LIFE INSURANCE CORPORATION OF INDIA versus MUKESH POONAMCHAND SHAH on 25 February 2020

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SUPREME COURT REPORTS

[2020] 3 S.C.R.

ALIFE INSURANCE CORPORATION OF INDIA

v.

MUKESH POONAMCHAND SHAH

(Civil Appeal No. 1804 of 2020)

BFEBRUARY 25, 2020

[DR. DHANANJAYA Y CHANDRACHUDAND HEMANT GUPTA, JJ.]

Life Insurance Corporation of India (Staff) Regulations, 1960:CRegulation 39(4) – Disciplinary proceedings againstrespondent – Punishment of reduction of pay – Criminal Proceedings– Conviction – During pendency of appeal, sentence suspended –Appellant employer’s show cause notice under Regulation 39(4)seeking removal from service of respondent in view of his convictionby Court – Notice to show cause challenged – Single Judge of HighDCourt dismissed the application – On Letters Patent Appeal, DivisionBench of High Court restrained the employer from passing finalorder pending disposed of criminal appeal – Appeal to SupremeCourt – Held: Only sentence was suspended and not the conviction– Show cause notice was issued within jurisdiction – No doubleEjeopardy occurred as one order was by disciplinary Committeeimposing penalty for misconduct while Notice was for conviction incriminal case.

Allowing the appeal, the Court

HELD: 1. The respondent has been convicted andFsentenced to two years of rigorous imprisonment by the SpecialJudge, CBI for offences under Sections 420, 467, 468, and 471read with Section 120B of the Penal Code, and Sections 13(1)(d)and 13(2) of the Prevention of Corruption Act. By the order ofthe Single Judge of High Court the conviction of the respondenthas not been stayed and it is only the sentence which has beenGsuspended. While the court hearing a criminal appeal does havethe power to suspend the conviction in appropriate cases, this isan exceptional power which can be exercised only when theattention of the court is drawn to the consequences which mayensue if the conviction is not stayed. A criminal miscellaneous H

application was filed by the respondent for the grant of bail pendingdisposal of the criminal appeal. Significantly, in the special civilapplication which was instituted before the High Court, therespondent himself understood the order of the Single Judge ashaving only suspended his sentence and not as having stayed theconviction. On a reading of the order of the Single Judge, it isevident that only the sentence of imprisonment was suspended.It is not possible to accede to the plea that the conviction of therespondent remains stayed pending the disposal of the appeal.[Para 11][993-C-F, G; 994-A]

2. The appellant exercised its disciplinary jurisdiction whileproceeding against the respondent and after a disciplinary enquiryimposed a penalty of a reduction of his basic pay to the minimumof the scale. The Life Insurance Corporation of India (Staff)Regulations, 1960 determine the terms and conditions of serviceof the employees of the Life Insurance Corporation of India.Regulation 39(1) of the 1960 Regulations deals with the penaltieswhich can be imposed upon an employee who is found guilty ofmisconduct. Regulation 39(2) mandates compliance with theprinciples of natural justice in terms of providing a reasonableopportunity to the employee to defend the charges. Regulation39(4) operates with a non-obstante clause. In terms of Regulation39(4)(i), “where a penalty is imposed on an employee on thegrounds of conduct which had led to a conviction on a criminalcharge”, the appellant is independently entitled to take stepsagainst the employee. It is in pursuance of the above provisionthat a notice to show cause was issued to the respondent. Thepenalty which was imposed on the disciplinary enquiry was for anact of misconduct. The notice which has been issued underRegulation 39(4) is for the conviction on a criminal charge. Theformer does not foreclose the latter. [Paras 12 and 13][994-B;995-A-G]

3. In the present case, following the conviction of therespondent by the Special Judge CBI, the appellant was actingwithin jurisdiction in issuing a notice to show cause underRegulation 39(4) of the 1960 Regulations. The Single Judge wascorrect in dismissing the special civil application filed by therespondent challenging the notice to show cause issued by the AB

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Aappellant. The judgment of the Division Bench restraining theappellant from taking a final decision on the show cause noticepending the disposal of the criminal appeal has no valid basis inlaw. [Para 16][997-F-G]

Dy Director of Collegiate Education (Admn) v.BS. Nagoor Meera (1995) 3 SCC 377 : [1995] 2 SCR308; K C Sareen v. CBI (2001) 6 SCC 584 : [2001] 1Suppl. SCR 224; State of Haryana v. Balwant Singh(2003) 3 SCC 362 : [2003] 2 SCR 557 – relied on.

Lt. Governor, Delhi v HC Narinder Singh (2004) 13CSCC 342 – distinguished.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1804of 2020.

EFrom the Judgment and Order dated 10.04.2018 of the High Courtof Gujarat at Ahmedabad in L.P.A. No. 1160 of 2017 in Special CivilApplication No. 12855 of 2017.

Gautam Narayan, Ms. Asmita Singh, Adithya Nair, Advs. for theAppellant.

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Harin P. Raval, Sr. Adv., Anando Mukherjee, Nipun Saxena,Ms. Sukanya Singh, Sarena Sharma, Advs. for the Respondent.

The Judgment of the Court was delivered by DR. DHANANJAYA Y CHANDRACHUD, J.

G1. Leave granted.

2. The present appeal arises from a judgment of a Division Benchof the High Court of Gujarat dated 10 April 2018. The Division Bench, ina Letters Patent Appeal arising from an order of a learned Single Judge dated 11 July 2017, allowed the respondent, who had instituted proceedingsunder Article 226 of the Constitution, to respond to a notice to showcause issued by the appellant under Regulation 39(4) of the Life InsuranceCorporation of India (Staff) Regulations 1960[1]. However, the appellantwas directed not to issue final orders during the pendency of the appealfiled by the respondent against his conviction for offences under thePrevention of Corruption Act 1988[2] and the Indian Penal Code 1860[3].

3. The respondent was appointed as a Probationary DevelopmentOfficer by the appellant on 27 September 1990. His services wereconfirmed on 4 December 1991. On 16 February 1996, a charge-sheetwas served on the respondent containing the following allegations:

“i. That, you introduced 2 proposal no.s 7377 and 7529 on thelives of Shri PS Vyas and Shri RP Mehta through the agency,which resulted in issuance of policy for sum assured ofRs 10,00,000/-;

ii. That, you certified as true a Fake School Leaving Certificatedated 13.07.1974 issued by the City High School, Raipur,Ahmedabad submitted the same as evidence of age along withthe proposals for Life Insurance on the lives of the aforesaid ShriPS Vyas and Shri RP Mehta;

iii. That, you submitted a Moral Hazard Report dated 14.12.1990in form No 3251recommending acceptance of the said proposalswithout making independent and discreet inquiries and withoutsatisfying about the genuineness of the proposals as required tobe done before the submission of the proposals;

iv. That, it has been revealed that the proposers Shri PS Vyas andShri RP Mehta are non-existent persons.”

4. A disciplinary enquiry was convened in which the respondentparticipated. The inquiry officer, in his report dated 17 April 1997, notedthat the respondent had unconditionally accepted the charges. The chargesagainst the respondent were held to be proven. On 16 June 1997, anotice to show cause was issued to the respondent, asking him to explainas to why a penalty of reducing his basic pay to the minimum of the timescale under Regulation 39(1)(d) of the 1960 Regulations should not be 1 “1960 Regulations”

2 “Prevention of Corruption Act”

3 “Penal Code”

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Aimposed upon him. The respondent submitted his response. By an orderdated 15 July 1997, the disciplinary committee held the respondent guiltyof misconduct and imposed the penalty of reducing his basic pay to theminimum of the time scale.

5. A Criminal prosecution[4] was instituted by the Central BureauBof Investigation[5] against the respondent and two other employees of theappellant before the Court of the Special Judge, CBI, Ahmedabad. Therespondent was prosecuted for offences under Sections 13(1)(d) and13(2) of the Prevention of Corruption Act and Section 120B read withSections 420, 467, 468 and 471 of the Penal Code. On 28 July 2014, therespondent was convicted of all the offences and sentenced to two yearsCof rigorous imprisonment along with a fine of ` 5,000 per offence. Therespondent preferred a criminal appeal[6] before the High Court of Gujaratchallenging his conviction. The appeal is pending before the High Court.On 21 August 2014, the respondent filed an application[7] before the HighCourt for suspension of his sentence. By an order dated 21 August 2014,Da learned Single Judge issued the following directions:

“3. Considering the question of sentence within which the appealis not likely to be heard, it is not in the interest of justice to ask theapplicant to be in jail during the pendency of the appeal.

4. Under the circumstances, the judgment dated 28.07.2014 passedEby Special Judge, Ahmedabad, in Special Case No 27 of 1993shall remain under suspension till final hearing and disposal of theappeal. The applicant is ordered to be enlarged on bail on hisexecuting a fresh bail bond and surety in the sum of Rs.5,000/-each (Rupees Five Thousand only) to the satisfaction of the TrialFCourt on the following terms and conditions that the applicant:

(a) Shall not take undue advantage of liberty or misuse liberty; (b) Shall surrender passport, if any, before the concerned policeauthority;

(c) Shall not leave territory of India without prior permission ofGthe Trial Court;”

4 CBI Special Case No 27 of 1993

5 “CBI”

6 CA no 1024 of 2014H7 Criminal Miscellaneous Application no 1301 of 2014

6. On 23 June 2017, the appellant issued a notice to show to therespondent under Regulation 39(4)(i) of the 1960 Regulations proposingto impose the penalty of removal from service in view of his convictionby the Special Judge, CBI. The notice to show cause was challenged bythe respondent in a Special Civil Application[8] before the High Court ofGujarat. A learned Single Judge by a judgment dated 11 July 2017dismissed the application holding that:

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(i) The notice of termination was based on the conviction of therespondent by the Special Judge for offences under thePrevention of Corruption Act and the Penal Code and noquestion of double jeopardy arose; and C

(ii) Though the sentence of the respondent was suspended duringthe pendency of the criminal appeal, the conviction still stood.

7. In a Letters Patent Appeal filed by the respondent, the DivisionBench restrained the appellant from passing final orders on the notice toshow cause pending disposal of the criminal appeal. The appellantpreferred a Special Leave Petition before this Court under Article 136of the Constitution against the judgment of the Division Bench whichhas given rise to the present appeal.

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8. Assailing the judgment of the Division Bench of the High Court,Mr Gautam Narayan, learned counsel appearing on behalf of the appellantsubmitted that:

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(i) In terms of the provisions contained in Regulation 39(4) ofthe 1960 Regulations, the appellant is entitled to proceed againstthe respondent upon his conviction on a criminal charge; F

(ii) No question of double jeopardy that attracts the provisions ofArticle 20(2) of the Constitution can arise in a situation wherethe service regulations empower the employer to proceedagainst the employee upon his conviction on a criminal charge;

(iii) The High Court by directing the appellant from refrainingfrom taking any action against the respondent pending theGdisposal of the criminal appeal has erroneously interfered withthe exercise of the disciplinary jurisdiction of the appellant;and 8 Special Civil Application no 12855 of 2017

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A(iv) The order of the learned Single Judge dated 21 August 2014did not stay or suspend the conviction of the respondentpending the disposal of the criminal appeal but only suspendedthe sentence as a result of which the conviction has not beenobliterated or effaced.

BIn this context, reliance was placed on the decisions of this Courtin (i) Dy Director of Collegiate Education (Admn) v S NagoorMeera[9], (ii) K C Sareen v CBI[10], and (iii) State of Haryana v BalwantSingh[11].

9. On the other hand, Mr Harin P Raval, learned Senior CounselCappearing on behalf of the respondent submitted before this Court on 10January 2020 that there was a delay of 257 days in filing the SpecialLeave Petition which had not been satisfactorily explained. This Courtallowed the appellant to file an additional affidavit setting out the reasonsfor delay. An additional affidavit was filed by the appellant explainingthat the appellant had initially, in terms of the view of its western zonalDoffice, sought to move the CBI authorities for expediting the disposal ofthe criminal appeal. However, the empaneled local advocate had opinedthat there was no provision of law under which the appellant could beallowed to join as a party in the criminal appeal. The affidavit refers tothe steps taken by the appellant thereafter to pursue the available remediesEagainst the judgment of the High Court before this Court. We are of theview that sufficient cause for condoning the delay has been made out.The delay is accordingly condoned.

10. Responding to the submissions of the appellant, Mr Harin PRaval, learned Senior Counsel for the respondent submitted that:F

(i) Originally, in the course of the disciplinary proceedings, therespondent was proceeded against under Regulation 39(1)(a to g) of the 1960 Regulations;

(ii) The underlying facts on the basis of which the disciplinaryenquiry was instituted and the criminal prosecution took placeGare identical;

(iii) The appellant having imposed a penalty in the course of thedisciplinary proceedings by reducing the respondent’s basic 9(1995) 3 SCC 377

10(2001) 6 SCC 584H11(2003) 3 SCC 362

pay to the minimum of the time scale has exhausted itsdisciplinary jurisdiction and is not entitled to issue a fresh noticeto show cause for removal from service;

(iv) Regulation 39(4) dispenses with the requirement of a noticeto show cause and an opportunity to defend. Recourse to theabove power can be taken only when the employer has notexercised its disciplinary jurisdiction under clauses (1) and(2) of Regulation 39; and

(v) There has been an unexplained delay on the part of theappellant in issuing a notice to show cause.

11. The respondent has been convicted and sentenced to twoyears of rigorous imprisonment by the Special Judge, CBI for offencesunder Sections 420, 467, 468, and 471 read with Section 120B of thePenal Code, and Sections 13(1)(d) and 13(2) of the Prevention ofCorruption Act. By the order of the learned Single Judge dated 21 August2014, the conviction of the respondent has not been stayed and it is onlythe sentence which has been suspended. The law on this point is wellsettled. While the court hearing a criminal appeal does have the powerto suspend the conviction in appropriate cases, this is an exceptionalpower which can be exercised only when the attention of the court isdrawn to the consequences which may ensue if the conviction is notstayed. A criminal miscellaneous application[12] was filed by the respondentfor the grant of bail pending disposal of the criminal appeal. Significantly,in the special civil application which was instituted before the High Courtof Gujarat, the respondent himself understood the order of the SingleJudge as having only suspended his sentence and not as having stayedthe conviction. The pleading of the respondent in that regard is as follows:

“The petitioner submits that vide order dated 21.08.,2014 passedin Criminal Misc. Application No 13091 of 2014, the sentence ofthe petitioner was suspended and the petitioner was ordered to beenlarged on bail on executing a fresh bail bond of Rs.5000/-.”

That apart, on a reading of the order of the Single Judge, it isevident that only the sentence of imprisonment was suspended.Paragraphs 3 and 4 of the order of the learned Single Judge, as mentionedin the earlier part of this judgment, must be read together. Hence, it is A

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Anot possible to accede to the plea that the conviction of the respondentremains stayed pending the disposal of the appeal.

12. The appellant exercised its disciplinary jurisdiction whileproceeding against the respondent and after a disciplinary enquiry imposeda penalty of a reduction of his basic pay to the minimum of the scale.BThe 1960 Regulations determine the terms and conditions of service ofthe employees of the Life Insurance Corporation of India. Chapter IIIof the 1960 Regulations provides for conduct, discipline and appeals.Regulation 39 deals with penalties and the relevant portion for ourpurposes is extracted below:

C“39. Penalties. - (1) Without prejudice to the provisions of otherregulations, [any one or more of] the following penalties for goodand sufficient reasons, and as hereinafter provided, be imposed [bythe disciplinary authority specified in Schedule-I] on an employeewho commits a breach of regulations of the Corporation, or whodisplay negligence, inefficiency or indolence or who knowinglyDdoes anything detrimental to the interest of the Corporation, orconflicting with the instructions or who commits a breach ofdiscipline, or is guilty of any other act prejudicial to goodconduct - (a) Censure; E(b) Withholding of one or more increments either permanently orfor a specified period;

(c) recovery from pay or such other amount as may be due to himof the whole or part of any pecuniary loss caused to theFCorporation by negligence or breach of order; (d) reduction to a lower service, or post, or to a lower time scale,or to a lower stage in a time-scale; (e) compulsory retirement; (f) removal from service which shall not be a disqualification forGfuture employment; (g) dismissal.

(2) No order imposing on an employee any of the penaltiesspecified in clauses (b) to (g) of sub-regulation (1) supra, shall be H

passed by the disciplinary authority specified in Schedule I withoutthe charge or charges being communicated to him in writing andwithout his having been given a reasonable opportunity ofdefending himself against such charge or charges and of showingcause against the action proposed to be taken against him.

(3) The disciplinary authority empowered to impose any of thepenalties, (b), (c), (d), (e), (f) or (g) may itself enquire into such ofthe charges as are not admitted or if it considers it necessary soto do, appoint a board of enquiry or an enquiry officer for thepurpose.

(4) Notwithstanding anything contained in sub-regulations (1) and(2) above -

(i) where a penalty is imposed on an employee on the grounds ofconduct which had led to a conviction on a criminal charge; or

(ii) where the authority concerned is satisfied, for reasons to berecorded in writing, that it is not reasonably practicable to followthe procedure prescribed in this regulation; or

(iii) where an employee has abandoned his post, the disciplinaryauthority may consider the circumstances of the case and passsuch orders thereon as it deems fit.”

13. Regulation 39(1) of the 1960 Regulations deals with thepenalties which can be imposed upon an employee who is found guiltyof misconduct. Regulation 39(2) mandates compliance with the principlesof natural justice in terms of providing a reasonable opportunity to theemployee to defend the charges. Regulation 39(4) operates with anon-obstante clause. In terms of Regulation 39(4)(i), “where a penaltyis imposed on an employee on the grounds of conduct which had led toa conviction on a criminal charge”, the appellant is independently entitledto take steps against the employee. It is in pursuance of the aboveprovision that a notice to show cause was issued to the respondent. Thepenalty which was imposed on the disciplinary enquiry was for an act ofmisconduct. The notice which has been issued under Regulation 39(4) isfor the conviction on a criminal charge. The former does not foreclosethe latter.

14. The position in this regard was elaborated upon in a judgmentof a two judge Bench decision of this Court in Dy Director of Collegiate A

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AEducation (Admn) v S Nagoor Meera[13], where Justice B P JeevanReddy speaking for the Court held:

“8. ... taking proceedings for and passing orders of dismissal,removal or reduction in rank of a government servant who hasbeen convicted by a criminal court is not barred merely becauseBthe sentence or order is suspended by the appellate court or onthe ground that the said government servant-accused has beenreleased on bail pending the appeal.”

This Court specifically disapproved of the view of the Tribunalthat until the appeal against the conviction was disposed of, action underCclause(a) of the second proviso to Article 311(2) was not permissible.The Court held:

“10. What is really relevant thus is the conduct of the governmentservant which has led to his conviction on a criminal charge. Now,in this case, the respondent has been found guilty of corruption byDa criminal court. Until the said conviction is set aside by theappellate or other higher court, it may not be advisable to retainsuch person in service. As stated above, if he succeeds in appealor other proceeding, the matter can always be reviewed in such amanner that he suffers no prejudice.”

This view has been reiterated in another two judge Bench decisionof this Court in K C Sareen v CBI[14]. Justice K T Thomas,speaking for the Court, held:

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“12. ...When a public servant who is convicted of corruption isallowed to continue to hold public office, it would impair the moraleFof the other persons manning such office, and consequently thatwould erode the already shrunk confidence of the people in suchpublic institutions besides demoralising the other honest publicservants who would either be the colleagues or subordinates ofthe convicted person. If honest public servants are compelled totake orders from proclaimed corrupt officers on account of theGsuspension of the conviction, the fallout would be one of shakingthe system itself...”

13 (1995) 3 SCC 37714 (2001) 6 SCC 584H

15. In State of Haryana v Balwant Singh[15], the respondent,who was an employee of a public transport corporation, caused a deathas a result of his rash and negligent driving. The Corporation had tosuffer an award of the Motor Accident Claims Tribunal. Following thedisciplinary enquiry, the employee was subjected to a punishment of areduction of pay to the minimum of the time scale of a driver for fouryears. On the conviction of the employee for offences under Sections279, 337, 338 and 304A of the Penal Code, his services were terminated.On this set of facts, a two judge Bench of this Court, speaking throughJustice Shivaraj V Patil, rejected the argument based on the principle ofdouble jeopardy and held:

“7… there was no question of the respondent suffering a doublejeopardy. The aid of Article 20(2) of the Constitution of India waswrongly taken. Article 20(2) of the Constitution of India does notget attracted to the facts of the present case...”

The Court held that when a major penalty was proposed to beimposed on the ground of the conduct of the employee which had led toconviction on a criminal charge, it was not necessary to take recourse ofthe provisions of Rules 7(1) and (2) of the Haryana Civil Services(Punishment and Appeal) Rules 1987 relating to the convening of aninquiry in which a reasonable opportunity of showing cause would haveto be given.

16. The decision in Lt Governor, Delhi v HC Narinder Singh[16],relied upon by the respondent, is clearly distinguishable. Unlike the presentcase, where the respondent was convicted of various criminal offencesand subsequently, a notice to show cause was issued, in HC NarinderSingh there was no conviction based on a criminal charge. In the presentcase, following the conviction of the respondent by the Special JudgeCBI, the appellant was acting within jurisdiction in issuing a notice toshow cause under Regulation 39(4) of the 1960 Regulations. The learnedsingle judge was correct in dismissing the special civil application filedby the respondent challenging the notice to show cause issued by theappellant. The judgment of the Division Bench restraining the appellantfrom taking a final decision on the show cause notice pending the disposalof the criminal appeal has no valid basis in law.

15 (2003) 3 SCC 362

16 (2004) 13 SCC 342

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998SUPREME COURT REPORTS

[2020] 3 S.C.R.

A17. We accordingly allow the appeal and set aside the impugnedjudgment and order of the Division Bench dated 10 April 2018. As aconsequence, we confirm the order and judgment of the learned singlejudge dismissing the Special Civil Application filed by the respondent.There shall be no order as to costs.

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Kalpana K. Tripathy

Appeal allowed.

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