M.B. Dhiwar vs Syndicate Bank

Anand Byrareddy, J.—Heard the learned Counsel for the parties.

The facts briefly stated are as follows:

The Petitioner was a practising advocate of the Mumbai High Court. He had joined the services of the Dena Bank as a Law Officer. While so working, he was appointed as a Senior Law Officer in the Middle Management Grade Scale-III by direct recruitment in the Respondent - bank. He had joined the services of the bank on 23.1.1984. The Petitioner was working as an officer in Senior Management Grade Scale-IV with the Respondent and he was to retire from the services of the bank on reaching the age of superannuation on 28.2.2003. The Petitioner contends that having regard to the minimum qualifying service prescribed under the promotion policy, he was entitled to be promoted to Senior Management Grade Scale-IV in the year 1987 and Senior Management Grade Scale-V in the year 1990 and Top Executive Grade Scale-VI in the year 1993 and Top Executive Grade Scale-VII in the year 1997. Since he was denied promotion to Scale-IV while bringing in the concept of zone of consideration, he was denied promotion to further higher scales.

Aggrieved by this, the Petitioner had initiated proceedings in WP 2488/1994 in the High Court of Mumbai seeking retrospective promotions. When the petition was pending final hearing, he was taken into confidence by the Chairman and Managing Director of the bank and was assured of promotion if the matter pending before the High Court was withdrawn. The Petitioner accordingly withdrew the same However, the bank resiled from its assurance. On the other hand, it is the Petitioner''s contention that the bank initiated a series of actions to victimise the Petitioner only because he had chosen to air his legitimate grievances. Though the Petitioner was granted promotion to Senior Management Grade-IV with effect from 16.5.1998, the other aspects of the matter were ignored.

It is his further allegation that even during the pendency of the aforesaid writ petition before the High Court of Mumbai, the bank had issued a show-cause notice dated 20.4.1998 questioning his action in furnishing a legal opinion in the matter of credit facility granted to one of its customers of the Bangalore Branch of the bank. This pertained to the year 1995, but was resurrected in the year 1998 and it was sought to be made the subject matter of disciplinary proceedings which was clearly aimed at victimising the Petitioner.

Ultimately, the proceedings resulted in imposition of a penalty of reduction in the basic pay by three stages. That has been independently challenged by the Petitioner in another writ petition in WP No. 24438/2002, which is heard alongwith this petition. In any event, the order of penalty was confirmed by the appellate authority. Added to this, the bank had initiated yet another proceeding as per letter dated 21.1.2000. The same also adverted to a legal opinion of the Petitioner said to have been given on 14.11.1998 accepting another legal opinion dated 16.10.1998 furnished by a legal advisor of the bank. The Petitioner was called upon to show-cause why disciplinary proceedings ought not to be taken against him. The Petitioner was the Chief Manager of a branch and the show-cause notice was issued by another Chief Manager, which itself indicated that the bank only intended to humiliate and harass the Petitioner without regard to his position. The Petitioner however, replied to the notice and it was pointed out that the only aspect on which the Petitioner had been asked to express his opinion was about the propriety of accepting leasehold rights in respect of certain property as security for a loan transaction. It is pointed out by the Petitioner that the advance had been made at the Shoolay branch of the bank at Bangalore. The said branch had obtained a legal opinion from one Sanjeev Kanchan, a legal advisor of the bank, who had furnished his opinion as to the title to the property of the mortgagor and had further expressed that leasehold rights in respect of certain property, where the lease being for a period of 99 years, could be received as collateral security. This opinion had been referred by the Shoolay branch of the bank to the Bangalore Zonal office namely, whether the mortgage has to be put through at Bangalore where the loan is being granted on the security of property at Mumbai. This was the limited scope of reference that had been made to the zonal office.

The Law Officer at the zonal office expressed his apprehension of receiving leasehold rights as security and sought clarification from the Mumbai office. It was the limited clarification expressed by the Petitioner that financial institutions such as the State Financial Corporations and Industrial Development Corporations accept such security and that there can be no impediment in accepting the leasehold rights as security for the loan and therefore, the Petitioner explained by way of reply to the notice that there was no impropriety committed by him insofar as the legal opinion furnished. The disciplinary authority, however; with a single-minded determination issued a charge-sheet while overlooking the explanation offered by the Petitioner. The charges wee verbatim reproduction of the contents of the show-cause notice. The Petitioner therefore, reiterated his explanation and the disciplinary authority ignoring the same, appointed an inquiry officer to inquire into the charges. The Petitioner raised an objection that the inquiry officer was not well-versed in the law and therefore, would not be in a position to address the legal aspects in considering the alleged misconduct committed by the Petitioner in respect of furnishing a legal opinion. This was rejected. An inquiry was conducted. The Presenting Officer had furnished a list of nine documents and a list of two witnesses, both of whom were not law officers or lawyers.

MW.1 who was examined was working as a Chief Officer of the Vigilance unit of the bank at Mumbai and he was speaking on the basis of an investigation said to have been carried out by him. The investigation report itself was not produced at the inquiry nor was it made available to the Petitioner. The said witness admitted with reference to Clause 7.4 of Circular 14/1999 issued by the bank that housing loans could be granted even against leasehold land where the unexpired lease is 50 years or more. He also admitted that an unregistered equitable mortgage could be created even where the original title deeds were not available. He admitted that there was no mandatory requirement in the Manual of Instructions that it was only a registered simple mortgage which was to be accepted in respect of the properties where the original documents of title were not available. It was also admitted by the witness that the guarantor was a company governed by the Companies Act, 1956 and Form Nos. 8 and 13 registering the charge of the bank on the property had been filed before the Registrar of Companies at Mumbai. There were other admissions elicited from the said witness which according to the Petitioner clearly demonstrated and established the innocence of the Petitioner.

M.W.2 was said to be an officer in the Vigilance Cell at the relevant time. He in turn had admitted that the Shoolay Branch had not taken any action to comply with the directions issued by the Law Officer of the Zonal Office at Bangalore and it was also admitted by him that the property in question had been attached by the Debt Recovery Tribunal in favour of the bank in proceedings for recovery of the dues. It was sought to be impressed upon the inquiry officer by the Petitioner that negligence or an error of judgment on the part of an advocate would not amount to misconduct even if it could be construed as such. In any event, the opinion expressed by the Petitioner could not be termed as illegal or a negligent opinion since it could be fully justified. It was further pointed out that the charge levelled against the Petitioner was a failure to take all possible steps to protect the interests of the bank and the alleged failure to discharge his duties with utmost diligence. There was however no allegation imputing dishonesty or want of integrity on the part of the Petitioner However, the bank having made a reference to the Central Vigilance Commission (hereinafter referred to as ''the CVC'' for brevity), even though the charges lacked any character involving vigilance, a distorted version was attributed alleging that the Petitioner was instrumental in causing a loss of Rs. 133.45 lakh and the CVC in turn having advised that a stiff major penalty, which would, in other words, mean compulsory retirement or dismissal from service, be imposed, the bank had mechanically rejected the submissions of the Petitioner and acting in terms of the dictates of the CVC, imposed the penalty of compulsory retirement by an order dated 20.7.2001. The same was challenged by way of an appeal which was summarily dismissed. It is in that background that the present petition is filed.

The writ petition in WP 24438/2002, as already stated, was filed challenging the punishment imposed in yet another proceeding initiated by the issuance of a charge-sheet dated 10.5.1999. The allegation was that the Petitioner while working as a Senior Law Officer at the Zonal Office, Bangalore, had advised creation of an unregistered equitable mortgage by deposit of certified copies of documents of title belonging to one Y.V. Surendranath instead of advising the creation of a registered mortgage. This, it was stated was contrary to the Manual of Instructions, which required the creation of a registered mortgage. It was therefore alleged that there was a failure to discharge the duty with utmost integrity and indicated an exhibition of conduct unbecoming of a bank officer. The disciplinary authority thereafter appointed an inquiring authority. Even though the Petitioner had sought for the copies of certain documents to enable him to file his response to the charge-sheet, it was held that the Petitioner had not chosen to file his reply and it is in that circumstance that the Petitioner was compelled to file his reply even without receiving the documents that he had asked for. At the inquiry, a list of 12 documents and one witness was produced. The Petitioner''s request for several documents was not entirely met. The Respondent - bank claimed privilege in the production of certain documents, which was also one of the grievances of the Petitioner, to the effect that the ground on which privilege could be claimed was that the production of such document will be against the public interest and there is no such public interest involved insofar as the documents that are sought for by the Petitioner.

It is the Petitioner''s case that witness MW.1 was the person who had conducted an investigation into the allegations against the Petitioner, but the investigation report itself was not produced. It is the Petitioner''s ease that he was denied a reasonable opportunity to cross-examine MW.1 by the denial of the investigation report. The Petitioner further contends that a duty was cast on the inquiry officer after the evidence of the management was completed and when the Petitioner did not seek to lead any evidence to pose general questions to the Petitioner on the circumstances appearing against him in the evidence to enable the Petitioner to explain those circumstances. This is as provided under Regulation 6(17) of the Syndicate Bank Officer Employees'' (Discipline and Appeal) Regulations, 1976 (hereinafter referred to as ''the Regulations'' for brevity), has not been complied with. However, the inquiry officer proceeded to submit his report holding that the charge against the Petitioner was proved. The defence raised by the Petitioner was to the effect that a comprehensive reading of the Manual of Instructions would indicate that the instructions do not prohibit the creation of an equitable mortgage even in the absence of original title deeds. Further that the several statements elicited in cross-examination in favour of the Petitioner have been completely overlooked. The Petitioner having been called upon by a notice by the disciplinary authority to submit his reply, to the enquiry report, the disciplinary authority however proceeded on the undisclosed advice of the CVC imposing major penalty of reduction by three stages in the time scale of pay with immediate effect for a period of three years with a further direction that he would not earn increments of pay during the period of such reduction and on expiry of such period, the reduction will have the effect of postponing the future increments of pay. The Petitioner filed an appeal against the same which was summarily rejected. It is that which is sought to be challenged in this writ petition

The learned Counsel for the Petitioner would submit that though the Petitioner was an officer of the bank as a Law Officer, his functions continued to be that of a lawyer or an advocate and in the course of his functioning in that capacity, even if it could be established that there was an error of judgment in furnishing his legal opinion, it would not amount to misconduct and to characterise the act of an advocate as a misconduct something more than a mere error of judgment would be required to be established. As is evident from the circumstances narrated, the Petitioner was consulted with regard to the limited aspect as to whether leasehold rights could be accepted as security to secure certain advances to be made. The Petitioner was not called upon to examine the title to the property or other aspects which had already been addressed by yet another legal advisor whose opinion was already on record. It was not a comprehensive legal opinion as regards all aspects of the matter that was solicited from the Petitioner. Therefore, the Respondent - bank seeking to proceed against the Petitioner was with a mala fide intention of victimising him for reasons already stated. It is also pointed out that the evidence on record and the admitted sequence of events would clearly demonstrate that there was no error of judgment or want of diligence in the opinion expressed by the Petitioner which is the subject matter of the inquiry. It is contended that the inquiry is also vitiated in the enquiry officer having failed to comply with the mandatory requirement under Rule 6(17) of the Regulations and it is also vitiated as the disciplinary authority has proceeded on the basis of the dictates of the CVC in imposing the extreme punishment of compulsory retirement insofar as the charges which alleged that he had caused loss to the bank by virtue of the alleged misconduct.

The learned Counsel for the Petitioner places reliance on an unreported decision of this Court, in the case of A. Srinivasa v. State Bank of Mysore in W.P.30429/2003 dated 14.10.2009 and the writ Appeal arising therefrom in WA 4298/2009 decided on 25.10.2010 GK well as WA 67/2007 in the case of Syndicate Bank v. B. Ganesh Pai dated 3.12.2010 in support of his case.

The learned Senior Advocate Shri S. Ramdas appearing for the counsel for the Respondents would contend that the present writ petition seeks to question the findings of fact and hence, the Petitioner is precluded from seeking to question those proceedings as if by way of an appeal in the present petition. Even if a second view is possible on the same set of facts, it would not be a ground for interference by this Court in its writ jurisdiction. It is stated without prejudice to the above preliminary objection that the Petitioner was functioning as a Senior Law Officer. He accorded clearance for a legal opinion given by one M/s Sanjeev Kanchan and Company in respect of certain property enabling a customer to obtain credit facility of a large sum of money exceeding Rs. 1 crore and which was in violation of bank''s guidelines contained in its Manual of Instructions. The specific irregularities were as follows:

The legal opinion furnished by M/s Sanjeev Kanchan and Company was not in accordance with the Manual of Instructions. A history of title over 25 years preceding the loan transaction was not examined in the face of which the Petitioner had accorded his clearance for the legal opinion. Secondly, in the absence of original documents of title, it was incumbent on the creation of a registered simple mortgage in terms of the Manual of Instructions. Therefore, he failed in his duty as an advocate and as a specialist officer thereby exposing the bank to loss. And further, since the Petitioner was furnishing a second opinion in the face of an apprehension expressed by another Law Officer of the Zonal Office, Bangalore, as to the propriety in accepting the leasehold rights as security, the Petitioner had negligently expressed an opinion that it could be done thereby overlooking the bank''s interest. It is in that background that an inquiry was initiated and findings have beer, arrived at, in respect of which, appropriate punishment has been, imposed, which has been further scrutinised by the appellate authority and held to be in order. The alleged infirmity sought to be pointed out by the Petitioner are exaggerated and do not merit consideration.

Insofar as the contention that the inquiry is vitiated on account of non-compliance with Regulation 6(17) is concerned, the learned Senior Advocate would place reliance on the following authorities to contend that it is well settled by the above authorities that the failure to comply with the requirement of a Rule or Regulation akin to Regulation 6(17) does not vitiate the inquiry unless the delinquent officer is able to establish prejudice.

(a) Syndicate Bank and Ors. v. Venkatesh Gururao Kurati AIR 2006 Kar 145,

(b) Syndicate Bank v. A.M. Sugunasundaram, Writ Appeal No. 4599/2001

(c) Sunil Kumar Banerjee Vs. State of West Bengal and Others, ,

(d) State Bank of Patiala and Ors. v. S.K. Sharma 1996 II LLJ 103 (SC)

(e) Vijay Kumar Nigam (dead) through LRs. Vs. State of M.P. and others, .

In the above feels and circumstances, while it is true that this Court in its writ jurisdiction would not reexamine the material evidence to test the findings of fact arrived at by the inquiring authority, but whether the conclusion arrived at on the basis of those findings would be tenable is an aspect that is open to scrutiny. In the instant case, the sequence of events leading up to the alleged misconduct on the part of the Petitioner can be traced with reference to Annexure-T in the first of these writ petitions which is a legal opinion furnished by M/s Sanjeev Kanchan and Company dated 16.10.1998 concluding as follows:

4.1 On scrutiny of the documents submitted before us, we are of the opinion that the title of the said property is clear, marketable and free from encumbrances.

4.2 The equitable mortgage can be created by deposit of certified copies of documents listed in Clause I above, NOC from M/s Cadel Estates Private Limited and index II.

4.3 You may obtain a letter from the borrower addressed to the Sub-Registrar to send indenture of lease to you after registration.

The Law Officer of the Zonal Office at Bangalore in turn furnished a second opinion expressing the following doubt:

On a perusal, we find that Sanjeev Kanchan & Co. have offered legal opinion for the properties belonging to M/s. Bhupendra Plantation Private Limited M/s MPL Corporation Limited have offered the property as security situated at Mumbai. Hence, branch may get legal clearance from ZO; Mumbai.

However, on a scrutiny, we find that the documents submitted are lease deed and valuation report. M/s Cadel Estates Private Limited have given the property to M/s. Bhupendra Plantations Private Limited vide Lease Deed dated 13.01.1998 the security offered as mortgage by way of lease bold right, are discouraged as a banker. Therefore, branch may confirm the aspect of security and may send it to ZO: Mumbai for their clearance.

Branch may also request the requirements to be called for by the advocate and to be complied at there end. Hence, we are returning all the enclosures for doing the needful at your end.

The said opinion expressed by the Law Officer, Zonal Office, Bangalore is despatched to the Petitioner seeking his opinion, on the limited aspect of whether leasehold rights could be received as a security and the Petitioner has expressed his brief opinion on this aspect of the matter. It is apparent that no other issue was required to be addressed by the Petitioner. The charge however, reads as follows:

That you were functioning as Sr. Law Officer/Chief Manager (Law) at Zonal Office, Mumbai during the period between 31.12.1996 and 22.10.1999 and while functioning in your position as such, on 14.11.1998, misusing your official position you accorded clearance for the legal opinion dated 16.1.0.1.998 furnished by M/s Sanjeev Kanchan & Co., Mumbai, in respect of a property said to be a Flat No. 402, IV Floor, Mani Mansion, 63, Peddar Road, Mumbai, leased to M/s Bhupendra Plantations Private Limited, who were proposed guarantors to the credit facility of Rs. 110.00 lakhs applied for by M/s MPL Corporation Limited at our Shoolay Branch, Bangalore, and advised creation of UREM of a leasehold property in the absence of original documents of title to the property in violation of Bank''s guidelines vide paragraph Nos. 9.15.4 and 9.15.8 of Manual of Instructions, and thereby the parties were unduly accommodated.

115/PD:IRD/DA-3 dated June 9, 2000.

In the process you also committed various other irregularities morefully described in the statement of imputations of misconduct on your part appended herebelow.

By your above acts, you failed to take all possible steps to ensure and protect the interest of Bank and discharge your duties with utmost diligence and devotion and exhibited conduct unbecoming of the status of the Bank Officer and thus, contravened Regulations No. 3(1) read with Regulation No. 24 of Syndicate Bank Officer Employees (Conduct) Regulation, 1976.

It was also elicited during the course of the inquiry that the property in question was an unauthorised structure on the terrace of the existing three storied building with inferior construction and was not under the occupation of any person and its market value was highly inflated and the borrower had fraudulently created an unregistered equitable mortgage by depositing the photo copies of the title deeds and suppressing the fact that the original deed was collected by him on 15.1.1998, for all of which the Petitioner was held responsible at the inquiry. It is difficult to accept that the Petitioner was primarily responsible in the bank having provided a loan on the basis of the copies of title deeds which were not thoroughly scrutinised and the property in question being unauthorised or over-valued, it is apparent that the documents of title had been scrutinised by the legal advisor of the bank, who had furnished an opinion and the law officer of the zonal office at Bangalore as well as the Chief Manager of the Shoolay branch, which has extended the loan, were fully aware of the Manual of Instructions and were also required to comply with the formalities of obtaining the original title deeds and ensuring proper documentation even in the absence of any legal opinion furnished by the Petitioner. The limited aspect on which the Petitioner has expressed his opinion is to the effect that the leasehold rights could be accepted as security for the loan transaction. He was not required to examine the title deeds which had already been scrutinised nor was he required to re-examine the original title deeds and carry out an inspection of the property in offering his legal opinion. The bank, therefore, has apparently overreached the enforcement of discipline in brining the charge against the Petitioner in respect of a function which was not dissimilar to that of a professional advocate expressing his opinion tinged with pragmatism.

The further circumstance that the Respondent - bank though initiated recovery proceedings in respect of a loan transaction and has also secured a recovery certificate would also water down the alleged seriousness of the so-called misconduct on the part of the Petitioner. Hence, the punishment of compulsory retirement imposed pursuant to the inquiry proceedings, which is the subject matter of the first of these writ petitions is wholly unwarranted and cannot be sustained.

Since the second of these writ petitions also arises pursuant to the very incident and the imposition of punishment of reduction by three stage in the time scale of pay with immediate effect for a period of three years is also bad in law and cannot be sustained.

In the above view of the matter, it would be wholly unnecessary to examine whether there was violation of Rule 6(17) and whether there was prejudice caused to the Petitioner and if they bank had acted on the dictates of the CVC in imposing major penalties etc.

The writ petitions are allowed. The impugned orders of punishment are set aside. The Petitioner shall be entitled to consequential benefits.