Supreme Court Upholds Disciplinary Action Against Bank Manager For Lapses In Loan Approval; Rejects Defence Of Following Superiors' Instructions

The Supreme Court recently set aside the order of a division bench of the Delhi High Court that had quashed the disciplinary action initiated by Bank of India (later amalgamated with Punjab National Bank) against a delinquent Bank Manager. Disciplinary action was initiated against the respondent for sanctioning a loan which later became a Non-Performing Asset (NPA) causing huge losses to the bank.

The Apex Court rejected the defence of the Bank Manager that he was only following the instructions of his superiors and found that when he recommended the loan, he failed to properly evaluate the deficiencies in the loan proposal.

A Division Bench of Justice Hrishikesh Roy and Justice Sanjay Karol observed

“..the only contention raised is that he did it on instructions of the Executive Director and the CMD who had the ultimate authority to sanction loan. On this, it cannot be overlooked that the delinquent as Bank’s Deputy General Manager had recommended the loan. The deficiencies in the loan proposals were not appropriately evaluated at the time of recommendation and this was the ground on which his lapses were found to have been proved, by the Inquiry Officer.”

The Apex Court also observed that the Bank Manager had not challenged the findings against him and had only taken the defence that he was merely following the instructions of his superiors.

The Single Bench of the High Court had upheld the Bank’s disciplinary action against the delinquent, while the Division Bench had set it aside holding that the sanctioning of the loan was a collective decision of the superiors and no action had been taken against them.

Adv. Rajesh Kumar Gautamhe appearing for the bank pointed out that there was a factual error in the assessment of the division bench as action has been taken against other officials involved in sanctioning the concerned loan as well.

Adv. Ambhoj Kumar Sinha appearing for the bank manager argued that he was singled out and made a scapegoat in the whole transaction. He also argued that he was made to suffer ‘double jeopardy’ as he was made to retire prematurely and was also dismissed from service. It was also pointed out that there was delay in initiating disciplinary action.

The Apex Court rejected the contention that the premature retirement of the Bank Manager amounted to double jeopardy. Since the disciplinary action was taken when the amalgamation with PNB was taking place, the Board of Directors of PNB had revised the age of superannuation of the employees of New Bank of India, in line with the employees of the PNB. The respondent was also considered for superannuation according to the policy of PNB and hence it was not a case of double jeopardy the Top Court concluded.

The Apex Court also held that the respondent Bank Manager could not be called a scapegoat in the transaction, as action had been initiated against other officials involved in the said loan approval as well.

With respect to the delay, the Supreme Court noted that loan was sanctioned in 1987 and disciplinary action was initiated in 1993. In this regard, the Apex Court stated that no time limit is prescribed under the Punjab National Bank Officer Employees (Conduct) Regulations, 1977 and the Punjab National Bank Officer Employees (Discipline & Appeal) Regulations, 1977 and hence it cannot be said that there was an inordinate delay in taking action against the respondent.

Case Title: Punjab National Bank V. M.L. Kalra (D) Thr. Lrs. & Anr. Civil Appeal No. 9917 Of 2011