Calcutta High Court Denies Relief To Bank Manager Demoted For ‘Undue Favours’ To Borrowers, Applies Wednesbury Test Of Reasonableness

The Calcutta High Court has recently dismissed a writ petition filed by a former Branch Manager for Bangiya Gramin Vikash Bank (“Bank”), challenging his demotion arising out of a punishment order passed upon him for unauthorisedly refinancing certain loan accounts, and failing to check the ‘end-use’ of loans obtained under the PM Employment Generation Programme Scheme (“PMEGP”).

In refusing to interfere with the “punishment order,” by referring to various Apex Court judgements, and invoking the Wednesbury Principle of Reasonableness, a single-bench of Justice Shekhar B Saraf held:

[Petitioner] was found extending undue favour to borrowers without taking into consideration their past track record; and financing accounts under the PMEGP scheme without undertaking post lending inspection. Lord Diplock held that for a decision to be unreasonable under the Wednesbury Test, it must be so outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at it. Considering there is prima facie proof of misconduct on behalf of the petitioner, demotion in salary pay scale does not shock the conscience of this Court.

Brief background

The petitioner had been appointed as a Junior Officer at the Raniganj branch of the Bank in 2014, and had been working in the capacity of Branch Manager, before an order of demotion was passed against him in 2018, in connection with a charge sheet dated 30^th August 2016.

Petitioner preferred the present writ petition to quash the 2016 charge sheet, the enquiry report and demotion order from 2018, as well as the order of the appellate authority in 2019, finding him guilty of misconduct and reducing his pay scale accordingly.

In 2016, the Bank alleged that the petitioner had refinanced certain loan accounts without authority, and had failed to ensure the end use of PMEGP loan accounts, leading to such accounts becoming irregular and causing losses to the bank.

In reply to the Bank’s allegations, the petitioner stated that certain overdue loans had been affecting the banks NPA (“Non-performing assets”) figures, and that being an inexperienced bank clerk, he believed that he could reduce the NPA figures of the branch by contacting the loanees and offering them new loans in exchanged for paying off their present loans in full.

Petitioner argued that there was no mala fides on his end, and that one of the impugned loans had been sanctioned by his predecessor, and the rest were sanctioned under the discretionary powers of a bank manager, along with full cooperation of his second officer.

Regarding loans given under the PMEGP, the petitioner argued that he was under pressure from local management and government officials to sanction such loans, beneficiaries of which had been selected by a District-level task force.

Petitioner argued that he had disbursed the initial part of the loan, and on a second officer’s recommendation cash/credit loans were given.

Petitioner submitted that he was unable to follow-up due to being in an accident, which led to him being bedridden for three months from July 2015.

Respondent-bank accused the petitioner of acting outside his authority and committing breach of trust through his actions, as well as influencing the second officer who was categorised as a “novice.”

Petitioner said that there was a difference of only 4 months seniority between him and the second officer, and that it was improper to let the second officer off scot-free by calling him novice.

Petitioner argued that the loans granted by him did not violate bank policies, since those who were allotted loans, had repaid their previous loans in full before being sanctioned further loans, and that in case of PGEMP loans, those who had been derelict or defiant, had their loans stopped.

Bank’s Enquiry officer had found that the petitioner had committed misconduct in failing to execute his duties faithfully or within Bank’s rules and that there were anomalies in the way that loans were disbursed without ensuring proper end use or to defaulters whose ‘integrity was not beyond doubt.’

Accordingly, in finding that there were 11 cases wherein absence of due diligence was observed in sanctioning or disbursing loans, as well as departure from Bank policies, the demotion in pay-scale of the petitioner was recommended by the Disciplinary authority and adopted by the Bank.

Proceedings before the High Court

Petitioner claimed unfair treatment by the enquiring officer, since the charges against him and the second officer were identical, but yet the second officer who shared duties of credit management and ensuring correct use of funds, had been spared.

It was submitted that the disciplinary authority had acted mechanically and affixed an arbitrary punishment by failing to appreciate his actual pay-scale and thereby reverting him to a wrong pay-scale.

It was contended that mere errors, negligence or innocent mistakes in professional duty cannot be regarded as misconduct, which arose out of ill-motive.

Respondents argued that loans were sanctioned outside the Bank’s rules and that the position of a bank manager came with great trust, leading to any misappropriation, even if temporary constituting serious misconduct with appropriate punishment.

Respondents argued that even if no-loss had been proved, any misconduct found in running of a bank, which operated on public confidence would justify punishment, and that while there was no mistake in understanding the appropriate pay-scale of the petitioner, the High Court could not interfere with the findings of the Disciplinary/appellate authorities.

Court’s findings

Court observed that it was prima facie clear that the petitioner had refinanced wilful defaulters, and that such actions were against the bank’s policies, thereby constituting misconduct.

In abiding by the Supreme Court’s ratio in Apparel Export Promotion Council (1999) it was held that the Disciplinary/Appellate authorities are the sole judge of facts, and that the High Court could not interfere with factual findings unless there were compelling circumstances or arbitrary actions.

In further observing that the position of branch manager and his second officer could not be considered to be identical, the Court limited its examination to whether the authorities had acted in accordance with the Wednesbury test of reasonableness.

In dealing with the petitioners contentions that the punishment imposed on him was unreasonable, the Court held that the petitioner had not only been given a chance to argue his case before the disciplinary authority, but he had also had the opportunity of appealing the punishment order before the appellate authority.

It was further held that the enquiry officer’s action in not punishing the second officer was not arbitrary enough to sanction interference and that the petitioner had failed to disprove the charges levelled against him by the enquiring officer, thereby not absolving himself of any guilt.

In laying down a list of principles emergent from the discussions and case laws above, the Court refused to interfere with the petitioner’s demotion, and dismissed the writ petition. It concluded:

It is patently clear that in the present case, the petitioner has been unable to show that the punishment order dated October 1st, 2018, is in violation of any law, based on non-appreciation of relevant facts and on consideration of irrelevant facts or that the judgement was completely irrational. Ergo, the petitioner could not adequately prove that this Court should exercise its discretionary powers and interfere under Article 226 of the Constitution of India.

Citation: 2023 LiveLaw (Cal) 283

Case: Sri Uttam Kumar Das v Bangiya Gramin Vikash Bank & Ors.

Case No: WPA 5066 of 2020

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