“From ‘May’ to ‘Shall’” – The Supreme Court Makes the Charged-Officer’s Examination and Disclosure of CVC Advice Mandatory in Departmental Inquiries

Introduction

The decision in K. Prabhakar Hegde v. Bank of Baroda, 2025 INSC 997 (19 August 2025), reshapes the procedural landscape of disciplinary proceedings in India’s public sector banks and, by extension, in all statutory service jurisprudence. The Supreme Court (Dipankar Datta & Prashant Kumar Mishra, JJ.) reversed a Karnataka High Court ruling and laid down two significant principles:

Regulation 6(17) of the Vijaya Bank Officer Employees’ (Discipline & Appeal) Regulations, 1981 is mandatory. An Inquiry Officer must “generally question” a charged employee on every circumstance appearing against him when the employee has not entered the witness box. The earlier “substantial-compliance / no-prejudice” view in Sunil Kumar Banerjee and Alok Kumar can no longer be invoked to dilute this mandate.
CVC recommendations relied on while deciding penalty must be supplied to the delinquent officer. Claiming “privilege” over such advice—absent any real national-security concern—violates natural justice as crystallised in SBI v. D.C. Aggarwal.

These rulings realign service law with the broader constitutional trend that treats natural-justice violations as self-evident prejudice (the Olga Tellis / Tulsiram Patel / A.R. Antulay “trilogy”). The Court refused to remand owing to the antiquity of the dispute (the appellant is now 86) but still quashed the dismissal and awarded limited relief.

Summary of the Judgment

The appellant, a long-serving banker, was dismissed for sanctioning irregular temporary overdrafts. The disciplinary authority originally proposed compulsory retirement, but, after receiving an undisclosed adverse recommendation from the Central Vigilance Commission (CVC), imposed dismissal instead.
The Karnataka High Court held that (a) non-supply of the preliminary investigation report and (b) failure to comply fully with Regulation 6(17) caused no prejudice, relying on Sunil Kumar Banerjee.
The Supreme Court disagreed. While non-supply of the preliminary report did not vitiate the inquiry, two other lapses did:
- the Inquiry Officer’s total omission to question the appellant under Regulation 6(17); and
- the use of an undisclosed CVC recommendation to enhance penalty.
Holding these lapses to be per se prejudicial, the Court set aside both the High Court ruling and the dismissal order. Given the lapse of time and merger of Vijaya Bank into Bank of Baroda, it declined full back-wages but directed payment of an amount equal to gratuity within eight weeks.

Detailed Analysis

1. Precedents Cited and Their Influence

a. Constitutional Trilogy on Natural Justice

Olga Tellis v. BMC (1985), Union of India v. Tulsiram Patel (1985) and A.R. Antulay v. R.S. Nayak (1988): collectively hold that violation of audi alteram partem is itself prejudice, anchored in Article 14.

b. Earlier Service-Law Cases

Sunil Kumar Banerjee v. State of W.B. (1980) and Union of India v. Alok Kumar (2010) had treated the ‘questioning’ requirement as directory, subject to a showing of prejudice.
SBI v. D.C. Aggarwal (1993) and Mohd. Quaramuddin (1994) mandate disclosure of CVC advice if the disciplinary authority relies on it.
State Of Punjab v. Sodhi Sukhdev Singh (1961) and Raj Narain (1975) restrict claims of “privilege” under s. 123 Evidence Act to true affairs-of-State.

By prefacing its opinion with these decisions, the Court signalled its intention to prioritise fairness over procedural shortcuts.

2. The Court’s Legal Reasoning

a. Directory vs. Mandatory – Interpretation of “May” and “Shall”

Regulation 6(17) has two limbs:

If the delinquent examines himself, the IO may put questions.
If he does not examine himself, the IO shall “question him generally on the circumstances appearing in the evidence”.

The Court applied a linguistic-contextual test: where the rule-maker consciously uses both “may” and “shall” in the same sentence, “shall” denotes compulsion. Ignoring it is ipso facto illegal; no prejudice inquiry survives.

b. Distinguishing Sunil Kumar Banerjee

Evolving jurisprudence – Banerjee pre-dates the constitutional trilogy. Natural-justice law has since shifted from a “prejudice test” to an “intrinsic prejudice” approach.
Mismatch of contexts – Banerjee borrowed the prejudice standard from s. 342 CrPC 1898; but s. 342/313 CrPC operates under statutory ‘cure-all’ clauses (s. 537/465) absent in service rules.
Unnoticed larger benches – Banerjee overlooked the four-Judge ruling in Tara Singh v. State (1951), which treated the questioning requirement as essential.

c. Privilege Claim Rejected

The CVC’s advice did not pertain to defence, security, or other classic “affairs of State”. Therefore, privilege was untenable. Withholding the document denied the appellant an opportunity to rebut the harsher penalty recommendation – squarely falling within D.C. Aggarwal.

3. Impact and Prospective Significance

Service-Law Compliance: All disciplinary authorities (banks, PSUs, civil services) must hereafter scrupulously question a delinquent officer at the close of prosecution evidence if he has not testified.
Limitation on “prejudice” defence: Employers can no longer escape by arguing “no prejudice”. Violation is substantive.
CVC & Vigilance Framework: Any reliance on CVC/CBI/vigilance input requires prior disclosure to the employee. Internal correspondence cannot be masked as “privileged” routinely.
Drafting of Rules: Future disciplinary‐procedure codes may consciously build in “cure” provisions akin to CrPC s.465 if they wish to retain a prejudice test. Until then, fairness is non-negotiable.
Litigation Strategy: Defence practitioners now possess strong grounds to challenge dismissal orders where:
- the IO never questioned the employee; or
- adverse material (vigilance notes, second-stage advice) was withheld.

Complex Concepts Simplified

Principles of Natural Justice: Fundamental procedural guarantees – usually (i) hearing the other side, (ii) absence of bias. The Court now treats them as integral to Article 14 (equality).
Prejudice Theory: Earlier, a violation had to cause demonstrable harm. The Court re-affirms that in some contexts the violation itself equals prejudice.
CVC Recommendation: The Central Vigilance Commission issues “first-stage” advice (whether to charge-sheet) and “second-stage” advice (penalty). If the disciplinary authority departs from its tentative decision after receiving CVC advice, the advice must be shared.
Privilege Under s. 123 Evidence Act: Allows withholding documents where disclosure injures public interest (e.g., defence secrets). It cannot be stretched to shield routine administrative communications.

Conclusion

The Supreme Court’s ruling in K. Prabhakar Hegde marks a decisive doctrinal shift:

“When a rule says ‘shall’, compliance is not optional; and when an authority relies on adverse material, secrecy is not a privilege.”

By overruling the lenient “substantial-compliance” doctrine in departmental inquiries and insisting on transparency whenever vigilance advice alters punishments, the Court reinforces that fairness is substance, not form. The decision will compel employers to fine-tune their disciplinary protocols, amplifying employee protections and aligning domestic inquiries with constitutional due-process standards.