Disciplinary proceedings need not await criminal prosecution: High Court

Holding that it was not obligatory on the part of Disciplinary Committee to await prosecution of the delinquent, the Delhi High Court in a recently reported decision [TALLURI SRINIVAS v. THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA 2010 (174) DLT 537] has declared that the disciplinary proceedings can be continued even while the criminal prosecution is in vogue. Deciding in the context of the disciplinary proceedings initiated by the Institute of Chartered Accountants of India against one of the auditors who was an accused for having signed audited balance sheets of Satyam Computer Services Limited, the High Court held that the Institute could carry out its proceedings without requiring to await the culmination of criminal proceedings. 

The High Court summed up the law in this regard as under;

31. Before proceeding to discuss the contentions of the counsel for the parties, it is necessary to recapitulate the current legal position as regards the continuation of disciplinary proceedings when a criminal trial on the same charges is pending.

32. The question whether the disciplinary proceedings can be allowed to proceed when a criminal trial is pending on the same charges has invariably arisen in the domain of service law. The cases discussed hereinafter will show that the context invariably has been of an employee facing disciplinary proceedings over a set of charges, which are either similar or identical to the charges forming the subject matter of a criminal trial in which such employee is the accused.

33. In Delhi Cloth & General Mills Ltd. v. Kushal Bhan AIR 1960 SC 806, it was acknowledged that it was not a principle of natural justice “that an employer must wait for the decision at least of the criminal trial court before taking action against an employee.” However, it was observed by the Supreme Court that “if the case is of a grave nature or involves questions of fact or law, which are not simple, it would be advisable for the employer to await the decision of the trial court, so that the defence of the employee in the criminal case may not be prejudiced.”

34. In Tata Oil Mills Co. Ltd. v. Workmen AIR 1965 SC 155, it was held to be “desirable” to stay the domestic enquiry pending final disposal of the criminal case. In Jang Bahadur Singh v. Baij Nath Tiwari AIR 1969 SC 30, it was held that “the initiation and continuation of disciplinary proceedings in good faith is not calculated to obstruct or interfere with the course of justice in the pending court proceeding. The employee is free to move the court for an order restraining the continuance of the disciplinary proceedings.” In Kusheshwar Dubey v. Bharat Coking Coal Ltd. AIR 1988 SC 2118, the Supreme Court after analyzing the case law found that “it is neither possible nor advisable to evolve a hard and fast strait-jacket formula valid for all cases and of general application without regard to the particularities of the individual situation.” In the facts of that case, it was found that since the “criminal action and the disciplinary proceedings are grounded upon the same set of facts”, the disciplinary proceedings should have been stayed. 

35. In Nelson Motis v. Union of India AIR 1992 SC 1981, it was held that the disciplinary proceedings could be continued even after the employee had been acquitted by the criminal court since the standard of proof was different. Moreover, the Court found that the subject matter of the disciplinary proceedings in that case was not exactly the same as in the criminal case.

36. In State of Rajasthan v. B.K. Meena (1996) 6 SCC 417, the State Government issued a memo of charges in regard to the allegation that the Respondent had misappropriated public funds while working as Additional Collector-cum-Project Director, District Rural Development Agency, Jaipur in the year 1989. An FIR had been registered in relation thereto on 12th March 1990. The Respondent had been arrested on 26th March 1990. After responding to the articles of charges in the disciplinary proceedings, the Respondent filed a petition before the Central Administrative Tribunal, Jaipur challenging the disciplinary proceedings. The CAT stayed the disciplinary proceedings. Thereafter the State of Rajasthan revoked the order of suspension and reinstated him. The Respondent thus amended his petition before the CAT and asked for the stay of the disciplinary enquiry. The CAT stayed the disciplinary proceedings pending the conclusion of the criminal trial. The Supreme Court reversed the CAT's order. After analyzing the relevant case law, it observed as under (SCC @ p.422-423):

“14. It would be evident from the above decision that each of them starts with the indisputable proposition that there is no legal bar for both proceedings to go on simultaneously and then say that in certain situations, it may not be 'desirable', 'advisable or 'appropriate' to proceed with the disciplinary enquiry when a criminal case is pending on identical charges. The staying of disciplinary proceedings, it is emphasised, is a matter to be determined having regard to the facts and circumstances of a given case and that no hard and fast Rules can be enunciated in that behalf. The only ground suggested in the above decisions as constituting a valid ground for staying the disciplinary proceedings is "that the defence of the employee in the criminal case may not be prejudiced." This ground has, however, been hedged in by providing further that this may be done in cases of grave nature involving questions of fact and law. In our respectful opinion, it means that not only the charges must be grave but that the case must involve complicated questions of law and fact. Moreover, 'advisability', 'desirability' or 'propriety', as the case may be, has to be determined in each case taking into consideration all the facts and circumstances of the case. The ground indicated in D.C.M. and Tata Oil Mills is not also an invariable rule. It is only a factor which will go into the scales while judging the advisability or desirability of staying the disciplinary proceedings. One of the contending consideration is that the disciplinary enquiry cannot be - and should not be - delayed unduly. So far as criminal cases are concerned, it is well-known that they drag on endlessly where high officials or persons holding high public offices are involved. They get bogged down on one or the other ground. They hardly ever reach a prompt conclusion. That is the reality in spite of repeated advice and admonitions from this Court and the High Courts. If a criminal case is unduly delayed that may itself be a good ground for going ahead with the disciplinary enquiry even where the disciplinary proceedings are held over at an earlier stage. The interests of administration and good government demand that these proceedings are concluded expeditiously. It must be remembered that interests of administration demand that undesirable elements are thrown out and any charge of misdemeanour is enquired into promptly. The disciplinary proceedings are meant not really to punish the guilty but to keep the administrative machinery unsullied by getting rid of bad elements. The interest of the delinquent officer also lies in a prompt conclusion of the disciplinary proceedings. If he is not guilty of the charges, his honour should be vindicated at the earliest possible moment and if he is guilty, he should be dealt with promptly according to law. It is not also in the interest of administration that persons accused of serious misdemeanour should be continued in office indefinitely, i.e., for long periods awaiting the result of criminal proceedings. It is not in the interest of administration. It only serves the interest of the guilty and dishonest. While it is not possible to enumerate the various factors, for and against the stay of disciplinary proceedings, we found it necessary to emphasise some of the important considerations in view of the fact that very often the disciplinary proceedings are being stayed for long periods pending criminal proceedings. Stay of disciplinary proceedings cannot be, and should not be, a matter of course. All the relevant factors, for and against, should be weighed and a decision taken keeping in view the various principles laid down in the decisions referred to above.”

37. The other factor on facts which weighed with the Supreme Court in B.K. Meena was that (SCC @ p. 423):

“The irregularities alleged against the respondent are of the year 1989. The conclusion of the criminal proceedings is nowhere in sight. (Each party blames the other for the said delay and we cannot pronounce upon it in the absence of proper material before us.) More than six years have passed by. The charges were served upon the respondent about 4 years back. The respondent has already disclosed his defence in his elaborate and detailed statement filed on 9.2.93. There is no question of his being compelled to disclose his defence in the disciplinary proceedings which would prejudice him in a criminal case. The charges against the respondent are very serious. They pertain to misappropriation of public funds to the tune of more than Rupees one crore. The observation of the Tribunal that in the course of examination of evidence, new material may emerge against the respondent and he may be compelled to disclose his defence is, at best, a surmise - a speculator reason. We cannot accept it as valid.”

The further factor that weighed with the Supreme Court was that the standard of proof in the disciplinary proceedings and that in the criminal trial would be different. It must be mentioned here that the observations in para 14 in B.K. Meena were heavily relied upon by Mr. Srinivasan, learned Senior counsel for the Respondent No. 1 ICAI to urge that the disciplinary proceedings may be stayed only where there are criminal cases involving questions of grave nature of both fact and law. He urged that in the present case there were no grave questions of law, which have been shown by the Petitioners to be involved in the criminal proceedings that warranted stay of disciplinary proceedings.

38. In Depot Manager APSRTC v. Mohd Yousuf Miya, the APSRTC initiated disciplinary proceedings against the Respondent driver on the ground that he had caused an accident in which a cyclist died. Prosecution was also launched against the driver under Section 304, Part II of the IPC in the criminal court. The High Court stayed the departmental enquiry pending criminal trial. This ruling of the High Court was reversed by the Supreme Court. After discussing the earlier decisions, it was observed in that case that the charge in the disciplinary proceedings was about the failure to anticipate the accident and prevention thereof. It was concluded that “it has nothing to do with the culpability of the offence under Section 304-A and 338 IPC.” It was reiterated that (SCC @ p. 704):

“It would, therefore, be expedient that the disciplinary proceedings are conducted and completed as expeditiously as possible. It is not, therefore, desirable to lay down any guidelines as inflexible rules in which the departmental proceedings may or may not be stayed pending trial in criminal case against the delinquent officer. Each case requires to be considered in the backdrop of its own facts and circumstances. There would be no bar to proceed simultaneously with departmental enquiry and trial of a criminal case unless the charge in the criminal trial is of grave nature involving complicated questions of fact and law.”

39. In M. Paul Anthony v. Bharat Gold Mines Ltd., the appellant was a Security Officer in Bharat Gold Mines, a government undertaking. In a police raid, a mining sponge gold ball weighing 4.5 grams and 1276 grams of gold-bearing sand were recovered from the appellant's house. He was placed under suspension and disciplinary proceedings were commenced. Criminal proceedings were also initiated. On the conclusion of the disciplinary proceedings, the appellant was dismissed from service. Thereafter he was acquitted by the criminal court with the categorical finding that the prosecution had failed to establish its case. On the basis of his acquittal, he requested for reinstatement which was turned down. After unsuccessfully challenging it before the High Court, the appellant approached the Supreme Court. It was held that the criminal case and departmental proceedings were based on identical set of facts and in the circumstances, “it would be unjust, unfair and rather oppressive to allow the findings recorded at the ex parte departmental proceedings to stand.” The witnesses who were examined by the enquiry officer in the departmental proceedings were the same witnesses who were examined in the criminal case. Since there was no iota of difference in the facts and evidence in the departmental and criminal proceedings, it was concluded that “the distinction, which is usually drawn as between the departmental proceedings and the criminal case on the basis of approach and burden of proof, would not be applicable to the instant case.” In arriving at the above conclusion, the Supreme Court had an occasion to review the entire case law up to that point in time and summarized the position as under (SCC @ p. 691):

“22. The conclusions which are deducible from various decisions of this Court referred to above are: (i) Departmental proceedings and proceedings in a criminal case can proceed simultaneously as there is no bar in their being conducted simultaneously, though separately. (ii) If the departmental proceedings and the criminal case are based on identical and similar set of facts and the charge in the criminal case against the delinquent employee is of a grave nature which involves complicated questions of law and fact, it would be desirable to stay the departmental proceedings till the conclusion of the criminal case. (iii) Whether the nature of a charge in a criminal case is grave and whether complicated questions of fact and law are involved in that case, will depend upon the nature of offence, the nature of the case launched against the employee on the basis of evidence and material collected against him during investigation or as reflected in the charge sheet. (iv) The factors mentioned at (ii) and (iii) above cannot be considered in isolation to stay the Departmental proceedings but due regard has to be given to the fact that the departmental proceedings cannot be unduly delayed. (v) If the criminal case does not proceed or its disposal is being unduly delayed, the departmental proceedings, even if they were stayed on account of the pendency of the criminal case, can be resumed and proceeded with so as to conclude them at an early date, so that if the employee is found not guilty his honour may be vindicated and in case he is found guilty, administration may get rid of him at the earliest.”

40. On account of the above decision in M.Paul Anthony, much of the argument in the present petitions centered on whether the Petitioners were facing charges in the criminal cases which were identical to that forming subject matter of the disciplinary proceedings before the ICAI; whether the charges in the criminal court were of a grave nature, and whether they involved “complicated questions of law and fact.”

41. To continue the discussion of the decisions on the point, the question again arose in Kendriya Vidyalaya v. T. Srinivas. There the Respondent, while working with the appellant Kendriya Vidyalaya Sangathan ('KVS') as an Upper Division Clerk, was arrested with the CBI and charged for the offence under Section 7 read with Section 13(1)(d) of the Prevention of Corruption Act, 1988 ('PCA'). During the pendency of the criminal trial, departmental proceedings were initiated. The Tribunal stayed the disciplinary proceedings till the disposal of the trial. The KVS challenged the decision in the High Court stating that they should be permitted to proceed in the departmental enquiry at least in regard to Charge 3 which was independent of Charges 1 and 2. This was rejected by the High Court holding that Charge 3 was interconnected with the other two charges. The Supreme Court, while allowing the appeal of the KVS, found that the Tribunal and the High Court proceeded on an erroneous principle as if the stay of the disciplinary proceedings “is a must in every case where there is a criminal trial on the very same charges.” The Court followed the decision in State of Rajasthan v. B.K. Meena, and reversed the High Court's judgment.

42. In State Bank of India v. R.B. Sharma (2004) 7 SCC 27, the High Court order staying the departmental proceedings was reversed by the Supreme Court only on the ground that the High Court had come to an abrupt conclusion that the employee had been able to show that the entire matter in the departmental proceedings and the criminal court was the same. Since no details had been given to justify this conclusion, it was directed that the High Court should rehear the matter.

43. In HPCL v. Sarvesh Berry, the CBI raided the house of the Respondent in 1998 and charged him with having been in possession of assets disproportionate to his known sources of income. After obtaining sanction for prosecution, the CBI filed a charge sheet. The criminal trial did not progress for at least four years. In the disciplinary proceedings initiated by the employer, there were three charges. The first related to possession of assets disproportionate to the known sources of income and the other two related to misconduct relating to non-disclosure or non-submission of property returns as required by the conduct rules. A Division Bench of the High Court held that the second and third charges were related to the first charge and it would not be safe to permit the employer to continue the departmental proceedings till the completion of the criminal case. Allowing the appeal of the employer, the Supreme Court held as under (SCC @ p. 475):

“8. The purposes of departmental enquiry and of prosecution are two different and distinct aspects. Criminal prosecution is launched for an offence for violation of a duty the offender owes to the society, or for breach of which law has provided that the offender shall make satisfaction to the public. So, crime is an act of commission in violation of law or of omission of public duty. The departmental enquiry is to maintain discipline in the service and efficiency of public service. It would, therefore, be expedient that the disciplinary proceedings are conducted and completed as expeditiously as possible. It is not, therefore, desirable to lay down any guidelines as inflexible rules in which the departmental proceedings may or may not be stayed pending trial in criminal case against the delinquent officer. Each case requires to be considered in the backdrop of its own facts and circumstances. There would be no bar to proceed simultaneously with departmental enquiry and trial of a criminal case unless the charge in the criminal trial is of a grave nature involving complicated questions of fact and law. Offence generally implies infringement of public duty, as distinguished from mere private rights punishable under criminal law. When trial for criminal offence is conducted it should be in accordance with proof of the offence as per the evidence defined under the provisions of the Indian Evidence Act 1872 (in short the “Evidence Act"). Converse is the case of departmental enquiry. The enquiry in departmental proceedings relates to conduct or breach of duty of the delinquent officer to punish him for his misconduct defined under the relevant statutory rules or law. That the strict standard of proof or applicability of the Evidence Act stands excluded is a settled legal position. Under these circumstances, what is required to be seen is whether the departmental enquiry would seriously prejudice the delinquent in his defence at the trial in a criminal case. It is always a question of fact to be considered in each case depending on its own facts and circumstances.”

Thereafter in para 13 it was observed as under (SCC @ p. 477):

“13. It is to be noted that in cases involving Section 13(1) (e) of the P.C. Act, the onus is on the accused to prove that the assets found were not disproportionate to the known sources of income. The expression 'known sources of income' is related to the sources known to the authorities and not the accused. The Explanation to Section 13(1) of the P.C. Act provides that for the purposes of the Section, "known sources of income" means income derived from any lawful source and such receipt has been intimated in accordance with the provisions of any law, rules or orders for the time being applicable to a public servant. How the assets were acquired and from what source of income is within the special knowledge of the accused. Therefore, there is no question of any disclosure of defence in the departmental proceedings. In the criminal case, the accused has to prove the source of acquisition. He has to satisfactorily account for the same. Additionally, issues covered by charges 2 and 3 cannot be the subject matter of adjudication in the criminal case.”

Consequently the employer was permitted to continue the departmental proceedings.

44. In NOIDA Entrepreneurs Association v. NOIDA (2007) 10 SCC 375, it was again held that there was a subtle difference between a departmental enquiry and the criminal proceedings, the standards of proof in which were different. The order of the State Government not to continue the departmental enquiry was held unsustainable and the departmental enquiry was directed to continue. In Indian Overseas Bank v. P. Ganesan, the Supreme Court again answered in the negative the question whether the pendency of a criminal case by itself would be a sufficient ground for stay of the departmental proceedings. Additionally in that case, it was noticed that the departmental proceedings against the employees in question had made considerable progress and a large number of witnesses had already been examined.

Applicability of the M Paul Anthony test to the present cases.

45. The judgments of the Supreme Court discussed hereinbefore by and large permitted the continuation of disciplinary proceedings notwithstanding the pendency of a criminal case on the same charges. In applying the law explained in the above cases to the present petitions, the Court is called upon to examine: (a) are the charges on which the disciplinary proceedings are proposed to be held identical or nearly similar to the charges on which they are facing criminal proceedings? (b) Are the criminal charges of a grave nature? (c) Do the charges involve complicated questions of law and fact?

46. It may at the outset be noticed that in the criminal case, arguments on charge which were in progress when these petitions were argued have been framed by the Special Judge on 25th October 2010. The offences mentioned in the charge sheets do allege that the Petitioners have committed offences which could be characterized as being of a 'grave' nature. These include the offences under Sections 409, 420, 468, 471, 477-A, 201 r/w Section 120-B IPC. Secondly, a comparison of the charges in the disciplinary proceedings with those in the criminal trial indicates that while the charges in the former will all be examined in the latter as well, the converse is not true. There would be additional matters that are likely to be examined in the criminal trial. This brings up the third limb, i.e. whether the charges involve complicated questions of law and fact? It may be recalled that in B.K. Meena the Supreme Court has reiterated that criminal case should be of a grave nature “involving complicated questions of fact and law.” In other words, it is not sufficient for a Petitioner resisting departmental proceedings to show that the criminal case is based on an identical set of facts but that it involves complicated questions of both fact and law.

47. The learned senior counsel for the ICAI was right in the submission that apart from merely stating that the charges involve complicated questions of law and fact there has been nothing actually shown by the Petitioners to demonstrate this. Whether in fact the charges that are stated to have been framed on 25th October 2010 by the Special Judge involve complicated questions of law and fact cannot be determined unless they are studied in some detail and further after the trial progresses. Also, the mere fact that the number of witnesses is large or that the alleged fraud is of a large sum need not by itself mean that the questions of fact and law are complicated. Thirdly, even if in criminal cases, the facts may be invariably complicated, the question of law need not be. Understandably therefore, the learned senior counsel for the Petitioners did not address the Court on this particular aspect except to repeat the requirement of M Paul Anthony that the criminal case involved complicated questions of law and fact. This however is not sufficient if the court has to be persuaded to stay the disciplinary proceedings.

48. The inescapable conclusion is that the third and important limb of the test evolved in the decisions discussed hereinbefore and succinctly summarised in M Paul Anthony has not been shown by the Petitioners to be satisfied in their cases viz., that the criminal cases in which they are arrayed as accused involve complicated questions of law and fact. They have therefore been unable to persuade this Court, on the basis of the law explained above, to stay the disciplinary proceedings pending the conclusion of the criminal trial.

Other factors

49. One important factor in each of the above decisions that have been discussed is that the issue arose in the context of service law where the desirability of permitting an employee continuing to discharge official duties pending disciplinary proceedings weighed with the courts. In the present writ petitions, although the Petitioners cannot be equated with government servants, they too have been charged with professional misconduct in not discharging their duties, as expected of a professional chartered accountant in terms of the CA Act. A chartered accountant who continues to have a privilege of practising as such notwithstanding the fact that he may be facing charges of professional misconduct is indeed a matter of concern. It is no less than having a government servant facing disciplinary proceedings on serious charges. What is more significant is that a chartered accountant cannot be suspended from practice and there is nothing to prevent a chartered accountant practising as such till such time the disciplinary proceedings come to an end. 

50. Relying on the observations of the Supreme Court in M Paul Anthony [SCC para 22 (v)] to the effect that the disciplinary proceedings can be asked to continue if “the criminal case does not proceed or its disposal is being unduly delayed”, it was urged that since there is a designated fast track court that has been asked to conclude the criminal trial before 31st July 2011, the disciplinary proceedings, even if stayed on account of the pendency of the criminal case, could be resumed and proceeded with soon thereafter and would therefore not get indefinitely postponed. This Court is not persuaded to accept this submission. The penultimate paragraph of the Supreme Court's order dated 26th October 2010 acknowledges that if the trial is unable to conclude before 31st July 2011 the accused whose bail have been cancelled can apply afresh for bail. In any event, unless this Court is shown that the charges involve complicated questions of law and fact the case for stay of disciplinary proceedings pending the conclusion of the criminal trial cannot be said to be made out.

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