PUNJAB NATIONAL BANK AND ORS.versusK.K. VERMA

                 [2010] 11 S.C.R. 311


           PUNJAB NATIONAL BANK AND ORS.                          A
                            v.
                       K.K. VERMA
             (Civil Appeal No. 7416 of 2010)
                   SEPTEMBER 7, 2010
                                                                  B
     [R.V. RAVEENDRAN AND H.L. GOKHALE, JJ.]

     Service Law - Departmental Inquiry - Punjab National
Bank Officers Employees (Discipline and Appeal)
Regulations, 1977 - Regulation 7(2) and 9 - Right of              C
employee to represent against the adverse findings in an
inquiry report - Nationalized bank - Employee allegedly
committed serious irregularities/lapses while discharging his
duties - Served with charge-sheet and consequently removed
from service - Held: Nationalized bank is an instrumentality      o
of the State, and is always expected to act in fairness and to
follow the principles of natural justice - The service
regulations in question contained the requirement to furnish
a copy of the inquiry report, and the order of the Disciplinary
Authority recording its disagreement therewith, to the            E
employee, prior to any decision on the penalty, in order to
secure to hirn c:.1 opportuniiy to make his submissions on the
adverse findings and to prove his innocence - By not giving
the inquily report and the adverse order of the disciplinary
authority, the employee was denied the opportunity to
                                                                  F
represent, before the finding of guilt was arrived at, and
thereby he was certainly prejudiced - Constitution of India,
1950 - Article 311(2) - Natural justice.

     The respondent, a Manager in the appellant-bank,
allegedly committed serious irregularities I lapses while         G
discharging his duties. He was served with a charge-
sheet which contained in all four charges. Departmental
inquiry was held against the respondent in terms of the

                             311                                  H
    312    SUPREME COURT REPORTS              [201 OJ 11 S.C.R.

A   Punjab National Bank Officers Employees (Discipline and
    Appeal) Regulations, 1977.

       The Inquiry Officer submitted report stating that the
  first three charges were established but not the fourth
  one. The Disciplinary Authority accepted the finding of
8
  the Inquiry Officer in respect of the first three charges but
  reversed its finding as regards charge no.4 inasmuch as
  it found the respondent guilty in regard to a part of that
  charge as well; and consequently imposed the major
C penalty of removal of the respondent from service.

       The respondent challenged the order of his removal
  from service by filing a writ petition. He contended that
  he was not furnished with a copy of the inquiry report
  before the issuance of the order of removal and thereby
D he was not afforded an appropriate opportunity to defend
  himself resulting in denial of principles of natural justice
  and causing him great prejudice. The writ petition was
  allowed by the Single Judge of the High Court. The order
  was upheld by the Division Bench of the High Court.
E
       Aggrieved, the employer-bank filed the instant appeal
  contending that it was not mandatory for it to furnish the
  inquiry report since the same became necessary only
  after the Supreme Court judgment in the case of Mohd.
  Ramzan Khan* which judgment itself declared that the
F law declared therein was to be applied prospectively and
  that the order of removal of the respondent was passed
  prior to the said judgment.

        Per contra, the respondent-employee contended that
G all that the judgment in Mohd. Ramzan's case did was to
  remove the doubts which arose due to the changes
  brought into Article 311 (2) of the Constitution by the 42nd
  Constitutional amendrr.ent; and in any event Regulations

H
    PUNJAB NATIONAL BANK AND ORS. v. K.K.               313
                  VERMA
7(2) and 9 the 1977 regulations made it obligatory for the     A
appellant to furnish a copy of the inquiry report to the
respondent.

    Disposing of the appeal, the Court
     HELD:1.1. The right to represent against the findings     B
in the inquiry report to prove one's innocence is distinct
from the right to represent against the proposed penalty.
It is only the second right to represent against the
proposed penalty which is taken away by the 42nd
Constitutional Amendment. The right to represent against       C
the findings in the report is not disturbed in any way. In
fact, any denial thereof will make the final order
vulnerable. [Para 28] [334-B-E]

     1.2. The right of an employee to represent against the
                                                               0
adverse findings in an inquiry report is referrable to
Article 311(2) of the Constitution of India. The import of
this provision was explained by a Constitution Bench**
of the Supreme Court which held that it included both the
opportunities to an employee, namely, to deny one's guilt      E
and establish innocence, which he can, only if he is
informed about the charges and the imputations in
support, and secondly, an opportunity to make a
representation on the proposed punishment. The
Fifteenth Amendment to the Constitution w.e.f 6th
October;'1963 amended Article 311 (2), and further             F
clarified the position in this behalf. The import of this
change was explained by another Constitution Bench £
which in terms noted that it is well settled that the public
servant who is entitled to the protection of Article 311,
must get two opportunities to defend himself. First, to        G
defend the charge against him and prove his innocence,
which opportunity is to be given by giving him the report
against him, and then a second notice when the
government decides provisionally about the proposed
                                                               H
    314    SUPREME COURT REPORTS              [201 OJ 11 S.C.R.


A punishment, as to why the same should not be imposed.
  The 42nd Amendment effected in 1976 once again
  amended sub-article 311 (2). In Mohd. Ramzan Khan's
  case, this Court was concerned with the question as to
  whether the 42nd Amendment brought about any change
B in the matter of supply of a copy of the report which is a
  part of the first stage, and the effect of non-supply thereof
  on the punishment proposed. It is only with a view not to
  affect the inquiries which were conducted in the
  meanwhile that the Court held that those inquiries will not
C be affected, and though it was only declaring the law, the
  propositions laid down therein will apply prospectively.
  This was basically to protect the actions which were taken
  during the interregnum i.e after the 42nd Amendment
  became effective until it was explained as above in this
  judgment. [Paras 17, 18, 19, 20] [326-A-E; G-H; 327-A-F;
0
  328-B-C]

        *Union of India vs. Mohd. Ramzan Khan 1991 (1) SCC
    588, Explained.

E        **Khem Chand v. Union of India AIR 1958 SC 300;
    £Union of India v. H.C. Goel AIR 1964 SC 364 and Union
    of India & Anr. v. Tulsiram Patel 1985 (3) SCC 398, referred
    to.

       2.1. Regulation 7(2) of the Punjab National Bank
F Officers Employees (Discipline and Appeal) Regulations,
  1977 requires the Disciplinary Authority to record its
  reasons for disagreement wherever it disagrees with the
  findings of the inquiry officer while Regulation 9 provides
  for communicating to the employee concerned, the orders
G passed under Regulation 7, apart from providing him with
  a copy of the inquiry report. These regulations will have
  to be read as laid down only with a view to provide an
  opportunity to the employee to represent against the
  findings to the extent they are adverse to him. Then only
H they will become meaningful. The service regulations of
                 PUNJAB NATIONAL BANK AND ORS. v. K.K.                 315
                               VERMA
             the appellant are concerning the discipline and conduct          A
             in a nationalized bank which is an instrumentality of the
             state. The instrumentalities of the state have always been
             expected to act in fa'.:-ness, and following the principles
             of natural justice has always been considered as a
             minimum expectation in that behalf. The -above                   B
             regulations will, therefore, have to be read as containing
           · the requirement to furnish a copy of the inquiry. report and
             the order of the Disciplinary Authority recording its
             disagreement therewith to the employee prior to any
             decision on the penalty being arrived at. That will secure       c
             to the delinquent employee an opportunity to make his
             submissions on the adverse findings and to prove his
             innocence. [Para 23] (330-C-F]                           ·

                  2.2. It is clear that where the service rules with regard
             to the disciplinary proceedings themselves made it               D
            ·obligatory ~o supply a copy of the report to the
             employees, it would act as an exception. The direction
·, __        that the judgment ih Mohd. Ramzan Khan will not apply
  :-. .
             retrospectively, will not cover such service regulations
             arid the concerned employers will have to continue to            E
             give a copy of the inquiry report to the delinquent
             employees, as provided in their service regulations. [Para
             26) (332-B-C]

                  2.3. In the instant case, it is clear that the appellants   F
          · · had hot followed their own Regulations which clearly
              require the disciplinary authority to record the reasons
              where it differed from the inquiry officer. The Regulations
              also clearly lay down that a copy of the inquiry report and
              the order of disagreement are to be provided to the             G
            · employee. In the present case, one is concerned with the
              stage where the Disciplinary Authority differs with the
              inquiry officer on his findings. This is prior to arriving at
              the guilt of the employee. His right to receive the report
              and defend at that stage before the guilt is established
                                                                              H
    316    SUPREME COURT REPORTS              [2010] 11 S.C.R.


A is very much recognized. As seen from the order of
  Disciplinary Authority, the appellant has considered it to
  be a serious charge and, therefore, the respondent ought
  ~o have been given the opportunity to challenge the
  adverse finding of the Disciplinary Authority where it
B differed from the inquiry officer to establish his
  innocence. By not giving the inquiry report and the
  adverse order of the disciplinary authority, the
  respondent was denied the opportunity to represent,
  before the finding of guilt was arrived at, and thereby he
c was certainly prejudiced. [Paras 28, 29, 30] [333-B-E; 334-
  D-E; G-H]

       2.4. The service regulations are required to be
  followed in letter as well as in spirit. There is no error on
  the part of the High Court in interfering with the order of
D removal of the respondent from the service and in
  directing the appellant to furnish the respondent a copy
  of the inquiry report, and afford him opportunity of
  hearing. The respondent is directed to be given a copy
  of the report of the Inquiry Officer and the detailed order
E of the Disciplinary Authority differing therewith, basically
  to afford him the opportunity to explain his position with
  respect to the charges and prove his innocence. [Paras
  31, 32] [335-A-E]

F       Union of India vs. Mohd. Ramzan Khan 1991 (1) SCC
    588, held inapplicable.

        Managing Director, ECIL, Hyderabad and Ors. v. B.
    Karunakar and Ors. 1993 (4) SCC 727 and Punjab National
    Bank v. Kun} Behari Misra 1998 (7) SCC 84, relied on.
G
      ·State of Assam vs. Vimal Kumar Pandit AIR 1963 SC
  1612; National Fertilizers Ltd. and Anr. v. P.K. Khanna AIR
  2005 SC 3742 ; State of Maharashtra v. B.K. Takkamore &
  Ors. AIR 1967 SC 1353; S.K. Singh v. Central Bank of India
H and Ors. 1996 (6) SCC 415 and Haryana Financial
    PUNJAB NATIONAL BANK AND ORS. v. K.K.               317
                  VERMA
Corporation and Anr. v. Kai/ash Chandra Ahuja 2008 (9) SCC    A
31, referred to.
                    Case Law Reference:
    1991 (1) sec 588         held inapplicable    Para 14
                                                              B
    1993 (4) sec 121         relied on            Para 15
    AIR 1958 SC 300          referred to          Para 17
    AIR 1964 SC 364          referred to          Para 18
    1998 (7) sec 84          relied on            Para 24     c
    AIR 1963 SC 1612         referred to          Para 25
    AIR 2005 SC 3742         referred to          Para 27
    1985 (3) sec 398         referred to          Para 28     D
    AIR 1967 SC 1353         referred to          Para 29
    1996 (6) sec 415         referred to          Para 30
    2008 (9) sec 31          referred to          Para 30
                                                              E
    CIVIL APPELLATE JURISDICTION : Civil Appeal No.
7416 of 2010.

    From the Judgment & Order dated 31.01.2008 of the High
Court of Punjab & Haryana at Chandigarh in LPA No. 17 of
                                                           F
2008.

    Dhruv Mehta, Yashraj Singh Deora, Sarv Mitter, R.K.
Gautam (for Mitter & Mitter Co.) for the Appellants.

    Rohit Arya, Nitin Gaur, S.K. Sabharwal for the Respondent. G

    The Judgment of the Court was delivered by

    GOKHALE J. 1. Leave granted.

                                                              H
    318          SUPREME COURT REPORTS              [2010] 11 S.C.R.


A        2. This appeal by the appellant Bank seeks to challenge
    the judgment and order dated 31.1.2008 rendered by Division
    Bench of the Punjab and Haryana High Court dismissing LPA
    No. 17 of 2008 filed by the appellant 3ank with costs. The
    impugned judgment was rendered in an appeal arising out of
B   the judgment dated 26.11.2007 by a Single Judge of that court
    whereby the Learned Single Judge had allowed the Writ Petition
    No. 2756 of 1986 filed by the respondent challenging his
    removal from service by the order of the appellant dated
    17.4.1985.
c         3. The two impugned judgments have interfered with the
    order of removal on the ground of not furnishing the respondent
    a copy of the inquiry report before issuing the order of
    punishment and thereby not affording him an appropriate
    opportunity to defend resulting into denial of principles of natural
D   justice causing him great prejudice. The appellant Bank has
    raised the question in this appeal as to whether the respondent
    was entitled either in law or as per the rules governing his
    service conditions to a copy of the inquiry report before issuance
    of the order of punishment.
E
          4. Short facts leading to the appeal are as follows:

        The respondent was working as a Manager of appellant's
    branch at Jallianwalan Bagh, Amritsar. He was served with a
    Charge Sheet dated 12.8.1983 which contained in all four
F   charges. They were principally as follows:

           (1)     He connived with the borrowers and showed undue
                   favour to them by throwing bank's norms to winds.
                   In that, amongst others particulars, it was alleged
G                  that when he has on leave from 09 .02 .1982 to
                   17.02.1982, he visited the office to issue the bank
                   guarantee in the favour of Income Tax Officer,
                   Amritsar on behalf of M/s Des Raj Aggarwal & Co.

H
    PUNJAB NATIONAL BANK AND ORS. v. K.K.                  319
          VERMA [H.L. GOKHALE, J.]
      (2)   The second charge was that he submitted wrong          A
            information to the authorities thereby concealed the
            factual state of affairs of the branch from the
            authorities.

      (3)   The third charge was that he allowed unauthorized      B
            facilities to various parties during the period of
            credit squeeze for which his powers had been
            withdrawn.

      (4)   The fourth charge consisting of three parts reads as
            follows:                                               C

    (i) He misused his official position to secure undue benefit
    for himself. He was given a personal allowance of~. 147/
    - per month from 01.07 .1979 at the time of fitme t of the
    salary under PNB Officer Employees (S rvice) 0
    Regulations, 1979, which was to be adjusted out of annual
    grades increment@ 1/3rd of the increment of the year. He
    did not allow the person concerned to make any
    adjustment from the increments released in his favour.

    (ii) He was sanctioned a refundable loan by the Trustees       E
    of the Provident Fund against his Provident Fund in 1973.
    He did not pay instalments. The balance as on 30.6.1981
    was 5291/-.

    (iii) The Regional Office, Amritsar sanctioned a consumer F
    loan of Rs. 5000/- to Shri Verma for purchase of fridge.
    He showed the purchase of the said item from M/s
    Electronics Services Centre having cash credit limits with
    the Branch without actually purchasing the fridge. The firm
    .Mis Electronics Service Centre is not dealing in G
    refrigerators/fridges. The amount of fridge was paid cash
    through a cash order at the counter.

     5. The respondent denied these allegations. According to
him they were vague and general in nature. At the highest they
may be considered as procedural lapses/minor irregularities        H
    320      SUPREME COURT REPORTS                  [2010] 11 S.C.R.


A   during the discharge of duties. They would certainly not amount
    to moral turpitude, requiring a departmental enquiry for a major
    penalty.

         6. A regular departmental inquiry was held thereafter into
    those allegations in terms of the Punjab National Bank Officers
B
    Employees (Discipline and Appeal) Regulations 1977, framed
    under Section 19 of the Banking Companies (Acquisition and
    Transfer of Undertaking Act) 1970. The inquiry officer submitted
    his report dated 7 .2.1985 returning a finding that the first three
    charges were established but not the fourth one.
c
         7. As can be seen from the earlier narration, Charge No.
    4 was in three parts. The first part of this charge was that the
    respondent used his official position to secure undue benefit
    for himself. In that it is alleged that he was given a personal
D   allowance of Rs. 147/- from 01.07.1979 which was to be
    adjusted out of annual grades increment at one-third of the
    increment of the year. The respondent did not allow the person
    concerned to make any adjustment from the increments
    released in his favour. As far as this aspect is concerned the
E   inquiry officer held as follows:-

          Non-adjustment of the personal allowance

         Mr. Verma was given a personal allowance of Rs. 147/-
    per month with effect from 01.07 .1979 i.e. at the time of fitment
F   of salary under the PCT which was to be adjusted out of the
    annual graded increment at the rate 1/3rd of the increment of
    the year but did not adjust as per the above norms.

         This fact cannot be proved as he can never give such
G   things in writing for not deducting 1/3rd of the graded increment.
    He might have verbally asked the Establishment Clerk not to
    adjust, but here it is doubtful and the benefit of this should go
    to Mr. Verma.

       The salary bill is sent every month for post audit to Regional
H   Manager Office and it should have been pointed out by the
PUNJAB NATIONAL BANK AND ORS. v. K.K. VERMA321
             [H.L. GOKHALE, J.]
Regional Officer of this lapse, whereas it was pointed out on      A
29.05.1981, followed by reminders of date 17.07.1981,
08.09.1981, and finally on 21.4.1982 exhibit page 32 which was
duly deposited by Verma in three instalments with the kind
permission of the R.M. Amritsar exhibit page 31.
                                                                B
     8. The second part of this Charge No. 4 was that the
respondent was sanctioned a refundable loan from the
Provident Fund Department but he did not pay the instalments
and the balance as on 30.6.1983 was Rs. 6381/-. The inquiry
officer held that this charge was proved. (This is however a
situation of not refunding a small portion of the advance which C
could be adjusted later on).

      9. The third part of charge No. 4 was that the respondent
had taken consumer loan of Rs. 5000/- for purchasing a
refrigerator. It was alleged that he had purchased the item from   D
Mis Electronic Service Centre which was having cash credit
limits with the Bank. Intact he had not purchased the fridge and
that firm was not dealing with refrigerators at all. The inquiry
officer held that the respondent came from a well to do family
and was financially of good means. He is living in a bungalow      E
owned by himself and it was difficult to believe that he was not
already having any refrigerator. He, therefore, held that no
refrigerator was purchased by him from that concern.

     10. The discii:-linary authority vi de its order dated
30.3.1985 accepted the finding of the inquiry officer in respect F
of the first three charges but differed with its finding on charge
No. 4. He was of the view that the charges were serious and
therefore decided to impose the major penalty of removal of
respondent from service. In the said order, as regards Charge
No. 4 (i) the Disciplinary Authority observed as follows:-         G

          "As regards the findings of Enquiry Officer with
    regard to non-deduction and adjustment of 1/3rd of the
    graded increment towards personal allowance, I do not
    agree with him that there is nothing on record which could     H
    322      SUPREME COURT REPORTS                 [2010) 11 S.C.R.


A         show that Shri Verma had instructed the Establishment
          Clerk not to adjust this part of increment towards personal
          allowance. Shri Verma must have been signing salary bill
          as a final signatory and if deductions were not adjusted
          towards adjustment of personal allowance he could point
B         out to the office. It shows, he intentionally did not permit
          this adjustment to get personal benefit."

         11. The impugned order of removal passed by the
    disciplinary authority reads as follows:-
C                           "Punjab National Bank
                                 Zonal Office
                                 Chandigarh.
          Ref:ZO:DAC:               Dated 17.4.1985
          Shri K.K. Verma,
D         215-Green Avanue,
          Amritsar
        Reg: Departmental Enquiry against you - chargesheet
    Dated 12.8.83.
E               You were served with chargesheet dated 12.8.83 for
          the serious irregularities/lapses committed by you while
          working as manager, BO: Jallianwala Bagh, Amritsar. To
          know the truth of imputations of lapses on your part,
          enquiry proceedings were initiated against you in terms of
F         PNB Officer employees (D & A) Regulations, 1977
          (Clause-6) and for this purpose Shri A.L. Pahwa, Manager,
          BC:Akali Market, Amritsar, was appointed as Enquiry
          Officer and Shri A.K. Aggarwal, Manager PF Deptt., HO,
          New Delhi was appointed as Presenting Officer. The
G         Enquiry officer has since submitted his report alongwith
          relevant records of the proceedings in the above matter. I
          have carefully gone through the report alongwith the entire
          record of the enquiry proceedings and agree with the
          findings of the Enquiry Officer and hold you guilty of the
H         aforesaid serious irregularities/lapses.
PUNJAB NATIONAL BANK AND ORS. v. K.K. VERMA 323
             [H.L. GOKHALE, J.]
          Keeping in view the above, I decide to impose upon A
    you the major penalty of your removal from the service of
    the Bank with immediate effect.

    A copy of the detailed orders passed by the undersigned
    in regard to the above matter alongwith a copy 6f the       B
    Enquiry report is enclosed herewith.
                                                        Sci/-
                                       Disciplinary Authority
                                   Deputy General Manager"
      12. The respondent thereafter preferred a Departmental C
appeal and then a review petition, both of which came to be
rejected. Being aggrieved by that order, the respondent filed
the above referred Writ Petition to a Single Judge of the Punjab
and Haryana High Court who allowed that Writ Petition. The
learned Single Judge set aside the order of removal. He has D
further observed that it will be open to the competent authority
to decide the question of proposed punishment after following
principles of natural justice by furnishing the respondent a copy
of the enquiry report and affording him opportunity of hearing
in the context of proposed punishment. As stated above, the E
appeal filed by the appellants herein from that judgment also
came to be dismissed. Being aggrieved by both these
judgments, the appellant has filed the present appeal by special
leave. The main submission of the appellant has been that the
appellant was not required to give a copy of the inquiry report F
prior to the decision of the disciplinary authority, and the order
of removal could not be interfered on that ground.

     13. Now, what is material to note is, that the respondent
was not furnished with a copy of the inquiry report, and the
disciplinary authority straightforward passed the order of G
removal which has been quoted earlier. The report of the inquiry
officer and the detailed order of the Disciplinary Authority
became available to the respondent only alongwith the order
of removal, and he did not have any opportunity to make his
submissions on that report to defend the charges anytime prior H
    324      SUPREME COURT REPORTS                  [201 O] 11 S.C.R.


A   to the punishment of removal being decided and imposed. It
    was therefore, canvassed on behalf of the respondent before
    the Learned Single Judge that the action of the appellant was
    violative of principles of natural justice. He had not been
    furnished with the copy of the report any time prior to his
B   removal and it was particularly necessary when the disciplinary
    authority had ultimately differed with the finding on Charge No.
    4 rendered by the inquiry officer which became known only after
    the inquiry report and the detailed order of the Disciplinary
    Authority was received alongwith the removal order. He would
c   have made submissions on his innocence and would have
    pointed out to the disciplinary authority that even the first three
    charges were not established. There is no dispute with respect
    to the fact that the inquiry report was not furnished to the
    respondent earlier. The Learned Single Judge had specifically
    asked the appellant whether they had furnished a copy of the
D
    inquiry report to the respondent and he recorded in this order
    that they could not produce any material from the concerned
    file to show that a copy of the report had been furnished to the
    respondent. That apart, the Division Bench also held that the
    order of removal was a mechanical order passed without going
E   into the findings referred in the report, (which were in favour of
    the respondent at least on charge No. 4) and without explaining
    as to why the disciplinary authority had differed from the inquiry
    officer on Charge No. 4.

F        14. It was canvassed on behalf of the appellant that it was
    not mandatory for them to furnish the inquiry report, which had
    become necessary only after the judgment of the Apex Court
    dated 20.11.1990 rendered in the case of Union of India vs.
    Mohd. Ramzan Khan [1991 (1) SCC 588). The judgment in
G   Mohd. Ramzan (supra) would not apply to the present case
    since the order of removal in the present case was passed prior
    to this judgment on 17.4.1985 and the judgment in Mohd.
    Ramzan itself declared that the law declared therein was to be·
    applied as a prospective one. This plea was raised by the
H   appellant before the Division Bench but it was turned down
PUNJAB NATIONAL BANK AND ORS. v. K.K. VERMA 325
             [H.L. GOKHALE, J.]
holding that the principles of natural justice were always there      A
to protect the right of hearing to be provided to the delinquent
official, before awarding him the punishment, and that the
judgment in Mohd. Ramzan Khan had only recognized this
position and made it mandatory.
                                                                      B
     15. The learned counsel for the appellant pressed into
service the following observations in para 33 of the Judgment
of the Constitution Bench in Managing Director, ECIL,
Hyderabad and Ors. versus B. Karunakar and Ors. reported
in 1993 (4) sec 727.
                                                                      c
           " ........ It is for the first time in Mohd. Ramzan Khan
     case that this court laid down the law. That decision made
     the law laid down there prospective in operation i.e.
     applicable to the orders of punishment passed after
     November 20, 1990. The law laid down was not applicable          D
     to the orders of punishment passed before that date
     notwithstanding the fact that the proceedings arising out
     of the same were pending in courts after that date. The
     said proceedings had to be decided according to the law
     prevalent prior to the said date which did not require the       E
     authority to supply a copy of the enquiry officer's report to
     the employee. The only exception to this was where the
     service rules with regard to the disciplinary proceedings
     themselves made it obligatory to supply a copy of the
     report to the employee." (emphasis supplied)                     F

      16. The counsel for the respondent on the other hand
submitted that the right to receive the inquiry report and to make
submissions thereon to prove one's innocence was always
available to the employees of Government and Public Bodies.
All that the judgment in Mohd. Ramzan Khan's case did was             G
to rernove the doubts which arose due to the changes brought
into Article 311 (2) by the 42nd Constitutional amendments. The
judgment made the law declared prospective only to avoid the
difficulties that would arise in inquiries held prior thereto.
                                                                      H
    326      SUPREME COURT REPORTS                   [201 OJ 11 S.C.R.


A         17. In this connection, it is to be noted that as far as the
    right of an employee to represent against the adverse findings
    in an inquiry report is concerned, the same is referrable to Article
    311 (2) of the Constitution of India. Article 311 (2) in the original
    Constitution read as follows:-
B
                "311. (2) No such person as aforesaid shall be
          dismissed or removed or reduced in rank until he has been
          given a reasonable opportunity of showing cause against
          the action proposed to be taken in regard to him."
c        The import of this provision was explained by a Constitution
    Bench of this Court in Khem Chand v. Union of India [AIR 1958
    SC 300]. It held that it included both the opportunities to an
    employee, namely to deny one's guilt and establish innocence,
    which he can, only if he is informed about the charges and the
D · imputations in support, and secondly an opportunity to make a
    representation on the proposed punishment.

         18. The Fifteenth Amendment to the Constitution w.e.f 6th
    October, 1963 amended Article 311 (2), and further clarified the
E   position in this behalf. The amended Article 311 (2) reads as
    follows:-

                 "311. (2) No such person as aforesaid shall be
          dismissed or removed or reduced in rank except after an
          enquiry in which he has been informed of the charges
F         against him and given a reasonable opportunity of being
          heard in respect of those charges and where it is proposed,
          after such inquiry, to impose on him any such penalty, until
          he has been given a reasonable opportunity of making
          representation on the penalty proposed, but only on the
G         basis of the evidence adduced during such inquiry."

      The import of this change was explained by another
  Constitution Bench in Union of India v. H.C. Goel [AIR 1964
  SC 364] which in terms noted that it is well settled that the public
H servant who is entitled to.the protection of Article 311, must get
PUNJAB NATIONAL BANK AND ORS. v. K.K. VERMA 327
             [H.L. GOKHALE, J.]
two opportunities to defend himself. First, to defend the charge        A
against him and prove his innocence, which opportunity is to
be given by giving him the report against him, and then a
second notice when the government decides provisionally about
the proposed punishment, as to why the same should not be
imposed.                                                                B

   19. The 42nd Amendment effected in 1976 once again
pmended sub-article 311 (2) as follows:-

           "311. (2) No such person as aforesaid shall be
     dismissed or removed or reduced in rank except after an            C
     enquiry in which he has been informed of the charges
     against him and given a reasonable opportunity of being
     heard in respect of those charges.

           Provided that where it is proposed, after such inquiry,
                                                                        0
     to impose upon him any such penalty, such penalty may
     be imposed on the basis of the evidence adduced during
     such inquiry and it shall not be necessary to give such
     person any opportunity of making representation on the
     penalty proposed:"
                                                                        E
     20. In Mohd. Ramzan Khan's case (supra) the Court was
concerned with the question as to whether the 42nd Amendment
brought about any change in the matter of supply of a copy of
the report which is a part of the first stage, and the effect of n6n-
su pp ly thereof on the punishment proposed. The Court                  F
considered the various judgments on this aspeCt and held in
paragraph 18 of the judgment as follows:-

            "We make it clear that wherever there has been an
     Inquiry Officer and he has furnished a report to the               G
     disciplinary authority at the conclusion of the inquiry holding
     the delinquent guilty of all or any of the charges with
     proposal for any particular punishment or not, the
     delinquent is entitled to a copy of such report and will also
     be entitled to make a representation against it, if he so
                                                                        H
    328      SUPREME COURT REPORTS                      [2010] 11 S.C.R.


A         desires, and non-furnishing of the report would amount to
          violation of rules of natural justice and make the final order
          liable to challenge hereafter." (emphasis supplied)

        It is only with a view not to affect the inquiries which were
  conducted in the meanwhile that the Court held that those
8 inquiries will not be affected, and though it was only declaring
  the law, the propositions laid down therein will apply
  prospectively. This was basically to protect the actions which
  were taken during the interregnum i.e after the 42nd
  Amendment became effective until it was explained as above
C in this judgment.

        21. Counsel for the appellant submitted that appellant's
  action was protected since the impugned order of removal was
  passed during this interregnum. On the other hand, the counsel
o for the respondent pointed out that though the observations in
  Karunakar (extracted above) explained the prospective
  application of the propositions in Mohd. Ramzan Khan, it also
  made it clear that where the service rules themselves made it
  obligatory, it was necessary to furnish a copy of the inquiry
E report to the employee. In this connection, counsel for the
  respondent pressed into service regulation 7 (2) and regulation
  9 of the above referred service regulations under which the
  inquiry was held. (Regulation 8 is about minor penalties with
  which we are not concerned in this matter). These two
F regulations read as follows:-

          7. Action on the Inquiry Report:

           (1)   The Disciplinary Authority, if it is not itself the Inquiry
                 Authority may, for reasons to be recorded by it in
G                writing, remit the case to the Inquiring Authority for
                 fresh or further inquiry and report and the Inquiring
                 Authority shall thereupon proceed to hold the further
                 inquiry according to the provisions of Regulation 6
                 as far as may be.
H
    PUNJAB NATIONAL BANK AND ORS. v. K.K.                     329
          VERMA [H.L. 'GOKHALE, J.]

     (2)    The Disciplinary Authority shall, if it disagrees with 1-'\
            the findings of the Inquiring Authority on any article
            of charge, record its reasons for such disagreement
            and record its own findings on suc;h charge, if the
            evidence on record is sufficient for the purpose.
                                                                   B
      (3)   If the Disciplinary Authority, having regard to its
            findings on all or any of the articles of charge is of
            the opinion that any of the penalties specified in the
            regulation 4 should be imposed on the officer
            employee it shall, notwithstanding anything c
            contained in regulation 8, make an order imposing
            such penalty.

      (4)   If the Disciplinary Authority, having regard to its
            findings on all or any of the articles of charge, is of
            the opinion that no penalty is called for, it may pass D
            an order exonerating the officer employee
            concerned.

     9.     Communication of orders

    Orders made by the Disciplinary Authority under                  E
    Regulation 7 or Regulation 8 shall be communicated to the
    officer employee concerned, who shall also be supplied
    with a copy of the report of inquiry, if any."

     22. Regulation 7 thus, speaks of four kinds of orders to F
be passed by the Disciplinary Authority after receiving the
report of the inquiry. (1) Order once again remitting the case
to the inquiry officer, (2) Order recording disagreement with the
inquiry officer, (3) Order imposing a penalty and (4) an order
exonerating the employee. Regulation 7 (2) makes it clear that G
where the disciplinary authority disagrees with the findings of
the inquiry officer on any article of charge. it must record its
reasons for such disagreement. Regulation 9 provides that the
orders made by the disciplinary authority under article 7 have
to be communicated to the officer I employee concerned. He H
     330     SUPREME COURT REPORTS                  [2010] 11 S.C.R.

A    is also to be supplied with a copy of the report of the inquiry, if
     any. The counsel for the respondent submitted with much force
     that both these regulations when read together provide that
     when the disciplinary authority was differing with the inquiry
     officer, the report of the inquiry officer must be furnished to the
.B   employee before the decision on penalty was arrived at.

          23. Regulation 7 (2) requires the Disciplinary Authority to
     record its reasons for disagreement wherever it disagrees with
     the findings of the inquiry officer. Regulation 9 provides for
     communicating to the employee concerned, the orders passed
c    under Regulation 7, apart from providing him with a copy of the
     inquiry report. These regulations will have to be read as laid
     down only with a view to provide an opportunity to the employee
     to represent against the findings to the extent they are adverse
     to him. Then only they will become meaningful. The service
D    regulations of the appellant are concerning the discipline and
     conduct in a nationalized bank which is an instrumentality of the
     state. The instrumentalities of the state have always been
     expected to act in fairness, and following the principles of
     natural justice has always been considered as a minimum
E    expectation in that behalf. The above regulations will, therefore,
     have to be read as containing the requirement to furnish a copy
     of the inquiry report and the order of the Disciplinary Authority
     recording its disagreement therewith to the employee prior to
     any decision on the penalty being arrived ·at. That will secure
F    to the delinquent employee an opportunity to make his
     submissions on the adverse findings and to prove his
     innocence.

         24. The interpretation of regulation 7 (2) of the appellant
G    bank is no longer res integra. In Punjab National Bank v. Kunj
     Behari Misra [1998 (7) sec 84] this very question came up
     before this Court. Two Assistant Managers at the Lucknow
     Branch of the appellant bank viz. Kunj Behari Misra and S.P.
     Goel were charged for misconduct, when shortage of Rs. 1 lakh
     was detected in the branch on 10.11.1981. The inquiry officer
H
     PUNJAB NATIONAL BANK AND ORS. v. K.K.                      331
           VERMA [H.L. GOKHALE, J.]
held Mr. Misra guilty of only one out of the six charges viz. that     A
he had not signed the concerned register at the relevant time.
He exonerated Mr. Goel of all the charges. The disciplinary
authority reversed the findings of the inquiry officer and held that
the charges were proved. By his orders dated 12.12.83 and
15.12.83 he directed proportionate recovery of Rs. 1 lakh from         B
both the officers.

      25. In that case also the appellant bank canvassed the
same submission viz. that since the inquiry was· during the
period prior to the judgment in Mohd. Ramzan Khan (supra)
the appellant was not required to give the inquiry report or the
                                                                       c
report of the disciplinary authority differing with the inquiry
officer. The very regulation 7 (2) came up for consideration. A
bench of three judges of this Court held that the requirement to
give these reports to the employee will have to be read into
regulation 7 (2). The Court referred to and relied upon an earlier     D
judgment of the constitution bench in State of Assam vs. Vima/
Kumar Pandit [AIR 1963 SC 1612] and para 26 of Karunakar
(supra) and specifically ruled in para 19 as follows:-

           "19. The result of the aforesaid discussion would be        E
    that the principles of natural justice have to be read into
    Regulation 7(2). As a result thereof, whenever the
    disciplinary authority disagrees with the enquiry authority
    on any article of charge, then before it records its own
    findings on such charge, it must record its tentative reasons      F
    for such disagreement and give to the delinquent officer
    an opportunity to represent before it records its-findings.
    The report of the enquiry officer containing its findings will
    have to be conveyed and the delinquent officer will have
    an opportunity to persuade the disciplinary authority to
                                                                       G
    accept the favourable conclusion of the enquiry officer. The
    principles of natural justice, as we have already observed,
    require the authority which has to take a final decision and
    can impose a penalty, to give an opportunity to the officer
    charged of misconduct to file a representation before the
    disciplinary authority records its findings on the charges         H
     332       SUPREME COURT REPORTS                 [2010] 11 S.C.R.


 A         framed against the officer."

         26. Apart from this, as seen from the legal position
   enunciated in para 33 of Karunakar (supra), earlier extracted,
   it is clear that where the service rules with regard to the
 8 disciplinary proceedings themselves made it obligatory to
   supply a copy of the report to the employees, it would act as
   an exception. The direction that the judgment in Mohd. Ramzan
   Khan will not apply retrospectively, will not cover such service
   regulations and the concerned employers will have to continue
 C to give a copy of the inquiry report to the delinquent employees,
   as provided in their service regulations.

        27. The counsel for the appellant relied upon the judgment
   of this Court in National Fertilizers Ltd. and Anr. v. P.K.
   Khanna [AIR 2005 SC 3742] where the disciplinary rules were
 D pari-materia to the rules in the present case as can be seen
   from para 10 of that judgment. Counsel relied on para 13 of
   the judgmentwhichJeads as follows:-                     ·

                  "As far as the secol}d question is concerned, neither
           the decision in Karunakar nor Rule 33 quoted earlier
 E
           postulate .that the delinquent employee should be given an
           opportunity to show cause after the finding of guilt as to
           the quantum of the punishment. The Rules envisage the
           passing of an order by the Disciplinary Authority not only
           finding the delinquent guilty, but also imposing punishment
 F         after the delinquent has been given a copy of the Enquiry
           report and had an opportunity of challenging the same."
           (emphasis supplied)

         This paragraph make it clear that there is no second
· G opportunity available to the delinquent employee after the finding
    of guilt on the quantum of punishment. At the same time, the
    second sentence of this para clearly states that a copy of the
    inquiry report is to be given to the delinquent employee prior
    to the decision of the disciplinary authority for providing him with
. H an opportunity to challenge the report. It is also material to note
    PUNJAB NATIONAL BANK AND ORS. v. K.K.                    333
          VERMA [H.L. GOKHALE, J.]
from this judgment that since the employee had contended in A
that case, that the Disciplinary Authority had not considered his
objections correctly, this Court directed the Appellate Authority
(and not the Disciplinary Authority) to reconsider the objections
of the respondent.
                                                                     B
      28. This being the position, in the instant case it is clear
that the appellant had not followed their own regulations which
clearly require the disciplinary authority to record the reasons
where it differed from the inquiry officer. The regulations also
clearly lay down that a copy of the inquiry report and the order C
of disagreement are to be provided to the employee. In the
present case, we are concerned with the stage where the
Disciplinary Authority differs with the inquiry officer on his
findings. This is prior to arriving at the guilt of the employee.
His right to receive the report and defend at that stage before
the guilt. is established is very much recognized as seen above. D
Counsel for the appellant submitted that Constitution Bench has
held in Union of India & Anr. v. Tulsiram Patel [1985 (3) SCC
398] that after the 42nd Amendment, the employees are not
entitled in law to be heard in the matter of penalty. In Karunakar's
case (supra), another Constitution Bench has referred to E
Tulsiram Patel in paragraph 4 and then explained the legal
position in this behalf in paragraph 7 as follows:-

           "While the right to represent against the findings in
    the report is part of the reasonable opportunity available F
    during the first stage of the inquiry viz., before the
    disciplinary authority takes into consideration the findings
    in the report, the right to show cause against the penalty
    proposed belongs to the seconc;i stage when the
    disciplinary authority has considered the findings in the G
    report and has come to the conclusion with regard to the
    guilt of the employee and proposes to award penalty on
    the basis of its conclusions. The first right is the right to
    prove innocence. The second right is to plead for either
    no penalty or a lesser penalty although the conclusion H
    334      SUPREME COURT REPORTS                  (201 O] 11 S.C.R.


A         regarding the guilt is accepted. It is the second right
          exercisable at the second stage which was taken away by
          the 42nd Amendment."

          Thus, the right to represent against the findings in the
    inquiry report to prove one's innocence is distinct from the right
8
    to represent against the proposed penalty. It is only the second
    right to represent against the proposed penalty which is taken
    away by the 42nd Amendment. The right to represent against
    the findings in the report is not disturbed in any way. In fact, any
    denial thereof will make the final order vulnerable.
c
         29. Counsel for the respondent relied upon the judgment
    in State of Maharashtra v. B.K. Takkamore & Ors. [AIR 1967
    SC 1353] to submit that if the impugned order can be sustained
    excluding the disputed charge, this Court should not interfere.
D   In our view, it is not possible for us to pre-judge the issue in the
    present case. As seen from the order of Disciplinary Authority
    quoted above, the appellant has considered it to be a serious
    charge and therefore the respondent ought to have been given
    the opportunity to challenge the adverse finding of the
E   Disciplinary Authority where it differed from the inquiry officer
    to establish his innocence.

          30. It was then submitted that non supply of inquiry report
    is inconsequential if the employee does not show as to how he
    is prejudiced thereby. Karunakar (supra), S.K. Singh v. Central
F   Bank of India and Ors. (1996 (6) SCC 415] and Haryana
    Financial Corporation and Anr. v. Kai/ash Chandra Ahuja
    (2008 (9) sec 31] were relied upon in support. There cannot
    be any grievance with respect to the proposition. In the present
    case however, we are concerned with a situation where the
G   finding of the inquiry officer on a charge has been reversed by
    the Disciplinary Authority, which was not the case in any of the
    three cases. Besides, by not giving the inquiry report and the
    adverse order of the disciplinary authority, the respondent was
    denied the opportunity to represent before the finding of guilt
H   was arrived at and thereby he was certainly prejudiced.
      PUNJAB NATIONAL BANK AND ORS. v. K.K.                    335
            VERMA [H.L. GOKHALE, J.]
       31. Thus, there is no error on the part of the learned Single   A
  Judge in interfering with the order of removal of the respondent
  from the service. The Court was ultimately dealing with the
· removal of an employee from his service which is a very serious
  matter. The regulations are, therefore, required to be followed
  in letter as well as in spirit. The Learned Single Judge was,        s
  therefore, right in directing the appellant to furnish the
  respondent a c;opy of the inquiry report, and afford him
  opportunity of hearing. The Learned Division Bench was equally
  right in leaving the order of the Learned Single Judge
  undisturbed. In our view, there is no reason to take a different     c
  view from the one taken by the learned judges of the High Court.

       32. In the circumstances, though in principle, we uphold the
 order of the learned Single Judge, we modify the same to a
 limited extent by observing that the respondent is to be given
 a copy of the report of the Inquiry Officer and the detailed order D
 of the Disciplinary Authority differing therewith, basically to
 afford him the opportunity to explain his position with respect
 to the charges and prove his innocence. The Learned Single
 Judge has directed that the competent authority will keep in
 mind that the respondent is out of job since 1985 and in that E
 context it should also consider the factor of the service put in
 by him. We may also add that the competent authority may as
 well consider that when the respondent was removed, his date
 of retirement viz. 30.9.1987 was round the corner. We however,
 make it clear that it is for the competent authority to consider. F
 these aspects, when he takes steps in accordance with the
 impugned judgments which we confirm with the modification as
 above.

     33. The appeal is disposed of accordingly. The Interim            G
 order stands vacated. There will no order as to costs.

 8.8.B.                                      Appeal disposed of.