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service matter=whether an employer can take disciplinary action =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.

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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
2

 

 

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.
3

 

 

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
5

 

 

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
6

 

 

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
7

 

 

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
8

 

 

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
9

 

 

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
10

 

 

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
11

 

 

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
12

 

 

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
13

 

 

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) ……………….”

 

 
14

 

 

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
15

 

 

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
16

 

 

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
17

 

 

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
18

 

 

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
19

 

 

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
20

 

 

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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