A.D. PADHEY OF MUMBAI INDIAN INHABITANT Vs. STATE BANK OF INDIA
HIGH COURT OF BOMBAY
A.D. Padhey Of Mumbai Indian Inhabitant
STATE BANK OF INDIA
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M.S. Karnik, J. -
(1.) The petitioner was working as Assistant General Manager with the respondent-Bank and was heading Personal Banking Division. The petitioner is challenging the order dated 8th March, 2000 compulsorily retiring the petitioner pursuant to the Departmental Inquiry held against him in respect of the transactions relating to the Securities Scam of 1991-92. The transactions in question were carried out by the Securities Division, Mumbai Main Branch of the respondent-Bank and the bank alleges that the same resulted in loss of Rs. 812 crores to the bank which may be very difficult to recover. The petitioner was served with a charge-sheet dated 23rd November, 1993 as regards irregularities and malpractices at Securities Division, Mumbai Main Branch, Mumbai. The petitioner while working as Assistant General Manager of PBD has committed certain serious irregularities in discharge of his duties which as per the Articles of Charge are as under:
Shri Harshad S. Mehta, a broker was maintaining his personal account Current A/c.No.4/87/10 in the Personal Banking Division of Bombay Main Branch. Debit/Credit vouchers emanating from the Investment Cell of the Securities Division of the Branch were allowed to be put through the aforesaid account maintained in the Division of Sh. A.D. Padhye despite the following unsatisfactory features:
(a) If Shri H.S. Mehta or his firm was/were to sell or purchase securities and transactions were to be routed through his current account, for purchases, his account was to be debited and full particulars should have been noted/written on the vouchers and similarly for sales. The relative Bankers cheques were to be issued or received and these were to be dealt with by the Section of the Securities Department at Bombay Main Branch who were dealing with the sale and purchase transactions for the Bank's customers. Instead, debit/credit vouchers with incomplete details originated by the Bank's Investment Cell in the Securities Division (who were to deal with Bank's own purchase and sale of securities) representing payments made to counter-party Banks on account of purchase of securities from them or receipts from counter-party Banks on account of sale of securities to them were freely allowed to be routed through the said account. A few instances of such transactions are given in Annexure 'A' of the chargesheet.
(b) The vouchers referred to above which were passed by Shri R. Sitaraman, Officer JMGS I (now under suspension) at the Investment Cell for debit of the said account maintained in his Division were put through without any verification and/or scrutiny by his Division.
(c) Shri R. Sitaraman, Officer JMGS I who was posted in the Investment Cell of the Securities Division was vested with passing powers upto Rs. 25,000/only. Sh. Padhye, however, allowed the debits passed by Shri Sitaraman, an official from another Department, much in excess of the passing powers delegated to him, to be debited to the Current Account of Shri H.S. Mehta, maintained in his Division. He thus abdicated the control expected to be exercised by him as Manager of P.B. Division over the transactions passing through his Department and he had allowed Shri R. Sitaraman to continue his nefarious activities without any check. A few instances of such transactions are given in Annexure 'A' of the charge-sheet.
He failed to scrutinise daily the vouchers routed through his Division as required in terms of paragraph 47 of Chapter II of the Bank's Book of Instructions, Vol. I. Had he done this, as expected of him, the fraudulent transactions put through by Shri R. Sitaraman could have been detected in time.
He recommended to the Dy. General Manager, Bombay Main Branch on the letter dated 10.1.92 (a copy of which is enclosed at Annexure 'B' of the charge-sheet) addressed by Shri Pankaj v. Shah for Shri Harshad Mehta to the SBI Main Branch, Personal Banking Division (for attention of Mr. Padhye) requesting the facility of issuing Bankers Cheques against presentation by the broker of Bankers Cheques drawn in favour of SBI, as under :
"DGM - This is one of the valued customers and the request of his is genuine. We recommend that the same may be accepted. The Co. is keeping good float funds with us. We have requested the Firm to start keeping some money in TDR with us." Initialed/10.1.92. His further remarks as under with date and initials also appear on the letter.
"DGM - They have assured Rs. 25 lacs in TDR this month out of which Rs. 5 lacs received on 13.1.192". Initialed 14.1.92.
(a) Before recommending the proposal, he failed and/or neglected to ascertain :
(i) How the request was considered genuine by him ?
(ii) Why the Bankers cheques in favour of other Banks were to be issued out of Bankers Cheques issued by other Banks in favour of State Bank when the transactions and the purpose for which the Bankers cheques were issued in the name of State Bank and the Bankers cheques to be issued in the name of the other Banks was known ? He deliberately remained silent on the point and in addition misled the DGM about the so called genuine request of the firm as it by keeping some deposit with the Bank, the grave risks were covered.
(b) The letter dated 10.1.92 addressed to the SBI Main Branch, P.B. Division, marked for his attention, makes a reference to their earlier letter of 19.8.91. "Ignoring this letter and making no efforts to know its contents, he recommended to accede to the request of Shri Harshad S. Mehta to the detriment of bank's interest.
(c) He did enquire before or after recommending to the DGM that the practice of issuing Bankers Cheques against the Bankers Cheques brought in by Shri Harshad Mehta in favour of the Bank was already going on. Had he enquired that the actual position obtaining would have been avoided. For his negligence the Bank had to pay Rs. 707,56,39,000/to National Housing Bank and Rs. 105,10,75,000/to SBI Capital Market Ltd. These amounts are doubtful of recovery and the Bank may have to ultimately incur the loss.
He, therefore, displayed gross negligence throwing the safety of Bank's interest and its funds to the winds and also made recommendations to the DGM in order that Shri Harshad S. Mehta derived undue benefit at the cost of the Bank.
One or more of the charges listed in items 1 to 3 above or a part of one or more of the aforesaid charges would amply demonstrate that he failed to act with utmost integrity, honesty, devotion and diligence and acted in a manner unbecoming of a Bank official. He also failed to protect the Bank's interest, thereby infringing Rule no.50(4) of SBI Officers Service Rules."
(2.) The petitioner submitted a detailed written statement of defence to the charge-sheet on 16th February, 1994. He denied the charges levelled against him. During the course of inquiry, the Presenting Officer introduced five prosecution documents which were marked and taken on record as Exh. S1 to Exh. S5. The petitioner introduced twenty five defence documents which were marked and taken on record as Exh. D1 to D25. The Presenting Officer did examine any prosecution witness. The petitioner examined one defence witness whose evidence is recorded as DW1. The petitioner was generally examined as he was examined as a witness. The Presenting Officer submitted his written submission on 21st December, 1994 and that of the petitioner was submitted on 19th January, 1995.
(3.) The Inquiry Officer submitted his report and held that the charges levelled in the Articles of Charge are proved. The Disciplinary Authority upon considering the material on record and the inquiry report recommended that the petitioner failed to take all possible steps to ensure and protect the interest of the bank and discharge his duties with utmost devotion and diligence, thereby infringing Rule 50(4) of the State Bank of India Officers Service Rules. The Appointing Authority therefore imposed the penalty of compulsory retirement in terms of Rule 67(h) on the petitioner.;
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