Holding

Under Rules 20‑A and 20‑B of the State Bank of India (Supervisory Staff) Service Rules, 1975, the Bank may lawfully withhold sanction for retirement and forfeit its contribution to the employee’s provident fund.

Summary

The case concerned C.B. Dhall, a former Imperial Bank of India employee who, after being promoted to Head Cashier in the State Bank of India (SBI), was extended in service beyond his normal retirement date and later faced disciplinary charges. While the enquiry was pending, the SBI’s Central Board withheld sanction for his retirement and ordered forfeiture of the Bank’s contribution to his provident fund under Rule 11 of the Imperial Bank Pension Rules and Rule 20 of the Provident Fund Rules. Dhall challenged the decision in a writ petition, which the Delhi High Court set aside, directing the Bank to pay his pension and provident fund amounts. On appeal, the Supreme Court examined whether Rules 20‑A and 20‑B of the SBI (Supervisory Staff) Service Rules, 1975, permitted withholding retirement sanction and forfeiture of the Bank’s contribution, and whether the Service Rules were validly made under Section 43 of the SBI Act. The Court held that the Service Rules are valid and that, under Rules 20‑A and 20‑B, the Bank could lawfully withhold retirement sanction and forfeit its contribution to the provident fund. Consequently, the appeal was dismissed, upholding the High Court’s decision in part and setting aside the rest.

Issues considered

Whether Rules 20‑A and 20‑B of the SBI (Supervisory Staff) Service Rules, 1975, allow the Bank to withhold sanction for retirement of an erstwhile Imperial Bank employee.
Whether the withholding of retirement sanction triggers Rule 11 of the Imperial Bank Pension and Guarantee Fund Rules, which mandates forfeiture of pension claims.
Whether Rule 18 of the Imperial Bank Employees’ Provident Fund Rules applies to the forfeiture of the Bank’s contribution.
Whether the Service Rules are validly framed under Section 43 of the State Bank of India Act, 1955.
Which service rules govern the employee – the 1959 Sub‑Accountants and Head Cashiers Rules or the 1975 Supervisory Staff Rules.

Legislation cited

State Bank of India Act, 1955s. 43, s. 50, s. 7

Subjects

service rulesretirement sanctionforfeitureprovident fundpension funddisciplinary proceedingsState Bank of India ActImperial Bank of IndiaRule 20-ARule 20-BRule 11Rule 18Rule 20superannuation

Judgment

A STATE BANK OF INDIA
v.
C.B. DHALL ,.
DECEMBER 11, 1997 .

B (SUJATA V. MANOHAR AND D.P. WADHWA, JJ.]

Seivice Law :

State Bank of India (Supeivisory Staff) Se1vice Rules, 1975 : Rules
C 20-A and 20-B.

Sanction to retire-Withholding of-In case of erstwhile Imperial Bank
of India (/BJ) employees-Pennissibility of-Person who was initially
recmited as Cashier in July 1939 in the erstwhile /BI became an employee of
State Ba11k of /11dia (SB/) upon its constitution in 1955--Employee promoted
D as Head Cashier in SB/ in July 1956-His date of retirement was 28-5-1970
but was granted extension in service for seven years up to 30-6-1977-Dwi11g
" extended f/eriod charge sheet was served 011 him 011 24-JJ-1975-After 30-6-
1977 decision was taken to withhold sanction to retire him and to f oifeit the
Bank's contribution to his provident jimd:-Held: Withholding of sanction for
E retirement pennissible in view of Rr. 20-A a11d 20-B-Fwther, in order to avail
of retiremmt be11efits under the mies and regulatiollS framed for erstwhile /Bl
employees, sa11ctio11 to retire under R.20-A mandat01y-Decisio11 to withhold
sanction to retire and to fo.jeit Ba11k's cont1ibution to employee's provident
fund held valid-State Ba11k of /11dia (S11b-Acco1111taltls and Head Cashiers)
Seivice Rules, 1959--State Bank of India rlct, 1955, S.43-fmperial Bank of
F fl!dia Act, 1920.

Imperial Bank of India Employees' Pension and Guarantee Fw1d
(Rules and Regulatio11s) : Rule 7, Pe11sio11-Foifeit11re of-Held : Implies
foifeiture of Bank's contribution to pension fund and illferest accruing there-
G 011.

Imperial Bank of India Employees' Provide11t Fund Rules : Rules 18
and 20.

Rule 18-He/d : Applies whei1 an employee is dismissed from service
'H but does not apply when sanction to retire an employee is withheld--Foifeiture
416
S.B.L v. C.B. DHALL 417

of Bank's cont1ibution towards provident fund--Fo1feited amount detem1ined A
at after holding enquiry against the employee-The forfeited amount repre-
sented the liability incun·ed by the employee to the Bank-Forfeiture was in
accordance with R.2(}-ffence upheld.

State Bank of India (Supervisory Staff) Se1vice Rules, 1975 :
B
Validity of-Held : 17ie Service Rules have been framed in exercise of
statutory power under S.43 of the State Bank of India Act, 1955-Hence valid.

The respondent was appointed as Cashier in the Imperial Bank of
India in July 1939 and became an employee of State Bank of India (SBI)
in 1955 upon its constitution. The respondent was promoted as Head
c
Cashier by the SBI in July 1956. Under the State Bank of India (Sub-Ac-
countant and Head Cashiers) Service Rules, 1959 the respondent was due
to retire on 28-5-1970. H,owever, the respondent was granted extension in
service for seven years np to 30-6-1977.
D
During the extended period the respondent was served with a Charge
Sheet on 24-11-1975. Enquiry proceedings were initiated against the
respondent After 30-6-1977 a decision under Rule 11 of the Imperial Bank
of India Pension and Guarantee Fund (Rules and Regulations) was taken
to withhold sanction to retire the respondent and to forfeit the Bank's E
contribution to the respondent's provident fund under Imperial Bank of
India Employees' Provident Fund ~oles. The High Court allowed the writ
petition filed by the respondent challenging the aforesaid decision. Hence
this appeal.

Disposing of the appeal, the Court F
HELD : 1. In view of Rules 20-A and 20-B of the State Bank of India
(Supervisory Staff) Service Rules, 1975 withholding of sanction to retire
an employee of the erstwhile Imperial Bank of India (IBI) is permissible.
Further, in order to avaii of retirement benefits under the Imperial Bank
of India Employees' Pension and Guarantee Fund (Rules and Regulations) G
and the Imperial Bank of India Employees' Provident Fund Rules framed
for erstwhile IBI employees sanction to retire an employee is mandatory
under Rule 20-A of the Service Rules. Moreover, the Service Rules had
been framed by the State Bank of India in exercise of its statutory powers
under Section 43 of the State Bank of India Act, 1955. Hence, the decision H
418 SUPREME COURT REPORTS (1997) SUPP. 6 S.C.R.

A to withhold sanction to retire the respondent is valid and permissible.
(426-F-H; 427-A-B; 429-C-D]
State Bank of India v. A.N. Gupta, (1997) 6 SCALE 303, held inap-
plicable.

B T. Narsiah v. State Bank of India, (1978) 2 LW 173, referred to.

2. Under Rule 7 of the Imperial Bank of India Employees' Pension
and Guarantee .Fund (lltules and Regulations) an employee has right of
property in the pension fund to the eA1ent of his contribution made thereof
with interest thereon. When the Rules talk of forfeiture of all claims upon
C the fund for pension that would only mean the Bank's contribution and
the interest accruing thereon. [430-A-B]

3. Rule 18 of the Imperial Bank of India Employees' Provident Fund
Rules applies when an employee is dismissed from service but does not apply
where sanction to retire an employee has been withheld. The forfeited
D amount is the Bank's contribution to the respondent's provident fund ac-
count. This, the Bank is entitled to forfeit under Rule 20 of the Provident
Fund Rules. The forfeite1l amount has been arrived at after due enquiry and
represents the liability incurred by the respondent to the Bank. [43o:C-D]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 10078 of
E 1983.

From the Judgment and Order dated 22.8.83/2.9.83 of the Delhi High
Court in C.W. No. 1484 of 1980.

Sunil Dogra, Ms. Monica Sharma for S.A. Shroff & Co. for the
F Appellant. '

The Judgment of the Court was delivered by

D.P. WADHWA, J. This appeal by the State Bank of India (for short,
the 'Bank' or 'State Bank') arises out of the judgment dated August 22,
G 1983 of the learned single Judge of the High Court of Delhi. The reasons
for the judgment were given by order dated September 2, 1983. ·The
-impugned judgment was delivered on a writ petition filed by the respon-
dent, C.B. Dhall. Dhall had challenged the order of the Central Board of
the State Bank dated June 4, 1980 by which it was resolved that "the
H sanction to retire you be withheld and the Bank's contribution to your
S.B.I. v. C.B. DHALL [D.P. WAD HWA, J.] 419

provident fund Account amounting to Rs. 24006-49 be forfeited" which A
decision was communicated to Dhall by letter dated July 16, 1980 of the
Chief General Manager of the Bank. The High Court allowed the writ
petition and quashed the Resolution of the Central Board as well as the
communication by which it was conveyed to Dhall. The High Court further
ordered that the Bank shall pay within six weeks to Dhall the following
amounts:
B

"l. The entire arrears of pension in regard to the pension and
gratuity fund rules with interest @ 6% per annum.

2. Pension will be paid in future in accordance with the rules.
Pension will be computed on the basis of full pay during the period
c
of suspension.

3. The provident Fund (Bank's Contribution which has been with-
t held) with interest according to the Rules after deducting the
admitted sum of Rs. 10,000 P.F. and the interest up-to-date on D
payment according to the Rules will be calculated first. Thereafter
the admitted amount of Rs. 10,000 will be deducted therefrom.
The balance shall be paid to the petitioner.

4. The Petitioner shall also be entitled to such other. retirement
benefits as arc admissible to him according to the service rules, E
have already not been given to him.

5. Petitioner will also be entitled to full pay for the period of
suspension and the bank shall pay the sum after deducting such
amount as has been paid to him dm·ing the period of suspension
by way of subsistence allowance or otherwise.
F

6. The petitioner shall be entitled to his costs.

Counsel's fee for Rs. 500."

Dhall was appointed as Cashier in the Imperial Bank of India in July G
1939 and was confirmed to this post after completion of his period of
probation of one year. The Imperial Bank of India was constituted under
the Imperial Bank of India Act, 1920 which was repealed by the State Bank
of India Act, 1955 by which the State Bank was constituted. Services of
Dhall were taken over by the State Bank and the existing Services Rules, H
420 SUPREME COURT REPORJ'S (1997] SUPP. 6 S.C.R.

A Pension Fund Rules and Provident Fund Rules of the Imperial Bank of
India were adopted by the State Bank in respect of these employees. This
was under Section 7 of the State Bank of India Act which, in relevant part,
is as under:

"7. Transfer of service of exi,ting officers and employees of the
B Imperial Bank to the Stace Bank - (1) Every officer or other
employee of the Imperial Bank (excepting the managing director
the deputy managing director and other directors) in the employ-
ment of the Imperial Bank immediately before the appointed day
shall on and from the appointed day, become an officer or other
c employee, as the case may be, of the State Bank, and shall hold
his office or service therein by the same tenure, at the same
remuneration and upon the same terms and condition~ and with
the same rights and privileges as to pension, gratuity and other
matters as he would have held the same on the appointed day if
the undertaking of the Imperial Bank had not vested in the State
D Bank, and shall continue to do so unless and until his employment
in the State Bank is terminated or until hls remuneration, terms
or conditions are duly altered by the State Bank.

(2) ......................................................... .
E
(3) ··························································

(4) ··························································

(5) ··························································
F (6) .......................................................... "

In July 1956, Dhall was promoted as Head Cashier by the State Bank
-
of India. The State Bank of India (Sub-Accountant & Head Cashiers)
Service Rules came into force on January 1, 1959. Under these Rules, the
age of superannuation for Head Cashier was 55 years but w.e.f. April 1,
G 1967, this was increased to 58 years. Dhall was due to retire on May 28,
1970 after completing 30 years of pensionable service. However, the com-
petent authority granted extension to him of his service by seven years upto
and including 30th June 1977 on which date Dhall was to complete 58 years
of his age. While in the extended period of service, Dhall was suspended
H on account of certain allegations against him of fraud and defalcation of
S.B.I. v. C.B. DHALL[D.P. WADHWA,J.] 421

funds while posted at Agra. A

On November 24, 1975 Dhall was served with the Charge Sheet. The
charges laid under this Charge-sheet were many and some of these were
(1) shortage of Rs. 10,000 in the currency chest which was stated to be
admitted by Dhall, thus, admitting his negligence and responsibility there- B
for collaterally; (2) shortage in cash to the tune of Rs. 1,000 on September
25, 1972; (3) exchanging mutilated notes for the denomination of Rs. 5, Rs.
20 and Rs. 100 without approval of the joint custodian. The Reserve Bank
of India had intimated the Bank that mutilated notes to the extent of Rs.
55,000 were irregularly exchanged and that this was borne out by the
inspection of the currency at the branch at Agra held on August 11, 1976 c
which pertained to the period when Dhall was the Head Cashier. Enquiry
proceedings were initiated against Dhall. Dhall completed 58 years of his
age on June 30, 1977. However, due to the pendency of enquiry, he was
given two years extension. Report of the enquiry officer was submitted on
June 15, 1979 which was placed before the Disciplinary Authority who D
found Dhall guilty of most of the charges levelled against him. Extended
period of service of Dhall expired on June 17, 1979 on his attaining the age
of 60 years. On November 22, 1979, he was intimated and given show cause
notice as to why Bank's contribution to the provident fund should not be
forfeited as he was liable to the Bank to the extent of Rs. 37458/83 and
further why sanction to his retirement be not withheld under Rule 11 of E
the Imperial Bank of India Pension and Guarantee Fund Rules and
Regulations. Reply of Dhall was considered and the Central Board of the
Bank directed forfeiting of Bank's contribution amounting to Rs.24006/49
from the provident fund. Dhall was also told that sanction to retire him
& · was withheld under Rule 11 of the Rules and Regulations of the Pension F
and Guarantee Fund by the competent authority. The result was that Dhall
was deprived of pension and Batik's contribution to his provident fund. The
show cause notice and the decision of the Bank are reproduced hereunder
as:

G
"State Bank of India,
Local Head Office,
P.O.Box No. 398,
11, Sansad Marg,
New Delhi. H
422 SUPREME COURT REPORTS (1997) SUPP. 6 S.C.R.

A Disciplinary Action Cell
No. DAC/79/RL/1336
Dated 22nd Nov.' 79.

Dear Sir,

B With reference to the correspondence resting with your letter
dated 29th June 1976, in reply to the statement of the charges •
served on you, in terms of our letter No. R IV/8990 dated 24th
November 1975 and subsequent departmental enquiry held against
you, we have perused the findings of the enquiry authority vis-a-vis
the proceedings of the enquiry and "held you guilty of charges Nos.
c 1, 2, 4, 5, 6, 7, 7A, 9, 10 and partially Charge No. 3.

2. With reference to your letter dated 1st August, 1979 as
charges proved against are grave and you attained the age of 60
years on the 30th June, 1979 and ceased to be in the service of the
D Bank from the date, you are hereby required to show cause - why
recommendation should not be made to Local Board to withhold
the sanction of your retirement and pension in the term of Rule
11 of the Imperial Bank of India Pension and Guarantee Fund
Rules. Please also show cause as to why the bank's contribution
towards the Provident Fund may not be forfeited as you are liable
E to the bank to the extent of Rs. 37,458/83.

3. Your reply in this regard should reach the undersigned within
7 days of the receipt of this letter by you. Otherwise it will be
presumed that you have nothing to submit in this regard as we
shall proceed accordingly. .,
F
Yours faithfully."
Sd/-

"State Bank of India,
G
Local Head Office,
P.O. Box No. 398,
11, Sansad Marg,
New Delhi.

H No. DAC
S.B.I. v. C.B. DHALL(D.P. WADHWA,J.] 423

Disciplinary Action Cell A
Agra Branch

- Shri C.B. DHALL OFFICER GDE II
H/Cashier - Under suspension.
B
•••
With ref. to your written statement dated 11.2.80, be advised
that the entire matter had to be considered by the Executive
Committee of the Central Board at its meeting held on 4.6.80 and
it is resolved that the sanction to retire you be withheld and the C
bank's contribution to your P. Fund a/c amount to Rs. 24,006/49
be forfeited.

- 2. Therefore our tentative decision conveyed to you vide letter
No. DAC/79/R-V/1336 dated 23rd Nov. '79 is confirmed.

Sd/-
D

Chief General Manager"

When the decision was communicated to Dhall, he as noted above,.
filed the writ petition challenging the decision of the Bank. The High Court
allowed the writ petition in terms mentioned above. Special leave petition E
filed by the Bank against the impugned judgment was admitted. On Oc-
tober 28, 1983, the Court passed the following order :

"Special leave granted. The appellant however undertakes that
even in the event of success nothing will be recovered from the
F
respondent. The judgment in appeal will not be treated as a
precedent for any other case. Four weeks' time is granted for
payment.

Will be listed for fmal hearing alongwith SLP No. 431/81 (CA
9943/83)." G
It may be noted that SLP (C) No. 431/81 (CA No. 2141/80) entitled
State Bank of India v. A.N. Gupta etc., has since been decided and judgment
is reported in (1997) 6 SCALE 303.

In A.N. Gupta's case, this Court considered the scope of Rule 11 of H
424 SUPREME COURT REPORTS [1997) SUPP. 6 S.C.R.

A the Rules and Regulations of the Imperial Bank of India Pension and
Guarantee Fund and Rule 20 of the Imperial Bank of India Employees
Provident Fund Rules. These Rules and Rule 18 of the Imperial Bank of
India Employees Provident Fund Rules are as under : .
(1) The Imperial Bank of India Employees' Pension and Guarantee
B Fund (Rules and Regulations):

"The retirement of all officers of the Bank shall be subject to the
•
sanction of the Ex.:cutive Committee of the Central Board. The
retirement of all other employees of the Bank shall be subject to
c the sanction of the Executive Committee or the Local Board
concerned with their employment. Any officer or other employee
who shall leave the service without sanction, as required by this
rule shall forfeit all claim upon the fund for pension."

(2) The Imperial Bank of India Employees Provident Fund
D Rules.

"18. If any member shall be dismissed from the service of the Bank
for any fault or other cause justifying dismissal, he shall not be
entitled to receive, unless permitted to do so by the trustees, the
sums contributed by the Bank to his provident fund account, or
E
any 'interest credited to that account on the sums so contributed.
Provided that when any member is so dismissed any amount due
under a liability incurred by the member to the Bank (not exceed-
ing in any case the sums so contributed by the Bank and interest
thereon) shall be paid by the trustees to the Bank out of the sum I
F standing to the credit of the member's account. ~
I

20. When a member resigns or retires from the service of the Bank
he shall, if he has served the Bank for a period of five years or
more (including service in the Presidency Banks), be entitled to
G receive the balance at his credit in the fund. Provided that when
any member resigning or retiring from the service of the Bank is ·
under a liability incurred by him to the Bank, the trustees shall,
irrespective of the duration of his service, pay to the Bank out of
the balance at his credit in the fund any amount due by him to the
H Bank (not exceeding in any case the sums contributed by the Bank
S.B.I. v. C.B. DHALL [D.P. WADHWA, J.] 425

to his account in the fund and any interest credited to his account A
on the sums so contributed)."

This Court held that Rule 11 had no application in the .case of the
employees governed by the Imperial Bank of India Pension and Guarantee
Fund Rules who had retired on attaining the age of superannuation. The
Court did not agree with the submission of the Bank that sanctioning of
B
retirement must be understood as sanctioning of service which in term must
be understood as approval of service. It was observed that proceedings in
the garb of disciplinary proceedings could not be permitted after an
employee had ceased to be in the service of the Bank as Service Rules then
in force applicable to such employees did not provide for continuation of c
disciplinary proceedings after the date of superannuation and that sanction
of the bank was required only if the retirement of an employee was by any
other method except superannuation. As regards Rule 20 of the Imperial
Bank of India Employees Provident Fund Rules, this Court took the view
that this Rule would become applicable only if an employee retiring from D
the service of the bank was under a liability incurred by him to the Bank
and in that case, trustees administering the provident Fund could pay to
the bank from balance to the credit of the employee in the Fund any
amount due by him to the bank. The Court observed that there was nothing
on record to show if any liability was incurred by any of the respondents
and if so what were the amounts and then said as under : E

"In this view of the matter we do not think it is necessary for us to
go into the question as to whether the term "liability incurred"
means only such liability as is either not disputed or established
by due process. Can it be said that this term would also include F
any liability that may be alleged by the bank? In any case the bank
should at least p1ima f acie establish that any liability has been
incurred by the employee for which it can lay claim to the Provident
Fund of the employee. We cannot accept the proposition on behalf
of the Bank that the trustees should be allowed to withhold the
provident Fund due till they have had an opportunity to have G
established and determined the amount, if any, due from the
respondents to the Bank. We are of the view that the respondents
are entitled to the Provident Fund due to them in accordance with
the Provident Fund Rules as it cannot be said that they incurred
any liability." H
426 SUPREME COURT REPORTS (1997] SUPP. 6 S.C.R.

A This Court did not approve the view expressed by the Andhra
Pradesh High Court in T Narsiah v. State Bank of India & Ors., (1978) 2 ·
LLJ 173 wherein the High Court was of the view that enquiry could also
be made against an employee after his retirement on attaining the age of
superannuation. This Court said that by giving such an interpretation to
Rule 11, the High Court had, in fact, lent validity to disciplinary proceeding
B
against an employee even after his superannuation for which no provision
existed either in the relevant Pension Rules or in the relevant Service Rules
and when the High Court had itself observed that an enquiry even if
initiated during the service period of the employee could not be continued
after his retirement on superannuation. In corning to the conclusion that
c Rule 11 would not be applicable when an employee superannuates on his
attaining the age of retirement, this Court considered various relevant
Pension Rules and Service Rules of the Imperial Bank.

Later on it would appear Rule 22B was inserted in the Imperial Bank
D of India Pension and Guarantee Fund Rules which postulates continuance
of disciplinary proceedings even after an employee ceases to be in Bank's
service. This Rule 22B (to be read as Rule 22A as per the additional
•
affidavit filed by the Bank) came into force with effect from June 25, 1987
and would, therefore, be not r~levant in the present case.
E
The question then arises what are the Rules of service applicable in
the case of D hall. Mr. Dogra, learned counsel for the Bank, submitted that
Rules 20A and 20B which were inserted in the State Bank of India
(Supervising Staff) Service Rules, 1975 (for short "Service Rules") would
be answer to that. Rules 20A and 20B were introduced with effect from
F
April 1, 1977 and are as under :

"20A. Notwithstanding anything to the contrary in these rules, no
employee who has ceased to be in the Bank's service by the
operation of, or by virtue of, any rule, shall be deemed to have
G retired from the Bank's service for the purpose of the Imperial
Bank of India Employees' Pension and Guarantee Fund Rules or
the State Bank of India Employees' Pension Fund Rules unless
such c:ssation of service has been sanctioned as retirement for the
purpose of either of the said pension fund rules as may be ap-
H plicable to him.
S.B.I. v. C.B. DHALL[D.P. WADHWA,J.] 427

20B. In case disciplinary proceedings under these rules have been A
initiated against an employee before he ceases to be in the Bank's
service by the operation of, or by virtue of, any of these rules, the
disciplinary proceedings may, at the discretion of the Managing
Director, be continued and concluded by the authority by which
the proceedings were initiated in the manner provided for in these B
rules as if the employee continues to be in service, so however,
that he shall be deemed to be in service only for the purpose of
the continuance and conclusion of such proceedings."

We asked Mr. Dogra if the services of Dhall, the Head Cashier, were C
governed by the State Bank of India (Sub-Accountants and Head Cashiers)
Service Rules as Rule 2 therein provided that the Rules shall apply to all
Sub-Accountants and Head Cashiers who are in the service of the Bank as
such on January 1, 1959 and to all Sub-Accountants and Head Cashiers
appointed thereafter. Mr. Dogra with reference to the additional affidavit D
filed by the Bank submitted that State Bank of India (Sub-Accountants and
Head Cashiers) Service Rules, 1959 were no longer in force as they were
repealed in terms of Rule 2(1) of the State Bank of India Supervising Staff
(Service Rules), 1975. Said Rule 2(1) states that the Service Rules which
came into force with effect from July 1, 1975 shall apply to all officers/staff
officers and senior staff officers in the Bank other than persons who were E
in the service of the Bank on June 30, 1955 either as ofiicers or as assistants.
It was submitted by Mr. Dogra that Dhall was a Cashier on June 30, 1955
and was not an officer. He was also not an Assistant to be governed by the
Rules governing the services of Assistants in the Bank. Dhall was promoted
as Head Cashier in July 1956 under Rule 3(p) of the Service Rules. Head F
Cashier is a person appointed on the terms and conditions applicable to
officers Grade II and as per the definition of officer under Rule 3(j), officer
means an officer Grade II. Dhall would, therefore, be an officer under the
Service Rules. State Bank of India (Sub-Accountants and Head Cashiers)
Service Rules, 1959 would, therefore, be no longer in force as these would
deem co have been repealed by Rule 2(1) of the Service Rules which states G
that these Service Rules shall apply to all Officers, Staff Officers and Senior
Staff Officers in the Bank other than persons who were in the service of
the Bank on the 30th June, 1955 either as Officers or as Assistants."
Consequently, Dhall would be governed by Rules 20A and 20B of the
Service Rules which came into effect from April 1, 1977. H
428 SUPREME COURT REPORTS (1997] SUPP. 6 S.C.R.

A There is no dispute that the employees who are in the service of the
Bank as on 30th June, 1955 would continue to be governed by the Imperial
Bank of India Rules relating to Pension and Provident Fund and those
joining the Bank after this date by the Rules of the State Bank of India
framed under Section 50 of the State Bank of. India Act. In this
B connection we may also refer to Rule 21 of the Service Rules of 1975 which
is as under:

"21. Unless otherwise directed by the Appointing Authority, every
employee shall as from the commencement of his service as an
Officer become a member of-
c
(a) the State Bank of India Employees Provident Fund, if he is not
already a member of that ·Fund or the Imperial Bank of India
Employees' Provident Fund;

D (b) the State Bank of India Employees' Pension Fund, if he is not
already a member of that Fund or the Imperial Bank of India
Employees' Pension and Guarantee Fund or the Bank of Bombay
Officers' Pensions and Guarantee Fund or the Bank of Madras
Pension and Gratuity Fund;
E and shall subscribe and agree to be bound by the rules of those
Funds:

Provided that if his age at the time of commencement of his
service as Officer is below 21 years he shall become a member of
F the State Bank of India Employees' Pension Fund on attaining the
age of 21 years and on becoming a member shall subscribe and
agree to be bound by the rules of that Fund."

Rules 20-A and 20-B of the Service Rules have been framed under
Section 43 of the State Bank of India Act. This section is as under :
G
"43. State bank may appoint officers and other employees - ( 1) The
State Bank may appoint such number of officers, advisers and
employees as it considers necessary or desirable for the efficient
performance of its functions, and determine the terms and condi-
H tions of their appointment and service.
S.B.I. v. C.B. DHALL(D.P. WADHWA,J.) 429

(2) The officers, advisers and employees of the State Bank shall A
exercise such powers and perform such duties as may, by general
or special order be entrusted or delegated to them by the Central
Board."

Section 43 empowered the State Bank to determine the terms and
B
conditions of the appointment and service of its officers and employees.
These officers and employees exercise such powers and perform such
duties as may be entrusted or delegated to them by the Central Board of
the State Bank. Section 50 of the State Bank of India Act empowers the
Central Board to make regulations but Section 43 is independent of Section
50. We hold that Service Rules had been framed by the State Bank in c
exercise of its statutory powers under Section 43 of the State Bank of India
Rules.

Rules 20-A and 20-B have now made a material difference to the
applicability of Rule 11 of the Pension Rules. However, the case of A.N. D
Gupta (Supra) is distinguishable as these Rules, 20-A and 20-B, came into
existence only w.e.f. March 31, 1977. Under Rule 20-A retirement under
the Pension Fund Rules has now to be sanctioned by the competent
authority. Under this Rule, retirement would mean retirement on
superannuation or any other type of retirement. E

Under Rule 20-B disciplinary proceedings if initiated against an
employee before he retires from service could be continued and concluded
even after his retirement and for the purpose of conclusion of the discipli-
nary proceedings, the employee is deemed to have continued in service but F
for no other purpose. After the disciplinary proceedings were concluded,
the State Bank directed that (1) sanction of Dhall to retire be withheld and
(2) Bank's contribution to his provident fund accounts be forfeited. Under
Rule 10 of the Pension Fund Rules, an employee dismissed from the Bank
Service for wilful neglect or fraud shall forfeit all claims upon the fund for
pension. Dhall has not been dismissed from service though he was charged G
with wilful neglect and fraud. The question that arises for consideration is
what is the effect of the direction of the State Bank that sanction to retire
of Dhall be withheld. Here cessation of service of Dhall on retirement has
not been sanctioned and accordingly as per the last portion of Rule 11 of
the Pension Fund he forfeits all claims upon the fund for pension. H
430 SUPREME COURT REPORTS [1997) SUPP. 6 S.C.R.

A But then applicability of this Rule 11 has to be contrasted with Rule
10. It is only if an employee has been dismissed from service that he forfeits
all claims upon the fund for pension and so would appear to be the effect
of Rule 11. Under Rule 7, an employee has right of property in the pension
fund to the extent of his contribution made thereof with interest thereon.
It would, therefore, appear to us that when the Rules talk of forfeiture of
B all claims upon the fund for pension that would only mean the Bank's
contribution and the interest accruing thereon. These Rules cannot be
extended to forfeit' even the employee's contribution to the pension fund
and the interest accruing thereon. However, after the introduction of Rule
5-A in the Pension Fund Rules w.e.f. April 1, 1968, there is not to be any
C contribution by employee to the pension fund.
Coming to the Provident Fund Rules, Rule 18 applies when an
employee is dismissed from service which is not the case here. It is under
Rule 20 that an amount of Rs. 24,006.49 has been forfeited which is the
Bank's contribution to the provident fund account of Dhall. Thus, the State
D Bank is entitled to forfeit under Rule 20. The amount has been arrived at
after due enquiry and represents the liability incurred by Dhall to the Bank.
Accordingly we hold that Dhall was rightly proceeded against in the
disciplinary proceedings and the State Bank was within its authority to
impose the penalty as conveyed to Dhall by letter dated July 16, 1980 of
E the Chief General Manager of the State Bank.
We, therefore, uphold the impugned judgment of the High Court to
the extent that Dhall would be entitled to his contribution, if any, to the
Pension Fund along with the interest accrued thereon. The impugned
judgment in all other respects is set aside. However, in view of the interim
F orders made on October 28, 1983, no further orders are required in this
appeal.

v.s.s. Appeal disposed of.