Tracking Legal Developments.

Bank Officer's Dismissal for Misconduct Upheld by Gauhati High Court

Guwahati, India – The Gauhati High Court has dismissed an appeal filed by a former Branch Manager of the State Bank of India (SBI) challenging his "Removal from Service." A Division Bench, comprising the Honourable Chief Justice and Honourable Mr. Justice N. Unni Krishnan Nair , upheld the decision of a Single Judge, emphasizing the high standards of honesty and integrity required of bank officers and the employer's prerogative in cases of loss of confidence.

The judgment was delivered on March 6, 2025, in Case No. WA/132/2022, filed by K. Suanthang against the State Bank of India and its authorities.

Background of the Case

The appellant, K. Suanthang , while serving as Branch Manager at SBI's Lunglei Branch between 2004 and 2008, faced disciplinary proceedings initiated by a charge sheet issued on February 8, 2010. He was accused of gross irregularities in the sanction, disbursal, and follow-up of five housing loans. The charges included:

1. Not ensuring the delivery of sanction-cum-arrangement letters to loanees.
2. Not conducting pre-sanction surveys and post-disbursal inspections for the loans.
3. Forcing the five loanees to pay ₹86,000 each for buying HERBALIFE products and joining its membership.

These alleged actions were deemed a violation of Rule 68(2)(iv) (later cited as Rule 50(4) in the charges) and Rule 67(i) of the State Bank of India Officers Service Rules, indicating a failure to discharge duties with utmost devotion and diligence.

In his written statement (March 2, 2010), Mr. Suanthang denied forcing loanees into the HERBALIFE business but admitted to sanctioning loans without pre-sanction surveys due to the distance of residences from the branch and the loanees being government employees.

The inquiry officer found allegations 1 and 3 not proved but allegation 2 proved. However, the disciplinary authority disagreed with the finding on allegation 3, holding it proved based on the loanees' statements. Following representation and a personal hearing, the appointing authority imposed the penalty of "Removal from Service" on May 21, 2011. The appellant's internal appeal and review petition were subsequently rejected or returned. He then challenged these orders before a Single Judge of the High Court (WP(c)302/2014), which was dismissed on January 21, 2022, leading to the present intra-Court appeal.

Arguments Presented

Mr. S. Banik, counsel for the appellant, argued that the Single Judge failed to appreciate the evidence. He contended that allegation 1 was disproved by evidence showing loanees received letters, suggesting complainants' dishonesty. Regarding allegation 2, he argued that while admitted, it was minor, especially since the loans did not turn into Non-Performing Assets (NPA). For allegation 3 (HERBALIFE), he claimed it was perverse, lacking documentary evidence or eye-witnesses, and the disciplinary authority's disagreement note was vague. He asserted that even if the appellant was involved in HERBALIFE, it was unconnected to his official duties and did not warrant such a harsh penalty, which was disproportionate and should be reduced to allow for pensionary benefits, noting the appellant had retired during the proceedings.

Mr. H. Buragohain, Standing Counsel for SBI, countered that allegations 2 and 3 were established. He submitted that the appellant's conduct led to a loss of confidence by the bank authorities, which justified the penalty of "Removal from Service" for a Branch Manager. He argued that once confidence is lost, interference with the penalty is not warranted.

Court's Analysis and Findings

The Division Bench meticulously reviewed the charges and the findings of the disciplinary proceedings and the Single Judge.

The Court noted that Allegation 1 was indeed found not proved in the inquiry and required no further discussion.

Regarding Allegation 2 (lack of surveys/inspections), the Court held it established, primarily based on the appellant's own admission in his written statement and the inquiry finding confirming no entry in the relevant register.

For Allegation 3 (HERBALIFE), the Court observed that the appellant, in his written statement, "had not disputed the fact that he had asked the loanees to buy products from HERBALIFE." While he denied forcing them, the loanees' complaint alleged compulsion. The Court referenced the Single Judge's finding that there was no denial of involvement in the HERBALIFE business and that loanees joined after loan sanction. The Division Bench concluded, "the conclusion reached in the matter by the learned Single Judge that the appellant had misused his position, cannot be held to be erroneous," and held Allegation 3 established.

Legal Principles on Misconduct and Penalty

The Court emphasized the "higher standard of honesty and integrity" expected of bank officers, citing Chairman-cum-Managing Director, United Commercial Bank & ors. v. P. C. Kakkar (2003) 4 SCC 364 . This precedent highlights that protecting the bank's interests with utmost integrity and diligence is paramount, and acting without authority is misconduct, irrespective of financial loss.

The Bench also relied on Divisional Controller, Karnataka State Road Transport Corporation v. M. G. Vittal Rao (2012) 1 SCC 442 , which discusses "Loss of confidence" as a valid ground for dismissal. The principle holds that objective facts leading to a definite inference of apprehension regarding the employee's trustworthiness must be proved, and reinstatement is not mandated where confidence is lost.

Furthermore, citing a co-ordinate Bench decision in Bijoy Rajkhowa v. State Bank of India & ors. (2013) 2 GLR 6 , the Court reiterated that "Conduct of a bank employee must be above board... Compromise with doubtful integrity will not only erode the faith of the people... In such matters, quantum of misappropriation is immaterial the factum of misappropriation itself would justify the disciplinary action taken."

Applying these principles, the Court found that the established misconduct demonstrated that the bank had lost confidence in the appellant.

Conclusion on Proportionality

Addressing the argument of disproportionate penalty, the Court stated that the decision on penalty is within the domain and discretion of the disciplinary authority, guided by the nature and gravity of the charge, past conduct, responsibilities, and the discipline required.

"The allegations levelled against the appellant having been held to have been established and the misconduct as committed by him, being apparent, the penalty as imposed upon him, cannot be stated to be disproportionate to the proved misconduct," the judgment stated. The Court found no special circumstances warranting interference. It reiterated that it is not for the writ court to substitute a penalty deemed appropriate by the bank in a position of trust and confidence, noting that "The amount involved is immaterial, what matters much, is tarnishing the image of the Bank in the eyes of the valued customers and public."

Accordingly, finding no merit in the appeal and no reason to interfere with the Single Judge's decision, the Division Bench dismissed the writ appeal.