Holding

Regulation 18 cannot be exercised to review a disciplinary order that has attained finality, and the six‑month limitation (without a valid extension under Regulation 21) was breached, rendering the third charge sheet invalid.

Summary

Swapan Kumar Pani, an accountant of Canara Bank, was first exonerated in 1989 of charges of unauthorised removal of special bearer bonds. Later, after a CBI report, the bank’s Managing Director invoked Regulation 18 of the Canara Bank Officer Employees' (Discipline and Appeal) Regulations, 1976 to set aside the exoneration and issued a fresh charge sheet in 1996. The Supreme Court examined whether Regulation 18 could be used to review an order that had attained finality, and whether the six‑month limitation (or any extension under Regulation 21) was complied with. It held that the order of exoneration was final, the review was beyond the statutory time‑limit and no extension was valid, rendering the third charge sheet invalid. The Court also ruled that the High Court erred in permitting the bank to launch a fresh inquiry, but upheld the High Court’s decision to deny back wages to the employee. Consequently, the bank’s appeal was dismissed and the employee’s appeal was allowed in part.

Issues considered

The applicability of Regulation 18 to review a disciplinary order that has attained finality.
Whether the six‑month time limit for review under Regulation 18 (or its extension under Regulation 21) was complied with.
The validity of issuing a fresh charge sheet for a part of the charge interlinked with a previously exonerated part.
The propriety of the High Court granting liberty to the bank to initiate a fresh inquiry.
The appropriateness of denying back wages to the employee.

Legislation cited

Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970

Subjects

disciplinary proceedingsbanking regulationsreview powerlimitation periodexonerationcharge sheetback wagesstatutory regulationsservice law

Judgment

't CANARA BANK AND ORS. A
11.
SWAPAN KUMAR PAN! AND ANR.

FEBRUARY 24, 2006

[S.B. SINHA AND DALVEER BHANDARI, JJ.] B

'> Service Law:

Banking Services--Canara Bank Officer Employees' (Discipline and
Appeal) Regulations, 1976-Regulations 18 and 21-Bank employee charged c
with misconduct-Exonerated by order of disciplinary authority-Power of
review under Regn. 18-When exercisable-Held: Exercisable in respect of
a proceeding which has not attained finality-Order exonerating the employee
having attained finality, hence, Reg. 18 not applicable-Moreover, purported
order of review was passed after 6 years, which was much beyond the period D
of limitation and also not within reasonable time-Banking Companies
-t (Acquisition & Transfer of Undertakings) Act, 1970.

Misconduct-Inter-linked charges-Departmental enquiry-Scope of'-:
Three charge sheets-Charges levelled in third charge sheet in 2 parts-
First part was covered by the first charge sheet wherefrom the employee had E
already been exonerated-Second part was inter-linked with the first part-
Hence, High Court right in quashing the third charge-sheet-But it erred in
granting liberty to the employer to initiate fresh enquiry, moreso, when
alleged misconduct was committed more than a decade back.
F
First Respondent working as Accountant in Appellant-Bank was charged
-~ with misconduct for unauthorised removal of certain special bearer bonds pledged
into the Bank. But in the departmental proceedings, he was found to be not guilty
pursuant to which he was exonerated by an order of the Disciplinary Authority.
Subsequently another charge-sheet on identical charges was issued and again
departmental proceeding initiated but no action was taken despite submission of G
report by the Inquiry Officer. Managing Director of the Bank, the Reviewing
), ·-(
Authority, set aside the earlier order exonerating Respondent in purported exercise
-~
of powers under Regulation 18 of the Canara Bank Officer Employees'
{Discipline and Appeal) Regulations, 1976 on the basis of fresh evidence allegedly

631 H
_,
632 SUPREME COURT REPORTS [2006] 2 S.C.R.

A revealed from the CBI report regarding the said bearer bonds. Consequently, the
Bank framed charges for the third time by issuing a fresh charge sheet First
Respondent questioned the validity of third charge sheet, by filing a writ petition.
High Court quashed the third charge sheet but having regard to the seriousness
of charges, denied backwages to the First Respondent and further granted liberty
B to the Bank to initiate fresh inquiry. Both the parties filed appeals before this
Court.

Allowing the appeal of First Respondent in part while dismissing the appeal
of Appellant-Bank, the Court

HELD: I.I. The Canara Bank Officer Employees' (Discipline and Appeal)
c Regulations, 1976 having been framed under Section 19 of the Banking
Companies (Acquisition & Transfer of Undertakings) Act, 1970 have statutory
force. An authority exercising such statutory power was required to act within
the four corners thereof and was bound by the limitations prescribed therein.
Regulation 18 could have been applied in a case where the power of review is
D exercised in respect of a proceeding which has not attained finality. In this case,
however, admittedly two charge sheets were issued and at least in one of them the
First Respondent was exonerated. The said order attained finality. The second
?'
one was not pursued despite a report having been submitted by the Inquiry Officer l

evidently because of the first disciplinary proceeding. As the First Respondent
was exonerated there was no question of enhancement of punishment and in that
E
view of the matter second part of Regulation 18 had also no application. As no
order had been passed extending the time, evidently the power under Regulation
21 had also not been exercised. (637-F; 638-F-H]

1.2. Noticeably the First Respondent was exonerated by an order dated
F 29.3.1989 whereas the purported order of review was passed on 25.7.1995, Le.
after a period of 6 years, which was much beyond the period of limitation. The
~
power was also not exercised within a reasonable time. (638-H; 639-A) ,..

2. Furthermore, the charges levelled against the First Respondent are in 2
parts; (i) that he had on 6.11.1985 removed 20 special bearer bonds pledged by
G the Managing Director of Mis Utkal Iron & Steel Industries from the strong
room of the bank; and (ii) out of those special bearer bonds five bearer bonds
were disposed of at Calcutta for Rs. 59,500/-. Admittedly, the first part of the
charge was covered by the first charge sheet dated 20.5.1987. He having been r ~

exonerated therefrom, no fresh charge sheet could have been issued in absence
H of any statutory power in this behalf. Only the second part of the said charge
(
~-

CANARA BANK v_ SWAP AN KUMAR PAN! [SINHA, J.] 633
sheet, is said to be based on new materials purported to have been discovered by A
-t-
the Managing Director of the bank. An inquiry in the second part of the charge
sheet could have been possible, if the first part thereof viz. the respondent had
removed the said bonds pledged by Mis Utkal Iron & Steel Industries was not
required to be proved. As the bank cannot be permitted to reopen the first part of
the ch~rge, it a fortiori cannot be allowed to enquire into the second part also as
both the parts of the charge are interlinked with each other. In other words, proof B
of second part of the charge was wholly dependent upon the first part. The
impugned judgment of High Court to that extent is unassailable. [639-B-D)

3.1. The High Court, however, comm.itted an error in granting liberty to
the bank to initiate a fresh inquiry. If the High Court was of the opinion that the
new materials purported to have been found were not sufficient for initiation of
c
the enquiry in question, one fails to understand as to on what basis liberty was
given to the bank to initiate a fresh inquiry, more so when the misconduct, if any,
was committed as far back as in the year 1985. [639-E, F)

3.2. However, in the facts and circumstances of this case the discretion D
exercised by the High Court in refusing back wages to the first respondent need
not be interfered with. [639-F]
-t
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1641 of2004.

From the Final Order and Judgment dated 14.08.2003 of the Calcutta E
High Court in Appeai from Original Order No. 1276 of 2000.

WITH

Civil Appeal No. 1642 of2004.
F
Ravindra Kumar, S. Muralidhar, Krishna Kumar, Rani Nanda, Amit Sharma
~I and Ms. Lupanlu Gangnei for the appearing parties.

The Judgment of the Court was delivered by

S.B. SINHA, J. These are two cross appeals between the parties. G
Canara Bank is appellant in Civil Appeal No. 1641 of 2004 and respondent in
Civil App.!al No. 1642 of2004. Shri Swapan Kumar Pani (hereinafter referred
__..
i to as "the first respondent") is appellant in Civil Appeal No. 1642 of2004 and
" first respondent in Civil Appeal No. 1641 of 2004.

The first respondent at all material time was working as Accountant, in H
634 SUPREME COURT REPORTS (2006) 2 S.C.R.
A Jajpur Road, Orissa Branch of Canara Bank, Calcutta (hereinafter referred to
as 'the Bank'). It is stated that in the said capacity he used to hold one set
of keys of the locker of the bank. Another set of keys used to be in the
custody of the Manager of the Bank. Admittedly on the ground that he had
committed a misconduct; a departmental proceeding was proposed to be held
in terms of Regulation 6 of the Canara Bank Officer Employees' (Discipline
B &Appeal) Regulations, 1976 (Regulations) wherefor the following Articles of
Charge were served on the first respondent:

"Mis Utkal Iron & Steel Industries is a Constituent of our Jajpur road
Branch. They were sanctioned an M.L. Limit of Rs. I0.00 lakhs vide
advances Section I, C.O. Calcutta, letter CC: ADV-1:0069:84T dated
c 6.1.1984. the loan was sanctioned on Collateral Security of Bearer
Bonds of Rs. 2.00 lacs besides other securities. The details of the
bearer bonds are given in the statement of imputations.

The bearer bonds were put in a loan paper cover and kept in double
lock on 20.1.1984.
D
On 23.1.1986, Mis S.K. Sahu & Brothers, the Statutory auditors,
requisitioned the bonds for verifiration. It was found, on verification,
that the bonds were missing and the cover contained a few blank
sheets of B-2, attendance marking register.
E There are reasons to believe that you had unathorisedly and with
ulterior motive removed the aforesaid bearer bonds from safe custody.

You have, thereby, failed to protect the interests of the Bank and have
exposed the Bank to financial loss.

F By your above action, you have failed to perform your duties with
utmost honesty, integrity, devotion and diligence and thereby ;..
committed a misconduct within the meaning ofRegulation-3 (I) read '
with Regulation 24 of the Canara Bank Officer Employees (Conduct)
Regulations, 1976, which is punishable under the provisions of Canara
Bank Officer Employees' (Discipline Appeal) Regulations, 1976."
G
The gist of the charge contained in the said article of charge, thus, was
that the first respondent had unauthorisedly and with ulterior motive removed
the special bearer bonds worth Rs. 2 lacs from the bank's safe custody on
6.11.1985 on which date he was holding the second set of keys of the double
H lock having obtained the keys from the Manager's drawers and while removing
CANARA BANK v.SWAPAN KUMAR PAN! [SINHA, J.] 635
the said bonds kept blank sheets of B-2 register therein. The said bearer A
bonds had been taken as collateral security from Mis Utkal Iron and Steel
Industries towards sanctioning of M.L. Limit of Rs. 10 lacs.

In the departmental proceedings he was found to be not guilty of the
said charges pursuant whereto he was exonerated by an order of the
Disciplinary Authority dated 29.3.1989. Again a charge-sheet containing almost B
identical charges was issued on 31.3 .1989. The allegations made against the
first respondent in the said charge sheet were that the said bearer bonds had
y been last seen by him in July, 1985 and thereafter he failed to verify the
existence thereof. Though he was one of the holders of the keys the bank
double lock and a certificate was issued by him as regards the existence of
the said bearer bonds without actually verifying their availability he committed
c
a misconduct. The charge against him in short was that he had failed to
protect the bank's interest and exposed it to financial loss and that he had
failed to discharge his official duties with devotion and diligence. Another
departmental proceeding was initiated whereupon the Inquiry Officer submitted
a report. It is, however, accepted that the said matter was not further proceeded D
against.
~
·~ The Managing Director of the bank, who was the Reviewing Authority,
allegedly came to know that the matter regarding missing of the bearer bonds
had been investigated into by the CBI and from its report it was revealed that
the same were removed by the respondent on 6.11.1985 and out of the 20 E
bonds, 5 were disposed of at Calcutta through a private person for a sum of
Rs. 59,500/-. The Reviewing Authority, on the aforementioned premise, in
purported exercise of his powers under Regulation 18 of the Regulations
called upon the first respondent to show cause within 15 days as to why
action should not be taken against him in the light of the fresh evidence; and F
.... as to why the Reviewing Authority should not set aside the findings of the
( Inquiring Authority dated 17 .6.1988 and consequently the orders dated
29.03.1989 passed by the Disciplinary Authority should not be set aside. No
show cause was filed by him. No explanation was submitted by him and
consequently the Reviewing Authority passed an order dated 26.10.1995
setting aside the findings of the Inquiring Authority and consequent order G
dated 29th March, 1989. Pursuant to and in furtherance of the said order dated
,. 26.10.1995 passed by the Managing Director of the appellant bank issued a
~ fresh charge sheet on 31.01.1996 on the following terms :

"You are working as officer at our Rourkela branch since 20.6.1974. H
636 SUPREMI: COURT REPORTS [2006] 2 S.C.R.

A Earlier you were working as accountant at our Jajpur Road, Orissa
branch from 1.5.1985 to 3.5.1986. f

Mis Utkal Iron & Steel Industries is a constituent of our Jajpur Road
branch. They were sanctioned an ML limit of Rs. I0 lacs vide advances
section I, circle office. Calcutta letter CC/ADV-l/0069/84T dated 6.1.1984.
B the loan was sanctioned on collateral security of Bearer bond of Rs.
2 lacs besides other securities. The details of the bearer bonds are
given in the statement of imputation .

The bearer bonds were put in a loan paper cover and kept in
double lock on 20.1.84.
c On 23.1.86, M/s S.K. Sahu & Brothers the statutory auditors
requisitioned the bonds for verification. It was found, on verification,
that the bonds were missing and the cover contained a few blank
sheets of B-2, attendance marking register.

D Investigation has revealed that you had on 6.11.1985 removed the
20 special bearer bonds 1991 pledged by Shri R.K. Taparia, Managing
Director of Mis. Utkal Iron & Steel Industries from the strong room
and out of these bearer bonds get bearer bonds bearing Nos. A
160112. A 160136. A 160491 disposed of at Calcutta through a private
person Sri Debipada Bhattacharya of Balasore town for Rs. 59,500/-
E

The first respondent questioned the legality and validity of the said
charge sheet by filing a writ petition in the High Court of Calcutta. A learned
Single Judge of the said High Court refused to pass an order of stay. During
F pendency of the said writ petition disciplinary proceedings were held by the
Inquiry Officer. A report was submitted finding him guilty of the charges; and
pursuant thereto the disciplinary authority imposed a punishment of dismissal ....
,
from service upon the first respondent by an order dated 4..12.1995. The said
order, however, was not given effect to in view of the pendency of the writ
petition.
G The learned Single Judge dismissed the said writ petition by an order
dated 12.4.2000. Aggrieved by and dissatisfied therewith the first respondent
preferred a Letters Patent Appeal which has been allowed by a Division r ...
Bench of the said High Court by reason of the impugned judgment holding
(I) The Managing Director of the Bank could not have taken recourse to
H Regulation 18, as no punishment had been imposed upon the first respondent.
CANARA BANK v.SWAPAN KUMAR PAN! [SINHA, J.] 637

(2) In any event the power under Regulations 18 could have been exercised A
within a period of six months only and not thereafter.(3) Regulation 21 which
empowers the bank to extend the time could not have been invoked in the
fact of the case. (4) As the charge sheet was issued in terms of the said order
of review, the same was liable to be quashed.
However, having regard to the seriousness of charges, the first B
respondent was denied the back wages. The bank was further given liberty
to initiate fresh proceedings on proper materials, if any. Both the parties have,
thus, filed appeals before us.
Mr. Ravindra Kumar, learned counsel appearing on behalf cifthe appellant
bank assailing the judgment of the High Court would contend that in view C
of the fact that the third charge sheet was issued on new grounds, the
Division Bench of the High Court committed a manifest error. In view of the
fact that Regulation 21 of the Regulations, it was submitted, confers power
upon the bank to enlarge the time for taking any action in terms thereof, the
time for initiating the proceedings of review must be held to have been D
. extended and, thus, it was not necessary to pass an order within a period of
six months from the date of the first order, as has been held by the High Court.
Mr. S. Murlidhar, learned counsel appearing on behalf of the first
respondent, on the other hand, would urge that the Reviewing Authority was
bound to exceed his jurisdiction under Regulation 18 of the Regulations while E
issuing the show cause notice dated 31.1.1996. In respect of the appeal
preferred by the first respondent herein it was submitted that the High Court
having found that the bank could not have initiated any disciplinary inquiry
afresh, committed a patent illegality by granting liberty to the appellant to
initiate fresh inquiry on fresh materials and denying back wages to the first
respondent. F
Regulations have been framed under Section 19 of the Banking
Companies (Acquisition & Transfer of Undertakings) Act, 1970. Regulations
18 and 21 read as under :
"18 Review: Notwithstanding anything contained in these regulations, G
the Reviewing Authority may at any time within six months from the
date of the final order, either on his own motion or otherwise review
the said order, when any new material or evidence which could not
be produced or was not available at the time of passing the order
under review and which has the effect of changing the nature of the
case, has come or has been brought to his notice and pass such H
638 SUPREME COURT REPORTS [2006] 2 S.C.R.

A orders thereon as it may deem fit:
Provided that:

(i) [f any enhanced penalty, which the Reviewing Authority proposes
to impose, is a major penalty specified in Clauses (f), (g), (h), (i)
or (j) of Regulation 4 and an enquiry as provided under Regulation
B 6 has not already been held in the case, the Reviewing Authority
shall direct that such an enquiry be held in accordance with the
provisions of Regulation 6 and thereafter consider the record of
the enquiry and pass such orders as it may be deem proper;
(ii) If the Reviewing Authority decides to enhance the punishment
c but an enquiry has already been held in accordance with the
provisions of Regulation 6, the Reviewing Authority shall give
show cause notice to the officer employee as to why the enhanced
penalty should not be imposed upon him and shall pass an order
after taking into account the representation, if any, submitted by
D the officer employee."
"21. Power to relax time- -limit and to condone delay:
Save as otherwise expressly provided in these regulations the
authority competent under these regulations to make any order may,
for good and sufficient reasons or if sufficient cause is shown, extend
E the time specified in these regulations for anything required to be
done under these regulations or condone any delay."
(Emphasis supplied)
The said Regulations have statutory force. An authority exercising
such statutory power was required to act within the four corners thereof. He
F was bound by the limitations prescribed therein. Regulation 18 could have
been applied in a case where the power of review is exercised in respect of
a proceeding which has not attained finality. In this case, however, admittedly
two charge sheets were issued and at least in one of them the first respondent
was exonerated. The said order attained finality. The second one was not
G pursued despite a report having been submitted by the Inquiry Officer evidently
because of tht: first disciplinary proceeding. As the first respondent was
exonerated there was no question of enhancement of punishment and in that
view of the matter second part of Regulation 18 had also no application. As
no order had been passed extending the time, evidently the power under
Regulation 21 had also not been exercised. We may notice that the first
H respondent was exonerated by an order dated 29.3.1989 whereas the purported
CANARA BANK v. SWAPAN KUMAR PAN! [SINHA, J.] 639
·')·
order of review was passed on 25.7.1995, i.e. after a period of6 years, which A
was much beyond the period of limitation. The power was also not exercised
within a reasonable time.
Furthermore, the charges levelled against the first respondent herein are
in 2 parts; (i) that he had on 6.11.1985 removed 20 special bearer bonds
pledged by the Managing Director of Mis Utkal Iron & Steel Industries from B
the strong room of the bank; and (ii) out of those special bearer bonds five
bearer bonds were disposed of at Calcutta for Rs. 59,5001-. Admittedly, the
.., first part of the charge was covered by the first charge sheet dated 20.5.1987.
He having been exonerated therfrom, no fresh charge sheet could have been
issued in absence of any statutory power in this behalf. Only the second part
of the said charge sheet, is said to be based on new materials purported to c
have been discovered by the Managing Director of the bank. An inquiry in
the second part of the charge sheet could have been possible, if the first part
thereof charge viz. the respondent had removed the said bonds pledged by
Mis Utkal Iron & Steel Industries was not required to be proved. As the bank
cannot be permitted to reopen the first part of the charge, it a fortiori cannot D
be allowed to enquire into the second part also as both the parts of the charge
·i are interlink_ed with each other. In other words, proof of second part of the
charge was wholly dependent upon the first part. The impugned judgment to
that extent is unassailable.
The High Court, however, committed an error in granting liberty to the E
bank to initiate a fresh inquiry. If the High Court was of the opinion that the
new materials purported to have been found were not sufficient for initiation
of the enquiry in question; we fail to understand as to on what basis liberty
was given to the bank to initiate a fresh inquiry, more so when the misconduct,
if any, was committed as far back as in the year 1985.
.4- F
·1 We are, however, of the opinion that in the facts and circumstances of
this case the discretion exercised by the High Court in refusing back wages
to the first respondent herein need not be interfered with.
For the aforementioned reasons, the appeal filed by the appellant bank
being Civil Appeal No. 164 I of 2004 is dismissed. The appeal filed by the first G
.. -;'-,
respondent being Civil Appeal No. 1642 of2004 is allowed in part and to the
extent mentioned hereinbefore. There shall be no order as to costs.

B.B.B. Appeals disposed of.