Karnataka High Court
Vijaya Bank vs N Jayaprakasan S/O Late C A Nair on 6 November, 2012
Author: N Kumar
Bench: N Kumar
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IN THE HIGH COURT OF KARNATAKA AT BANGALORE
Dated this the 6th day of November 2012
PRESENT
THE HON'BLE MR. JUSTICE N KUMAR
AND
THE HON'BLE MR. JUSTICE V. SURI APPA RAO
Writ Appeal No. 315 of 2007 (S.DIS)
BETWEEN:
Vijaya Bank
A body constituted under the
Banking Companies' (Acquisition
And Transfer of Undertakings) Act
1980 having its Head Office at
No.41/2, M.G. Road
Trinity Circle
Bangalore - 560 001
Represented by its Executive Director
Now represented by
Deputy General Manager -
Personnel Department (IRD) ...Appellant
(By Sri P.S. Sawkar, Advocate for
M/s. Sundaraswamy Ramdas & Anand, Advocates)
2
AND:
N. Jayaprakasan
S/o late C.A. Nair
Aged 62 years
Earlier Working as Chief Manager
Office in Senior Management
Grade Scale-IV, Vijaya Bank IV
Head Office, 41/2, M.G. Road
Trinity Circle, Bangalore - 560 001
Residing at No.740/B, Vinayakanagar
Konena Agrahara
Vimanapura Post
Bangalore - 560 017 ...Respondent
(By Sri. P.S. Rajagopal, Sr. Counsel)
This Writ Appeal filed Under Section 4 of the Karnataka
High Court Act praying to set aside the order passed in Writ
Petition No.35884 of 2000 dated 5-1-2007.
This Writ Appeal coming on for hearing this day,
N. KUMAR J., delivered the following:
JUDGMENT
This appeal is preferred by the Vijaya Bank against the order passed by the learned Single Judge allowing the writ petition and setting aside the order of dismissal, directing 3 reinstatement of the respondent into service with 30% backwages while protecting his continuity of service.
2. For the purpose of convenience, the parties are referred to as they are referred in the writ petition.
3. The petitioner at relevant point of time was working as a Divisional Manager in the respondent-Bank. By letter dated 30.12.1992, the petitioner was called upon by the Central Vigilance Officer of the respondent-Bank to explain why action ought not to be initiated against him in respect of certain allegations. The allegations were that the petitioner while working as Divisional Manager in IM & M Department (FMFS Division), during the period from 27.09.1991 to 03.06.1992, entered into purchase contracts and sale contracts with Fairgrowth Financial Services Limited and Fairgrowth Investments Limited for investment and disinvestment of funds received from the portfolio clients. Only some transaction could be completed and that in respect of two transactions 4 commitment to buy equity shares from the Bank by FFSL and FIL were not fulfilled. The purchase of shares from one Company of the said group and a contract for sale with another Company of the same group indicated rotation of funds within the group. This practice of entering into contracts with the same group companies was adopted without ensuring the safety of the investment portfolio funds. The petitioner had specifically recommended rejecting the offer of FFSL on the ground that the Company did not possess the required financial strength to handle the volume of transaction in one lot as per market enquiries. In spite of this, the petitioner had recommended to the Committee for the management of portfolio investment for purchase of shares worth Rs.297.67 lakh from FFSL, out of which, only shares worth Rs.288.18 lakh was purchased. On promulgation of the Special Court Ordinance in June 1992, and the fact that FFSL was notified under the Ordinance, all sales of securities by FFSL after 01.04.1991 were subject to verification by the Special Court before the transaction could be regarded as 5 bonafide transaction and since the accounts of the FFSL were frozen by the CBI, the sale agreement entered into with FFSL could not be enforced and in terms of the legal opinion obtained by the Bank, the possibility of their custodian under the said Ordinance could set aside the transactions and this possibility could not be ruled out. An amount of Rs.206.60 lakh due from FIL had to be taken as a potential loss to the Bank.
4. The petitioner replied to the said notice pointing out that the petitioner could not be held responsible for the sequence of events leading to FFSL being notified under the Special Court Ordinance and the petitioner pointed out that the transaction were put through in good faith as per the procedure followed by the Bank in such cases with prior approval of the appropriate authority and ensuring good investments as per the prevailing conditions. The allegation that he had been unduly favouring any particular Company and the apprehension of the Bank suffering any loss was not a 6 foregone conclusion. After a year, departmental enquiry was initiated. Petitioner participated in the said enquiry. After enquiry, the enquiring authority submitted a report to the disciplinary authority holding petitioner guilty of all the charges levelled against him. The disciplinary authority in turn issued a second show cause notice to the petitioner enclosing a copy of the enquiry report. The petitioner sent his reply to the second show cause notice pointing out how the enquiry report is vitiated. On consideration of the reply and the report of the enquiry, the disciplinary authority found that the allegations levelled against the petitioner were well founded and the petitioner was found guilty.
5. The disciplinary authority as per the requirement of Regulation 19 of the Vijaya Bank Officer Employees' (Conduct) Regulations, 1981 submitted a copy of the entire enquiry proceedings along with the report to the Central Vigilance Commission, in order to impose penalty. The Central Vigilance Commission after going through the said material, 7 gave its recommendation by letter dated 12.07.1996 accepting the enquiry officer's report. Further it recommended that considering the charges which have been proved in the enquiry and exposure of the Bank funds, the Commission advised them to impose major penalty of dismissal. On receipt of the said recommendation, the Bank addressed a letter to the Chief Vigilance Officer, Vigilance Department, bringing to his notice the charges levelled against the petitioner, his explanation, the contents of the enquiry report and that it was of the view that the imposition of penalty of dismissal from service of the Bank would be too harsh a punishment for the collective decision of the committee in the matter of placing of funds. Therefore they requested him to take up the matter with the Central Vigilance Commission to enable them to impose any other major penalty short of dismissal for the misconduct committed by the petitioner. Accordingly, Chief Vigilance Officer addressed a letter to the Director of Central Vigilance Commission on 15.11.1996 bringing to their notice the facts mentioned by the Bank in their letter and requested them to permit the Bank to 8 impose any other major penalty short of dismissal. By letter dated 20.03.1997 the Central Vigilance Commission reiterated their earlier stand. Thereafter, the disciplinary authority proceeded to pass order of dismissal on 06.06.1997. The statutory appeal preferred by the petitioner against the said order of dismissal also came to be dismissed by the appellate authority.
6. Thereafter, the petitioner preferred writ petition before this Court in W.P.29774/97 contending that the order of dismissal passed is dictated by Central Vigilance Commission and the recommendation of the Central Vigilance Commission was not made available to the petitioner and therefore the impugned order of dismissal is vitiated and is liable to be set aside. The respondent-Bank contended that the decision to dismiss the petitioner is not influenced by the recommendation of the Central Vigilance Commission and the Central Vigilance Commission gave the recommendation and when they have taken into consideration the said recommendation before 9 passing the order of dismissal, the principles of natural justice requires that the petitioner should have been made available the recommendations which was against his interest, so that he would have the opportunity to have his say in the matter. The said procedure having not been followed, in the light of the judgment of the Apex Court in the case of NAGARAJ SHIVARAO KARJAGI Vs. SYNDICATE BANK, HEAD OFFICE, MANIPAL AND ANOTHER (AIR 1991 SC 1507), the order of punishment is vitiated. The contention that they were not influenced by the Central Vigilance Commission's recommendation, in the said context, was not accepted. Therefore the writ petition was allowed, the impugned order of dismissal was set aside, a direction was issued to the disciplinary authority to furnish to the petitioner a copy of the advise tendered by the Central Vigilance Commission and to pass fresh order on the subject after considering the petitioner's response to the same. The reinstatement of the petitioner in the services of the Bank and the grant of consequential benefits was made dependent upon the fresh orders that the disciplinary authority may pass, 10 treating the advise of Central Vigilance Commission to be no more than recommendatory in nature.
7. After the said order, the Bank made available the said recommendation of the Central Vigilance Commission to the petitioner. On receipt of the said letter, the petitioner submitted a detailed reply. On considering the said reply and the entire enquiry proceedings as well as the recommendation of the Central Vigilance Commission, the respondent passed the order of dismissal dated 02.05.2000. Against the said order, the petitioner preferred a statutory appeal which came to be dismissed by order dated 30.08.2000. It is thereafter the petitioner preferred W.P.No.35884/2000. The learned Single Judge after hearing both the parties was of the view that there is no marked change in the findings of the Disciplinary Authority as recorded earlier before the matter was remitted by this Court in the earlier writ petition and the present impugned order. Similar is the case with the order of the appellate authority. He was of the view that the advice and dictates of 11 the Central Vigilance Commission was in line with the authorities and even in the absence of a fresh advice having been sought, the fact that the respondent Bank has not chosen to produce the entire records or the files pertaining to the correspondence as between the Central Vigilance Commission and the Bank, in the face of vehement contention that there was no case made out against the petitioner to proceed, is writ large in the conduct of the respondent Bank reluctantly producing some documents while withholding the entire correspondence even before this Court. According to the learned Single Judge, it demonstrates that the respondent- Bank had buckled to the dictates of the Central Vigilance Commission and therefore was seeking to suppress the material in order to sustain its actions, which would clearly indicate acceding to the dictates of the Central Vigilance Commission and in the light of the judgment of the Supreme Court in the case of Nagaraj Shivarao Karjagi, the petition deserves to be allowed. Accordingly he allowed the petition, set aside the impugned orders and directed reinstatement into 12 service with 30% backwages, while protecting his continuity of service. Aggrieved by the said order, the Bank has preferred this appeal.
8. The learned Counsel appearing for the Bank, assailing the impugned order of the learned Single Judge contended that as per the directions issued in the earlier writ petition, all that the Bank was expected to do was to furnish a copy of the Central Vigilance Commission recommendation, which admittedly has been done. Thereafter, they did not seek for any further recommendation. On the contrary, as required under law, the disciplinary authority applied its mind independently to the material on record as well as the recommendations of the Central Vigilance Commission and came to the conclusion that the allegations against the petitioner stand proved and having regard to the nature of the misconduct which is proved, the punishment of dismissal is the punishment to be imposed having regard to the gravity of the charges which are proved. Therefore the learned Single 13 Judge was not justified in setting aside the order on the ground that the Bank did not make available the entire correspondence between the Bank and the Central Vigilance Commission, which was not the requirement of law nor was directed to be complied with by the earlier order. Therefore the learned Single Judge committed serious error in setting aside the order passed on merits on the very same ground on which the earlier order came to be passed, though this time there was no flaw in the procedure followed by the Bank. Therefore he submits that the impugned order requires to be set aside.
9. Per contra, the learned Counsel for the petitioner contended that as is clear from the extractions in the earlier order of this Court, the disciplinary authority after applying its mind to the enquiry report, though held the petitioner guilty of the charges levelled against him, was of the considered opinion that the punishment of dismissal would be too harsh. Therefore they sought permission of the Central Vigilance Commission to impose a major punishment other than the 14 punishment of dismissal. Now, after compliance of the direction of the Court in the earlier proceedings, if really the disciplinary authority had applied its mind, the facts being the same, if he is not imposing the punishment other than the punishment of dismissal, the only inference to be drawn is they are giving effect to the recommendation of the Central Vigilance Commission. Therefore the learned Single Judge was justified in setting aside the order of dismissal.
10. If the learned single Judge had set aside the order of dismissal on the ground that the punishment of dismissal is disproportionate to the charges proved against the petitioner, probably no case for interference was made out. But, the learned single Judge has set aside the order on the ground that the bank did not make available the correspondence between the bank and the CVC and therefore he draws an adverse inference and he finds fault with the bank accusing them of suppressing the material in order to sustain its action. The said finding is without any basis. Whatever may be the 15 correspondence between the bank and the CVC it is the recommendation of the CVC that was crucial. Without furnishing a copy of that recommendation, when the disciplinary authority acted on that recommendation, on an earlier occasion the said order of dismissal was set aside a specific time was given to the bank to furnish the copy of the recommendation, hear the petitioner and then proceed to pass orders. After the order, admittedly copies of CVC recommendation was given to the petitioner. Petitioner gave his reply. Thereafter, the bank did not correspond with the CVC to any extent. On the contrary, they looked into the enquiry report, looked into the CVC recommendation, then looked into the explanation given by the petitioner to the CVC and then independently the disciplinary authority came to the conclusion that allegations are proved and punishment of dismissal is the appropriate action to be taken. Therefore, the learned single Judge was not justified in setting aside the said order on the ground that the bank had suppressed any material, bank did not make available the entire 16 correspondence between the bank and the CVC and merely because even after remand the very same order of dismissal is passed. Therefore, the order passed by the learned single Judge cannot be sustained.
10. However, the learned counsel appearing for the respondent submitted, having regard to the fact that the petitioner was dismissed from service in 1997, in the meanwhile he has reached the age of superannuation, if the matter is remanded to the learned single Judge for decision on merits, it would cause great hardship for no fault of the petitioner. Therefore, he requested this Court to decide the case on merits. We find substance in the said contention. Therefore, we have looked into the material on record in order to decide the case on merits.
11. The facts are not in dispute. The main lapse/allegation levelled against the petitioner is that, on 24.3.1992 he had placed two office notes before the committee 17 for Management of Portfolio Investment wherein they had specifically recommended for entering into transactions with Fairgrowth Financial Services Ltd., and Fairgrowth Investments Ltd., for investment and disinvestment of funds relating to portfolio account but had deliberately withheld in the said office notes material information in regard to financial inadequacy of Fairgrowth Financial Services Ltd., in spite of the fact that on the same day, another note was placed before the then Chairman and Managing Director in the matter of sale of RPCL shares wherein they had brought out the fact that the Fairgrowth Financial Services Ltd., was got having the required financial adequacy. The Enquiry Officer has come to the conclusion that it was not proper on the part of the charge sheeted official to have withheld the information with regard to financial inadequacy of FFSL from the committee on portfolio investment and that if the committee was made aware of the factual position, their decision would have been different and the committee would have advised not to deal with the Fairgrowth Group of Companies.
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12. The petitioner has pleaded that in the case of RPCL share, the amount involved was Rs.16.67 crores which was more than the paid up capital of Fairgrowth Financial Services Ltd., (which was Rs.8.60 crores as on 31-3-1992) and this was the reason why he had made observations regarding the financial inadequacy of FFSL to cover this volume of transaction. However since the amount covered in the purchase and sale agreement with Fairgrowth Group Companies involved transaction up to 3 crores which was well within the net worth of the company, there was no need to mention this fact in the two office notes for investment and disinvestment of funds with the Fairgrowth Group. The petitioner has further stated that all the committee members including the then Chairman and Managing Director were well aware of the financial status of these groups and also regarding simultaneous purchase and sale transaction that were taking place with various groups during the relevant period. The co- accused - Shri K.Aithappa Shetty has also taken similar stand. 19
13. On consideration of the aforesaid material, the disciplinary authority was of the view that since September, 1991 the Bank had entered into 11 purchase and 10 sale contracts with the 2 companies of Fairgrowth Group viz., FFSL and FIL. The transaction with one company is guaranteed by another company and for purchase transaction from one company there is corresponding sale transaction with the other company. Since the purchase and sale contracts are entered into only after the relevant matter is placed before the Portfolio Management Committee, which included 2 General Managers and thereafter the matter is placed before the Chairman and Managing Director for final decision, there is every indication to show that the top management of the Bank was fully aware of the transactions the Bank had with Fairgrowth Group since September, 1991. The main argument of the petitioner is that if the FFSL is not having the financial strength to handle transaction involving Rs.16 crores is mentioned in the office note, it does not mean that they are incapable of not handling 20 any transactions at all. Further, it was up to the committee members to have sought for clarifications and that the committee members are also equally responsible in the decision making process and they alone cannot be held responsible. The disciplinary authority found merit in the argument of the petitioner. The Portfolio Management Committee was fully aware of the purchase and sale transactions with FFSL. Further, what has been emphasized in the office note relating to RPCL shares is that, the sale of shares to Fairgrowth Group cannot be effected in one lot due to their inadequate financial strength. Inference could be drawn from the above observation of the department that piece-meal transaction could be entered into with the Fairgrowth Group, but off loading the entire shares in one lot with the said group is not feasible due to their inadequate financial strength. In the note prepared by the Department it is stated that in the present market conditions, it is not available to sell the shares/debentures in small quantities or on piece-meal basis, as each sale would bring the price of the security and successive 21 sales may fetch only lower and lower prices. Hence, it would be in the interest of the Bank to conclude the deal in one or two lots. According to the disciplinary authority, the above facts indicate that the department has only expressed the financial inadequacy of the Fairgrowth Group for a volume of transaction aggregating to Rs. 16 crores in the matter of sale of RPCL shares. That apart, the transaction relating to sale of RPCL shares is quite distinct from the transaction relating to the investment and disinvestment of funds that has taken place with Fairgrowth Group of Companies. In the sale of RPCL shares, the bank had to receive process aggregating to over Rs.16 crores whereas in the case of investment transaction entered into with the Fairgrowth Group, the bank had to part with an amount of Rs.3 crores on behalf of portfolio clients. Therefore, actually there was no loss. In those circumstances, the disciplinary authority was of the view, though the misconduct is proved, imposing the punishment of dismissal from service of the bank on the petitioner will be too harsh a punishment, for the collective decision of the committee in the 22 matter of placement of funds. Therefore, the disciplinary authority requested the Vigilance Officer of the bank to bring the said facts to the notice of CVC so that they could review their recommendation for imposing the punishment of dismissal against the petitioner. The said fact was brought to the notice of the CVC. In spite of the same, they reiterated their earlier stand.
14. Once the recommendation of the CVC was made available to the petitioner, the petitioner has filed his say in the matter and set out how the said recommendation is not reasonable. He has set out in detail the nature of transactions, the exposure of the bank and he has also stated that the bank did not suffer any loss on account of the said contracts and on the contrary they have earned profit. That is all the material which was before the disciplinary authority before passing the impugned order. If on an earlier occasion, on careful consideration of the entire material on record if they were of the view that the decision of the bank is based on the collective 23 decision of the committee and the bank was exposed to a financial risk, it was only potential and the bank had in fact not sustained any loss and therefore was of the view punishment of dismissal was disproportionate to the gravity of the misconduct proved, in the absence of any other incriminating material which aggravates the misconduct, the finding now recorded that the punishment is proportionate to the gravity of the misconduct proved do not stand to reason. Though in the order it is stated that the bank is exposed to a loss of Rs. 1,52,64,600/- in reply to the contention of the petitioner that there was no loss and on the contrary the bank has made out profit even in those circumstances, the said finding is not based on any legal evidence. That apart as rightly pointed out by the bank throughout it is a decision of the committee. Now they are proceeding against only two officials. It is in this context, the Apex Court in the case of BONGAIGAON REFINERY & P.C. LIMITED AND OTHERS vs GIRISH CHANDRA SARMAH [2007 AIR SCW 5185] has held as under:-
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"All these three Committees have processed the deal and it is only the respondent has been made a scapegoat. After going through the report and the finding recorded by the Division Bench of the High Court, we are of opinion that in fact the Division Bench correctly assessed the situation that the respondent alone was made a scapegoat whereas the decision by all three committees was unanimous decision by all these members participating in the negotiations and the price was finalized accordingly. It is not the respondent alone can be held responsible when the decision was taken by the committees. If the decision of the Committee stinks, it cannot be said that the respondent was alone stink, it will be arbitrary. If all fish stink, pick one and say it stinks only is unfair in the matter of unanimous decision of the Committee. In all the three charges, the respondent has been found to be guilty for not assessing the reasonable price in his report submitted by him where the price indicated by the owner of the land was Rs.30 lakhs. The appointment of Shri I. Sharma as a valuer for land valuation was not 25 also the decision of the respondent alone and the exploration of soil and rock strata given to the company. M/s. ESS Pvt. Ltd., was also not the decision of the respondent alone. Therefore, all the three charges which have been framed against the respondent as if he is alone responsible for the deal is not the correct approach........."
15. In the instant case, from the material on record it is clear that, the petitioner has not disputed the fact that he had prepared a note specifically recommending that Fair Growth Financial Services Limited was not having sufficient financial adequacy to handle the volume of transaction as per market enquiries made by the bank. Subsequently, on the very same day he has placed two notes before the Committee specifically recommending for entering into transaction with Fair Growth Financial Services Limited and Fair Growth Investments Limited for investment and disinvestments of funds relating to portfolio account. The allegation is that he deliberately withheld material information in regard to the 26 earlier note. Thus, he has shown undue favour to the said two companies and exposed the bank to huge financial loss. Now, the material on record shows that the committee of portfolio was fully aware of the transactions the bank had with the Fair Growth Group since 1991. Further, it is the specific case of the petitioner that in case of RPCL where the amount involved was Rs.16.67 crores which was more than the paid up capital of Fairgrowth Financial Services Limited which was Rs.8.60 crores as on 31.3.1992. However, the investment transaction entered into Fair Growth group is only to the extent of Rs.3 crores on behalf of port folio clients which is less than Rs.8.6 crores which is the paid up capital of Fair Growth Financial Services. He has also produced Ex.D30 which shows and estimates a profit of Rs.311.32 Lakhs. By Ex.D33 the bank has also realized a profit of Rs.311.32 Lakhs by part sale of shares held by it and still holds with it shares worth Rs.560 Lakhs. The shares worth Rs.560 Lakhs is with the custodian. This apart the bank is having Rs.161.09 Lakhs. The bank has already made substantial profit and still hold shares worth 27 Rs.560 Lakhs. A legal opinion obtained by the bank shows that the said transactions are all bona fide transactions and the bank should have no difficulty in getting the certification from the custodian. Bank is also in its application before the custodian and to the Bond Committee has clearly taken a stand that these are bona fide transactions and bank is a bona fide holder of shares. These are part of the enquiry records. These facts are not disputed. On the contrary, the disciplinary authority proceeds to hold that the contention of the petitioner that the bank would not be exposed to any financial loss would also not hold good as the bank with due approval of the Board in terms of Agenda Item No.A-8/99 dated 23.1.1991 had incurred huge financial loss of Rs.1,52,64,600/- in respect of transactions entered with Fairgrowth Financial Services Limited alone. This material is not a part of the enquiry report. This is something which has happened if at all subsequent to the order of his dismissal. It is not supported by any legal evidence. Under these circumstances, we are of view even if the conduct of the petitioner is held to have exposed the bank 28 to a potential future loss, the punishment of dismissal imposed for the proved misconduct is grossly disproportionate to the proved misconduct. Therefore, the order of dismissal requires to be set aside. In the facts of this case we are satisfied that, when once the misconduct is proved, the proper punishment to be imposed on the petitioner would be to retire him compulsorily. As he is already deprived of all monetary benefits of 8 years, that would be a sufficient punishment. Therefore, he would be entitled to full consequential retiral benefits. That would meet the ends of justice. Hence, we pass the following order :-
(a) Appeal is partly allowed.
(b) The order of the learned single Judge is set aside.
(c) Similarly, the order of dismissal passed by the disciplinary authority as per Annexure-
X dated 2.5.2000 and the order of the 29 Appellate Authority as per Annexure-Z dated 30.8.2000 are hereby set aside.
However, the finding of misconduct is confirmed.
(d) The punishment of dismissal is substituted by the punishment of compulsory retirement with full retiremental benefits.
(e) The bank is directed to pay all the benefits within 3 months from the date of receipt of this order.
Sd/-
JUDGE Sd/-
JUDGE Ksp/ckl