Holding

NABARD guidelines are not mandatory; non‑compliance does not invalidate the dismissal, and the employee was not prejudiced.

Summary

The employee, Devi Sahai, was dismissed by Ganga Yamuna Gramin Bank, a Regional Rural Bank, on charges of misconduct after he failed to attend a departmental inquiry. He challenged the dismissal before the High Court, contending that the bank had not followed disciplinary procedures prescribed in guidelines issued by NABARD, and that the non‑compliance rendered the dismissal void. The High Court held the NABARD guidelines to be mandatory and set aside the dismissal. On appeal, the Supreme Court held that the NABARD guidelines were issued merely for guidance, not as a statutory requirement under Section 30 of the Regional Rural Banks Act, 1976, and that the employee was not prejudiced by the bank’s non‑compliance. Consequently, the Supreme Court set aside the High Court’s judgment, restored the dismissal, and remanded the matter to the High Court to consider any other contentions raised by the employee.

Issues considered

Whether the NABARD guidelines on disciplinary procedure are mandatory for Regional Rural Banks under Section 30 of the Regional Rural Banks Act, 1976.
Whether non‑compliance with the NABARD guidelines renders a dismissal order void.
Whether the employee was prejudiced by the alleged procedural irregularities.

Legislation cited

Regional Rural Banks Act, 1976s. 30

Subjects

Service lawDisciplinary inquiryNABARD guidelinesRegional Rural BankNatural justiceDismissalProcedural fairness

Judgment

[2009] 2 S.C.R. 138

A CHAIRMAN, GANGA YAMUNA GRAMIN
BANK & ORS.
V.
DEVI SAHAI
Civil Appeal No. 940 Of 2009
B FEBRUARY 12, 2009
[S.B. SINHA. AND DR. MUKUNDAKAM SHARMA, JJ.]
Service Law - Disciplinary inquiry - On charges of mis-
J-
conduct ~ Employee did not participate in the inquiry - Was
'c dismissed by employer-Regional Rural Bank - Dismissal
challenged inter alia on ground that the disciplinary proce"-
dure laid down in the guidelines issued by NABARD was not
followed by employer-bank - High Court held that NABARD
guidelines were mandatory in character and non-compliance
D thereof had resulted in rendlpring the order of dismissal void -
Propriety of - Held: Not proper - NABARD guidelines were
issued only for guidance of Regional Rural Banks and were
not mandatory in character - In any event, the employee was
not prejudiced by reason of non-compliance thereof - Matter
E remitted to High Court for consideration of other·contentions
raised by the employee - Regional Rural Banks Act, 1976 -
s.30.
Appellant-employer is a bank constituted and incor-
-~
porated under the Regional Rural Banks Act, 1976. Re-
F spondent-employee was dismissed from service on
charges of misconduct. He purportedly had not partici-
pated In the disciplinary inquiry proceedings.
Respondent challenged the dismissal on ground that
the disciplinary procedure laid down in the guidelines is-
G
sued by the National Bank for Agricultural and Rural De-
velopment (NAl3ARD) was not followed by the Appellant.
In appeal to this Court, it was contended that the

H 138
CHAIRMAN, GANGA YAMUNA GRAMIN BANK & ORS. 139
V. DEVI SAHAI

- High Court, by the impugned judgment, committed a se- A
rious error in holding that the guidelines issued by
NABARD were mandatory in character and non-compli-
ance thereof had resulted in rendering the order of dis-
missal void.
Allowing the appeal, the Court B

HELD: 1. Appellant has been constituted under the
Regional Rural Banks Act, 1976. Regulations framed by it
- t subject to the compliance of the statutory mandate con-
tained in Section 30 of the Act have statutory force. The
provisions of the Act and the Service Regulations made c
by the appellant, therefore, form s·elf-contained Code. At
the point of time when NABARD issued guidelines, it had
nothing to do with the functionings of the Regional Rural
Banks. [Para 9] [ 146-C, D, E]
2. Act No.1 of 1988, in terms whereof the 'National D
-~ Bank' was defined and in terms whereof in.stead of con-
suiting the Reserve Bank of India for the purpose of mak-
ing regulation in terms of Section 30 of the Act, NABARD
was required to be consulted, came into force only with
effect from 28.9.1988. Again, the guidelines issued by E
NABARD laying down the procedure to be adopted for
disciplinary action in Regional Rural Banks were made
part of the Regulations. Even after coming into force of
Act No.1 of 1988, regulations were not amended. The re-
spondent does not enjoy any status. The service condi- F
ti~ms of employees of Regional Rural Banks are not pro-
tected in terms of Article 311(2) of the Constitution. The
validity or otherwise of the regulations framed by appel-
lant is not in question. In any event, respondent did not
participate in the inquiry. [Paras 9, 10, 11] [ 146-D, E, F, G,
G
H; 147-A]
3. The respondent does not show how he was preju-
diced. He was supplied with a copy of the report of the
Inquiry Officer. He even did not submit any reply thereto.
Notices had not only been published asking the respon-
H -
140 SUPREME COURT REPORTS [2009] 2 S.C.R.

A dent to take part in the disciplinary proceedings but also
chance after chance had been given to him to respond to .
the report of the Inquiry Officer. The NABARD guidelines
having been issued only for the guidance of the Regional
Rural Banks, the same was not mandatory in character
B and in any event respondent was not prejudiced by rea-
son of non-compliance thereof. [Para 11] [ 147-C, D, E]
Bank oflndia vs. Apurba Kumar Saha (1994) 2 SCC 615
- relied on. !-

c - 4. The High Court committed a serious error in pass-
ing the impugned judgment. It is set aside accordingly.
However, as it is stated that the respondent had raised
several other c9ntentions before the High Court, the mat-
ter is remanded to the High court for consideration of all
D other contentions raised by the respondent. In the facts
and circumstances of the case, as the disciplinary pro- r.

ceeding ~gainst the responden~. rad been initiated long
time back, the High Court is requested to consider the
desirability of disposing of the matter at the earliest pos-
E sible oppo~unity. [Para 12] [ 148-C, D]
Case Law Reference
(1994) 2 sec s1s relied on Para 11
CIVILAPPELLATE JURISDICTION: Civil Appeal No. 940
F of 2009
. From the Judgement and Order dated 30.12.2003 &
01.03.2006 of the High Court of Uttaranchal at Nainital in W. P.
No. 1628 of 2002 & R.A. No. 75 of 2004
G Sanjay Kumar, Ms. Arti Singh, for the Appellant.
Anand Prakash Srivastava, Manoj K. Mishra, Sanjay
Visen, for the Respondent
The Judgement of the Court was delivered by
H
CHAIRMAN, GANGA YAl\llUNA GRAfvllN BANK & ORS. 141
V. DEVI SAHA!

S.B. SINHA, J. A
1. Leave granted.
2. Appellant is a bank constituted and incorporated under
the Regional Rural Banks Act, 1976 (for short, "the Act"}. Sec-
tion 30 thereof provides for a regulation making power. B
On or about 13.5.1980, the Government of India circulated
the model (staff service) regulations for the officers/employees
of the Regional Rural Bank for adoption/approval by their re-
spective Board of Directors. The Board of Directors of the Ap-
pellant- Bank in exercise of its powers conferred upon it under C
Section 30 of the Act after consultation with the State Bank of
India (sponsor bank) and Reserve Bank of India and with the
previous sanction of the Central Government framed regulations
known as "Ganga Yamuna Gramin Bank Staff Service Regula-
tions, 1985" laying down the terms and conditions of service of D
its employees. Some of the relevant provisions of the said Regu-
lations are as under:
"10.(2)(a) The Bank may terminate the services of an
(i) Officer after giving him three month's notice of E
emolument in lieu thereof.
(ii) Employee after giving him one month's notice or
emoluments in lieu thereof.
(30)(1) PENALTIES- F
Without prejudice to the prov1s1ons of other
regulations, an officer or employee who commits a breach
of these regulations or who displays negligence,
inefficiency or indolence, or who knowingly does anything
detrimental to the interests of the Bank or in conflict with G
its instructions or who commits a bre&ch of discipline or
1 is guilty of any other act of misconduct shall be liable to the
following penalties-
(a) reprimand;
H
142 SUPREME COURT REPORTS [2009) 2 S.C.R.

A (b) delay or stoppage of increments or promotion;
(c) degradation to a lower post or grade to a lower stage
,.
in his incremental scale;
(d) recovery from pay of the whole or part of any pecuniary
B loss caused to the Bank by the officer or employee;
(e) Removal from service which shall not be- a ~

disqualification for future employment;
(f) Dismissal. ~ -
c (2) No officer or employee shall be subjected to the
penalties referred to in clause (b), (c), (d), (e) or (f)
of sub-regulation (1) except by-an order in writing
signed by the Chairman and no such order shall be
passedwithout the charge being formulated in writing
D
and given to the said officer or employee so that he
shall have reasonable 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 as r
read to him.
E
Provided that requirements of this sub-regulation may
be waived. If the facts on the basis of which action is
to be taken have been established in the court of law
or court martial where the officer or employee has
),__
F absconded or where it is for any reason impracticable
to communicate with him or where there is difficulty
in observing them and the requirements can be
waived and the reasons for so doing shall be
recorded in writing."
G 3. The Act was amended by Act No. 1 of 1988 which came
into force with effect from 28.9.1988 in terms whereof 'National t
Bank' was defined in Section 2(ca), to mean:

"(ca) "National Baok" means the National Bank for
j

Agriculture and Rural Development established under ~ -
H
CHAIRMAN, GANGA YAMUNA GRAMIN BANK & ORS. 143
",, V. DEVI SAHAI [ S.B. SINHA, J.]

Section 3 of the National Bank for Agriculture and Rural A
Development Act, 1981."
4. However, even prior thereto 'National Bank for Agricul-
tural and Rural Development (NABARD)' being the National
Bank, which although had nothing to do with statutory function-
ing of the Regional Rural Banks, allegedly, on requests made B
by Board of Directors of several regional banks issued guide-
lines, stating:
~.
"We have been receiving a number of references from
Chairmen of RRBs requesting us for guidance on c
disciplinary procedure to be adopted by RRBs for
disciplinary action against their staff. In order to meet the
demands of the Chairman of RRBs, we have prepared a
set of guidelines on the above subject with the help of our
Legal Department and representative of some sponsor
D
banks/RRBs. A copy of the manual is enclosed for your
guidance."
Relevant portion of the said guidelines are as follows:
" ..... The penalty prescribed in sub-regulation (1) can be
... imposed only after following the procedure as laid down E
in the regulation strictly in accordance with the principles
of natural justice. Broadly stated in a case of disciplinary
action, those principles require that:
' i) there is good and sufficient reason for formulating F
the charges;
ii) The charge-sheeted official knows precisely what
the charges are against him and the grounds on which
these have been based;
G
iii) the employee is given reasonable opportunity to
show cause against the penalty prescribed to be
imposed on him."
5. Indisputably, on or about 6.8.1996, an explanation was
-··. sought for from the respondent for alleged acts of misconduct H

''
144 SUPREME COURT REPORTS [2009] 2 S.C.R.
'lt-
~

A committed by him. He submitted his reply to the show cause
notice but the same was not found satisfactory by the compe- \
. -·
tent authority. On or about 25.2.1997, a charge-sheet was is-
sued to him. An Inquiry Officer was appointed to conduct a de-
partmental inquiry. In spite of several notices/advertisements
B published in the newspaper, respondent did not attend the de-
partmental inquiry. The Inquiry Officer conducted the inquiry ex
· parte and submitted his report holding the charges as proved.
The Disciplinary Authority by its letter dated 18.6.1998 forwarded
the report of the Inquiry officer to the respondent and called upon
him to submit his comments, if any, within one week from the
··-
c date of receipt of that letter. As the respondent did not do so
'I.

within that time, he was granted another opportunity by letters
i-
dated 11.07.1998 and 29.07.2008. The Disciplinary Authority
thereafter imposed a penalty of dismissal upon him by order
dated 28.9. 1998.
D
Some of the charges held proved against the respondent
are as under:-
i) Respondent sanctioned a demand loan for himself,
from time to time - without obtaining sanction,
E contrary to the rules of the Bank. Thus misusing his ,..
powers as Branch Manager for his personal interest;
ii) To achieve the target of the Branch, he started making "t
window dressing by first crediting and later debiting
F the amount, of the account holders, without their
request;
iii) Bank amount was misutilized. He received the cash
amount, but did not deposit the same, instead he
purchased NSC in his name, and thereafter took
G demand loan against the said NSC.
iv) He left the cash, under the custody of a clerk/cashier;
r
he entrusted the master key to the said clerk, thereby
failing to discharge his duties.

H
CHAIRMAN, GANGA YAMUNA GRAMIN BANK & ORS. 145
V. DEVI SAHAI [ S.B. SINHA, J.]
v) He left the place of his duty without permission of the A
competent authority.
vi) He sanctioned crop loan to 16 debtors, however did
not allow them to withdraw the amount till closure of
financial year, to achieve the target.
B
vii) Complaint was received that he was demanding
bribe.

·, . viii) Complaint was also made that he fraudulently
withdrew an amount from the saving account of a
customer. c
6. An appeal was preferred thereagainst. In the said Memo
of Appeal, no plea was raised by him that a second show cause
notice was required to be issued. He also did not make any
refer~nce to the NABARD guidelines; he also did not say that D
any prejudice has been caused to him.
),
On or about 8. 7.1999, the Appellate Authority dismissed
the said appeal. He filed a writ petition thereagainst. However,
in the meanwhile, he filed a review petition against the order of
the Appellate Authority. By an order dated 17. 7.2001, the writ E
petition was dismissed in view of the pendency of the review
petition. By an order dated 21.8.2001, the review petition was
dismissed. He filed another writ petition on 14.11.2002 for
quashing the order of dismissal dated 28.9.1998 passed by
the Disciplinary Authority as also the order dated 8. 7 .1999 F
passed by the Appellate Authority, which by reason of the im-
pugned judgment and order dated 30.12.2003 was atlowed. A
review petition filed by the appellant - Bank thereagainst has
been dismissed by an order dated 1.3.2006.
Appellant is, thus, before us. G
7. Mr. Sanjay Kapur, learned counsel appearing on behalf
of the appellant would contend that the High Court committed a
serious error in passing the impugned judgment in holding that
the guidelines issued by NABARD were mandatory in charac- H
146 SUPREME COURT REPORTS [2009] 2 S.C.R.

A ter and non-compliance thereof had resulted in rendering the
order of dismissal void.
8. Mr. Anand Prakash Srivastava, learned counsel appear-
ipg on behalf of the respondent, on the other hand, would not
only support the impugned judgment but also contend that the
B procedure laid down in the said guidelines have been followed
in the cases of the other employees and, thus, there was abso-
lutely no reason as to why the same could not be implemented
in the case of the appellant.
• <

c 9. Indisputably, Appellant has been constituted under the
Act. It ha_s a regulation making power. Regulations framed by it
subject to the compliance of the statutory mandate contained in
Section 30 of the Act have statutory force. The provisions of the
Act and the Service Regulations made by the appellant, there-
fore, form self-contained Code. Indisputably, at a point of time
D
when NABARD issued guidelines, it had nothing to do with the
functionings of the Regional Rural Banks. Act No.1 of 1988, in l
terms whereof the 'National Bank' was defined and in terms
whereof instead of consulting the Reserve Bank of India for the
purpose of making regulation in terms of Section 30 of the Act,
E NABARD was required to be consulted, came into force only
with effect from 28.9.1988.
"
10. Concededly again, the guidelines issued by NABARD 'f
laying down the procedure to be adopted for disciplinary action
F in Regional Rural Banks were made part of the Regulations.
Even after coming into force of Act No.1 of 1988, regulations
were not amended. Issuance of second show cause notice for
the purpose of obtaining the views of delinquent officer in re-
gard to quantum of punishment is not a part of the common law
principles of natural justice. Such a provision could be laid down
G
by reason of a statute. The respondent does not enjoy any sta-
~-
tus. The service conditions of employees of Regional Rural
Banks are not protec_ted in terms of Article 311 (2) of the Consti-
tution of India.

H 11. The validity or otherwise of the regulations framed by
CHAIRMAN, GANGA YAMUNA GRAMIN BANK & ORS. 147
V. DEVI SAHAI [ S.B. SINHA, J.]
appellant is not in question. In any event, respondent did not A
participate in the inquiry.
The learned counsel, however, submitted that a situation
was created by transferring the respondent to Uttar Kashi as a
result whereof he could not participate in the inquiry. It is stated
before us that such a contention has been raised in the writ B
petition. A copy of the writ petition has not been placed before
us, We are not aware as to whether such a contention has been
raised in the_ writ petition as from the perusal of the order passed
'"-.
by the High court it does not appear that such a contention had
been raised. In any event, respondent does not show how he c
was prejudiced. He was supplied with a copy of the report of
the Inquiry Officer. He even did not submit any reply thereto. As
indicated hereinbefore, notices had not only been published
asking the respondent to take part in the disciplinary proceed-
ings but also chance after chance had been given to him to D
respond to the report of the Inquiry Officer. We, therefore, are of
>·
the opinion that the NABARD guidelines having been issued
only for the guidance of the Regional Rural Banks, the same
was not mandatory in character and in any event respondent
was not prejudiced by reason of non-compliance thereof. E
In Bank of India vs. Apurba Kumar Saha [(1994) 2 SCC
615], this Court opined as under:

"4. Having regard to the arguments addressed by learned
Counsel on both sides we have gone through the papers F
and seen that the High Court's view that there was violation
of principles of natural justice, in conducting the disciplinary
proceedings against the respondent, was wholly unjustified.
The records of the disciplinary proceedings show that the
respondent had avoided filing of the written explanation
G
for the charges of misconduct levelled against him and
~
also had for no valid reason refused to participate in the
disciplinary proceedings. A Bank employee who had
refused to avail of the opportunities provided to him in a
disciplinary proceeding of defending himself against the
H
148 SUPREME COURT REPORTS [2009] 2 S.C.R.

A charges of misconduct involving his integrity and
dishonesty, cannot be permitted to complain later that he
had been denied a reasonable opportunity of defending
himself of the charges levelled against him and the
disciplinary proceeding. conducted against him by the
B. Bank-employer had resulted in violation of principles of
natural justice of fair hearing."
12. We, therefore, are of the opinion that the High Court
committed a serious error in passing the impugned judgment. It
is set aside accordingly. However, as it is stated before us that
C. the respondent had raised several other contentions before the
High Court, we remand the matter to the High court for consid- '
J:·
eration of all other contentions raised by the respondent. In the
facts and circumstances of the case, as the disciplinary pro-
ceeding against the respondent had been initiated long time
D back, we would request the High Court to consider the desir-
ability of disposing of the matter at the earliest possible oppor-
tunity and preferably within six months from the date of commu-
nication of this Court's order.
13. The appeal js allowed with the aforementioned direc-
E tions. However, in the facts and circumstances of the case, there
shall be no order as to costs.
8.8.8. Appeal allowed.

J-