CO-OPERATIVE SOCIETY - Disciplinary action against its employee

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   8th  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.

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 2nd 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 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   8th  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 the   allegation   of   defalcation   of   the   funds   of   the amity   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 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 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   42nd  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 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 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 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 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  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   8th  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 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)     ..................."

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 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 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 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 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   8th 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 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 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