Holding

Acting beyond authority breaches Regulation 3 and amounts to misconduct under Regulation 24, and loss or motive need not be proved.

Summary

The respondent, a Scale‑I officer of the Central Bank of India serving as Branch Manager, was charged with ten counts of allowing overdrafts, issuing guarantees and sanctioning loans beyond his delegated authority. An enquiry found several charges fully established and others partially, leading to his dismissal. The Orissa High Court, on a writ petition, held that the acts were merely errors of judgment and not misconduct because no loss was proven and no ulterior motive was shown, and ordered his reinstatement. On appeal, the Supreme Court examined Regulation 3 and Regulation 24 of the Central Bank of India Officer Employees' (Discipline and Appeal) Regulations, 1976. It held that acting beyond one's authority is a breach of discipline and constitutes misconduct irrespective of actual loss or motive. Consequently, the Court allowed the appeal, set aside the High Court judgment and upheld the dismissal. The Court also rejected the respondent's request for a reduced punishment on the ground of his age.

Issues considered

Whether acts of allowing overdrafts and other transactions beyond authority constitute misconduct under Regulation 3 and Regulation 24 of the Central Bank of India Officer Employees' (Discipline and Appeal) Regulations, 1976.
Whether proof of actual loss or ulterior motive is required to establish misconduct.
Whether the respondent's age warrants mitigation of the punishment.

Legislation cited

Central Bank of India Officer Employees’ (Discipline and Appeal) Regulations, 1976s. Regulation 24, s. Regulation 3

Subjects

misconductbank officerauthoritydisciplinary regulationsCentral Bank of IndiadismissalappealRegulation 3Regulation 24overdraftbank guaranteeage mitigation

Judgment

A THE DISCIPLINARY AUTHORITY-CUM-REGIONAL
MANAGER AND ORS.
v.
NTKUNJA BIHARI PATNAlK

APRIL 15, 1996
B
[B.P . .JEEVAN REDDY AND M.K. MUKHERJEE, J.1.j

Service Law :

Central Bank of India Officer Employee's (Discipline and Appeal)
c Regulations, 1976 : Regulations 3 and 24.

Misconduct-Delinquent Bank Of{tce1-Allowed overdrafts and passed
cheques involving substantial amounts biyond his authority-Held : act
amounted to misconduct-Proof of any loss not necessary-Such acts could
D not be treated as mere eTTors of judgment.

Punishment-Bank Office1-Di.r111issed for acting beyond his auth01ity
in allowing overdrafts and passing cheques-Several of which became sticky
and i1recoverable-Relief-Request for reducing his punishment having regard
to his age (37 years )--Rejected by Supreme Court.
E
The respondent was an officer in Scale-I in the service of the Appel-
lant-Bank. While he was working as the Branch Manager, he was
suspended pending enquiry and ten charges were communicated to him.
He denied all of them. An Enquiry Officer was appointed and on the basis
of his report the appropriate authority dismissed the Respondent from
F service. The respondent filed a writ petition before the High Court which
was allowed. Aggrieved by the High Court's judgment the appellant
preferred the present appeal.

A.llowing the appeal, this Court
G HELD 1.1. Acting beyond one's authority is by itself a breach of
discipline and a breach of Regulation 3 of the Central Bank of India
Officer Employees' (Discipline and Appeal) Regulations, 1976. It con-
stitutes misconduct within the meaning of Regulation 24. No further proof
of loss is really necessary though as a matter of fact, in the instant case
H there are findings that several advances and over-drawals allowed by the
314
DISCIPLINARY AlTilfORITYCUM-REGL MANAGER v. N.B. PATNAIK[JEEVANREDDY,J.] 315

respondent beyond his authority have become sticky and irrecoverable. A
Just because, similar acts have fetched some profit they are no less
blameworthy. It i s wrong to characterise them as errors of judgment. It
is not suggested that the respondent being a Class-I officer was not aware
of the limits of his authority or of his powers. lnspite of instructions by
the Regional Officer to stop such practice, the respondent continued to · B
indulge in such acts. The Enquiry Officer has recorded a clear finding that
the respondent did flout the said instructions and has thereby committed
an act of disobedience of lawful orders. Similarly, the respondent did not
submi.t "Control Returns" to the Regional Officer. All this could not be
characterised as error of judgment and not as misconduct as defined by
the Regulations. [320-C-Fj C
1.2. It is not possible to accede to the request of the respondent for
reducing the punishment having regard to his age (37 years).
[320-H; 321-B]
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7188 of D
1996.

From the Judgment and Order dated 23.6.95 of the Orissa High
Court in OJ.C. No. 3275 of 1991.

V.R. Reddy, Additional Solicitor General, 0.C. Mathur, and Mrs.
E
Meera Mathur for the Appellants.

V.A. Mohta and P. Gaur for the Respondents.

The Judgment of the Court was delivered by

B.P. JEEVAN REDDY, J. Leave granted. F

The respondent was an officer in Scale-1 in the service of the Central
Bank of India. While he was working as the Branch Manager, Pardeep
Branch, he was suspended pending enquiry on November 21, 1988. On
January 16, 1989, ten charges were communicated to him. He denied all of
them: An Enquiry Officer Was appointed who reported, after holding a due G
enquiry, that Charges Nos. 1, 6, 8 and 9 were established fully while
Charges Nos. 2, 3, 5, 7 aud 10 were established parti.ally. Charge No. 4 was
held not es11blished. On the basis of the said report, the appropriate
authority dismissed the respondent from service. The appeal preferred by
the respondent was dismissed whereupon he approached the Orissa High H

·l
316 SUPREME COURT REPORTS [1996] SUPP. 1 S.C.R.

A Court by way of a writ petition. The High Court has allowed the writ
petition holding that the charges held established against the respondent
represent errors of judgment but not "misconduct''. The High Court opined
that though the respondent was guilty of doing many acts beyond his
authority, it was not established that it was done with any ulterior motive
or for any extraneous consideration. Since the Enquiry Officer has not
B
fo>,nd that the Bank has actually incurred any loss on account of the said
acts of the respondent, the High Court held, the charge of misconduct is
not established. Accordingly, the writ petition was allowed, the order of
punishment imposed upon the respondent was set aside and the respon-
dent was directed to be reinstated in service with all consequential benefits.
c
The charges framed against the respondent are the following :

"(1) The Petitioner took charge of the Branch from 29.9.86. At the
lime of taking over charge, there were number of overdrafts
accounts. Instead of taking care for adjustment of such advances
D by constant follow up, he continued to extend the facility un-
authorisedly and without any delegated powers even exceeding the
outstanding balance as on 29.9.86 as a result bank's interest is likely
to be jeopardised.

(2) The petitioner allowed clean overdrafts to several parties
E without any delegated authority and much beyond his discretionary
powers, violating Central office guideline as a result he has exposed
the bank to severe financial risk.

(3) The petitioner allowed drawings in cash credit a/cs much
beyond the sanctioned limits and or enhanced the existing limits
F
in gross violation of his discretionary powers. As such, there is
every likelihood that the bank's interest may be at stake.

( 4) The petitioner sanctioned number of fresh cash credit limits
to different parties much beyond his lending powers in violation
G of bank's norms and guidelines without proper documents and in
some cases without any documents.

(5) The petitioner sanctioned a number of Term Loans directly
without observing the bank's rules and guidelines.

H (6) The petitioner unauthorisedly issued Bank Guarantee on behalf

t
•
DISCIPLINARY AUTHORITYCUM-REGL. MANAGER v. N.B. PATNAIK[JEEVAN REDDY, J.] 317

of different parties without intimating to R.O. The guarantees were A
issued and signed by himself as Br. Manager though on behalf of
the Bank. While acting so he had not taken counter guarantee in
some cases.

(7) While allowing unauthorisedly advances(fOD/other loans, the
petitioner had not taken proper documents. Most of the documents B
taken were blank, undated, unstamped. Thus he had not
safeguarded the interest of the Bank.

(8) The petitioner though made member of unauthorised irregular
advances, allowed clean overdrafts, he had not submitted any
Control Returns to the regional Office inspite of letters/reminders.
c
(9) The petitioner allowed dean overdraft in number of accounts
even after Regional Office's specific instructions to stop such
practices and stop allowing further overdrafts. As such wilfully he
violated instructions of higher authorities which was an act of D
insubordination.

(10) in number of borrowal accounts, the petitioner had not done
proper follow up and had not taken due care either for renewal
of documents or for obtaining balance confirmation. As a result,
in number of borrowal a/cs the documents were allowed to go time
E
barred, putting the interest of the bank at jeopanly. Even in proper
time he had not submitted the STF to Regional Office for taking
legal action against such defaulters."

Jn support of Charge No. 1 as many as fifteen instances were cited. F
While it is not necessary to refer to all those instances, it is sufficient to
mer.lion that in all these cases it has been found that rhe respondent acted
beyond his authority in allowing the overdrafts or in passing the cheques,
as the case may be. In some cases, the Bank was benefited by the acts of
the respondent while in some other cases, the concerned amounts became G
stickly or irrecoverable. Charge No. 2 relates to temporary overdrawals
allowed by the respondent beyond his authority to different parties. A
number of instances were cited and held established. The Enquiry officer
held the charge proved. He also found that in some cases the Bank stood
to gain while in some other cases the concerned advances had become
sticky. Similarly, in respect of Charge No. 3, number of instances were H
318 SUPREME COURT REPORTS [1996] SUPP. 1 S.C.R.

A cited. It was held that in many cases the respondent allowed drawings/en-
hanced limits in excess of the sanctioned limits in violation of his discre-
tionary powers. Charges Nos. 5, 6 and 7 speak of the respondent acting
beyond his authority. Charge No. 8 says that inspite of reminders, the
respondent failed lo send "Control Returns" lo the Regional Office. This
charge was held fully established. Charge No. 9 is to the effect that the
B respondent allowed number of accounts and clean overdrafts even after
receiving the instructions of the Regional Office to stop such practice. The
Enquiry Officer found that the respondent had indeed flouted the orders
of the Regional Manager and committed an act of disobedience of lawful
orders. The substance of Charge No. 10 is that for want of proper follow
c up action, a number of borrower accounts have become time-barred and
the prospects of the recovery of bank's dues have become bleak. Fifteen
instances were cited in support of this charge.

It may be remembered that Charges Nos. 1, 6, 8, and 9 were hel.d to
have been established in full while the remaining charges (except charge
D No. 4) were held to be established in part. It is indeed a matter of surprise
that inspite of the aforesaid findings, the High Court came to the opinion
that it is not a case of misconduct. Regulation 24 of the Central Bank of
India Officer Employees' (Discipline and Appeal) Regulations, 1976
defines the acts of misconduct in the following words :
E
"24. Acts of misconduct: A breach of any of the provisions of these
regulations shall be deemed to constitute a misconduct punishable
under the Central Bank of India Officer Employees' (Discipline
and Appeal) Regulations, 1976."

F Regulation 3 of the said Regulations may also be noticed :

"3(1). Every officer employee shall, at all times take all possible
steps to ensure and protect the interest of the bank and discharge
his duties with utmost integrity, honesty, devotion and diligence
G and do nothing which is oncoming of a bank officer.

(2) Every officer employee shall maintain good conductrand dis-
cipline and show courtesy and attention to all persojis in all
transactions and negotiations.

H (3) No officer employee shall, in the performance of his official
DJSCIPLINAR Y AUTHORITY CUM-REGL MANAGER v. N.B. PA TNAJK [JEEVAN REDDY, J.) 319

duties or in the exercise of powers conferred on him, act otherwise A
than in his best judgment except when he is acting under the
direction of his official superior.

(4) Every officer employee shall take all possible steps to ensure
the .integrity devotion to duty of all persons for the time being B
under his control and authority."

It may be mentioned that in the memorandum of charges, the
aforesaid two regulations are said to have been violated by the respondent.
Regulation 3 requires every officer/employee of the Bank to take all
possible steps to protect the interests of the Bank and to discharge his c
duties with utmost integrity, honesty, devotion and diligence and to do
nothing which is unbecoming of a Bank officer. It requires the of-
ficer/employee to maintain good conduct and discipline and to act to the
best of his judgment in performance of his official duties or in exercise of
the powers conferred upon him. Breach of Regulation 3 is "misconduct" D
within the meaning of Regulation 24. The findings of the Enquiry Officer
which have been accepted by the disciplinary authority, and which have not
been disturbed by the High Court, clearly show that in number of instances
the respondent allowed overdrafts or passed cheques involving substantial
amounts beyond his authority. True, it is that in some cases, no loss has
resulted from such acts. It is also true that in some other instances such E
acts have yielded profit to the Bank but it is equally true that in some other
instances, the funds of the Bank have been placed in jeopardy; the advan-
ces have becom.e sticky and irrecoverable. It is not a single act; it is a course
of action spreading over a sufficiently long period and involving a large
number of transactions. Jn the case of a Bank - for that matter, in the case F
of any other organisation - every officer/employee is supposed to act within
the limits of ms authority. If each officer/employee is allowed to act beyond
his authority the discipline of the organisati01\/bank will disappear; the
functioning of the Bank would become chaotic and unmanageable. Each
officer of the Bank cannot be allowed to carve out his own little empire G
wherein he dispenses favours and largesse. No organisation, more par-
ticularly, a bank can function properly and effectively if its officers and
employees do not observe the prescribed norms and discipline. Such
indiscipline cannot be condoned on the specious ground that it was not
actuated by ulterior motives or by extraneous considerations. The very act
of acting beyond authority - that too a course of conduct spread over a H
320 SUPREME COURT REPORTS [1996] SUPP. l S.C.R.

A sufficiently long period and involving innumerable instances - is by itself a
misconduct. Such acts, if permitted, may bring in profit in some cases but
they may also lead to huge losses. Such adventures are not given to the
employees of Banks which deals with public funds. If what we hear about
the reasons for the collapse of Barings Bank is true, it is attributable to the
acts of one of its employees, Nick Leeson, a minor officer stationed at
B
Singapore, who was allowed by his superiors to act far beyond his authority. •
As mentioned hereinbefore the very discipline of an organisation and more
particularly, a Bank is dependent upon each of its employees and officers
acting and operating within their allotted sphere. Acting beyond one's
authority is by itself a breach of discipline and a breach of Regulation 3.
c It constitutes misconduct within the meaning of Regulation 24. No further
proof of loss is really necessary though as a matter of fact, in this case there
are findings that several advances and over-drawals allowed by the respon-
dent beyond his authority have become sticky and irrecoverable. Just
because, similar acts have fetched some profit - huge profit, as the High
Court characterises it - they are no less blameworthy. It is wrong to
D
characterise them as errors of judgment. It is not suggested that the
respondent being a Class-I officer was not aware of the limits of his
authority or of his powers. Indeed, Charge No. 9, which has been held
established in full is to the effect that inspite of instructions by the Regional
Office to stop such practice, the respondent continue to indulge in such
E acts. The Enquiry Officer has recorded a clear finding that the respondent
did flout the said instructions and has thereby committed an act of dis-
obedience of lawful orders. Similarly, Charge No. 8, which has also been
established in full is to the effect that inspite of reminders, the respondent
did not submit "Control returns" to the Regional Office. We fail to under-
F stand how could all this be characterised as errors of judgment and not as
misconduct as defined by the Regulations. We are of the opinion that the
High Court has committed a clear error in holding that the aforesaid
con<luct of the respondent does not amount to misconduct or that it does
not constitute violation uf Regulation~ 3 an<l 24.

G We must mention that Sri V.A. Mohta, learned counsel for the
respondent, stated fairly before us that it is not possible for him to sustain
the reasoning and approach of the High Court in this case. His only
submission was that having regard to the age of the respondent (37 years)
and the facts and circumstances of the case, this Court may substitute the
H punishment awarded to the respondent by a lesser punishment. The
D!SCIPLJNARY AUTHORITY CUM-REGL. MANAGER ~. N.B. PATNAIK !JEEVAN REDDY, J.] 321

learned counsel suggested that any punishment other than dismissal may A
be imposed by this Court. We considered this request with the care it
deserves, but we regret that we are unable to accede to it. Learned counsel
for the Bank, Sri V.R. Reddy, Additional Solicitor General, also stated, on
Instructions of the Bank, that it is not possible for the Bank to accom-
modate the respondent in its service in view of his conduct.
B
The appeal is accordingly allowed and the judgment of the High
Court is set aside. There shall be no order as lo costs.

V.S.S. Appeal Allowed.