Nirmala Vs. Karnataka
Corporation & Ors  INSC 840 (8 May 2008)
S.B. SINHA & P.P. NAOLEKAR
1 REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.__3404______ OF 2008 (Arising out of SLP (C) No. 14803 of 2006)
H.V. Nirmala .... Appellant Versus Karnataka State Financial Corporation &
Ors. .... Respondents
S.B. SINHA, J.
1. Leave granted.
2. Respondent-Corporation was constituted under the State Financial
Corporations Act, 1951 (1951 Act). Appellant was appointed as Trainee Assistant
Manager in the Corporation in June 1983. She was promoted and posted as Branch
Manager at Chikkaballapur Branch. A disciplinary proceeding was initiated
against her in April, 1996. The imputation of charges against her pertained to
sanction and disbursal of amount of loan in 2 four cases. As many as four
charges were framed against her. The disciplinary proceeding was initiated by
the Managing Director of Corporation, wherein one Sri B. Rudregowda, a legal
advisor of the company, was appointed as an Enquiry Officer on 4th July, 1996.
A finding of guilt was arrived at by the said Enquiry Officer, a copy
whereof was made available to the appellant. The records of the disciplinary
proceeding were placed before the Board of Directors of the Corporation. By an
order dated 9th June, 1998 a penalty of dismissal from services was imposed
upon her. Appellant preferred an appeal thereagainst before the Board itself on
or about 4th December, 1998. The said appeal was treated to be a petition for
review which by reason of an order dated 2nd March, 1999 was dismissed.
Aggrieved by and dissatisfied therewith, the appellant filed a writ petition
before the High Court of Karnataka at Bangalore. By reason of a judgment and
order dated 23rd June, 2005 a learned Single Judge of the said Court dismissed
the writ petition. An intra court appeal was preferred thereagainst which has
been dismissed by a Division Bench of the said High Court by reason of the
impugned judgment and order dated 22nd February, 2006.
3. Mr. Basava Prabhu S. Patil, learned counsel appearing on behalf of the
appellant, principally raised two contentions before us :- 3 i) Having regard
to clause (3) of Regulation 41 of Karnataka State Financial Corporation (Staff)
Regulations, 1965 a Legal Advisor could not have been appointed as an Enquiry
and ii) In the absence of any provision in the Regulations unlike Rule 13 of
the Central Civil Service (Classification, Control and Appeal) Rules, 1965, the
Managing Director of the Corporation could not have transferred the proceeding
to the Board of Directors.
4. Ms. Kiran Suri, learned counsel appearing on behalf of the respondents,
on the other hand, urged :- i) Appointment of a Legal Advisor is permissible
under clause (3) of Regulation 41 of the Regulations; and ii) As a major
penalty was proposed to be imposed, the Board of Directors only was the
competent authority therefore in terms of the Regulations.
5. Before adverting to the rival contentions of the parties as noticed
hereinbefore, we may notice that the terms and conditions of appointment and
service of the staff of the Corporation are governed by the 1951 Act and 4 the
Regulations framed thereunder known as Karnataka State Financial Corporation
(Staff) Regulations, 1965 (for short the Regulations).
6. Officers of the Corporation are classified in three groups, namely Class
A; Class B and Class C. Appellant was a Category `A' officer.
Chapter IV of the Regulations deals with conduct, discipline and appeals.
Regulation 26 deals with the liability of an employee to abide by the
Regulations and the orders. Regulation 28 enjoins a duty upon the employee to
promote the interest of the Corporation. Regulation 41 deals with penalties
which reads as under :- "Without prejudice to the provisions of other
Regulations, an employee who commits a breach of the rules or Regulations of
the Corporation or who display negligence, inefficiency or indolence, or who
knowingly does anything detrimental to the interests of the Corporation or in
conflict with its instructions, or commits a breach of discipline or is guilty
of any other act of misconduct, shall be liable to the following penalties :
(b) delay or stoppage of increments or promotion including stoppage at an efficiency
bar, if any;
(c) reduction to a lower post or grade or to a lower stage in the time
(d) recovery from pay of the whole or part of any pecuniary loss caused to
the Corporation by negligence or breach of orders;
5 (e) dismissal.
(2) No employee shall be subjected to the penalties (a), (b), (c), (d) or
(e) of sub-regulation (1) except by an order in writing signed by an
appropriate disciplinary authority and no such order of the disciplinary
authority shall be passed without the charge or charges being formulated in
writing and given to the said employees 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. For this
purpose the disciplinary authorities will be as indicated at Appendix III of
the (Staff) Regulations, 1965 of KSFC.
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 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 causing
injustice to the employee in every case, where all or any of the requirements
of this sub-regulation are waived, the reasons therefor shall be recorded in
(3) The enquiry under this sub-regulation and the procedure with the
exception of the final order may be delegated to an officer of the Corporation
of a rank above that of the employee against whom the charges have been framed.
We may, however, note that according to the respondents, clause (3) of
Regulation 41 in fact reads as under :- 6 "41(3). For the purpose of
holding an enquiry into Articles of charges, Disciplinary Authority may itself
hold an enquiry or appoint an Inquiring Authority for the purpose from amongst
the offices of the Corporation of rank above that of the employee against whom
the charges have been framed or any authority as listed in the panel approved
for the purpose."
7. Before proceeding further we may also notice the relevant portions of
Appendix III enumerating the functions of the appointing authority and the
disciplinary authority etc., which read :- Name of Appointing Disciplinary
Penalty Appellate Office Authority that can Authority Authority be imposed I.
III IV Managing a.b. Board Group `A' Board Director Board c.d.e. Board
8. Appellant did not raise any objection in regard to the appointment of the
Enquiry Officer. He participated in the enquiry proceeding without any demur
whatsoever. A large number of witnesses were examined before the Enquiry
Officer. They were cross-examined. Appellant examined witnesses on her own
7 Learned Single Judge as also the Division Bench of the High Court opined
that the appellant has failed to establish that any prejudice has been caused
to her by reason of appointment of a Legal Advisor as an Enquiry Officer and as
the appellant has participated in the enquiry proceeding, she could not be
permitted to raise the said contention.
9. Mr. Patil, however, would submit that such a contention which goes to the
root of jurisdiction can be urged at any stage.
We do not agree. Appointment of an incompetent enquiry officer may not
vitiate the entire proceeding. Such a right can be waived. In relation thereto
even the principle of Estoppel and Acquiescence would apply.
10. In State Bank of India vs. Ram Das : (2003) 12 SCC 474 this Court held :
"It is an established view of law that where a party despite knowledge
of the defect in the jurisdiction or bias or malice of an arbitrator
participated in the proceedings without any kind of objection, by his conduct
it disentitles itself from raising such a question in the subsequent
proceedings. What we find is that the appellant despite numerous opportunities
made available to it, although it was aware of the defect in the award of the
umpire, at no stage made out any case of bias against the umpire. We,
therefore, find that the appellant cannot be permitted to raise the question of
bias for the first time before this Court."
11. There are questions and questions in regard to the jurisdictional
issues. An authority may lack inherent jurisdiction in which case the order
passed would be a nullity but he may commit a jurisdictional error while
exercising jurisdiction. The legal rights conferred upon the employees in this
behalf may be different under different statutes. A legal admission under the
common law is not debarred for acting as an enquiry officer.
Even in relation to applicability of the principles of natural justice,
breaches whereof would ordinarily render the decision nullity, the courts have
been applying the prejudice doctrine to uphold the validity thereof.
We are, however, not unmindful of the legal principle laid down in Vitarelli
vs. Seaton : (1959) 359 US 535 which has been noticed in Ramana Dayaram Shetty
vs. International Airport Authority : (1979) 3 SCC 489 stating :- "10.
Now, there can be no doubt that what para (1) of the notice prescribed was a
condition of eligibility which was required to be satisfied by every person
submitting a tender. The condition of eligibility was that the person
submitting a tender must be conducting or running a registered IInd Class hotel
or restaurant and he must have at least 5 years' experience as such and if he
did not satisfy this condition of eligibility, his tender would not be eligible
for consideration. This was the standard or norm of eligibility laid down by
Respondent 1 and since the Respondents 4 did not satisfy this standard or norm,
it was not competent to Respondent 1 to entertain the tender of Respondents 4.
It is a well-settled rule of administrative law that an executive authority
must be rigorously held to the standards by which it professes its 9 actions to
be judged and it must scrupulously observe those standards on pain of
invalidation of an act in violation of them. This rule was enunciated by Mr
Justice Frankfurter in Viteralli v. Saton1 where the learned Judge said:
"An executive agency must be rigorously held to the standards by which
it professes its action to be judged .... Accordingly, if dismissal from
employment is based on a defined procedure, even though generous beyond the
requirements that bind such agency, that procedure must be scrupulously
observed .... This judicially evolved rule of administrative law is now firmly
established and, if I may add, rightly so. He that takes the procedural sword shall
perish with the sword."
But in the said decisions, applicability of the prejudice doctrine was not
considered being not necessary to do so. Jurisdictional issue should be raised
at the earliest possible opportunity. A disciplinary proceeding is not a judicial
proceeding. It is a domestic tribunal. There exists a distinction between a
domestic tribunal and a court. Appellant does not contend that any procedure in
holding the enquiry has been violated or that there was no compliance of
principles of natural justice.
12. This Court in Union of India vs. S. Vinodh Kumar : (2007) 8 SCC 100 has
held :- "18. It is also well settled that those candidates who had taken
part in the selection process knowing fully well the procedure laid down
therein were not entitled to question the same."
10 13. Reliance has been placed by Mr. Patil on Central Bank of India vs. C.
Bernard : (1991) 1 SCC 319 wherein this Court in a case of disciplinary
enquiry allowed the plea of incompetence on the part of the disciplinary authority
to be raised for the first time before the High Court, stating :- "9.
Lastly, Shri Shetye submitted that in any event the respondent succeeded in
getting the order of punishment quashed on a mere technicality and that too on
the contention belatedly raised before the High Court for the first time and,
therefore, the High Court was in error in directing payment of all
consequential benefits. We think there is merit in this contention. If the
objection was raised at the earliest possible opportunity before the Enquiry
Officer the appellant could have taken steps to remedy the situation by
appointing a competent officer to enquire into the charges before the
respondent's retirement from service. It is equally true that the penalty has
not been quashed on merits. On the contrary, if one were to go by the charge
levelled against the respondent and the reply thereto one may carry the
impression that the respondent had made the claim on the basis of the fake
receipt; whether the respondent himself was duped or not would be a different
matter. The fact, however, remains that the impugned order of punishment has to
be quashed not because the merits of the case so demand but because the
technical plea of incompetence succeeds."
(Emphasis supplied) However, therein also all consequential benefits were
not given. In that case the Enquiry Officer had no jurisdiction at all. Even
the defecto doctrine could not be applied as he was not the holder of the
office but merely an ex-employee, who could not have been appointed as an
14. We may at this stage also notice two other decisions of this Court
whereupon reliance has been placed by Mr. Patil. In Union of India vs. Tulsiram Patel : (1985) 3 SCC 398 this Court held :
"57. The question came to be reconsidered by a larger Bench of seven
Judges in Moti Ram Deka case. While referring to the judgment of the majority
in Babu Ram Upadhya case the Court observed as follows (at pp. 731-2):
"What the said judgment has held is that while Article 310 provides for
a tenure at pleasure of the President or the Governor, Article 309 enables the
Legislature or the executive, as the case may be, to make any law or rule in
regard, inter alia, to conditions of service without impinging upon the
overriding power recognised under Article 310. In other words, in exercising
the power conferred by Article 309, the extent of the pleasure recognised by
Article 310 cannot be affected, or impaired. In fact, while stating the
conclusions in the form of propositions, the said judgment has observed that
the Parliament or the Legislature can make a law regulating the conditions of
service without affecting the powers of the President or the Governor under
Article 310 read with Article 311. It has also been stated at the same place that
the power to dismiss a public servant at pleasure is outside the scope of
Article 154 and, therefore, cannot be delegated by the Governor to a
subordinate officer and can be exercised by him only in the manner prescribed
by the Constitution. In the context, it would be clear that this latter
observation is not intended to lay down that a law cannot be made under Article
309 or a rule cannot be framed under the proviso to the said article
prescribing the procedure by which, and the authority by whom, the said
pleasure can be exercised. This observation which is mentioned as proposition
number (2) must be read along with the subsequent propositions specified as
(3), (4), (5) and (6).
The only point made is that whatever is done under Article 309 must be subject
to the pleasure prescribed by Article 310."
12 In Rattan Lal Sharma vs. Managing Committee, Dr. Hari Ram (Co- education)
Higher Secondary School : (1993) 4 SCC 10 it was held :
"But if the plea though not specifically raised before the subordinate
tribunals or the administrative and quasi- judicial bodies, is raised before
the High Court in the writ proceeding for the first time and the plea goes to
the root of the question and is based on admitted and uncontroverted facts and
does not require any further investigation into a question of fact, the High
Court is not only justified in entertaining the plea but in the anxiety to do
justice which is the paramount consideration of the court, it is only desirable
that a litigant should not be shut out from raising such plea which goes to the
root of the lis involved."
The said decisions, to our mind, are not applicable to the fact of the
15. Appellant himself has quoted the said Regulation which was corrected
merely upto 31st October, 1991. On the other hand, Ms. Suri has produced the
Regulation which is said to be applicable at the relevant point of time, in
terms whereof not only an officer of the Corporation but also any authority as
listed in the panel approved for the purpose could have been appointed as an
13 However, the Regulation, which was produced by Ms. Suri is corrected upto
1st April, 2002, but it is not clear as to whether the necessary amendment has
been carried out prior to 14th July, 1996 or not. We hope that the said
assertion of the learned counsel is correct. We are, however, in this case
proceed on the basis that Regulation 41(3) remained unchanged and according to
learned counsel in terms of the Regulation which was prevalent at the relevant
point of time, an outsider could have been appointed as the Enquiry Officer.
16. In Central Bank of India (supra) also this Court held that an Enquiry
Officer need not be an officer of the Bank as even a third party can be
appointed an Enquiry Officer to enquire into the conduct of an employee.
What was, however, emphasised was that a non-official cannot act as a
disciplinary authority and pass an order of punishment against the delinquent
employee. It is in that view of the matter it was held that a retired employee
could not act as a disciplinary authority.
17. We may, however, notice that in a case of this nature where appointment
of the Enquiry Officer may have something to do only for carrying out the
procedural aspect of the mater, strict adherence to the Rules may not be
insisted upon. Superior courts in a case of this nature may not 14 permit such
a question to be raised for the first time. (See - Sohan Singh and others vs.
The General Manager, Ordnance Factory, Khamaraia, Jabalpur and others : AIR
1981 SC 1862).
18. Prejudice doctrine, in our opinion, may also be applied in such a
contingency. We, therefore, are of the opinion that the first contention of Mr.
Patil has no merit.
19. Submission of Mr. Patil that the Managing Director could not have
directed the proceeding to be placed before the Board, in our opinion, has
equally no merit. Appointing authority of Class `A' Officers is the Board.
Managing Director is the disciplinary authority only in respect of minor
punishments. When a major punishment is proposed to be imposed, the Board of
Directors alone will have the jurisdiction to consider the gravity of the
alleged misconduct so as to enable it to pass an appropriate order. It is idle
to contend that had Managing Director passed an order, an appeal could have
been preferred thereagainst. If the entire Board is the appropriate authority
for taking a decision, it is only that authority which was required to take
decision and not any other. (See Indian Airlines Ltd. vs. Prabha D, Kanan :
(2006) 11 SC 67).
20. For the said purpose an express provision in the Regulation was not
imperative. Managing Director of the Corporation initiated a proceeding but he
could not impose a major penalty and in that view of the matter he will have
the incidental power to place the findings of the Enquiry Officer before the
Board. Such an incidental power must be held to be existing with all the
statutory authorities. Absence of any Rule as is obtaining in Rule 13 of the
CCS (CCA) Rules would not, in our opinion, vitiate the proceeding.
21. For the reasons aforementioned the impugned judgment does not warrant
any interference. The appeal fails and is dismissed accordingly.
There shall, however, be no order as to costs.
( S.B. SINHA ) ................................J.