The curious case of demotion of executive director at a public-sector bank

If someone is deemed unfit for the ED post, can that person be considered fit to be a general manager?

On June 24, the finance ministry’s Department of Financial Services notified the following:

 

The central government hereby cancels the appointment of A* [name withheld] as executive director, Union Bank of India, made vide Department of Financial Services’ notification no 4/3/2023-BO.1 dated 27.03.2024, with immediate effect, by reverting him to his previous post, ie, general manager in Punjab & Sind Bank.

 

Besides A, this notification was copied to the Reserve Bank of India governor, chairman of the State Bank of India, managing directors and chief executive officers of all public sector banks (PSBs), the chief executive of Indian Banks’ Association, among others.

 

We have seen many disciplinary actions against senior PSB officials. Investigative agencies such as the Central Bureau of Investigation (CBI) and the Intelligence Bureau hounding them for allegedly abetting frauds and/or tacitly supporting fraudsters, too, aren’t unheard of. Instances of PSB chiefs being arrested and sent to Tihar Jail are also not rare. But this case appears unique.

 

What exactly happened?

 

Here is a reconstruction of what led to this action. I am just stating facts and not getting into who is right and who isn’t.

 

The story had begun much earlier, in the financial year 2016-17 (FY17), but the latest trigger for the action is a public interest litigation filed in the Delhi High Court in August 2024 (WP 11590/2024) by a woman employee of Punjab & Sind (P&S) Bank, challenging A’s appointment. She raised a question: How could someone be appointed ED of a PSB without proper due diligence?

 

Ahead of this, she had sought all relevant information about A’s appointment as an ED under the Right to Information Act. I understand that she did not succeed in getting the information.

 

Once the Delhi High Court started probing, the Chief Vigilance Commission (CVC) stepped in and denied vigilance clearance. The denial came after A’s appointment — after he had been in the position of executive director for 14 months.

 

This brings to light the role of the chief vigilance officer (CVO) and senior management of P&S Bank. In a bank, the CVO is responsible for overseeing the vigilance function, and ensuring ethical conduct and compliance with regulations. The CVO is the nodal point for interaction with the CVC and CBI. Typically, a bank’s CVO focuses on preventive vigilance.

 

In FY17, the woman [let’s call her B], who was the chief manager at P&S Bank’s PY Road branch in Indore, reported alleged irregularities and corruption by A, who was then the bank’s central India zonal manager based in Bhopal.

 

On December 14, 2017, B received a transfer order to Saraswan in Kundam tehsil, Jabalpur. Claiming that the transfer order was issued with “mala fide intentions” and by an “incompetent authority”, she challenged it vide a writ petition (9048/2018) at the Indore Bench of the Madhya Pradesh High Court.

 

Before that, in February 2018, B had approached the bank’s management, accusing A of sexual harassment. After waiting for 11 months, she went to the Local Complaints Committee (LCC) on January 8, 2019. Such a committee is mandatory under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 — also referred to as the Prevention of Sexual Harassment (POSH) Act.

 

The LCC addresses complaints of workplace harassment within the jurisdiction of a district. It has advisory and recommending powers, but limited enforcement authority.

 

Any organisation that has 10 or more employees is bound by law to form an Internal Complaints Committee (ICC), headed by a senior woman employee and with one external member as part of it.

 

While the LCC proceedings were on, the bank formed an ICC in Delhi, where P&S Bank is headquartered. The ICC report, on February 26, 2019, gave A a clean chit. However, the LCC report, on June 17, 2019, rejected the ICC’s finding that the complaint was false. The 

 

LCC recommended a ₹50,000 penalty on the bank for not having an ICC in Indore and for violating POSH provisions. It also advised disciplinary action against A according to service rules and recommended reconsidering B’s non-promotion on merit.

 

It found A guilty of sexual harassment, and the bank of supporting him, creating a hostile work environment, and humiliating a woman employee, which affected her health and safety.

 

Meanwhile, the Madhya Pradesh High Court cancelled B’s transfer order on April 17, 2018. It was a single Bench judgment.

 

The bank filed an appeal (377/2019) at the division bench of the High Court. It was dismissed on March 18, 2019, affirming the order of the single bench and cancelling B’s transfer order.

 

At this stage, P&S Bank moved the Supreme Court with a civil appeal (1809/2020). The apex court dismissed the appeal on February 25, 2020, and upheld the order passed by the division Bench of the Madhya Pradesh High Court.

 

The Supreme Court also came down heavily on the bank on the matter of constituting the ICC. It took note of the alleged sexual harassment against B.

 

The bank and A filed writ petitions against the LCC order (23858 of 2019 and 25127 of 2019) at the Madhya Pradesh High Court. There was also another writ petition challenging the LCC order. All three writ petitions argued that the ICC order should be taken as final, and that there was no need for an LCC when there was a provision to constitute an ICC.

 

B’s counsel, Prashant Bhusan, argued that the LCC order was final and that it could be challenged only at the appellate authority under Section 2 of the Industrial Employment [Standing Orders] Act and not before a high court.

 

While the high court proceedings were on, in March 2024, A was appointed ED in Union Bank.

 

In August 2024, B filed a fresh writ petition in the Delhi High Court against the appointment. The Delhi High Court questioned the grounds of vigilance clearance given to the “offender” of moral turpitude and his subsequent appointment as ED.

 

While the petition challenging the appointment was in the Delhi High Court, the writ petitions filed by P&S Bank, A and another person at the Madhya Pradesh High Court were dismissed on April 8, 2025. The court directed the bank and A to appeal to an appropriate forum against LCC’s decision.

 

Finally, the government stepped in. It cancelled A’s appointment as ED and sent him back to the bank as a general manager.

 

The case raises some questions: How could the officer concerned get his promotion from a zonal manager (who is of the rank of a deputy general manager) to a general manager? And, of course, to the post of ED? Does sexual harassment not fall under the jurisdiction of vigilance?

 

Indeed, an ED of a public sector bank losing his job this way is rare, but rarer is an ED returning to the position of general manager. EDs are central government appointees, while general managers are employees of a bank. 

 

Of course, it is possible for an ED to return to a GM’s post. Through a notification in 2012, the government ensured continuation of service in the case of elevation of a wholetime director (such as ED and MD). Earlier, a GM had to retire before taking up the higher position.

 

This is possibly a case of “Doctrine of Relation Back” — a legal principle where an act, though performed later, is legally treated as if it occurred earlier. This means that a later event can be deemed to have happened at an earlier, specified date, often to validate a previous action or right. The doctrine essentially gives a retroactive effect to certain actions or rights, making them effective from a date prior to their actual occurrence.

 

The question is: If someone is deemed unfit for the post of ED, can that person be considered fit to be general manager?

 

I am aware of at least one other instance in a PSB, where a deputy general manager facing criminal charges for moral turpitude in a chief judicial magistrate’s court was recently promoted as general manager. Will he become an ED? 

 

The writer is an author and senior advisor to Jana Small Finance Bank Ltd. His latest book: Roller Coaster: An Affair with Banking. To read his previous columns, log on to www.bankerstrust.in. X: @TamalBandyo