In a significant ruling, the Karnataka High Court has observed that the opinion provided by the Central Vigilance Commission (CVC) to the disciplinary authority in a bank need not be shared with the delinquent employee facing disciplinary proceedings. This judgment came while reversing an order of a Single Bench directing the reinstatement of a bank employee who was dismissed from service for lending money to fictitious persons without securing the repayment of loans.

The Division Bench of Justice Krishna S Dixit and Justice Ramachandra D Huddar allowed the appeal filed by Vijaya Bank and agreed with the bank's contention that no error was committed by the management in seeking the opinion of the Central Vigilance Officer, as per Regulation 19 of the Vijaya Bank Officer Employees' (Discipline and Appeal) Regulations, 1981.

The Central Vigilance Commission's Role The Central Vigilance Commission (CVC) is a statutory body constituted under Section 3 of the Central Vigilance Commission Act, 2003. One of its primary duties is to advise banks in matters related to disciplinary proceedings. The High Court observed that the object of consulting the Vigilance Commission is not in the interest of the employee but rather in the larger interest of the banking institution.

Disagreement with Previous Supreme Court Judgments The High Court refused to follow the view taken by the Supreme Court in the cases of Nagaraj Shivarao Karjagi vs. Syndicate Bank (1991) and Oriental Bank of Commerce vs. SS Sheokand (2014). In these cases, the Supreme Court had held that the vigilance opinion should be shared with the delinquent employee, and their say should be considered.

However, the Karnataka High Court distinguished the present case, stating that the ratio in those decisions could have been invoked from the delinquent employee's side had there been no provision like Regulation 19 of the 1981 Regulations. This aspect was not discussed in the impugned order, even though it was essential.

Dismissal for Moral Turpitude Offenses The High Court further held that once a bank employee is convicted of an offense involving moral turpitude, they are liable to be dismissed from employment. In the present case, the respondent-employee, M Ravindra Shetty, a manager cadre employee, was dismissed from service by the Competent Authority in April 1997.

Shetty was also convicted for offenses punishable under Sections 120B, 420, 468, and 471 of the Indian Penal Code and Sections 13(1)(d) and 13(2) of the Prevention of Corruption Act, 1988. After appeals, he was sentenced to one year of imprisonment.

The bank argued that once a penalty is imposed after duly conducting disciplinary proceedings, and the employee is tried and convicted for offenses involving moral turpitude on the same set of facts, a Writ Court should be reluctant to interfere.

Public Trust and Financial Loss The High Court emphasized that funds are parked with banks by broad segments of the public, establishing a public trust that compels bankers to act with greater care. However, in this case, the respondent-employee had indiscriminately lent the bank's money to fictitious persons without securing repayment, resulting in a financial loss of more than Rs. 13 lakh to the bank.

The findings of guilt were recorded by the Enquiry Officer and accepted by the disciplinary authority while awarding the punishment of dismissal from service. The Appellate Authority had upheld these findings.

The High Court observed that the impugned order of the Single Judge had treated the matter as if he were sitting in appeal, suffering from legal infirmity and warranting interference.

Indiscriminate Lending and Bad Debts The High Court recollected American Economist Robert C Holland's slogan, "Husband your Banking resources," highlighting the relevance of prudent lending practices in the current economic scenario. The court noted that two dozen public sector banks have been closed down or merged with other banks, with one of the reasons being "bad debts."

Indiscriminate lending in gross violation of prescribed protocols and manuals of instructions is unscrupulous and culpable, the court said. Such reckless acts, lacking in bona fide, put banking institutions at risk of losing public money, which they are entrusted to manage responsibly.

Conclusion The Karnataka High Court's ruling in this case has significant implications for the banking sector and disciplinary proceedings against delinquent employees. By upholding the validity of not sharing the CVC's opinion with the delinquent employee, the court has prioritized the larger interest of the banking institution and the public trust vested in it.

The judgment also underscores the importance of maintaining high ethical standards and financial prudence in the banking sector. Indiscriminate lending and offenses involving moral turpitude can have severe consequences, including dismissal from service and criminal prosecution.

As the banking sector navigates the challenges of bad debts and financial losses, this ruling serves as a reminder of the need for stringent disciplinary measures and adherence to prescribed protocols and guidelines. It highlights the judiciary's commitment to upholding the integrity and accountability of the banking system, which plays a crucial role in the nation's economic growth and stability.