Canara Bank v. Prem Latha Uppal (Dead) Through LRs.
Background
The respondent, a Senior Manager at Canara Bank and a member of its Credit Sanction Committee, was disciplinarily punished in 2006 with a reduction in rank after an inquiry found she had negligently sanctioned loans to two firms without properly verifying the borrowers, collateral, or guarantors. She challenged the punishment in the Karnataka High Court, which initially dismissed her case, but a Division Bench later reversed course and set aside the punishment order, finding the inquiry relied on unexamined witness statements and violated natural justice; the Bank then appealed to the Supreme Court. The appeal raised two questions: whether the High Court exceeded the limited scope of judicial review over disciplinary findings, and whether a regulation letting the Bank hold "common proceedings" against multiple co-accused employees was mandatory or merely optional.
Decision Breakdown
The Supreme Court largely upheld the High Court's finding on the merits, agreeing that the disciplinary inquiry against the respondent was flawed because the Enquiry Officer relied on statements of co-accused officers who were never examined as witnesses in the proceedings, denying her a fair opportunity to rebut that evidence: this was not improper "re-appreciation of evidence" but a legitimate correction of an error apparent on the record. However, on the second question, the Court held that the word "may" in Regulation 10 of the Canara Bank Officer Employees (Discipline and Appeal) Regulations, 1976, which allows (but does not compel) holding a common disciplinary proceeding against multiple implicated employees, is directory, not mandatory, since reading it as compulsory would strip management of necessary discretion in cases where co-accused employees have different roles or fall under different disciplinary authorities. The Court therefore partly reversed the High Court's reasoning on this legal point while confirming the outcome, and directed the Bank to settle the deceased respondent's dues within six weeks.
Lesson Learnt
In service law, an employer's decision not to hold a joint disciplinary inquiry against multiple implicated employees is not, by itself, a legal defect: such "may" provisions in service regulations are ordinarily read as giving discretion, not creating a mandatory right for an employee to demand a joint proceeding; separately, an inquiry that relies on statements of witnesses never produced for examination remains vulnerable to being struck down for violating natural justice.