Karnataka High Court rejected reinstatement of Bank Employee for flouting Banking Rules

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The Karnataka High Court recently reversed an order from a single bench that directed the reinstatement of a delinquent bank employee who was dismissed from service for lending money to fictitious persons without securing repayment of loans. The court observed that the opinion given by the Central Vigilance Commission (CVC) to the disciplinary authority need not be shared with the employee.

The division bench of Justice Krishna S Dixit and Justice Ramachandra D Huddar allowed the appeal filed by Vijaya Bank and agreed with its contention that taking the opinion of the Central Vigilance Officer is internalized through Regulation 19 of Vijaya Bank Officer Employees’ (Discipline and Appeal) Regulations, 1981. The court stated that the purpose of consulting the Vigilance Commission is not in the interest of the employee but in the larger interest of the banking institution.

The court also held that once an employee of a bank is convicted for an offense involving moral turpitude, they are liable to be discontinued from employment. In this case, the employee was convicted for offenses under the Indian Penal Code and the Prevention of Corruption Act.

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The court rejected the view taken by the Supreme Court in previous cases and stated that the provision in Regulation 19 of the 1981 Regulations was absent in those cases. The court emphasized that the provision in Regulation 19 was essential and should have been discussed in the impugned order.

Importance of Proper Banking Practices and Protecting Public Trust

The court highlighted the importance of proper banking practices and the need to protect the public trust. It stated that funds are entrusted to banks by the public, and this establishes a public trust that compels bankers to act with greater care. The court criticized the employee in this case for indiscriminately lending the bank’s money to fictitious persons without securing repayment, resulting in a significant financial loss for the bank.

The court referred to the closure and merger of public sector banks due to bad debts and emphasized the need for responsible lending practices. It stated that indiscriminate lending in violation of prescribed protocols is unscrupulous and culpable, putting banking institutions at risk of losing public money.

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Conclusion

In conclusion, the Karnataka High Court ruled that the opinion given by the Central Vigilance Commission to the disciplinary authority need not be shared with a delinquent bank employee. The court emphasized the importance of proper banking practices and protecting the public trust. It held that once an employee is convicted for an offense involving moral turpitude, they are liable to be discontinued from employment. The court set aside the reinstatement order for the delinquent bank employee.

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