Canara Bankv.Prem Latha Uppal (Dead) Through LRS

Legal Analysis: Canara Bank vs. Prem Latha Uppal (Dead) Through LRS

Citation: 2026 INSC 478
Court: Supreme Court of India
Bench: Justice S.V.N. Bhatti and Justice Vijay Bishnoi (Division Bench)
Date of Decision: May 12, 2026
Nature of Judgment: Civil Appeal under Article 136 of the Constitution of India against the judgment of the Division Bench of the Karnataka High Court in Writ Appeal No. 6228 of 2013.

Synopsis of the Judgment

The respondent (a Senior Manager in Canara Bank) was charge‑sheeted and punished by reduction to a lower grade for negligence and misconduct in sanctioning loans. The Single Judge of the High Court dismissed her writ petition, upholding the punishment. However, the Division Bench allowed her appeal, set aside the disciplinary order, and held that the enquiry was vitiated because statements of co‑accused officers (who were not examined as witnesses) were relied upon, violating natural justice. The Supreme Court, while affirming the Division Bench’s conclusion on merits (that the punishment could not be sustained), disagreed with the Division Bench on the interpretation of Regulation 10 of the Discipline and Appeal Regulations, 1976. The Court held that the word “may” in Regulation 10 (empowering common proceedings against multiple officers) is directory, not mandatory. The appeal was disposed of with a direction to the Bank to settle the respondent’s account in light of the impugned judgment (i.e., treating the punishment as set aside).

1. Basic Information of the Judgment

• Case Title: Canara Bank vs. Prem Latha Uppal (Dead) Through LRS

• Civil Appeal No.: Arising out of Special Leave Petition (Civil) No. 10226 of 2023

• Bench: Justice S.V.N. Bhatti and Justice Vijay Bishnoi (Division Bench)

• Date of Decision: May 12, 2026

• Citation: 2026 INSC 478

• Appeal From: Judgment dated 15.02.2023 of the High Court of Karnataka at Bengaluru in Writ Appeal No. 6228 of 2013

2. Legal Framework

Laws and Provisions Involved

• Canara Bank Officer Employees’ (Discipline and Appeal) Regulations, 1976: Regulation 10 (common proceedings – “may”)

• Constitution of India, 1950: Articles 226 and 227 (judicial review of disciplinary proceedings)

• Principles of natural justice (audi alteram partem) – right to cross‑examine witnesses and not to be condemned on un‑testified material.

Key Precedents Cited

1. T. Baba Prasad v. Andhra Bank, Hyderabad and others (Andhra Pradesh High Court) – Interpreted “may” in Regulation 10 of the Andhra Bank Officer Employees (Discipline and Appeal) Regulations, 1981 (pari materia) as directory, not mandatory. Held that the provision is facilitative, not obligatory; failure to hold a joint enquiry does not vitiate individual proceedings.

2. Arun Kumar Alva v. The Vijaya Bank, M.G. Road, Bangalore and others (Karnataka High Court) – Took a contrary view (that “may” should be read as mandatory) – overruled by implication.

3. Principles of statutory interpretation – “may” is not understood as “must” unless the context or purpose of the statute compels such reading.

What the Judgment is About

The judgment addresses two essential questions in service law: (i) the scope of judicial review in disciplinary matters – whether the High Court can interfere on the ground of violation of natural justice when the enquiry relied on statements of co‑accused who were not examined; and (ii) whether the employer is mandatorily required to hold a common disciplinary proceeding against all officers involved in a single incident, or whether it has the discretion to proceed separately. The Supreme Court upheld the High Court’s finding that the enquiry was vitiated (for lack of opportunity to cross‑examine), but clarified that Regulation 10 is directory, not mandatory, thereby correcting the High Court’s reasoning on that point.

3. Relevant Facts

• Employer and employee: Canara Bank (Appellant). The first Respondent, Prem Latha Uppal, was a Senior Manager, Scale‑III, at the Diplomatic Enclave Branch, New Delhi.

• Misconduct: She was a member of the Credit Sanction Committee that sanctioned financial assistance to M/s. Aman Trading Company and M/s. Creative Trading Company. The loans were sanctioned without proper verification of the borrower’s existence, ownership of collateral security, genuineness of previous banker’s OPL, and with significant irregularities (impersonation, discrepancies in documents, large cash withdrawals without monitoring). Multiple charges were framed under two Articles.

• Disciplinary proceedings: An enquiry was held. The Presenting Officer relied on statements of other officers (S.S. Bhat and R. Chandramouli) who were co‑accused in the same matter. These officers were not examined as witnesses; only their statements recorded during investigation were used. The Enquiry Officer partly proved the charges.

• Punishment (31.05.2006): The Disciplinary Authority reduced the respondent from SMG Scale‑IV to MMG Scale‑III.

• Writ Petition (No. 3150/2008): Respondent challenged the punishment. The learned Single Judge dismissed the writ on 02.09.2013, holding that the enquiry was fair, there was no discrimination, and Regulation 10 was directory.

• Writ Appeal (No. 6228/2013): The Division Bench allowed the appeal, set aside the punishment, and held that the enquiry was vitiated because statements of co‑accused (not examined) were relied upon, violating natural justice. It also implied that common proceedings should have been held (interpreting Regulation 10 as mandatory).

• Subsequent events: The respondent died during pendency; her legal representatives were brought on record. She had already superannuated on 31.11.2010.

• Supreme Court Appeal: Canara Bank appealed, challenging the Division Bench’s order on both the scope of judicial review and the interpretation of Regulation 10.

4. Issues

1. Whether the Division Bench of the High Court exceeded the permissible scope of judicial review in setting aside the disciplinary order on the ground that the enquiry relied on statements of co‑accused officers who were not examined as witnesses.

2. Whether Regulation 10 of the Canara Bank Officer Employees’ (Discipline and Appeal) Regulations, 1976 (which uses the word “may”) is mandatory (requiring a common proceeding against all officers involved in a case) or directory (giving discretion to the employer).

5. Ratio Decidendi

A. Scope of judicial review – no error in the Division Bench’s conclusion on merits (Paras 14-15):

The Supreme Court held that the findings recorded by the Division Bench on the merits of the matter – particularly that the enquiry was vitiated because the Enquiry Officer relied on statements of co‑accused officers (S.S. Bhat and R. Chandramouli) who were not examined as witnesses, thereby denying the respondent an opportunity to cross‑examine – were “available” and did not exceed the scope of judicial review. The Court noted that the errors noted by the High Court against the findings recorded in respect of the respondent were “not material” and that the impugned judgment to that extent required confirmation. In other words, the setting aside of the punishment was upheld.

B. Regulation 10 – “may” is directory, not mandatory (Paras 15-17):

The Court examined Regulation 10: “Where two or more officer employees are concerned in a case, the authority competent to impose a major penalty on all such officer employees may make an order directing that disciplinary proceedings against all of them may be taken in a common proceeding.”

The Court held that the word “may” in this provision is directory. It rejected the interpretation (implicitly adopted by the Division Bench) that “may” should be read as “shall” (mandatory common proceedings). The reasons were:

• Plain language: “May” is not understood as “must” unless the context compels it.

• The provision is facilitative, not obligatory. It vests the employer with the power to hold common proceedings; it does not create a corresponding right in the employee to demand a joint enquiry.

• The disciplinary authority may differ depending on the cadre of the charge‑sheeted employees; a mandatory common proceeding could be impractical.

• Following the interpretation of the Andhra Pradesh High Court in T. Baba Prasad v. Andhra Bank (which dealt with identical regulation), the Court held that the provision is directory. The contrary view of the Karnataka High Court in Arun Kumar Alva was not approved.

C. Effect on the impugned judgment (Para 18):

The Supreme Court set aside the view taken in the impugned judgment with respect to Regulation 10 of the 1976 Regulations. However, since the Division Bench’s conclusion on the merits (setting aside the punishment) was upheld, the overall result remained the same – the punishment was not restored. The Court directed the Bank to settle the account of the first Respondent (i.e., give effect to the setting aside of punishment) within six weeks.

6. New Legal Principles Established / Reiterated

• The word “may” in a service regulation conferring power to hold common disciplinary proceedings against multiple officers is directory, not mandatory. An employee has no right to insist on a joint enquiry merely because multiple officers are involved in the same transaction. The employer retains discretion to proceed separately based on the nature of charges, grades of officers, or administrative convenience.

• A disciplinary enquiry is vitiated if the Enquiry Officer relies on statements of co‑accused or other persons who are not examined as witnesses and to whom the delinquent has no opportunity to cross‑examine. Mere use of such statements as “material” without providing an opportunity to rebut violates natural justice.

• The scope of judicial review in disciplinary matters includes ensuring that the findings are based on “some evidence” and that the principles of natural justice are complied with. The High Court may interfere if the enquiry is based on no evidence or if the procedure is fundamentally flawed.

7. Court’s Analysis and Examination of Concepts

The Court first noted that the Division Bench’s finding regarding violation of natural justice was based on a clear record: the Presenting Officer had relied on statements of co‑accused officers (S.S. Bhat and R. Chandramouli) who were not examined as witnesses. MW‑1 (a management witness) merely referred to those statements; no opportunity was given to the respondent to cross‑examine the makers of those statements. The Enquiry Officer then used those statements to record findings. The Supreme Court held that this was a valid ground to set aside the punishment – not an impermissible reappreciation of evidence, but a finding that there was “no semblance of evidence” on certain charges because the material relied upon was not tested.

On Regulation 10, the Court engaged in a plain‑meaning interpretation. It referred to the Karnataka High Court’s contrary view in Arun Kumar Alva and the Andhra Pradesh High Court’s view in T. Baba Prasad. The Court agreed with the latter. It observed that the use of “may” cannot be construed as “shall” without doing violence to the language. The provision was enacted to enable the bank to hold common proceedings if it chose to do so, but it did not obligate it. The Court also noted that the employees involved might be at different levels and the competent disciplinary authority might be different – a mandatory common proceeding would then be unworkable.

The Court clarified that it was not interfering with the Division Bench’s ultimate conclusion (setting aside the punishment) because that conclusion was based on a valid natural justice ground. It only corrected the reasoning regarding Regulation 10 to the extent the Division Bench might have treated it as mandatory.

8. Critical Analysis

Strengths: The judgment correctly balances the need for fair procedure with the employer’s administrative discretion. By affirming the Division Bench’s setting aside of the punishment on natural justice grounds, the Court protects the employee’s rights. At the same time, by clarifying that Regulation 10 is directory, it prevents future litigation where employees might claim a right to joint proceedings. The distinction between “may” and “shall” is properly applied, and the Court avoids an overly rigid interpretation that would hamper disciplinary administration.

Potential concerns: The judgment does not elaborate on what constitutes “some evidence” in a disciplinary enquiry when statements of co‑accused are involved. It also does not explicitly overrule the Karnataka High Court’s view in Arun Kumar Alva; it merely states that it does not reflect the correct position. However, the clarification is sufficient for future cases. Also, the Court did not discuss whether the bank could have proceeded afresh after the Division Bench’s order – but that was not necessary as the employee had already superannuated and died.

Practical impact: This judgment will be cited in disciplinary matters where multiple employees are charge‑sheeted for the same incident. It establishes that the employer can choose to hold separate enquiries without being compelled to hold a joint enquiry. It also reinforces that reliance on un‑testified statements (especially of co‑accused) without examination and cross‑examination vitiates the enquiry. Banks and public sector undertakings will adjust their disciplinary procedures to ensure that any statement of a co‑accused or witness is recorded in the presence of the delinquent and the witness is made available for cross‑examination.

9. Final Outcome

• Civil Appeal disposed of (not allowed or dismissed in toto, but disposed with clarifications).

• The impugned judgment of the Division Bench of the Karnataka High Court dated 15.02.2023 is confirmed to the extent it set aside the disciplinary order of punishment against the first Respondent.

• However, the Division Bench’s view (if any) that Regulation 10 of the Canara Bank Officer Employees’ (Discipline and Appeal) Regulations, 1976 is mandatory is set aside. The Court holds that the word “may” in Regulation 10 is directory.

• The appellant (Canara Bank) is directed to settle the account of the first Respondent (i.e., give effect to the impugned judgment) within six weeks from the date of the judgment.

• No order as to costs.

• Pending applications disposed of.

10. Practical Application (Use in Court)

• For employees (delinquent officers): If you are charged in a disciplinary proceeding and the enquiry officer relies on statements of co‑accused or other witnesses who are not examined and made available for cross‑examination, you can challenge the enquiry as violative of natural justice. Cite this judgment to argue that such reliance (without opportunity to rebut) vitiates the proceedings, even if the statements are part of the preliminary investigation.

• For employers (banks, PSUs, government departments): You are not bound to hold a joint disciplinary proceeding against all officers involved in a single incident, even if the charges arise from the same transaction. Regulation 10 (or similar provisions) confers a discretion, not an obligation. You may proceed separately against individual officers based on their roles, grades, or administrative convenience. However, you must ensure that evidence against each officer is adduced through witnesses who are examined and made available for cross‑examination. Do not rely solely on statements of co‑accused without calling them as witnesses.

• For courts (High Courts, CAT): When reviewing disciplinary orders, examine the nature of evidence relied upon by the enquiry officer. If the findings are based on statements of persons who were not examined as witnesses and to whom the delinquent had no opportunity to cross‑examine, the enquiry is vitiated. The court may set aside the punishment on that ground without reappreciating evidence. Also, on the issue of common proceedings, apply the directory interpretation of “may” and do not impose a mandatory requirement.

11. Court Lines

“The findings recorded in the impugned judgment on the merits of the matter are available, and there is no departure from the settled position of law. Having perused the record, we are of the view that the errors noted by the High Court against the findings recorded in respect of the first Respondent are not material, and the impugned judgment to that extent requires confirmation.” (Para 14)

“A word or a section is interpreted not as what one thinks but what it means. … ‘May’ is not understood as ‘must’, so long as the English language retains its meaning.” (Para 15)

“Regulation 10 does not vest any power or right in the hands of a delinquent officer/employee to either insist or ask for joint or common proceedings to be held. There is no such corresponding right vested in an employee… Failure to hold a joint enquiry [does not vitiate] the disciplinary proceedings already initiated against an individual officer.”(Para 16, quoting T. Baba Prasad)

“In our view, the word ‘may’ in Regulation 10 of the 1976 Regulations, from any standpoint, is directory. Construing ‘may’ as mandatory would remove the discretion available to the employer in dynamic circumstances.” (Para 17)

12. Legal Strategy Insight

• For the employee/defence: If you are facing a disciplinary enquiry where co‑accused have given statements against you but are not being examined as witnesses, immediately raise an objection before the enquiry officer. If the objection is overruled, after the punishment is imposed, challenge the order in writ jurisdiction. Argue that the enquiry violated natural justice because you were denied the right to cross‑examine the makers of adverse statements. Cite this judgment for the proposition that reliance on un‑testified statements of co‑accused vitiates the proceedings. Do not rely on Regulation 10 to demand a joint enquiry; instead, focus on the due process violation.

• For the employer/prosecution: Before initiating disciplinary proceedings against multiple officers, consider whether a joint enquiry is administratively convenient and fair. If the officers are at different levels or their roles are distinct, you may proceed separately. Ensure that for each separate proceeding, you examine witnesses (including co‑accused if their statements are used) and give the delinquent an opportunity to cross‑examine. Do not rely on statements recorded during a preliminary investigation without examining the makers. If you choose to hold a joint enquiry, it is permissible, but not mandatory.

• For courts: When a delinquent employee claims a right to a joint enquiry under a provision using the word “may”, reject that argument. The provision is directory; the employee has no enforceable right. However, if the enquiry officer relies on statements of co‑accused without examining them, the proceedings are vitiated. The court should set aside the punishment on natural justice grounds, not on the ground that a joint enquiry was not held.