Ashok Mathrani vs Bastar Kshetriya Gramin Bank and Another

Satish K. Agnihotri, J.—Challenge in this petition is to the order dated 30th June, 1999 (Annexure P/9) whereby the Petitioner was reprimanded. It was further directed that the loan advanced to the Petitioner for residential purpose was used for commercial purpose and as such, the loan amount be recovered with interest at the rate of 17%. The Petitioner further challenges the order dated 18th March, 2002 (Annexure P/12), whereby a direction was issued to recover the loan amount advanced to the Petitioner for residential purpose which was used for commercial purpose at the rate of 17%, and the order dated 23rd March, 2002 (Annexure P/11) whereby after calculation, the equated monthly installments (E.M.I.) of Rs. 7,572/- of 108 installments was directed to be recovered from the salary of the Petitioner.

The indisputable facts, in brief, are that the Petitioner, being an employee of the Respondent/Bank, under the housing scheme, made an application on 18th July, 1996 (Annexure R/l) for grant of loan to purchase a house constructed over a plot of land bearing plot No. 91/1, street No. 78 at Pratapganjpara, Main Road, Jagdalpur. A loan amount of Rs. 2 lacs was sanctioned and vide letters dated 20th March, 1996 and 29th March, 1996, the loan amount was disbursed to the Petitioner by the Respondent bank. After purchase of the said house, the sale deed was executed and registered, and thereafter, the same was deposited with the Respondent bank for creation of charge in favour of the bank. The loan amount was recoverable under an agreement. The first Rs. 1 lac would carry interest at the rate of 5% p.a. and the second Rs, 1 lac would carry interest at the rate of 11% p.a.. The said amount of loan with interest was to be paid in 180 equal installments of Rs. 1110/- per month, deductible from the salary of the Petitioner. The Petitioner reconstructed the old purchased house without prior intimation to the Respondent-bank and after obtaining required sanction from the local authorities. After two years, the Petitioner received a notice dated 14th July, 1998 (Annexure P/2), calling upon the Petitioner to submit required documents indicating sanction of the competent officers for converting the residential building to the commercial shop and expenditure made thereon. The Petitioner submitted his reply to the Chairman, Bastar Kshetriya Gramin Bank on 31st July, 1998 (Annexure P/3) stating that the Petitioner was constrained to reconstruct the house without obtaining necessary permission, with a request that if a permission was required, the same may be sanctioned to the Petitioner. On 7th September, 1999 (Annexure P/4), the Respondent-bank issued a show-cause-notice stating that the Petitioner has deliberately converted the use of the residential house to commercial shop and as such, why departmental action should not be taken against the Petitioner under the provisions of Section 17 and 18 of the rules and regulations of the bank. The Petitioner again submitted reply stating that whatever has happened, it was on account of ignorance of law and the rules, thus, proceedings against the Petitioner may be dropped. A charge-sheet dated 27th March, 1999 (Annexure P/6) was issued under the provisions of Regulations 17 and 19 of the Bastar Kshetriya Grameen Bank (Staff) Service Regulations, 1980 (for short ''the Regulations, 1980''). Consequent thereupon, the impugned order dated 30th June, 1999 was passed. An appeal was preferred before the Chairman i.e. the Respondent No. 2, under the provisions of regulation 31 and 32 of the Regulations, 1980. According to the learned Counsel for the Petitioner, without affording an opportunity of hearing, the appeal was dismissed confirming the order dated 30th June, 1999. Thereafter, no action was taken for about two years. After a lapse of about 2 years, the Petitioner was served a letter dated 23rd March. 2002, whereby the Petitioner was directed to pay monthly installments of Rs. 7,572/-. Thus, this petition.

Shri Sharma, learned Counsel appearing for the Petitioner would submit that the Petitioner was punished without holding an enquiry stating that the defence/reply of the Petitioner was not acceptable to them. The act of the Respondent-bank is in violation of the statutory rules and principles of natural justice. The Petitioner was granted loan as an employee of the Respondent-bank. Thus, the Respondent bank could not have treated the employee in the same manner as a lender is treated. The imposition of any penalty on the delinquent employee cannot be done without enquiry and without affording a reasonable opportunity of hearing, which is contrary to the regulation 30(2) of the Regulations, 1980. The banking authorities had knowledge of the nature of the property throughout. Thus, it cannot be held that the residential use of the property was converted to commercial use when the Petitioner resides in the premises. However, one portion of the premises is used for commercial purpose. The Respondent authorities have not taken any steps at the time of construction of the house. The appeal was dealt with in a slipshod manner without examining various aspects of the matter and without affording an opportunity of hearing. Imposition of penal interest is in fact under the disciplinary proceedings. However, the stand taken by the authorities that imposition of penal interest is not a part of the disciplinary action, is misleading. In support of his contention, Shri Sharma relies on a decision of Supreme Court in Chairman, Disciplinary Authority, Rani Lakshmi Bai Kshetriya Gramin Bank Vs. Jagdish Sharan Varshney and Others,

Per contra, on the other hand, Shri Prafull N. Bharat, learned Counsel appearing for the Respondent-Bank would submit that the Petitioner being the employee of the Respondent, obtained a loan under the Personal Housing Loan Scheme for the Employees of the Bank, 1993 (for short ''the Scheme, 1993'') for the employees (Annexure R/2). Under the Scheme, the Petitioner was granted loan with rebate in interest which was less than the then prevalent rate of interest of the bank and the Petitioner gave his undertaking that he would utilize the loan for residential purpose only. Inspite of the undertaking, the Petitioner changed the use of loan amount and used the same for construction of shop. Thus, the Petitioner played fraud with the answering Respondent. Accordingly, after issuing show-cause-notice, a charge-sheet was issued. In reply, the Petitioner admitted the charges and the change of purpose for which loan was granted (Annexure R/3). As the Petitioner violated the terms and conditions of the agreement under the Scheme, 1993, the penal provision was invoked. The penal provision provides for charge of penal interest over and above 1 1/2% as charged by the State Bank of India. Penal provision further provides that in addition to enhancement of interest, the employee also has to face the departmental proceedings. This is in accordance with the penal provision of the Scheme, 1993 and accordingly the interest at the rate of 17% per annum was charged. The Petitioner in his application (Annexure R/l) had opted for purchase of the house only and it was not disclosed that the same was to be used for composite purposes i.e. for commercial business also. Since the Petitioner has admitted the fact that he has changed the purpose for use of the loan amount, thus, it was not thought necessary to hold any enquiry. In support of his contention, Shri Bharat relies on a decision of Supreme Court in Chairman and MD V.S.P. and Others Vs. Goparaju Sri Prabhakara Hari Babu, . Shri Bharat would further submit that a punishment of reprimand was inflicted upon the Petitioner and the same was a minor punishment, therefore, no full-fledged enquiry was necessary. Section 73 of the Indian Contract Act, 1872 (for short ''the Act, 1872'') makes it clear that when a contract has been broken the party who suffers by such breach is entitled to receive, from the party who has broken the contract, the compensation for loss or damage. Section 74 of the Act, 1872 also provides for the same.

Shri Bharat further submits that it is indisputable that the Petitioner has violated the terms and conditions of the agreement. It is well settled that if the appellate authority affirms or confirms the order of the disciplinary authority, only brief reasons are required. Thus, this petition deserves to be dismissed. In support of his contention, he relies on a decision of Supreme Court in S.N. Mukherjee Vs. Union of India, .

Having heard learned Counsel for the parties, perused the pleadings and annexures appended thereto, it is established that the Petitioner was granted a loan of Rs. 2 lacs for the purpose of purchase of a residential house as is evident from the application for grant of housing loan (Annexure R/l).

Clause 4.2 of the Scheme, 1993 clearly provides that in case of a breach of conditions and non-payment of the installments, the penal rate of interest at the rate of 1 1/2 % more than the State Bank of India, shall be charged. Under Clause 4.2 of the Scheme, 1993 accordingly interest was calculated as the Petitioner, has breached the terms of the scheme by spending the loan amount on construction of a commercial shop in residential premises. Clause 4.3 of the Scheme, 1993 provides for disciplinary action against the delinquent employee in addition to recovery of money with penal interest, under the provisions of service conditions. Clause 4.2 and 4.3 of the Scheme, 1993 reads as under:

Section 73 and 74 of the Act, 1872 contemplates compensation for loss or damages caused by breach of contract. u/s 73 of the Act, 1872, it is provided that if the contract is broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused by him thereby, which naturally arose in the usual course of things from such breach. u/s 74 of the Act, 1872, the party complaining of the breach is entitled to receive from the party the amount so specified in the contract. In the present case, the Scheme, 1993 clearly provides for imposition of penalty, as stated above. Accordingly, the penalty was imposed.

So far as the second contention of the Petitioner that no opportunity of hearing was afforded to the Petitioner at the appellate or revisional stage before imposition of penalty is concerned, this is a case where the Petitioner, in his reply has admitted the fact of conversion of a part of the residential house to a commercial shop. This is a clear breach of the provisions of the Scheme, 1993 as under the Scheme, 1993, loan was provided at a lower rate of interest. Once the breach has occurred by admission of the Petitioner himself, no further opportunity of hearing is necessary.

The third contention of the Petitioner that the appellate authority has affirmed the initial order without giving detailed reasons, is noticed to be rejected on a simple ground that it is not necessary to give detailed reason in case of affirmation of the order under challenge. The Supreme Court, in Chairman, Disciplinary Authority, Rani Lakshmi Bai Kshetriya Gramin Bank Vs. Jagdish Sharan Varshney and Others, , observed as under:

In our opinion, an order of affirmation need not contain as elaborate reasons as an order of reversal, but that does not mean that the order of affirmation need not contain any reasons whatsoever. In fact, the said decision in Prabhu Dayal Grover case has itself stated that the appellate order should disclose application of mind. Whether there was an application of mind or not can only be disclosed by some reasons, at least in brief, mentioned in the order of the appellate authority. Hence, we cannot accept the proposition that an order of affirmation need not contain any reasons at all. That order must contain some reasons, at least in brief, so that one can know whether the appellate authority has applied its mind while affirming the order of the disciplinary authority.

The view we are taking was also taken by this Court in Divl. Forest Officer v. Madhusudhan Rao (vide SCC para 20: JT para 19), and in M.P. Industries Ltd. v. Union of India, Siemens Engg. And Mfg. Co. of India Ltd. v. Union of India (vide SCC para 6: AIR para 6), etc.

The Supreme Court, in Viveka Nand Sethi Vs. Chairman, J and K Bank Ltd. and Others, it was observed as under:

The principle of natural justice, it is trite, is no unruly horse. When facts are admitted, an enquiry would be an empty formality. Even the principle of estoppel will apply. [See Gurjeewan Garewal (Dr.) v. Dr. Sumitra Dash.] The principles of natural justice are required to be complied with having regard to the fact situation obtaining therein. It cannot be put in a straitjacket formula. It cannot be applied in a vacuum without reference to the relevant facts and circumstances of the case. (See State of Punjab v. Jagir Singh and Karnataka SRTC v. S.G. Kptturappa.)

Further, the Supreme Court, in P.D. Agrawal v. State Bank of India and Ors. (2006) 8 SCC 776, observed as under:

Decision of this Court in S.L. Kapoor v. Jagmohan whereupon Mr Rao placed strong reliance to contend that non-observance of principle of natural justice itself causes prejudice or the same should not be read "as it causes difficulty of prejudice", cannot be said to be applicable in the instant case. The principles of natural justice, as noticed hereinbefore, have undergone a sea change. In view of the decisions of this Court in State Bank of Patiala v. S.K. Sharma and Rajendra Singh v. State of M.P. the principle of law is that some real prejudice must have been caused to the complainant. The Court has shifted from its earlier concept that even a small violation shall result in the order being rendered a nullity. To the principle/doctrine of audi alteram partem, a clear distinction has been laid down between the cases where there was no hearing at all and the cases where there was mere technical infringement of the principle. The Court applies the principles of natural justice having regard to the fact situation obtaining in each case. It is not applied in a vacuum without reference to the relevant facts and circumstances of the case. It is no unruly horse. It cannot be put in a straitjacket formula. (See VivekaNand Sethi v. Chairman, J. and K. Bank Ltd. and State of U.P. v. Neeraj Awasthi. See also Mohd. Sartaj v. State of U.P.).

In the departmental enquiry, the Petitioner has been reprimanded for violation of the service conditions as grant of loan was also a part of service conditions as being an employee of the Respondent-bank, the Petitioner was entitled to loan for residential purpose on a lesser rate of interest.

Regulation 30 of the Regulations, 1980 dealing with penalties clearly ptovides that except in case of reprimand, other penalties enshrined at Clause (b), (c), (d), (e) or (f) of sub-regulation (1) of Regulation 30, cannot be passed without signature of the chairman and without the charge being formulated in writing and given to the said officer or employee so that he shall have reasonable opportunity to answer them in writing or in person.

In the present case, the charges were formulated and on receipt of the reply of the Petitioner to the show-cause-notice, it was found that a minor penalty of reprimand under Regulation 30(1 )(a) of the Regulations, 1980 may be imposed. Thus sub-regulation (2) is not applicable to the present case. Section 30 reads as under:

Penalties (1) Without prejudice to the provisions of other regulations, an officer or employee who commits a breach of these regulations or who displays negligence, inefficiency or indolence, or who knowingly does anything detrimental to the interest of the Bank or in conflict with its instructions or is guilty of any other act of misconduct, shall be liable to the following penalties-

(a) reprimand;

(b) delay or stoppage of increments or promotion;

(c) degradation to a lower post or grade or to a lower stage in his incremental scale;

(d) recovery from pay of the whole or part of any pecuniary loss caused to the Bank by the officer or employee;

(e) Removal from the service which shall not be a disqualification for future employment.

(f) Dismissal.

(2) No officer or employee shall be subjected to the penalties referred to in Clause (b), (c), (d), (e) or (f) of sub-regulation (1) except by an order in writing signed by the Chairman and no such order shall be passed without the charge being formulated in writing and given to the said officer or employee so that he shall have reasonable opportunity to answer them in writing or in person, as he prefers and in the latter case his defence shall be taken down in writing and read to him:

Provided that the requirements of this sub-regulation may be waived, if the facts on the basis of which action is to be taken have been established in a court of law or court martial, or where the officer or employee has absconded or where it is for any other reason impracticable to communicate with him or where there is difficulty in observing them and the requirements can be waived without injustice to him. hi every case where all or any of the requirements of this sub-regulation are waived the reasons for doing so shall be recorded in writing.

Applying the well-settled principles of law to the facts of the case on hand and for the reasons stated hereinabove, the petition is devoid of merit.

Accordingly, the writ petition is dismissed. No order as to costs.