Punjab National Bank By Chairman & Anr vs. Astamija Dash (2008)

Case No.: Appeal (civil) 3125 of 2008

Petitioner: Punjab National Bank by Chairman & Anr.

Respondent: Astamija Dash

Citation: AIR 2008 SCC 3182, 2008 (14) SCC 370, 2008 AIR SCW 5374, 2008 LAB. I. C. 3535, 2009 (1) SERVLJ 336 SC, 2009 (1) SERVLJ 129 SC, (2009) 1 SERVLJ 336, (2009) 1 SERVLJ 129, (2008) 5 CTC 554 (SC), (2008) 7 SCALE 726, 2008 (73) ALL LR 13 SOC, (2008) 118 FACLR 438, (2008) 3 SCT 60, (2009) 1 MAD LW 62, (2008) 4 LAB LN 98, (2008) 7 MAD LJ 490, (2008) 5 SERVLR 232, (2008) 3 ESC 469, (2009) 1 BANKCLR 620

Court: Supreme Court of India

Bench: S.B. Sinha, & Sirpurkar

Date: April 30, 2008

Introduction

In the case of Punjab National Bank vs. Astamija Dash is a significant judgment in banking and consumer protection law, addressing the liability of banks in cases of fraudulent withdrawals by employees. The Supreme Court of India examined whether a nationalized bank could be held vicariously liable for the fraudulent actions of its employee and whether the customer was entitled to compensation. The ruling reinforced the fiduciary duty of banks towards their customers and established important legal principles regarding employee fraud, negligence, and consumer rights.

Key Legal Issues

1. Bank’s Vicarious Liability: Can the bank be held responsible for an employee’s fraudulent actions during employment?
2. Customer Negligence: Did the customer contribute to the fraud by failing to secure account details?
3. Fiduciary Duty: Did the bank fulfil its duty to safeguard the customer’s funds and prevent fraud?
4. Scope of Employment: Was the employee’s fraudulent act within the scope of their duties, making the bank liable?
5. Consumer Protection Laws: Do consumer protection laws apply to banking fraud cases, considering banking as a service?

 Facts of the Case:

Astamija Dash joined Punjab National Bank (PNB) as a Management Trainee in 1986, subject to a probationary period of two years, extendable by another year at the Bank’s discretion. This probation was a trial phase to assess her:

• Job performance (ability to learn banking operations).
• Conduct and discipline (adherence to bank rules).
• Overall suitability for a permanent role.

Key Conditions for Confirmation:

To be confirmed as a permanent employee, Dash had to fulfill the following:

1. Satisfactory Performance During Training

• She was expected to acquire banking knowledge, operational skills, and professional competence.
• Supervisors would evaluate her progress through periodic assessments.

2. Passing the Bank’s Confirmation Test

• The confirmation test was designed to assess Dash’s understanding of banking procedures, policies, and her ability to apply them in practical scenarios.
• Failure could lead to termination or re-testing, depending on Bank policy

3. Police Verification

• A background checks to confirm her character, integrity, and antecedents (standard for bank employees due to financial trustworthiness requirements).

4. Language Proficiency Test (If Applicable)

• Since PNB operates in a multilingual environment, she might have needed to demonstrate proficiency in a language other than her mother tongue (e.g., Hindi, English, or a regional language).

5. Termination Clause During Probation

• The Bank reserved the right to terminate her services with one month’s notice (or one month’s salary in lieu) if her performance was unsatisfactory.

The sequence of events that led to Dash’s request for exemption

• From the confirmation test May 1988: Dash appeared for her first confirmation test but failed.
• As per Bank policy, she was given a second chance to reappear in October 1989.
• By September 1989, Dash’s pregnancy had progressed to an advanced stage.
• September 5, 1989: She submitted a formal request for exemption from the October 1989 test, supported by a medical certificate advising against long-distance travel due to her pregnancy.
• Dash asked the bank to allow her to take the confirmation test at a later date, after she had delivered her baby and recovered.

Significance of the Probation and Confirmation Process:

• The probationary period acted as a screening mechanism—only those who met PNB’s standards were confirmed.
• Failure in the confirmation test could lead to termination or extension of probation, depending on Bank policy.
• Dash’s case highlights a conflict between institutional requirements and medical necessity, raising questions about workplace accommodations for pregnant employees.

This structured evaluation ensured that only competent and reliable candidates were absorbed into the Bank’s permanent workforce. However, Dash’s situation also underscores the need for flexibility in employment policies, especially concerning health and maternity.

Legal Issues:

1. The Supreme Court has admitted two appeals for hearing, granting special leave to appeal in the case.
2. Origin of Appeals: The appeals arise from a judgment and order dated May 20, 2005, rendered by the Division Bench of the Orissa High Court at Cuttack in WP No. 2333 of 1991.
3. Petitioner’s Claim: Astamija Dash, a Management Trainee at Punjab National Bank, filed a writ petition challenging the bank’s actions.
4. Grounds of Challenge:

• Confirmation Test Validity: She contested the requirement to pass a confirmation test, arguing it contradicted the Punjab National Bank (Officers) Service Regulations, 1979.
• Automatic Confirmation: Dash asserted that upon completion of her extended probation period on July 28, 1989, she should be deemed confirmed in service without needing further evaluation.
• Discriminatory Treatment: She alleged discriminatory treatment compared to another employee, Indubala, who was granted an opportunity to appear in the confirmation test for the fourth time due to her mother’s illness.

5. Appeal to Supreme Court: Both parties, being aggrieved by the High Court’s decision, appealed to the Supreme Court.

Petitioner’s Arguments

Arguments by Mr. Dhruv Mehta (Bank’s Counsel):

• The bank argued that the writ petitioner, having accepted the appointment terms, including the requirement to pass the confirmation test, cannot now contest this condition. The doctrine of approbate and reprobate applies, preventing her from challenging the terms she previously accepted.
• No Implied Confirmation: Since her services were not expressly confirmed, the doctrine of implied confirmation does not apply, as held in General Manager, Punjab National Bank vs. Khar Bhan Ram (1995).
• Misplaced Reliance on Indubala Case: The High Court erred in relying on Indubala as an explanatory affidavit was ignored, and no legal right arises from an employer’s illegal act (Article 14 grants positive rights only).

Arguments by Mr. S.S. Upadhyay (Petitioner’s Counsel):

• Invalid Termination Grounds: The termination was based on failing a confirmation test, which is not prescribed under the Regulations (only in-house training and language tests are mandated).
• Deemed Confirmation: Under Regulations 15 and 16, her service should be deemed confirmed as termination occurred after the extended probation period (ended on 28th July 1989).
• Discrimination: She was denied a fourth attempt at the confirmation test, while a similarly situated employee was granted one, violating equality under Article 14.

Bank’s Policy (Executive Committee Decision, 19th June 1990):

• The Bank enforced a policy limiting confirmation test attempts to three chances; failure would lead to termination of probationers.

 Respondent’s Arguments:

The extension of the probation period is limited to one year, subject to the conditions in sub-regulation (2). Sub-regulation (3) clarifies that the competent authority must assess the officer’s fitness for confirmation strictly within the probation period, including any extension, and not beyond it.

Holdings:

The Supreme Court’s decision in this case established significant precedents regarding the rights of probationary employees and the obligations of public sector employers. The case centered on whether the bank’s termination of a probationary employee for failing to pass a confirmation test despite her medical inability to appear for the examination – was legally valid. In its holdings, the Court delineated crucial principles about employment conditions, reasonable accommodations, and protections against arbitrary termination in public sector employment. The following points encapsulate the Court’s definitive legal positions in this landmark judgment.

1. No Automatic Confirmation After Probation

• Completion of the probation period does not entitle an employee to automatic confirmation if they fail to meet other stipulated conditions (such as passing required examinations).

2. Employers Must Accommodate Medical Grounds

• Valid medical reasons (including pregnancy) must be reasonably considered by employers when enforcing service conditions, and refusal to do so may render termination arbitrary.

3. Discrimination in Retest Opportunities Violates Equality

• If an employer grants additional examination attempts to similarly placed employees, denying the same opportunity to another without justification constitutes arbitrary discrimination under Article 14 of the Constitution.

4. Employer Discretion Must Be Fair and Non-Arbitrary

• While employers have contractual discretion to terminate probationers for failing confirmation tests, such power must be exercised fairly and not in a mechanically rigid manner.

5. No Unlimited Right to Retests, But Exceptions Apply

• Employees do not have an absolute right to unlimited examination attempts, but genuine hardships (such as medical conditions) require case-by-case consideration.

6. Termination Subject to Judicial Review for Fairness

• Terminations in public sector employment are open to judicial scrutiny to ensure compliance with principles of natural justice and non-arbitrariness.

7. Remedy for Wrongful Termination

• If termination is found illegal due to procedural or substantive unfairness, the affected employee may be entitled to reinstatement or compensation.

Reasoning:

The court’s decision in favour of the writ petitioner was based on the following key legal and equitable considerations:

1. Differential Treatment Under Article 14

• Article 14 of the Constitution guarantees equality before the law, but this does not mean uniform treatment in all cases.
• The principle of “positive equality” requires that differently situated individuals be treated differently to ensure substantive justice.
• The petitioner’s case (involving two miscarriages, high-risk pregnancy, and post-caesarean recovery) was materially distinct from Indubala’s case (where the reason for missing the exam was her mother’s illness).
• Treating both cases alike would violate Article 14, as the petitioner’s circumstances warranted compassionate consideration.

2. Doctrine of Reasonableness & Fairness in State Actions

• The Bank, being a “State” under Article 12, must act fairly, justly, and without arbitrariness.
• While the rules did not explicitly mandate a confirmation test or specify the number of attempts, the Bank’s decision to impose a rigid three-attempt rule—without considering medical emergencies—was unreasonable.
• The employer’s discretion should align with constitutional morality, ensuring that policies do not disproportionately affect employees facing genuine hardships.

3. Gender-Sensitive Approach and Maternity Considerations

• Although the Maternity Benefit Act, 1961 was not formally invoked, the court emphasized that biological and caregiving burdens unique to women must be factored into employment decisions.
• Denying the petitioner an additional opportunity despite her health complications and childcare responsibilities would amount to indirect discrimination.
• The Bank’s failure to relax its rules in such a case was arbitrary and violative of Article 16 (equality in employment).

4. Discretionary Powers Must Be Exercised Equitably

• The appellate authority had the power to relax rules but failed to do so despite the petitioner’s extraordinary circumstances.
• Judicial review mandates that such discretion be used to prevent injustice, not perpetuate rigidity.
• Since Indubala (a less compelling case) was granted concessions, denying the same to the petitioner was manifestly unfair.

Conclusion:

1. Article 14 Inapplicability in Illegality:

• The court held that Article 14 (Right to Equality) does not apply in cases involving illegality.

2. Employer’s Discretion Upheld:

• The court rejected the argument that the employer (Bank) must specify how many chances an employee should get for confirmation. The Bank retains discretionary jurisdiction in such matters.

3. Confirmation Test Compliance Not Addressed:

• The court did not rule on whether the insistence on a confirmation test aligned with the Regulations, as it was unnecessary given their conclusions.

4. Appeal Dismissed & Writ Petition Allowed:

• The Bank’s appeal was dismissed.
• The writ petitioner (employee) was ordered to be reinstated immediately.
• She was granted 50% back wages (considering her termination dated 9th November 1990).
• Costs awarded, with counsel’s fee assessed at ₹50,000.