The Supreme Court has ruled that banks are not legally bound to conduct a joint disciplinary inquiry merely because multiple officers are involved in the same transaction. The Court clarified that the word “may” used in disciplinary regulations gives discretion to the employer and cannot automatically be read as “shall.”
A bench of Justice S.V.N. Bhatti and Justice Vijay Bishnoi delivered the judgment while deciding an appeal filed by Canara Bank against a former senior manager.
Background of the Case
The dispute arose from disciplinary proceedings initiated against Prem Latha Uppal, a Senior Manager of Canara Bank posted at its Diplomatic Enclave branch in New Delhi. She was accused of negligence while sanctioning loans to two trading firms as part of a Credit Sanction Committee.
According to the bank, the committee failed to properly verify borrowers, collateral documents, guarantors, and other financial records before approving credit facilities. The disciplinary authority later reduced Uppal from SMG Scale-IV to MMG Scale-III as punishment in May 2006.
She challenged the punishment before the Karnataka High Court. While a Single Judge dismissed her plea, a Division Bench later set aside the punishment order, holding that the inquiry relied upon statements of co-accused officers who were never examined during the proceedings.
Court’s Observation
The Supreme Court agreed with the High Court’s conclusion that certain findings in the disciplinary inquiry suffered from evidentiary defects and violation of natural justice principles. The bench noted that reliance had been placed on statements which the employee had no opportunity to challenge during the inquiry.
However, the Court disagreed with the High Court’s interpretation of Regulation 10 of the Canara Bank Officer Employees’ (Discipline and Appeal) Regulations, 1976.
The bench observed:
“The word ‘may’ in Regulation 10 of the 1976 Regulations, from any standpoint, is directory.”
The Court explained that making joint proceedings compulsory would unnecessarily restrict the discretion of employers, especially where officers hold different ranks or play different roles in a transaction.
It further observed that disciplinary authorities may vary depending on the cadre of employees involved, making separate proceedings practical in many situations.
Decision
The Supreme Court partly interfered with the Karnataka High Court judgment only on the interpretation of Regulation 10 and held that conducting a common disciplinary proceeding is optional, not mandatory.
At the same time, the Court did not disturb the High Court’s conclusions regarding defects in the inquiry against the employee. The appeal was disposed of with directions to Canara Bank to settle the service account of the deceased employee within six weeks.
Case Details
Case Title: Canara Bank v. Prem Latha Uppal (Dead) Through LRs
Case Number: Civil Appeal arising out of SLP (C) No. 10226 of 2023
Judges: Justice S.V.N. Bhatti and Justice Vijay Bishnoi
Decision Date: May 12, 2026
