit no inquiry report subsequent to charge sheet dated 18.01.1993 was referred to.

5. The Division Bench of the High Court heard the matter and vide judgment dated 01.12.2010 quashed the dismissal order. The Division  Bench took  the view  that dismissal  orders have  been passed without holding an inquiry which deserves to be set aside.

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6. Learned senior counsel appearing for the appellant-Bank contends  that  Inquiry  Officer  had  issued  a  letter  dated 11.09.1992  to  the  employee/respondent  No.1  asking  the employee/respondent No.1 to appear on 18.09.1992 at 10.00 AM, but employee/respondent No.1 failed to appear in the inquiry, hence, the  view  of  the  High  court  that  no  inquiry  was  held  is  not correct. He further submits that inquiry report dated 21.09.1992 was submitted by the Inquiry Officer which has been brought on record as Annexure P3.  Learned counsel for the appellant-Bank further submits that there were serious allegations against the employee/respondent  No.1  on  the  basis  of  which  the employee/respondent No.1 was dismissed from service.

7. It is further contended that First Information Reports have  been  lodged  against  the  employee/respondent  No.1  and criminal cases are pending.

8. We  have  considered  the  submissions  and  perused  the record.

9. The statutory regulations have been framed under the Act, namely,  U.P.  Co-operative  Societies  Employees  Service Regulations, 1975, which regulations are applicable with regard to  the  conduct  of  Disciplinary  enquiry  against  the employee/respondent No.1 and where governing the field at the relevant time. Regulation 84, Chapter-VII of the Regulation deals

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with  Penalties,  Regulation  85  deals  with  Disciplinary proceedings, and Regulation 86 deals with Appeal. Regulation 85 which deals with Disciplinary proceedings, is as follows:- “85. Disciplinary Proceedings.-  (i) The  disciplinary  proceedings  against  an  employee shall be conducted by the Inquiring Officer (referred to in  clause  (iv)  below)  with  due  observance  of  the principles  of  natural  justice  for  which  it  shall  be necessary -  

(a) The  employee  shall  be  served  with  a charge-sheet  containing  specific  charges  and mention of evidence in support of each charge and he  shall  be  required  to  submit  explanation  in respect  of  the  charges  within  reasonable  time which shall not be less than fifteen days; (b) Such an employee shall also be given an opportunity  to  produce  at  his  own  cost  or  to cross-examine witnesses in his defence and shall also  be  given  an  opportunity  of  being  heard in-person, if he so desires; (c) If  no  explanation  in  respect  of  charge sheet is received or the explanation submitted is unsatisfactory, the competent authority may award him appropriate punishment considered necessary.

(ii)(a)  Where  an  employee  is  dismissed  or  removed from service on the ground of conduct which has led to his conviction on a criminal charge; or (b) Where the employee has absconded and his whereabouts are not known to the society for more than three months; or (c) Where  the  employee  refuses  or  fails without  sufficient  cause  to  appear  before  the Inquiring Officer when specifically called upon in writing to appear; or (d) Where it is otherwise (for reasons to be recorded) not possible to communicate with him, the  competent  authority  may  award  appropriate punishment  without  taking  or  continuing disciplinary proceedings.

(iii) Disciplinary  proceedings  shall  be  taken  by  the society against the employee on a report made to this

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effect by the inspecting authority or an officer of the society under whose control the employee is working. (iv) The  inquiring  officer  shall  be  appointed  by  the appointing  authority  or  by  an  officer  of  the  society authorised for the purpose by the appointing authority:

Provided  that  the  officer  at  whose  instance disciplinary action was started shall not be appointed as an inquiring officer nor shall the inquiring officer be the appellate authority.

….......”

10. From the facts, as noted above, it is clear that charge sheet dated 03.07.1992 was issued to the employee/respondent No.1 to which he submitted a reply on 31.07.1992. Inquiry report dated 21.09.1992 was issued and submitted. However, without proceeding any further on the basis of the inquiry report dated 21.09.1992, a  fresh  charge  sheet  dated  18.01.1993  was  issued  to  the employee/respondent  No.1  containing  24  charges.  The employee/respondent No.1 was asked to submit a reply within 15 days. Reply to the subsequent charge sheet was again filed by the employee/respondent No.1 on 04.02.1993. The second charge sheet having been issued on 18.01.1993 which included all the charges which were contained in the earlier charge sheet, the earlier proceedings  consequent  to  charge  sheet  dated  03.07.1992  stood abandoned.  The  appellant-Bank  decided  to  proceed  with  the Disciplinary  Inquiry  on  the  basis  of  charge  sheet  dated 18.01.1993. After 18.01.1993 charge sheet reply was submitted by the  employee/respondent  No.1  on  04.02.1993  but  there  is  no material on the record brought by the appellant-Bank indicating that any inquiry proceedings were conducted.

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11. It is relevant to note that in the writ petition filed by the employee/respondent No.1, specific averments were made that disciplinary proceedings against him were conducted in violation of  principles  of  natural  justice  and  against  the  procedure prescribed  in  Regulation  85,  which  averments  were  made  in paragraphs  19  and  25  of  the  writ  petition,  to  the  following effect:-

“19.  That since the whole of the procedure adopted in conducting  of  the  disciplinary  proceeding  is  against the principle of natural justice and procedure mention in regulation 85, In fact, no inquiry worth to name has been  conducted  by  the  respondents.  The  so  called inquiry was a mere eye-wash. It is a farce and fraud played on the statutory rights of the petitioner.”

25. That the disciplinary proceeding held against the petitioner  was  not  conducted  in  accordance  with  the provisions of natural justice and procedure prescribed under the Regulations of 1975. Serious objections were raised  by  the  petitioner  through  his  replies  dated 31.07.1993, 04.02.1993 and 21.03.1993 but no heed was given to the objections raised by the petitioner. Once the  charge  sheet  has  been  issued  to  the  petitioner, second  charge  sheet  cannot  be  sent  by  the  Inquiry Officer in the same disciplinary proceeding. But this objections  was  also  not  considered  by  the  Inquiry Officer  or  disciplinary  authority.  After  the  reply dated 04.02.1993 to the charge-sheet dated 18.01.1993, no inquiry was held by the Inquiry Officer. Instead of holding the inquiry in accordance with the provisions, the  disciplinary  authority  sent  the  letter  dated 04.05.1993 saying that the charges were proved against the  petitioner.  Between  18.01.1993  to  04.05.1993  no inquiry was held and the petitioner was never called upon  to  cross  examine  the  witnesses.  No  records  or documents which the petitioner has requested to inspect were summon or made available to the petitioner. Even these documents were not available to the petitioner. Even those documents were not inspected or considered by the disciplinary authority and inquiry officer. The way the Disciplinary Proceeding were conducted it cost serious doubt and aspersion against the respondents. It

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appears  that  before  the  conduct  of  the  inquiry  the respondents  made  up  their  mind  to  get  rid  of  the petitioner and for that reason they have conducted the inquiry  in  such  a  perfunctory  manner,  which  is  not known to services jurisprudence.”

12. In the counter affidavit, the averments made in paragraph 19 and 25 were replied by the appellant-Bank in paragraph 18 and 24, which are to the following effect:-

“18. That in reply to the contents of para nos.18 & 19 of the writ petition it is submitted that the grounds on which the charges issued were found proved was supplied to the petitioner vide letter no.251-52 annexure no.7 to the writ petition, instead of a copy of the enquiry report. The letter of charges serves the purpose of an enquiry report. That it is incorrect to say that no reasonable opportunity was given to the petitioner by the Inquiry Officer a letter dated 6-1-93 Annexure No.5 to the writ petition was sent to the petitioner to know whether he wanted to be cross-examined by his witnesses, but the petitioner did not want any such opportunity. Further, the petitioner was directed to appear before the committee of management in person, but he did not appear  at  all.  Another  opportunity  was  given  as  per resolution  no.14  dated  25.11.1993  which  was  also  not available  by  him.  Petitioner  was  again  given  an opportunity to appear before the committee on 3-8-2000 Annexure No.10 to the writ petition to explain his case personally,  but  he  did  not  appear.  It  is  therefore, totally false to say that no opportunity of being heard was  given  to  the  petitioner.  Copy  of  the  resolution no.14 dated 25.11.1993 is annexed herewith and is marked as Annexure No. CA.5 to this counter affidavit.”

24. That the contents of para nos.25, 26, 27 & 28 of the writ petition are denied. It is incorrect to say that the second charge sheet dated 18-1-93 was sent in the same disciplinary proceedings as a matter of fact this  was  the  first  and  the  only  chargesheet  issued. Disciplinary proceedings were initiated on 21.10.92 and, therefore, charge sheet was issued to the petitioner on 18.1.93 to which reply was submitted by the petitioner on 4.2.93. It is wrong to allege that records were not made available to the petitioner as the petitioner did not want to refer to any record and he did not make any request even during the course of the cross examination

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of the witness. It is further  incorrect to state that opportunity was not given to the petitioner. That the answering  respondent  is  justified  a  dismissing  the services  of  the  petitioner  as  heavy  loss  of Rs.35,00,000/-  approximately  was  caused  to  the  bank, exceeding all his powers and overlooking all the norms laid down by the bank in making unsecured advances to various customers/parties. Therefore, the order of the respondents dismissing the services of the petitioner is lawful  and  in  the  interest  of  justice  and  the  writ petition of the petitioner is liable to be dismissed on this ground alone.”

13. As noted above, learned counsel for the appellant/Bank has referred to the letter issued by the Inquiry Officer dated 11.09.1992, calling the employee/respondent No.1 to appear before the  Inquiry  Officer  on  18.09.1992.  The  inquiry  report  dated 21.09.1992 mentioned that the employee/respondent No.1 did not appear, hence the inquiry report was submitted. The letter dated 11.09.1992 and the inquiry report dated 21.09.1992 looses all its importance when the bank decided to issue a fresh charge sheet on 18.11.1993 which includes all earlier charges.  The petitioner submitted  a  reply  on  04.02.1993  but  thereafter  no  inquiry proceeding  seems  to  have  taken  place.  The  employee/respondent No.1 made a specific complaint that inquiry proceeding has not been held and there is violation of Regulation 85. No specific reply  have been  made, by  the appellant/bank  referring to  any inquiry proceeding before the Inquiry Officer or the date of any inquiry.

14. As noted above, Regulation 85 is a statutory Regulation according to which an opportunity to the employee to produce at his own cost or to cross-examine witnesses in his defence and

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shall also be given an opportunity of being heard in person, if he so desires. Regulation 85 (i)(b) is specifically mandates the said requirements.

15. From the pleadings and the materials on record, it is clear  that no  inquiry was  conducted by  the appellant/Bank  in conformity with Regulation 85 (i)(b) after issuance of charge sheet  dated  16.01.1993.  The  High  Court  has  set  aside  the dismissal  order  after  coming  to  the  conclusion  that  without holding  an  inquiry  the  employee/respondent  No.1  has  been dismissed.  No  materials  have  been  brought  in  the  appeal  to indicate that any inquiry was conducted or inquiry report was submitted subsequent to the charge sheet dated 16.01.1993.

16. Learned counsel for the appellant/Bank has submitted that in  the  Resolution  passed  by  the  Disciplinary  Authority  that inquiry report has been mentioned.

17. Imposing of any penalty on an employee of the bank that too major penalty of dismissal from service can only be done after  following  the  statutory  provisions  governing  the disciplinary proceedings.

18. It  is  also  relevant  to  note  that  after  submission  of reply  dated  04.02.1993,  Disciplinary  Authority  issued  a show-cause notice on 04.05.1993 asking the employee/respondent No.1 to submit his reply. When the Inquiry Officer was appointed,

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conducting of the inquiry was mandatory and without conducting of an inquiry and without any inquiry report having been served on the employee/respondent No.1, Disciplinary Authority could not have  proceeded  to   impose  any  punishment.  The  compliance  of principles of natural justice by the appellant-Bank is not a mere formality,  more  so  when  the  statutory  provisions  specifically provides that disciplinary proceedings shall be conducted  with due observations of the principles of natural justice.

19. The  compliance  of  natural  justice  in domestic/disciplinary  inquiry  is  necessary  has  long  been established. This Court has held that even there are no specific statutory  rule  requiring  observance  of  natural  justice,  the compliance of natural justice is necessary. Certain ingredients have been held to be constituting integral part of holding of an inquiry. The Apex Court in  Sur Enamel and Stamping Works Pvt. Ltd. v. Their Workmen reported in (1964) 3 SCR 616 has laid down following:-

“... An enquiry cannot be said to have been properly held unless,  (i)  the  employee  proceeded  against  has  been informed  clearly  of  the  charges  levelled  against  him, (ii)  the  witnesses  are  examined  –  ordinarily  in  the presence of the employee – in respect of the charges, (iii)  the  employee  is  given  a  fair  opportunity  to cross-examine  witnesses,  (iv)  he  is  given  a  fair opportunity to examine witnesses including himself in his defence if he so wishes on any relevant matter, and (v) the inquiry officer records his findings with reasons for the same in his report.”

20. The Apex Court again in State Bank of India Vs. R.K. Jain and Ors., reported in (1972) 4 SCC 304 held that if an inquiry is

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vitiated by violation of principles of natural justice or if no reasonable opportunity was provided to the delinquent to place his  defence, it  cannot be  characterized as  a proper  domestic inquiry held in accordance with the rules of natural justice. In paragraph 23, the following was laid down:-

“......As  emphasised  by  this  Court  in  Ananda  Bazar Patrika (P) Ltd. v. Its Workmen, (1964) 3 SCR 601, the termination of an employee's service must be preceded by a proper domestic inquiry held in accordance with the rules of natural justice. Therefore, it is evident that if the inquiry is vitiated by violation of the principles  of  natural  justice  or  if  no  reasonable opportunity was provided to a delinquent to place his defence,  it  cannot  be  characterized  as  a  proper domestic inquiry held in accordance with the rules of natural justice......”  

21. The Apex Court in State of Uttranchal & Ors. Vs. Kharak Singh reported  in  (2008)  8  SCC  236  had  occasion  to  examine various contours of natural justice which need to be specified in a departmental inquiry. The Apex Court noticed earlier judgments where  principles  were  laid  down  as  to  how  inquiry  is  to  be conducted. It is useful to refer paragraphs 9, 10, 11, 12, 13 and 15, which are to the following effect:-

“…..9.  Before  analyzing  the  correctness  of  the  above submissions, it is useful to refer various principles laid down by this Court as to how enquiry is to be conducted and which procedures are to be followed.  10. The following observations and principles laid down by this Court in Associated Cement Co. Ltd. vs. The Workmen and Anr. [1964] 3 SCR 652 are relevant:  

"... ... In the present case, the first serious infirmity from which the enquiry suffers proceeds from  the  fact  that  the  three  enquiry  officers claimed  that  they  themselves  had  witnessed  the alleged misconduct of Malak Ram. Mr. Kolah contends that  if  the  Manager  and  the  other  officers  saw Malak Ram committing the act of misconduct, that itself would not disqualify them from holding the

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domestic  enquiry.  We  are  not  prepared  to  accept this  argument.  If  an  officer  himself  sees  the misconduct of a workman, it is desirable that the enquiry should be left to be held by some other person who does not claim to be an eye- witness of the  impugned  incident.  As  we  have  repeatedly emphasised,  domestic  enquiries  must  be  conducted honestly and bona fide with a view to determine whether  the  charge  framed  against  a  particular employee is proved or not, and so, care must be taken to see that these enquiries do not become empty formalities. If an officer claims that he had himself  seen  the  misconduct  alleged  against  an employee, in fairness steps should be taken to see that the task of holding an enquiry is assigned to some other officer. How the knowledge claimed by the  enquiry  officer  can  vitiate  the  entire proceedings of the enquiry is illustrated by the present enquiry itself. ... .....

..... It is necessary to emphasise that in domestic enquiries, the employer should take steps first to lead evidence against the workman charged, give an opportunity to the workman to cross-examine the said evidence and then should the workman be asked  whether  he  wants  to  give  any  explanation about the evidence led against him. It seems to us that it is not fair in domestic enquiries against industrial employees that at the very commencement of  the  enquiry,  the  employee  should  be  closely cross-examined  even  before  any  other  evidence  is led against him. In dealing with domestic enquiries held in such industrial matters, we cannot overlook the  fact  that  in  a  large  majority  of  cases, employees are likely to be ignorant, and so, it is necessary  not  to  expose  them  to  the  risk  of cross-examination  in  the  manner  adopted  in  the present  enquiry  proceedings.  Therefore,  we  are satisfied that Mr. Sule is right in contending that the  course  adopted  in  the  present  enquiry proceedings  by  which  Malak  Ram  was  elaborately cross-examined  at  the  outset  constitutes  another infirmity in this enquiry."  

11) In ECIL v. B. Karunakar (1993) 4 SCC 727, it was held:

"(1) Where the enquiry officer is other than the disciplinary authority, the disciplinary proceedings break into two stages. The first stage ends when the disciplinary authority arrives at its conclusions on the basis of the evidence, enquiry officer's report

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and  the  delinquent  employee's  reply  to  it.  The second stage begins when the disciplinary authority decides  to  impose  penalty  on  the  basis  of  its conclusions. If the disciplinary authority decides to  drop  the  disciplinary  proceedings,  the  second stage is not even reached.  While the right to represent against the findings in the  report  is  part  of  the  reasonable  opportunity available  during  the  first  stage  of  the  inquiry viz., before the disciplinary authority takes into consideration the findings in the report, the right to show cause against the penalty proposed belongs to the second stage when the disciplinary authority has considered the findings in the report and has come to the conclusion with regard to the guilt of the employee and proposes to award penalty on the basis of its conclusions. The first right is the right to prove innocence. The second right is to plead  for  either  no  penalty  or  a  lesser  penalty although  the  conclusion  regarding  the  guilt  is accepted. It is the second right exercisable at the second  stage  which  was  taken  away  by  the Forty-second Amendment. The second stage consists of the issuance of the notice to show cause against the proposed penalty and of considering the reply to the notice  and  deciding  upon  the  penalty.  What  is dispensed  with  is  the  opportunity  of  making representation on the penalty proposed and not of opportunity of making representation on the report of the enquiry officer. The latter right was always there. But before the Forty-second Amendment of the Constitution, the point of time at which it was to be  exercised  had  stood  deferred  till  the  second stage viz., the stage of considering the penalty. Till  that  time,  the  conclusions  that  the disciplinary authority might have arrived at both with regard to the guilt of the employee and the penalty to be imposed were only tentative. All that has happened after the Forty-second Amendment of the Constitution  is  to  advance  the  point  of  time  at which the representation of the employee against the enquiry officer's report would be considered. Now, the  disciplinary  authority  has  to  consider  the representation of the employee against the report before it arrives at its conclusion with regard to his guilt or innocence in respect of the charges.

* * * Article 311(2) says that the employee shall be given a "reasonable opportunity of being heard in respect

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part    of    the  disciplinary/punishing  authority  to supply a copy of the enquiry report and all connected materials relied on by the enquiry officer to enable him to offer his views, if any.”

22. From the proposition of law, as enunciated by Apex Court as noted above, and the facts of the present case, we arrive at the following conclusions:-

(a) After service of charge sheet dated 16.01.1993 although the petitioners submitted his reply on 04.02.1993 but neither Inquiry Officer fixed any date of oral inquiry nor any inquiry was held by the Inquiry Officer.  

(b) Mandatory requirement of a disciplinary inquiry i.e. is holding of an inquiry when the charges are refuted and serving the inquiry report to the delinquent has been breached in the present case.

(c) The  employee/respondent  No.1  having  not  been  given opportunity to produce his witnesses in his defence and having not  been  given  an  opportunity  of  being  heard  in  person,  the statutory provisions as enshrined in Regulation 85 (i)(b), have been violated.

(d) The Disciplinary Authority issued show case notice dated 04.05.1993 to the employee/respondent No.1 without holding of an inquiry and subsequent resolution by Disciplinary Authority taken

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in the year 2000 without their being any further steps is clearly unsustainable.  The High Court has rightly quashed the dismissal order  by  giving  liberty  to  the  bank  to  hold  de-novo  inquiry within a period of six months, if it so desires.

(e) The  bank  shall  be  at  liberty  to  proceed  with  the Disciplinary  Inquiry  as  per  directions  of  the  High  Court  in paragraph (1) of the judgment. The High Court has already held that petitioner shall be deemed to be under suspension and shall be paid suspension allowance in accordance with rules.

23. In view of the foregoing discussion and our conclusion, as noted above, we do not find any merit in this appeal. In the result, the appeal is dismissed.

   ....................J.   (ABHAY MANOHAR SAPRE)

NEW DELHI     ....................J. MAY 17, 2016     (ASHOK BHUSHAN)