Bank Disciplinary Proceedings Cannot Be Invalidated Merely Because Separate Enquiries Were Held Against Different Employees

Case Name: Canara Bank v. Prem Latha Uppal (Dead) Through LRs.

Citation: 2026 INSC 478

Date of Judgment/Order: 12 May 2026

Bench: Justice S.V.N. Bhatti and Justice Vijay Bishnoi

Held: The Supreme Court held that Regulation 10 of the Canara Bank Officer Employees’ (Discipline and Appeal) Regulations, 1976, which permits common disciplinary proceedings against multiple employees, is directory and not mandatory. The Court clarified that the use of the word “may” in Regulation 10 preserves the discretion of the employer to decide whether joint proceedings should be conducted, depending upon the role, rank, and circumstances of each employee involved. The Court further held that failure to conduct a common enquiry does not vitiate disciplinary proceedings initiated separately against an employee. At the same time, the Court affirmed the High Court’s conclusion that the disciplinary findings against the employee suffered from lack of proper evidentiary support and violation of principles of natural justice.

Summary: The case arose from disciplinary proceedings initiated by Canara Bank against Prem Latha Uppal, a Senior Manager and member of a Credit Sanction Committee, in connection with sanction of loans to two trading firms without adequate verification of collateral securities, borrower credentials, guarantor identity, and financial documentation. The Bank alleged negligence and collusion amounting to misconduct under the 1976 Regulations and imposed punishment by reverting the officer from SMG Scale-IV to MMG Scale-III. Her writ petition challenging the punishment was dismissed by the Single Judge of the Karnataka High Court, which held that Regulation 10 used the word “may” and therefore common proceedings against all officers were discretionary. However, the Division Bench set aside the punishment after finding that the enquiry officer relied upon statements of co-accused officers who were never examined during the departmental enquiry, thereby depriving the employee of an opportunity to rebut the material used against her. Before the Supreme Court, the Bank contended that the Division Bench had exceeded the permissible scope of judicial review and wrongly treated Regulation 10 as mandatory. The Supreme Court analysed the settled principles governing judicial review in disciplinary matters, the distinction between “may” and “shall,” and conflicting judicial precedents on interpretation of Regulation 10.

Decision: The Supreme Court partly allowed the appeal and clarified that Regulation 10 of the 1976 Regulations is directory and not mandatory, affirming the interpretation adopted by the Andhra Pradesh High Court in T. Baba Prasad v. Andhra Bank and overruling the contrary approach taken by the Karnataka High Court. However, the Court upheld the Division Bench’s interference with the disciplinary punishment on merits, holding that the enquiry suffered from evidentiary infirmities and violation of natural justice because statements relied upon during enquiry were not proved through examination of witnesses. Since the employee had already superannuated and subsequently passed away, the Court declined to remit the matter for fresh disciplinary proceedings. The Bank was directed to settle the service and monetary accounts of the deceased employee within six weeks, and all pending applications stood disposed of.