NETRANANDA PATNAIK Vs. UCO BANK

JUDGEMENT

(1.) In this writ petition, the petitioner challenges the enquiry report and the original and appellate orders of punishment of reversion under Annexures-9,11 and 13 respectively and further prays to declare the punishment illegal and without jurisdiction and to quash the same.

(2.) The petitioner while working as an Officer in the UCO Bank in the rank of Middle Management Scale-III was deputed as General Manager, Cuttack Gramya Bank, Friends Colony, Bajrakabati Road, Cuttack from 20.12.2001 till 20.04.2002. Certain allegations were levelled against him and served upon him vide Annexure-1 dated 16.08.2002 which are to the effect that while acting as General Manager of the Cuttack Gramya Bank he committed certain irregularities in the matter of investment made by the bank in GOI securities. It is alleged that on 09.01.2002 buy back arrangement was made with M/s. Home Trade Ltd. for a security of 12.69% GOI-2002 for a face value of Rs.4 crores and the same was bought back by the dealer on 09.04.2002 with offer of Government securities of 13.82% GOI-2002. Further on 09.04.2002 a sum of Rs.6.28 crores invested in 13.80% GOI-2002 was rolled over to 13.82% GOI-2002 through the same broker and that investment in GOI security made on 09.01.2002 through M/s. Home Trade Ltd. was done without insisting on physical delivery of scripts of earlier investment made in Government security through the same broker. It was further alleged that funds were invested in security through M/s Home Trade Ltd whose credentials were not established before parting with huge sum for investment to them and that the investment committee was not authorized to enter into buy back/roll over transactions in Government securities and that physical delivery of securities was not obtained and as such in the process, investment was undertaken in irregular manner violating RBI guidelines. It was also alleged that in May, 2002 M/S. Home Trade Ltd. closed their Company and as a result the bank suffered a loss of more than Rs.10 crores. With the aforesaid allegations, the petitioner was directed to show cause within a fortnight as to why a disciplinary proceeding should not be initiated against him.

(3.) In pursuance of the aforesaid show cause notice, the petitioner submitted his reply dated 29.10.2002 vide Annexure-2 contending inter alia that as the ex-officio Chairman of the Investment Advisory Committee of the bank, he had only recommended for investment of funds in GOI securities through broker, M/s. Home Trade Ltd. since the said broker was a registered Stock Broker with SEBI and that Cuttack Gramya Bank had previous dealings with it even before he took over charge as General Manager and that at the time of recommending for investment on 08.01.2002 and 09.04.2002 no defect or deficiency with the concerned broker firm was brought to the knowledge of the committee, nor any paper or document was placed before the committee by the convener, who was the Senior Manager(Accounts) of the Bank, questioning the credentials of the said broker firm. It was also replied that the committee recommendation to the Chairman was accepted by the latter, who was the final authority and further that the committee recommendation dated 08.01.2002 for investment through the said broker firm was noted by the Board of Directors of Cuttack Gramya Bank in its meeting dated 08.03.2002 without any adverse comments. It was further stated that on the basis of notes/recommendation of the convener of the investment committee, the committee deliberated on the profitability aspect of the transaction and made recommendations to the Chairman for further consideration. The Chairman having approved the recommendation and the Board of Directors having noted the same, the committee recommended for buy back/rollover security on 09.04.2002 again which was also not objected to. It was also stated that the petitioner as the Chairman of the investment committee, his role was limited to only make recommendation, without having any role in the operational aspect of investment proper. It was outside the ambit of responsibility of the Committee or the General Manager to physically verify or to ascertain whether the securities in respect of earlier investments were obtained or not. As per Board Resolution dated 18.04.2001, obtaining of physical delivery of the securities is the job and responsibility of the Senior Manager (Accounts), who was the convener of the Investment committee. The Convener never apprised the Investment Committee about non-receipt of security for investment made earlier through M/s. Home Trade Ltd. and therefore the Committee had no reason to doubt that the securities might not have been received back by the Senior Manager (Accounts). The petitioner accordingly pleaded innocence in the whole transaction stating that he acted in good faith and without any negligence on his part and requested to absolve him from the allegations.