Unauthorized Possession Alone Is Not “Act Prejudicial to the Interest of the Bank” Under Clause 19.5(j): Reinstatement with Full Back Wages, Subject to Set-off

1. Introduction

This intra-court appeal arose from disciplinary action taken by Bank of Baroda against its employee (the respondent/workman, Sri Jyotirmoy Basu). The core allegation was that, after being transferred from the Bhawanipur Branch to the Ballygunge Branch, the respondent was found in possession (at his residence) of branch-related bank property—rubber stamp, letterheads, and passbooks—seized during a police raid on 06-11-2000.

The bank proceeded departmentally and removed him from service (with superannuation benefits and without disqualification for future employment). An industrial dispute culminated in an award of lump-sum compensation by the Central Government Industrial Tribunal-cum-Labour Court. In writ proceedings, the Single Judge held the termination illegal and ordered reinstatement with full back wages. The bank appealed.

Procedural Timeline (Condensed)

2. Summary of the Judgment

The Division Bench dismissed the bank’s appeal and substantially upheld the Single Judge’s order directing reinstatement with full back wages. The Court agreed that:

• The charge under Clause 19.5(j)—“doing act prejudicial to the interest of the bank”—required the bank to show an act that ultimately stands as prejudicial to the bank.
• Although possession of bank materials at the employee’s residence for about 11 months was not disputed, no evidence emerged in the enquiry, before the Tribunal, or before the Court that such possession caused any prejudice to the bank’s business or reputation.
• The employee’s explanation (materials inadvertently carried during transfer) was not shown to be inherently unbelievable; the bank produced no convincing basis to reject it.

However, the Division Bench modified the Single Judge’s relief to the extent that any superannuation benefit and mandatory compensation already received by the respondent must be adjusted (set off) from the back wages payable.

3. Analysis

A. Precedents Cited

1) Authorities relied on by the appellants (Bank)

• AAI v. Pradip Kumar Banerjee (2025 INSC 149)
  How it was used: The bank argued that once the Labour Court found the domestic enquiry to be valid, the High Court should not interfere or substitute its subjective assessment.
  How the present court dealt with it: The Division Bench did not accept the premise that the matter was merely about deference to a “valid enquiry.” Instead, it treated the central deficiency as absence of material showing prejudice, i.e., failure to establish the very ingredient of Clause 19.5(j). In effect, the Court’s approach suggests that even where procedure is otherwise acceptable, the finding of misconduct cannot stand if the substantive charge is not made out on evidence.
• MSRTC v. Mahadeo Krishna Naik (2025 INSC 218)
  How it was used: The bank argued reinstatement with back wages is not automatic; lump-sum compensation can be an adequate remedy.
  How the present court dealt with it: The Division Bench upheld reinstatement/back wages, indicating that on the facts—where termination was found illegal and the misconduct ingredient (“prejudice”) was not evidenced—the Single Judge’s choice of remedy did not amount to “palpable illegality.” The only balancing done was via set-off of already-received retiral/compensatory amounts.
• Ramesh Chand v. Management of Delhi Transport Corporation (Civil Appeal no. 4208 of 2023)
  How it was used: Cited to support restraint in interfering with labour/disciplinary outcomes and/or remedial discretion (as invoked by the bank).
  How the present court dealt with it: Not expressly analysed in the reasoning. The Court’s conclusion rested on the failure to prove “prejudice” and on limited scope for interference with the Single Judge absent gross illegality.

2) Authorities relied on by the respondent (Workman)

• SBI v. Arvind K. Shukla (2004) 13 SCC 797 para-2
  Typically invoked for service jurisprudence principles (including the role of evidence and fairness in disciplinary matters). The present judgment does not extract or apply its specific ratio, but the respondent’s reliance aligns with the Court’s insistence on evidentiary support for the charge.
• Jagdish Prasad Saxena v. State of Madhya Bharat AIR 1961 SC 1070 para-13 and Amulya Ratan Mukherjee v. Deputy Chief Mechanical Engineer, Eastern Rly. AIR 1961 Cal 40 para-4
  Often cited on natural justice and disciplinary fairness. The Division Bench did not decide the case on procedural invalidity; rather, it focused on the substantive element of prejudice.
• PNB v. Kunja Behari Misra (1998) 7 SCC 84 para-17&18
  A leading authority on the requirement of hearing on disagreement with enquiry findings (natural justice). Although the respondent alleged appellate-stage denial of hearing, the Division Bench did not base its outcome on the Kunja Behari Misra line; the result was reached on the insufficiency of proof of “prejudice.”
• Jayantibhai Raojibhai Patel v. Municipal Council, Narkhed (2019) 17 SCC 184 para-4,6,13 to 17, State of Rajasthan v. Heem Singh (2021) 12 SCC 569 para-37, Roop Singh Negi v. PNB (2009) 2 SCC 570 para-17 to 23, State of U.P. v. Shyam Kewal Ram 2024 SCCOnline All 2716
  These are commonly relied upon for standards of proof in domestic enquiries, evidentiary adequacy, and limits on conjecture. The Division Bench’s emphasis that “no evidence has come on record” of prejudice is broadly consistent with this jurisprudential insistence that findings must rest on some probative material.
• Deepali Gundu Surwase v. Kranti Junior Adhyapak Mahavidyalaya (D.Ed.) (2013) 10 SCC 324
  Frequently cited on back wages and restitution principles upon illegal termination. While not expressly analysed, the Single Judge’s grant of full back wages (upheld by the Division Bench with adjustment) is compatible with the remedial approach Deepali is known for, subject to equitable calibration (here, set-off).
• Bank of Baroda v. S.K. Kool (dead) through legal representatives (2014) 2 SCC 715 para-715, Parmar (R.M) v. Gujarat Electricity Board, Baroda, Baroda (1983) 2 LLN 278 para-9, Khem Chand v. Union of India AIR 1958 SC 300 para-19, Surath Chandra Chakrabarty v. State of West Bengal (1970) 3 SCC 548 para-6, Narain v. State of Punjab AIR 1959 SC 484, Hardwari Lal v. State of U.P. (1999) 8 SCC 582
  These authorities generally address natural justice, disciplinary procedure, and fairness. The present judgment, however, ultimately turns on a narrower but decisive point: the charge as framed required proof of prejudice, which was not provided.

B. Legal Reasoning

1) Construing Clause 19.5(j): “doing act prejudicial to the interest of the bank”

The Court treated “prejudicial to the interest of the bank” as an essential ingredient of the misconduct. Therefore, it was not enough to show mere unauthorized possession of bank articles; the employer had to demonstrate—by material on record—how the act ultimately caused prejudice to the bank (business, reputation, or other protectable interests).

Two reasoning moves are notable:

• Admitted fact is not equivalent to proved misconduct: The respondent admitted possession and recovery from his residence. Yet the Court held that admission did not automatically prove the particular misconduct charged, because the charge was not “unauthorized possession” simpliciter; it was an act “prejudicial” to the bank.
• Inference of prejudice cannot be presumed without evidentiary foundation: The disciplinary and appellate authorities proceeded as though recovery from exclusive custody itself establishes prejudice. The Court rejected this as unsupported, noting the absence of any “fact or figure or material” showing actual prejudice.

2) Treatment of the workman’s explanation

The respondent’s case was that he inadvertently carried the materials along with his belongings at the time of transfer and lacked knowledge of their presence. The Court observed that there was “no convincing material” shown by the bank for why this explanation “should not be believed.” This indicates a judicial insistence that where the charge depends on a consequential element (prejudice), the employer must do more than rely on suspicion generated by circumstances (e.g., police raid/recovery).

3) Criminal proceedings vs departmental proceedings

The disciplinary authority recorded that departmental proceedings are independent of criminal proceedings and acquittal does not affect departmental findings, especially where charges differ. While the Division Bench did not dispute that general proposition, it did not treat the criminal acquittal as the decisive factor either. The deciding factor remained: the departmental charge under Clause 19.5(j) was not substantiated by proof of prejudice.

4) Appellate restraint in intra-court appeal

The Division Bench reaffirmed that an intra-court appeal should not interfere with the Single Judge’s order unless there is “palpable illegality or gross miscarriage of justice.” Having found no such illegality—given the absence of proof of prejudice—it declined interference and dismissed the appeal.

5) Relief and equitable adjustment (set-off)

While upholding reinstatement with full back wages, the Court introduced a targeted modification: any “superannuation benefit and mandatory compensation, if any,” already received must be adjusted from the back wages payable. This reflects a restitutionary balance—preventing double recovery while maintaining the consequence of illegal termination.

C. Impact

1) Higher evidentiary discipline for “prejudice-based” misconduct clauses

For employers (particularly banks governed by bipartite settlements), the decision signals that where misconduct is framed as “prejudicial to the interest” of the institution, the employer should lead evidence that connects the employee’s act to:

• actual reputational harm, or
• actual operational/business harm, or
• a demonstrable and articulated risk materialization (not merely speculative possibility),

rather than relying solely on suspicious circumstances such as unauthorized custody or police recovery.

2) Charge-framing becomes outcome-determinative

The case illustrates that the employer’s chosen charge language matters. If the bank had charged “unauthorized possession of bank property” as an independent head of misconduct (if available under applicable rules/settlement), the evidentiary and legal inquiry might have been different. Here, by proceeding under Clause 19.5(j), the bank assumed the burden to prove the “prejudice” element.

3) Remedies: reinstatement/back wages remain available where termination is illegal, subject to adjustments

Although modern labour remedies sometimes prefer compensation over reinstatement, this judgment shows that reinstatement with back wages remains a viable judicial outcome where the termination is found illegal on merits—while still allowing courts to craft practical set-offs to avoid unjust enrichment.

4) Intra-court appeal strategy: “no evidence” findings are hard to dislodge

Where the Single Judge’s conclusion rests on lack of evidence on an essential ingredient, an appellant faces a high threshold in an intra-court appeal, particularly under the “palpable illegality” standard stated by the Division Bench.

4. Complex Concepts Simplified

• Clause 19.5(j) of bipartite settlement: A negotiated rule (between banks and unions) defining certain “gross misconduct.” Here, it penalizes acts that harm the bank’s interests. The Court read it as requiring proof of actual prejudice, not mere suspicion.
• Domestic/departmental enquiry: The employer’s internal fact-finding process to decide whether an employee committed misconduct. It is not a criminal trial and uses different standards, but it still must be evidence-based.
• Industrial Tribunal Award: A labour adjudicator’s binding decision on an industrial dispute. The Tribunal here held termination illegal but granted lump-sum compensation instead of reinstatement.
• Writ petition (Article 226) review: High Court’s supervisory review to correct legal errors, perversity, or violations of fairness. The Single Judge used this to modify the Tribunal’s relief.
• Intra-court appeal: An appeal from a Single Judge to a Division Bench within the same High Court. The Division Bench emphasized restraint unless there is palpable illegality.
• Back wages: Salary the employee would have earned during the period of illegal termination.
• Set-off/adjustment: Deducting amounts already paid (e.g., superannuation benefits/compensation) from back wages to prevent double recovery.

5. Conclusion

The Calcutta High Court’s Division Bench affirmed a clear and practically significant principle: when an employee is charged under a “prejudice to the bank” misconduct clause (Clause 19.5(j)), the employer must prove the element of prejudice with material on record; mere unauthorized possession—even if admitted and recovered from the employee’s residence—does not, by itself, satisfy that charge.

On remedies, the Court upheld reinstatement with full back wages as directed by the Single Judge, while introducing an equitable correction by ordering adjustment of already-received superannuation benefits and mandatory compensation from the back wages. The decision thus strengthens evidentiary rigor in disciplinary findings and clarifies that remedial restoration may be ordered where termination is illegal—tempered by set-off to ensure fairness.