# CASE DETAILS STATE BANK OF INDIA v. A.G.D. REDDY

- **Citation:** 2023 INSC 766
- **Court:** Supreme Court of India
- **Decided:** 2023-08-24
- **Case number:** Civil Appeal No. 11196 of 2011
- **Bench:** J. K. Maheshwari, K. V. Viswanathan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/case-details-state-bank-of-india-v-a-g-d-reddy-36293
- **Pages:** 22

## Headnote

Issue for consideration: Whether the Division Bench and the Single
Judge of the High Court were justifi ed in quashing the order passed by the
Appointing Authority imposing a punishment of "reduction in basic pay to
the lowest stage in Scale-I" as envisaged under Rule 49 (e) of the State Bank
of India (Supervising Staff ) Service Rules and treating the period spent by
the delinquent offi cer under suspension from 18.08.1990 till the date of his
reinstatement as suspension only.
Service Law - Misconduct - Commission of certain acts of
misconduct by the employee while working as Field Offi cer of the
Bank - Disciplinary proceedings - Appointing Authority imposed
punishment of reduction in basic pay to the lowest stage in Scale-I
and treated the period spent by the delinquent officer under
suspension till the date of his reinstatement as suspension only -
Single Judge and the Division Bench of the High Court quashed the
order - Correctness:
Held: Both the Single Judge and the Division Bench of the High Court
erred in interfering with the fi ndings of the Enquiry Offi cer, the decision of
the Disciplinary Authority, and the order of the Appointing Authority and
the Appellate Authority - Thus, the order of the Single Judge and that of the
Division Bench set aside - State Bank of India (Supervising Staff ) Service
Rules - r. 49 (e).[Para 41]
Service Law - Disciplinary proceeding - Onus of proof:
652
653
 Held: In a disciplinary proceeding, the burden of proof depends upon
the nature of the charge and the nature of the explanation put forward by
the employee - In a given case, the burden may be shifted to the employee
depending upon the explanation - On facts, the specifi c charge was with
regard to a series of named units, periodical inspections were not carried
out - It was after the production of the inspection register that the defence
representative of the employee stated, that they would respond after going
through the said documents - No response was forthcoming - Neither from
the records nor at the hearing it was demonstrated as to how the charge of
failure to conduct the inspection was countered by the employee - Records
sought being made available, the onus did shift to the employee to show
that the charge was untenable - As regards the failure to conduct periodical
inspection, it cannot be said that the fi nding of the Enquiry Offi cer is on a
mis-reading of the evidence or that the records of the inspection of units
were part of the records that could be possibly misplaced or that a fi nding
was based on some stray sentence and personal knowledge was imported
by the Enquiry Offi cer de hors the record. [Paras 22-25]
Service Law - Disciplinary proceedings - Scope of judicial review:
Held: Scope of judicial review against a departmental enquiry
proceeding is very limited - It is not in the nature of an appeal and a review
on merits of the decision is not permissible - Scope of the enquiry is to
examine whether the decision-making process is legitimate and to ensure
that the fi ndings are not bereft of any evidence - If the records reveal that the
fi ndings are based on some evidence, it is not the function of the court in a
judicial review to re-appreciate the same and arrive at an independent fi nding
on the evidence - On facts, it could not be said that the Enquiry Report,
the fi ndings of the Disciplinary Authority and the order of the Appointing
Authority are based on no evidence or are perverse - Even if the report
insofar as the aspect of non-submission of control form, the transgression
of the area of operation and non-declaration of the immovable property and
certain other charges is avoided, the order of penalty can be sustained -
Aspects of failure to conduct periodic inspection and the negligence in not
stipulating the taking of immovable property as collateral security in spite
of the party off ering it, constrains to conclude that there was material on
record for the appellant to pass the order of penalty

## Text

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[2023] 11 S.C.R. 652 : 2023 INSC 766
CASE DETAILS
STATE BANK OF INDIA
v.
A.G.D. REDDY
(Civil Appeal No. 11196 of 2011)
AUGUST 24, 2023
[J. K. MAHESHWARI AND K. V. VISWANATHAN, JJ.]
HEADNOTES
Issue for consideration: Whether the Division Bench and the Single
Judge of the High Court were justifi ed in quashing the order passed by the
Appointing Authority imposing a punishment of "reduction in basic pay to
the lowest stage in Scale-I" as envisaged under Rule 49 (e) of the State Bank
of India (Supervising Staff ) Service Rules and treating the period spent by
the delinquent offi cer under suspension from 18.08.1990 till the date of his
reinstatement as suspension only.
Service Law - Misconduct - Commission of certain acts of
misconduct by the employee while working as Field Offi cer of the
Bank - Disciplinary proceedings - Appointing Authority imposed
punishment of reduction in basic pay to the lowest stage in Scale-I
and treated the period spent by the delinquent officer under
suspension till the date of his reinstatement as suspension only -
Single Judge and the Division Bench of the High Court quashed the
order - Correctness:
Held: Both the Single Judge and the Division Bench of the High Court
erred in interfering with the fi ndings of the Enquiry Offi cer, the decision of
the Disciplinary Authority, and the order of the Appointing Authority and
the Appellate Authority - Thus, the order of the Single Judge and that of the
Division Bench set aside - State Bank of India (Supervising Staff ) Service
Rules - r. 49 (e).[Para 41]
Service Law - Disciplinary proceeding - Onus of proof:
652
653
 Held: In a disciplinary proceeding, the burden of proof depends upon
the nature of the charge and the nature of the explanation put forward by
the employee - In a given case, the burden may be shifted to the employee
depending upon the explanation - On facts, the specifi c charge was with
regard to a series of named units, periodical inspections were not carried
out - It was after the production of the inspection register that the defence
representative of the employee stated, that they would respond after going
through the said documents - No response was forthcoming - Neither from
the records nor at the hearing it was demonstrated as to how the charge of
failure to conduct the inspection was countered by the employee - Records
sought being made available, the onus did shift to the employee to show
that the charge was untenable - As regards the failure to conduct periodical
inspection, it cannot be said that the fi nding of the Enquiry Offi cer is on a
mis-reading of the evidence or that the records of the inspection of units
were part of the records that could be possibly misplaced or that a fi nding
was based on some stray sentence and personal knowledge was imported
by the Enquiry Offi cer de hors the record. [Paras 22-25]
Service Law - Disciplinary proceedings - Scope of judicial review:
Held: Scope of judicial review against a departmental enquiry
proceeding is very limited - It is not in the nature of an appeal and a review
on merits of the decision is not permissible - Scope of the enquiry is to
examine whether the decision-making process is legitimate and to ensure
that the fi ndings are not bereft of any evidence - If the records reveal that the
fi ndings are based on some evidence, it is not the function of the court in a
judicial review to re-appreciate the same and arrive at an independent fi nding
on the evidence - On facts, it could not be said that the Enquiry Report,
the fi ndings of the Disciplinary Authority and the order of the Appointing
Authority are based on no evidence or are perverse - Even if the report
insofar as the aspect of non-submission of control form, the transgression
of the area of operation and non-declaration of the immovable property and
certain other charges is avoided, the order of penalty can be sustained -
Aspects of failure to conduct periodic inspection and the negligence in not
stipulating the taking of immovable property as collateral security in spite
of the party off ering it, constrains to conclude that there was material on
record for the appellant to pass the order of penalty - Orders of the Single
STATE BANK OF INDIA v. A.G.D. REDDY
654
SUPREME COURT REPORTS
[2023] 11 S.C.R.
Judge and the Division Bench not sustainable for transgressing the limits of
judicial review in setting aside the enquiry proceedings and the punishment
imposed. [Paras 32, 33, 36 and 37]
Service Law - Penalty - Severability of charges - Interference
with the order of penalty:
Held: If in a disciplinary proceeding, the order of penalty can be
imposed on the charges proved and the punishment imposed is lawfully
sustainable on those charges, it is not for the Court to consider whether
those grounds alone would have weighed with the authority in imposing
the punishment - Unless punishment imposed is only co-relatable to any
of those charges found not proved, the penalty cannot be set aside - On
facts, the punishment can be sustained even if the charges held not proved
are severed - Test is not of loss having being resulted or profi t having
been made, the test is whether the delinquent employee, has observed the
prescribed norms of the Bank - Penalty imposed is "reduction in basic pay
to the lowest stage in Scale-I" and further, to treat the period spent by the
delinquent offi cer as under suspension - Since the charge of not conducting
periodical inspection and the failure to complete the formalities for creating
equitable mortgage are supported by evidence, the penalty as imposed is
not disproportionate so as to shock the conscience of the Court - Penalty
as imposed by the Appointing Authority and as confi rmed by the Appellate
Authority maintained. [Para 41]
LIST OF CITATIONS AND OTHER REFERENCES
State of Orissa v. Bidyabhushan Mohapatra [1963] 1 Suppl. SCR 648;
Deputy General Manager (Appellate Authority) and Others. v. Ajai Kumar
Srivastava (2021) 2 SCC 612 - relied on.
Nand Kishore Prasad v. State of Bihar and Others (1978) 3 SCC 366
: [1978] 3 SCR 708; Anil Kumar v. Presiding Offi cer and Others (1985) 3
SCC 378 - distinguished.
Orissa Mining Corporation and Another v. Ananda Chandra Prusty
(1996) 11 SCC 600 : [1996] 8 Suppl. SCR 433; State Bank of India v. Ram
Lal Bhaskar and Another (2011) 10 SCC 249 : [2011] 12 SCR 1036; State of
A.P. v. S. Sree Rama Rao AIR 1963 SC 1723 : [1964] SCR 25; Disciplinary
655
STATE BANK OF INDIA v. A.G.D. REDDY
Authority-cum-Regional Manager and Others vs. Nikunja Bihari Patnaik,
(1996) 9 SCC 69:[1996] 1 Suppl. SCR 314 - referred to.
OTHER CASE DETAILS INCLUDING IMPUGNED
ORDER AND APPEARANCES
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 11196 of
2011.
From the Judgment and Order dated 20.10.2010 of the High Court of
Karnataka at Bangalore in WA No. 8085 of 2003.
Appearances:
Sanjay Kapur, Ms. Mahima Kapur, Surya Prakash, Arjun Bhatia, Advs.
for the Appellant.
S. N. Bhat, Sr. Adv., Tarun Kumar Thakur, D P Chaturvedi,
Ms. Parvati Bhat, Ms. Anuradha Mutatkar, Advs. for the Respondent.
JUDGMENT / ORDER OF THE SUPREME COURT
JUDGMENT
K. V. VISWANATHAN, J.
1. The present appeal by the State Bank of India (for short "the Bank"),
calls in question the correctness of the judgment of the Division Bench of
the High Court of Karnataka at Bangalore dated 20.10.2010 in Writ Appeal
No. 8085 of 2003. By the said judgment, the Division Bench had dismissed
the Appeal of the Bank and confi rmed the judgment and order of the learned
Single Judge dated 12.11.2003. The learned Single Judge had allowed
the Writ Petition No. 29547 of 1997 fi led by the respondent and quashed
the order passed by the Appointing Authority and granted consequential
benefi ts to the respondent. The Appointing Authority had, by its order of
31.01.1995, imposed a punishment of "reduction in basic pay to the lowest
stage in Scale-I" as envisaged under Rule 49 (e) of the State Bank of India
(Supervising Staff ) Service Rules and further, has treated the period spent
by the delinquent offi cer under suspension from 18.08.1990 till the date of
his reinstatement as suspension only.
STATE BANK OF INDIA v. A.G.D. REDDY
656
SUPREME COURT REPORTS
[2023] 11 S.C.R.
2. Being aggrieved, the Bank has fi led the present Appeal. Shri Sanjay
Kapur, learned counsel for the Bank, contends that the courts below have
transgressed the limits of Judicial Review. According to the learned counsel,
the courts below have erred in characterizing the orders of the Disciplinary
authorities as perverse.
3. On the contrary, the respondent represented by Shri S.N. Bhat,
learned Senior Counsel, vehemently defends the orders impugned. Learned
Senior Counsel contends that the present was a case of "no evidence" and
the enquiry offi cer without any evidence on record and based only on his
personal purported knowledge has recorded the fi ndings of guilt. Learned
Senior Counsel further contends that the courts below have rightly set aside
the order of the Disciplinary Authorities and that the case did not call for
any interference.
Relevant Facts
4. The facts, insofar as they are necessary for the adjudication of this
Appeal, are set out hereinbelow:
a) Disciplinary proceedings were initiated against the respondent for
certain acts of misconduct allegedly committed by him when he was working
as Field Offi cer of the Mahadevapura Branch of the Bank. Broadly stated,
the charges in the Charge Sheet dated 13.02.1992 were:
i) That he recommended and obtained sanction from the Branch
Manager, credit limits to various units as detailed therein and permitted
excess drawings on an on-going basis; that he did not report to the controlling
offi ce the excess drawings permitted; that he did not conduct periodical
inspections as per the extant instructions; that loan sanctions were given and
credit limit extended to entities operating in the premises of another entity;
ii) That credit limit was recommended and sanction obtained for M/s
Saraswathi Fabricators even though the unit was located away from the area
of operation; sanction of the advance was not reported to the Controlling
Offi ce; and formalities for creating equitable mortgage over immovable
property off ered as collateral security were not completed;
iii) That the respondent recommended and obtained sanction of
advance to M/s ACE Photo Reprographers and M/s Sangeetha Refreshments
657
STATE BANK OF INDIA v. A.G.D. REDDY
[K. V. VISWANATHAN, J.]
both from Shivajinagar, even though the units were non-existent and the
particulars furnished were fi ctitious as another fi rm M/s All Arts Company
was operating from the same premises; that the sanction of these advances
were not reported to the controlling offi ce and periodical inspection of the
units were not conducted.
iv) That the respondent had recommended and obtained sanction on
20.05.1987 cash credit limit to M/s. Rajeswari Enterprises and the respondent
did not submit control return; that periodical inspections were not carried out
and formalities for creation of equitable mortgage over immovable property
stipulated as pre-condition for sanction of limit were not completed. Certain
other charges set out, which are not directly relevant for the adjudication of
the Appeal, have not been highlighted hereinabove.
v) It was alleged in the charge memo that by the acts committed,
the respondent failed to comply with the extant instructions with regard
to sanction and follow-up of advances and failed to take all possible
steps to ensure and protect the interest of the Bank and did not discharge
his duties with utmost diligence and integrity and thereby violated the
service rules.
b) As part of the charge, it was further alleged that he purchased
agricultural land in October 1987 ad-measuring 21.36 acres and got it
registered in his name for a nominal amount, using the infl uence of one Shri
Ramamurthy of M/s Bindu Enterprises who are enjoying credit facilities with
the branch and he failed to declare to the Bank the purchase of immovable
property as per the extant instructions. It was alleged that by the above acts,
he placed himself under pecuniary obligations to the party.
c) The statement of imputations were also furnished.
Findings of the Enquiry Offi cer
5) The respondent fi led his detailed reply denying the allegations.
An Enquiry Offi cer was appointed. Before the Enquiry Offi cer, the Bank
examined seven witnesses and marked twenty four documents. The
delinquent employee did not examine any witness but had produced
thirty documents. The Enquiry Offi cer, after completion of the enquiry
proceedings, analyzed all the oral and documentary evidence and found
the respondent guilty for some of the charges levelled and absolved the
658
SUPREME COURT REPORTS
[2023] 11 S.C.R.
respondent with regard to a few other charges. The presenting Offi cer did
not pursue the following charges contained in the chargesheet.
"(a) Recommendation of the loan by charged offi cial in respect of
M/s. Fotografi ks.
(b) Charge vii (b) - The unit had borrowing from Central Bank of
India, Avenue Road, Bangalore.
(c) Charge II - The infl uence of Shri Ramamurthy of M/s. Bindu
Enterprises towards purchase and registration of 21.36 acres of
lands."
The following charges were held not proved:
"I. Charge No. (ii) (a) pertaining to M/s. Farooq Tanning Control
forms in respect of these units were submitted.
II. Non reporting of excess drawings permitted in the case of M/s
Fotografi ks.
III. M/s Ace Photo Reprographers
The charge that the unit is not functioning is not proved."
The remaining charges were held proved.
6) With these fi ndings, the Enquiry Offi cer submitted his report
dated 23.08.1993 and the records of the enquiry to the Disciplinary
Authority. The Disciplinary Authority issued a second show cause notice
along with the copy of the Enquiry report to which the respondent fi led
a detailed reply. Thereafter, the Disciplinary Authority also issued a
notice dated 04.10.1993 setting out the points of disagreement with
regard to the Enquiry Offi cer's fi ndings to which again the respondent
furnished a reply.
Findings of the Disciplinary Authority and Imposition of
Penalty
7) The Disciplinary Authority, by his order of 28.12.1994,
elaborately considered the matter. He agreed with all the fi ndings of the
enquiry offi cer and even on the aspects where the enquiry offi cer held
that the charges were not proved, the disciplinary proceeding diff ered
659
with the enquiry offi cer on some of those aspects and held the charges
to be proved.
For example, in the case of a unit - ACE Foto Reprographers not
functioning in the premises, while the enquiry offi cer held the charge not
proved, the Disciplinary Authority held the charge to be proved.
8) These aspects need not detain the Court any further. As it will be
clear from the discussion below, ultimately the charges with regard to not
conducting periodical inspections of the units mentioned in the charge and
the non-completion of the formalities for creating equitable mortgage over
immovable property off ered as collateral security, in the case of M/s Saraswathi
Fabricators are the primary aspects that has engaged the attention of this Court.
As will be clear from the discussion in the later part of this judgment, it is those
two charges which have ultimately been found to be proved that have been
elaborated herein below.
9. Pursuant to the above, the Appointing Authority passed an order on
31.01.1995 imposing the penalty of "reduction in basic pay to the lowest
stage in Scale-I" as provided under Rule No. 49(e) of the State Bank of
India (Supervising Staff ) Service Rules and further to treat the period under
suspension from 18.08.1990 till the order of his reinstatement as suspension
only.
10. The Appellate Authority to whom the respondent approached
confi rmed the orders.
11. Challenging the order of the Disciplinary Authorities and the Appellate
Authority, the petitioner moved a writ petition, which has now resulted in the
orders of the learned Single Judge and that of the Division Bench.
12. The learned Single Judge classifi ed the common heads under Charge
I as was also done by the Enquiry Offi cer as being
i) Conduct of periodical inspection;
ii) Non-submission of control forms; and
iii) Area of operation
13. We will deal with the fi rst limb, after we consider the second and
third limbs, for the sake of convenience.
STATE BANK OF INDIA v. A.G.D. REDDY
[K. V. VISWANATHAN, J.]
660
SUPREME COURT REPORTS
[2023] 11 S.C.R.
Charge regarding non-submission of control forms and area of
operation
14. On the aspect of non-submission of the control forms, the learned
Single Judge records that the burden was wrongly shifted on the respondent
when the Enquiry Offi cer held that the delinquent had not proved the
submission of the control forms. The learned Single Judge held that when
the respondent denied the charge, the onus was on the Disciplinary Authority
to prove the charge alleged against the delinquent employee by producing
relevant material and the material must be such that it amounts to proving
the guilt of the employee in respect of the charge against him with some
degree of defi niteness.
15. We have perused the Enquiry Report on this issue and we are
satisfi ed that the learned Single Judge is right on this score. The following
fi ndings in the Enquiry Report fortify that conclusion:-
"However, in respect of other units listed in the charge sheet regarding
non-submission of control form the charges are proved. Although, it
is likely that the Bank's fi les may be missing due to shifting of the
branch, no attempt has been made by the defence to bring the control
forms from the controlling authority. It only clearly indicates that the
control forms have not been submitted. This is a failure on the part of
the charged offi cial."
16. Equally with regard to the third limb, namely, transgression of the
area of operation, the learned Single Judge rightly found that in a number
of instances loans had been sanctioned outside the area of operation and, as
such, it could not be held that there was any transgression by the delinquent
respondent. This view is independently fortifi ed when we peruse the Enquiry
Report.
17. In the preliminary paragraphs under the head "Area of operation",
while dealing with the relative instructions of the Bank, the following is
set out:
"ii) Where there are clusters of eligible units, whether SSI or Small
business, situated outside the respective operational area, assistance
could be rendered to them, provided the place is accessible throughout
the year and is connected by the public transport. Even in such cases,
661
the location of units should not be far beyond the operational area and
the number of units should reasonably large. (sic.) Recommendations in
this regard should be fi rst got approved from the controlling authority.
iii) Lending to SSI and small business units could also be aff ected in
adopted villages with the prior approval of the controlling authority.
iv) Care, should however, be taken that the fl exible approach does not
lead to scattered lending. Approach should preferably be fi nancing of
clusters of units/growth centres."
Nowhere in the Enquiry Report or in the evidence had it been brought
out that any of these above conditions in the excepted categories were
breached.
Charge regarding conduct of periodical inspections
18. However, we fi nd that the learned Single Judge and the Division
Bench, which confi rmed the order of the learned Single Judge, erred in
recording the following fi nding with regard to the fi rst limb, namely, about
the respondent not conducting the periodical inspections as required under
the extant instructions:-
"In so far as the fi rst component of the charge is concerned, it can
safely be said that none of the witnesses examined by the Bank
before the enquiry offi cer have spoken about the truth or otherwise
of the allegations made in the charge memo. However, the enquiry
offi cer in his lengthy report based on his personal knowledge about
the instructions and guidelines issued by the Head Offi ce of the bank
for conduct of inspection by Field Offi cers of the bank, observes that
it is the duty of the Field Offi cer, to conduct periodical inspection
and maintain proper records of those inspections. To arrive at the
conclusion that the delinquent offi cer is guilty of this charge, he
merely states in his report that Sri Krishna Murthy Urala - PW 4 has
deposed that the charged offi cial has not conducted any periodical
inspection. This conclusion of the enquiry offi cer is based on the misreading of the evidence of PW-4 by the enquiry offi cer. In fact, PW
4 in his lengthy deposition before the enquiry offi cer has stated that
the periodical inspections of units were carried out by the petitioner
sometimes independently and some time with the Branch Manager
STATE BANK OF INDIA v. A.G.D. REDDY
[K. V. VISWANATHAN, J.]
662
SUPREME COURT REPORTS
[2023] 11 S.C.R.
and the relevant records were not available at the Branch. It has also
come in the evidence that the Branch was shifted to new building some
time in the year 1989 and during shifting, books used for recording
of the inspection of units might have been misplaced and they are bit
traceable. So, in my opinion picking out one stray sentence here and
there in the deposition of P.W. 4 and importing his personal knowledge
about the so called instructions and guidelines issued by the Bank, in
my view, the enquiry offi cer could not have come to the conclusion
that the Petitioner failed to conduct periodical inspection and therefore
that part of the charge in the charge memo is proved against him."
19. To satisfy ourselves on this aspect, we examined the enquiry report.
The rationale for the inspection is set out in the preliminary portion of the
report. It is stated as follows:-
"Follow up and supervision for term loans:
Term lending particularly to small scale units, is subject to various
risks due to the long period of loan and the fact that the small
scale units being fi nancially vulnerably are likely to be aff ected
by even minor adverse changes in their fortunes, where mortgage
of immovable properties are obtained, we are in a relatively better
position although the process of realization in the event of default
may prove to be cumbrous. Where, however, the security comprises
machinery in leased, rented premises, the risks are much greater;
movable machinery, particularly, being liable to felonious removal.
Further, the tenancy in rented premises may sought to be terminated
by the owner although the law generally protects the tenancy against
unfair ejectment.
Having regard to the foregoing consideration, it is needles to add the
proper selection of clients is one matter to which considerable thought
should be given. The only means of forestalling and avoiding possible
loss would lie in the vigilant follow up of loans after they have been
granted."
Thereafter, some guidelines have been set out. Dealing with the charge,
the Enquiry Offi cer records the following:-
663
"From the above instructions it may be observed that it is the duty
of Field Offi cer to conduct periodical inspection and maintain proper
records of those inspections.
The defence merely contested the charge on the plea that inspection
register has not been produced for evidence. The I is not only supposed
to maintain the inspection register but also report the observations
made by his (sic.) during the inspection by means of separate report.
None of such reports have been produced by the defence to prove that
inspections have been conducted by him.
In this connection it is pertinent to bring the following instructions
of the Bank in regard to report to be submitted by the fi eld Offi cer.
Accounts with borrowings of Rs.2 lacs and over should be followed
up by I on the basis of a proforma marked follow up form for I
(STF6). The objective underlying the form is to relate outstanding to
the activity level on a continuing basis i.e. every month, and to relate
the activity level to earlier projections (as indicated in the scheme or
estimates based on past performance). A systematic follow-up through
this form will reveal any tendency towards irregularity in an account
and the probable reasons if any irregularity does occur. In either case,
the situation is brought to the attention of the Manager SIB or BM,
who even otherwise will be expected to check these statements every
month. The abnormalities indication (sic.) in item 6 of the Notes on
Form SIF 6 are illustrative. There could be other abnormalities which
could be inferred on the basis of this form. Sri Krishnamurthy Urala
- PW4 deposed on page 10,11 of the proceedings that the charged
offi cial has not conducted any periodical inspection. This deposition
clearly proves the above charge.
Accordingly, I conclude that the charges levelled against him regarding
conduct of periodical inspection has been amply proved."
(In the summary of fi ndings 'I' is recorded as indicating
the Field Offi cer)
No doubt, the report records that no such report has been produced by
the defence to prove that the "inspections have been conducted by him".
To satisfy ourselves, whether the onus has been wrongly shifted on the
employee, we perused the evidence of PW-4 Krishnamurthy Urala to whose
STATE BANK OF INDIA v. A.G.D. REDDY
[K. V. VISWANATHAN, J.]
664
SUPREME COURT REPORTS
[2023] 11 S.C.R.
deposition, copious references were made both by Mr. Sanjay Kapur, learned
Counsel and Mr. S.N. Bhat, learned Senior Counsel.
20. In the charge memo, the respondent was specifi cally charged that
the respondent had recommended and obtained sanction from the Branch
Manager, credit limits to various units as detailed therein and permitted
excess drawings on an on-going basis and the respondent did not report to
the controlling offi ce the excess drawings and did not conduct periodical
inspections as per the extant instructions. A number of units were mentioned
in the charge memo to substantiate the allegation that periodical inspections,
as per the extant instructions, were not conducted on them. The following
have emerged in the deposition of PW-4 - Shri Krishnamurthy Urala recorded
on 17.02.1993:
"PO:
Mr. Urala do you by chance know who was the fi eld offi cer
handling this unit between June 86 to 1988.
PW4:
 Yes. It is Mr. AGD Reddy.

 .... .....
PW4:
 What is the procedure for conducting inspections to units as
per laid down instructions.
PO:
 The laid down instruction is the unit has to be inspected
normally once in a month by FO along with the stock
statements to verify whether the disbursal of the funds from
the a/cs has been properly utilized.

The fi eld offi cer should carry branch inspection book to the
units and write the observations thereon, and also he has to
make the observations in the inspection book kept at the unit."

 ..... .......
PO:
 Were the inspections conducted for these units.
PW4:
 No."
Deposition of PW-4 recorded in the enquiry on 03.03.1993:
"DR:
You said certain units have not been inspected by your
predecessors. Can you tell us the basis for this allegation.
665
PW 4:
No proper records were maintained.
DR:
Did you trace/see the inspection cards relating to the
period of 1988, 87 & back.
PW4:
Yes.
DR:
A submission to EO: We have been told by the branch
that the inspection records related to 88,87 & back are
not available. Kindly direct the prosecution to make
available copies of the records for the defence purpose.
EO:
DR to specifi cally mention the inspection registers in
r/o which units you require to enable EO to examine your request.
DR:
Inspection cards in r/o units mentioned in the charge
sheet.
EO:
PO may examine the request of DR and if possible
records, if available may be given.

Otherwise a report may be given to EO."
21. It transpires that there was a direction to produce the inspection
records relating to units mentioned in the chargesheet. The following is
found in the transcript in the enquiry proceeding (dated 04.05.1993):-
"PO: I was requested by DR in the previous sitting to produce two
documents viz. Inspection register for the relevant period and list
of machinery in r/o M/s. Bindu Enterprises. I am submitting the
inspection register & also a list of machineries as requested for
perusal of EO & DR.
DR: We will respond after going through the said documents."

 (emphasis supplied)
Onus of proof
22. Having considered the above, we are constrained to conclude
that the charge of the Bank, that the inspection was not carried, stood
established. Then it was for the respondent to show, as undertaken by
him, what his response to the allegation was.
STATE BANK OF INDIA v. A.G.D. REDDY
[K. V. VISWANATHAN, J.]
STATE BANK OF INDIA v. A.G.D. REDDY
[K. V. VISWANATHAN, J.]
666
SUPREME COURT REPORTS
[2023] 11 S.C.R.
23. It is well settled that, in a disciplinary proceeding, the question of
burden of proof would depend upon the nature of the charge and the nature
of the explanation put forward by the respondent. In a given case, the burden
may be shifted to the respondent depending upon the explanation. [See Orissa
Mining Corporation and Another vs. Ananda Chandra Prusty, (1996) 11
SCC 600, Para 6].
24. Here the specifi c charge was with regard to a series of named units,
periodical inspections were not carried out. To support the charge, witnesses
were examined and on the request through his defence representative, the
Enquiry Offi cer has directed the presenting offi cer to produce the inspection
records. The Enquiry Offi cer specifi cally asked the defence representative to
mention the inspection registers in respect of the units which are required.
The defence representative specifi cally makes a request for the inspection
records in respect of the units mentioned in the charge sheet. The Enquiry
Offi cer directs the presenting offi cer to examine the request and records, if
available, be given. Thereafter, it has come on record that the Presenting
Offi cer produced the inspection register for the relevant period for perusal
of the Enquiry Offi cer and the defence representative. On this, the defence
representative stated that they would respond, after going through the
documents. In the written submissions fi led, a grievance is raised that the
records pertaining to inspection were produced at the fag end of the enquiry.
We are not impressed with the submission since, it was after the production
of the inspection register that the defence representative of the respondent
had stated, that they will respond after going through the said documents. No
response was forthcoming. Neither from the records nor at the hearing has it
been demonstrated as to how the charge of failure to conduct the inspection
was countered by the respondent. The records sought being made available,
the onus did shift to the respondent to show that the charge was untenable.
25. In view of the above, clearly with regard to the fi rst limb of the
fi rst charge, namely, the failure to conduct periodical inspection, it cannot
be said that the fi nding of the Enquiry Offi cer is on a mis-reading of the
evidence or that the records of the inspection of units were part of the records
that could be possibly misplaced or that a fi nding was based on some stray
sentence and personal knowledge was imported by the Enquiry Offi cer de
hors the record.
667
Charge regarding formalities for creation of equitable mortgage
26. There is one other aspect which has completely escaped the
attention of the learned Single Judge and consequently the Division Bench.
One of the charges dealt with by the Enquiry Offi cer was about not securing
the advance to M/s Saraswathi Fabricators by creation of an equitable
mortgage even though the equitable mortgage of immovable property was
off ered by the party. The following fi ndings were recorded by the Enquiry
Offi cer:-
"On page 12 para 7.2 of PEX 9, the borrower has off ered equitable
mortgage of building at No. 458, Viveknagar, Bangalore, a site
measuring 1500 sq. ft. and built in area of 700 sq. ft. belonging to Sri
K. V. Srinivasan valued at Rs. 4.5 lacs. The CO by his negligence has
not stipulated this in his recommendations to the BM. In the process
the advance could not be collaterally secured by non-creation of
equitable mortgage. Hence the charge that equitable mortgage has not
been created is proved."
27. To satisfy ourselves, we examined the record of the enquiry
proceedings on this issue. In the deposition of PW-4, recorded in the enquiry
proceeding on 17.02.1993, the following is found:-
"PO:
Looking to PEX page 12 item 7.2 of PEX 9 please tell us
the collateral security off ered by the unit.
PW4:
.... security is a site measuring 1,500 sq. ft. & bldg. area of
700 sq. ft. belonging to Sri KV Srinivasan at Vivek Nagar,
Bangalore valued at Rs.4.5 lacs.
PO:
Was the formality completed at the time of sanctioning of
this loan.
PW4:
No."
Deposition of PW-4 recorded on 03.03.1993:-
"DR:
Who puts the stipulations in sanctioning of a loan?
At the branch level?
PW4:
Field Offi cer in consultation with the Br. Manager.
STATE BANK OF INDIA v. A.G.D. REDDY
[K. V. VISWANATHAN, J.]
668
SUPREME COURT REPORTS
[2023] 11 S.C.R.
DR:
Can the Br. manager as sanctioning authority waive any
stipulation?
PW4:
Depends on the circumstances.

.... .....
DR:
Showing PEX9 from pg. l to 12 constitute the application.
Do you agree?
PW4:
It is application cum interview form.
DR:
From pg. 13 to 19 forms appraisal memorandum.
PW4:
Yes.
DR:
The application contains the off ers of the applicant and
the appraisal contains the conditions of sanction by the
sanctioning authority. Do you agree?
PW4:
The application cum interview form is containing information
regarding the prospective borrower.

Based on the information the FO in consultation with BM
has to fi x the credit limits and stipulations in the appraisal
memorandum.
DR:
On page 12 para 7. 2 though there is an off er, on pg. 18 para
9.2 there is no stipulation to the eff ect that the off er of the
applicant should be taken as collateral security. Do you see?
PW4:
I do not know.
DR:
On pg.12 para 7.2 there is a mention of equitable mortgage
of certain properties. Do you see?
PW4:
Yes.
DR:
On pg.18 para 9.2 under the stipulation the stipulation column
is vacant. Do you see?
PW4:
Yes.
DR:
The taking of equitable mortgage of certain securities is not
a condition stipulated by the sanctioning authorities i.e. BM
at branch level in r/o PEX9, pg. 18, para 9.2 'stipulations'.
669
PW4:
Yes,
DR:
Hence the question of completion of the formalities of nonexistent stipulation does not arise. Do you see?
PW4:
I do not know."
28. What is signifi cant to note is PEX 9 pertains to the application for
working capital in respect of M/s Saraswathi Fabricators together with the
appraisal memorandum. It is clear from the deposition that the applicant for
the loan had off ered collateral security in the form of land and building and
that the formality of collateral security was not taken. It is further borne out
that it is the Field Offi cer in consultation with the Branch Manager who has
to fi x the credit limit and the stipulations. It appears from the records that
no stipulation was put with regard to equitable mortgage so mentioned with
regard to M/s Saraswathi Fabricators, even though the party had off ered
equitable collateral security in the form of immovable property.
29. The explanation of the respondent is only that there was no
stipulation in the sanction order with regard to the taking of collateral
security. The charge is that, with regard to M/s Saraswathi Fabricators,
the formalities for creating equitable mortgage over immovable property
off ered as collateral security were not completed. The evidence of PW-4 is
that the stipulation for collateral security is so made by the Field Offi cer in
consultation with the Branch Manager.
30. In the light of the above, the fi nding of the Enquiry Offi cer that the
respondent, by his negligence, did not stipulate this in his recommendation
to the Branch Manager and, as such, the advance could not be collaterally
secured by creation of equitable mortgage cannot be said to be perverse or
based on no evidence.
31. The answer given by the respondent in the writ petition that
personal guarantee was available; that the sanction did not contain any
condition regarding equitable mortgage of the property; that documents
of title were traced only in September, 1988 after he left the Branch in
June, 1988; that as required by the successor of the respondent and the
then Branch Manager, the respondent had identifi ed the documents and
suggested that they complete the work connected with the creation of
equitable mortgage, are not matters on which the view of the Disciplinary
STATE BANK OF INDIA v. A.G.D. REDDY
[K. V. VISWANATHAN, J.]
670
SUPREME COURT REPORTS
[2023] 11 S.C.R.
Authority can be substituted. In the written submissions filed, the
respondent claims that, after the papers were traced, the mortgage was,
in fact, eff ected. Even this would not make any diff erence to the charges
and the fi ndings recorded, which themselves were based on the evidence
on record.
Scope of judicial review in disciplinary proceedings
32. From the above discussion, it is clear that it could not be said that
the Enquiry Report, the fi ndings of the Disciplinary Authority and the order
of the Appointing Authority are based on no evidence or are perverse. Even
if we eschew the report insofar as the aspect of non-submission of control
form, the transgression of the area of operation and non-declaration of the
immovable property and certain other charges are concerned, the order of
penalty can be sustained.
33. As has been demonstrated above, the aspects of failure to conduct
periodic inspection and the negligence in not stipulating the taking of
immovable property as collateral security in the case of M/s Saraswathi
Fabricators in spite of the party off ering it, constrain us to conclude that
there was material on record for the appellant to pass the order of penalty.
34. Mr. S.N. Bhat, learned Senior Counsel, relying upon the judgments
of this Court in Nand Kishore Prasad vs. State of Bihar and Others, (1978)
3 SCC 366 and Anil Kumar vs. Presiding Offi cer and Others, (1985) 3 SCC
378 contends that the Disciplinary Authority should arrive at its conclusion
on the basis of some evidence with some degree of defi niteness pointing to
the guilt of the delinquent in respect of the charge against him. He would
contend that a suspicion cannot be allowed to take the place of proof and
scrupulous care must be taken to see that the innocent are not punished by
recording fi ndings merely based on ipse dixit of the Enquiry Offi cer. We are
unable to accept the contention that the principles laid down in the above
judgments are attracted to the present case. The judgments cited are clearly
distinguishable, for the reasons that we have set out hereinabove, while
analyzing the facts of the present case.
35. Shri Sanjay Kapur, learned counsel for the Bank relies on State
Bank of India vs. Ram Lal Bhaskar and Another, (2011) 10 SCC 249. In
that judgment the scope of judicial review of departmental proceedings was
671
set out and the principle laid down in State of A.P. vs. S. Sree Rama Rao,
AIR 1963 SC 1723, was reiterated, which reads as follows:-
"This Court has held in State of A.P. and Others v. S. Sree Rama
Rao (AIR 1963 SC 1723, para 7):
"7. ...