Acquittal in Criminal Case Does Not Affect Disciplinary Proceedings or Forfeiture of Gratuity: Gujarat High Court

In a significant ruling Gujarat High Court dismissed a petition filed by Kishorebhai Sunderji Mistry, a former employee of Indian Bank, challenging his removal from service and forfeiture of terminal benefits, including gratuity and provident fund. The petitioner argued that his subsequent acquittal in a criminal case should invalidate the disciplinary action taken against him. However, the Court held that acquittal in a criminal case, based on lack of evidence, does not affect disciplinary proceedings that are governed by the standard of "preponderance of probabilities."
The case, Kishorebhai Sunderji Mistry v. Indian Bank & Anr. (Special Civil Application No. 7413 of 2016), revolved around allegations of financial misconduct committed by the petitioner while serving as a branch manager at Indian Bank’s Godhra branch. He had been removed from service following a departmental inquiry in 2002.

Justice Vaibhavi D. Nanavati upheld the bank’s disciplinary action and rejected the petitioner’s claims for reinstatement and terminal benefits. The Court noted that:
1.    Criminal Acquittal Irrelevant to Disciplinary Proceedings
The Court clarified that the petitioner’s acquittal in a criminal case, filed by Kapol Co-operative Bank, had no bearing on the disciplinary inquiry conducted by Indian Bank. The acquittal was based on insufficient evidence, while the disciplinary action was taken under a different standard of proof—preponderance of probabilities.
2.    Forfeiture of Gratuity and Provident Fund Justified
The Court upheld the bank’s decision to forfeit the petitioner’s gratuity under Section 4(6) of the Payment of Gratuity Act, 1972, as his misconduct caused financial losses to the bank. Additionally, deductions from the provident fund to recover part of the financial loss were deemed valid.
3.    Delay in Filing Petition
The Court emphasized that the petitioner had delayed filing the petition by 14 years after his removal from service in 2002. Citing the principle of delay and laches, the Court refused to entertain the stale claims, noting that the petitioner had not challenged his removal for over a decade.
4.    No Procedural Impropriety in Disciplinary Inquiry
Addressing the petitioner’s claims of procedural unfairness, the Court found that the disciplinary proceedings were conducted in accordance with the principles of natural justice. The petitioner had been given sufficient opportunities to present his defense.

The petitioner, who joined Indian Bank in 1973, was suspended in August 2000 following allegations of financial misconduct. He was charged with:
1.    Co-accepting 10 usance bills worth ₹99.70 lakhs without authorization.
2.    Allowing a temporary overdraft of ₹4.49 lakhs without approval.
3.    Failing to deposit ₹35,000 meant for a fixed deposit, instead keeping the amount with himself.
A departmental inquiry found him guilty of the first two charges, leading to his removal from service in November 2002.
Separately, the petitioner faced criminal charges filed by Kapol Co-operative Bank but was acquitted in 2013 due to lack of evidence. Following his acquittal, he approached the High Court seeking reinstatement and terminal benefits, including gratuity and provident fund.

The Court held that criminal proceedings and departmental disciplinary inquiries are independent processes, governed by different legal standards. While criminal cases require proof beyond reasonable doubt, disciplinary actions are based on the preponderance of probabilities, making the acquittal irrelevant to the findings of misconduct.
The Court further noted that the petitioner’s actions, including unauthorized financial transactions, caused significant losses to the bank, justifying the forfeiture of gratuity under Section 4(6) of the Payment of Gratuity Act, 1972. Additionally, the petitioner’s delay in filing the writ petition undermined his case.
Citing the Supreme Court’s judgment in State of Jammu and Kashmir v. R.K. Zalpuri (2016), the Court reiterated that stale claims filed after inordinate delays cannot be entertained unless grave injustice is shown, which was not the case here.

Dismissing the petition, the Court upheld the bank’s disciplinary action and its decision to forfeit gratuity and recover financial losses through deductions from the provident fund. The judgment underscores the principle that disciplinary proceedings and criminal trials operate independently, and an acquittal in the latter does not invalidate the former.
“The petitioner’s misconduct caused financial loss to the bank. The disciplinary action and forfeiture of terminal benefits are fully justified under the law. Stale claims filed after inordinate delays cannot be entertained,” the judgment concluded.

Date of Decision: December 24, 2024