Bank's Iron Fist Prevails: MP High Court Upholds Compulsory Retirement Despite Flawed Inquiry

In a nuanced ruling that underscores the high standards of integrity for bank officers, the High Court of Madhya Pradesh at Gwalior dismissed a writ petition by Sanjay Bansal, a former Scale-II Officer at Madhya Pradesh Gramin Bank's Morar Branch. Justice Ashish Shroti upheld the punishment of compulsory retirement imposed in 2016, even as the court found the underlying departmental inquiry process vitiated. This decision, delivered on May 4, 2026, reinforces that procedural lapses won't shield proven misconduct.

Loan Scandals and a Manager's Downfall

Sanjay Bansal's troubles began with irregularities in loan sanctions and disbursements at his Gwalior branch. A preliminary probe in 2014 uncovered lapses, leading to a 14-charge charge-sheet on May 27, 2015. An inquiry officer, S.L. Khandelwal, and presenting officer Deepak Joshi handled the proceedings. The disciplinary authority imposed compulsory retirement on November 30, 2016, after finding most charges proved. Bansal's appeal was dismissed in 2017, remanded by the court in 2022 for a speaking order, and rejected again on September 13, 2022—prompting this Article 226 petition.

The core disputes revolved around allegations of reckless lending, unexplained high-value transactions in Bansal's personal savings and overdraft accounts (totaling over Rs. 54 lakh from 2011-2015), and claims of a biased probe.

Petitioner's Plea: Vendetta, Not Justice

Bansal's counsel painted a picture of malice. Regional Manager K.U. Parate allegedly demanded gratification at his residence on July 11, 2014, and threatened inquiry when refused. An unscheduled audit followed, allegedly rigged to frame him. Bansal claimed key documents weren't supplied pre-inquiry, prejudicing his defense.

He hammered the inquiry's fatal flaw: the initial report was deemed unsatisfactory, prompting a "de-novo" directive without fresh evidence or notice to him. Citing State of U.P. v. Saroj Kumar Sinha (2010) 2 SCC 772, counsel argued the inquiry officer surrendered quasi-judicial independence to higher-ups, vitiating the process. Precedents like Sirpur Paper Mills Ltd. v. CWT (1970) 1 SCC 795 and State of U.P. v. Ram Prakash Singh (2025 SCC OnLine SC 891) backed claims of prejudice from unseen reports.

Bank's Counter: Habitual Violator Caught Red-Handed

Respondents flipped the script: Bansal was restrained from loans on June 16, 2014, for ignoring guidelines, then misbehaved at Parate's home—admitting fault and apologizing. The audit revealed serious lapses, justifying the charge-sheet. All procedural norms were followed, with opportunities for defense. They spotlighted Charge 13: suspicious deposits far exceeding salary, unexplained by Bansal.

Counsel invoked Union of India v. P. Gunasekaran (2015) 2 SCC 610 to limit judicial review—no re-appreciation of evidence. Parate's non-impleadment barred personal bias claims, per cases like I.K. Mishra v. Union of India (1997) 6 SCC 228.

Court's Verdict: Procedure Flawed, But Misconduct Stands

Justice Shroti dissected the issues methodically. Non-supply of some pre-charge-sheet documents caused no prejudice ( Union of India v. Alok Kumar , (2010) 5 SCC 349). Mala fides failed sans Parate as party.

The inquiry bombshell: respondents admitted remitting for a "de-novo" report as the first was "not rationale," without explanation or fresh evidence—impermissible, breaching the inquiry officer's impartial role ( Saroj Kumar Sinha ). "Directing the Inquiry Officer to submit a fresh report on the basis of the same set of evidence is impermissible and unacceptable in law."

Yet, the court refused to quash punishment. Charge 13 independently proved grave dishonesty: unexplained transfers, "customer insurance" deposits in personal accounts, lacking documentation. Bank officers must exemplify integrity ( Boloram Bordoloi v. Lakhimi Gaolia Bank , (2021) 3 SCC 806; U.P. SRTC v. Hoti Lal , (2003) 3 SCC 605). No interference warranted under P. Gunasekaran .

"Therefore, even though the report submitted by enquiry officer was found to have vitiated for the reasons recorded above, the ultimate punishment of compulsory retirement imposed on petitioner does not warrant interference in view of aforesaid discussion with regard to charge no.13."

This echoes reports like Even If Inquiry Is Vitiated, Punishment Can Stand If Misconduct Is Independently Established: MP High Court , highlighting the ruling's broader impact.

Key Observations from the Bench

  • On Inquiry Independence : "The role of an Inquiry Officer in a disciplinary inquiry is very important. He is expected to act as an impartial and independent adjudicator and is not supposed to act upon the dictates of higher authorities."

  • Prejudice Threshold : "Except stating that the documents were not supplied to him, the petitioner has failed to establish... he suffered prejudice."

  • Banker's Burden : "Being a senior officer of the Bank, the petitioner was expected to understand the meaning of routing of funds, other than his salary, from his personal accounts."

  • Punishment Rationale : "The finding on this charge itself is sufficient to justify the punishment of compulsory retirement on petitioner."

Ripple Effects: A Warning to Financial Custodians

The petition stands dismissed; Bansal's reinstatement bid fails. This precedent signals courts' reluctance to nullify penalties for procedural hitches if core misconduct—like fiduciary breaches—is irrefutably shown. For bankers handling public funds, it's a stark reminder: personal accounts under scrutiny demand unassailable proof, lest careers end abruptly.

Future cases may cite this to sustain punishments in vitiated inquiries, prioritizing public trust over process purity.