Krishna District Cooperative Central Bank Ltd. v. K. Hanumantha Rao

2. A departmental inquiry was conducted against respondent No.1 herein, an employee of appellant, viz. Krishna District Cooperative Central Bank Ltd., into certain charges of misconduct. In the said inquiry, charges were proved and as a result the disciplinary authority inflicted the punishment of dismissal from service upon respondent No.1. The High Court vide impugned judgment has altered the said penalty of dismissal Civil Appeal No. 11975 of 2016 (arising out of SLP (Civil) No.30710 of 2014) Page 2 to that of stoppage of two increments for a period of three years. Whether it was permissible for the High Court to do so in the facts of the present case, is the question that needs to be determined in the instant appeal.

3. The events leading to the filing of this appeal are recapitulated in brief as under: Respondent No. 1 was a Supervisor of five Primary Agricultural Cooperative Societies (PACS). He failed in discharging his duties properly in supervising the same, which led to cheating by the members of the Nidamanuru Primary Agricultural Cooperative Society (PACS) resulting in misappropriation of the society funds, for which disciplinary action was initiated against him. The precise charges against him, vide charge memo dated 08.03.2002, were that he had derelicted his duties as Supervisor leading to misappropriation of the funds of the society. Details of fifteen such accounts/instances were given wherein frauds had taken place and the amount of fraud involved in each such case totalling upto Rs.46,87,950.10. Names of the persons who had misappropriated these amounts were also given. It was mentioned that respondent No.1 worked as a Page 3 Supervisor of the society and it was his duty to have close supervision over the affairs of the society and bring to the notice of the Bank the fraud which took place and safeguard the funds of the society and the Bank. However, he failed to discharge his legitimate duties of supervision leading to huge misappropriation that had taken place, which he could not detect and thwart. Thus, by derelicting his legitimate duties he paved way for huge misappropriation and thereby committed grave misconduct. Inquiry was held and charge of dereliction of duty was proved as per the report given by the Inquiry Officer.

4. There is no dispute that this inquiry was conducted in accordance with the principle of natural justice giving fair chance to respondent No.1 to defend himself. In fact, as per the report of Inquiry Officer, respondent No.1 had even admitted dereliction of duties on his part.

5. The General Manager, Krishna District Cooperative Central Bank Ltd., after examining the report of the Inquiry Officer in detail, observed that the charged employee committed grave misconduct and acted in a way unbecoming of an employee of the Bank and passed an order of dismissal from service of the Page 4 Bank. Feeling aggrieved by the order dated 05.10.2002, respondent No. 1 herein filed an appeal/mercy petition before the Chairman, Person In-charge Committee of the Krishna Cooperative Central Bank Ltd., and prayed to consider the case sympathetically on humanitarian grounds and issue reinstatement orders, which was also dismissed on 22.01.2003. Respondent No. 1 thereafter filed writ petition bearing W.P. No.4238/2003 before the High Court of Andhra Pradesh at Hyderabad.

6. The learned single Judge of the High Court of Andhra Pradesh at Hyderabad, after considering the material available on record and after hearing the arguments of the counsel for the parties, held that respondent No.1 was negligent in performing his duties and committed an act prejudicial to the interest of the Bank which resulted in serious loss to the Bank. The Single Judge of the High Court further observed that because of the negligence of respondent No.1, an amount of Rs.46,87,950.10 had been misappropriated by the staff and members of Nidamanuru PACS. It was held that there were no grounds to interfere with the punishment imposed by the disciplinary authority and confirmed by the appellate authority. Page 5

7. Feeling aggrieved by the order dated 18.07.2005, respondent No.1 preferred Writ Appeal No. 1640/2005, which has been partly allowed by the Division Bench of the High Court vide its impugned order dated 17.08.2014. The Division Bench of the High Court has, in fact, interfered with the penalty imposed. Reason for such a course of action adopted by the High Court given in the impugned judgment is that there was no allegation of misappropriation against respondent No.1. The accusation was lack of proper supervision which holds good against the top administration as well.

8. After hearing the counsel for the parties, we are of the view that the impugned judgment of the Division Bench of the High Court is unsustainable. There are more than one reason for coming to this conclusion, which are stated hereunder:

(i) The observation of the High Court that accusation of lack of proper supervision holds good against the top administration as well is without any basis. The High Court did not appreciate that respondent No.1 was the Supervisor and it was his specific duty, in that capacity, to check the accounts etc. and supervise the work of subordinates. Respondent No.1, in fact, admitted this Page 6 fact. Also, there is an admission to the effect that his proper supervision would have prevented the persons named from defrauding the Bank. The High Court failed to appreciate that the duties of the Supervisor are not identical and similar to that of the top management of the Bank. No such duty by top management of the Bank is spelled out to show that it was similar to the duty of respondent No.1.

(ii) Even otherwise, the aforesaid reason could not be a valid reason for interfering with the punishment imposed. It is trite that Courts, while exercising their power of judicial review over such matters, do not sit as the appellate authority. Decision qua the nature and quantum is the prerogative of the disciplinary authority. It is not the function of the High Court to decide the same. It is only in exceptional circumstances, where it is found that the punishment/penalty awarded by the disciplinary authority/ employer is wholly disproportionate, that too to an extent that it shakes the conscience of the Court, that the Court steps in and interferes. No doubt, the award of punishment, which is grossly in excess to the allegations, cannot claim immunity and remains open for Page 7 interference under limited scope for judicial review. This limited power of judicial review to interfere with the penalty is based on the doctrine of proportionality which is a well recognised concept of judicial review in our jurisprudence. The punishment should appear to be so disproportionate that it shocks the judicial conscience. (See State of Jharkhand & Ors. v. Kamal Prasad & Ors.[1] ). It would also be apt to extract the following observations in this behalf from the judgment of this Court in Deputy Commissioner, Kendriya Vidyalaya Sangthan & Ors. v. J. Hussain[2]:

10. An imprimatur to the aforesaid principle was accorded by this Court as well in Ranjit Thakur v. Union of India [(1987) 4 SCC 611:

Page 9 Speaking for the Court, Venkatachaliah, J. (as he then was) emphasising that “all powers have legal limits” invoked the aforesaid doctrine in the following words: (SCC p. 620, para 25) “25...The question of the choice and quantum of punishment is within the jurisdiction and discretion of the court martial. But the sentence has to suit the offence and the offender. It should not be vindictive or unduly harsh. It should not be so disproportionate to the offence as to shock the conscience and amount in itself to conclusive evidence of bias. The doctrine of proportionality, as part of the concept of judicial review, would ensure that even on an aspect which is, otherwise, within the exclusive province of the court martial, if the decision of the court even as to sentence is an outrageous defiance of logic, then the sentence would not be immune from correction. Irrationality and perversity are recognised grounds of judicial review.” No such finding is arrived at by the High Court to the effect that the punishment awarded to respondent No.1 was shockingly disproportionate. Even otherwise, we do not find it to be so having regard to the fact that respondent No.1 did not perform his duties with due diligence and his negligence in performing the duties as a Supervisor has led to serious frauds in number of accounts by the subordinate staff. It was, therefore, for the disciplinary authority to consider as to whether respondent No.1 was fit to continue in the post of Supervisor. Page 10

(iii) The impugned order is also faulted for the reason that it is not the function of the High Court to impose a particular punishment even in those cases where it was found that penalty awarded by the employer is shockingly disproportionate. In such a case, the matter could, at the best, be remanded to the disciplinary authority for imposition of lesser punishment leaving it to such authority to consider as to which lesser penalty needs to be inflicted upon the delinquent employee. No doubt, the administrative authority has to exercise its powers reasonably. However, the doctrine that powers must be exercised reasonably has to be reconciled with the doctrine that the Court must not usurp the discretion of the public authority. The Court must strive to apply an objective standard which leaves to the deciding authority the full range of choice. In Lucknow Kshetriya Gramin Bank & Anr. v. Rajendra Singh[3], this principle is formulated in the following manner: