BURDWAN CENTRAL COOPERATIVE BANK LTD.versusASIM CHATTERJEE & ORS.

                         (2012] 1 S.C.R. 390


A       BURDWAN CENTRAL COOPERATIVE BANK LTD.
                           &ANR.
                              v.
                ASIM CHATTERJEE & ORS.
               (Civil Appeal No. 657 of 2012)
B                       JANUARY 18, 2012
         [ALTAMAS KABIR AND CYRIAC JOSEPH, JJ.]

        SeNice Law:
c
        Disciplinary proceedings - Central Co-operative Bank
  taking disciplinary action against its employee for financial
  irregularities committed by him during his previous
  employment with the affiliated Society - Held: At the relevant
0 point of time the delinquent was employed in the Primary Co-
  operative Society which was affiliated to the appellant-Bank
  and in view of this link, even though the delinquent was not
  under the administrative control of the appellant-Bank when
  he allegedly committed various financial irregularities, it was
E still entitled to commence disciplinary proceedings against
  him in view of his past conduct.

       Dismissal of employee of Central Co-operative Bank -
  Held.: The order of punishment had been passed against the
  delinquent on a/legations of financial irregularities - The
F allegation would require serious consideration as to whether
  such an employee should be retained in the seNice of the
  Bank - Since a Bank acts in a fiduciary capacity in regard to
  people's investments, the very legitimacy of the banking
  system depends on the complete integrity of its employees -
G Order of the Bank upheld.

        Constitution of India, 1950:

       Article 311 (2) - Dismissal of employee of Central

H                               390
BURDWAN CENTRAL COOPERATIVE BANK LTD. & 391
        ANR. v. ASIM CHATTERJEE
Cooperative Bank - Opportunity of hearing - Held: Since no      A
prejudice has been caused to the delinquent by the non-
supply of the enquiry report or the second show cause notice
under Art. 311 (2), it cannot be said that the disciplinary
proceedings had been vitiated on account of such non-supply.
                                                           B
     Respondent no.1, an employee of Krishi Unnayan
Samity, which was a cooperative society affiliated to the
Burdwan Central Cooperative Bank (appellant-Bank),
was appointed as a Grade Ill Staff of the appellant-Bank
on 8.9.1997. While he was serving in the appellant-Bank, C
he was issued a charge-sheet by the appellant-Bank for
various financial irregularities committed by him in
maintaining the accounts of the Samity. Respondent No.1
was found guilty of the charges and an order dismissing
him from service was passed. Respondent No.1 filed a
writ petition which was allowed by the Single Judge of D
the High Court holding that the dismissal order had been
passed by the Bank with the mala fide intention of getting
rid of respondent no.1, and the appellant-Bank had no
authority to proceed against him on the allegation of
defalcation of the funds of the Samity at a point of time E
when he was not an employee of the Bank. It was further
held that the order of the Disciplinary Authority was
vitiated as respondent no.1 was not served with a copy
of the enquiry report, nor was any opportunity given to
him by way of a second show-cause notice to offer his F
explanation thereto. The Division Bench of the High
Court declined to interfere.

      In the instant appeal filed by the Central Co-operative
Bank, the question for consideration before the Court           G
was: whether an employer can take disciplinary action
against an employee in regard to acts purported to have
been done by him in his previous employment in an
affiliated society.

     Allowing the appeal, the Court                             H
    392      SUPREME COURT REPORTS              [2012] 1 S.C.R.


A      HELD: 1.1. The appellant-Bank appointed respondent
   no.1 against the quota reserved for the employees of
  Primary Cooperative So.cieties affiliated to it in terms of r.
  69(2)(b) of the West Bengal Co-operative Societies Rules,
  1987. In view of this link between the Primary Cooperative
B Society and the appellant-Bank, even though respondent
  no.1 was not under the administrative control of the
  appellant-Bank when he allegedly committed various
  financial irregularities, it was still entitled to commence
  disciplinary proceedings against him in view of his past
C conduct. In the instant case, since the question of integrity
  in managing the accounts of the Samity is in question, it
  was but natural for the Bank to proceed departmentally
  against respondent no.1 after coming to learn of the
  allegations which have been made against him. [para 16
D and 18] [399-E-G; 402-A-B]

          S. Govinda Menon vs. Union of India (1967) 2 SCR 566
    - relied on.

      1.2: This is, in fact, a case where the order of
E punishment had been passed against respondent no.1
  on allegations of financial irregularities. The allegation
  would require serious consideration as to whether such
  an employee should be retained in the service of the
  Bank. Since a Bank acts in a fiduciary capacity in regard
F to people's investments, the very legitimacy of the
  banking system depends on the complete integrity of its
  employees. [para 17] [400-F-H; 401-A]

       1.3. Since no prejudice has been caused to
G respondent no.1 by the non-supply of the Inquiry Officer's
  report or the second show cause notice under Article
  311 (2) of the Constitution, it cannot be said that the
  disciplinary proceedings had been vitiated on account of
  such non-supply. [para 17] [401-D-E]

H
BURDWAN CENTRAL COOPERATIVE BANK LTD. & 393
        ANR. v. ASIM CHATIERJEE
   Managing Director, E. C. I. L. vs. 8. Karunakar 1993 (2) A
                 =
Suppl. SCR 576 {1993) 4 SCC 727 - referred to.

     1.4. Both the Single Judge ahd the Division Bench
of the High Court were nQt justified in interfering with the
action taken by the disciplinary authorities of the Bank.
                                                             8
The orders of the Single Judge and the Division Bench
of the High Court, are set aside. The decision taken by
the Bank in dismissing respondent No.1 from service is
restored. [para 19] [402-C-D]

                     Case Law Reference:                      c
    1993 (2) Suppl. SCR 576      referred to      para 9
    (1967) 2 SCR 566             relied on        para 11

     CIVIL APP ELLATE JURISDICTION : Civil Appeal No. 657 D
of 2012.

     From the Judgment and Order dated 07.08.2007 of the
Division Bench of the High Court of Calcutta in FMA No. 301
of 2005.
                                                              E
      Tarun Kr. Ray, Soumya Chakraborty and P. Narasimhan
for the Appellants.

   R.K. Gupta, S.K. Gupta, M.K. Singh, B.K. Shahi, Shekhar
Kumar and H.K. Puri for the Respondents.                   F

    The Judgment of the Court was delivered by

    ALTAMAS KABIR, J. 1. Leave granted.

     2. The short point for decision in this Appeal is whether G
an employer can take disciplinary action against an employee
in regard to acts purported to have been done by him in his
previous employment in a~ affiliated society.

    3. The Respondent No.1 herein was an employee of H
    394     SUPREME COURT REPORTS                    [2012] 1 S.C.R.

A Raipur Krishi Unnayan Samity (hereinafter referred to as "the
  Samity"), a cooperative society affiliated to the Burdwan Central
  Cooperative Bank, the Appellant herein. Under its Recruitment
  Rules, the Bank was entitled to recruit people from the affiliated
  societies through a regular recruitment process. In the
B recruitment process held in 1997, the Bank appointed the
  Respondent No.1 as a Grade Ill Staff of the Bank by an
  appointment letter dated 8th September, 1997. On being
  offered the said appointment, the Respondent No.1 left the
  services of the Samity where he was working and joined the
c Bank pursuant to the appointment letter issued to him.
         4. While the Respondent No.1 was serving in the Bank,
    the Assistant Registrar, Cooperative Societies, B.urdwan-1,
    lodged a complaint with the Bank that during an enquiry
    conducted by the Registrar of Cooperative Societies, it had
0
    transpired that the Respondent No.1 had committed various
    financial irregularities in maintaining the accounts of the Samity.
    In view of the above, the Assistant Registrar recommended that
    action be taken against him.

E      5. On the basis of the said complaint, the Bank issued a
  charge-sheet to the Respondent No.1 on 2nd February, 2000.
  Although, according to the Bank, the said Respondent admitted
  his guilt in his reply to the charge-sheet, a full-fledged enquiry
  was held by the Bank by appointing an Enquiry Officer and
F affording the Respondent No.1 adequate opportunity to defend
  himself, since according to him, he had been forced to sign a
  letter of confession. On conclusion of the disciplinary
  proceedings, the Enquiry Officer found the Respondent No.1
  guilty of the charges brought against him. On the basis of the
G Enquiry Report, the Bank through its Chief Executive Officer,
  being the Disciplinary Authority of the Respondent No.1,
  passed an order of dismissal on 8th May, 2000. It appears that
  neither a copy of the Enquiry Report nor the second show-
  cause notice was served upon the Respondent No.1.
H
 BURDWAN CENTRAL COOPERATIVE BANK LTD. & 395
  ANR. v. ASIM CHATIERJEE [ALTAMAS KABIR, J.]
      6. Aggrieved by the order of the Disciplinary Authority, the   A
 Respondent No.1 filed a Writ Petition challenging the order of
 dismissal. The learned Single Judge who heard the matter,
 allowed the Writ Petition by holding that the dismissal order had
 been passed by the Bank with the mala fide intention of getting
 rid of the Respondent No.1. The learned Judge held that the         B
 Bank had no authority to proceed against the Respondent No.1
 on the allegation of defalcation of the funds of the Samity at a
 point of time when he was not an employee of the Bank. In
 addition, the learned Judge held that the order of the
·rnsciplinary Authority was vitiated as the Respondent No.1 was      C
 not served with a copy of the Enquiry Report, nor was any
 opportunity given to him by way of a second show-cause notice
 to offer his explanation thereto.

     7. The Bank preferred First Misc. Appeal No.301 of 2005
                                                                     0
against the aforesaid order, wherein the attention of the Division
Bench was drawn to the provisions of the West Bengal
Cooperative Rules, 1987, wherein it has been stipulated that
any mis-appropriation of the employer's business or property
would come within the mischief of "misconduct". It was urged         E
on behalf of the Bank that since the Samity was affiliated to the
Bank, defalcation of the funds of the Samity would attract the
definition of "misconduct" and the Respondent No.1 had been
rightly proceeded with departmentally. It was, however,
admitted before the Division Bench that the Bank had
                                                                     F
dismissed the Respondent No.1 without affording him an
adequate opportunity of explaining his version on the findings
of the enquiry by serving him a copy of the Enquiry Report as
well as the second show-cause notice.

     8. On the submissions made on behalf of the parties, the        G
Division Bench affirmed the view expressed by the learned
Single Judge that the Bank could not have proceeded against
the Respondent No.1 in respect of an illegality and/or
misconduct which had allegedly been committed when he was
not an employee of the Bank. Accordingly, without commenting         H
    396     SUPREME COURT REPORTS                  [2012] 1 S.C.R.


A on the findings of the learned Single Judge with regard to the
  allegations of mala fide and/or biased attitude on the part of
  the Bank, the Division Bench held that the Bank was not entitled
  to proceed against the Respondent No.1 in law and disposed
  of the Appeal accordingly.
B
       9. As indicated hereinbefore, the present Appeal is
  directed against the said judgment and order of the Calcutta
  High Court.

     . 10. Mr. Ta run Kumar Ray, learned senior advocate
C   app,earing for the Appellant-Bank, urged that the Respondent
    No.1 had not been prejudiced in any way on account of non-
    supply of the report of the Enquiry Officer or in the absence of
    a second show-cause notice, as was earlier envisaged under
    Article 311 (2) of the Constitution prior to its amendment by the
D   42nd Constitutional Amendment Act, 1976. Mr. Ray submitted
    that as had been held by this Court in Managing Director,
    E.C.l.L. vs. B. Karunakar [(1993) 4 SCC 727], the order of
    reinstatement for non-furnishing of Enquiry Report to the
    concerned employee would depend on the extent of prejudice
E   caused to him and could not be ordered as a matter of course.
    It was, however, mentioned that a copy of the Enquiry Report,
    if not served earlier, should be provided to the employee before
    arguments were allowed to be advanced and thereafter the
    court should apply its judicial mind before setting aside the
F   punishment on a finding that prejudice has been caused to the
    concerned employee. The Court held further that this was the
    minimum compliance of the rules of natural justice while
    awarding major penalties.
G      11. In support of his contention that even though the
  Respondent No.1 was not under the administrative control of
  the Appellant when the alleged irregularity was perpetrated, the
                                              '
  Appellant-Bank was still entitled to commence       disciplinary
  proceedings against him, Mr. Ray referred to the decision of
H this Court in S. Govinda Menon vs. Union of India ((1967) 2
 BURDWAN CENTRAL COOPERATIVE BANK LTD. & 397
  ANR. v. ASIM CHATIERJEE [ALTAMAS KABIR. J.]
SCR 566]. In the said decision this Court had held that even if      A
an employee was not subject to the administrative control of
the Government when he was functioning as Commissioner, his
acts or omissions as Commissioner could form the subject
matter of disciplinary proceedings, provided the act or omission
reflected on his reputation for integrity or devotion to duty as a   B
member of the service.

      12. Mr. Ray urged that in the instant case there was no
prejudice caused to the Respondent No.1 either by the non-
service of the report of the Enquiry Officer or by the non-          C
issuance of a second show-cause notice, which merited
interference by the High Court with the decision to terminate
the services of Respondent No.1. Mr. Ray submitted that in 8.
Karunakar's case (supra) it had been held that the failure to
provide the Enquiry Report was not fatal to the disciplinary
                                                                     0
proceedings which could be re-commenced from the stage
prior to arguments, after supply of a copy of the Enquiry
Officer's report which resulted in the termination of the services
of the Respondent No.1. Mr. Ray further submitted that since
no prejudice had been caused to the Respondent, in the above-        E
mentioned circumstances the decision of the High Court to set
aside the said Respondent's order of termination was not
warranted in law and the judgments of both the learned Single
Judge and the Division Bench were, therefore, liable to be set
aside.
          .,
                                                                     F
     13. On the other hand, Mr. Gupta appearing for the
Respondent No. 1 submitted that the learned Single Judge had
rightly arrived at the conclusion that the dismissal of the
Respondent No.1 was tainted with malafides on the part of the
Bank to get rid of him. Mr. Gupta also contended that tile High      G
Court had rightly held that the dismissal of the Respondent on
the basis of an allegation of defalcation of the funds of the
Samity, when he was not even an employee of the Bank, was
wholly without jurisdiction, as he was not answerable to the Bank
forwhatever allegations that may have been made ag11inst him         H
    398     SUPREME COURT REPORTS                 [2012] 1 S.C.R.

A in his previous employment under the Raipur Krishi Unnayan
  Samity, which was a co-operative society affiliated to the
  Appellant-Bank. Mr. Gupta further submitted that in the absence
  of employer-employee relationship at the time when the alleged
  defalcation is said to have been committed, the Appellant co-
B operative Bank ought not to have proceeded against the
  Respondent No.1 in disciplinary proceedings, and, thereafter,
  dismissed him from service. Mr.Gupta submitted that the order
  of the learned Single Judge, as well as that of the Division
  Bench, was based on a correct appreciation of the law and did
C not merit interference in the appeal.

        14. Having carefully considered the submissions made on
  behalf of the respective parties and having regard to the fact
  that the Respondent No.1 was an employee of the Samity,
0 which was a cooperative society affiliated to the Appellant
  Cooperative Bank herein, there was a link between the previous
  employment of the Respondent No.1 and his subsequent
  appointment under the Appellant-Bank. It has to be kept in mind
  that under its Recruitment Rules, the Appellant-Bank was
E entitled to recruit people from the affiliated societies through a
  regular recruitment process. Accordingly, even though the
  Respondent No.1 was employed by a different Cooperative
  Society, the same had a link with the Appellant-Cooperative
  Bank on the basis whereof the Respondent No.1 was
F appointed by the Appellant-Bank on 8th September, 1997.

       15. There is no denial of the fact that the Respondent No.1
  came to be appointed by the Appellant-Bank on a temporary
  basis as a Grade-Ill employee in the quota reserved for the
  employees of Primary Cooperative Societies affiliated to the
G District Central Cooperative Bank in terms of Rule 69(2)(b) of
  the West Bengal Co-operative Societies Rules, 1987. The
  provisions of Rule 69(2)(b) of the 1987 Rules, which are
  relevant in this case, provides as follows :

H
BURDWAN CENTRAL COOPERATIVE BANK LTD. & 399
 ANR.. v. ASIM CHATIERJEE [ALTAMAS KABIR, J.]
    "69. Minimum paid staff to be employed by a co-                 A
    operative society, their respective essential
    qualifications and procedure of their employment and
    the conditions of their s~rvice -
    (1) )()()( )()()( )()()( )()()(
                                                                    B
    (2) The posts shall be filled up in the following manner :-

    (a) ......... ;

    (b) not more than twenty-five percent of the sanctioned         C
    posts in the establishment of an apex or central society
    shall be filled up by promotion of fit and suitable employees
    of the societies affiliated to it;
    (c) ............ ;
                                                                    D
    (d) ............... ;

    (e) ...... ............ :

     16. In keeping with the above, the Appellant-Bank
appointed the Respondent No.1 against the quota reserved for E
the employees of Primary Cooperative Societies affiliated to
the Respondent-Bank in terms of Rule 69(2)(b) of the 1987
Rules. Mr. Ray appears to be correct in his contention that in
view of the above link between the Primary Cooperative
Society and the Appellant-Bank, even though the Respondent F
No.1 was not under the administrative control of the Appellant-
Ba nk when he allegedly committed various financial
irregularities, the Appellant-Bank was still entitled to commence
disciplinary proceedings against him in view of his past
conduct. The decision of this Court in S. Govinda Menon's case G
(supra), cited by Mr. Ray, also has a direct bearing on the facts
of this case, where, although the Respondent No.1 was not
under the administrative control of the Appellant-Bank, prior to
his service with the Bank, his previous conduct was a blot on
                                                                  H
    400     SUPREME COURT REPORTS                   [2012] 1 S.C.R.

A his integrity and devotion to duty as a member of the service.
  Since no prejudice had been caused to the Respondent No.1
  by the non-supply of the Enquiry Officer's report or the second
  show-cause notice under Article 311 (2) of the Constitution, the
  Respondent No.1 had little scope to contend that the principles
B of natural justice had been violated which had vitiated the
  proceedings.

        17. However, there is one aspect of the matter which
  cannot be ignored. In B. Karunakar's case (supra), despite
  holding that non-supply of a copy of the report of the Inquiry
C Officer to the employee facing a disciplinary proceeding,
  amounts to denial of natural justice, in the later part of the
  judgment it was observed that whether in fact, prejudice has
  been caused to the employee on account of non-furnishing of
  a copy of the inquiry report has t6 be considered in the facts
0 of each case. It was observed that where the furnishing of the
  inquiry report would not make any difference to the ultimate
  outcome of the matter, it would be a perversion of justice to
  allow the concerned employee to resume his duties and to get
  all consequential benefits. It was also observed that in the event
E the Inquiry Officer's report had not been furnished to the
  employee in the disciplinary proceedings, a copy of the same
  should be made available to him to enable him to explain as
  to what prejudice had been caused to him on account of non-
  supply of the report. It was held that the order of punishment
F should not be set aside mechanically on the ground that the
  copy of the inquiry report had not been supplied to the
  employee. This is, in fact, a case where the order of punishment
  had been passed against the Respondent No.1 on allegations
  of financial irregularity. Such an allegation would require serious
G consideration as to whether the services of an employee
  against whom such allegations have been raised should be
  retained in the service of the Bank. Since a Bank acts in a
  fiduciary capacity in regard to people's investments, the very
  legitimacy of the banking system depends on the complete
H
 BURDWAN CENTRAL COOPERATIVE BANK LTD. & 401
  ANR. v. ASIM CJ-jATTERJEE [ALTAMAS KABIR, J.]
                                                                    A
 integrity of its employees. As indicated hereinb~fore, there is
 a live-link between the Respondent No.1's performance as an
 employee of the Samity, which was affiliated to the Bank, and
 if the Bank was of the view that his services could not be
 retained on account of his previous misdemeanor, it is then that B
 the second part of B. Karunakar's case (supra) becomes
 attracted and it becomes necessary for the court to examine
 whether any prejudice has been caused to the employee or not
 before punishment is awarded to him. It is not as if the Bank
 with an ulterior motive or a hidden agenda dismissed the C
 Respondent No.1 from service, in fact, he was selected and
 appointed in the Appellant-Bank on account of his merit and
 performance at the time of interview. It cannot be said that the
 Bank harboured any ill-feeling towards the Respondent No.1
·which ultimately resulted in the order of dismissal passed on
 8th May, 2010. We, therefore, repeat that since no prejudice D
 has been caused to the Respondent No.1 by the non-supply of
 the Inquiry Officer's report, the said Respondent had little scope
 to contend that the disciplinary proceedings had been vitiated
 on account of such non-supply.
                                                                    E
       18. II) the above circumstances, we cannot agree with the
 view taken by the learned Single Judge, as affirmed by the
 Division Bench of the High Court, that the Appellant-Bank had
 no jurisdiction to proceed against the Respondent No.1 by way
 of disciplinary proceedings in regard to the allegations of F
 defalcation made against him while he was employed under
 the Co-Operative Samity which was an affiliate of the Appellant-
 Bank. The other decision cited by Mr. Ray in S. Govinda
 Menon's case (supra) also makes it abundantly clear that even
 though the Respondent No.1 may not have been under the G
 direct administrative control of the Bank at the relevant point
 of time when the defalcation is alleged to have taken place, on
 account of the affiliation of the Samity with the Bank under the
 provisions of the West Bengal Co-operative Societies Rules,
  1987, the Appellant-Bank had jurisdiction over the Respondent H
    402       SUPREME COURT REPORTS                  [2012] 1 S.C.R

A No.1 after he joined the employment of the Appellant-Bank. In
  the instant case, since the question of integrity in managing the
  accounts of the Samity is in question, it was but natural for the
  Bank to proceed departmentally against the Respondent No.1
  after coming to learn of the allegations which have been made
B against him.

       19. In our view, both the learned Single Judge and the
  Division Bench of the High Court were not justified in interfering
  with the action taken by the disciplinary authorities of the Bank
C and their findings are liable to be set aside. The appeal,
  therefore, succeeds and is allowed. The orders of the learned
  Single Judge and the Division Bench of the High Court, are set
  aside .. The decision taken by the Bank in dismissing the
  Respondent No.1 from service is restored.

D          20. There will be no order as to costs.
    R.P.                                             Appeal allowed.