Delhi Development Authority Vs. Skipper
Construction Co. (Pvt.) Ltd. & Ors  Insc 469 (13 November 2002)
C. Banerjee & Shivaraj V. Patil. Banerjee, J.
Skipper Constructions (P) Ltd. was incorporated on 14th February, 1986 to undertake development and construction of
commercial and residential complexes. The activity is generally financed from
advances/deposits from prospective buyers.
has had five other associates : Skipper Tower Private Limited; Skipper Builders
Private Limited; Skipper Sales Private Limited; Skipper Properties Private
Limited; and Anand Construction (Delhi) Private Limited.
contextual facts depict that in an auction held on 8th October, 1980 in respect of the plot of land in Jhandewalan, the bid of
Rs.982 lacs offered by Skipper Constructions was accepted by the Delhi
Development Authority (DDA herein). The Company had deposited Rs.245.75 lacs on
the date of auction and the balance amount of Rs.736.25 lacs was required to be
deposited within 90 days. The records depict that the Company was able to raise
a sum of Rs.645.66 lacs from the flat owners in stages, out of which Rs.583.25 lacs
were paid to the DDA towards the cost of the land. The DDA, however, had agreed
to recover the balance amount of Rs.398.75 lacs together with interest at the
rate of 18% per annum amounting to Rs.392.61 lacs accumulated up to the end of
year 1985 in five equal instalments in 2-1/2 years and delivered possession of
the land against bank guarantee for the like amount.
Company accordingly approached the New Bank of India, Tolstoy Marg Branch in January 1986 with the request for
issuance of bank guarantee of Rs.7.90 crores to be executed in favour of the
DDA. The said guarantee was required to be given as the cost of land was not
paid in full by the Company to the DDA. The Company proposed to construct the
flats on a portion of the Jhandewalan Tower, New Delhi.
facts further depict that on receipt of the letter dated 23rd January, 1986
from the Skipper Company, the Tolstoy Marg Branch of New Bank of India
recommended the facility of having the bank guarantee sanctioned by charging 1%
commission per annum on diminishing balance of half yearly rests together with
a margin of 15% in the form of FDR main security by equitable mortgage of
property No.3, Aurangzeb Road, New Delhi and the lien over unsold space in Jhandewalan
Tower amounting to Rs.676.09 lacs along with collateral security of counter
guarantee of the Company and personal guarantee of the Directors Tejwant Singh
and Harpreet Singh having net means of Rs.2,78,000/- and Rs.2,51,706/-
factual score further depicts that the application of the party for issue of
guarantee was duly received by the Head Office and after initial quibbles, the
proposal was finally sanctioned by the Board of New Bank of India and the limit was enhanced from
Rs.7.90 crores to Rs.8.70 crores.
role played by the bank officials, however, did not find favour with this Court
and without much of a narration on the factual score since the matter is kept
pending in this Court for quite some time, it would be worthwhile only to note
that liberality in advancement of loans and bank guarantees prompted this Court
to have the matter inquired into by a sitting Judge of the High Court.
for our purpose, we are concerned with the Report as detailed out by Justice Saharya,
a former Judge of the Delhi High Court and a former Chief Justice of Punjab and
Haryana High Court.
however, the issue was examined by the two Deputy Governors of the Reserve Bank
of India relating to the question on the issuance of the guarantee for and on
behalf of Skipper Constructions by the New Bank of India and Canara Bank.
Report of the Governors stands out to be singularly singular in its vagueness
and we do think it fit, however, to put on record relevant extracts of the
In regard to the conspiracy, the persons referred to represent different
interests and constituencies. There is no clear evidence that there was any
communication amongst them in the matter nor was there any concerted action
apparent. In fact, there has been resistance with some of them at different
points of time, to the whole proposal. There is, therefore, no evidence beyond
a remote suspicion of any conspiracy.
The question of loss to the banks is extremely critical because neither malafides
nor personal gains have been established. Hence further action can be supported
only on the basis of crystallisation of loss. The properties under dispute are
still under examination in the courts. PNB is pursuing the matter in various
judicial fora. At this stage, therefore, it is not possible to assess whether a
loss would occur and if it occurs, what would be the extent of loss.
Responsibility of the CMDs & Board Directors 6.28 As regards the relative
role of the persons referred to, the matter has been dealt extensively in the
context of analysing the statements made by them.
banks' Boards as institutions have been found to be not actively involved
though the Board of New Bank of India has a greater responsibility in the matter. Hence personal
responsibility cannot be fixed in the case of seven (7) members of the Board
referred to viz. Smt. T.R. Sahni, S/Shri Sudarshan Lal, S.S. Ranade, J.P. Awasthi,
J.K. Sawhney, Dr. M.R. Kotdawala and Shri D. Seetharama.
respect of CMDs, the role of Canara Bank being a participant rather than a lead
bank, there is no evidence to show that there was any act of omission or
commission on the part of late Shri B. Ratnakar in this regard and E.C. would
not hold him responsible.
primary responsibility for initiating the case, considering it, taking it
repeatedly before the Board, getting it approved, following it up at the
implementation stage in whatever manner that happened should squarely be placed
on the then CMD of the New Bank of India (viz. Shri R.C. Suneja).
action can justifiably be contemplated once the loss to the bank is established
and crystallized." It is on the basis of the Report of the Deputy
Governors of the Reserve Bank of India that Canara Bank officials as well wanted to put on record a clean chit
to late Shri B. Ratnakar and the only person in terms of the report of the
Deputy Governors responsible for financial irregularities seems to be R.C. Suneja.
of Suneja, however, in the affidavit had been a complete denial and a categoric
denial as to the existence of any procedural illegality neither any malfeasance
or misfeasance stand out to be noticed by the scrutiny of account by the two
Deputy Governors of the Reserve Bank of India. The Board itself sanctioned
guarantee upon proper inquiries being made and Mr. Suneja is not the only
person in the Board who was responsible for the grant and it is in this context
the Report stands contradicted by Mr. Suneja recording therein that no
individual responsibility can be foisted on to the latter as otherwise it would
be travesty of justice and to seek a scapegoat in Mr. Suneja. We do find some
justification in such a statement why alone and not other members of the Board
including the representatives of the Reserve Bank of India the answer seems to be delightfully
vague in the two Deputy Governors' Report.
Commission did go into the issue and indicated in a tabular column the norms
required to be followed when a bank guarantee is issued and the status in
respect of its compliance.
significant finding in the report is to be found wherein it is clear that the
Board of Directors of the New Bank of India had specifically declined on
13.3.1986 the proposal of giving Skipper a bank guarantee and in fact that
meeting was a follow-up of an earlier Board meeting of 18.2.1986 where also the
Board had not been too enthusiastic about the proposal. However suddenly in the
meeting of 17.3.1986 the Skipper case rose from the dead like a phoenix and the
matter was reconsidered when the same was not even on the agenda.
report indicates further that there were several lacunae in terms of
supervision by intermediary authorities such as Regional Office and also wrong
forms were used in the transaction.
inquiring into the role of the individual officers and the members of Board the
Commission comes to a finding that there was complete lack of prudence on the
part of the officials.
the Commission comes to a definite finding after discussing the role played by
the various officers at different levels in the hierarchy of the bank as follows
have no hesitation to conclude that the transaction from its very inception was
unsafe. It was not adequately secured. It was not profitable. It was,
therefore, not prudent for the two banks to get into it. I have also no
hesitation to conclude that the concerned officials of the said two banks did
not act diligently or prudently in extending the facility to the Company."
In fine, the report concluded as below :
the two Banks granted the facility of Bank Guarantee in violation of statutory
norms as well as established practices and procedures;
that Mr. R.C. Suneja, Chairman-cum-Managing Director of the New Bank of India
while holding public office in fiduciary capacity was the prime functionary,
who, intentionally, fraudulently and to further the interests of the Company
played a major role in the grant of the facility thereby defrauding the bank and
causing it huge losses;
that other functionaries of the New Bank of India as named in Issue No.2
violated the established norms and procedure in grant of the facility as well
as non-fulfillment of the conditions laid down in the Bank Guarantee;
Mr. B.R. Ratnakar, Chairman-cum-Managing Director, Canara Bank, intentionally
and with knowledge that sanction of the proposal was neither in consonance with
the norms nor was it for the benefit and in the interest of the Bank, involved
the Bank in the transaction;
that the other functionaries of the Canara Bank as named in Issue No.2 directly
assisted the Company to get participation of Canara Bank in the unprofitable
transaction and did not ensure fulfillment of the conditions contained in the
it stands established that the two banks intentionally and with full knowledge
sacrificed all norms, caution, care and prudence in granting the facility;
the concerned functionaries of the Reserve Bank of India did not take due notice
of the quarterly/half yearly reports submitted by its nominee Directors and
therefore due to their inaction corrective steps could not be initiated within
that because of the inaction of the senior functionaries of the Department of
Banking in dealing with the allegations/complaints against Mr. R.C. Suneja,
initiation of corrective measures got delayed to a point when substantial
damages had already been caused; and
that the manner of scrutiny of proposal of the Company, the grant of the
facility, the monitoring of the conditions of the facility, inaction on the
reports by the RBI Nominee Director and inaction on the complaints made to
Government especially the one made by 28 sitting M.Ps. establishes that things
were "rotten" and stinking not only in the two Banks but all over.
indeed essential to note that in spite of concluding that there were in fact
intentional acts on the part of the officials the Commission did not, however,
feel it expedient to note or quantify the amount of misfeasance and malfeasance
on the part of the bank officials.
this Court in its decision pertaining to an issue of more or less similar
nature did hear the matter in great length in the matter of proposal to reopen
the quantum of punishment imposed in the departmental inquiry held on certain
officers of the Delhi Development Authority who were connected with the land of
DDA allotted to Skipper Construction Company. It was proposed to consider
imposition of higher degree of punishment in view of the role of those officers
since the Court had no occasion to examine whether the right punishments were
awarded to the officers in accordance with the known principles of law or
whether the punishment required any upward revision. It is in the light of the
above situation this Court by its order dated 17.11.2000 and upon reliance to
the Wednesbury principles stated the law to be as below :
. where administrative action is challenged under Article 14 as being
discriminatory equals are treated unequally or unequals are treated equally,
the question is for the Constitutional Courts as primary reviewing courts to
consider correctness of the level of discrimination applied and whether it is
excessive and whether it has a nexus with the objective intended to be achieved
by the administrator. Here the court deals with the merits of the balancing
action of the administrator and is, in essence, applying
"proportionality" and is primary reviewing authority.
where an administrative action is challenged as "arbitrary" under
Article 14 on the basis of Royappa (E.P. Royappa v. State of T.N. 1974(4) SCC
3) (as in cases where punishments in disciplinary cases are challenged), the
question will be whether the administrative order is "rational" or
"reasonable" and the test then is the Wednesbury test. The courts
would then be confined only to a secondary role and will only have to see
whether the administrator has done well in his primary role, whether he has
acted illegally or has omitted relevant factors from consideration or has taken
irrelevant factors into consideration or whether his view is one which no
reasonable person could have taken. If his action does not satisfy these rules,
it is to be treated as arbitrary. [In G.B. Mahajan v. Jalgaon Municipal Council
(1991 (3) SCC 91 at 111)] Venkatachaliah J. (as he then was) pointed out that
"reasonableness" of the administrator under Article 14 in the context
of administrative law has to be judged from the stand point of Wednesbury
rules. In Tata Cellular v. Union of India (1994 (6) SCC 651 at 679-80), Indian
Express Newspapers Bombay (P) Ltd. v. Union of India (1985 (1) SCC 641 at 691),
Supreme Court Employees' Welfare Assn. v. Union of India (1989 (4) SCC 187 at
241) and U.P. Financial Corpn. v. Gem Cap (India) (P) Ltd. (1993 (2) SCC 299 at
307) while judging whether the administrative action is "arbitrary"
under Article 14 (i.e. otherwise then being discriminatory), this Court has
confined itself to a Wednesbury review always.
when administrative action is attacked as discriminatory under Article 14, the
principle of primary review is for the courts by applying proportionality.
However, where administrative action is questioned as "arbitrary:"
under Article 14, the principle of secondary review based on Wednesbury
and punishments in service law The principles explained in the last preceding
paragraph in respect of Article 14 are now to be applied here where the
question of "arbitrariness" of the order of punishment is questioned
under Article 14.
this context, we shall only refer to these cases.
Thakur v. Union of India (1987 (4) SCC 611) this Court referred to
"proportionality" in quantum of punishment but the Court observed
that the punishment was "shockingly" disproportionate to the
misconduct proved. In B.C. Chaturvedi v. Union of India (1995 (6) SCC 749) this
Court stated that the Court will not interfere unless the punishment awarded
was one which shocked the conscience of the court. Even then, the court would
remit the matter back to the authority and would not normally substitute one
punishment for the other. However, in rare situations, the court could award an
alternative penalty. It was also so stated in Ganayutham (Union of India v. Ganayutham
1997 (7) SCC 463).
from the above principles and decided cases, it must be held that where an
administrative decision relating to punishment in disciplinary cases is
questioned as "arbitrary" under Article 14, the court is confined to Wednesbury
principles as a secondary reviewing authority. The court will not apply
proportionality as a primary reviewing court because no issue of fundamental
freedoms nor of discrimination under Article 14 applies in such a context. The
court while reviewing punishment and if it is satisfied that Wednesbury
principles are violated, it has normally to remit the matter to the
administrator for a fresh decision as to the quantum of punishment. Only in
rare cases where there has been long delay in the time taken by the
disciplinary proceedings and in the time taken in the courts, and such extreme
or rare cases can the court substitute its own view as to the quantum of
punishment." In fine, however, this Court in the last noted decision of
which one of us (U.C. Banerjee, J.) was a party concluded :
the result, we do not propose to pursue the matter further and we drop further
proceedings. The show-cause notice is disposed of accordingly." The
situation presently is slightly different. The Administrative Authority did not
feel it expedient to take any step or steps as against the erring officials and
discharged its obligation by recording the above.
Report of the Deputy Governors as regards the relative role of persons who have
in fact dealt with the matter is rather significant. The clean chit has been
made available to Smt. T.R. Sahni, S/Shri Sudarshan Lal, S.S. Ranade, J.P. Awasthi,
J.K. Sawhney, Dr. M.R. Kotdawala and D. Seetharama and the CMD of the New Bank
of India has been found to be squarely responsible for such a mess up and
having irregularity obviously the decision was not of one individual but of the
body in its entirety. It is thus extremely significant as to how the
responsibility stands foisted on to one individual rather than a body of
persons who had taken up on themselves to sanction the limit or for issuance of
thus are not in a position to record our concurrence with report of the Deputy
Governors of the Reserve Bank of India. Undue burden stands foisted on to one
particular individual, whereas others have not been assigned any role which
runs counter obviously to the entire banking practice. We are not trying to
exclude Mr. Suneja but he cannot be held to be the only responsible officer for
a transaction of this magnitude :
as noticed above, it is not the Managing Director only who takes the decision
but the Board itself and when that be the usual practice, this anxiety to let
off others does not stand to reason and hence we find some justification in the
criticism levelled by the learned Advocate appearing for Mr. Suneja. It seems
the two Governors of the Reserve Bank of India have been proceeding more on
ethical value rather than practicability of the situation ethical since in
common and popular acceptation no one ought to speak ill of a dead man. Canara
Bank has been let off absolutely free the only reason available that the latter
is not a lead bank, rather a participant bank : a participant bank thus can do
no wrong if that be the methodology of working of the banking structure of the
country it is a sad day for the entire banking industry. We, however, refrain
ourselves from making any further comments thereon by reason of the proposed
order, which we record hereinbelow.
In our view, the matter requires a further look by a functionary of the State
for the purposes of ascertainment of the quantum of loss suffered by the bank
or banks by reason of malfeasance and misfeasance of the concerned officials of
the public sector banks, in particular that of Canara Bank and New Bank of
India, irrespective of factum of death or retirement. The matter in issue is to
be dealt with and be considered by the Central Vigilance Commission for the
purposes aforesaid. We are aware of the factum of there being a Report of the
Central Vigilance Commission, but unfortunately this Court had not had the
privilege of having a detailed Report in the matter by reason of certain
technicality. We do feel it expedient on that score to record that the Central
Vigilance Commission shall investigate the matter in terms of this order as an
independent agency of the country without being inhibited by any restraint or
any other Report or Reports for the purposes of assessment of the situation. It
is in this context, however, that the Commission should also take note of the
Report of the Deputy Superintendent of Police, CBI, New Delhi.
observations made in this order are confined to the disposal of the objection
pertaining to Saharya Commission's Report being a part of I.A. No.56, which
stands disposed of earlier.
are not to be taken as any expression on merits affecting the investigation to
be made by the Central Vigilance Commission pursuant to this order.
Commission is however further directed to file a present status Report
pertaining to its earlier Report dated 1st July, 1992 by Shri Harinder Singh,
Director, Central Vigilance Commission, bearing No.V25/BNK 19.
Registry is directed to communicate this order to the Central Vigilance
Commission so as to enable the Commission to complete the inquiry within a
period of 18 months and file a Report in a sealed cover before this Court.