Canara Bank vs Prem Latha Uppal (Dead)

2026 INSC 478 REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO(S). _________ OF 2026 @ SPECIAL LEAVE PETITION (CIVIL) NO(S). 10226 OF 2023

CANARA BANK … APPELLANT(S)

VERSUS

PREM LATHA UPPAL (DEAD) THROUGH LRS. … RESPONDENT(S)

JUDGMENT

S.V.N. BHATTI, J.

1. Leave granted.

2. The Civil Appeal arises from the judgment dated 15.02.2023, in Writ

Appeal No. 6228 of 2013 in the High Court of Karnataka at Bengaluru. Canara

Bank is the Appellant, and Prem Latha Uppal/first Respondent, was working

as a Senior Manager, Scale-III, at one of Canara Bank’s branches in New

Delhi. The first Respondent is Deceased, Respondent Nos. 1.1 to 1.3 are the

legal heirs and representatives of the estate of the deceased first Respondent.

3. By order dated 31.05.2006, the Appellant, pursuant to disciplinary

proceedings and report, by way of punishment, reduced the first Respondent Signature Not Verified Digitally signed by SNEHA DAS to a lower grade, namely, from the SMG Scale-IV to MMG Scale-III. The first Date: 2026.05.12 17:30:39 IST Reason:

Respondent filed a Writ Petition No. 3150 of 2008, in the High Court of

1 Karnataka at Bengaluru, challenging the order of punishment of reversion to

a lower grade. On 02.09.2013, the Writ Petition was dismissed. The first

Respondent, aggrieved by the order of the learned Single Judge, filed a Writ

Appeal No. 6228 of 2013. Through the impugned Judgment, the Writ Appeal

was allowed, and the order of punishment dated 31.05.2006 has been set

aside. Hence, the Civil Appeal at the instance of Canara Bank.

4. The Appeal presents the following two questions for consideration:

(a) Whether the impugned Judgment in setting aside the order of

punishment dated 31.05.2006 exceeded the scope of judicial

review of a decision taken in the disciplinary proceedings initiated

against an employee?

(b) Whether Regulation 10 of the Canara Bank Officer Employees’

(Discipline and Appeal) Regulations, 1976 (“1976 Regulations”) is

mandatory or directory in deciding whether a common cause of

action against more than one employee should be through a

common or independent disciplinary proceeding?

5. A few relevant circumstances are that the first Respondent worked as a

Senior Manager in the Diplomatic Enclave, New Delhi Branch of the

Appellant-Bank. The first Respondent was one of the three members of the

Credit Sanction Committee. The Credit Sanction Committee sanctioned

financial assistance to M/s. Aman Trading Company and M/s. Creative

Trading Company. The said sanction of the loan was found to be vitiated by

negligence and collusion amounting to misconduct under the 1976

Regulations. The gist of the misconduct is that the officers sanctioned a loan

2 without a basic examination of the proposed borrower and without verifying

the availability of the assets offered as security for the financial assistance.

The first Respondent was charge-sheeted on 27.07.2005 for two Articles of

Charges, i.e., Article I for M/s Aman Trading Company and Article II for M/s.

Creative Trading Company.

5.1 Article I Charges cited failure to: (i) independently verify the existence

of the business at the address provided and to conduct a proper credit

investigation; (ii) independently check the ownership of property offered as

collateral security through neighbourhood or Sub-Registrar’s office enquiries;

(iii) ensure the OPL from the previous banker, M/s. Jain Co-operative Bank,

was obtained directly and to verify its genuineness; (iv) ensure the borrower’s

account with the previous banker was closed as per sanction terms; (v) notice

discrepancies in financial papers, such as auditors sharing the same address

as the guarantors; (vi) ensure loan documents were executed by the correct

person whose photograph was on record, rather than an impersonator; and

(viii) verify the identity and net worth of the guarantor. The charges further

note that the first Respondent permitted large cash withdrawals without

ensuring proper use of the funds and recommended renewing credit facilities

without first obtaining the necessary audited balance sheets.

5.2 Article II charges her with failing to: (i) properly scrutinise the Legal

Scrutiny Report, specifically by failing to identify a discrepancy in the address

of the Sub-Registrar’s office; (ii) compare and note differences between

photographs and signatures on official identity documents and those on bank

applications and title deeds; and (iii) verify guarantors’ net worth and permit

3 large cash withdrawals without monitoring the use of funds. The charges also

note that she recommended the credit limit without independently verifying

the existence of the business or the ownership of the collateral property, and

that she recommended limits based on an introducer whose account did not

meet the bank’s minimum account age requirement of one year.

6. In the disciplinary proceedings, the charges were proved against the

first Respondent. The case of the first Respondent in assailing the order dated

31.05.2006 is that the Appellant was only a Senior Manager and a member of

the Credit Committee, and not the final Sanctioning Authority. Investigations

into the fraudulent firms were handled by other officers, P.P. Nayak and S.S.

Bhat, and she is being punished for duties that fall outside her Key Result

Areas. The enquiry relied on statements from individuals who were not

examined during the disciplinary proceedings, thus violating principles of

natural justice. Furthermore, she was punished by the disciplinary authority

for charges that the Enquiry Officer found to be not established. The first

Respondent suffered hostile discrimination, whereas six other officers

involved received minor penalties, such as the denial of increments, while she

was singled out for severe punishment. The Disciplinary Authority, Appellate

Authority, and Reviewing Authority acted mechanically, with closed minds,

and exhibited a lack of application of mind. She prayed the High Court to

quash these orders and restore her to the SMG-IV rank, with consequential

benefits.

7. The Appellant, apart from relying on the findings recorded by the

Enquiry Officer, resisted the Writ Petition by contending that as the Senior

4 Manager in charge of the Credit Department and a committee member, she

was directly responsible for cross-checking documents and ensuring

compliance with safeguards while sanctioning a loan, regardless of whether

other officers acted diligently or handled parts of the verification. The strict

rules of the Indian Evidence Act do not apply to domestic enquiries, and the

first Respondent did not question the veracity of the statements relied upon

by the Appellant during the enquiry. The enquiry authority was unbiased,

specifically finding her not guilty on charges such as cash withdrawals, where

evidence was lacking. There was no discrimination, as her senior position

carried greater authority and responsibility than other charge-sheeted

officers. Considering the gross lapses and the massive financial risk she

exposed the Bank to, the Disciplinary Authority viewed her case reasonably

and imposed a lenient punishment. The orders from the Disciplinary,

Appellate, and Reviewing Authorities were well-reasoned, fair, and just. The

Review Petition was rightfully dismissed as she presented no new material

evidence. Hence, the Writ Petition lacked merit and should be dismissed.

8. The learned Single Judge on 02.09.2013 dismissed the Writ Petition No.

3150 of 2008. The Single Judge rejected the first Respondent’s argument that

she should receive a lesser punishment, similar to that imposed on other

officials, upon observing that no material evidence was produced to prove that

the charges against the first Respondent and the other officials were identical.

It was observed that the first Respondent acted casually and negligently,

failing to independently verify the existence of firms and the ownership of

collateral securities, thereby prejudicing the bank’s interests. Regarding

5 Regulation 10 of 1976 Regulations, it was observed that the use of the word

“may” makes holding a common proceeding discretionary for the Competent

Authority. Because the charges against the Officers differed, the bank was not

bound to order a joint proceeding. Further, the High Court held that the

Enquiry Officer provided the respondent with a substantial opportunity to

present her case. Lastly, it determined that the authorities had diligently and

exhaustively considered the first Respondent’s case, leaving no grounds for

judicial review. The learned Single Judge concluded the writ petition was

devoid of merit and dismissed it.

9. On appeal, the Division Bench, by the impugned order, set aside the

order dated 02.09.2013 in the writ petition and the disciplinary order dated

31.05.2006. For convenience, we may summarise the Division Bench’s

consideration of the issues on the merits of the enquiry as follows:

9.1 The Division Bench declined to grant liberty to the appellant to proceed

afresh against the respondent since granting such liberty would impact

the other six officers not party to the appeal, and the bank’s own pleading

admitted that no criminal connivance was found against the respondent. The

respondent had been promoted to SMG Scale-IV on 19.07.2004, after the very

transactions in question, and the respondent had already superannuated on

31.11.2010.

9.2 The Division Bench, on merits, held that during the enquiry, the

Presenting Officer relied upon and extracted from the statements of S.S. Bhat,

MW2, and R. Chandramouli, MW3, both of whom were officers and co-

accused in respect of the same cause of action. These statements, recorded

6 by the Investigating Officer, were referred to during the cross-examination of

Management Witness, MW1, and relied upon by the Enquiry Officer in

recording a finding that the charges against the respondent were partly

proved. However, neither of them was examined as witnesses in the

departmental enquiry. The Bench held that the Enquiry Officer had relied

upon material against which the respondent was given no opportunity to

rebut. In fine, accordingly, the Division Bench appreciated and noted that

MW1 cannot be considered a witness to the accusation against the

respondent, and that he relies on the statements recorded during the

preliminary investigation. The findings of the Enquiry Officer were vitiated for

want of a semblance of evidence.

9.3 On a perusal of the charges framed against the respondent, the Bench

found that no vigilance angle was involved. Therefore, consultation with the

Central Vigilance Commission (“CVC”) was not required in the facts of the

case. Since the CVC had nonetheless been consulted, the Bench answered

this issue against the appellant, though it did not separately set aside the

proceedings on this ground alone. Hence, the impugned order has set aside

the order of punishment.

10. We have heard the learned Senior Counsel Mr. Naveen R. Nath, and Mr.

Shailesh Madiyal, for the parties.

11. The Appellant assails the findings of the Division Bench on the merits

of the matter, particularly by arguing that the re-appreciation of evidence to

test the veracity of findings recorded by the disciplinary authority and learned

Single Judge is illegal and erroneous.

7 11.1 The next argument is that Regulation 10 of the 1976 Regulations has

been interpreted as mandatory, thereby removing the Management’s

discretion. The High Court of Andhra Pradesh and the High Court of

Karnataka have taken inconsistent views on the meaning of the word “may”

in Regulation 10, with one treating it as “directory” and the other as

“mandatory”. The argument proceeds that there is no basis whatsoever in

plain interpretation to read “may” as “shall” and make it mandatory.

12. For the first Respondent, it is argued that the Division Bench’s findings

largely rest on the lack of evidence to support any view on the charges framed

against her. It is not a case of exceeding the scope of judicial review, but of

appreciating an error apparent on the face of the record. The first Respondent

is no more, and it serves no purpose to remit the matter to the Disciplinary

Authority for reconsideration. It is further argued that it is not a case of re-

appreciation of evidence or of giving a new finding to the admitted

circumstances of the case. The Division Bench recorded that the enquiry held

by the Appellant was vitiated by principles of natural justice, and such

findings were made for want of evidence. The precedents on the point set out

a few limitations, such as re-appreciation of evidence, when examining an

issue arising in a disciplinary proceeding. In the case at hand, the Division

Bench has not exceeded the scope of judicial review. On the construction of

the word “may” as mandatory or directory, it is argued that the Appellant’s

effort is to get the law declared by this Court. The first Respondent, therefore,

does not canvass whether one or the other view is available.

13. We have perused the record and appreciate the rival submissions.

8

14. We prefer to take up the first argument, namely, that the impugned

judgment has exceeded the scope of judicial review. It is axiomatic that the

scope of judicial review, particularly in disciplinary matters, is well settled,

and we do not intend to burden the judgment with citations. We have taken

note of the findings and are of the view that 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.

15. The above discussion takes us to the next point on the interpretation of

Regulation 10 of the 1976 Regulations, which reads as follows:

“10. Common Proceedings: 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 interpretation of “may” as “shall” is a question presented for our

consideration. The interpretation, particularly before a court of law, is not a

conundrum, inasmuch as it is based on the interpretative cannons. A word

or a section is interpreted not as what one thinks but what it means. Further,

in the process of interpretation, there must be no stress or strain to the

sentence subjected to interpretation. “May” is not understood as “must”, so

long as the English language retains its meaning. Then it may be a question

of which cases an authority or body with the power to interpret the words

9 treats “may” as mandatory, thereby interpreting “may” as “shall”. The

enabling words are construed as compulsory whenever the object of the said

authority is to effectuate a legal right.

16. The High Court of Andhra Pradesh at Hyderabad, in T. Baba Prasad v.

Andhra Bank, Hyderabad and others,1 interpreted “may” in Regulation 10 of

the Andhra Bank Officer Employees (Discipline and Appeal), Regulations 1981

as directory (“1981 Regulations”). Regulation 10 of 1981 Regulations is pari

materia to the 1976 Regulations. The High Court of Andhra Pradesh has taken

note of the view of the High Court of Karnataka in Arun Kumar Alva v. The

Vijaya Bank, M.G. Road, Bangalore and others,2 and held that the view does

not reflect the correct position of law. T. Baba Prasad (supra) surveys3 the case

law on the point, interpreting “may” and “shall,” and concludes that “may” in

Regulation 10 of the 1981 Regulations is directory rather than mandatory.

While differing with the High Court of Karnataka, the learned Single Judge,

Justice Nooty Ramamohana Rao, held that Regulation 10 of the 1981

Regulations was enacted to vest the Bank with the necessary power to order

1 (2011) SCC OnLine AP 276.

2 (2006) SCC OnLine Kar 178.

3 See Natvarlal Nagindas v. Emperor, AIR (1931) Bom. 198 (Chief Justice Beaumont): “The

word 'may' is sometimes construed as 'shall' but obviously its prima facie effect is merely permissive and not obligatory.” The Magistrate under Section 29-B CrPC had a discretion, not an obligation, to use the special provision;

State of U.P. v. Babu Ram Upadhya, AIR (1961) SC 751 (Constitution Bench, Koka Subba Rao J.): held (i) Whether a statute is mandatory or directory depends on the intent of the Legislature, not on the language in which that intent is clothed, (ii) The court must attend to the nature, design, and consequences of construing the provision one way or the other, (iii) Even the word "shall" may be directory, and "may" may be mandatory, (iv) Where invalidation of acts done in neglect of a provision "would work serious general inconvenience or injustice to persons who have no control over those entrusted with the duty without promoting the essential aims of the Legislature, the provision is directory (Maxwell on Interpretation of Statutes, 10th ed., p. 381, approved by the Privy Council in Montreal Street Railway v. Normandin, AC 170).

10 joint/common proceedings where more than one officer is involved. Without

it, such proceedings might not have been permissible at all. It is a facilitative,

not an obligatory, provision. Further, the context of Regulation 10 does not

support reading “may” as “shall.” The judgment observes that “[t]he very

context of its setting does not lend any support to the view that holding of such

common proceedings is a mandatory affair.” In continuation thereof, it

observes that treating “may” as mandatory either takes away or restricts the

discretion vested with the Management or the dynamic situations of the

different authorities, being the Competent Authority in the disciplinary

proceedings. The learned Single Judge held that “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”, and that “[f]ailure to hold a joint

enquiry [does not vitiate] the disciplinary proceedings already initiated against

an individual officer.”

17. 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.

We need not elaborate on all the circumstances, but it would suffice to note

that the roles of charge-sheeted employees may not be the same or similar in

cases that fall under a common category. Similarly, the disciplinary authority

may be different, such as Assistant General Manager, Regional Manager,

Chief General Manager or Executive Director, to initiate disciplinary action

depending upon the cadre of the charge-sheeted employee. We affirm the view

11 taken by the High Court of Andhra Pradesh in T. Baba Prasad (supra). Hence,

we set aside the view taken in the impugned judgment with respect to

Regulation 10 of the 1976 Regulations.

18. The impugned Judgment is interfered with to the extent indicated

above, and the Civil Appeal is disposed of accordingly. The Appellant is

directed to settle the account of the first Respondent by duly noting the

outcome of the impugned Judgment within six weeks from today. Pending

application(s), if any, stand disposed of.

……..……….…………………J. [S.V.N. BHATTI]

.……..…………………………J. [VIJAY BISHNOI]

New Delhi;

May 12, 2026

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