WPSB/682/1998 of BALDEV KUMAR AGARWAL Vs UCO. BANK and OTHERS

IN THE HIGH COURT OF UTTARANCHAL AT NAINITAL.

Writ Petition (S/B) No. 693 of 2001 (Old No. 682 of 1998)

Baldev Kumar Agrawal

S/o Late Sri D.L. Agrawal, R/o 61/3, Chakrata Road, City & District-Dehradun.

…………. Petitioner

Versus

1.UCO Bank,

10, BTM Sarani, Brabourne Road, Calcutta – 700001 – Through its Chairman. Calcutta – 700001 – Through its Chairman.

2.General Manager (Personnel), UCO Bank, Head Office – 10, BTM Sarani, Brabourne Road, Calcutta – 700001 UCO Bank, Head Office – 10, BTM Sarani, Brabourne Road, Calcutta – 700001

3.Divisional Manager, UCO Bank, Divisional Office, Bareilly. UCO Bank, Divisional Office, Bareilly.

…………… Respondents.

Sri S.N. Babulkar, learned counsel for the petitioner Sri Rajendra Dobhal, learned counsel for the respondents.

Date: 17[th] July, 2006

Hon’ble P.C.Verma, J.Hon’ble B.S.Verma, J.

This writ petition has been filed by the petitioner challenging the dismissal order dated 22.09.1994, contained in Annexure No. 10 to the writ petition.

2. The petitioner was holding the post of Officer Scale-II in UCO Bank. He was placed under suspension on 06.05.1986 with regard to certain charges against him. He was charge-sheeted by the Bank on 01.05.1987,

contained in Annexure No. 1 to the writ petition. The extract of charge-sheet, contained in Annexure No. 1 to the writ petition, is as under:-

“Mr. B.K.Agarwal is hereby charged as under:-

1.On 31[st] October, 1985 and 2[nd ]November, 1985, he willfully and knowingly made advances of Rs. 10000/- each to five fictitious borrowers viz. Hakim Singh, Teja Singh, Judge Singh, Baijnath Singh and Smt. Badami Devi and when the said irregularities were discovered, he adjusted these accounts by raising loans against NSCs/FDRs and by borrowings from the market. 1985, he willfully and knowingly made advances of Rs. 10000/- each to five fictitious borrowers viz. Hakim Singh, Teja Singh, Judge Singh, Baijnath Singh and Smt. Badami Devi and when the said irregularities were discovered, he adjusted these accounts by raising loans against NSCs/FDRs and by borrowings from the market.

2.In September 1985, he also made advances of Rs. 5000/- each to three borrowers viz. M/s Keshar Singh, Mohan Lal and Sudhir Singh who were also fictitious and these accounts were also got adjusted on 3[rd ]April, 1986. Rs. 5000/- each to three borrowers viz. M/s Keshar Singh, Mohan Lal and Sudhir Singh who were also fictitious and these accounts were also got adjusted on 3[rd ]April, 1986.

3.He allowed various other advances in hasty manner. The credit worthiness of borrowers and guarantors, economic viability and end use of advances were generally ignored. In some accounts proper documents/securities were not obtained whereas in some others, advances were allowed beyond the sanctioning powers. Some advances were not reported to the higher authorities as per prescribed procedure. In case of some advances sanctioned by higher authorities the terms of sanctions were not complied with and documentation and disbursement were not done in accordance with the terms of sanction. number of accounts were not followed up properly for rectification of irregularities. In some accounts drawings were allowed very much in excess of sanctioned limits. manner. The credit worthiness of borrowers and guarantors, economic viability and end use of advances were generally ignored. In some accounts proper documents/securities were not obtained whereas in some others, advances were allowed beyond the sanctioning powers. Some advances were not reported to the higher authorities as per prescribed procedure. In case of some advances sanctioned by higher authorities the terms of sanctions were not complied with and documentation and disbursement were not done in accordance with the terms of sanction. number of accounts were not followed up properly for rectification of irregularities. In some accounts drawings were allowed very much in excess of sanctioned limits.

4.He did not take sufficient and proper steps for safe custody and proper control of demand drafts books as result of which some of draft leaves were found missing. As matter of fact, he himself utilized some draft leaves for safe custody and proper control of demand drafts books as result of which some of draft leaves were found missing. As matter of fact, he himself utilized some draft leaves for

issuance of duplicate drafts or otherwise in violation of Bank’s prescribed procedures.

He, by his above facts, acted in a, manner prejudicial to the interest of the Bank.”

The petitioner was served supplementary

charge-sheet dated 01.08.1988 in which he charged as under:-

“1. He allowed two advances of Rs. 10,000/- each

in the names of

(i)Mr. Jasvinder Singh and

(ii)Mr. Gurdayal Singh & Mr.Satnam Singh

On 21.1.1986 and 3.3.1986 respectively without completion of necessary formalities. The application forms and documents were not properly obtained/executed and were not properly entered in the respective books and kept in Safe Custody. The identification of borrowers guarantees cannot be established and the said two advances are reported to be fictitious.

2.He by his above acts, acted in manner prejudicial to the interest of the Bank and the Bank is likely to suffer financial loss due to the same.”

3. There were 06 charges against the petitioner. All the charges relate to irregularities committed by the petitioner in disbursing the loan and advances to the peoples and overdraft made by him. preliminary inquiry was held and it was found that when the irregularities were discovered, the petitioner adjusted the accounts by raising loans against NSCs/FDRs and by borrowings from the market. Thereafter departmental inquiry was conducted against the petitioner. All the six charges leveled against the petitioner were found proved. On the basis of inquiry report, the punishing officer

awarded the punishment of dismissal to the petitioner from Bank service. It is also evident from the punishment order as well as the inquiry report that full opportunity of defence has been given to the petitioner and there is no violation of principle of natural justice in conducting the departmental inquiry.

4. Learned counsel for the petitioner submitted that none of the disputed loans were fictitious in nature nor had they been shown in fictitious names. Therefore, the punishment is harsh and shocking in nature and is liable to be reduced.

5. The learned counsel for the respondents has placed reliance on judgment of Hon’ble Apex Court in Chairman and Managing Director, United Commercial

Bank and others versus P.C. Kakkar, reported in (2003) 4 Supreme Court Cases, 364 and submitted that this Court should not interfere with the punishment order in view of the law laid down by the Apex Court. In that case respondent/P.C. Kakkar was dismissed from service on the ground of charges of misconduct proved against him. The Hon’ble Apex Court in the said judgment after referring the very principles of Council of Civil Service Union versus Minister for Civil Service case (called CCSU case), reported in 1985 AC 374 examined the proportionality of the punishment and defined the meaning of proportionality in Para 8 of the said judgment. It is useful to quote Para 8 of the said judgment which reads as under:-

“8.In Om Kumar v. Union of India [(2001) 2 SCC 386] this Court observed, inter alia, as follows:

“27. 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.

28. 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 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 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. (SCC pp.399- 400, paras 27-28)

37. 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 [Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation, (1948) 1 KB 223] grounds. But in the last few years, administrative action affecting the freedom of expression or liberty has been declared invalid in several cased applying the principle of ‘strict scrutiny’. In the case of these freedoms, Wednesbury principles are no longer applied. The court 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 Spycather case: Attorney General v. Guardian Newspapers Ltd. (No. 2) (1990)1 AC 109) (AC at pp. 283-84), 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] the right of prisoner to grant an interview to 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 more intense and anxious judicial scrutiny in administrative decisions which engage fundamental human rights was re-emphasized in R. v. Lord Saville of Newdigate ex p (1999) 4 All ER 860 (All ER 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.

38. 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 prescribed 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 film, provided there was ‘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 pp. 748-49)

‘… whether the Secretary of State, in the exercise of his discretion, could reasonably impose the restriction he has imposed on the broadcasting organizations’

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’.

Lord Templeman also said in the above case that the courts could go into the question whether 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).

39. 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 Brind case. Where Convention rights were in question the courts could exercise right of primary review. However, the courts would exercise 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 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 secondary judgment by asking whether reasonable

Secretary of State, on the material before him, could reasonably make the primary judgment.’ (SCC pp. 402-04, paras 37-39)

67. But where an administrative action is challenged as ‘arbitrary’ under Article 14 on the basis of Royappa [E.P.Royappa v. State of T.N. (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 confirmed only to secondary role and will only have to see whether the administrator has done well is 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] (SCC 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 standpoint of Wednesbury rules. In Tata Cellular v. Union of India [(1994) 6 SCC 651] (SCC at pp.679-80), Indian Express Newspapers Bombay (P) Ltd. v. Union of India [(1985) 1 SCC 641 (SCC at p. 691), Supreme Court Employees’ Welfare Assn. v. Union of India [(1989) 4 ASCC 187] (SCC at p. 241) and U.P. Financial Corpn. v. Gem Cap (India) (P) Ltd._[(1993) 2 SCC 299] (SCC at p. 307) while judging whether the

administrative action is ‘arbitrary’ under Article 14 (i.e. otherwise than being discriminatory), this Court has confined itself to Wednesbury review always.

69. 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.

71. Thus, from the above principles and decided cases, it must be held that where an administrative decision relating to punishment in disciplinary cases in questioned as ‘arbitrary’ under Article 14, the court is confined to Wednesbury principles as secondary reviewing authority. The court will not apply proportionality as primary reviewing court because no issue of fundamental freedoms nor of discrimination under Article 14 applies in such 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 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.” (SCC pp. 411-12, paras 67, 69 & 71).”

6.In Para 10 of the judgment the conclusion drawn by the Apex Court in Union of India versus G.Ganayatham [(1997) 7 SCC, 463] have been quoted which reads as under:-

“10. In Union of India v. G.Ganayutham[(1997) 7 SCC 749] this Court summed up the position relating to proportionality in paras 31 and 32, which reads as follows: (SCC pp. 478-80, paras 31-32)

“31. The current position of proportionality in administrative law in England and India can be summarized as follows:

(1) To judge the validity of any 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 test.

(2) The court would not interfere with the administrator’s decision unless it was illegal or suffered from procedural impropriety or was

irrational – 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 [Bugdaycay v. Secy. Of State for Home Deptt. 1987 AC 514], Brind [ (1991) 1 AC 696] and Smith [R. v. Ministry of Defence, ex p.Smith, (1996) 1 All ER 257] as long as the Convention is not incorporated into English law, the English courts merely exercise 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 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 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 administrative or executive action affecting fundamental freedoms, the courts in our country will apply the principle of ‘proportionality’ and assume 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 primary role only if the freedoms under Articles 19, 21 etc. are involved and not for Article 14.

32. 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 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 v. Union of India (1987) 4 SCC 611.”

7. In the present case it has been contended that the punishment of dismissal from service is shocking in nature inasmuch as there was no charge of embezzlement or fraud and there was no loss caused to the Bank. Therefore, the punishment of dismissal from service is irrational and the decision is one which no sensible person should weigh the force and conscious could have arrived at.

8. The Apex Court in the said judgment has summed up in Para 12 that 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 and it has been further held that in 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.

9. In the instant case, the learned counsel for the petitioner has invited our attention on the finding recorded by the punishing authority to show that there was no loss caused to the Bank and there was no charge of embezzlement or fraud. He also submitted that no loss was caused to the Bank rather the Bank will get interest on the overdraft alongwith the re-payment to the Bank. Thus, the order of dismissal is shocking in nature and no reasonable/sensible person could reach to such decision in the facts and circumstances of the case.

10. In our opinion, the learned counsel for the petitioner is right in submitting that the punishment of

dismissal from service is shocking in nature in comparison to the charges leveled against him. Therefore, we, following the dictum of the Apex Court laid down in P.C.Kakkar’s case (Supra), direct the Disciplinary Authority to re-consider the penalty of dismissal imposed on the petitioner within period of one month form the date of production of certified copy of this order.

11. The petition is disposed of accordingly.

P.Singh

(B.S.Verma,J.) (P.C.Verma,J.) 17.07.2006 17.07.2006