Employee Dismissed On Retirement Day, Denied Retirement Benefits: Delhi HC Orders Bank To Review Penalty

The Delhi High Court, in a recent ruling, highlighted the principle of proportionality and parity in determining penalties under the law. Justice Sanjeev Narula expressed concerns over the civil consequences of the extent of penalty on the petitioner, who was dismissed from services on the last day of 37 years of service in the Punjab National Bank (PNB), and was denied all retirement benefits. The Court clarified that while the penalty is the bank’s internal disciplinary matter, “when the penalty is so disproportionate to the misconduct proved that it shocks the conscience”, the judicial interference is justified.

Case Background

The petitioner joined the bank (PNB) in December 1980. Between May 2012 and April 2015, he served as Assistant General Manager and incumbent-in-charge at the MCB, Brady House branch in Mumbai. In July 2017, just months before his retirement, he was served a chargesheet for lack of exercising due diligence in sanctioning loans and credit facilities to five borrower accounts (Plymouth Multiventure Pvt. Ltd., Gopal Masterbatch Pvt. Ltd., Vision Machines Pvt. Ltd., K.V. Alloys, and Basil Resources Pvt. Ltd).

This led to a departmental enquiry. The enquiry officer submitted its report with ‘proved’, ‘partly proved’, and ‘not proved’ findings against the petitioner on October 18, 2017. The petitioner also submitted a representation to the report. However, on October 31, 2017, the Disciplinary Authority passed the petitioner’s dismissal order based on the deficiency in discharging his duties at the sanction stage, such as accepting projections without checking, not ensuring specified documents, etc., and at the monitoring stage, in verifying stock, routing of sales, financial monitoring, and so on.  

The petitioner made a departmental appeal, but it was rejected on March 28, 2018. The Appellate Authority declined the argument that the lapses were merely ‘operational’ and attributable to the processing officials, and maintained the penalty, which included dismissal of the petitioner on the date of his superannuation and, thus, as a consequence, withholding of his retiral benefits, including pension, gratuity, etc.

Arguments

The petitioner’s counsel argued that the enquiry was based on ‘no evidence’. The bank didn’t examine any management witnesses. The enquiry was based on marketing documents, provided through a Presenting Officer and not any competent witness. The counsel also contended that the punishment was discriminatory as the other officials involved in the credit process were only given minor penalties, such as censure, but the petitioner was awarded dismissal. The counsel’s argument was that “this disparity is left unexplained by any rational distinction.”

On the other hand, the bank (respondent) argued that the petitioner, as the incumbent-in-charge, had the responsibility to ensure compliance with the guidelines. It also highlighted that the lapses in credit appraisal and monitoring resulted in a loss of approximately Rs 31.84 crore to the bank. The bank argued that disciplinary action had been taken against all the officials involved in the said credit episode, and there had been no discriminatory treatment.

Court Observation

The Court noted that under Article 226, its role is not to act as an appellate forum but only to review the legality of the process of decision-making. The Court rejected the petitioner’s argument of no evidence in the matter, saying that in banking matters, evidence is often based on internal records rather than the witness or oral testimony.

The Court held, “the findings returned in the present case cannot be condemned as findings based on 'no evidence', nor can they be said to be so unreasonable that no fair-minded disciplinary authority could have reached them.”

However, it found the proportion of penalties concerning. It noted, “The misconduct found established is framed as lapses in credit appraisal, due diligence, and monitoring across five accounts. The record does not proceed on allegations of bribery, personal gain, or moral turpitude. The Bank emphasises seriousness, and it is right to do so because failures in credit discipline can imperil public money. Still, the character of misconduct remains relevant while weighing the penalty.”

“The Petitioner has long service since 29th December, 1980. Dismissal was imposed on 31st October, 2017, the last day of service, with an acknowledged cascading impact on terminal benefits under the Bank’s regime. That consequence is a relevant consideration in proportionality,” said the Court.

The Court observed that a sanctioning authority “may stand on a different footing from a processing official”, but only the petitioner faced a dismissal, whereas other officials escaped with minor penalties, and the Bank failed to provide a rational and reasoned differentiation regarding it.  

Court Judgment

In the final judgment on Mach 25, 2026, the Court directed the bank’s competent authority to reconsider the punishment afresh, considering the role of the petitioner and other officials in the credit process, the length of petitioner’s service, his entitlements on retiral benefits following the final penalty, petitioner's own willingness to accept a lesser penalty like "Compulsory Retirement’, and pass a reasoned order within six-week from the date of the Court’s order.

The Court further clarified that withholding of gratuity must be in compliance with the rules under the Payment of Gratuity Act, 1972, and that it cannot be treated as a routine consequence of dismissal.