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PETITIONER:

THE STATE BANK OF INDIA

Vs.

RESPONDENT:

SHRI C.B. DHALL

DATE OF JUDGMENT: 11/12/1997

BENCH:

SUJATA V. MANOHAR, D.P. WADHWA

ACT:

HEADNOTE:

JUDGMENT:

J U D G M E N T

D.P. Wadhwa, J.

This appeal by the State Bank of India (for short, the

'Bank' or 'State Bank') arises out of the judgment dated

August 22, 1983 of learned single Judge of the High Court of

Delhi. The reasons for the judgment were given by order

dated September 2, 1983. The impugned judgment was delivered

on a writ petition filed by the respondent, C.B. Dhall.

Dhall had challenged the Order of the Central Board of the

State Bank dated June 4, 1980 by which it was resolved that

"the sanction to retire you be withheld and the Bank's

contribution to your provident fund Account amounting to Rs.

24006-49 be forfeited" which decision was communicated to

Dhall by letter dated July 16, 1980 of the Chief General

Manager of the Bank. The High Court allowed the writ

petition and quashed the Resolution of the Central Board as

well as the Communication by which it was conveyed to Dhall.

The High Court further ordered that the Bank shall pay

within six weeks to Dhall the following amounts:

"1. The entire arrears of pension

in regard to the pension and

gratuity fund rules with interest @

6% per annum.

2. Pension will be paid in future

in accordance with the rules.

Pension will be computed on the

basis of full pay during the period

of suspension.

3. The provident Fund (Bank's

contribution which has been

withheld) with interest according

to the Rules after deducting the

admitted sum of Rs. 10,000/- P.F.

and the interest up-to-date on

payment according to the Rules will

be calculated first. Thereafter the

admitted amount of Rs. 10,000/-

will be deducted therefrom. The

balance shall be paid to the

petitioner.

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4. The petitioner shall also be

entitled to such other retirement

benefits as are admissible to him

according to the service rules,

have already not been given to him.

5. Petitioner will also be entitled

to full pay for the period of

suspension and the bank shall pay

the sum after deducting such amount

as has been paid to him during the

period of suspension by way of

subsistence allowance or otherwise.

6. The petitioner shall be entitled

to his costs.

Counsel's fee for Rs. 50/-.

Dhall was appointed as Cashier in the Imperial Bank of

India in July 1939 and was confirmed to this post after

completion of his period of probation of one year. The

Imperial Bank of India was constituted under the Imperial

Bank of India Act, 1920 which was repealed by the State Bank

of India Act, 1955 by which the State Bank was constituted.

Services of Dhall were taken over by the State Bank and the

existing Services Rules, Pension Fund Rules and provident

Fund Rules of the Imperial Bank of India were adopted by the

State Bank in respect of these employees. This was under

Section 7 of the State Bank of India Act which, in relevant

part, is as under:

"7. Transfer of service of existing

officers and employees of the

Imperial Bank to the State Bank-

(1) "Every officer or other

employee of the Imperial Bank

(excepting the managing director

the deputy managing director and

other directors) in the employment

of the Imperial bank immediately

before the appointed day shall on

and from the appointed day, become

an officer or other employee, as

the case may be, of the state Bank,

and shall hold his tenure, at the

same remuneration and upon the same

terms and conditions and with the

same rights and privileges as to

pension, gratuity and other matters

as he would have held the same on

the appointed day if the

undertaking of the Imperial Bank

had not vested in the State Bank,

and shall continue to do so unless

and until his employment in the

State Bank is terminated or until

his remuneration, terms or

conditions are duly altered by the

State Bank.

(2)................................

.....

(3)................................

..............

(4)................................

...............

(5)................................

................

(6)................................

................"

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In July 1956, Dhall was promoted as Head Cashier by the

State Bank of India. The State Bank of India (Sub-Accountant

& Head Cashiers) Service Rules came into force on January 1,

1959. Under these Rules, the age of super annuation for head

Cashier was 55 years but w.e.f. April 1, 1967, this was

increased to 58 years. Dhall was due to retire on May 28,

1970 after completing 30 years of pensionable service.

However, the competent authority granted extension to him of

his service by seven years up to & including 30th June 1977

on which date Dhall was to completed 58 years of his age.

While in he extended period of service, Dhall was suspended

on account of certain allegations against him of fraud and

defalcation of funds while posted at Agra.

On November 24, 1975 Dhall was served with the Charge

Sheet. The charges laid under this Charge sheet were many

and some of these were (1) shortage of admitted by Dhall,

thus, admitting his negligence and responsibility therefor

collaterally; (2) shortage in cash to the tune of Rs. 1,

000/- on September 25, 1972; (3) exchanging mutilated noted

for he denomination of Rs. 5, Rs. 20 and Rs. 100 without

approval of the joint custodian. The Reserve Bank of India

had intimated the Bank that mutilated notes to the extent of

Rs. 55,000/- were irregularly exchanged and that this was

borne out by the inspection of the currency at the branch at

Agra held on August 11, 1976 which pertained to the period

when Dhall was the head Cashier. Enquiry proceedings were

initiated against Dhall. Dhall completed 58 years of his age

on June 30, 1977. However, due to the pendency of enquiry,

he was given two years extension.

Report of the enquiry officer was submitted on June 15,

1979 which was placed before the disciplinary Authority who

found Dhall guilty of most of the charges levelled against

him. Extended period of Service of Dhall expired on June 17,

1979 on his attaining the age of 60 years. On November 22,

1979, he was intimated and given show cause notice as to why

Bank's contribution to the provident fund should not be

forfeited as he was liable to the Bank to the extent of Rs.

37458/83 and further why sanction to his retirement be not

withheld under Rule 11 of the Imperial Bank of India Pension

and Guarantee Fund Rules and Regulations. Reply of Dhall was

considered and the Central Board of the Bank directed

forfeiting of Bank's contribution amounting to Rs.24006/49

from the provident fund. Dhall was also told that sanction

to retire him was withheld under Rule 11 of the Rules and

Regulations of the pension and Guarantee Fund by the

competent authority. The result was that Dhall was deprived

of pension and Bank's contribution to his provident fund.

The show cause notice and the decision of the Bank are

reproduced hereunder as:

"State Bank of India,

Local Head Office,

P.O. Box No. 398,

11, Sansad Marg

New Delhi.

Disciplinary Action Cell

No. DAC/79/RL/1336

Dated 22nd Nov. 1979.

Dear Sir,

With reference to the

correspondence resting with your

letter dated 29th June 1976, in

reply to the statement of the

charges served on you, in terms of

out letter No. R. IV/8990 dated

24th November 1975 and subsequent

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departmental enquiry held against

you, we have perused the findings

of the enquiry authority vis-a-vis

the proceedings of the enquiry and

"held you guilty of charges Nos. 1,

2, 4, 5, 6, 7, 7a, 9, 10 and

partially charge No.3.

2. With reference to your letter

dated 1st August, 1979 as charges

proved against are grave and you

attained the age of 60 years on the

30th June, 1979 and ceased to be in

the service of the Bank from that

date, you are hereby required to

show cause - why recommendation

should not be made to Local Board

to withhold the sanction of your

withhold the sanction of your

retirement and pension in the term

of Rule 11 of the Imperial Bank of

India Pension and Guarantee Fund

rules. Please also show cause as to

why the bank's contribution towards

the provident Fund may not be

forfeited as you are liable to the

bank to the extend to Rs.

37,458/83.

3. Your reply in this regard should

reach the undersigned within 7 days

of the receipt of this letter by

you. Otherwise it will be presumed

that you have nothing to submit in

this regard as we shall proceed

accordingly.

Yours faithfully."

Sd/-

"State Bank of India,

Local Head Office,

P.O. Box No. 398,

11, Sansad Marg,

New Delhi.

No. DAC

Disciplinary action Cell

Agra Branch

Shri C.B. DHALL OFFICER GDE II

H/Cashier - Under suspension.

With ref. to your written

statement dated 11.2.80, be advised

considered by the Executive

committee of the Central Board at

its meeting held on 4.6.80 and it

is resolved that the sanction to

retire you be withheld and the

bank's contribution to your P.Fund

a/c amount to Rs. 24,006/49 be

forfeited.

2. Therefore our tentative decision

conveyed to you vide letter No.

DAC/79/R-V/1336 dated 23rd Nov. '79

is confirmed.

Sd/- Chief General Manager"

When the decision was communicated to Dhall, he as

noted above, filed the writ petition challenging the

decision of the Bank. The High Court allowed the writ

petition in terms mentioned above. Special leave petition

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filed by the Bank against the impugned judgment was

admitted. On October 28, 1983, the Court passed the

following order:

"Special leave granted. The

appellant however undertakes that

even in the event of success

nothing will be recovered from the

respondent. The judgment in appeal

will not be treated as a precedent

for any other case. Four weeks'

time is granted for payment.

Will be listed for final hearing

along with SLP No. 431/81 (CA

9943/83)."

It may be noted that SLP (C) No. 431/81 (CA No.

2141/80) entitled State Bank of India vs. A.N. Gupta etc.

has since been decided and judgment is reported in 1997 (6)

SCALE 303.

In A.N. Gupta's case, this court considered the scope

of Rule 11 of the Rules and Regulations of the Imperial Bank

of India Pension and Guarantee Fund and Rule 20 of the

Imperial Bank of India Employees provident Fund Rules. These

Rules and Rule 18 of the Imperial Bank of India Employees

Provident Fund Rules are as under:

(1) The Imperial Bank of India

Employees Pension and Guarantee

Fund (Rules and Regulations)

"The retirement of all officers of

the Bank shall be subject to the

sanction of the Executive Committee

of the Central Board. The

retirement of all other employees

of the Bank shall be subject to the

sanction of the Executive Committee

or the Local Board concerned with

their employment. Any officer or

other employee who shall leave the

service without sanction, as

required by this rule shall forfeit

all claim upon the fund for

pension."

(2) The Imperial Bank of India

Employees Provident Fund Rules

"18. If any member shall be

dismissed from the service of the

Bank for any fault or other cause

justifying dismissal, he shall not

be entitled to receive, unless

permitted to do so by the trustees,

the sums contributed. Provided that

when any member is so dismissed any

amount due under a liability

incurred by the member to the Bank

(not exceeding in any case the sums

so contributed by the Bank and

interest thereon) shall be paid by

the trustees to the Bank out of the

sum standing to the credit of the

member's account.

20. When a member resigns or

retires from the service of the

Bank he shall, if he has served the

bank for a period of five years or

more (including service in the

Presidency Banks), be entitled to

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receive the balance at his credit

in the fund. Provided that when any

member resigning or retiring from

the service of the Bank is under a

liability incurred by him to the

Bank, the trustees shall,

irrespective of the duration of his

service, pay to the Bank out of the

balance at his credit in the fund

any amount due by him to the Bank

(not exceeding in any case the sums

contributed by the Bank to his

account in the fund and any

interest credited to his account on

the sums so contributed)."

This Court held that Rule 11 had no application in the

case of the employees governed by the Imperial Bank of India

Pension and Guarantee Fund Rules who had retired on

attaining the age of superannuation. The Court did not agree

with the submission of the Bank that sanctioning of

retirement must be understood as sanctioning of service

which in term must be understood as approval of service. It

was observed that proceedings in the garb of disciplinary

proceedings could not be permitted after an employee had

ceased to be in the service of the Bank as Service Rules

then in force applicable to such employees did not provide

for continuation of disciplinary proceedings after the date

of superannuation and that sanction of the Bank was required

only if the retirement of an employee was by any other

method except superannuation. As regards Rule 20 of the

Imperial bank of India Employees Provident Fund Rules, this

Court took this view that this Rule would become applicable

only if an employee retiring from the service of the Bank

was under a liability incurred by him to the Bank and in

that case, trustees administering the provident Fund could

pay to the bank from balance to the credit of the employee

in the Fund any amount due by him to the bank. The Court

observed that there was nothing on record to show if any

liability was incurred by any of the respondents and if so

what were the amounts and then said as under:

" In this view of the matter we do

not think it is necessary for us to

go into the question as to whether

the term "liability incurred "

means only such liability as is

either not disputed or established

by due process. Can it be said that

this term would also include any

liability that may be alleged by

the bank? In any case the bank

should at least prima facie

establish that any liability has

been incurred by the employee for

which it can lay claim to the

provident Fund of the employee. We

cannot accept the proposition on

behalf of the Bank that the

trustees should be allowed to

withhold the provident Fund due

till they have had an opportunity

to have established and determined

the amount, if any, due from the

respondents to the Bank. We are of

the view that the respondents are

entitled to the Provident Fund due

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to them in accordance with the

provident Fund Rules as it cannot

be said that they incurred any

liability."

This Court did not approve the view expressed by the

Andhra Pradesh high Court in T. Narsiah vs. State Bank of

India & Ors. [1978 (2) LLJ 173] wherein the High Court

was of the view that enquiry could also be made against an

employee after his retirement on attaining the age of

superannuation. This Court said that by giving such an

interpretation to Rule 11, the High Court had, in fact, lent

validity to disciplinary proceeding against an employee even

after his superannuation for which no provision existed

either in the relevant Pension Rules or in the relevant

Service Rules and when the High Court had itself observed

that an enquiry even if initiated during the service period

of the employee could not be continued after his retirement

on superannuation. In coming to the conclusion that Rule 11

would not be applicable when an employee superannuates on

his attaining the age of retirement, this Court considered

various relevant pension Rules and Service Rules of the

Imperial Bank.

Later on it would appear Rule 228 was inserted in the

Imperial Bank of India Pension and Guarantee fund Rules

which postulates continuance of disciplinary proceedings

even after an employee ceases to be in Bank's service. This

Rule 22B (to be read as Rule 22A as per the additional

affidavit filed by the bank) came into force with effect

from June 25, 1987 and would, therefore, be not relevant in

the present case.

The question then arises what are the Rules of service

applicable in the case of Dhall. Mr. Dogra, learned counsel

for the Bank, submitted that Rules 20A and 20B which were

inserted in the State Bank of India (Supervising Staff)

Service Rules, 1975 (for short "Service Rules") would be

answer to that. Rules 20A and 20B were introduced with

effect from April 1,1977 and are as under:

"20A. Notwithstanding anything to

the contrary in these rules, no

employee who has ceased to be in

the Bank's service by the operation

of , or by virtue of, any rule,

shall be deemed to have retired

form the Bank's service for the

purpose for the Imperial Bank of

India Employees' Pension and

Guarantee Fund Rules or the State

Bank of India Employees' Pension

Fund Rules unless such cessation of

service has been sanctioned as

retirement for the purpose of

either of the said pension fund

rules as may be applicable to him.

20B. In Case disciplinary

proceedings under these rules have

been initiated against an employee

before he ceases to be in the

Bank's service by the operation of,

or by virtue of, any of these

rules, the disciplinary proceedings

may, at the discretion of the

Managing Director, be continued and

concluded by the authority by which

the proceedings were initiated in

the manner provided for the in

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these rules as if the employee

continues to be in service, so

however, that he shall be deemed to

be in service only for the purpose

of the continuance and conclusion

of such proceedings."

We asked Mr. Dogra if the services of Dhall, the Head

Cashier, were governed by the State Bank of India (Sub-

Accountants and Head Cashiers) Service Rules as Rule 2

therein provided that the Rules shall apply to all Sub-

Accountants and head Cashiers who are in the service of the

Bank as such on January 1, 1959 and to all Sub-Accountants

and Head Cashiers appointed thereafter. Mr. Dogra with

reference to the additional affidavit filed by the Bank

submitted that State Bank of India (sub-Accountants and head

Cashiers) Service Rules, 1959 were no longer in force as

they were repealed in terms of Rule 2(1) of the State Bank

of India Supervising Staff (Service Rules), of the State

Bank of India Supervising Staff (Service Rules), 1975. Said

Rule 2(1) states that the Service Rules which came into

force with effect from July 1,1975 shall apply to all

officers/staff officers and senior staff officers in the

Bank other than persons who were in the service of the Bank

on June 30,1955 either as officers or as assistants. It was

submitted by Mr. Dogra that Dhall was a Cashier on June 30,

1955 and was not an officer. he was also not an Assistant to

be governed by the Rules governing the services of

Assistants in the Bank. Dhall was promoted as head Cashier

in July 1956 under Rule 3(p) of the Service Rules. head

Cashier is a person appointed on the terms and conditions

applicable to officers Grade ii and as per the definition of

officer under Rule 3(j), officer means an officer Grade II.

Dhall would, therefore, be an officer under the Service

Rules, State bank of India (Sub-Accountants and Head

Cashiers) Service Rules, 1959 would, therefore, be no longer

in force as these would deem to have been repealed by Rule

2(1) of the Service Rules which states that these Service

Rules shall apply to all officers, staff officers and Senior

Staff Officers in the bank other than persons who were in

the service of the Bank on the 30th June, 1955 either as

officers or as Assistants. Consequently, Dhall would be

governed by Rules 20A and 20B of the Service Rules which

came into effect from April 1,1977.

There is no dispute that the employees who are in the

service of the Bank as on 30th June, 1955 would continue to

be governed by the Imperial Bank of India Rules relating to

pension and provident Fund and those joining the Bank after

this data by the Rules of the State bank of India framed

under Section 50 of the State bank of India Act. In this

connection we may also refer to Rule 21 of the Service Rules

of 1975 which is as under:

" 21. Unless Otherwise directed by

the Appointing Authority, every

employee shall as from the

commencement of his service as an

officer become a member of-

(a) the State bank of India

Employees Provident Fund, if he is

not already a member of that Fund

or the Imperial bank of India

Employee's Provident Fund:

(b) the State Bank Of India

Employees' pension Fund, if he is

not already a member of that Fund

or the imperial bank of India

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Employees' Pension and Guarantee

Fund or the bank of Bombay

Officers' pensions and Guarantee

Fund or the bank of Madras pension

and Gratuity Fund:

and shall subscribed and agree to

be bound by the rules of those

Funds.

Provided that if his age at the

time of commencement of his service

as Officer is below 21 years he

shall become a member of the State

bank of India Employees' Pension

Fund on attaining the age of 21

years and on becoming a member

shall subscribe and agree to be

bound by the rules of that Fund."

Rules 20-A and 20-B of the Service Rules have been

framed under Section 43 of the State Bank of India Act. This

section is as under:

"43. State bank may appoint

officers any other employees- (1)

The State bank may appoint such

number of officers, advisers and

employees as it considers necessary

or desirable for the efficient

performance of its functions, and

determine the terms and conditions

of their appointment and service.

(2) The officers, advisers and

employees of the State Bank shall

exercise such powers and perform

such duties lies may, by general or

special order be entrusted or

delegated to them by the Central

Board."

Section 43 empowered the State bank to determine the

terms and conditions of the appointment and service of its

officers and employees. These officers and employees

exercise such powers and perform such duties as may be

entrusted or delegated to them by the Central board of the

State Bank. Section 50 of the State Bank of India Act

empowers the Central Board to make regulations but Section

43 is independent of Section 50, we hold that Service Rules

had been framed by the State bank in exercise of its

statutory powers under Section 43 of the State Bank of India

Rules.

Rules 20-A and 20-B have now made a material difference

to the applicability of Rule 11 of the pension Rules.

However, the case of A.N. Gupta (Supra) is distinguishable

as these Rules, 20-A and 20-B, came into existence only

w.e.f. March 31, 1977. Under Rule 20-A retirement under the

Pension Fund Rules has now to be sanctioned by the competent

authority. Under this Rule, retirement would mean retirement

on superannuation or any other type of retirement.

Under Rule 20-B disciplinary proceedings if initiated

against an employee before he retires from service could be

continued and concluded even after his retirement and for

the purpose of conclusion of the disciplinary proceedings,

the employees is deemed to have continued in service but for

no other purpose. After the disciplinary proceedings, the

employee is deemed to have continued in service but for no

other purpose. After the disciplinary proceedings were

concluded, the State Bank directed that (1) sanction of

Dhall to retire be withheld and (2) Bank's contribution to

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his provident fund accounts be forfeited. Under Rule 10 of

the Pension Fund Rules, and employee dismissed from the Bank

Service for willful neglect or fraud shall forfeit all

claims upon the fund for pension. Dhall has not been

dismissed from service through he was charged with willful

neglect and fraud. The question that arises for

consideration is what is the effect of the direction the

State bank that sanction to retire of Dhall be withheld.

Here cessation of service of Dhall on retirement has not

been sanctioned accordingly as per the last portion of Rule

11 of the pension Fund he forfeits all claims upon the Fund

for pension.

But then applicability of his Rule 11 has to be

contrasted with Rule 10. It is only if an employee has been

dismissed from service that he forfeits all claims upon the

fund for pension and so would appear to be the effect of

Rule 11. Under Rule 7, an employee has right of property in

the pension fund to the extent of his contribution made

thereof with interest thereon. It would, therefore, appear

to us that when the Rules talk of forfeiture of all claims

upon the fund for pension that would only mean the Bank's

contribution and the interest accruing thereon. These Rules

cannot be extended to forfeit event eh employee's

contribution to the pension fund and the interest accruing

thereon. However, after the introduction of Rule 5-A in the

pension Fund Rules w.e.f. April 1, 1968, there is not to be

any contribution by employee to the pension fund.

Coming to the provident Fund Rules, Rule 18 applies

when an employee is dismissed from service which is not the

case here. It is under Rule 20 that an amount of Rs.

24,006,49 has been forfeited which is the Bank's

contribution to the provident fund account of Dhall. This,

the State Bank is entitled to forfeit under Rule 20. The

amount has been arrived at after due enquiry and represents

the liability incurred by Dhall to the Bank. Accordingly we

hold that Dhall was rightly proceeded against in the

disciplinary proceedings and the State bank was within its

authority to impose the penalty as conveyed to Dhall by

letter dated July 16, 1980 of the Chief General Manager of

the State Bank.

We, therefore, uphold the impugned judgment of the High

Court to the extent that Dhall would be entitled to his

contribution, if any, to the pension Found along with the

interest accrued thereon. The impugned judgment in all other

respects is set aside. However, in view of the interim

orders made on October 28, 1983, no further orders are

required in this appeal.