BRIJ BIHARI SINGHversusBIHAR STATE FINANCIAL CORPORATION AND OTHERS

                     :2015111 s.c.R. 51


                    BRIJ BIHARI SINGH                            A
                              v.
BIHAR STATE FINANCIAL CORPORATION AND OTHERS
               Civil Appeal No.1217 of 2011
                                                                 B
                   NOVEMBER20, 2015
         [M. Y. EQBAL AND C. NAGAPPAN, JJ.]
      Service Law - Disciplinary proceedings - Enquiry
conducted on the basis of files without giving opportunity to c
delfnquent to place his defence - Disciplinary Authority
instead of passing final order, recommended the case to.
Appellate Authority for imposing punishment - Disciplinary
Authority also participated in the meeting when the decision
was taken by the Appellate Authority dismissing the D
delinquent from service - Held: The disciplinary proceedings
is violative of principles of natural justice and Regulation 39 ·
of State Financial Corporation (Staff) Regul@tions, in as much
opportunity was not granted to the delinquent to put his
defence - Thus, the enquiry is vitiated in law - E
Recommendation of the case by Disciplinary Authority to
Appellate Authority for imposition of punishment is violative
of Regulation 40 inasmuch as it takes away delinquent's right
to appeal and is also arbitrary and discriminatory - The
procedure of disciplinary proceedings adopted by the F
Disciplinary as well as Appellate Authorities is erroneous and
suffers from serious discrimination and bias ~ Bihar State
Financial Corporation (Staff) Regulations, 1965 - Natural
Justice.
                                                                  G
      Allowing the appeal, the Court

      HELD: 1. A person, required to answer a charge
imposed, should know not only the accusation but also
the testimony by which the accusation is supported. The          H
                              51
52        SUPREME COURT REPORTS             [2015] 11 S.C.R.


A delinquent must be given fair chance to hear the
  evidence in support of the charge and to cross-examine
  the witnesses who prove the charge. The delinquent
  must also be given a chance to rebut the evidence led
  against him. A departure from this requirement violates
B the principles of natural justice. Furthermore, the
  materials brought on record pointing out the guilt are
  required to be proved. If the enquiry report is based on
  merely ipse dixit and also conjecture and surmises, it
  cannot be sustained in law. In the instant case, the
C disciplinary proceeding was conducted in gross
  violation of Regulation 39 of Bihar State Financial
  Corporation (Staff) Regulations, inasmuch as no
  reasonable opportunity was given to the delinquent to
  place his case in defence. The Regulation imposed a
0
  duty on the Authority to give a personal hearing to the
  delinquent. [Paras 8 and 10] [60-B-D; 61-E-F]
         State of U.P. vs. Saroj Kumar Sinha 2010 (2)
         SCR 326: (2010) 2 SCC 772 - relied on.
E       2. A right of appeal has been provided by
  Regulation 40 of the Regulations against any order
  passed by the competent Authority. In the instant case,
  the Disciplinary Authority, instead of exercising the power
F as Disciplinary Authority imposing punishment, referred
  his recommendations to the appellate authorit/, namely,
  Board of Directors for taking a decision and the Board
  of Directors exercised the power of Disciplinary
  Authority and imposed punishment of dismissal thereby
G deprived the appellant from moving the appellate
  authority against the said order. Such exercise of power
  is wholly arbitrary and discriminatory. [Para 11] [61-G-
  H; 62-A]

H         3. Further, the Managing Director being the
     disciplinary authority prepared his report and referred
    BRIJ BIHARI SINGH v. BIHAR STATE FINANCIAL            53
                   CORPORATION

the matter to the Board of Directors to consider the draft A
charges, enquiry report, representation filed by the
officer concerned and his finding, for taking an
appropriate decision in the case. Not only that, when
the case was placed before the Board for taking a final
decision, he participated in the said meeting and a B
decision was taken by the Board of Directors to dismiss
the appellant from service. Such a procedure adopted
by the disciplinary authority and the appellate authority
is absolutely erroneous in law. [Para 12] [62-B-D]
                                                          c
     Surjit Ghosh vs. United Commercial Bank AIR
     1995 SC 1053; AmarNath Chowdhury               vs.
     Braithwaite and Company Ltd. and Ors. 2002 (1)
     SCR 184~(2002) 2 SCC 290; Institute of
     Chartered Accountants of India vs. L. K. Ratna and   D
     Ors.1986 (3) SCR 1048: (1986) 4 sec 537; K.
     Chelliah vs. Chairman Industrial Finance
     Corporation oflndia andAnr. AIR 1973 Mad.122
     -relied on.
                                                          E
     4. Thus, the procedure adopted by the
respondents in removing the appellant from service is
erroneous and suffers from serious discrimination and
bias. Further, the Enquiry Officer conducted the enquiry
without following the procedure and without giving F
sufficient opportunity to the delinquent to place his case.
Enquiry is also vitiated in law. [Para 16] [64-D-E]

                    Case Law Reference
     2010 (2) SCR 326             relied on.    Para 9    G
     AIR 1995 SC 1053             relied on.    Para13
     2002 (1) SCR 184             relied on.    Para 14
     1986 (3) SCR 1048            relied on.    Para,14
     AIR 1973 Mad.122             relied on.    Para 15   H
54         SUPREME COURT REPORTS                 (2015] 11 S.C.R.


A         CIVILAPPELLATE JURISDICTION: Civil Appeal No.
     1217 of2011

          From the Judgment and Order dated 27.09.2007 of the
     High Court of Judicature at Patna in LPA No. 51 of 1998.
B
          Sun ii Kumar, Himanshu Shekhar, Rohini Prasad, A. P.
     Sa hay for the Appellant.

            Harshvardhan Jha, Yugandhara Jha, Abhishek
     Chaudhary, Chandan Kumar, Prerna Singh, (for Gopal Singh)
C    for thA Respondents.

          The Judgment of the Court was delivered by

           M. Y. EQBAL, J. 1. The appellant was working on the
o    post of Assistant General Manager in the Bihar State Financial
     Corporation (in short, "the Corporation"). At the direction of
     State Government, vide letter dated 201" March, 1993, the
     Managing Director of the Corporation, who is the Disciplinary
     Authority, put the appellant under suspension and initiated
E    disciplinary proceedings on the following charges:-

          "1. He recommended release of Rs. 4.33 lakhs to Mis.
          Koshi Jute Mills Pvt. Ltd., Supaul against purchased
          machines without deducting the stipulated promoter's
F         margin money, which is evident from the fact that the
          promoter's margin money was deducted in totality at the
          time of subsequent release of Rs.7.80 lakhs to the
          concern on 19.12.90.
          2. He intentionally and in utter v!olence of delegated
G         powers released Rs. 7.80 lakhs to the concern (M/s.
          Koshi Jute Mills Pvt. Ltd., Supaul) on 19.12.90 at his own
          for which he was not the competent authority for
          disbursing such amount at his own. This irregular act of
          his is a grave misconduct for his wrongful gain.
H
    BRIJ BIHARI SINGH v. BIHAR STATE FINANCIAL                      55
           CORPORATION [M. Y. EQBAL, J.]

     3. While making release of Rs. 7.80 lakhs to the concern       A
     (M/s. Koshi Jute Mills Pvt.·Ltd., Supaul) in utter violation
     of delegated powers, he did not retain the 15% retention
     money according to stipulated conditions in the Sanction
     Order and mutual agreement between the promoter and
     the machine supplier.                                          B
     4. While making release to the aforesaid concern he
     deliberately suppressed the facts regarding observations
     of the Vigilance and Grievance Cell dated 22.12.89 and
     mentioned that the dealing of machine supplier is genuine      c
     whereas observations of Vigilance and Grievance Cell
     duly approved by the M.D. available in the loan file shows
     that the machine supplier is not refunded and that of his
     connivance with the promoter.
     5. He deliberately ignored the further observations of the     D
     Vigilance & Grievance Cell duly approved by M.D. to
     inspect the site of the machine supplier immediately and
     made release to the aforesaid concern.
     6. He deliberately received the payment of Car Allowance       E
     for the period from 9.3.88 to 1.10.88 without having a
     car in his name during aforesaid period.
     7. He purchased land at Patliputra Colony, Patna from
     Dr. Bindeshwari Prasad Singh through three different
     absolute sale deeds (Registered at Calcutta) showing           F
     himself as false profession without disclosing the source
     offund arranged."

     2. After serving the aforesaid memorandum of charges
upon the appellant some additional charges were served,             G
which are also set out below:- ·

     "He himself examined the proposal of Delhi based fake
     promoter of M/s. Divine Cycle (P) Ltd., Industrial Area,
     Fatwah on promoter's personal guarantee and placed             H
56        SUPREME COURT REPORTS                   [2015] 11 S.C.R.


A        the proposal with recommendation before the Board for
         sanction of loan to the Company when the residential
         addresses of promoters were incomplete and official
         address was subsequently found fake. He should have
         examined the proposal before recommending the case
B        to the Board which he did not do so as a result the
         promoter managed to grab the fund from the Corporation
         and left the unit abandoned. Thus due to his negligence
         of duties in processing of the loan proposal the
         Corporation has been put to a huge financial loss.
c
         He, with an ulterior motive did not inform H.O. after getting
         the site jointly inspected with BICICO representative in
         Feb. '83 that the unit was running in a rented premises
         other than that of mortgaged to the Corporation and
D        deliberately did not take any action against the promoter
         which proves his connivance with the promoter of the
         company to cause wrongful loss to the Corporation."

        3. It appears that one officer of the State Government on
E deputation was made Enquiry Officer, who conducted the
  enquiry in respect of the aforesaid charges and submitted
  enquiry report holding that the majority of the charges have
  been proved. Consequently, 2"" show cause notice was given
  to the appellant which was duly responded. The appellant was
F then directed to be personally present for hearing and then the
  Managing Director, instead of passing final order,
  recommended the Board of Directors of the Corporation for
  the punishment to be imposed upon the appellant. On receipt
  of the said recommendation, the Board finally passed an order
G of dismissal of the appellant from service.

       4. The appellant assailed the order of dismissal by filing
  a writ petition being CWJC No.3528 of 1994, which was
  eventually dismissed by the learned Single Judge of the High
H Court. The said judgment and order was finally upheld by the
     BRIJ BIHARI SINGH v. BIHAR STATE FINANCIAL                      57
            CORPORATION [M. Y. EQBAL, J.]

Division Bench of the High Court in Letters Patent Appeal            A
No.51of1998.

      5. Mr. Sunil Kumar, learned senior counsel appearing
for the appellant assailed the impugned judgment of the High
Court and the order of dismissal of the appellant mainly on the      B
following grounds:-

     "!. The departmental proceeding was conducted by the
     Enquiry Officer by merely perusing the files without
     representing officer presenting the case on behalf of the C
     employer and without recording any evidence in support
     of the charges.
     II. The Enquiry Officer in the departmental proceedings
     submitted his report merely by perusing the files without
     the charges being proved by the employer.                       D
      Ill. There is a serious violation of principles of natural
      justice for the reason inter a/ia thatthe presenting officer
      neither presented the case of the employer nor led any
      oral or documentary evidence. The Disciplinary Authority,      E
      instead of passing a final order on the basis of enquiry
      report and the explanation submitted by the appellant,
      recommended the case to the Board for taking a final
      decision. The Board, which is the appellate authority
     .usurp the power of the Disciplinary Authority and passed       F
      the order of punishment."

      6. Before we decide the legality and propriety of the order
of dismissal passed by the respondent, we would like to refer
relevant provisions of the Regulations called the Bihar State G
Financial Corporation (Staff) Regulations, 1965. Regulations
39 and 40 read as under:-

     "39. Penalties:- (i) Without prejudice to the provisions
     of the Regulations, an employee who commits a breach
     of the regulations of the Corporation or who displays           H
58   SUPREME COURT REPORTS                        [2015] 11 S.C.R.


A    negligence, inefficiency or indolence or who knowingly
     does anything detrimental to the interest of the
     Corporation or in conflict with its instructions or who
     commits a breach of discipline or is guilty of any other
     act of misconduct or who is convicted of a criminal
B    offence shall be liable to any or all of the following
     penalties:-
        (a}    Reprimand;
        (b)    Withholding or postponement of increment or
c              promotion including stoppage at an efficiency
               bar, if any,
        (c)    Reduction to a lower post or grade or to a lower
               stage in his incremental scale.
        (d)    Recovery from pay of the whole or part of any
D              pecuniary loss caused to the Corporation by the
               employee,
        (e)    Fine,
        (f)    Suspension,
E       (g)    Dismissal,
        (h)    Discharge, or
        (i)    Compulsory retirement
     (ii) No employee shall be subjected to the penalties in
F    clauses (b), (c), (d), (e), (f), (g), (h) or (i) of sub-regulation
     (i) except by an order in writing signed by the Managing
     Director and no such order shall be passed without the
     charge or charges being formulated in writing and given
     to the said employ so that he shall have reasonable
G    opportunity to answer them in writing or in person, as he
     prefers, and in the latter case his defence shall be taken
     down in writing and read to him, provided that the
     requirements or this Regulation may be waived if the facts
     on the basis of which action is to be taken have been
H
     BRIJ BIHARI SINGH v. BIHAR STATE FINANCIAL                       59
             CORPORATION [M. Y EQBAL, J.]

      established in a Court of Law or where the employee A
      has absconded or where it is for any other reason
      impracticable to communicate with him or where there
      is difficulty in observing them and the requirements can
      be waived without injustice to the employee. In every
      case where all or any of the requirements of this B
      Regulation are waived, the reasons for so doing shall be
      recorded in writing.
      (iii) An employee may, before the initiation of any
      proceeding under sub-regulation (ii) or pending the c
      completion of such proceeding be placed under
      suspension by the Managing Director. During such
      suspension he shall receive subsistence allowance equal
      to. two thirds of his substantive pay plus the dearness
      allowance, provided that if no penalty under any of the D
      clauses (b), (c}, (d), (e), (f), (g), (h) or (i) of sub-regulation
      (i) is imposed, the employee shall be paid the difference
      between the subsistence allowance and the emoluments
      which he would have received but for such suspension
      for the period while he was under suspension and that, if E
      a penalty is imposed on him under the said clauses, no
      order shall be passed which shall have the effect of
      compelling him to refund such subsistence allowance.
      The period during which an employee is under
      suspension shall, if he is not dismissed from the service, F
      be treated as on duty for specific purpose, i.e. as the
      Managing Director may direct.
,,    40. Rightto appeal:-(i)An employee shall have a right
       of appeal against any order passed by the competent G
     . authority which injuriously affects his interests.
      (ii) No appeal shall lie after the expiration of sixty days
      from the date of receipt of the order against which the
      appeal is preferred."
                                                                      H
60         SUPREME COURT REPORTS                  [2015) 11 S.C.R.


A         7. Perusal of Regulations 39 and 40 would show the
     manner and procedure for conducting departmental enquiry.
     Regulation 40 confers a statutory right of appeal to the
     employee against an order passed by the competent authority
     which injuriously affects his interest.
8
         8. It is well settled that a person who is required to
  answer a charge imposed should know not only the accusation
  but also the testimony by which the accusation is supported.
  The delinquent must be given fair chance to hear the evidence
C in support of the charge and to cross-examine the witnesses
  who prove the charge. The delinquent must also be given a
  chance to rebut the evidence led against him. A departure
  from this requirement violates the principles of natural justice.
  Furthermore, the materials brought on record pointing out the
D guilt are required to be proved. If the enquiry report is based
  on merely ipse dixit and also conjecture and surmises C'.annot
  be sustained in law.

          9. In the case of State of U.P. vs. Saroj Kumar Sinha,
E    (2010) 2 SCC 772, this Court held:-

          "28. An inquiry officer acting in a quasi-judicial authority
          is in the position of an independent adjudicator. He is
          not supposed to be a representative of the department/
F         disciplinary authority/Government. His function is to
          examine the evidence presented by the Department,
          even in the absence of the delinquent official to see as
          to whether the unrebutted evidence is sufficient to hold
          that the charges are proved. In the present case the
G         aforesaid procedure has not been observed. Since no
          oral evidence has been examined the documents have
          not been proved, and could not have been taken into
          consideration to conclude that the charges have been
          proved against the respondents.
H
    BRIJ BIHARI SINGH v. BIHAR STATE FINANCIAL                  61
           CORPORATION [M. Y. EQBAL, J.]

     29. Apart from the above, by virtue of Article 311 (2) of A
     the Constitution of India the departmental enquiry had to
     be conducted in accordance with the rules of natural
     justice. It is a basic requirement of the rules of natural
     justice that an employee be given a reasonable
     opportunity of being heard in any proceedings which may B
     culminate in punishment being imposed on the
     employee.

      30. When a departmental' enquiry is conducted against
      the government servant it cannot be treated as a casual C
      exercise. The enquiry proceedings also cannot be
      conducted with a closed mind. The inquiry officer has to
      be wholly unbiased. The rules of natural justice are
      required to be observed to ensure not only that justice is
      done but is manifestly seen to be done. The object of D
      rules of natural justice is to ensure that a government
      servant is treated fairly in proceedings which may
      culminate in imposition of punishment including
      dismissal/removal from service."
                                                                 E
      10. In the instant case, the disciplinary proceeding was
conducted in gross violation of Regulation 39 of the said
Regulations inasmuch as no reasonable opportunity was given
to the delinquent to place his case in defence. The Regulation
imposed a duty on the Authority to give a personal hearing to F
the delinquent.

     11. A right of appeal has been provided by Regulation
40 of the said Regulations against any order passed by the
competent Authority. In the instant case as noticed above, the G
Disciplinary Authority, instead of exercising the power as
Disciplinary Authority imposing punishment, referred his
recommendations to the appellate authority, namely, Board of
Directors for taking a decision and the Board of Directors
exercised the power of Disciplinary Authority and imposed H
62         SUPREME COURT REPORTS                     [2015] 11 S.C.R.


A    punishment of dismissal thereby deprived the appellant from
     moving the appellate authority against the said order. Such
     exercise of power is wholly arbitrary and discriminatory.

        12. Curiously enough, the Managing Director being the
s disciplinary authority prepared his report and referred the
  matter to the Board of Directors to consider the draft charges,
  enquiry report, representation filed by the officer concerned
  and his finding, for taking an appropriate decision in the case.
  Not only that, when the case was placed before the Board for
C taking a final decision, he participated in the said meeting and
  a decision was taken by the Board of Directors to dismiss the
  appellant from service. In our considered opinion, such· a
  procedure adopted by the disciplinary authority and the
  appellate authority is absolutely erroneous in law.
D
        13. In the case of Surjit Ghosh vs. United
  Commercial Bank, AIR 1995 SC 1053, this Court in similar
  circumstances, observed:-

          "5 ......... It is true that when an authority high1~r than the
E
          disciplinary authority itself imposes the punishment, the
          order of punishment suffers from no illegality when no
          appeal is provided to such authority. However, when an
          appeal is provided to the higher authority c;oncerned
F         against the order of the disciplinary authority or of a lower
          authority and the higher authority passes an order of
          punishment, the employee concerned is deprived of the
          remedy of appeal which is a substantive right given to
          him by the Rules/Regulations. An employee cannot be
G         deprived of his substantive right. What is further, when
          there is a provision of appeal against the order of the
          disciplinary authority and when the appellate or the higher
          authority against whose order there is no appeal,
          exercises the powers of the disciplinary authority in a
H         given case, it results in discrimination against the
          BRIJ BIHARI SINGH v. BIHAR STATE FINANCIAL                      63
                 CORPORATION [M. Y. EQBAL, J.]

           employee concerned. This is particularly so when there A
           are no guidelines in the Rules/Regulations as to when
           the higher authority or the appellate authority should
           exercise the powers of the disciplinary authority. The
           higher or appellate authority may choose to exercise the
           power of the disciplinary authority in some cases while B
           not doing so in other cases. In such cases, the right of
           the employee depends upon the choice of the higher/
           appellate authority which patently results in discrimination
           between an employee and employee. Surely, such a
           situation cannot savour of legality. Hence we are of the c
           view that the contention advanced on behalf of the
           respondent-Bank that when an appellate authority
           chooses to exercise the power of disciplinary authority,
           it should be held that there is no right of appeal provided
                                                                        D
           under the Regulations cannot be accepted.

           The result, therefore, is thatthe present order of dismissal
           suffers from an inherent defect and has to be set aside."

              14. In Amar Nath Chowdhury vs. Braithwaite and E
        Company Ltd. and Ors., (2002) 2 SCC 290, a similar case
       came for consideration before this Court. In that case, the
       appellant who was an employee of Braithwaite and Company
       Ltd., a Government of India undertaking, was subjected to
       disciplinary proceedings. The enquiry committee submitted F
       its report to the disciplinary authority who was the Chairman-
       cum-Managing Director of the Company. The disciplinary
       authority passed an order of removal of the appellant from
       service. The appellant moved the Board of Directors who was
     . the appellate authority. When the appeal was taken up by the G
       Board, the said Chairman-cum-Managing Director
       participated in the deliberation of the meeting of the Board
       which heard and dismissed the appeal. On these facts, this
       Court held that the proceeding of the Board was vitiated on
.•     account of participation of the disciplinary authority while H
64          SUPREME COURT REPORTS                 [2015] 11 S:C.R.


A    deciding the appeal preferred by the appellant. Similar view
     has been taken in the case of Institute of Chartered
     Accountants of India vs. L.K. Ratna and Ors., (1986) 4
     sec 537.
B      15. In the case of K. Chel/iah vs. Chairman Industrial
  Finance Corporation of India and Anr., Al R 1973 Mad. 122,
  an employee of the IFCI was dismissed from service. The
  decision to terminate the employee was taken up by the
  Chairman who was also a Member of the Board which
C considered the appeal. The High Court held that the entire
  proceeding was vitiated by non-observance of principles of
  natural justice.

        16. After giving our anxious consideration in the matter,
D we are of the definite view that the procedure adopted by the
  respondents in removing the appellant from service is
  erroneous and suffers from serious discrimination and bias.
  Further, the Enquiry Officer conducted the enquiry without
  following the procedure and without giving sufficient opportunity
E to the delinquent to place his case. Enquiry is also vitiated in
  law.

        17. For the reason aforesaid, we find that the appeal
  deserves to succeed. The orders passed by the Board of
F Directors and the impugned judgments passed by the High
  Court are liable to be set aside. The matter is, therefore, sent
  back to the Disciplinary Authority to proceed from the stage of
  the enquiry afresh and pass a reasoned order in accordance
  with law after giving full opportunity of hearing to the appellant.
G Needless to say ifthe appellant is aggrieved by the final order
  that may be passed by the Disciplinary Authority, he shall have
  a right to appeal before the appellate authority.

     Kalpana K. Tripathy                               Appeal allowed.

H