The Supreme Court has clarified that where service regulations create a legal fiction to treat a superannuated employee as if they were still in service for the purpose of concluding disciplinary proceedings that were initiated prior to their retirement (as provided in Regulation 20(3)(iii) of the Punjab and Sind Bank Officers’ Service Regulations, 1982), such proceedings can be lawfully continued and concluded post-retirement.
Further, a punishment that is capable of being implemented post-retirement, such as a reduction in the time scale of pay which would affect the computation of pension and other retiral dues, can be validly imposed as a result of such proceedings, added the Court.
A Two-Judge Bench comprising Justice Pamidighantam Sri Narasimha and Justice Manoj Misra first addressed the merits of the disciplinary action. It found that the charge that was partly proved was the appellant’s failure to ensure the end use of the loan, and the Inquiry Officer found that bills for cash payments up to Rs. 27.25 lakhs were not on record and the loan account had turned into a Non-Performing Asset (NPA). The Bench noted that the appellant, in his comments on the inquiry report, did not challenge the finding that bills were missing, but rather argued that his predecessor had also not taken bills.
The Bench observed that ensuring the end-use of loan disbursal is critical for two main reasons: first, it prevents the diversion of funds from their sanctioned purpose, and second, it secures the recovery of the loan. Failure to ensure end-use exposes the Bank to significant financial risk. The Bench emphasized that a bank officer holds a position of trust dealing with public funds, and any dereliction of duty, whether by negligence or with deliberate intention, constitutes misconduct.
Given that the appellant did not challenge the core factual finding of cash withdrawals without supporting bills, the Bench found no perversity in the inquiry report and declined to permit the appellant to question the merits of the finding, especially since this point was not pressed before the High Court.
On the legality of post-retirement punishment, the Bench noted that the appellant argued that the Service Regulations apply only to serving officers, and post-retirement, action can only be taken under the Pension Regulations. The Bank countered by relying on Regulation 20(3)(iii) of the Service Regulations, which explicitly allows for the continuation of disciplinary proceedings initiated prior to superannuation.
The Bench analysed Regulation 20(3)(iii), which states that an officer against whom disciplinary proceedings have been initiated will cease to be in service on the date of superannuation, but the disciplinary proceedings will continue “as if he was in service” until a final order is passed. The Bench noted that this provision creates a legal fiction that the delinquent officer is deemed to be in service for the limited purpose of concluding the disciplinary proceedings.
Regarding the specific punishment of ‘reducing the pay scale by three stages on permanent basis’, the Bench observed that such a punishment is implementable post-retirement. It reasoned that the reduction in pay scale would relate back to the date the employee superannuated. Since pension is ordinarily computed based on the salary last drawn/payable, the punishment could be implemented by re-computing the pension based on the reduced pay scale.
Briefly, the appellant, an officer of the Punjab & Sind Bank, was served a charge sheet on 30 September 2011, alleging irregularities in the disbursement of loans. On the very same day, the appellant superannuated from service. The disciplinary proceedings continued post-retirement, and one of the charges, that the appellant failed to ensure the end use of a loan, was found to be partly proved. Consequently, on 15 June 2013, a punishment of reduction by three stages in the time scale of pay on a permanent basis was imposed on him.
Since the appellant’s internal appeal was dismissed by the Appellate Authority on 19 April 2014, he filed a petition before the High Court, arguing that since he had superannuated, only penalties under the Punjab and Sind Bank Employees’ Pension Regulations, 1995 could be imposed, not the one he received. A Single Judge of the High Court accepted this argument and set aside the punishment order, giving the Bank liberty to proceed under the Pension Regulations.
The Bank challenged this decision in an intra-court appeal, where the Division Bench of the High Court, relying on Regulation 20(3)(iii) of the Punjab and Sind Bank Officers’ Service Regulations, 1982, held that disciplinary proceedings could lawfully continue post-superannuation. Division Bench, therefore, set aside the Single Judge’s order.
Appearances:
For the Appellant: AOR Udita Singh
For the Respondent: AOR Rajesh Kumar Gautam, along with Advocates Anant Gautam, Deepanjal Choudhary, Vibhu Sharma, Likivi Jakhalu, Aman Gahlot, and Rishi Chauhan
