Page 1 REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 1217 OF 2011

Brij Bihari Singh Appellant(s)

versus

Bihar State Financial Corporation

and others Respondent(s)

J U D G M E N T

M.Y. Eqbal, J.:

The appellant was working on the post of Assistant

General Manager in the Bihar State Financial Corporation (in

short, “the Corporation”). At the direction of State

Government, vide letter dated 20

th

March, 1993, the Managing

Director of the Corporation, who is the Disciplinary Authority,

put the appellant under suspension and initiated disciplinary

proceedings on the following charges:-

“1. He recommended release of Rs. 4.33 lakhs to

M/s. Koshi Jute Mills Pvt. Ltd., Supaul against

purchased machines without deducting the

stipulated promoter's margin money, which is

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Page 2 evident from the fact that the promoter's margin

money was deducted in totality at the time of

subsequent release of Rs.7.80 lakhs to the

concern on 19.12.90.

2. He intentionally and in utter violence of

delegated powers released Rs. 7.80 lakhs to the

concern (M/s. Koshi Jute Mills Pvt. Ltd., Supaul)

on 19.12.90 at his own for which he was not the

competent authority for disbursing such amount

at his own. This irregular act of his is a grave

misconduct for his wrongful gain.

3. While making release of Rs. 7.80 lakhs to the

concern (M/s. Koshi Jute Mills Pvt. Ltd., Supaul)

in utter violation of delegated powers, he did not

retain the 15% retention money according to

stipulated conditions in the Sanction Order and

mutual agreement between the promoter and

the machine supplier.

4. While making release to the aforesaid concern

he deliberately suppressed the facts regarding

observations of the Vigilance and Grievance Cell

dated 22.12.89 and mentioned that the dealing

of machine supplier is genuine whereas

observations of Vigilance and Grievance Cell

duly approved by the M.D. available in the loan

file shows that the machine supplier is not

refunded and that of his connivance with the

promoter.

5. He deliberately ignored the further

observations of the Vigilance & Grievance Cell

duly approved by M.D. to inspect the site of the

machine supplier immediately and made release

to the aforesaid concern.

6. He deliberately received the payment of Car

Allowance for the period from 9.3.88 to 1.10.88

without having a car in his name during

aforesaid period.

7. He purchased land at Patliputra Colony,

Patna from Dr. Bindeshwari Prasad Singh

through three different absolute sale deeds

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Page 3 (Registered at Calcutta) showing himself as false

profession without disclosing the source of fund

arranged.”

2.After serving the aforesaid memorandum of charges

upon the appellant some additional charges were served,

which are also set out below :-

“He himself examined the proposal of Delhi

based fake promoter of M/s. Divine Cycle (P)

Ltd., Industrial Area, Fatwah on promoter's

personal guarantee and placed the proposal with

recommendation before the Board for sanction of

loan to the Company when the residential

addresses of promoters were incomplete and

official address was subsequently found fake. He

should have examined the proposal before

recommending the case to the Board which he

did not do so as a result the promoter managed

to grab the fund from the Corporation and left

the unit abandoned. Thus due to his negligence

of duties in processing of the loan proposal the

Corporation has been put to a huge financial

loss.

He, with an ulterior motive did not inform H.O.

after getting the site jointly inspected with

BICICO representative in Feb. '83 that the unit

was running in a rented premises other than

that of mortgaged to the Corporation and

deliberately did not take any action against the

promoter which proves his connivance with the

promoter of the company to cause wrongful loss

to the Corporation.”

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Page 4 3.It appears that one officer of the State Government on

deputation was made Enquiry Officer, who conducted the

enquiry in respect of the aforesaid charges and submitted

enquiry report holding that the majority of the charges have

been proved. Consequently, 2

nd

show cause notice was given

to the appellant which was duly responded. The appellant was

then directed to be personally present for hearing and then the

Managing Director, instead of passing final order,

recommended the Board of Directors of the Corporation for the

punishment to be imposed upon the appellant. On receipt of

the said recommendation, the Board finally passed an order of

dismissal of the appellant from service.

4.The appellant assailed the order of dismissal by filing a

writ petition being CWJC No.3528 of 1994, which was

eventually dismissed by the learned Single Judge of the High

Court. The said judgment and order was finally upheld by the

Division Bench of the High Court in Letters Patent Appeal

No.51 of 1998.

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Page 5 5.Mr. Sunil Kumar, learned senior counsel appearing for

the appellant assailed the impugned judgment of the High

Court and the order of dismissal of the appellant mainly on

the following grounds:-

“I.The departmental proceeding was

conducted by the Enquiry Officer by merely

perusing the files without representing officer

presenting the case on behalf of the employer

and without recording any evidence in support

of the charges.

II.The Enquiry Officer in the departmental

proceedings submitted his report merely by

perusing the files without the charges being

proved by the employer.

III.There is a serious violation of principles of

natural justice for the reason inter alia that the

presenting officer neither presented the case of

the employer nor led any oral or documentary

evidence. The Disciplinary Authority, instead of

passing a final order on the basis of enquiry

report and the explanation submitted by the

appellant, recommended the case to the Board

for taking a final decision. The Board, which is

the appellate authority usurp the power of the

Disciplinary Authority and passed the order of

punishment.”

6.Before we decide the legality and propriety of the order of

dismissal passed by the respondent, we would like to refer

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Page 6 relevant provisions of the Regulations called the Bihar State

Financial Corporation (Staff) Regulations, 1965. Regulations

39 and 40 read as under:-

“39.Penalties:- (i) Without prejudice to the

provisions of the Regulations, an employee who

commits a breach of the regulations of the

Corporation or who displays negligence,

inefficiency or indolence or who knowingly does

anything detrimental to the interest of the

Corporation or in conflict with its instructions or

who commits a breach of discipline or is guilty of

any other act of misconduct or who is convicted of

a criminal offence shall be liable to any or all of

the following penalties:-

(a)Reprimand;

(b)Withholding or postponement of

increment or promotion including

stoppage at an efficiency bar, if any,

(c)Reduction to a lower post or grade or to a

lower stage in his incremental scale.

(d)Recovery from pay of the whole or part of

any pecuniary loss caused to the

Corporation by the employee,

(e)Fine,

(f)Suspension,

(g)Dismissal,

(h)Discharge, or

(i)Compulsory retirement

(ii)No employee shall be subjected to the

penalties in clauses (b), (c), (d), (e), (f), (g), (h) or (i)

of sub-regulation (i) except by an order in writing

signed by the Managing Director and no such

order shall be passed without the charge or

charges being formulated in writing and given to

the said employ so that he shall have reasonable

opportunity to answer them in writing or in

person, as he prefers, and in the latter case his

defence shall be taken down in writing and read

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Page 7 to him, provided that the requirements or this

Regulation may be waived if the facts on the basis

of which action is to be taken have been

established in a Court of Law or where the

employee has absconded or where it is for any

other reason impracticable to communicate with

him or where there is difficulty in observing them

and the requirements can be waived without

injustice to the employee. In every case where all

or any of the requirements of this Regulation are

waived, the reasons for so doing shall be recorded

in writing.

(iii) An employee may, before the initiation of any

proceeding under sub-regulation (ii) or pending

the completion of such proceeding be placed

under suspension by the Managing Director.

During such suspension he shall receive

subsistence allowance equal to two thirds of his

substantive pay plus the dearness allowance,

provided that if no penalty under any of the

clauses (b), (c), (d), (e), (f), (g), (h) or (i) of sub-

regulation (i) is imposed, the employee shall be

paid the difference between the subsistence

allowance and the emoluments which he would

have received but for such suspension for the

period while he was under suspension and that, if

a penalty is imposed on him under the said

clauses, no order shall be passed which shall

have the effect of compelling him to refund such

subsistence allowance. The period during which

an employee is under suspension shall, if he is

not dismissed from the service, be treated as on

duty for specific purpose, i.e. as the Managing

Director may direct.

40. Right to appeal:- (i) An employee shall

have a right of appeal against any order passed by

the competent authority which injuriously affects

his interests.

(ii) No appeal shall lie after the expiration of

sixty days from the date of receipt of the order

against which the appeal is preferred.”

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Page 8 7.Perusal of Regulations 39 and 40 would show the

manner and procedure for conducting departmental enquiry.

Regulation 40 confers a statutory right of appeal to the

employee against an order passed by the competent authority

which injuriously affects his interest.

8.It is well settled that a person who is required to answer

a charge imposed should know not only the accusation but

also the testimony by which the accusation is supported. The

delinquent must be given fair chance to hear the evidence in

support of the charge and to cross-examine the witnesses who

prove the charge. The delinquent must also be given a chance

to rebut the evidence led against him. A departure from this

requirement violates the principles of natural justice.

Furthermore, the materials brought on record pointing out the

guilt are required to be proved. If the enquiry report is based

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Page 9 on merely ipse dixit and also conjecture and surmises cannot

be sustained in law.

9.In the case of State of U.P. vs. Saroj Kumar Sinha,

(2010) 2 SCC 772, this Court held:-

“28. An inquiry officer acting in a quasi-judicial

authority is in the position of an independent

adjudicator. He is not supposed to be a representative

of the department/disciplinary authority/Government.

His function is to examine the evidence presented by

the Department, even in the absence of the delinquent

official to see as to whether the unrebutted evidence is

sufficient to hold that the charges are proved. In the

present case the aforesaid procedure has not been

observed. Since no oral evidence has been examined

the documents have not been proved, and could not

have been taken into consideration to conclude that

the charges have been proved against the respondents.

29. Apart from the above, by virtue of Article 311(2) of

the Constitution of India the departmental enquiry had

to be conducted in accordance with the rules of

natural justice. It is a basic requirement of the rules of

natural justice that an employee be given a reasonable

opportunity of being heard in any proceedings which

may culminate in punishment being imposed on the

employee.

30. When a departmental enquiry is conducted against

the government servant it cannot be treated as a

casual exercise. The enquiry proceedings also cannot

be conducted with a closed mind. The inquiry officer

has to be wholly unbiased. The rules of natural justice

are required to be observed to ensure not only that

justice is done but is manifestly seen to be done. The

object of rules of natural justice is to ensure that a

government servant is treated fairly in proceedings

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Page 10 which may culminate in imposition of punishment

including dismissal/removal from service.”

10.In the instant case, the disciplinary proceeding was

conducted in gross violation of Regulation 39 of the said

Regulations inasmuch as no reasonable opportunity was given

to the delinquent to place his case in defence. The Regulation

imposed a duty on the Authority to give a personal hearing to

the delinquent.

11.A right of appeal has been provided by Regulation 40 of

the said Regulations against any order passed by the

competent Authority. In the instant case as noticed above, the

Disciplinary Authority, instead of exercising the power as

Disciplinary Authority imposing punishment, referred his

recommendations to the appellate authority, namely, Board of

Directors for taking a decision and the Board of Directors

exercised the power of Disciplinary Authority and imposed

punishment of dismissal thereby deprived the appellant from

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Page 11 moving the appellate authority against the said order. Such

exercise of power is wholly arbitrary and discriminatory.

12.Curiously enough, the Managing Director being the

disciplinary authority prepared his report and referred the

matter to the Board of Directors to consider the draft charges,

enquiry report, representation filed by the officer concerned

and his finding, for taking an appropriate decision in the case.

Not only that, when the case was placed before the Board for

taking a final decision, he participated in the said meeting and

a decision was taken by the Board of Directors to dismiss the

appellant from service. In our considered opinion, such a

procedure adopted by the disciplinary authority and the

appellate authority is absolutely erroneous in law.

13.In the case of Surjit Ghosh vs. United Commercial

Bank, AIR 1995 SC 1053, this Court in similar

circumstances, observed:-

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Page 12 “5. ……..It is true that when an authority higher than

the disciplinary authority itself imposes the

punishment, the order of punishment suffers from no

illegality when no appeal is provided to such authority.

However, when an appeal is provided to the higher

authority concerned against the order of the

disciplinary authority or of a lower authority and the

higher authority passes an order of punishment, the

employee concerned is deprived of the remedy of

appeal which is a substantive right given to him by the

Rules/Regulations. An employee cannot be deprived of

his substantive right. What is further, when there is a

provision of appeal against the order of the disciplinary

authority and when the appellate or the higher

authority against whose order there is no appeal,

exercises the powers of the disciplinary authority in a

given case, it results in discrimination against the

employee concerned. This is particularly so when there

are no guidelines in the Rules/Regulations as to when

the higher authority or the appellate authority should

exercise the powers of the disciplinary authority. The

higher or appellate authority may choose to exercise

the power of the disciplinary authority in some cases

while not doing so in other cases. In such cases, the

right of the employee depends upon the choice of the

higher/appellate authority which patently results in

discrimination between an employee and employee.

Surely, such a situation cannot savour of legality.

Hence we are of the view that the contention advanced

on behalf of the respondent-Bank that when an

appellate authority chooses to exercise the power of

disciplinary authority, it should be held that there is

no right of appeal provided under the Regulations

cannot be accepted.

The result, therefore, is that the present order of

dismissal suffers from an inherent defect and has to

be set aside.”

14.In Amar Nath Chowdhury vs. Braithwaite and

Company Ltd. and Ors. , (2002) 2 SCC 290, a similar case

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Page 13 came for consideration before this Court. In that case, the

appellant who was an employee of Braithwaite and Company

Ltd., a Government of India undertaking, was subjected to

disciplinary proceedings. The enquiry committee submitted its

report to the disciplinary authority who was the Chairman-

cum-Managing Director of the Company. The disciplinary

authority passed an order of removal of the appellant from

service. The appellant moved the Board of Directors who was

the appellate authority. When the appeal was taken up by the

Board, the said Chairman-cum-Managing Director

participated in the deliberation of the meeting of the Board

which heard and dismissed the appeal. On these facts, this

Court held that the proceeding of the Board was vitiated on

account of participation of the disciplinary authority while

deciding the appeal preferred by the appellant. Similar view

has been taken in the case of Institute of Chartered

Accountants of India vs. L.K. Ratna and Ors. , (1986) 4

SCC 537.

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Page 14 15.In the case of K. Chelliah vs. Chairman Industrial

Finance Corporation of India and Anr., AIR 1973 Mad. 122,

an employee of the IFCI was dismissed from service. The

decision to terminate the employee was taken up by the

Chairman who was also a Member of the Board which

considered the appeal. The High Court held that the entire

proceeding was vitiated by non-observance of principles of

natural justice.

16.After giving our anxious consideration in the matter, we

are of the definite view that the procedure adopted by the

respondents in removing the appellant from service is

erroneous and suffers from serious discrimination and bias.

Further, the Enquiry Officer conducted the enquiry without

following the procedure and without giving sufficient

opportunity to the delinquent to place his case. Enquiry is

also vitiated in law.

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Page 15 17.For the reason aforesaid, we find that the appeal deserves

to succeed. The orders passed by the Board of Directors and

the impugned judgments passed by the High Court are liable

to be set aside. The matter is, therefore, sent back to the

Disciplinary Authority to proceed from the stage of the enquiry

afresh and pass a reasoned order in accordance with law after

giving full opportunity of hearing to the appellant. Needless to

say if the appellant is aggrieved by the final order that may be

passed by the Disciplinary Authority, he shall have a right to

appeal before the appellate authority.

…………………………… .J.

(M.Y. Eqbal)

…………………………… .J.

(C. Nagappan)

New Delhi

November 20, 2015

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