"May" in Bank Disciplinary Regulation Is Directory, Not Mandatory: Supreme Court

A bench of Justices S.V.N. Bhatti and Vijay Bishnoi holds that Regulation 10 of Canara Bank’s 1976 Regulations gives management discretion, not an obligation, to hold common disciplinary proceedings against co-accused officers.

The Supreme Court on 12 May 2026 partly set aside a Karnataka High Court Division Bench judgment that had quashed a Canara Bank disciplinary order reducing a Senior Manager in grade. 

While the Court confirmed the Division Bench’s finding that the disciplinary enquiry was vitiated by a failure to examine key witnesses — thereby denying the employee a fair opportunity to rebut evidence — it reversed the Division Bench on a second, consequential question: whether Regulation 10 of the Canara Bank Officer Employees’ (Discipline and Appeal) Regulations, 1976 makes it mandatory to hold a single common proceeding whenever more than one officer faces charges arising from the same cause of action. 

The Court held that the word “may” in Regulation 10 is directory, not mandatory, and that no delinquent employee has a corresponding right to insist on a joint enquiry. Canara Bank was directed to settle the deceased first Respondent’s account in accordance with the outcome within six weeks.

How the Dispute Reached the Court

Prem Latha Uppal was a Senior Manager, Scale-III, at Canara Bank’s Diplomatic Enclave branch in New Delhi. She was one of three members of the Credit Sanction Committee that approved financial assistance to M/s. Aman Trading Company and M/s. Creative Trading Company. The sanction was later found to be vitiated by negligence and collusion amounting to misconduct under the 1976 Regulations.

The core allegation was that the committee sanctioned loans without a basic examination of the proposed borrowers and without verifying the assets offered as security. Uppal was charge-sheeted on 27 July 2005 under two Articles of Charges. 

Article I covered failures relating to M/s. Aman Trading Company: not independently verifying the business address, not checking collateral ownership through Sub-Registrar enquiries, not obtaining the outstanding particulars letter directly from the previous banker, not noticing that auditors shared an address with guarantors, and permitting large cash withdrawals without monitoring fund use. 

Article II covered similar failures for M/s. Creative Trading Company, including failure to scrutinise a discrepancy in the Sub-Registrar’s office address in the Legal Scrutiny Report and recommending credit limits based on an introducer whose account did not meet the bank’s minimum one-year age requirement.

After the disciplinary proceedings concluded, Canara Bank by order dated 31 May 2006 reduced Uppal from SMG Scale-IV to MMG Scale-III. She challenged this before the Karnataka High Court in Writ Petition No. 3150 of 2008. A learned Single Judge dismissed the petition on 2 September 2013, finding that she had acted casually and negligently, that Regulation 10 used the word “may” making common proceedings discretionary, and that the enquiry officer had given her a substantial opportunity to present her case. Uppal then filed Writ Appeal No. 6228 of 2013. 

The Division Bench allowed the appeal on 15 February 2023, set aside both the Single Judge’s order and the punishment order of 31 May 2006, and declined to grant liberty to the bank to proceed afresh. Canara Bank approached the Supreme Court by way of Special Leave Petition (Civil) No. 10226 of 2023, which was converted into a Civil Appeal.

By the time the matter reached the Supreme Court, Uppal had died. Respondents 1.1 to 1.3, her legal heirs, were brought on record as representatives of her estate.

Two Questions Before the Court

The Court framed two questions. 

First, whether the Division Bench exceeded the scope of judicial review in setting aside the punishment order. 

Second, whether Regulation 10 of the 1976 Regulations is mandatory or directory in deciding whether a common cause of action against more than one employee must be tried through a common or independent disciplinary proceeding.

The Natural Justice Finding: Division Bench Confirmed

On the first question, the Court examined the Division Bench’s reasoning on the merits of the enquiry. The Division Bench had found that the Presenting Officer relied upon and extracted from statements of S.S. Bhat (MW2) and R. Chandramouli (MW3), both officers and co-accused in respect of the same cause of action. 

These statements, recorded by the Investigating Officer, were referred to during cross-examination of Management Witness MW1 and were relied upon by the Enquiry Officer in recording a finding that the charges were partly proved. Neither Bhat nor Chandramouli was examined as a witness in the departmental enquiry. 

The Division Bench held that the Enquiry Officer had relied upon material against which Uppal was given no opportunity to rebut, and that the findings were vitiated for want of a semblance of evidence.

Canara Bank argued before the Supreme Court that the Division Bench had impermissibly re-appreciated evidence and tested the veracity of findings recorded by the disciplinary authority and the Single Judge, which is outside the scope of judicial review in disciplinary matters. The Court disagreed. It found that the errors noted by the High Court against the findings recorded in respect of Uppal were not material departures from settled law, and that the Division Bench’s findings on the merits were available on the record. The impugned judgment was confirmed to that extent.

The Division Bench had also noted that Uppal had been promoted to SMG Scale-IV on 19 July 2004 — after the very transactions in question — and had superannuated on 31 November 2010. It declined to grant liberty to the bank to proceed afresh, observing that doing so would impact the other six officers who were not parties to the appeal, and that the bank’s own pleadings admitted no criminal connivance was found against Uppal. The Supreme Court did not disturb these findings.

Regulation 10: “May” Is Directory

The more consequential holding concerned Regulation 10 of the 1976 Regulations, which reads: “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 Division Bench had treated “may” as mandatory, effectively holding that the bank was obliged to conduct a common proceeding when multiple officers faced charges arising from the same cause of action. Canara Bank challenged this, pointing to a conflict between two High Courts. 

The High Court of Karnataka, in Arun Kumar Alva v. Vijaya Bank, had read “may” as mandatory. The High Court of Andhra Pradesh, in T. Baba Prasad v. Andhra Bank, had disagreed and held that “may” in the pari materia Regulation 10 of the Andhra Bank Officer Employees (Discipline and Appeal) Regulations, 1981 was directory.

The Supreme Court sided with the Andhra Pradesh view. It reasoned that construing “may” as mandatory would remove the discretion available to the employer in dynamic circumstances. The roles of charge-sheeted employees may not be the same or similar even when charges fall under a common category. 

The disciplinary authority may also differ depending on the cadre of the charge-sheeted employee — whether an Assistant General Manager, Regional Manager, Chief General Manager, or Executive Director. Forcing a single common proceeding in all such cases would be unworkable.

The Court drew on the interpretive principle that enabling words are construed as compulsory only when the object of the authority is to effectuate a legal right. Regulation 10, the Court held, was enacted to vest the bank with the necessary power to order joint proceedings where more than one officer is involved — without such a provision, common proceedings might not have been permissible at all. It is a facilitative provision, not an obligatory one. 

Critically, the Court affirmed the Andhra Pradesh High Court’s observation that Regulation 10 does not vest any power or right in the hands of a delinquent officer to insist on or ask for joint or common proceedings, and that failure to hold a joint enquiry does not vitiate disciplinary proceedings already initiated against an individual officer.

Conflict Between High Courts Resolved

By affirming T. Baba Prasad v. Andhra Bank and setting aside the Division Bench’s reading of Regulation 10, the Supreme Court resolved a direct conflict between the Karnataka and Andhra Pradesh High Courts on the interpretation of identically worded provisions. The Karnataka High Court’s view in Arun Kumar Alva, which the Division Bench had followed, no longer holds the field.

The Court was clear that the word “may” is not understood as “must” so long as the English language retains its meaning, and that no stress or strain should be placed on the sentence subjected to interpretation. The enabling words become compulsory only when they are meant to effectuate a legal right — and no such right exists in favour of a delinquent employee under Regulation 10.

Outcome

The Civil Appeal was disposed of on 12 May 2026. The Supreme Court confirmed the Division Bench’s finding that the disciplinary enquiry against Uppal was vitiated by the reliance on statements of witnesses who were not examined during the proceedings, and upheld the setting aside of the punishment order dated 31 May 2006. However, it set aside the Division Bench’s holding that Regulation 10 of the 1976 Regulations is mandatory. Canara Bank was directed to settle the account of the first Respondent, duly noting the outcome of the impugned judgment, within six weeks from the date of the order. All pending applications were disposed of.