Holding

A promotion granted under Clause 9 of the bank's Promotion Policy does not constitute condonation of pre‑promotional misconduct, and disciplinary proceedings may lawfully continue.

Summary

The respondent, a bank manager, was promoted from Scale II to Scale III under Clause 9 of the bank's Promotion Policy while disciplinary action was merely contemplated. Later, a charge‑sheet was served and a departmental inquiry was ordered. The respondent filed a suit claiming that the promotion amounted to a legal condonation of the alleged misconduct, rendering the charge‑sheet illegal. The trial court and the High Court upheld his claim, but the Supreme Court held that promotion under the policy does not constitute condonation and therefore the disciplinary proceedings could lawfully continue. The Court allowed the appeal, set aside the High Court's order quashing the inquiry, and directed that the departmental enquiry be completed within six months, while the bank agreed to consider promotion to Scale IV if the officer is found fit.

Issues considered

Whether a promotion granted while disciplinary proceedings are contemplated amounts to condonation of the alleged misconduct, thereby barring further disciplinary action.
Whether disciplinary proceedings can be continued against an employee who has been promoted under Clause 9 of the bank's Promotion Policy.
Whether the absence of a charge‑sheet at the time of a promotion interview prevents the bank from withholding or delaying promotion.

Subjects

promotiondisciplinary proceedingscondonationservice lawbankdepartmental inquirypromotion policyClause 9manager misconduct

Judgment

NEW BANK OF INDIA
A
V.
N .P. SEHGAL AND ANR.

FEBRUARY 15, 1991

[M.H. KANIA AND KULDIP SINGH, JJ.] B

Service Law-Bank-Promotion Policy-Manager-Misconduct
-Promotion granted while disciplinary proceedings were contempla-
ted-Charge-sheet served and departmental inquiry initiated subsequent
to promotion-Held contemplated disciplinary proceedings are no bar
.J) for considering the employee for promotion-But grant of promotion
cannot be regarded as condonation of pre_promotional misconduct- c
Serving of charge-sheet and initiation of departmental inquiry held
valid.

Clause 9 of the Promotion Policy of the Appellant Bank provides
that an officer in respect of whom disciplinary action is in process will D
be permitted to take part in the promotion process, subject to tile
condition that his promotion will be withheld until the officer is
ex!>nerated from the charges and in case such an officer is exonerated
from the charges, the promotion shall take effect from the date on
which it would have been otherwi~ effective but for the disciplinary
action. Respondent-1, a Bank Manager, was promoted from Scale II to E
Scale-III under the aforesaid clause while disciplinary proceedings were
contemplated against him. Later he was also interviewed for promotion
from Scale III to Scale IV. thereafter the appellant-Bank cbarge-
sheeted him and initiated a departmental inquiry against him. He chal-
lenged the legality of the bank's action by filing a declaratory suit
contending that in view of the promotion granted to him, the appellant- F
Bank must be deemed to have condoned the earlier misconduct and
subsequent to his promotion it was not open to the Bank to take any
action against him. The Trial Court allowed the suit and restrained the
appellant-bank from proceeding with the inquiry by holding the
charge-sheet illegal. The order of the trial court was aiTmned by the
first appellate court and the second appeal filed by the bank was also G
dismissed by the High Court.

In appeal to this court, it was contended on behalf of the bank that
the grant of promotion to the appellant under clause 9 cannot be
regarded in iaw as condonation of pre-promotion misconduct. On
behalf of the respondent, it was contended that even if the continuation of H

473
474 SUPREME COURT REPORTS [1991] 1 S.C.R.

A disciplinary proceedings was valid, it was not a ground for holding up
of his promotion from Scale III to Scale IV because on the date of
interview no charge-sheet was served on him.

Allowing the appeal and setting aside the order of the High Court,
this Court,
B
HELD: 1. The mere fact that disciplinary proceedings are con-
templated or under consideration against an employee does not consti-
tute a good ground for not considering the employee eoncerned for
promotion if he is in the zone of consideration nor would it constitute a
good ground for denying the promotion if the employee is considered
otherwise fit for promotion. Clause 9 of the Promotion Policy of the
c Bank gives rise to the implication .that till disciplinary action is in pro-
cess or initiated, the officer concerned, against whom allegations of
misconduct might be made, can neither be excluded from consideration
for promotion if he is entitled to be considered for promotion otherwise
nor can the promotion be denied to him. In these circumstances, when
D the promotion from Scale II to Scale Ill was granted to respondent,
there could be no question of condonation of the earlier acts of miscon-
duct by reason of this promotion because in law and in view of clause 9
of the Promotion policy appellant had no option but to consider respon-
dent for promotion and if he was otherwise found fit for promotion to
promote him. Hence the charge~heet submitted against respondent and
E the disciplinary proceedings pursuant to the said charge-sheet cannot
be said to be bad in law and cannot be interferred with on the ground of
condonation. Therefore, the courts below were in error in holding that
the earlier alleged acts of IDi'iCOnduct of respondent had been condoned by the
appellant and basing their conclusions thereon. [476G-H; 477F-H; 488A]

F L. W. Middleton v. Horry Play Fair, AIR 1925 Cal. 87; District (

Council, Amraoti through Secretary v. Vithal Vinayak Bapat, AIR 1941 ~
Nagpur 125 and Audhraj Singh v. State of Madhya Pradesh, AIR. M.P.
284; held inapplicable.

2. In view of the fact that the appellant-bank has agreed that
G without creating a precedent it will grant promotion to respondent from
Scale Ill to Scale IV, if the departmental promotion Committee finds
him fit for promotion and that this promotion will be granted from the
date on which he would have been promoted but for the departmental
inquiry being contemplated against him, it is unnecessary to express
any opinion on the submission that since on t'1e date of selection for
H promotion from Scale m to Scale IV, no charge~sheet was served on the
NEW BANK v. N.P. SEHGAL [KANIA, J.] 475

respondent it was not open to the bank to hold back the respondent's
A
promotion from Scale III to Scale IV. [479C-D]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 739
of 1991.

From the Judgment and Order dated 16.3.1990 of the Punjab B
and Haryana High Court in Regular Second Appeal No. 405 of 1990.

G .B. Pai, and P .N. Gupta for the Appellant.

-
Ashok K. Mahajan for the Respondent.

The Judgment of the Court was delivered by
c

. v KANIA, J. Leave granted. Counsel heard .

This is an appeal by Special Leave against the decision of a
learned Single Judge of the Punjab and Haryana High Court, dismis- D
sing summarily Regular Second appeal No. 405 of 1990 in that Court.

The relevant facts can be stated very shortly.

At the relevant time respondent no. 1 was an officer being the
Manager in the Hardwar Branch of the appellant Bank, a Government E
of India Undertaking. On April 2, 1982 a show cause notice was served
on respondent no. 1 in respect of several i:i;regularities, lapses, acts,
omissions and so on. On May 4, 1982 respondent no. 1 submitted his
reply to the said show cause notice denying the charges made against
him and asking for the holding of an enquiry into the allegations. On
I July 17, 1984 respondent no. 1 was promoted from Scale II to Scale Ih 1
~ by the appellant. It appears from the record that disciplinary action
was contemplated against respondent no. 1 but in November 1984, the
disciplinary proceedings contemplated against respondent No. lwere
kept in abeyance as some of the allegations against him were under
investigation by the Central Bureau of Investigation (CBI). On March
11, 1988 interviews for promotion from Scale Ill to Scale IV were G
conducted and respondent no. 1 was one of the officers interviewed for
promotion. On April 27, 1988 a charge-sheet was served on respon-
dent no. 1. On May 27, 1988 an enquiry was ordered against him and
the Commissioner of Departmental Enquiries, Government of India,
was appointed as the Enquiry Officer. On June 30, 1988, respondent
no. 1 filed a suit in the Court of Sub-Judge, Second Class, Jallandhar H
476 SUPREME COURT REPORTS (1991] 1 S.C.R.

for a declaration that the Order dated April 27, 1988 by which respon-
A
dent no. 1 was served with charge-sheet was illegal and in violation of
the Service Regulations and unsustainable in law and prayed for a
permanent injunction restraining the appellant and others from pro-
ceeding with the enquiry -0n the basis of the said charge-sheet. One of
'"'
the main contentions urged on behalf of respondent no. 1 in the said
B suit was that by reason of the promotion granted to him from Scale II
to Scale III on July 17, 1984 as aforestated, which was after the irre-
gularities and misconduct alleged against him had been committed and
in view of the said promotion the appellant must be deemed to have
condoned the earlier misconduct, if any, of respondent no. 1 and
thereafter it was not open to the appellant to take any action against l.J.__,
respondent no. 1 iri respect of the said misconduct. This contention
c found favour with learned Trial Judge who gave a declaration that the
.-:--

order serving the charge-sheet on respondent no. 1 was illegal and
restrained the appellant and others from proceeding with the enquiry
on the basis of the said charge-sheet. An appeal was preferred by the "'(
appellant against the said order in the court of learned Additional
D District Judge, Jallandhar but it was dismissed as learned Additional
District Judge accepted the reasoning and conclusions of the learned
Trial Judge. The second appeal against thy decision of learned Addi-
tional District Judge was dismissed by the High Court and this is an
appeal directed against the judgment of the High Court.

E It was submitted before us by Mr. Pai, learned Counsel for the
appellant that the promotion granted to respondent no. 1 from Scale II
to Scale III on July 17, 1984, could not be regarded in law as condona-
tion of the earlier acts of misconduct committed by respondent no. 1.
It was urged by him that at that time no disciplinary proceedings had
been initiated against respondent no. 1 and in view of this, the appel-
lant had no option but to consider respondent no. 1 for promotion for
F
which he was entitled to be considered and to promote him if he was
found fit for promotion. It was, on the other hand, contended by Mr.
-.:,-
Rao, learned counsel for the respondent that the earlier acts of respon-
dent no. l, even if they constituted misconduct, could not be relied
upon to take any disciplinary action against respondent no. 1 because
G they were condoned by reason of the aforesaid promotion.
~
In considering the submissions of the respective parties, we have
~
to bear in mind that it is accepted before us that in law the mere fact !
that disciplinary proceedings are contemplated or under consideration
against an employee does not constitute a good ground for not consi-
H dering the employee concerned for promotion if he is in the zone of
NEW BANK v. N.P. SEHGAL [KANIA, J.] 477

consideration nor would it constitute a good ground for denying the
promotion if the employee is considered otherwise fit for promotion. A
In the present .case, we find that this legal position is reinforced by
clause (9) of the Promotion Policy of the appellant Bank. Clause (9)
reads as follows:

·~
"Clause 9. Officers in respect of whom disciplinary action B
is in process will be permitted to take part in the promotion
_..(_ process, subject to the condition that the promotions (if
they are selected) will be withheld until the Officer is
exonerated from the charges. In such an event the promo-
_...._,. tion will be given effect to from the date on which it would
have been otherwise effective but for the disciplinary
action. The officer will not be eligible for promotion if c
punishment, except censure, was awarded as a result of the
' -~
disciplinary action."

On a plain reading of this clause it is clear that even if discipli-
nary action is in process against an officer of the appellant Bank, that D
would not entitle the appellant Bank to exclude from consideration for
promotion the officer concerned if he is otherwise entitled to be so
considered. The only right given to the appellant in such cases is that,
in case such an officer is otherwise found fit for promotion and
-'..., selected for promotion, that promotion can be withheld until the
officer is exonerated from the charges. It is significant that the said E
clause goes to state that in case such an officer is exonerated from the
charges, promotion will have to be given effect to from the date on
which it would have been otherwise effective but for the disciplinary
action. This rule gives rise to the implication that till disciplinary
action is in process or initiated, the officer concerned, against whom
allegations of misconduct might be made, can neither be excluded F
'-- from consideration for promotion if he is entitled to be considered
otherwise nor can the promotion be denied to him. In these circums-
tances, when the promotion from Scale II to Scale III was granted to
respondent no. 1 on July 17, 1984, there could be no question of
condonation of the earlier acts of misconduct by reason of this promo-
tion because in law and in view of the said Regulation (9) the appellant G
had no option but to consider respondent no. 1 for promotion and if he
. ...( was otherwise found fit for promotion to promote him. In view of this
conclusion, it must follow that the charge-sheet submitted against
respondent no. 1 and the disciplinary proceedings pursuant to the said
charge-sheet cannot be said to be bad in law and cannot be interferred
with on the ground of condonation. In our view, the courts below were H
478 SUPREME COURT REPORTS (1991] 1 S.C.R.

in error in holding that the earlier alleged acts of misconduct of
A ~.
respondent no. 1 had been condoned by the appellant and basingtheir
conclusions thereon.

In support of his submissions relating to the question of condona-
tion, Mr. Rao relied upon the decision of a Division Bench of the
B Calcutta High Court in L. W. Middleton v. Horry Playfair, AIR (1925)
Calcutta 87 and the decision of a learned Single Judge of the Nagpur
High Court in District Council, Amraoti through Secretary v. Vithal,
Vinayak Bapat, AIR (1941) Nagpur 125. Both these cases lay down
>-
that once a master has condoned any misconduct on the part of servant
which would have justified dismissal or a fine, he cannot, after such --.JJ
condonation, go back upon his election to condone and claim a right to
c dismiss him or impose a fine or any other punishment in respect of the
offence which has been condoned. In our view, these decisions are of
no relevance in the present case. At the time these decisions were y· /

rendered under the general law of master and servant it was open to
the master to dismiss his servant or fine him on the ground of miscon-
D duct. On the facts of both these cases the master had the option of
dismissing the servant or finding him on the ground of misconduct but
voluntarily did not take the action of dismis~ing_or fining him on the
ground of misconduct and it was held that thereby the master had
condoned the earlier misconduct and could not thereafter rely on the
said misconduct for punishing the servant. In the case before us, how-
_.__
E ever, at the time when the promotion was granted to respondent no. 1
on July 17, 1984, the appellant had no option but to consider respon-
dent no. 1 for promotion and to promote him if he was found fit as no
disciplinary proceedings had been initiated against him or could be
said to be in process against him, as we have set out earlier. In such a
case, no question of condonation could arise. The ratio of decision in
F Lal Audhraj Singh v. State of Madhya Pradesh, AIR 1967 M.P. 284 is
---r
\
also of no application to the case before us as that again v.'ras a case
where the employer, namely, the State, had the option of punishing
the employee and volunarily refrained from doing so.

It was next contended by Mr. Rao that even if the disciplinary
G proceedings against respondent no. 1 were liable to be continued that
constitutes no ground for holding up the promotion of respondent
no. 1 'from Scale IIi to Scale IV if he was otherwise found fit for >--
promotion, as, on the date when the selections for that promotion
were made, no charge-sheet had been served on respondent no. 1 and
it is the accepted position here that till the charge-sheet was submitted
H it could not be said that disciplinary proceedings were in process or
NEW BANK v. N.P. SEHGAL [KANIA, J.] 479

had been initiated. It was submitted by Mr. Rao that this contention A
was fortified by the provisions of Clause (9) of the Promotional Policy
of the appell~nt, which we have discussed earlier. It was urged by him
that it was on this ground that the appellant had based its case regard-
ing the validity of the disciplinary proceedings against respondent no.
1 and on the same basis respondent no. 1 was entitled to be promoted
B
from Scale III to Scale IV as from March 1988 if he was found fi( It
was submitted by him that since the charge-sheet was served on
A(_ respondent no. 1 over a month after he was considered for promotion
from Scale III to Scale IV, it was not open to the appellant to hold
back the consideration of the case of respondent no. 1 for promotion
~ from Scale III to Scale IV or to deny him the promotion if he was
foMdfu. ~

It appears to us prima facie that the submissions of Mr. Rao in
connection with promotion of respondent no. 1 from Scale III to Scale
IV are not without substance. However, it is unnecessary for us to
decide this question because Mr. Pai, learned counsel for the appellant
.D
has agreed that without creating a precedent, the appellant will grant
promotion to respondent no. 1 from Scale III to Scale IV if it is found
that the Departmental Promotion Committee found him fit for promo-
tion and that-this promotion will be granted from the date on which he
would have been promoted but for the departmental enquiry being
contemplated against him.
E
In the result, the appeal is allowed to the extent aforestated and
the impugned order of the High Court quashing the departmental
proceedings is set aside. The departmental enquiry shall be proceeded
with and completed within a period of six months according to law. As
far as question of promotion of respondent no .. 1 from Scale III to
F
-..... Scale IV is concerned, that question will be considered in the light
~ what has been agreed to by Mr. Pai, as set out earlier.

Parties shall bear and pay their own costs throughout.

T.N.A. Appeal allowed.