Opinion Given By CVC To Disciplinary Authority Need Not Be Shared With Delinquent Employee Of Bank: Karnataka High Court

The Karnataka High Court, while reversing an order of the Single bench directing reinstatement of a delinquent bank employee who was dismissed from service for lending money to fictitious persons without duly securing repayment of loans, has observed that the opinion given by the Central Vigilance Commission to the disciplinary authority need not be shared with the employee.

A division bench of Justice Krishna S Dixit and Justice Ramachandra D Huddar allowed the appeal filed by Vijaya Bank and agreed with its contention that no error has been committed by the management in taking the opinion of Central Vigilance Officer inasmuch as such a course is internalised vide Regulation 19 of Vijaya Bank Officer Employees' (Discipline and Appeal) Regulations, 1981. It said,

“The CVC is constituted under Section 3 of the Central Vigilance Commission Act, 2003 and it has statutory duties. One such duty is to advice the banks in matters of disciplinary proceedings. We do not subscribe to the views of learned Single Judge that the vigilance opinion should always be shared with the delinquent employee and that his say should be had on that. The object of consulting the Vigilance Commission is not in the interest of the employee but in the larger interest of the banking institution. There is no scope for assuming the contra position, in the absence of any such indication in the Regulations. In taking this view, we are mindful of the presumption that the principles of natural justice are not ordinarily excluded.”

Refusing the follow the view taken by the Supreme Court in the case of Nagaraj Shivarao Karjagi vs. Syndicate Bank (1991) and Oriental Bank of Commerce vs. SS Sheokand (2014), Court said, “The ratio in these decisions could have been invoked from the side of delinquent employee had there been no provision like regulation 19 of 1981 Regulations. Such a provision was conspicuously absent in the aforesaid two decisions. This aspect has not been discussed in the impugned order even though it was very essential.”

It also held that once an employee of a bank is convicted for an offence involving moral turpitude, he is liable to be discontinued from employment.

“Once an employee of a bank is convicted for an offence involving moral turpitude as has happened in this case, he is liable to be discontinued from employment as discussed above. However, the text of Sec.10(1)(b)(i) (of Banking Regulation Act, 1949), does not indicate as to whether such disruption of vinculum juris is by way of dismissal or discharge simplicitor. When moral turpitude is involved and the bank is put to considerable financial loss, one can safely assume that the legislative intent is dismissal of the delinquent employee.”

M Ravindra Shetty, a manager cadre employee was dismissed from service by the Competent Authority in April 1997. The Departmental Appeal laying a challenge to the same came to be negatived by the Appellate Authority in August the same year.

Shetty was also convicted in the matter for offences punishable under sections 120B r/w Sections 420, 468, 471 of IPC and Sections 13(1)(d) and 13(2) of the Prevention of Corruption Act, 1988 and after appeals, he was sentenced to one year imprisonment.

The bank argued that once penalty is imposed after duly conducting disciplinary proceedings and on the same set of facts the employee having tried is convicted and sentenced for the offences involving moral turpitude, a Writ Court should be loathe to interfere.

The respondent-employee had entered appearance through his counsel who remained absent before the court to assist in the proceedings.

Court said funds are parked with the banks by broad segments of public and this establishes a public trust, which compels the banker to act with a greater care. However, in this case, the respondent had indiscriminately lent bank's money to fictitious persons without securing the repayment thereof and therefore bank had been put to financial loss of more than Rs.13 lakh. This was duly established in a disciplinary enquiry conducted with his participation. It thus observed,

“The findings of guilt as recorded by the Enquiry Officer and accepted by the disciplinary authority while awarding the punishment of dismissal from service. The same has been examined by the Appellate Authority who has upheld the same. Therefore the impugned order of the learned Single Judge who has treated the matter as if he was sitting in appeal suffers from legal infirmity and therefore cannot be sustained. It hardly needs to be reiterated that the focal point of examination of record in writ proceedings is the decision making process and not the decision itself. Such an approach is not reflected in the impugned order. Thus the same suffers from grave infirmities warranting our interference.”

Court recollected American Economist Robert C Holland's slogan “Husband your Banking resources" and said,

“This becomes prominently relevant nowadays when two dozen public sector banks have been closed down or merged with other banks, one of the reasons being 'bad debts'. This is not a happy thing to happen in a growing economy. Indiscriminate lending in gross violation of prescribed protocol in terms of extant Circulars & Manual of Instructions is unscrupulous & culpable. Such a reckless act that is obviously lacking in bona fide would put the banking institutions to the risk of losing public money which they have to husband, the borrowers being fictitious and securities proving futile.”

Accordingly, the Court allowed the appeal and set aside the reinstatement order.

Appearance: Advocate Pradeep S Sawkar for Appellant.

Advocate Mohit Kumar K for Respondent

Citation No: 2024 LiveLaw (Kar) 251

Case Title: Vijaya Bank AND M Ravindra Shetty

Case No: WRIT APPEAL NO. 7791 OF 2003

Click Here To Read/Download Order