Holding

The removal order was valid; the appointing authority acted independently, was not functus officio, and a civil suit cannot compel reinstatement as specific performance under the Specific Relief Act.

Summary

The case involved S.N. Goyal, a Branch Manager of State Bank of India, who was found guilty of temporarily misappropriating customers' funds. The disciplinary authority first recommended a reduction in pay, which the appointing authority tentatively approved but did not communicate. After consulting the bank’s Chief Vigilance Officer, the appointing authority reconsidered and imposed the harsher penalty of removal, communicated on 30‑June‑1995. The trial court set aside the removal, ordering reinstatement, a decision upheld by the first appellate court; the High Court also dismissed the bank’s appeal. The Supreme Court held that the Chief Vigilance Officer’s opinion was not a binding direction, the appointing authority was not functus officio after the tentative order, and a civil suit cannot enforce specific performance of a contract of personal service under the Specific Relief Act. Consequently, the order of removal was valid, the appeals by the bank were allowed and the respondent’s suit dismissed.

Issues considered

The order of removal was vitiated by reliance on the advice of the Chief Vigilance Officer.
Whether the appointing authority became functus officio after the tentative order of 18‑Jan‑1995.
Whether a civil court can grant specific performance (reinstatement) of a contract of personal service under SRA, 1963.
Whether the second appeal raised substantial questions of law under CPC s.100.
Whether the principles of natural justice were violated in the disciplinary process.

Legislation cited

Code of Civil Procedure, 1908s. Order 42 Rules 1-2, s. Order XI Rules 1,12,15, s. Section 100
Constitution of Indias. Article 309, s. Article 311
Specific Relief Act, 1963s. Section 14
State Bank of India Act, 1955s. Section 43(1)

Subjects

service lawdisciplinary actionmisappropriation of fundsremoval from servicefunctus officiospecific relief actnatural justicesecond appealsubstantial question of lawvigilance officerState Bank of India Officers Service Rules

Judgment

[2008] 7 S.C.R. 631

STATE BANK OF INDIA AND ORS. A
V.
S.N. GOYAL
(Civil Appeal Nos. 4243-4244 of 2004)
MAY 2, 2008
,. _.Ir
B
[H.K. SEMA AND R.V. RAVEENDRAN, JJ.]

Service law:

State Bank of India Officers Service Rules, Rule 68(3) -
Employee found guilty of misappropriation of funds - c
I.
Disciplinary authority recommended imposition of penalty of
reduction of pay by four stages of time scale - Appointing
authority agreed with recommendations - But said order not
communicated to employee - On reconsideration of matter,
disciplinary authority recommended penalty of removal which D
was accepted by appointing authority and was communicated
to employee - Trial court held that second order imposing
penalty of removal was passed by appointing authority on
extraneous considerations after taking advice of Chief
Vigilance Officer- The said finding affirmed by first appellate E
Court and High Court - Held: Chief Vigilance Officer neither
issued any direction to appointing authority to impose higher
punishment nor altered finding regarding guilt - He merely
gave his opinion that gravity of proved charge did not warrant
leniency and therefore, suggested that quantum of penalty may F
.. be examined again - So Jong as decision was not on dictates
of Vigilance Department or other outside authority, but on
independent consideration, order of removal cannot be faulted
- It cannot be said that either act of intimating Vigilance
Department about enquiry or independently re-considering
G
issue of penalty after receiving views of Vigilance Department
amounted to be acting on extraneous material.
_....
Employee found guilty of misappropriation of funds by
enquiry officer -Disciplinary authority recommended
~ 631 H
632 SUPREME COURT REPORTS [2008] 7 S.C.R.

A imposition of penalty of reduction of pay by four stages of time
scale - Appointing authority agreed with recommendations -
On reconsideration of matter, disciplinary authority
recommended penalty of removal which was accepted by
appointing authority and was communicated to employee -
s Plea of employee that after the first order of appointing
authority, it became functus officio - Held: First order was
intended only to be tentative and not final as it was not
communicated to respondent - Appointing Authority had only
tentatively approved proposal of disciplinary authority that
c lenient view be taken by imposing a penalty of reducing the
pay by four stages in the time scale - Therefore, the contention
that the Appointing Authority had earlier passed a final order
and had become functus officio and therefore, he could not
change the said order is liable to be rejected.
D Bank Manager - Removal from service for
misappropriation of funds - Request for reducing punishment
- Held: Bank survives on the trust of its clientele and
constituents - The position of Manager of Bank is matter of
great trust - The employees of the Bank in particular Manager
E are expected to act with absolute integrity and honesty in
handling the funds of customers/borrowers of Bank - Any
misappropriation, even temporary, of the funds of the Bank or
its customers/borrowers constitutes a serious misconduct,
inviting severe punishment- If the matter is to be viewed lightly
F or leniently it will encourage other Bank employees to indulge
in such activities thereby undermining the entire banking
system - The request for reducing the punishment is rejected.
Termination of bank employee- Specific Relief Act, 1963
- s. 14 - Bar of - Where relationship of master and servant is
G purely contractual, contract of personal service is not
specifically enforceable, having regard to bar contained in
s.14- Even if termination of contract of employment (by
dismissal or otherwise) is found to be illegal or in breach, the
r"emedy of employee is oniy to seek damages and not specific
H performance - When employer is statutory body, where the
STATE BANK OF INDIA AND ORS. v. S.N. GOYAL 633

~
relationship is purely governed by contract with no element of A
statutory governance, contract of personal service will not be
specifically enforceable - On facts, Held: Appellant-Bank is a
statutory body and contract of employment was governed by
Service Rules - Employee approached civil court alleging
that his removal from service was in violation of the said B
;.-Jr
statutory rules - When employee of statutory body whose
service is terminated, pleads that such termination is in
violation of statutory rules governing his employment, action
for declaration that termination is invalid and that he is deemed
to continue in service is maintainable and will not be barred c
by s. 14 - State Bank of India Officers Service Rules.
\
Code of Civil Procedure, 1908:
s. 100- 'Substantial questions of law' - Meaning of- Held:
Means not only substantial questions of law of general
D
,
importance, but also substantial question of law arising in a
~
case as between the parties - In the context of s.100, any
question of law which affects final decision in case is
substantial question of law as between the parties - Question
of law which arises incidentally or co/laterally, having no
bearing in the final outcome, will not be a substantial question E
of/aw.
s. 100 - Second appeals - Scope of and procedural
aspects of - Discussed.
Civil suit vis-a-vis Writ proceedings - Distinction between F
'
r - Held: Adjudication of dispute by civil court is different from
the exercise of power of judicial review in writ proceedings by
the High Court - In writ proceedings, the High Court can call
for the record of the order challenged, examine the same and
pass appropriate orders after giving an opportunity to the State G
or the statutory authority to explain any particular act or
omission - In civil suit parties are governed by rules of
~
pleadings and there can be no adjudication of an issue in the
absence of necessary pleadings - Constitution of India, 1950
- Article 226. H
634 SUPREME COURT REPORTS [2008] 7 S.C.R.

...,..
A Judgment/Order:
Pronouncement of - Held: Where judgment is reserved,
mere dictation does not amount to pronouncement, but where
iudgment is dictated in open court, that itself amounts to
pronouncement.
B
-..;...~
Judge becoming functus officio - When - Held: When
he pronounces, signs and dates the judgment.
Quasi judicial authorities - While some quasi judicial
tribunals fix a day for pronouncement and pronounce their
c orders on the day fixed, many quasi judicial authorities do not
pronounce their orders - Some publish or notify their orders -
Some prepare. and sign orders and communicate same to "
party concerned - Quasi judicial authority become functus
officio only when its order is pronounced, or published/notified
D or communicated (put in the course of transmission) to the
party concerned - When an order is made in office noting in ....
file but is not pronounced, published or communicated,
Authority can correct it or alter it for valid reasons - But once
the order is pronounced or published or notified or
E communicated, the Authority becomes functus officio.
A chargesheet was issued on respondent by
appellant bank on the ground of misappropriation of
customer's funds. An enquiry was held and enquiry
officer held that the charge was proved. A copy of the
F report was furnished to the respondent. In view of Rule
68(3) of State Bank of India Officers Service Rules, the ~
Disciplinary Authority after considering the inquiry
records and representation of the respondent made a
recommendation on 2.5.1995 to the Appointing Authority
G to impose penalty of 'removal from services'.

The Appointing Authority concerned with the
recommendation of Disciplinary Authority and passed ~

order dated 3.5.1995 imposing the penalty of removal from
service which was communicated to respondent by letter
H
STATE BANK OF INDIA AND ORS. v. S.N. GOYAL 635
.........
.,,., "

dated 30.6.1995. A
The respondent unsuccessfully filed appeal and
revision. He thereafter filed suit for declaration that the
order of removal dated 30.6.1995 was arbitrary and illegal
and should be set aside with direction to take him back
with all consequential benefits. B
1->

The trial Court decreed the suit and held that there
was no violation of principles of natural justice in
conducting the enquiry and the order holding the
respondent guilty of misconduct was proper. The Trial c
Court however found that the Disciplinary Authority by
his earlier note dated 18.1.1995 had recommended
imposition of the penalty of reduction of pay of respondent
by four stages in his time scale and Appointing Authority
agreed with the said recommendation on 18.1.1995. The
D
Appointing Authority had thereafter sought the advice of
Bank's Chief Vigilance Officer and acting on such advice
had changed earlier decision and imposed a higher
punishment of removal from service dated 3.5.1995. The
trial court was of the view that the second order imposing
penalty was passed by the Appointing Authority on E
extraneous reasons after taking advice of Chief Vigilance
Officer and that rendered the order of removal illegal and
therefore set aside the order of removal and directed
appellant Bank to pass fresh order imposing appropriate
I
penalty other than penalty of dismissal or removal from F
)"" service.
Both the parties filed appeals. Before the First
Appellate Court, respondent did not challenge the finding
of trial Court that the domestic enquiry was fair and proper
G
and limited his challenge only to the quantum of back
wages .
....._
The First Appellate Court upheld the decree of the
l
•
Trial Court, but in addition held that the respondent was
entitled to full back wages with interest thereon at 9% per H
636 SUPREME COURT REPORTS [2008] 7 S.C.R.

A annum. High Court dismissed the appeal filed by Bank
holding that there was nothing to show that the findings
recorded by the Courts below suffer from any infirmity or
are contrary to law in any manner, thus no question of
law, much less any substantial question of law, has arisen.
8 Hence these appeals.
Allowing the appeals, the Court """·.
HELD: 1.1 The High Court misread the findings of
the courts below. The High Court observed that 'on the
c directions of the Chief Vigilance Commissioner of the
Bank, the punishment was converted to that of dismissal'.
This observation contains three errors - firstly the penalty ,
of removal was read as dismissal; secondly the
communication from the Chief Vigilance Officer, termed
as "advice/recommendation" by the courts below, was
D
wrongly read as 'directions'; and thirdly, the Chief
Vigilance Officer of the Bank was wrongly referred to as ~

the Chief Vigilance Commissioner. The High Court also
erroneously assumed that respondent had pleaded that
the Appointing Authority had placed certain material which
E was never put to him, before the Chief Vigilance
Commissioner and as such the order of punishment was
violative of principles of natural justice. There was no such
plea, nor did the courts below record a finding on any .•
such plea. [Para 7] [652-A-E]
F \
1.2 The High Court completely missed the real points
arising for determination. After a cursory wrong reference ~

to the findings of the court below, the High Court wrongly
held that the second appeal did not give rise to any
substantial question of law, ignoring the several
G
substantial questions of law arising for consideration of
the High Court, which were clearly specified in the
memorandum of second appeal. [Para 8] [652-E, F]
1.3 Second appeals would lie in cases which involve
H substantial questions of law. The word 'substantial'

I-
STATE BANK OF INDIA AND ORS. v. S.N. GOYAL 637

•:y
prefixed to 'question of law' does not refer to the stakes A
involved in the casf,t, nor intended to refer only to
questions of law of general importance, but refers to
impact or effect of the question of law on the decision in
the lis between the parties. 'Substantial questions of law'
means not only substantial questions of law of general B
_,,,.
,__ _
importance, but also substantial question of law arising
in a case as between the parties. In the context of s.100
CPC, any question of law which affects the final decision
in a case is a substantial question of law as between the
parties. A question of law which arises incidentally or c
collaterally, having no bearing in the final outcome, will
not be a substantial question of law. Where there is a clear
and settled enunciation on a question of law, by this Court
or by the High Court conc9rned, it cannot be said that the
case involves a substantial question of law. It is said that
D
a substantial question of law arises when a question of
~- law, which is not finally nettled by this court (or by the
concerned High Court so far as the State is concerned),
arises for consideration in the case. But this statement
has to be understood in the correct perspective. Where
there is a clear enunciation of law and the lower court has E
followed or rightly applied such clear enunciation of law,
obviously the case will not be considered as giving rise
to a substantial question of law, even if the question of
law may be one of general importance. On the other hand,
if there is a clear enunciation of law by this Court (or by F
the concerned High Court), but the lower court had
·'" ignored or misinterpreted or misapplied the same, and
correct application of the law as declared or enunciated
by this Court (or the concerned High Court) would have
led to a different decision, the appeal would involve a G
substantial question of law as between the parties. Even
where there is an enunciation of law by this court (or the
...... concerned High Court) and the same has been followed
by the lower court, if the appellant is able to persuade the
High Court that the enunciated legal position needs H
638 SUPREME COURT REPORTS [2008] 7 S.C.R.

A reconsideration, alteration, modification or clarification or
that there is a need to resolve an apparent conflict between
two view points, it can be said that a substantial question
of law arises for consideration. There cannot, therefore,
be a strait-jacket definition as to when a substantial
B question of law arises in a case. [Para 9.1] [654-A-H;
655-A]
1.4. It is a matter of concern that the scope of second
appeals and as also the procedural aspects of second
appeals are often ignored by the High Courts. Some of
C the oft-repeated errors are : (a) Admitting a second appeal
when it does not give rise to a substantial question of law;
(b) Admitting second appeals without formulating
substantial question of law; (c) Admitting second appeals
by formulating a standard or mechanical question such
o as "whether on the facts and circumstances the judgment
of the first appellate co1,1rt calls for interference" as the
substantial question of law; (d) Failing to consider and
formulate relevant and appropriate substantial questionn/
s of law involved in the second appeal; (e) Rejecting
E second appeals on the ground that the case does not
involve any substantial question of law, when the case in
fact involves substantial questions of law; (f)
Reformulating the substantial question of law after the
conclusion of the hearing, while preparing the judgment,
thereby denying an opportunity to the parties to make
F submissions on the reformulated substantial question of
law; (g) Deciding second appeals by re-appreciating
evidence and interfering with findings of fact, ignoring the
questions of law; These lapses or technical errors lead
to injustice and also give rise to avoidable further appeals
G to this court and remands by this court, thereby
prolonging the period of litigation. Care should be taken
to ensure that the cases not involving substantial
questions of law are not entertained, and at the same time
ensure that cases involving substantial questions of law
H are not rejected, as not involving substantial questions
STATE BANK OF INDIA AND ORS. v. S.N. GOYAL 639

"",,-
of law. [Para 9.3] [655-G; 656-A-G] A
1.5 The failure on the part of the High Court to take
note of the substantial questions of law involved, has led
to unwarranted dismissal of the second appeal and calls
for interference. [Para 1O] [656-G, H]
B
... ~
2.1. Where the relationship of master and servant is
purely contractual, it is well settled that a contract of
personal service is not specifically enforceable, having
regard to the bar contained in s.14 of the Specific Relief
Act, 1963. Even if the termination of the contract of
employment (by dismissal or otherwise) is found to be
c
illegal or in breach, the remedy of the employee is only to
seek damages and not specific performance. Courts will
neither declare such termination to be a nullity nor declare
that the contract of employment subsists nor grant the
consequential relief of reinstatement. The three well D
recognized exceptions to this rule are: where a civil
servant is removed from service in contravention of the
provisions of Article 311 of the Constitution of India (or
any law made under Article 309); where a workman having
the protection of Industrial Disputes Act, 1947 is wrongly E
,. terminated from service; and where an employee of a
statutory body is terminated from service in breach or
violation of any mandatory provision of a statute or
statutory rules. [Para 11] [657-C-H]
2.2. There is a clear distinction between public F
employment governed by statutory rules and private
employment governed purely by contract. The test for
deciding the nature of relief - damages or reinstatement
with consequential reliefs - is whether the employment
is governed purely by contract or by a statute or statutory G
rules. Even where the employer is a statutory body, where
the relationship is purely governed by contract with no
element of statutory governance, the contract of personal
service will not be specifically enforceable. Conversely,
where the employer is a non-statutory body, but the H
640 SUPREME COURT REPORTS [2008] 7 S.C.R.

f•
A employment is governed by a statute or statutory rules, a
declaration that the termination is null and void and that
the employee should be reinstated can be granted by
courts. [Para 11] [658-A, B, C]
Dr. S. Dutt v. University of Delhi - AIR 1958 SC 1050;
B Executive Committee of UP State Warehousing Corporation
~ ...
Ltd. v. Chandra Kiran Tyagi - 1970 (2) SCR 250; Sirsi
Municipality vs. Cecelia Kam Francies Tellis - 1973 (3) SCR
348; Executive Committee of Vaish Degree College v.
Lakshmi Narain - 1976 (2) SCR 1006; Smt. J. Tiwari v. Smt.
c Jawala Devi Vidya Mandir - AIR 1981 SC 122; Dipak Kumar
Biswas v. Director of Public Instruction -AIR 1987 SC 1422 -
relied on.
2.3. The appellant is a statutory body established
under the State Bank of India Act, 1955 and the contract
D of employment was governed by the State Bank of India
Officers Service Rules, which are statutory rules framed
under s.43(1) of the said Act. The respondent approached
the civil court alleging that his removal from service was
in violation of the said statutory rules. When an employee
E of a statutory body whose service is terminated, pleads
that such termination is in violation of statutory rules .
governing his employment, an action for declaration that '
the termination is invalid and that he is deemed to continue
in service is maintainable and will not be barred by s.14
F of the Specific Relief Act. [Para 12] [658-E, F, G]
3.1. The plaint did not contain any plea that the order
of removal by the Appointing Authority (Chief General
Manager) was vitiated on account of his consulting and
acting on the advice of the Chief Vigilance Officer of the
G Bank. Nor did it contain any allegation that the Appointing
Authority acted on extraneous material in passing the
order of removal. In the plaint, the challenge to the order ....._
of removal was on the ground that the enquiry by the
Enquiry Officer was opposed to principles of natural
H justice. The respondent had also averred that the
STATE BANK OF INDIA AND ORS. v. S.N. GOYAL 641

''T
Appointing Authority had approved the recommendation A
made by the Disciplinary Authority for imposition of
penalty of removal, without application of mind and
without giving him a hearing. But there was absolutely
no plea with reference to the advice/recommendation of
the Chief Vigilance Officer of the Bank. The respondent- B
t-A-
plaintiff did not amend the plaint to include the averments
and grounds to challenge the order of removal on the said
additional ground. No issue was framed in that behalf. No
amount of evidence on a plea that was not put forward in
the pleadings can be looked into. In the absenre of c
necessary pleading and issue, neither the trial court nor
the appellate court could have considered the contention
and recorded a finding thereon. [Para 13] [658-H; 659-
A-D, G, H; 660-A]
3.2. The minimum pleading that was necessary was D
that the Appointing Authority acted on extraneous material
in arriving the decision or acted on the advice or
recommendation of an Authority who was not concerned
with the Enquiry. In the absence of appropriate pleading
on a particular issue, there can be no adjudication of such E
issue. [Para 14] [660-C, DJ
3.3 Adjudication of a dispute by a civil court is
significantly different from the exercise of power of judicial
review in a writ proceedings by the High Court. In a writ
proceedings, the High Court can call for the record of the F
)" order challenged, examine the same and pass appropriate
orders after giving an opportunity to the State or the
statutory authority to explain any particular act or
omission. In a civil suit parties are governed by rules of
pleadings and there can be no adjudication of an issue G
in the absence of necessary pleadings. [Para 14]
[660-D, E, F]
3.4 Code of Civil Procedure contains appropriate
provisions relating to interrogatories, discovery and
H
642 SUPREME COURT REPORTS [2008] 7 S.C.R.

A inspection (Order XI Rules 1, 12 and 15) to gain access to
relevant material available with the other party. A party to
a suit should avail those provisions and if any new ground
becomes available on the basis of information secured
by discovery, a party can amend his pleadings and
B introduce new facts and grounds which were not known
earlier. The difficulty in securing relevant material or
ignorance of existence of relevant material will not justify
introduction of such material at the stage of evidence in
the absence of pleadings relating to a particular aspect
C to which the material relates. If a party should be permitted
to rely on evidence led on an issue/aspect not covered
by pleadings, the other side will be put to a disadvantage.
Therefore, the courts below committed a serious error in
holding that the order of removal was based on an
extraneous material (the advice/recommendation of Chief
D Vigilance Officer) and therefore, invalid. Where the enquiry
was found to be fair and proper and the finding of guilt in
the enquiry in respect of a serious charge was found to
be valid, in the absence of any other valid ground of
challenge, the courts below ought to have held that the
E penalty of removal from service did not warrant any
interference. [Paras 14, 15] [660-G; 661-A-E]
4.1 The Disciplinary Authority though was of the view
that the respondent deserved a severe punishment, felt
that having regard to the length of his service, he should
F be shown leniency, and therefore, recommended
imposition of a lesser punishment of reduction of pay by
four stages in the time scale. The Appointing Authority
made a note on the same day (18.1.1995) agreeing with
the said recommendation. But the said order was not
G communicated to the respondent. On the other hand, the
Disciplinary Authority on reconsideration of the matter put
up a fresh note dated 2.5.1995 recommending the penalty
of removal and that was accepted by the Appointing
Authority on 3.5.1995 and communicated to the
H respondent on 30.6.1995. [Para 16] [661-G; 662-A-C]
STATE BANK OF INDIA AND ORS. v. S.N. GOYAL 643

VGM Holdings Ltd 1941 (3)All. ER page 417- referred A
to.
4.2. It is true that once an Authority exercising quasi
1 judicial power, takes a final decision, it cannot review its
decision unless the relevant statute or rules permit such
review. [Para 18] [662-F] B
P Ramanatha Aiyar's Advance Law Lexicon 3rd Edition,
Vol.2 Pages 1946-47; Black's Law Dictionary Sixth Edition
Page 673 - referred to.
5.1 Order XX of Code of Civil Procedure deals \Vith C
judgment and decree. Where a judgment is reserved, mere
dictation does not amount to pronouncement, but where
the judgment is dictated in open court, that itself amounts
to pronouncement. But even after such pronouncement
by open court dictation, the Judge can make corrections D
before signing and dating the judgment. Therefore, a
Judge becomes functus officio when he pronounces, signs
and dates the judgment (subject to section 152 and power
of review). The position is different with reference to quasi
judicial authorities. While some quasi judicial tribunals fix E
a day for pronouncement and pronounce their orders on
the day fixed, many quasi judicial authorities do not
pronounce their orders. Some publish or notify their
orders. Some prepare and sign the orders and
communicate the same to the party concerned. A quasi F
judicial authority becomes functus officio only when its
)-- order is pronounced, or published/notified or
communicated (put in the course of transmission) to the
party concerned. When an order is made in an office noting
in a file but is not pronounced, published or G
communicated, nothing prevents the Authority from
correcting it or altering it for valid reasons. But once the
_.... order is pronounced or published or notified or
communicated, the Authority will become functus officio.
•. The order dated 18.1.1995 made on an office note, was H
•
644 SUPREME COURT REPORTS (2008] 7 S.C.R.

A neither pronounced, nor published/notified nor
communicated. Therefore, it cannot be said that the
Appointing Authority became functus officio when he
signed the note on dated 18.1.1995. [Para 19] (663-C, F-H;
664-A-D] ,
B 5.2 A careful examination shows that the order dated
18.1.1995 was intended only to be tentative and not final.
Firstly, the said decision was not communicated to the
respondent, nor was any letter or order issued to the
respondent imposing the penalty mentioned in the order
C dated 18.1.1995. Secondly, the Appointing Authority by
letter dated 2.2.1995 informed the Chief Vigilance Officer
of the Bank about the enquiry against respondent, his
decision accepting the findings of the Enquiry Officer, and
the proposal to show leniency by imposing only a
D punishment of reduction of pay by four stages. The Chief
Vigilance Officer sent a reply dated 7.2.1995 wherein he
observed that "by pocketing the money of the customers
Sri Goyal has exposed the Bank's faith reposed in him"
and there was no ground for showing leniency. He also
E expressed the view that the respondent deserved a more
severe punishment and requested the appointing
authority to re-examine whether respondent should be
continued in the post. Thereafter the Disciplinary
Authority reconsidered the entire issue again and put up
F another note dated 23.3.1995/2.5.1995 to the Appointing
Authority proposing the punishment of removal from
service. [Para 20] (664-E-H; 665-A]
5.3 It is thus clear that on 18.1.1995, the Appointing
Authority had only tentatively approved the proposal of
G the disciplinary authority that a lenient view be taken by
imposing a penalty of reducing the pay by four stages in
the time scale; and that on 3.5.1995, a final decision was
taken in regard to the penalty and that final order was
communicated to the respondent as per letter dated
H 30.6.1995. Therefore, the contention that the Appointing ..
STATE BANK OF INDIA AND ORS. v. S.N. GOYAL 645
,...,,_
Authority had earlier passed a final order on 18.1.1995 and A
had become functus officio and therefore, he could not
change the said order dated 18.1.1995 is liable to be
rejected. [Para 21] [665-D, E]
6.1. A perusal of the letter dated 2.2.1995 sent by the
.... --t-' B
Appointing Authority to the Chief Vigilance Officer clearly
demonstrates that the Appointing Authority did not seek
any guidance or advice or directions from the Vigilance
Department and that the letter was only by way of
'intimation' of factual position. [Para 22] [665-F, G]
c
6.2 The reply dated 7.2.1995 from the Chief Vigilance
Officer also makes it clear that he neither issued any
_, direction to the Appointing Authority to impose a higher
punishment nor altered the finding regarding guilt. He
merely gave his opinion that the gravity of the proved
D
~. charge did not warrant leniency and therefore, suggested
that the quantum of penalty may be examined again. The
subsequent note put up by the disciplinary authoriu; on
2.5.1995 and the order passed thereon by the appoinhhg
authority on 3.5.1995 imposing the penalty of removal,
show that they were on independent consideration of the E
question. Neither the note dated 2.5.1995 nor the order
dated 3.5.1995 refer to the opinion or the view expressed
by the Chief Vigilance Officer of the Bank. Nor is there

• .. any material to show that the order imposing punishment
was on the dictates of the Chief Vigilance Officer. There
was no mechanical acceptance of any suggestion or
F

advice by the Chief Vigilance Officer nor consideration of
any extraneous material as assumed by the courts below.
The Appointing Authority is required to inform the
vigilance department in regard to cases involving vigilance G
angle. The Appointing Authority did so. But he did notseek
any instruction, direction, suggestion or advice from the
Vigilance Department. There was also no direction or
circular or instruction requiring the Appointing Authority
to accept or act upon the. suggestions or views of the H
"
fi4G SUPREME COURT REPORTS (2008) 7 S.C.R.

iJl1ief Vigilance Officer. The Vigilance Department merely
gave its comment or view that it was not a fit case for
showing leniency and left it to the concerned authority to
take a decision on the punishment to be imposed. So long
as the decision was not on the dictates of the Vigilance
B Department or other outside authority, but on independent
consideration, the order of removal cannot be faulted. It
cannot be said that either the act of intimating the
Vigilance Department about the enquiry or independently
re-considering the issue of penalty after receiving the
c views of the Vigilance Department amounted to be acting
on extraneous material, or acting on the advice or
recommendation or direction of the Chief Vigilance
Officer. [Para 23] [667-B-H; 668-A]
7. The assumption made by the High Court that the
D Appointing Authority had placed some undisclosed
additional material before the Chief Vigilance Officer is
without any basis. The issue relating to the respondent's
guilt was neither referred to the Vigilance Department nor
did the Vigilance Department give any finding on the
E question of guilt. When the Disciplinary Authority and the
Appointing Authority accepted the find1ing of guilt
recorded by the Enquiry Officer on examining the facts,
even before the matter was informed to Vigilance
Department, it cannot be said that the said d1:!cision was
F influenced by any extraneous advice from Vigilance
Department. The issue on which the Vigilance Department
made its comment was on the limited ground whether any
leniency should be shown in imposing punishment. No
additional facts or material were placed by the Appointing
G Authority before the Vigilance Department for this
purpose. Further the Vigilance Department merely
expressed the view that the gravity of the charue did not
warrant leniency and the authority should examine the
matter. [Para 24] [668-B-F]
H 8. The Disciplinary Authority made available the
.,, STATE BANK OF INDIA AND ORS. v. S.N. GOYAL

Enquiry Report to the respondent to enable him to make A
647

his submissions on the findings of the Enquiry Officer.
The respondent made his submissions in regard to the
Enquiry Report. The correspondence between the
Appointing Authority and Chief Vigilance Officer of the

. ~
Bank was not 'material' on which the finding regarding B
guilt/misconduct was based. Such correspondence was
subsequent to the Enquiry Report. There was no
compulsion or requirement that the Appointing Authority
should consult the Chief Vigilance Officer or act as per
his recommendations or directions. Nor was there any c
direction by the Chief Vigilance Officer to impose any
specific direction. Therefore non furnishing of copies of
the correspondence between the Appointing Authority
and the Chief Vigilance Officer to the respondent, did not
violate principles of natural justice nor vitiate the order of
D
penalty. [Para 25] [668-G, H; 669-A, B, C]
....
UP State Agro Industrial Corporation Ltd. v. Padam
Chand Jain - 1995 SCC L&S 1011 - distinguished.
Nagaraj Shivarao Karjagi v. Syndicate Bank 1991 (3)
SCC 219; State Bank of/ndia v D. C. Aggarwal [1993 (1) SCC E
13; Mohd. Quaramuddin (dead) By LRs. v. State of AP [1994
(5) sec 118 - referred to.
9. In the suit, the respondent had challenged the
enquiry as being opposed to principles of natural justice, F
and the finding of guilt recorded by the Enquiry Officer as
)
being erroneous. He gave up those contentions before
the first appellate court, and restricted the challenge to
the quantum of punishment and non-grant of back wages.
He cannot therefore be permitted to revive the contention
G
that the Enquiry Officer violated the principles of natural
justice in conducting the enquiry. [Para 27] [671-G, H;
...._ 672-A]
10. At the relevant point of time the respondent was
functioning as a Branch Manager. A Bank survives on the H
648 SUPREME COURT REPORTS [2008] 7 S.C.R.

{ ...
A trust of its clientele and constituents. The position of the
Manager of a Bank is a matter of great trust. The
employees of the Bank in particular the Manager are
expected to act with absolute integrity and honesty in
handling the funds of the customers/borrowers of the
B Bank. Any misappropriation, even temporary, of the
funds of the Bank or its customers/borrowers i- ..
constitutes a serious misconduct, inviting severe
punishment. When a borrower makes any payment
towards a loan, the Manager of the Bank receiving such
C amount is req1.1ired to credit it immediately to the
borrower's account. If the matter is to be viewed lightly
or leniently it will encourage other Bank employees to
indulge in such activities thereby undermining the entire
banking system. The request for reducing the punishment
is rejected. [Para 28] [648-A-D]
0
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.
4243-4244 of 2004.
From the Judgment and Order dated 11.12.2003 of the
E High Court of Punjab and Haryana at Chandigarh in RSA Nos.
4183-4184 of 2002.
R.F. Nariman, Sanjay Kapur Shubra Kapur and Arti Singh
for the Appellants.
Dr. K.S. Chauhan, Dr. Indra Pratap Singh, Chand Kiran,
F Gyan Mitra and P.K. Jayakrishnan for the Respondent.
The Judgment of the Court was delivered by
R.V. RAVEENDRAN, J. Theses appeals by special leave
are filed by a defendant-employer (State Bank of India) against
G the judgment dated 11.12.2003 of the Punjab & Haryana High
Court in R.S.A. No.4184 of 2002.
2. A charge-sheet dated 28.4.1994 was issued by the )""
Appellant Bank to the respondent alleging that when he was I
H posted as the Branch Manager of appellant's Kalanwali Branch,

I
STATE BANK OF INDIA AND ORS. v. S.N. GOYAL 649
[R.V. RAVEENDRAN, J.]
~ ...,,
Sirsa, Haryana, he had received cash payments tendered by A
two customers of the Bank, for being credited to their loan
accounts, and temporarily misappropriated such amounts and
had belatedly deposited them to the borrowers' accounts (after
about five months in one case and two and half months in
another). The said acts amounted to a misconduct, violative of B
., ~- Rule 50(4) of the State Bank of India Officers Service Rules
('Service Rules' for short). An enquiry was held in regard to the
said charge. The Enquiry Officer submitted his report dated
11.11.1994 holding that the charge was proved. The Disciplinary
Authority furnished a copy of the said report to the respondent c
-
"=#
and gave him an opportunity to show cause in the matter.
3. Rule 68(3) of the Service Rules required, where the
Disciplinary Authority was of the opinion that a major penalty is
to be imposed, and where he was lower in rank to the Appointing
Authority (in respect of the category of officers to which the D
delinquent officer belonged), that he should submit to the
Appointing Authority, the records of the enquiry together with
his recommendations regarding the penalty that may be
imposed, and the Appointing Authority should make the order
imposing the penalty, which in his opinion was appropriate. In E
view of the above rule, the Disciplinary Authority after
considering the inquiry records and the representation of the
respondent, made a recommendation on 2.5.1995 to the

-
Appointing Authority to impose the penalty of 'removal from
service' on the respondent. The Appointing Authority considered F
the entire material and concurred with the recommendation of
)- the Disciplinary Authority and made an order dated 3.5.1995
imposing the penalty of removal from service, which was
communicated to the Respondent by letter dated 30.6.1995 of
the Disciplinary Authority.
G,
4. The appeal and Revision (Review) filed by the
Respondent were dismissed on 29.11. 1995 and 27.11.1996 .
.....
The respondent thereafter filed Civil Suit No.158 of 1998 on the
file of the Civil Judge, Senior Division, Jind, for a declaration
that the order of removal dated 30.6.1995 as also the orders of H
650 SUPREME COURT REPORTS [2008] 7 S.C.R.

-( ..
A the Appellate Authority and Reviewing Authority were arbitrary ,_
and illegal. He also prayed that the said orders be set aside
with a direction to take him back into service with all i
consequential benefits. The suit was resisted by the appellant-
bank. After trial, the suit was decreed on 19.4.2003. The Trial
B Court found that there was no violation of principles of natural
justice in conducting the enquiry and the order holding the i. ..
respondent guilty of misconduct was proper. The trial court
however found that the Disciplinary Authority, by his earlier note
dated 18.1.1995, had recommended imposition of the penalty
c of reduction of pay of respondent by four stages in his time scale ._
and the Appointing Authority had agreed with the said
recommendation on 18.1.1995. According to the trial court, the
,.
said order was a final order of punishment by the Appointing
Authority; and the Appointing Authority had thereafter sought the
advice of the Bank's Chief Vigilance Officer, and acting on such
D
advice, had changed his earlier decision and imposed a higher
punishment by way of removal from service, by order dated
3.5.1995 (communicated on 30.6.1995). The trial court was of
the view that the second order imposing penalty was passed
by the Appointing Authority "on extraneous reasons after taking
E advice of the Chief Vigilance Officer", and that rendered the
order of removal illegal, null and void. The trial court therefore
set aside the order of removal dated 30.6.1995 as also the
orders dated 29.11.95 and 27.11.1996 of the Appellate Authority
and reviewing authority affirming the order of removal. It directed
F the appellant Bank to reinstate the respondent with continuity of ....
service and all consequential benefits except back-wages. The
~
Trial Court reserved liberty to the appellant to pass a fresh order
imposing appropriate penalty on the respondent, other than the
penalty of dismissal or removal from service.
G
5. Feeling aggrieved, both parties filed appeals. Before
the First Appellate Court, the respondent did not challenge the
finding of the trial court that the domestic enquiry was fair and ,._
proper and that his guilt was established. He limited his
challenge only to the quantum of punishment (that is, reservation
H
STATE BANK OF INDIA AND ORS. v. S.N. GOYAL 651

.
)
[R.V RAVEENDRAN, J.]

of liberty to the employer to pass a fresh order imposing
appropriate penalty) and the denial of back wages. The
A
I.
appellant, in its appeal, contended that the Trial Court, having
found that the enquiry was fair and proper and the finding of
guilt was justified, ought not to have set aside the order imposing
penalty. The two appeals were heard and disposed of by the B
Additional District Judge, Jind, by a common judgment dated
- J
20. 7.2002. The First Appellate Court upheld the decree of the
Trial Court, but in addition held that the respondent was entitled
to full back wages with interest thereon at 9% per annum .
• Consequently, the First Appellate Court dismissed the appeal
~
(

by the appellant and allowed in part the appeal of the respondent.
c
'·' 6. Feeling aggrieved the bank filed the second appeal,

-- which was dismissed by the judgment under appeal. The
judgment is short. After referring to the prayer in the suit and the
judgments rendered by the courts below, it contains the following D
reasoning:
"It is not in dispute that originally the punishment proposed
against the plaintiff was to bring him lower by four steps.
Subsequently on directions issued by the Chief Vigilance
Commissioner of the Bank, the punishment was converted E
to that of dismissal. The plaintiff made a complaint that the
aforesaid orders and the material placed before the Chief
Vigilance Commissioner were never put to him and as
_,, such the order of punishment was violative of principles of

- Ir
natural justice.

The learned courts below found that the contention of the
plaintiff was duly substantiated from the record.
F

Accordingly, the punishment orders were set aside with a
liberty as noticed above.
G
Nothing has been shown that the findings recorded by the
learned courts below suffer from any infirmity or are
contrary to law in any manner.
No question of law, much less any substantial question of
law, arises in this appeal." H
~
652 SUPREME COURT REPORTS [2008] 7 S.C.R.

A 7. We find that the High Court misread the findings of the ·( 4

courts below. The Trial Court held that the Appointing Authority
passed the order of removal after taking the advice of the Chief
Vigilance Officer. The first appellate court held that the Appointing
Authority imposed the penalty of removal on the
B recommendations of the Chief Vigilance Officer. But the High
Court observed that 'on the directions of the Chief Vigilance
Commissioner of the Bank, the punishment was converted to
that of dismissaf. This observation contains three errors - firstly
the penalty of removal was read as dismissal; secondly the
C communication from the Chief Vigilance Officer, termed as
"advice/recommendation" by the courts below, was wrongly read
as 'directions'; and thirdly, the Chief Vigilance Officer of the Bank

0
was wrongly referred to as the Chief Vigilance Commissioner.
The High Court also erroneously assumed that plaintiff
(respondent herein) had pleaded that the Appointing Authority
had placed certain material which was never put to him (the
-
plaintiff), before the Chief Vigilance Commissioner and as such
the order of punishment was violative of principles of natural
justice. There was no such plea, nor did the courts below record
a finding on any such plea.
E
8. We also find that the High Court completely missed the
real points arising for determination. After a cursory wrong
reference to the findings of the court below, the High Court
wrongly held that the second appeal did not give rise to any
F substantial question of law, ignoring the several substantial
questions of law arising for consideration of the High Court,
which were clearly specified in the memorandum of second
appeal. We find that the second appeal gave rise to several
substantial questions of law including the following :
G (i) Whether a direction by the Civil Court to reinstate the
respondent, amounted to granting specific performance
of a contract of personal service which is barred by section
14 of Specific Relief Act, 1963?
(ii) In the absence of a pleading that the order imposing
H
.
STATE BANK OF INDIA AND ORS. v. S.N. GOYAL 653
[R.V. RAVEENDRAN, J.]

.. )' penalty was invalid because the Appointing Authority acted A
on the advice or recommendation of the Chief Vigilance
Officer, and in the absence of any issue in that behalf,
could the Courts below hold that the order imposing
punishment was illegal on that ground?

(iii) Whether an order recorded by the Appointing Authority 8
• r on an office note, to impose the penalty of reduction in
pay, which was neither pronounced, published or
communicated, is a final decision which could not be
reconsidered or altered, by the Appointing Authority?
c
(iv) Whether the decision of the Appointing Authority
imposing penalty can be said to have been influenced by
extraneous material, merely because the Chief Vigilance
Officer of the Bank requested him to re-examine the
proposed penalty ?
D
(v) Whether the Appointing Authority ought to have
communicated the advice/recommendation of the Chief
Vigilance Officer to the respondent and given him an
opportunity to show cause before imposing punishment?
If questions (iii) to (v) or any of them is answered in the E
affirmative and as a consequence if it has to be held that the
order of removal was illegal or invalid, then, the second appeal
would give rise to several further substantial questions of law.
One question would have been whether the civil court could direct
the authority empowered to impose penalty, to restrict the F
punishment to something other than dismissal/removal. Another
~ question would have been whether full back wages with interest
could be awarded where the court accepts that the employee
was guilty of misconduct o'f misappropriation. Be that as it may.
G
9. Before examining the merits of the matter, we may briefly
refer to the scope of second appeals as also the procedure for
entertaining them, as laid down in section 100 of the Code of
_..., Civil Procedure.

What is a substantial question of law? H
654 SUPREME COURT REPORTS [2008] 7 S.C.R

"i 4
A 9.1) Second appeals would lie in cases which involve
substantial questions of law. The word 'substantial' prefixed to
'question of law' does not refer to the stakes involved in the
case, nor intended to refer only to questions of law of general
importance, but refers to impact or effect of the question of law
B on the decision in the /is between the parties. 'Substantial
questions of law' means not only substantial questions of law of
general importance, but also substantial question of law arising
~
•
in a case as between the parties. In the context of section 100
CPC, any question of law which affects the final decision in a
c case is a substantial question of law as between the parties. A
question of law which arises incidentally or collaterally, having
no bearing in the final outcome, will not be a substantial question
of law. Where there is a clear and settled enunciation on a
question of law, by this Court or by the High Court concerned, it
cannot be said that the case involves a substantial question of
D
law. It is said that a substantial question of law arises when a
question of law, which is not finally settled by this court (or by the;
>--
concerned High Court so far as the State is concerned), arises
for consideration in the case. But this statement has to be
understood in the correct perspective. Where there is a clear
E enunciation of law and the lower court has followed or rightly
applied such clear enunciation of law, obviously the case will
not be considered as giving rise to a substantial question of
law, even if the question of law may be one of general
-"'--
importance. On the other hand, if there is a clear enunciation of
F law by this Court (or by the concerned High Court), but the lower
court had ignored or misinterpreted or misapplied the same,
and correct application of the law as declared or enunciated by ...
this Court (or the concerned High Court) would have led to a
different decision, the appeal would involve a substantial
G question of law as between the parties. Even where there is an
enunciation of law by this court (or the concerneEl High Court)
and the same has been followed by the lower court, if the -•
appellant is able to persuade the High Court that the enunciated ~
legal position needs reconsideration, alteration, modification
H or clarification or that there is a need to resolve an apparent
STATE BANK OF INDIA AND ORS. v. S.N. GOYAL 655
[RV RAVEENDRAN, J.]
> 'T
conflict between two view points, it can be said that a substantial A
question of law arises for consideration. There cannot, therefore,
be a strait-jacket definition as to when a substantial question of
law arises in a case. Be that as it may.

- ,.
Procedure relating to second appeals
9.2) We may next refer to the procedure relating to second
appeals as evident from section 100 read with order 42 Rules
1 and 2, of Code of Civil Procedure :
B

(a) The appellant should set out in the memorandum of
appeal, the substantial questions of law involved in the c
appeal.
(
(b) The High Court should entertain the second appeal
only if it is satisfied that the case involves a substantial
question of law.
D
..(
(c) While admitting or entertaining the second appeal,
the High Court should formulate the substantial questions
of law involved in the case.
(d) The second appeal shall be heard on the question/s
E
of law so formulated and the respondent can submit at the
hearing that the second appeal does not in fact involve
any such questions of law. The Appellant cannot urge any
other ground other than the substantial question of law
without the leave of the court.
F
(e) The High Court is at liberty to reformulate the
y substantial questions of law or frame other substantial
question of law, for reasons to be recorded and hear the
parties or such reformulated or additional substantial
questions of law.
G
9.3) It is a matter of concern that the scope of second
_....
appeals and as also the procedural aspects of second appeals
are often ignored by the High Courts. Some of the oft-repeated
errors are:
H
656 SUPREME COURT REPORTS [2008] 7 S.C.R.

A (a) Admitting a second appeal when it does not give rise
to a substantial question of law.
(b) Admitting second appeals without formulating
substantial question of law.

B (c) Admitting second appeals by formulating a standard
or mechanical question such as "whether on the facts and
circumstances the judgment of the first appellate court
calls for interference" as the substantial question of law.

(d) Failing to consider and formulate relevant and
c appropriate substantial question/s of law involved in the
second appeal.
(e) Rejecting second appeals on the ground that the case
does not involve any substantial question of law, when the
case in fact involves substantial questions of law.
D
(f) Reformulating the substantial question of law after
the conclusion of the hearing, while preparing the judgment,
thereby denying an opportunity to the parties to make
submissions on the reformulated substantial question of
E law.

(g) Deciding second appeals by re-appreciating
evidence and interfering with findings of fact, ignoring the
questions of law.

F These lapses or technical errors lead to injustice and also
give rise to avoidable further appeals to this court and remands
by this court, thereby prolonging the period of litigation. Care
should be taken to ensure that the cases not involving substantial
questions of law are not entertained, and at the same time ensure
G that cases involving substantial questions of law are not rejected,
as not involving substantial questions of law.
10. In this case, the failure on the part of the High Court to
take note of the substantial questions of law involved, has led to
unwarranted dismissal of the second appeal and calls for
H interference. One alternative available to us is to remand the
STATE BANK OF INDIA AND ORS. v. S.N. GOYAL 657
. )'
[R.V. RAVEENDRAN, J.]

matter to the High Court for formulating the substantial questions A
of law and then hear and dispose of the appeal. But that is likely
to delay the matter further. The questions arising for decision
are questions of law. These had been raised in the memorandum
of second appeal before the High Court and again referred to
,,, in the special leave petition. Elaborate arguments have been 8
)'
addressed on those questions (extracted in para 8 above) by
both sides. We are, therefore, of the view that instead of
remanding the matter, we should ourselves consider the several
questions of law that ought to have been considered by the High
Court and decide the matter finally.
c
Re : Question (i) - Enforcement of a contract of
personal service.
11. Where the relationship of master and servant is purely
contractual, it is well settled that a contract of personal service
D
is not specifically enforceable, having regard to the bar
-l
contained in section 14 of the Specific Relief Act, 1963. Even if
the termination of the contract of employment (by dismissal or
otherwise) is found to be illegal or in breach, the remedy of the
employee is only to seek damages and not specific
performance. Courts will neither declare such termination to be E
a nullity nor declare that the contract of employment subsists
nor grant the consequential relief of reinstatement. The three
well recognized exceptions to this rule are:
~
(i) where a civil servant is removed from service in F
)' contravention of the provisions of Article 311 of the
Constitution of India (or any law made under Article
309);
(ii) where a workman having the protection of Industrial
Disputes Act, 194 7 is wrongly terminated from G
service; and
.... (iii) where an employee of a statutory body is terminated
from service in breach or violation of any mandatory
provision of a statute or statutory rules.
H
-· - ..
'f·
"""
658 SUPREME COURT REPORTS [2008] 7 S.C.R.

1 ~

A There is thus a clear distinction between public employment
governed by statutory rules and private employment governed
purely by contract. The test for deciding the nature of relief -
damages or reinstatement with consequential reliefs- is whether
the employment is governed purely by contract or by a statute
B or statutory rules. Even where the employer is a statutory body, ..., ..
where the relationship is purely governed by contract with no
element of statutory governance, the contract of personal service
will not be specifically enforceable. Conversely, where the
employer is a non-statutory body, but the employment is
c governed by a statute or statutory rules, a declaration that the
termination is null and void and that the employee should be
reinstated can be granted by courts. (Vide : Dr. S. Dutt vs.
University of Delhi -AIR 1958 SC 1050; Executive Committee
of UP State Warehousing Corporation Ltd. Vs. Chandra Kiran
Tyagi - 1970 (2) SCR 250; Sirsi Municipality vs. Cecelia Kom
D
Francies Tellis - 1973 (3) SCR 348; Executive Committee of
).
Vaish Degree College vs. Lakshmi Narain - 1976 (2) SCR
1006; Smt. J. Tiwari vs. Smt. Jawala Devi Vidya Mandir-AIR
1981 SC 122; and Dipak Kumar Biswas vs. Director of Public
Instruction -AIR 1987 SC 1422).
E
12. In this case the appellant is a statutory body established
under the State Bank of India Act, 1955 and the contract of
employment was governed by the State Bank of India Officers
Service Rules, which are statutory rules framed under section
~
F 43(1) of the said Act. The respondent approached the civil court
alleging that his removal from service was in violation of the ....
said statutory rules. When an employee of a statutory body whose
service is terminated, pleads that such termination is in violation
of statutory rules governing his employment, an action for
declaration that the termination is invalid and that he is deemed
G
to continue in service is maintainable and will not be barred by
section 14 of the Specific Relief Act.
>
Re : Question (ii) - Effect of absence of pleading.
13. The plaint did not contain any plea that the order of
H

.....
STATE BANK OF INDIA AND ORS. v. S.N. GOYAL 659
I' )' [R.V. RAVEENDRAN, J.]

removal by the Appointing Authority (Chief General Manager) A
was vitiated on account of his consulting and acting on the advice
of the Chief Vigilance Officer of the Bank. Nor did it contain any
allegation that the Appointing Authority acted on extraneous
material in passing the order of removal. In the plaint, the
'
1
.. r challenge to the order of removal was on the ground that the
enquiry by the Enquiry Officer was opposed principles of natural
B
~
justice that is: (i) the charge was vague and not established; (ii)
he was not given reasonable opportunity to defend himself; (iii)
material witnesses were not examined; (iv) documents relied
on were not formally proved; (v) burden of proof was wrongly c
placed on him; (vi) findings in the enquiry report were basea on
surmises and conjectures; and (viii) the enquiry officer was
prejudiced. The respondent had also averred that the Appointing
Authority had approved the recommendation made by the
Disciplinary Authority for imposition of penalty of removal, without
D
.J
application of mind and without giving him a hearing. He
alternatively contended that the punishment imposed was severe
and disproportionate to the gravity of the prov~d charge. But
there was absolutely no plea with reference to the advice/
recommendation of the Chief Vigilance Officer of the Bank.
However, during the examination of the Bank's witness DW-1 E
(TS. Negi, Deputy Manager) it was elicited that on 18.1.1995,
the Disciplinary Authority had put up a recommendation to
impose the penalty of reduction of pay by four stages by taking
a lenient view; t1iat the Appointing Authority had by his note dated
18.1.1995 accepted the said recommendation; that F
y·
subsequently, on 2.2.1995, the Appointing Authority had informed
the Chief Vigilance Officer of the Bank about the enquiry and
proposed punishment; and that after receiving the comments
of the Chief Vigilance Officer, the Appointing Authority on the
recommendations of the disciplinary authority had reconsidered G
the question of punishment and imposed the penalty of removal.
The respondent - plaintiff did not amend the plaint to include
""'
the averments and grounds to challenge the order of removal
on the said additional ground. No issue was framed in that behalf.
No amount of evidence on a plea that was not put forward in the H
660 SUPREME COURT REPORTS [2008] 7 S.C.R.
1 •

A pleadings can be looked into. In the absence of necessary
pleading and issue, neither the trial court nor the appellate court
could have considered the contention and recorded a finding
thereon.

14. The learned counsel for the respondent submitted that
B the order of removal was challenged on the ground that it was ~ ..
opposed to principles of natural justice, and the averments in
the plaint were sufficient to enable the plaintiff to establish any
ground in support of it and it was not necessary to separately
plead each and every fact or ground in support of his contention
c that the order of removal was vitiated. While there is no need to
plead evidence, the grounds of challenge and the facts in support
of each ground, will have to be pleaded. In this case, the minimum
pleading that was necessary was that the Appointing Authority
acted on extraneous material in arriving the decision or acted
D on the advice or recommendation of an Authority who was not
~
concerned with the Enquiry. In the absence of appropriate
pleading on a particular issue, there can be no adjudication of
such issue. Adjudication of a dispute by a civil court is
significantly different from the exercise of power of judicial review
E in a writ proceedings by the High Court. In a writ proceedings,
the High Court can call for the record of the order challenged,
examine the same and pass appropriate orders after giving an
opportunity to the State or the statutory authority to explain any
particular act or omission. In a civil suit parties are governed by
F rules of pleadings and there can be no adjudication of an issue
in the absence of necessary pleadings. The learned counsel 'f

for the respondent submitted that the respondent was unaware
of the earlier order dated 18.1.1995 or about the consultation
with the Chief Vigilance Officer when he filed the suit and
therefore, could not make necessary averments in the plaint in
G
that behalf. But that is no answer. Code of Civil Procedure
contains appropriate provisions relating to interrogatories,
discovery and inspection (Order XI Rules 1, 12 and 15) to gain "'
access to relevant material available with the other party. A party
to a suit should avail those provisions and if any new ground
H
,.

STATE BANK OF INDIA AND ORS. v. S.N. GOYAL 661
[RV RAVEENDRAN, J.]
,. )'
becomes available on the basis of information secured by A
discovery, a party can amend his pleadings and introduce new
facts and grounds which were not known earlier. The difficulty in
securing relevant material or ignorance of existence of relevant
material will not justify introduction of such material at the stage
of evidence in the absence of pleadings relating to a particular B
,. />'
aspect to which the material relates. If a party should be permitted
to rely on evidence led on an issue/aspect not covered by
pleadings, the other side will be put to a disadvantage. For
example, in this case, if there had been a plea and issue on the
question whether extraneous material was taken into account, c
the Bank could have examined the Appointing Authority to explain
the context in which he informed the Chief Vigilance Officer
about the matter or explain how his decision was not dependant
upon any extraneous material. Therefore, the courts below
committed a serious error in holding that the order of removal
D
was based on an extraneous material (the advice/
,J,
recommendation of Chief Vigilance Officer) and therefore,
invalid.
15. Where the enquiry was found to be fair and proper
and the finding of guilt in the enquiry in respect of a serious E
charge was found to be valid, in the absence of any other valid
~
ground of challenge, the courts below ought to have held that
the penalty of removal from service did not warrant any
interference and dismissed the suit. Be that as it may. We will
now consider the matter on merits, on the assumption that the F
averments in the plaint were sufficient to enable the court to
consider this issue.
Re : Questions (iii) - When did the Appointing
Authority became functus officio.
G
16. Ex.P24 is the note dated 18.1.1995 by which the

.. Disciplinary Authority accepted the finding of guilt recorded
arrived at by the Enquiry Officer in regard to the charge against
the respondent that he temporarily misappropriated the funds
of the customers of the Bank. The Disciplinary Authority though
H
,,.

662 SUPREME COURT REPORTS [2008) 7 S.C.R.

...
A of the view that the respondent deserved a severe punishment,
felt that having regard to the length of his service, he should be '
shown leniency, and therefore, recommended imposition of a
lesser punishment of reduction of pay by four stages in the time
scale. The Appointing Authority made a note on the same day
(18.1.1995) agreeing with the said recommendation. But the
B
said order was not communicated to the respondent. On the -I ..
other hand, the Disciplinary Authority on reconsideration of the
matter put up a fresh note dated 2.5.1995 recommending the
penalty of removal and that was accepted by the Appointing
c Authority on 3.5.1995 and communicated to the respondent on
30.6.1995.
17. The learned counsel for respondent contended that
the Appointing Authority became functus officio once he passed
the order dated 18.1.1995 agreeing with the penalty proposed
D by the Disciplinary Authority and cannot thereafter revise/review/
modify the said order. Reliance was placed on the English ).

decision Re : VGM Holdings Ltd, reported in 1941 (3) All. ER
page 417 wherein it was held that once a Judge has made an
order which has been passed and entered, he becomes functus
E officio and cannot thereafter vary the terms of his order and only
a higher court, tribunal can vary it. What is significant is that
decision does not say that the Judge becomes functus officio
.b
when he passes the order, but only when the order passed is
'entered'. The term 'entering judgment' in English Law refers to
F the procedure in civil courts in which a judgment is formally
recorded by court after it has been given.
18. It is true that once an Authority exercising quasi judicial
power, takes a final decision, it cannot review its decision unless
the relevant statute or rules permit such review. But the question
G is as to at what stage, an Authority becomes functus officio in
•
'

regard to an order made by him. P. Ramanatha Aiyar's Advance
Law Lexicon (3rd Edition, Vol.2 Pages 1946-47) gives the ,.
following illustrative definition of the term 'functus officio' :
"Thus a Judge, when he has decided a question brought
H
STATE BANK OF INDIA AND ORS. v. S.N. GOYAL 663
[RV. RAVEENDRAN, J.]

before him, is functus officio, and cannot review his own A
decision."
Black's Law Dictionary (Sixth Edition Page 673) gives its
meaning as follows :

"Having fulfilled the function, discharged the office, or s
accomplished the purpose, and therefore, of no further
force or authority".

19. We may first refer to the position with reference to civil
courts. Order XX of Code of Civil Procedure deals with judgment
and decree. Rule 1 explains when a judgment is pronounced. C
Sub-rule (1) provides that the Court, after the case has been
heard, shall pronounce judgment in an open court either at once,
or as soon thereafter as may be practicable, and when the
judgment is to be pronounced on some future day, the court
shall fix a day for that purpose of which due notice shall be given D
to the parties or their pleaders. Sub-rule (3) provides that the
judgment may be pronounced by dictation in an open court to a
shorthand writer (if the Judge is specially empowered in this
behalf). The proviso thereto provides that where the judgment
is pronounced by dictation in open court, the transcript of the E
judgment so pronounced shall, after making such corrections
as may be necessary, be signed by the Judge, bear the date on
which it was pronounced and form a part of the record. Rule 3
provides that the judgment shall be dated and signed by the
Judge in open court at the time of pronouncing it and when once F
signed, shall not afterwards be altered or added to save as
provided by section 152 or on review. Thus where·a judgment
is reserved, mere dictation does not amount to pronouncement,
but where the judgment is dictated in open court, that itself
amounts to pronouncement. But even after such pronouncement G
by open court dictation, the Judge can make corrections before
signing and dating the judgment. Therefore, a Judge becomes
functus officio when he pronounces, signs~nd dates the
judgment (subject to section 152 and power of review). The
position is different with reference to quasi judicial authorities.
H
664 SUPREME COURT REPORTS [2008] 7 S.C.R.

A While some quasi judicial tribunals fix a day for pronouncement
-. .
and pronounce their orders on the day fixed, many quasi judicial
authorities do not pronounce their orders. Some publish or notify
their orders. Some prepare and sign the orders and
communicate the same to the party concerned. A quasi
B judicial authority will become functus officio only when its order
is pronounced, or published/notified or communicated (put .. ....
in the course of transmission) to the party concerned. When
an order is made in an office noting in a file but is not
pronounced, published or communicated, nothing prevents
the Authority from correcting it or altering it for valid reasons.
c But once the order is pronounced or published or notified or
communicated, the Authority will become functus officio. The
order dated 18.1.1995 made on an office note, was neither
pronounced, nor published/notified nor communicated.
Therefore, it cannot be said that the Appointing Authority
D
became functus officio when he signed the note on dated
18.1.1995.
20. Let us next consider whether the decision taken on
18.1.1995 is a final decision. A careful examination shows that
E the order dated 18.1.1995 was intended only to be tentative
and not final. Firstly, the said decision was not communicated
to the respondent, nor was any letter or order issued to the
respondent imposing the penalty mentioned in the order dated
18.1.1995. Secondly, the Appointing Authority by letter dated
F 2.2.1995 (Ex.P23) informed the Chief Vigilance Officer of the
Bank about the enquiry against respondent, his decision
accepting the findings of the Enquiry Officer, and the proposal
to show leniency by imposing only a punishment of reduction of
pay by four stages. The Chief Vigilance Officer sent a reply dated
7.2.1995 (Ex.02) wherein he observed that "by pocketing the
G
money of the customers Sri Goyal has exposed the Bank's faith
reposed in him" and there was no ground for showing leniency.
He also expressed the view that the respondent deserved a
> ,
more severe punishment and requested the appointing authority
to re-examine whether respondent should be continued in the
H
STATE BANK OF INDIA AND ORS. v. S.N. GOYAL 665
[RV. RAVEENDRAN, J.]

post. Thereafter the Disciplinary Authority reconsidered the entire A
issue again and put up another note dated 23.3.1995/2.5.1995
to the Appointing Authority proposing the punishment of removal
from service. After considering the said recommendation, the

- .,
Appointing Authority passed the following order on the said note
on 3.5.1995 :

"On a dispassionate and objective evaluation of the facts,
circumstances of the case, inquiry proceedings and
B

evidence available, I concur with the recommend.ations of
the disciplinary authority mentioned at serial no.4 of the
note and have come to the conclusion that the penalty of c
"removal from Bank's service" proposed to be inflicted on
Sri S.L. Goyal, Officer JMGS-1, is just and appropriate
and I, therefore, order imposition of this penalty on the
official."
21. It is thus clear that on 18.1.1995, the Appointing Authority D
had only tentatively approved the proposal of the disciplinary
authority that a lenient view be taken by imposing a penalty of
reducing the pay by four stages in the time scale; and that on
3.5.1995, a final decision was taken in regard to the penalty
and that final order was communicated to the respondent as E
per letter dated 30.6.1995. Therefore, the contention that the
Appointing Authority had earlier passed a final order on
18.1.1995 and had become functus officio and therefore, he
could not change the said order dated 18.1.1995 is liable to be
rejected. F
'i
Re : Questions (iv) and (v) - Whether the Appointing
Authority was influenced by extraneous material.
22. A perusal of the letter dated 2.2.1995 sent by the
Appointing Authority to the Chief Vigilance Officer clearly G
demonstrates that the Appointing Authority did not seek any
_.._ guidance or advice or directions from the Vigilance Department
and that the letter was only by way of 'intimation' of factual
position. For convenience, we extract below the said letter in
entirely"
H
666 SUPREME COURT REPORTS [2008] 7 S. C.R.

A "The Chief Vigilance Officer,
State Bank of India, Central Office, Bombay.
Dear Sir,
Staff : Supervising
Shri S.N. Goyal: Officer JMGS I, Kaluana Branch
B Disciplinary Action.
Further to our letter No.CO/VIG/4266 dated the 19th
November, 1994, we advice that the Disciplinary Authority
has examined the enquiry proceedings and findings of
c the Inquiring Authority in the case initiated against Shri S.
N. Goyal, Office JMGS I and has agreed with the same.
2. In this connection, copies of the following documents
are enclosed for your perusal and record :
(i) Chargesheet issued to the official
D
(ii) Enquiry proceedings
(iii) Findings of the Inquiring Authority
(iv) Tabular statement showing the charges leveled
E against the official, findings of the Inquiring Authority,
official's submissions on the findings and Disciplinary
Authority's comments thereon.
(v) Note put up by the Disciplinary Authority to the
Appointing Authority viz., the Chief General Manager.
F
(vi) Bio-data of the Official.
3. In view of the seriousness of the charge proved against
Shri S.N. Goyal, Officer JMGS I, he deserves a severe
punishment. The Disciplinary Authority is, however, inclined
G to take a lenient view in the matter considering the length
of service put in by the official in the Bank and also to
provide him a chance to reform himself. The Disciplinary
Authority is of the view that the ends of justice will be met
if the official is brought down by four stages in his time
H scale in terms of Rule 67 (e) of State Bank of India Officers
STATE BANK OF INDIA AND ORS. v. S.N. GOYAL 667
[R.V. RAVEENDRAN, J.]

." Service Rules to which I concur in the capacity as the
Appointing Authority of the official.
A

Yours faithfully,
Chief General Manager."

- 'y
23. The reply dated 7.2.1995 from the Chief Vigilance B
Officer also makes it clear that he neither issued any direction
to the Appointing Authority to impose a higher punishment nor
altered the finding regarding guilt. He merely gave his opinion
that the gravity of the proved charge did not warrant leniency
and therefore, suggested that the quantum of penalty may be c
examined again. The subsequent note put up by the disciplinary
authority on 2.5.1995 and the order passed thereon by the
appointing authority on 3.5.1995 imposing the penalty of
removal, show that they were on independent consideration of
the question. Neither the note dated 2.5.1995 nor the order dated
D
3.5.1995 refer to the opinion or the view expressed by the Chief
Vigilance Officer of the Bank. Nor is there any material to show
that the order imposing punishment was on the dictates of the
Chief Vigilance Officer. There was no mechanical acceptance
of any suggestion or advice by the Chief Vigilance Officer nor
consideration of any extraneous material as assumed by the E
courts below. The Appointing Authority is required to inform the
vigilance department in regard to cases involving vigilance angle.
The Appointing Authority did so. But he did not seek any
instruction, direction, suggestion or advice from the Vigilance
Department. There was also no direction or circular or instruction F
requiring the Appointing Authority to accept or act upon the
i suggestions or views of the Chief Vigilance Officer. The
Vigilance Department merely gave its comment or view that it
was not a fit case for showing leniency and left it to the concerned
authority to take a decision on the punishment to be imposed. G
So long as the decision was not on the dictates of the Vigilance
Department or other outside authority, but on independent
consideration, the order of removal cannot be faulted. It cannot
be said that either the act of intimating the Vigilance Department
about the enquiry or independently re-considering the issue of H
668 SUPREME COURT REPORTS [2008] 7 S.C.R.

A penalty after receiving the views of the Vigilance Department
amounted to be acting on extraneous material, or acting on the
advice or recommendation or direction of the Chief Vigilance
Officer.
24. The assumption made by the High Court that the
8 Appointing Authority had placed some undisclosed additional
material before the Chief Vigilance Officer is without any basis.
The Enquiry Officer had found the respondent guilty of the charge
on consideration of the evidence. The finding of guilt was
accepted by the Disciplinary Authority and the Appointing
C Authority. This is not a case where any evidence or other material
was sent to the vigilance department seeking their decision or
views on the question of guilt of the respondent. The issue
relating to the respondent's guilt was neither referred to the
Vigilance Department nor did the Vigilance Department give
D any finding on the question of guilt. When the Disciplinary
Authority and the Appointing Authority accepted the finding of
guilt recorded by the Enquiry Officer on examining the facts,
even before the matter was informed to Vigilance Department,
it cannot be said that the said decision was influenced by any
E extraneous advice from Vigilance Department. The issue on
which the Vigilance Department made its comment was on the
limited ground whether any leniency should be shown in
imposing punishment. No additional facts or material were
placed by the Appointing Authority before the Vigilance
F Department for this purpose. Further the Vigilance Department
merely expressed the view that the gravity of the charge did not
warrant leniency and the authority should examine the matter.
Therefore the assumption by the High Court that the Appointing
Authority had placed some material not put to the respondent,
G before the Chief Vigilance Officer and that the Chief Vigilance
Officer had issued any direction to the Appointing Authority on
the basis of such material, is baseless.
25. The Disciplinary Authority made available the Enquiry
Report to the respondent to enable him to make his submissions
H on the findings of the Enquiry Officer. The respondent made his
STATE BANK OF INDIA AND ORS. v. S.N. GOYAL 669
[R.V. RAVEENDRAN, J.]

submissions in regard to the Enquiry Report. The A
correspondence between the Appointing Authority and Chief
Vigilance Officer of the Bank was not 'material' on which the
finding regarding guilt/misconduct was based. Such
correspondence was subsequent to the Enquiry Report. There
was no compulsion or requirement that the Appointing Authority B
... 'y should consult the Chief Vigilance Officer or act as per his
recommendations or directions. Nor was there any direction by
the Chief Vigilance Officer to impose any specific direction.
Therefore non furnishing of copies of the correspondence
between the Appointing Authority and the Chief Vigilance Officer c
to the respondent, did not violate principles of natural justice
nor vitiate the order of penalty.

26. The decisions relied on by the respondent do not lay
down any proposition of law which requires us to take a different
view in the matter. D

26.1) In Nagaraj Shivarao Karjagi vs. Syndicate Bank -
1991 (3) sec 219, this Court considered a case where the
employer Bank referred the matter to the Chief Vigilance
Commissioner (for short 'CVC') for advice and the
Commissioner made a specific recommendation that the E
employee may be compulsorily retired from service by way of
punishment. The impugned directive of the Ministry of Finance
directed that the disciplinary authority and appellate authority
could not impose a lesser punishment than what was suggested
by CVC without its concurrence. The Bank accordingly imposed F
the penalty of compulsory retirement. This Court held that the
advice tendered by the eve was not binding on the punishing
authority and it was not obligatory upon the punishing authority
to accept the advice of the CVC. This Court held that no third
party like CVC or Central Government could dictate the G
disciplinary authority or the appellate authority as to how they
should exercise their power and what punishment they should
impose on the delinquent officer. This Court also held that the
Finance Ministry directive that a punishment lesser than what
was recommended by the eve could not be imposed, was H
670 SUPREME COURT REPORTS [2008] 7 S.C.R.

f •
A without jurisdiction and contrary to the statutory regulations
governing disciplinary matters. The said decision is of no
assistance in this case, as there is no directive that the
recommendation of the Vigilance Department is mandatory and
should be followed while imposing punishment; nor has the
Vigilance Department directed the punishing authority to impose
B
any specific punishment; nor has the appointing authority acted
on the dictates of the Vigilance Department.
.,.
-
26.2) The next decision relied upon by the respondent is
the decision rendered by this Court in State Bank of India vs.
c 0. C. Aggarwal [1993 (1) SCC 13]. In that case, the Enquiry
Officer recommended exoneration of the employee. Instead of
acting on the recommendation, the Bank directed the Enquiry
Officer to submit the report through CVC. The CVC disagreed
with the finding of the Enquiry Officer and recorded a finding of
D guilt and recommended the imposition of major penalty of
removal. A copy of the CVC's recommendation was not furnished ~

to the employee. The disciplinary authority acting on the
recommendation of the CVC and agreeing with CVC's finding
of guilt, passed an order but imposed a punishment lesser than
E what was directed by eve. This Court held that the order of the
disciplinary authority imposing punishment was vitiated as it
violated the principles of natural justice by denying the copy of
the recommendation of the eve which was prepared behind
his back. The said decision therefore related to eve examining
F the facts of the case and arrived at a finding relating to guilt
contrary to the finding of the Enquiry Officer and such finding
being accepted by the Disciplinary Authority without giving "
opportunity to the employee to comment upon the CVC Report
finding him guilty. In this case as noticed above, the Enquiry
Report relating to guilt was not referred to the opinion of the
G
Vigilance Department at all. The Vigilance Department neither
expressed any view in regard to the finding of guilt recorded by
the Enquiry Officer nor did it re-assess the evidence or arrive at ...
a finding different from that of the Enquiry Officer. It merely opined
that the case was not a fit one for showing leniency while
H
STATE BANK OF INDIA AND ORS. v. S.N. GOYAL 671
[R.V. RAVEENDRAN, J.]

imposing punishment and left it to the Appointing Authority to A
take his own decision in the matter. Therefore, this decision is
also of no assistance.
26.3) Reference was next made to the decision of this
Court in Mohd. Quaramuddin (dead) By LRs. vs. State of AP
[1994 (5) SCC 118]. In that case, the Chief Vigilance B
Commissioner's report which formed part of the report of the
enquiry and which was taken into consideration by the
disciplinary authority was not supplied to the employee. It was
held that the omission has vitiated the order of dismissal. The
said decision is also of no assistance. c
26.4) The last decision relied on by the respondent was
UP State Agro Industrial Corporation Ltd. Vs. Padam Chand
Jain - 1995 SCC (L&S 1011 ). In that case, the report of the
Enquiry Officer was in favour of the employee exonerating him D
of all charges. The Disciplinary Authority invited .the comments
of the Accounts Officer and relying on the basis of the adverse
comments made by such officer, held the employee guilty and
terminated him from service. This Court upheld the view of the
High Court that the decision of the Disciplinary Authority was E
vitiated on account of the same being influenced by some
extraneous material in the form of adverse comments of the
Accounts Officer. That is not the case here.
27. The learned counsel for respondent submitted that as
the order of removal was set aside and as the employer's second F
appeal was rejected, he should be permitted to support the
decision of the courts below by demonstrating that the Enquiry
Officer had violated the principles of natural justice and therefore,
the order of removal deserves to be set aside. This is not
permissible. Though in the suit, the respondent had challenged G
the enquiry as being opposed to principles of natural justice,
and the finding guilt recorded by the Enquiry Officer as being
erroneous, he gave up those contentions before the first
appellate court, and restricted the challenge to the quantum of
punishment and non-grant of back wages. He cannot therefore H
672 SUPREME COURT REPORTS [2008) 7 S.C.R.

A be permitted to revive the contention that the Enquiry Officer
violated the principles of natural justice in conducting the enquiry.
28. At the relevant point of time the respondent was
functioning as a Branch Manager. A Bank survives on the trust
of its clientele and constituents. The position of the Manager of
B a Bank is a matter of great trust. The employees of the Bank in " ....
particular the Manager are expected to act with absolute integrity
and honesty in handling the funds of the customers/borrowers
of the Bank. Any misappropriation, even temporary, of the funds
of the Bank or its customers/borrowers constitutes a serious
C misconduct, inviting severe punishment. When a borrower
makes any payment towards a loan, the Manager of the Bank
receiving such amount is required to credit it immediately to the
borrower's account. If the matter is to be viewed lightly or
leniently it will encourage other Bank employees to indulge in
D such activities thereby undermining the entire banking system.
The request for reducing the punishment is misconceived and
rejected.
29. In view of the above we allow these appeals and set
E aside the judgments and decrees of the courts below and
dismiss the respondent's suit.
D.G. Appeals allowed.