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CASE NO.:

Appeal (civil) 8258 of 2004

PETITIONER:

Damoh Panna Sagar Rural Regional Bank & Anr.

RESPONDENT:

Munna Lal Jain

DATE OF JUDGMENT: 16/12/2004

BENCH:

ARIJIT PASAYAT & S.H. KAPADIA

JUDGMENT:

J U D G M E N T

(Arising out of S.L.P.(C) 19412/2004)

ARIJIT PASAYAT, J.

Leave granted.

Damoh Panna Sagar, Rural Regional Bank- the appellant no.1

(hereinafter referred to as the 'employer') calls in question legality

of the judgment rendered by a Division Bench of the Madhya Pradesh High

Court at Jabalpur directing the Board of Directors of the employer Bank

(in short the 'Board') to reconsider the matter and pass any punishment

other than dismissal, removal or termination of the respondent \026 Munna

Lal Jain (hereinafter referred to as the 'employee').

Background facts in a nutshell are as follows :

On the allegation that while temporarily functioning as the

Branch manager of Kabra Branch, the respondent-employee withdrew a sum

of Rs.25,000/- unauthorisedly and such act amounted to misconduct

warranting serious penalty. Because of such unauthorized withdrawal,

charges were framed against him by charge sheet dated 14.10.1992

alleging that he had withdrawn a sum of Rs.25,000/- on 6.5.1992 for his

personal use. The respondent-employee filed his explanation. Though

not disputing the factum of withdrawal, plea was taken by him that

during the relevant period condition of his wife had deteriorated and

required immediate surgical interference. He had informed about

withdrawal to the Head Office at Damoh. The explanation was not

accepted, an enquiry officer was appointed who submitted his report on

20.7.1993 holding that the employee was guilty of the charges. The

disciplinary authority concurred with the findings of the Enquiry

Officer and after following the formalities i.e. issuance of show-cause

notice, passed the order of removal. In appeal the said order of

removal was maintained. Against the aforesaid order the employee

preferred Writ Petition No. 2719 of 1995. Learned Single Judge held

that the charges levelled have been duly brought home, but remitted the

matter to the appellate authority for re-consideration with regard to

the quantum of punishment. Pursuant to the direction, the matter was

again considered by the Board and it was held that the order of removal

did not require reconsideration. Employee filed a Writ Petition (W.P.

No. 4812 of 1998). Learned Single Judge, who heard the matter, held

that the Board had not considered the matter from all angles keeping in

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view the observations made in the earlier order dated 13.5.1998.

Direction was given to the Board to re-consider the penalty of removal.

The matter was again re-considered and the Board refused to interfere

with the quantum of punishment. The said order was assailed in Writ

Petition No. 5236 of 2000. Learned Single judge declined to interfere

on the ground that the charges had been proved and the Board had passed

a detailed order. Learned Single Judge further held that the factum of

illness of the wife had not been proved as no documents had been filed.

The matter was carried in a Letters Patent Appeal before the

Division Bench. It was stand of the employee before the Division Bench

that the money was withdrawn because of an emergency and he had some of

money in his Provident Fund account. In any event, the money had been

deposited in the bank with 24% interest which was much higher than the

rate of interest that is payable on loan availed without security i.e.

overdraft.

In response, it was submitted by the learned counsel appearing

for the employer, that there was no scope for interference with the

quantum of punishment.

The High Court observed that ordinarily the High Court should not

interfere with the order of learned Single Judge. It, however, noticed

that the amount has been repaid with 24% interest. It was observed

that though adequate material was not placed to establish the wife's

illness that could not be a ground to uphold the punishment of removal,

particularly when he had paid back the amount with 24% interest. There

was no allegation that earlier he had committed any kind of

delinquency. It was noted that antecedents do not play positive role

in all cases, but in certain cases they cannot be totally ignored.

Reference was made to decision of this Court in Kailash Nath Gupta v.

Enquiry Officer (R.K. Rai) Allahabad Bank and others (AIR 2003 SC

1377). It was also observed that in the said case this Court has taken

note of the fact that a sum of Rs.46,000/-has already been repaid

and no loss was caused to the bank. Though factual matrix was noticed

to be different, yet it was held that the Branch Manager in a difficult

situation had withdrawn the money and repaid with 24% interest. There

was no loss caused. Again the High Court observed that it hastened to

add that it was not its view that unless there is any loss there cannot

be any misconduct. Ultimately it was concluded that this was a fit

case where the Board should be compassionate and gracious enough to

reconsider employee's case to pass any other punishment other than

dismissal, removal or termination. It was held that there was

irregularity but not such an irregularity as to attract the punishment

of removal. It was also indicated that even if lesser punishment is

awarded the employee would not be entitled to any kind of back wages.

In support of the appeal, learned counsel for the appellant

submitted that the High Court's judgment is full of contradictions.

Having accepted that there was practically no scope of interference

with the quantum of punishment, yet on irrelevant considerations High

Court directed that punishment of removal, termination or dismissal

should not be passed. The scope for interference with quantum of

punishment has been highlighted by this Court in many cases and this is

a case where no interference was called for. It has been found as a

fact that the defence taken by the employee was false. Though he

claimed that the amount was withdrawn on 9.5.1992, in fact it was

withdrawn on 6.5.1992. There was no evidence adduced regarding the

wife's ailment.

In response, learned counsel for the respondent-employee

submitted that the appeal was not maintainable and the appeal was

really unnecessary one. Ordinarily this Court should not interfere in

service matters by appreciating evidence. The respondent-employee had

intimated the head office about the withdrawal which is bonafide and he

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had repaid the amount with 24% interest.

The scope of interference with quantum of punishment has been the

subject-matter of various decisions of this Court. Such interference

cannot be a routine matter.

Lord Greene said in 1948 in the famous Wednesbury case (1948 (1)

KB 223) that when a statute gave discretion to an administrator to take

a decision, the scope of judicial review would remain limited. He said

that interference was not permissible unless one or the other of the

following conditions was satisfied, namely the order was contrary to

law, or relevant factors were not considered, or irrelevant factors

were considered; or the decision was one which no reasonable person

could have taken. These principles were consistently followed in the

UK and in India to judge the validity of administrative action. It is

equally well known that in 1983, Lord Diplock in Council for Civil

Services Union v. Minister of Civil Service [(1983) 1 AC 768] (called

the CCSU case) summarized the principles of judicial review of

administrative action as based upon one or other of the following viz.,

illegality, procedural irregularity and irrationality. He, however,

opined that "proportionality" was a "future possibility".

In Om Kumar and Ors. v. Union of India (2001 (2) SCC 386), this

Court observed, inter alia, as follows:

"The principle originated in Prussia in the

nineteenth century and has since been adopted in

Germany, France and other European countries. The

European Court of Justice at Luxembourg and the

European Court of Human Rights at Strasbourg have

applied the principle while judging the validity of

administrative action. But even long before that,

the Indian Supreme Court has applied the principle of

"proportionality" to legislative action since 1950,

as stated in detail below.

By "proportionality", we mean the question

whether, while regulating exercise of fundamental

rights, the appropriate or least-restrictive choice

of measures has been made by the legislature or the

administrator so as to achieve the object of the

legislation or the purpose of the administrative

order, as the case may be. Under the principle, the

court will see that the legislature and the

administrative authority "maintain a proper balance

between the adverse effects which the legislation or

the administrative order may have on the rights,

liberties or interests of persons keeping in mind the

purpose which they were intended to serve". The

legislature and the administrative authority are,

however, given an area of discretion or a range of

choices but as to whether the choice made infringes

the rights excessively or not is for the court. That

is what is meant by proportionality.

xxx xxx xxx xxx xxx

The development of the principle of "strict

scrutiny" or "proportionality" in administrative law

in England is, however, recent. Administrative action

was traditionally being tested on Wednesbury grounds.

But in the last few years, administrative action

affecting the freedom of expression or liberty has

been declared invalid in several cases applying the

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principle of "strict scrutiny". In the case of these

freedoms, Wednesbury principles are no longer

applied. The courts in England could not expressly

apply proportionality in the absence of the

convention but tried to safeguard the rights

zealously by treating the said rights as basic to the

common law and the courts then applied the strict

scrutiny test. In the Spycatcher case Attorney

General v. Guardian Newspapers Ltd. (No.2) (1990) 1

AC 109 (at pp. 283-284), Lord Goff stated that there

was no inconsistency between the convention and the

common law. In Derbyshire County Council v. Times

Newspapers Ltd. (1993) AC 534, Lord Keith treated

freedom of expression as part of common law.

Recently, in R. v. Secy. Of State for Home Deptt., ex

p. Simms (1999) 3 All ER 400 (HL), the right of a

prisoner to grant an interview to a journalist was

upheld treating the right as part of the common law.

Lord Hobhouse held that the policy of the

administrator was disproportionate. The need for a

more intense and anxious judicial scrutiny in

administrative decisions which engage fundamental

human rights was re-emphasised in in R. v. Lord

Saville ex p (1999) 4 All ER 860 (CA), at pp.870,872)

. In all these cases, the English Courts applied the

"strict scrutiny" test rather than describe the test

as one of "proportionality". But, in any event, in

respect of these rights "Wednesbury" rule has ceased

to apply.

However, the principle of "strict scrutiny" or

"proportionality" and primary review came to be

explained in R. v. Secy. of State for the Home Deptt.

ex p Brind (1991) 1 AC 696. That case related to

directions given by the Home Secretary under the

Broadcasting Act, 1981 requiring BBC and IBA to

refrain from broadcasting certain matters through

persons who represented organizations which were

proscribed under legislation concerning the

prevention of terrorism. The extent of prohibition

was linked with the direct statement made by the

members of the organizations. It did not however,

for example, preclude the broadcasting by such

persons through the medium of a film, provided there

was a "voice-over" account, paraphrasing what they

said. The applicant's claim was based directly on

the European Convention of Human Rights. Lord Bridge

noticed that the Convention rights were not still

expressly engrafted into English law but stated that

freedom of expression was basic to the Common law and

that, even in the absence of the Convention, English

Courts could go into the question (see p. 748-49).

".....whether the Secretary of State, in the

exercise of his discretion, could reasonably

impose the restriction he has imposed on the

broadcasting organisations"

and that the courts were

"not perfectly entitled to start from the

premise that any restriction of the right to

freedom of expression requires to be justified

and nothing less than an important public

interest will be sufficient to justify it".

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Lord Templeman also said in the above case that the

courts could go into the question whether a

reasonable minister could reasonably have concluded

that the interference with this freedom was

justifiable. He said that "in terms of the

Convention" any such interference must be both

necessary and proportionate (ibid pp. 750-51).

In the famous passage, the seeds of the

principle of primary and secondary review by courts

were planted in the administrative law by Lord Bridge

in the Brind case (1991) 1 AC 696. Where Convention

rights were in question the courts could exercise a

right of primary review. However, the courts would

exercise a right of secondary review based only on

Wednesbury principles in cases not affecting the

rights under the Convention. Adverting to cases

where fundamental freedoms were not invoked and where

administrative action was questioned, it was said

that the courts were then confined only to a

secondary review while the primary decision would be

with the administrator. Lord Bridge explained the

primary and secondary review as follows:

"The primary judgment as to whether the

particular competing public interest justifying

the particular restriction imposed falls to be

made by the Secretary of State to whom

Parliament has entrusted the discretion. But,

we are entitled to exercise a secondary

judgment by asking whether a reasonable

Secretary of State, on the material before him,

could reasonably make the primary judgment."

But where an administrative action is

challenged as "arbitrary" under Article 14 on the

basis of Royappa (1974) 4 SCC 3 (as in cases where

punishments in disciplinary cases are challenged),

the question will be whether the administrative order

is "rational" or "reasonable" and the test then is

the Wednesbury test. The courts would then be

confined only to a secondary role and will only have

to see whether the administrator has done well in his

primary role, whether he has acted illegally or has

omitted relevant factors from consideration or has

taken irrelevant factors into consideration or

whether his view is one which no reasonable person

could have taken. If his action does not satisfy

these rules, it is to be treated as arbitrary. In

G.B. Mahajan v. Jalgaon Municipal Council (1991) 3

SCC 91 at p. 111 Venkatachaliah, J. (as he then was)

pointed out that "reasonableness" of the

administrator under Article 14 in the context of

administrative law has to be judged from the stand

point of Wednesbury rules. In Tata Cellular v. Union

of India (1994) 6 SCC 651 at pp. 679-80), Indian

Express Newspapers Bombay (P) Ltd. v. Union of India

(1985) 1 SCC 641 at p.691), Supreme Court Employees'

Welfare Assn. V. Union of India (1989) 4 SCC 187 at

p. 241) and U.P. Financial Corpn. V. Gem Cap(India)

(P) Ltd. (1993) 2 SCC 299 at p. 307) while judging

whether the administrative action is "arbitrary"

under Article 14 (i.e. otherwise then being

discriminatory), this Court has confined itself to a

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Wednesbury review always.

The principles explained in the last preceding

paragraph in respect of Article 14 are now to be

applied here where the question of "arbitrariness" of

the order of punishment is questioned under Article

14.

xxx xxx xxx xxx xxx

Thus, from the above principles and decided

cases, it must be held that where an administrative

decision relating to punishment in disciplinary cases

is questioned as "arbitrary" under Article 14, the

court is confined to Wednesbury principles as a

secondary reviewing authority. The court will not

apply proportionality as a primary reviewing court

because no issue of fundamental freedoms nor of

discrimination under Article 14 applies in such a

context. The court while reviewing punishment and if

it is satisfied that Wednesbury principles are

violated, it has normally to remit the matter to the

administrator for a fresh decision as to the quantum

of punishment. Only in rare cases where there has

been long delay in the time taken by the disciplinary

proceedings and in the time taken in the courts, and

such extreme or rare cases can the court substitute

its own view as to the quantum of punishment."

In B.C. Chaturvedi v. Union of India and Ors. (1995 [6] SCC 749)

it was observed:

"A review of the above legal position would

establish that the disciplinary authority, and on

appeal the appellate authority, being fact-finding

authorities have exclusive power to consider the

evidence with a view to maintain discipline. They

are invested with the discretion to impose

appropriate punishment keeping in view the magnitude

or gravity of the misconduct. The High

Court/Tribunal, while exercising the power of

judicial review, cannot normally substitute its own

conclusion on penalty and impose some other penalty.

If the punishment imposed by the disciplinary

authority or the appellate authority shocks the

conscience of the High Court/Tribunal, it would

appropriately mould the relief, either directing the

disciplinary/appellate authority to reconsider the

penalty imposed, or to shorten the litigation, it may

itself, in exceptional and rare cases, impose

appropriate punishment with cogent reasons in support

thereof."

In Union of India and Anr. v. G. Ganayutham (1997 [7] SCC 463),

this Court summed up the position relating to proportionality in

paragraphs 31 and 32, which read as follows:

"The current position of proportionality in

administrative law in England and India can be

summarized as follows:

(1) To judge the validity of any

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administrative order or statutory discretion,

normally the Wednesbury test is to be applied

to find out if the decision was illegal or

suffered from procedural improprieties or was

one which no sensible decision-maker could, on

the material before him and within the

framework of the law, have arrived at. The

court would consider whether relevant matters

had not been taken into account or whether

irrelevant matters had been taken into account

or whether the action was not bona fide. The

court would also consider whether the decision

was absurd or perverse. The court would not

however go into the correctness of the choice

made by the administrator amongst the various

alternatives open to him. Nor could the court

substitute its decision to that of the

administrator. This is the Wednesbury (1948 1

KB 223) test.

(2) The court would not interfere with

the administrator's decision unless it was

illegal or suffered from procedural impropriety

or was irrational \026 in the sense that it was in

outrageous defiance of logic or moral

standards. The possibility of other tests,

including proportionality being brought into

English administrative law in future is not

ruled out. These are the CCSU (1985 AC 374)

principles.

(3)(a) As per Bugdaycay (1987 AC 514),

Brind (1991 (1) AC 696) and Smith (1996 (1) All

ER 257) as long as the Convention is not

incorporated into English law, the English

courts merely exercise a secondary judgment to

find out if the decision-maker could have, on

the material before him, arrived at the primary

judgment in the manner he has done.

(3)(b) If the Convention is incorporated

in England making available the principle of

proportionality, then the English courts will

render primary judgment on the validity of the

administrative action and find out if the

restriction is disproportionate or excessive or

is not based upon a fair balancing of the

fundamental freedom and the need for the

restriction thereupon.

(4)(a) The position in our country, in

administrative law, where no fundamental

freedoms as aforesaid are involved, is that the

courts/tribunals will only play a secondary

role while the primary judgment as to

reasonableness will remain with the executive

or administrative authority. The secondary

judgment of the court is to be based on

Wednesbury and CCSU principles as stated by

Lord Greene and Lord Diplock respectively to

find if the executive or administrative

authority has reasonably arrived at his

decision as the primary authority.

(4)(b) Whether in the case of

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administrative or executive action affecting

fundamental freedoms, the courts in our country

will apply the principle of "proportionality"

and assume a primary role, is left open, to be

decided in an appropriate case where such

action is alleged to offend fundamental

freedoms. It will be then necessary to decide

whether the courts will have a primary role

only if the freedoms under Articles 19, 21 etc.

are involved and not for Article 14.

Finally, we come to the present case. It is

not contended before us that any fundamental freedom

is affected. We need not therefore go into the

question of "proportionality". There is no

contention that the punishment imposed is illegal or

vitiated by procedural impropriety. As to

"irrationality", there is no finding by the Tribunal

that the decision is one which no sensible person who

weighed the pros and cons could have arrived at nor

is there a finding, based on material, that the

punishment is in "outrageous" defiance of logic.

Neither Wednesbury nor CCSU tests are satisfied. We

have still to explain "Ranjit Thakur (1987 [4] SCC

611)".

The common thread running through in all these decisions is that

the Court should not interfere with the administrator's decision unless

it was illogical or suffers from procedural impropriety or was shocking

to the conscience of the Court, in the sense that it was in defiance of

logic or moral standards. In view of what has been stated in the

Wednesbury's case (supra) the Court would not go into the correctness

of the choice made by the administrator open to him and the Court

should not substitute its decision to that of the administrator. The

scope of judicial review is limited to the deficiency in decision-

making process and not the decision.

To put differently unless the punishment imposed by the

Disciplinary Authority or the Appellate Authority shocks the conscience

of the Court/Tribunal, there is no scope for interference. Further to

shorten litigations it may, in exceptional and rare cases, impose

appropriate punishment by recording cogent reasons in support thereof.

In a normal course if the punishment imposed is shockingly

disproportionate it would be appropriate to direct the Disciplinary

Authority or the Appellate Authority to reconsider the penalty imposed.

In the case at hand the High Court did not record any reason as

to how and why it found the punishment shockingly disproportionate.

Even there is no discussion on this aspect.

A Bank officer is required to exercise higher standards of

honesty and integrity. He deals with money of the depositors and the

customers. Every officer/employee of the Bank is required to take all

possible steps to protect the interests of the Bank and to discharge

his duties with utmost integrity, honesty, devotion and diligence and

to do nothing which is unbecoming of a Bank officer. Good conduct and

discipline are inseparable from the functioning of every

officer/employee of the Bank. As was observed by this Court in

Disciplinary Authority-cum-Regional Manager v. Nikunja Bihari Patnaik

(1996 (9) SCC 69), it is no defence available to say that there was no

loss or profit resulted in case, when the officer/employee acted

without authority. The very discipline of an organization more

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particularly a Bank is dependent upon each of its officers and officers

acting and operating within their allotted sphere. Acting beyond one's

authority is by itself a breach of discipline and is a misconduct. The

charges against the employee were not casual in nature and were

serious. These aspects do not appear to have been kept in view by the

High Court.

It needs no emphasis that when a Court feels that the punishment

is shockingly disproportionate, it must record reasons for coming to

such a conclusion. Mere expression that the punishment is shockingly

disproportionate would not meet the requirement of law. Even in respect

of administrative orders Lord Denning M.R. in Breen v. Amalgamated

Engineering Union (1971 (1) All E.R. 1148) observed "The giving of

reasons is one of the fundamentals of good administration". In

Alexander Machinery (Dudley) Ltd. v. Crabtree (1974 LCR 120) it was

observed: "Failure to give reasons amounts to denial of justice".

Reasons are live links between the mind of the decision taker to the

controversy in question and the decision or conclusion arrived at".

Reasons substitute subjectivity by objectivity. The emphasis on

recording reasons is that if the decision reveals the "inscrutable face

of the sphinx", it can, by its silence, render it virtually impossible

for the Courts to perform their appellate function or exercise the

power of judicial review in adjudging the validity of the decision.

Right to reason is an indispensable part of a sound judicial system.

Another rationale is that the affected party can know why the decision

has gone against him. One of the salutary requirements of natural

justice is spelling out reasons for the order made, in other words, a

speaking out. The "inscrutable face of a sphinx" is ordinarily

incongruous with a judicial or quasi-judicial performance.

These aspects were highlighted in Chairman and Managing Director,

United Commercial Bank and Others v. P.C. Kakkar (2003 (4) SCC 364).

In the case at hand, the High Court's judgment is full of ifs and

buts. There is no definite finding recorded that the punishment is

suffering from any infirmity. No basis has been indicated to direct

re-consideration of the quantum of punishment. It is to be noted that

the respondent had miserably failed to prove bonafides. Though he took

the stand that he had informed the head office about the withdrawal, no

material was placed before any of the authorities to prove it. It is

to be noted that on the basis of material on record, it was concluded

that the withdrawal was on 6.5.1992 and not on 9.5.1992 as was claimed.

The respondent-employee has withdrawn a sum of Rs.20,000/- from the

account of bank with the State Bank of India on 6.5.1992 and had

withdrawn a further sum of Rs.5,000/- from the cash.

Above being the position the impugned judgment of the High Court

cannot be maintained and the same is set aside. The Writ Petition

filed by the respondent-employee, stands dismissed.

The appeal is allowed. No costs.