REPORTABLE

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

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 8

th

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.

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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 2

nd

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 8

th

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

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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

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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

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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 42

nd

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

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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

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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

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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

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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

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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 8

th

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

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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)……………….”

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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

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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

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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

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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

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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 8

th

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

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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

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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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