V.Arulkumar v. Housing and Urban Development Corporation Limited (HUDCO)

Authority, who, by an order dated 6.8.2005, has dismissed the appeal,as against which the writ petition came to be filed.5. The learned Single Judge, having found that the chargeslevelled against the delinquent officer are grave in nature andrelying upon the judgment of the Supreme Court in Union of India v.Vishwa Mohan, [1998] 4 SCC 310 wherein it was held that in thebanking business absolute devotion, diligence, integrity and honestyneed to be preserved by every bank employee, has held that thepunishment imposed need not be interfered with. The learned SingleJudge has also held that when the Disciplinary Authority differs fromthe view of the Inquiry Officer, it is not necessary to give furthernotice in cases where no prejudice is caused to the delinquentofficer.6.1. Mr.V.Ayyadurai, learned counsel appearing for thepetitioner/appellant would submit that the law is well settled thatin cases where the Disciplinary Authority differs from the view ofthe Inquiry Officer, a notice must be given the delinquent officeragain, so as to enable him to give explanation about the proposal ofthe Disciplinary Authority to pass different orders other than theInquiry Officer's finding. His contention is that the said principleis well established by hierarchy of judgments and in spite of that,the learned Single Judge, having quoted the said judgments, holdingthat this has been the consistent view taken by the Supreme Court,has only relied upon the judgment of the Supreme Court in Union ofIndia v. Vishwa Mohan, referred supra, and held that inasmuch as thedelinquent officer has filed an appeal to the first respondentagainst the order of the Disciplinary Authority, no prejudice hasbeen caused to the delinquent officer. According to the learnedcounsel, when once such an issuance of further notice is a matter ofright, the question of prejudice does not arise. 6.2. It is his further submission that even in the communicationof the respondents, enclosing the report of the Inquiry Officer,asking the delinquent officer to give reply, there is nothing todisclose that the Disciplinary Authority has decided to differ fromthe report of the Inquiry Officer and therefore, there was nooccasion for the delinquent officer to explain about the intendeddecision of the Disciplinary Authority to find the delinquent officerguilty in respect of all charges, even though in respect of fourcharges the petitioner/appellant was exonerated by the InquiryOfficer and therefore, there is a violation of the principles ofnatural justice and in such circumstances, the question of prejudicedoes not arise.6.3. It is his further submission that in respect of thedrafting of bank guarantee, it was the Law Officer of the secondrespondent, being an expert, who has prepared the same and therefore, https://hcservices.ecourts.gov.in/hcservices/ being a Regional Chief, the delinquent officer had to just believeand forward the same to the head office. Admittedly, the headoffice, after scrutiny, have accepted the issuance of bank guaranteeand therefore, there is no dereliction of duty. 6.4. It is his further submission that in respect of therecommendation for loan, while the delinquent officer has called foropinion from seven banks about the loanee, only two banks haveresponded and the said opinions, which are in the form of financialreports by the Indian Bank, have been approved by the Finance Officerof the second respondent, who is also an expert in finance and thepetitioner/appellant, being a Regional Chief, believing the saidreport has made a recommendation and therefore, according to thelearned counsel, it was, at the most, an error of judgment and not anintentional dereliction. He would also submit that the learnedSingle Judge has not considered that the report of the Indian Bank,which was stated to be available in the Regional Office was onlyrelied upon during the time of inquiry as an additional document,without furnishing a copy of the same to the delinquent officer. 6.5. It is his further submission that the other responsibleofficers of the second respondent, like the Law Officer, FinanceOfficer, etc., who are experts and who have given opinion about thesolvency of the loanee and also drafted the bank guarantee were onlyawarded minor punishment of censure, while the delinquent officer hasbeen imposed with one major punishment and two minor punishments andtherefore, according to him, it is an official bias and the said actof the Disciplinary Authority and the first respondent/AppellateAuthority is discriminatory in character. To substantiate the saidcontention reliance was placed on the decision of the Apex Court inAkhilesh Kumar Singh v. State of Jharkand and Others, [2008] 2 SCC 74.6.6. It is his further submission that multiple punishments,viz., both major and minor punishments, have been simultaneouslyimposed on the delinquent officer by way of the order of punishment,and the same is not permissible. He would rely upon the judgment ofthe Supreme Court in Union of India and Another v. S.C.Parashar,[2006] 3 SCC 167 to substantiate his contention.6.7. It is his further submission that even the AppellateAuthority, namely the first respondent, has not considered any pointraised by the delinquent officer and therefore, he would submit thatthe impugned order of the Disciplinary Authority is bad in law, byrelying upon the judgment of the Supreme Court in Moni Shankar v.Union of India and Another, [2008] 3 SCC 484 and D.K.Yadav v.J.M.A.Industries Limited, [1993] 3 SCC 259.6.8. He would submit that while the view expressed by theSupreme Court in Union of India v. Vishwa Mohan, referred supra, that https://hcservices.ecourts.gov.in/hcservices/ the employees of the bank should be very diligent and honest isindisputable, one has to see the legality of the disciplinaryproceedings while applying the celebrated concept of law.7.1. On the other hand, Mr.M.Vaidyanathan, learned counsel forthe respondents, would submit that, being the Regional Chief, it isonly the recommendation of the petitioner/appellant (delinquentofficer), which was the basis for release of loan to the loanee andas far as the opinion of the Law Officer and the Finance Officer, whoare subordinate to him, it was the duty of the delinquent officer toverify the correctness of such a report and in not verifying the sameand granting of loan, the second respondent had to incur financialloss, since the amount of loan was very huge, namely Rs.7 Crores.7.2. It is his submission that it is not as if the InquiryOfficer's report has not been furnished to the delinquent officer,who should have given explanation in respect of all charges. He wouldsubmit that the non issuance of notice for differing from the view ofthe Inquiry Officer is not fatal to the decision of the DisciplinaryAuthority, inasmuch as, admittedly, the delinquent officer had anopportunity to file an appeal before the first respondent, which wasconsidered on merits and therefore, according to him, thepetitioner/appellant had no grievance since no prejudice has beencaused to him. He would rely upon the judgment of the Supreme Courtin State Bank of India v. K.P.Narayanan Kutty, AIR 2003 SC 1100.7.3. He would submit that it is because of the negligence on thepart of the petitioner/appellant, the second respondent had to file acase before the Debt Recovery Tribunal against the loanee forrecovery of the interest amount.8. The fact that the petitioner/appellant was working as aRegional Chief of the second respondent and that on hisrecommendation loan was granted to PHIEL is not in dispute. It isalso stated that the principal amount has been paid by the loanee tothe second respondent and in respect of the recovery of interest, theDebt Recovery Tribunal proceedings are pending.9. The charges which were framed against the delinquent officerare:"Charge-I: Shri V.Arul Kumar while working as RegionalChief, HUDCO Regional Officer, Chennai, had accepted theBank Guarantee issued by Global Trust Bank on behalf ofM/s.Premier Housing & Industrial Enterprises Ltd. assecurity for the working capital loan of Rs.700 lacssanctioned by HUDCO in March 1998 with the limitingliability Clause introduced by Global Trust Bank as perRBI guidelines on the recommendations of Law Officer https://hcservices.ecourts.gov.in/hcservices/ without actually verifying the contents of the BankGuarantee. The acceptability of the qualified BankGuarantee resulted in non-realisation of interest at thetime of revocation of Bank Guarantee.Shri V.Arul Kumar by the above acts has thusexhibited lack of devotion of duty, negligence in theperformance of duty and acted in a manner prejudicial tothe interest of HUDCO thereby violated Rules 4(1)(ii), 4(2) and 5(5) of HUDCO Conduct, Discipline and AppealRules, 1976.Charge-II: Shri V.Arul Kumar while working as RegionalChief, HUDCO Regional Office, Chennai had givencertification regarding the financial soundness ofM/s.PHIEL without actually ascertaining the factualfinancial position. The draft appraisal report preparedby the Indian Bank clearly indicated that there wereoverdue payments to CANFIN Homes and HDFC which were nottaken into consideration while evaluating the financialperformance of the agency.Shri V.Arul Kumar, Regional Chief by the above actshas thus exhibited lack of devotion to duty, negligencein the performance of duty and acted in a mannerprejudicial to the interest of HUDCO thereby violatedRules 4(1)(ii), 4(2) and 5(5) of HUDCO Conduct,Discipline and Appeal Rules, 1976.Charge-III: Shri V.Arul Kumar while working as RegionalChief, HUDCO Regional Office, Chennai, had nothighlighted the position regarding default of M/s.PHIELin the sanction note. There were specific instructionsby the COD to check whether M/s.PHIEL had defaulted toany of the lending agencies in the past. Shri V.ArulKumar while working as Regional Chief had verified thatthere was no default to any of the financialinstitutions by M/s.PHIEL and recommended sanction ofthe scheme.Shri V.Arul Kumar, Regional Chief by the above actshas thus exhibited lack of devotion to duty, negligencein the performance of duty and acted in a mannerprejudicial to the interest of HUDCO thereby violatedRules 4(1)(ii), 4(2) and 5(5) of HUDCO Conduct,Discipline and Appeal Rules, 1976.Charge-IV: Shri V.Arul Kumar while working as RegionalChief, HUDCO Regional Office, Chennai, had violated the https://hcservices.ecourts.gov.in/hcservices/ guidelines approved by the Board for sanction of workingcapital loan of Rs.700 lakhs to M/s.PHIEL giving unduefavour to the agency which has resulted in non-realisation of interest, penal interest @ 2.5% over andabove the normal rate of interest causing a substantialloss to the Company.Shri V.Arul Kumar, Regional Chief by the above actshas thus exhibited lack of devotion to duty, negligencein the performance of duty and acted in a mannerprejudicial to the interest of HUDCO thereby violatedRules 4(1)(ii), 4(2) and 5(5) of HUDCO Conduct,Discipline and Appeal Rules, 1976.Charge-V: Shri V.Arul Kumar while working as RegionalChief, HUDCO Regional Office, Chennai, had not compliedwith the decision taken by the COD in its 87th Meetingheld on 24.2.1998 wherein it was decided that in case ofdefault by the agency, the Bank Guarantee should beinvoked promptly in the next following month. The agencywent in default in June, 1998 but the proposal forrevocation of Bank Guarantee was initiated only on 27thOctober, 1998, in violation of the directions of the CODthat in the case of default by the agency, the BankGuarantee should be revoked promptly in the nextfollowing month. HUDCO had to suffer substantialinterest loss because of this.Shri V.Arul Kumar, Regional Chief by the above actshas thus exhibited lack of devotion to duty, negligencein the performance of duty and acted in a mannerprejudicial to the interest of HUDCO thereby violatedRules 4(1)(ii), 4(2) and 5(5) of HUDCO Conduct,Discipline and Appeal Rules, 1976."The above said charges relate to grant of loan recommended by thepetitioner/appellant in March, 1998.10.1. The imputation regarding charge No.1 makes it clear thatthe Law Officer has prepared the Bank Guarantee as per the ReserveBank of India guidelines and that was recommended by the delinquentofficer without verifying the contents, which resulted in theinability of realisation of interest at the time of revocation ofBank Guarantee.10.2. In respect of Charge No.2, regarding the certification ofthe financial soundness of PHIEL, the imputation states that apartfrom the draft appraisal report of the Indian Bank, indicating thatthere was some overdue payment by the loanee to CANFIN Homes and https://hcservices.ecourts.gov.in/hcservices/ HDFC, there was a report of the Karnataka Bank Limited and withoutverifying the same, the recommendation has been made by thedelinquent officer.10.3. In respect of Charge No.3, the imputation states about nonhighlighting of the position of PHIEL as per the instructions of theCommittee of Directors and merely relying on the certificate of theChartered Accountant from PHIEL stating that the company has no duesas default to any of the financial institutions.10.4. In respect of Charge No.4 relating to non realisation ofpenal interest @ 2.5% over and above the normal rate, it is theimputation that the delinquent officer has violated the guidelinesapproved by the Board in the meeting held on 21.10.1997.10.5. Likewise, in respect of Charge No.5, regarding theinvoking of the Bank Guarantee, the decision taken by the Committeeof Directors on 24.2.1998 is stated to have been violated.11.1. In reply, the delinquent officer has stated that as far asthe first charge is concerned, regarding the acceptance of the BankGuarantee, the same was done as per the recommendation of the LawOfficer and as an expert when such a report has been given by the LawOfficer, it is not possible for the Regional Chief to go through eachand every paper, line by line and find out any addition or omissionand moreover, even during the legal inspection carried out by the SZOduring October, 1999 nothing was commented on the modification of theBank Guarantee format.11.2. In respect of the second charge of certification regardingthe financial soundness, it was the reply of the delinquent officerthat when the first level officers like the Legal, Financial andTechnical Officers have given their views, it is only a review ofappraisal notes given by such officials which will be verified andthe financial appraisal note put up by the Finance Officers has notdisclosed the status report from the banks from which the reportswere sought for. As per the financial performance report compiled,the loanee company was rated "P1" and "FA" by Crisil and they havebeen declaring dividend year after year and therefore, there was nooccasion to doubt the financial prudence.11.3. In respect of the third charge regarding the independentverification of the default by the agency, it was replied that thepetitioner/appellant has followed the advice from the Head Quartersdated 15.12.1997 in respect of an identical project. He has statedthat the Chartered Accountant issued a no default certificate andthat the default of the agency to other financial institutions wasnot known to any one in the Regional Office. https://hcservices.ecourts.gov.in/hcservices/

11.4. Likewise, in respect of Charge No.4, regarding theviolation of guidelines / provisions in the sanction-cum-loanagreement, it has been his reply that the agreement cannot be read bythe Regional Chief line by line, since the same has already beenscrutinized by the Law Officer and the Finance Officer.11.5. In respect of the last charge, namely delay in invokingthe Bank Guarantee, beyond one month, it is stated that there was nodelay on his part in invoking Bank Guarantee.12.1. Mr.K.C.Batra, Executive Director of the second respondent,who was appointed as an Inquiry Officer, after conducting theinquiry, while dealing with each and every one of the charge,independently assessing the evidence adduced before him, has foundthat in respect of Charge No.1 that the Presenting Officer has notbeen able to bring out any action which can be said to have beentaken by the delinquent officer in acceptance of the qualified BankGuarantee. In fact, the witnesses have spoken clearly that the BankGuarantee has been accepted by the Officials as found to be in order.The Inquiry Officer has held "The CO (Delinquent Officer) wasfunctioning as the Regional Chief at Chennai Regional Office at thattime and he was not expected to re-examine all legal documents de-novo after the concerned Law Officer had already recorded on filethat all "Legal documentation formalities have been completed" andthe bank guarantee received and "found to be in order"and alsoclearly recommended the release of the loan amount". Thus, theInquiry Officer exonerated the delinquent officer from the firstcharge.12.2. In respect of second charge, the Inquiry Officer foundthat the Presenting Officer was not able to bring out as to who wasrequired to look into the draft appraisal report of the Indian Bankor evaluate the financial performance of the agency, but found thatthe Presenting Officer has brought out that the Assistant FinanceOfficer had appraised the scheme based on the financial position ofthe agency and concluded that the primary responsibility forevaluating the financial performance and financial soundness of theborrowing agency rests with P.W.3, Assistant Finance Officer and notwith the delinquent officer and thus, exonerated the delinquentofficer from the second charge.12.3. In respect of the third charge, viz., not highlighting ofthe position regarding default of PHIEL in the sanction note, whilethe Inquiry Officer has categorically observed that "as suchfurnishing the current information regarding the borrowing agency'sdefault to the other financial institutions was the responsibility ofthe finance discipline officer posted at Chennai Regional Office",however found that the delinquent officer has not examined all thefinancial documents himself and had sent his communication solely https://hcservices.ecourts.gov.in/hcservices/ based on the information provided to him and sending the saidcommunication would tantamount to "wrong certification" and concludedthat in respect of the said charge the delinquent officer was liable.12.4. In respect of Charge No.4, it was specifically found thatin the absence of specific mention in the sanction condition orcommunication received from the HUDCO, it cannot be concluded thatthe delinquent officer must necessarily obtain post dated cheques andexonerated the delinquent officer from the said charge.12.5. Likewise, in respect of Charge No.5 regarding the delay ininitiating the proposal for invoking the Bank Guarantee, the InquiryOfficer has found that it was only the Head Office which has conveyedthe decision to the delinquent officer in the letter dated 28.4.1999and therefore, the delinquent officer was exonerated from the saidcharge.13. The said report of the Inquiry Officer was communicated tothe petitioner/appellant by communication dated 16.8.2004, by theDeputy Chief (Vigilance). It is interesting to note that in theletter, by which the said Deputy Chief (Vigilance) has communicatedthe report of the Inquiry Officer, he has asked thepetitioner/appellant to make his representation or submission, ifany, to the Disciplinary Authority, viz., the Chairman-cum-ManagingDirector, HUDCO. A reading of the letter also makes it very clearthat the Disciplinary Authority, on perusal of the report of theInquiry Officer is in "tentative agreement" with the finding of theInquiry Officer. The letter dated 16.8.2004 is as follows:"The Inquiry Officer appointed vide order dated 13.9.2002 hasconcluded the inquiry and sent the inquiry report to theDisciplinary Authority. The Disciplinary Authority hasperused the IO's report and is in tentative agreement with thefindings of the IO. A copy of the report of the IO is enclosedherewith. If you wish to make any representation orsubmission, you may do so in writing to the DisciplinaryAuthority i.e., CMD, HUDCO, within 15 days of the receipt ofthe letter. The Disciplinary Authority will take a finaldecision in the matter after considering your submission onthe report of the IO."14. Admittedly, this is the only letter which was enclosed alongwith the report of the Inquiry Officer. Apart from the fact thatunder this letter there is absolutely no reference that theDisciplinary Authority intends to differ from the report of theInquiry Officer in respect of Charge Nos.1, 2, 4 and 5, it, inunequivocal terms, says that the Disciplinary Authority is intentative agreement with the finding of the Inquiry Officer, whichmeans that the Disciplinary Authority has informed the https://hcservices.ecourts.gov.in/hcservices/ petitioner/appellant that only in respect of Charge No.3, theDisciplinary Authority desires to proceed. It was in such view ofthe matter, normal prudence would show that the petitioner/appellantwas called upon to given explanation only in respect of Charge No.3.In fact, the explanation submitted by the petitioner/appellant alsomakes it clear that he has submitted explanation only in respect ofCharge No.3. 15. On fact, it is clear that the Disciplinary Authority, in theimpugned order dated 9.3.2005, has differed from the report of theInquiry Officer and held that the petitioner/appellant is liable forpunishment in respect of all the five charges. A reading of theorder of the Disciplinary Authority, while arriving at suchconclusion, makes it abundantly clear that the Disciplinary Authorityhas not even applied its mind in respect of all the chargesindependently and he has only stated crisply about all charges asfollows:"I have gone through the findings of the IO, representation ofShri V.Arul Kumar on IOs' report, other evidence on record andkeeping in view the overall circumstances, find that the IO'sfindings are not altogether rational and Shri V.Arul Kumarcannot be absolved as such from the charges leveled againsthim. After examining the submission of the Charged Officerand the matter in entirety, I am of the view that the findingsof IO relating to holding the CO as not guilty in acceptingthe faulty Bank Guarantee, non-verification of financialsoundness of the Agency, violation of approved Guidelines anddelay in taking action for invoking the Bank Guarantee whichresulted in pecuniary loss to HUDCO, are not agreeable.Further, the contention of Shri V.Arul Kumar that he was anon-finance professional is not tenable. Shri V.Arul Kumar,the then Regional Chief, being the overall in-charge of theRegional Office cannot be absolved from the above charges justby laying blame on his subordinates whereas it was his coreresponsibility of overall supervision and cross verification.Even Shri V.Arul Kumar had himself admitted the lapse on hispart for not highlighting the default position of the Agencyin the sanction note. As a matter of fact, the lapsewhatsoever on part of Shri V.Arul Kumar has put HUDCO inpecuniary loss and the issue was specifically highlighted bythe CAG in its Report No.3 of 2001."16. In the appeal filed by the petitioner/appellant to the firstrespondent dated 30.3.2005, he had raised all the issues in detail.However, the Appellate Authority, while confirming the order of theDisciplinary Authority, has given its ultimate finding, which is asfollows: https://hcservices.ecourts.gov.in/hcservices/ (i)(a)The nature of each punishment is aimed to preventhim from getting further promotion especially inthe light of the fact that he attended theinterview for the further promotional post ofExecutive Direction on 6.8.2004; and(b)Imposing such punishment rendering the decisionof the Board in calling him for interview to thepost of Executive Director on 6.8.2004There is no relation between the penalty imposed bythe Disciplinary Authority in the instant case andthe future promotional avenues of Shri V.Arul Kumar.The instant inquiry is being carried out since19.2.2002 and it has come to this position now. Aspart of natural justice , Shri V.Arul Kumar wascalled for the interview for the post of ExecutiveDirector despite the pendency of this inquiry, sincehe was eligible for the post of the ExecutiveDirector at that time. As per procedure in vogue,the sealed cover proceedings were adopted and theoutcome of the instant inquiry was to decide aboutthe promotion of Shri V.Arul Kumar. Had no penaltybeen imposed on Shri V.Arul Kumar, his case forpromotion would have been taken up as per procedureto be adopted under the sealed cover proceedingcases. As such, the contention of Shri V.Arul Kumaris not correct.(ii)(a)Awarding multiple punishments by taking adifferent conclusion than that of the enquiryreport without issuing show cause notice;(b) Having issued the letter dated 16.8.2004 statingthat the Authority is in tentative agreement withthe findings of Inquiry Officer surprisinglypassed the final order without even providing anopportunity to him;(c) Non-furnishing of CVC advice both in first stageand the second stage, no second show cause noticeon the proposed punishment has been issued; and(d)No show cause notice before taking a differentconclusion than that of the enquiry report. https://hcservices.ecourts.gov.in/hcservices/ The stand of Shri V.Arul Kumar that the DisciplinaryAuthority had passed the order without giving him anopportunity has been evaluated in the context of thefact that vide letter dated 16.8.2004, he wasprovided with a copy of the findings of the InquiryOfficer to make representation/submission as hedeemed fit, expressly indicating that the decision ofthe Disciplinary Authority is "tentative". Theprocedure of departmental inquiry enjoins upon theDisciplinary Authority to take the final decisiononly after receipt of submission/ representation ofthe Charged Officer on the findings of the IO. ShriV.Arul Kumar vide his letter dated 23.11.2004 madethe submissions/ representations on the findings ofthe Inquiry Officer. The Disciplinary Authority hasto take a holistic view on the matter keeping in viewthe overall circumstances of the case, the findingsof the IO and the submissions of the Charged Officer.The penalty imposed by the Disciplinary Authority isa decision taken only after receipt and dueconsideration of the same. The available fact doindicate that these requirements have been dulycomplied by the Disciplinary Authority. As such, thecontentions of Shri V.Arul Kumar are not tenable.Further, the operational part of the penalty imposedon Shri V.Arul Kumar is consisting of differentparts, which gives an impression of multiplepunishments, but in fact it is only one penalty. TheCVC's 1st stage advice is not required to be providedto the Charged Officer, since during oral hearing hewas given a chance to putforth his view point on thecharge(s) levelled against him. As such, thecontentions of Shri V.Arul Kumar are not correct andaccordingly rejected.(iii)(a)Treating him with hostile treatment in awardingsevere punishment when compared to the punishmentawarded to the co-delinquents who had admittedtheir lapses during their cross examination;(b)Non-consideration of the role of delinquent andhis official responsibility as set out in Ex.D16viz. "Project Appraisal and Monitoring Manual forHousing Scheme"; and (c)Total non-consideration of the evidenceselucidated in the cross examination of PW1, PW2 &PW3 who had admitted their lapses respectively. https://hcservices.ecourts.gov.in/hcservices/ The contentions of Shri V.Arul Kumar are notjustified. The Disciplinary Authority has toevaluate the delinquency of each officer involved inthe case as per the individual officer's status andresponsibility in the overall circumstances of thecase/issue under consideration. The DisciplinaryAuthority had duly considered the overallcircumstances of the case, the findings of the IO inother cases, the respective role of other officersand the overall responsibility of Shri V.Arul Kumarin the affairs of the Regional Office, which wasunder his charge. It is also to be seen that ShriV.Arul Kumar cannot be absolved from the chargesmerely by blaming his subordinate officers. Beingthe Regional Chief, he had the overall responsibilityfor the operations of the Regional Office, keepingthe HUDCO's interest as paramount.(iv)(a)There is no reason being assigned to sustain theconclusion of the Disciplinary Authority to holdthat the findings of the Inquiry Officer are notaltogether rational and are not agreeable etc.;(b) Failure to consider the overall facts andcircumstances of the case especially the subjectmatter of loan is based on bank guarantee forworking capital; and (c)Findings as of pecuniary loss of interest andpenal interest and the duty to cross, crossverification etc. without any iota of evidencesavailable on recordsThe order passed by the Disciplinary Authority isexplicitly speaking order, detailing out the reasonsfor holding Shri V.Arul Kumar as guilty and as wellas the reasons to differ from the findings of theInquiry Officer. The above issues raised by ShriV.Arul Kumar were also elucidated by him, in hissubmissions. Even if, it is accepted thatHUDCO recovered the principal loan amount, the factremains that the due interest has not been received.Based on the earlier submissions of Shri V.Arul Kumarand considering the overall facts and circumstancesof the case, the Disciplinary Authority had imposedthe penalty on Shri V.Arul Kumar and the penaltyimposed is appropriate considering the gravity ofcharges. https://hcservices.ecourts.gov.in/hcservices/ In view of the above, the Board decided to reject theappeal preferred by Shri V.Arul Kumar.17. Before going into the crux of the issue involved in thiscase, it is relevant to point out that the Disciplinary Authority hasawarded three punishments to the delinquent officer, which are asfollows:(i)Reduction to the post of Deputy Chief under Rule 23(2)(g);(ii)Reducing the scale of pay by five increments under Rule 23(1)(d); and(iii)Not to be considered for promotion for next two yearsunder Rule 23(1)(e).18. Out of the above said three punishments, the firstpunishment under Rule 23(2)(g) of the HUDCO Conduct, Discipline andAppeal Rules (in short, "the Rules"), is a major penalty, while theother two punishments under Rule 23(1)(d) and 23(1)(e) respectivelyare minor penalties. Therefore, on fact, it is clear that theDisciplinary Authority has awarded three different punishments,including the major and minor penalties, jointly.19. In the above said factual background, we would proceed toexamine the entire issue involved, including the order of the learnedSingle Judge.20. At the outset, the major legal issue, which arises for ourconsideration in this case, is as to whether the delinquent officeris entitled to a specific notice for explanation when theDisciplinary Authority proposes to differ from the findings of theInquiry Officer. 21. It is not in dispute that the Disciplinary Authority isentitled to differ from the view of the Inquiry Officer. Theprinciples of natural justice start at the time when the originalcharges are framed against the delinquent officer, for which thedelinquent officer has submitted his explanation, and the saidconcept continues at the time of conducting inquiry by the InquiryOfficer, in which witnesses are examined. After appreciation ofevidence, when the Inquiry Officer finds the delinquent officer notliable in respect of charges 1, 2, 4 and 5 and finds that he isliable only in respect of charge No.3, it is clear that in respect ofthose charges, in which the delinquent officer was exonerated, therewas no sufficient proof or evidence to implicate him. Now, if theDisciplinary Authority wants to differ in respect of the charges,which were exonerated by the Inquiry Officer, giving of further https://hcservices.ecourts.gov.in/hcservices/ notice to the delinquent officer asking him to submit furtherexplanation in respect of those charges in which he was exonerated iscertainly the continuation of the principles of natural justice andit is not merely a second opportunity. There is no doubt in our mindthat, in such circumstances, conferring of an opportunity to thedelinquent officer is not only in compliance of the principles ofnatural justice, but the same is a mandatory requirement, failingwhich it would mean that without giving opportunity, the DisciplinaryAuthority would impose punishment in respect of charges, regardingwhich, after full-fledged inquiry and appreciation of evidence, theInquiry Officer found on fact that charges 1, 2, 4 and 5 stood notproved. 22. In such circumstances, in our considered opinion, it cannever be said that conferring of an opportunity is only a matter ofconvenience and not of legal necessity, under the guise that nongiving of such opportunity has not caused any prejudice to thedelinquent officer. Non conferring of such opportunity certainlycauses great prejudice to the delinquent officer, since he loses avery vital opportunity to explain to the Disciplinary Authority notonly about the correctness of the finding arrived at by the InquiryOfficer exonerating him, but also explain to the DisciplinaryAuthority various grounds against the charges levelled against him.In such view of the matter, it is not possible to accept the view ofthe learned Single Judge that no prejudice has been caused to thedelinquent officer and therefore, non giving of an opportunity by theDisciplinary Authority, while differing from the finding of theInquiry Officer, does not vitiate the disciplinary proceedings.23. It is true that there are cases where non furnishing ofInquiry Officer's report may not vitiate the disciplinaryproceedings. There may be cases where the regulation governing theservice conditions of an employee may not stipulate providing of suchinquiry report. There may also be cases where all particularscontained in the inquiry report were very much available with thedelinquent officer and therefore, the furnishing of copies would onlybecome an empty formality. It has been the consistent view of theHon'ble Apex Court that the principles of natural justice cannot beapplied in the straight-jacket formula and the same is flexible basedon the circumstances, especially in the circumstances that in recenttime, the principle has undergone a sea change.24. The view that non giving of an opportunity of hearing, whilediffering with the finding of the Inquiry Officer, is a flagrantviolation of the principles of natural justice has been laid down bythe Supreme Court in P.D.Agrawal v. State Bank of India and Others,[2006] 8 SCC 776. In almost similar facts to that of the presentfacts in issue, wherein out of the charges levelled, the DisciplinaryAuthority wanted to differ in respect of a charge, which was https://hcservices.ecourts.gov.in/hcservices/ exonerated by the Inquiry Officer and in spite of it, theDisciplinary Authority has given punishment in respect of that chargealso and when the Bank raised a similar contention that no prejudicehas been caused by omission on the part of the Disciplinary Authorityof giving the delinquent an opportunity of hearing, it was held asfollows:"34. Firstly, the effect of the Disciplinary Authorityhaving not given him an opportunity of hearing whilediffering with the findings of the Inquiry Officer ashas been laid down in Punjab National Bank & Ors. vs.Kunj Behari Mishra [(1998) 7 SCC 84] may be noticed. 35. In Ranjit Singh vs. Union of India & Ors. [2006 (4)SCALE 154], following Punjab National Bank (supra), itwas held:"In view of the aforementioned decisions of thisCourt, it is now well settled that the principlesof natural justice were required to be compliedwith by the Disciplinary Authority. He was alsorequired to apply his mind to the materials onrecord. The Enquiry Officer arrived at findingswhich were in favour of the Appellant. Suchfindings were required to be over turned by theDisciplinary Authority. It is in that view ofthe matter, the power sought to be exercised bythe Disciplinary Authority, although not as thatof an appellate authority, but akin thereto.The inquiry report was in favour of theAppellant but the Disciplinary Authorityproposed to differ with such conclusions and,thus, apart from complying with the principlesof natural justice it was obligatory on his part,in absence of any show cause filed by theAppellant, to analyse the materials on recordsafresh. It was all the more necessary becauseeven the CBI, after a thorough investigation inthe matter, did not find any case against theAppellant and thus, filed a closure report. Itis, therefore, not a case where the Appellant wasexonerated by a criminal court after a fullfledged trial by giving benefit of doubt. It wasalso not a case where the Appellant could be heldguilty in the disciplinary proceedings applyingthe standard of proof as preponderance of theprobability as contrasted with the standard ofproof in a criminal trial, i.e., proof beyondall reasonable doubt. When a final form was https://hcservices.ecourts.gov.in/hcservices/ filed in favour of the Appellant, the CBI evendid not find a prima facie case against him.The Disciplinary Authority in the aforementionedpeculiar situation was obligated to apply hismind on the materials brought on record by theparties in the light of the findings arrived atby the Inquiry Officer. He should not haverelied only on the reasons disclosed by him inhis show cause notice which, it will bearrepetition to state, was only tentative innature. As the Appellate Authority in arrivingat his finding, laid emphasis on the fact thatthe Appellant has not filed any objection to theshow cause notice; ordinarily, this Court wouldnot have exercised its power of judicial reviewin such a matter, but the case in hands appearsto be an exceptional one as the Appellant wasexonerated by the Inquiry Officer. He filed ashow cause but, albeit after some time the saidcause was available with the DisciplinaryAuthority before he issued the order ofdismissal. Even if he had prepared the order ofdismissal, he could have considered the showcause as it did not leave his office by then.The expression "communication" in respect of anorder of dismissal or removal from service wouldmean that the same is served upon the delinquentofficer. [See State of Punjab vs. Amar SinghHarika, AIR 1966 SC 1313]"36. Contention of Mr. Bobde in this behalf that he wasnot prejudiced thereby cannot be accepted. There hasbeen a flagrant violation of principles of naturaljustice in so far as no show cause notice was issued tothe Appellant by the Disciplinary Authority whilediffering with the findings of the Inquiry Officer asregard charge No.2. We would deal with this aspect ofthe matter a little later."25. Again that was the view of the Supreme Court in Lav Nigam v.Chairman & MD, ITI Ltd. and Another, [2006] 9 SCC 440. In fact, theSupreme Court in that case, while referring to the judgment in PunjabNational Bank v. Kunj Behari Misra, [1998] 7 SCC 84 and YoginathD.Bagde v. State of Maharashtra, [1999] 7 SCC 739, wherein therelevant Bank Officer Employees Regulations and Civil Services Rulesdid not specifically provide for the Disciplinary Authority giving anopportunity to the delinquent officer before differing with the viewof the Inquiry Officer, it was held that the principles of naturaljustice required the authority to give opportunity to the officer https://hcservices.ecourts.gov.in/hcservices/ charged of misconduct when he disagrees with the inquiry authority.The operative portion of the said judgment reads as follows:"10. The conclusion of the High Court was contrary tothe consistent view taken by this Court that in case thedisciplinary authority differs with the view taken bythe inquiry officer, he is bound to give a noticesetting out his tentative conclusions to the appellant.It is only after hearing the appellant that thedisciplinary authority would at all arrive at a finalfinding of guilt. Thereafter, the employee would againhave to be served with a notice relating to thepunishment proposed.11. In Punjab National Bank v. Kunj Behari Misra, [1998]7 SCC 84 a Bench of this Court considered Regulation 7(2) of the Punjab National Bank Officer Employees’(Discipline and Appeal) Regulations, 1977. TheRegulation itself did not provide for the giving of anynotice before the disciplinary authority differed withthe view of the enquiry officer. This Court held: “The result of the aforesaid discussion would bethat the principles of natural justice have to beread into Regulation 7(2). As a result thereof,whenever the disciplinary authority disagreeswith the enquiry authority on any article ofcharge, then before it records its own findingson such charge, it must record its tentativereasons for such disagreement and give to thedelinquent officer an opportunity to representbefore it records its findings. The report of theenquiry officer containing its findings will haveto be conveyed and the delinquent officer willhave an opportunity to persuade the disciplinaryauthority to accept the favourable conclusion ofthe enquiry officer. The principles of naturaljustice, as we have already observed, require theauthority which has to take a final decision andcan impose a penalty, to give an opportunity tothe officer charged of misconduct to file arepresentation before the disciplinary authorityrecords its findings on the charges framedagainst the officer.”12. This view has been reiterated in Yoginath D. Bagdev. State of Maharashtra, [1999] 7 SCC 739. In this casealso Rule 9(2) of the Maharashtra Civil Services(Discipline and Appeal) Rules, 1979 did not specifically https://hcservices.ecourts.gov.in/hcservices/ provide for a disciplinary authority to give anopportunity of hearing to the delinquent officer beforediffering with the view of the enquiry officer. TheCourt said: “But the requirement of ‘hearing’ in consonancewith the principles of natural justice even atthat stage has to be read into Rule 9(2) and ithas to be held that before the disciplinaryauthority finally disagrees with the findings ofthe enquiring authority, it would give anopportunity of hearing to the delinquent officerso that he may have the opportunity to indicatethat the findings recorded by the enquiringauthority do not suffer from any error and thatthere was no occasion to take a different view.The disciplinary authority, at the same time, hasto communicate to the delinquent officer the‘TENTATIVE’ reasons for disagreeing with thefindings of the enquiring authority so that thedelinquent officer may further indicate that thereasons on the basis of which the disciplinaryauthority proposes to disagree with the findingsrecorded by the enquiring authority are notgermane and the finding of ‘not guilty’ alreadyrecorded by the enquiring authority was notliable to be interfered with.”(See also State Bank of India v. K.P. Narayanan Kutty,[2003] 2 SCC 440.)"26. As correctly submitted by the learned counsel for thepetitioner/appellant, a little difference in fact or additional factmay make a lot of difference in the precedential value of a decisionas held in the decision of the Supreme Court in Bhavnagar Universityv. Palitana Suga Mill (P) Ltd. and Others, [2003] 2 SCC 111.27. In the light of the consistent view of the Supreme Court inthis regard, as it is elicited by the learned Single Judge in theimpugned judgment, the different view taken by the learned SingleJudge to make the petitioner/appellant liable, based on theobservation of the Supreme Court in Union of India v. Vishwa Mohan,referred supra, wherein it was held that the banking businessrequires devotion, diligence, integrity and honesty, and every bankemployee has to act as per the said norms and if and the same is notfollowed the confidence of the public would be impaired, and theconsequential finding that the petitioner/appellant has been servedwith the copy of the order passed by the Disciplinary Authority and https://hcservices.ecourts.gov.in/hcservices/ he has also filed a statutory appeal under Rule 33 of the Rules andtherefore, the non giving of an opportunity to the delinquent officerby the Disciplinary Authority, while differing from the view of theInquiry Officer has not caused any prejudice, is not a correctposition of law. The mere availability of a statutory appealright, which is independent, does not mean that in the first stage ofdisciplinary proceedings the principles of natural justice can bedispensed with. It is true that the principles of natural justice,which cannot be put under a straight-jacket formula, is not an emptyformality, but nevertheless it remains to be a necessary ingredient,since the concept of audi alteram partem continues to be thecelebrated concept of law. 28. In the facts of the present case, it can never be said thatmerely because the petitioner/appellant has availed a statutory rightof filing an appeal before the first respondent, the legal right,which has been conferred on him based on the principles of naturaljustice, as stated above, can be dispensed with at the time when theDisciplinary Authority desires to differ from the view of the InquiryOfficer. The giving of an opportunity to the delinquent officer atthe time when the Disciplinary Authority proposes to differ from theview of the Inquiry Officer is neither an empty formality nor aprinciple which can be dispensed with only on the basis that thedelinquent officer will have a right of appeal and in the said appealhe can raise this point.29. Even though the applicability of the concept of naturaljustice has undergone a sea change in the legal parlour by the adventof principles of no prejudice formula, the said later invention hasabsolutely no application on the facts of the present case, in thelight of the law enunciated by the Hon'ble Supreme Courtconsistently, as narrated above. In such view of the matter, we donot subscribe to the view of the learned Single Judge in the impugnedjudgment, in this regard since the same is not the reflection of thecorrect legal position. 30. In fact the judgment of the Supreme Court in State Bank ofIndia v. K.P.Narayanan Kutty, AIR 2003 SC 1100 is actually in favourof the delinquent officer. In that case the Supreme Court has heldthat in circumstances wherein the Disciplinary Authority disagreeswith some of the findings of the Inquiry Officer, an opportunity ofhearing to the delinquent officer is necessary. In fact, the SupremeCourt has held that the fact that in the absence of such opportunityno prejudice was caused to the delinquent officer is immaterial. "4. When asked, learned Senior Counsel for theappellants submitted that Regulation 7(2) of the PunjabNational Bank Officer Employees’ (Discipline and Appeal)Regulations, 1977 referred to in Punjab National Bank https://hcservices.ecourts.gov.in/hcservices/ case is in pari materia to Rule 50(3)(ii) of the StateBank of India (Supervising Staff) Service Rulesgoverning the facts of the present case with which weare concerned. The contentions advanced by the learnedSenior Counsel for the appellant before us are almostsimilar to the contentions advanced in the case ofPunjab National Bank aforementioned. In the case ofPunjab National Bank also similar contentions were urgedthat the Punjab National Bank Officer Employees’(Discipline and Appeal) Regulations, 1977 did notrequire that an opportunity of being heard be given tothe delinquent officers when the disciplinary authoritydisagreed with the finding of the enquiring authority;once the enquiring authority had given hearing to themand if the decision was before Ramzan Khan's case, thedisciplinary authority was not required to give the copyof the enquiry report to the delinquent officer. In thatview, it was not necessary to give a hearing to the casewhere the disciplinary authority differs from theenquiry report. A Bench of learned three Judges in thesaid case has specifically noticed in para 11 as to thecontroversy that was required to be resolved in thatcase. The controversy in that case also related to thecase where the disciplinary authority disagreed with thefindings of the enquiring authority and Regulation 7(2)does not expressly state that when the disciplinaryauthority disagrees with the finding of the enquiringauthority, an opportunity is to be given. Afterreferring to various decisions including the decisionsrelied on behalf of the Bank, this Court has clearlyheld that where the disciplinary authority disagreeswith the report of the enquiring authority in regard tocertain charges, providing of an opportunity isnecessary to satisfy the principles of natural justice.Paragraph 19 of the said judgment reads thus: “... The result of the aforesaid discussion wouldbe that the principles of natural justice have tobe read into Regulation 7(2). As a resultthereof, whenever the disciplinary authoritydisagrees with the enquiry authority on anyarticle of charge, then before it records its ownfindings on such charge, it must record itstentative reasons for such disagreement and giveto the delinquent officer an opportunity torepresent before it records its findings. Thereport of the enquiry officer containing itsfindings will have to be conveyed and the https://hcservices.ecourts.gov.in/hcservices/ delinquent officer will have an opportunity topersuade the disciplinary authority to accept thefavourable conclusion of the enquiry officer. Theprinciples of natural justice, as we have alreadyobserved, require the authority which has to takea final decision and can impose a penalty, togive an opportunity to the officer charged ofmisconduct to file a representation before thedisciplinary authority records its findings onthe charges framed against the officer.”"31. It is no doubt true that the other points raised by thelearned counsel for the petitioner/appellant also deserve to beconsidered in this case, even though the same is not necessary due toour finding on the vital legal issue, as stated above.32. It is not in dispute that in respect of the other officials,who were instrumental in giving opinions, like the legal opinion ofthe Law Officer in respect of the format of Bank Guarantee, apartfrom the financial appraisal report given by the Assistant FinanceOfficer, meagre punishment of censure was awarded. In Akhilesh KumarSingh v. State of Jharkand and Others, [2008] 2 SCC 74, under similarcircumstances, the Supreme Court has held as follows:"15. It is true that delinquent officers similarlysituated should be dealt with similarly and, thus if thecharges against the employees are identical, it isdesirable that they be dealt with similarly.........19. Director General of Police v. G. Dayasan, [1998] 2SCC 407 is a case where respondent therein as also theHead Constable were tried together, but as differentpunishments having been imposed upon them although theyfaced identical charges, this Court interfered with thequantum of punishment." 33. While dealing with mixing of major and minor penalties, theSupreme Court in Union of India and Another v. S.C.Parashar, [2006] 3SCC 167 has held that the action of the Disciplinary Authority inthat regard is illegal and without jurisdiction. The operativeportion of the said judgment is as follows:"10. It is not in dispute that sub-Rules (iii) and (iii)(a) of Rule 11 provide for minor penalties whereasclause (v) thereof provides for major penalty.Indisputably the procedure adopted in the departmental https://hcservices.ecourts.gov.in/hcservices/ proceeding was for imposition of a major penalty. It istrite that even in a case where the procedure followedin the departmental proceedings for imposition of amajor penalty, having regard to the facts andcircumstances of a case, minor penalty can also beimposed. The question is as to whether the penaltyimposed by the President upon taking into considerationthe report filed by the Enquiry Officer, was underclauses (iii) and (iii)(a) or clause (v) of Rule 11 ofthe CCS Rules. ........12. The penalty imposed upon the respondent is anamalgam of minor penalty and major penalty. Therespondent has been inflicted with three penalties : (1)reduction to the minimum of the time-scale of pay for aperiod of three years with cumulative effect; (2) lossof seniority; and (3) recovery of 25% of the lossincurred by the Government to the tune ofRs.74,341.89p., i.e., Rs.18,585.47p. on account ofdamage to the Gypsy in 18 (eighteen) equal monthlyinstalments. Whereas reduction of time-scale of paywith cumulative effect is a major penalty within themeaning of clause (v) of Rule 11 of the CCS Rules, lossof seniority and recovery of amount would come withinthe purview of minor penalty, as envisaged by clause(iii) and (iii)(a) thereof. The Disciplinary Authority,therefore, in our opinion acted illegally and withoutjurisdiction in imposing both minor and major penaltiesby the same order. Such a course of action could nothave been taken in law."34. For all the reasons aforesaid, the writ appeal is allowedand the impugned judgment of the learned Single Judge is set aside.No costs. Consequently, M.P.No.1 of 2008 is closed. Sd/- Asst.Registrar/true Copy/Sub Asst.Registrarsasi https://hcservices.ecourts.gov.in/hcservices/ To1. The Board of Directors/ Appellate Authority through Vigilance Officer, Housing and Urban Development Corporation Limited (HUDCO) HUDCO Bhavan, India Habited Centre Lodhi Road, New Delhi-110 003.2. The Chairman-cum-Managing Director HUDCO, HUDCO Bhavan India Habited Centre Lodhi Road, New Delhi-110 003.+ 1 cc to Mr.V.Ayyadurai, Advocate, SR.No.19554+ 1 cc to Mr.M.Vaidyanathan, Advocate, SR.NO.19098W.A.No.1451 of 2008RSI {CO}TP/15.5.2009.