Supreme Court Reinstates SBI Employee’s Removal in Fraudulent Loan Case

The Supreme Court of India, in the case of State Bank of India & Others vs. B.R. Saini, ruled in favor of the State Bank of India (SBI) by reinstating the disciplinary action taken against its officer, B.R. Saini, for fraudulent loan transactions. The Court set aside the Punjab and Haryana High Court’s decision that had reinstated the employee, holding that procedural fairness was maintained in the disciplinary process and that the employee had been given sufficient opportunity to respond.

Background of the Case

The case concerned B.R. Saini, an officer of SBI working at the bank’s Chandigarh branch. He was charged with serious misconduct related to the fraudulent disbursement of loans. A detailed inquiry was conducted by the bank, which found him guilty of multiple violations, leading to his removal from service on January 22, 2000. Saini challenged his removal before the Punjab and Haryana High Court, which ruled in his favor, reinstating him into service. The bank subsequently appealed the decision before the Supreme Court.

Charges Against the Employee

Saini was accused of committing financial irregularities in loan disbursements. The specific charges against him included:

• Fraudulent Demand Loans: Saini sanctioned loans by forging signatures of depositors on term deposit receipts (TDRs).
• Manipulation to Evade Inspection: He closed certain demand loans before an inspection and reopened them on the same day to prevent scrutiny.
• Using Personal Accounts for Fraud: He liquidated fraudulent loans using proceeds from cheques deposited in his personal savings account.
• Misuse of Agricultural Cash Credit (ACC) Loans: He approved ACC loans based on forged signatures and without proper revenue records.
• Illegal Transfers: He routed fraudulent loan repayments through the accounts of junior employees, including a part-time sweeper.
• Cheque Manipulation: He purchased demand drafts (DDs) using his personal cheques without maintaining sufficient funds in his account.
• Unexplained Transactions: His personal account showed transactions far exceeding his known sources of income.

Bank’s Disciplinary Proceedings

An internal inquiry was conducted under Rule 68(2) of the State Bank of India Officers Service Rules. The Inquiry Officer found him guilty of five out of the eight charges. The Disciplinary Authority reviewed the inquiry report and also found sufficient evidence to hold Saini guilty. Since the Disciplinary Authority did not have the power to impose a major penalty, the case was referred to the Appointing Authority, which ultimately decided to remove Saini from service.

Petitioner’s (B.R. Saini’s) Arguments

Saini challenged his removal before the High Court, arguing that:

• He was not given a proper show-cause notice before the final penalty was imposed.
• The bank did not provide a second opportunity to explain his stance after the Disciplinary Authority disagreed with the Inquiry Officer’s findings.
• His removal was disproportionate to the alleged misconduct.

Respondent’s (SBI’s) Arguments

The State Bank of India defended its decision, stating that:

• Saini was given ample opportunities to respond at multiple stages of the inquiry process.
• The bank had followed the due process outlined in Rule 68(3) of the SBI Officers Service Rules, which required submission of the inquiry report before imposing penalties.
• Once the charges were proved, removal from service was the only appropriate penalty given the gravity of financial fraud.

High Court’s Ruling

The Punjab and Haryana High Court ruled in favor of Saini, stating that:

• The principles of natural justice required that Saini be given a second opportunity to respond before the final penalty was imposed.
• Even though the Inquiry Report was shared with him, a separate notice on the proposed punishment should have been issued.
• The removal order was thus set aside, and Saini was reinstated.

Supreme Court’s Observations

The Supreme Court, in a judgment delivered by Justice S.A. Bobde and Justice L. Nageswara Rao, disagreed with the High Court and reinstated Saini’s removal. Key observations included:

“There is no requirement under law that a second show-cause notice must be issued before imposing a penalty once the employee has been given a chance to respond to the Inquiry Report.”

Other key findings:

• The inquiry was fair and in compliance with SBI rules. Saini had received a copy of the Inquiry Report and had responded.
• The High Court misapplied the ruling in State Bank of India vs. Ranjit Kumar Chakraborty (2009), which required a second notice only where the delinquent employee was not given a chance to respond.
• Since Saini had already responded to the Inquiry Report, there was no additional procedural requirement.

Final Judgment

The Supreme Court ruled as follows:

• Allowed the appeal filed by SBI.
• Set aside the High Court’s ruling.
• Reinstated Saini’s removal from service.
• Clarified that a second notice is not mandatory if the employee has already been given an opportunity to respond to the Inquiry Report.

Impact of the Judgment

This ruling has major implications for employment law and disciplinary proceedings:

• Upholds procedural fairness: Confirms that once an employee has responded to an Inquiry Report, a second notice is unnecessary.
• Strengthens financial fraud deterrence: Reinforces strict consequences for bank officers involved in fraudulent transactions.
• Limits judicial interference: Prevents courts from overturning disciplinary actions that follow due process.
• Ensures consistency in labor law: Aligns disciplinary procedures with natural justice principles without unnecessary procedural delays.

The Supreme Court’s decision sets a precedent ensuring that disciplinary actions in the banking sector are upheld when due process has been followed, safeguarding the integrity of financial institutions.

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Download Judgment: State Bank of India vs B.R. Saini Supreme Court of India Judgment Dated 15-12-2017.pdf

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