“Corruption Cannot Be Excused”: Supreme Court on Misconduct in SBI Loan Scandal

Case Summary

• Case Name: State Bank of India & Others v. Ramadhar Sao

• Citation: 2025 INSC 1010, Civil Appeal No. 10680 of 2025 (arising out of S.L.P.(C) No. 6722 of 2023)

• Court: Supreme Court of India, Civil Appellate Jurisdiction

• Date of Judgment: 20 August 2025

• Coram: Hon’ble Justice Rajesh Bindal and Hon’ble Justice Manmohan

• Appellants: State Bank of India & Others

• Respondent: Ramadhar Sao

• Advocates: [Not specified in the text of the judgment]

• Relevant Acts & Provisions:

  • Article 226, 32, and 136 of the Constitution of India (scope of judicial review)

  • Service Rules of Award Staff and Bi-Partite Settlement dated 10.04.2002 (para 5, sub-para J & K on misconduct)

• Cited Judgments:

  • State Bank of India v. Ajai Kumar Srivastava, (2021) 2 SCC 612

  • Boloram Bordoloi v. Lakhimi Gaolia Bank & Ors., (2021) 3 SCC 806

Introduction

On 20th August 2025, the Supreme Court of India delivered its decision in State Bank of India & Others v. Ramadhar Sao, a case concerning the dismissal and subsequent disciplinary proceedings against a Class IV employee of the State Bank of India (SBI). The judgment provides an important reaffirmation of the limited scope of judicial review in disciplinary proceedings and underscores that constitutional courts must refrain from substituting their own views for that of the Disciplinary or Appellate Authority.

The central issue revolved around whether the High Court was justified in interfering with the punishment imposed upon the respondent, who had been found guilty of acting as a middleman in loan sanction processes and accepting illegal gratification.

Background of the Case

The respondent, Ramadhar Sao, joined SBI in 1997 as a messenger. Allegations surfaced in 2008 accusing him of taking bribes to facilitate the sanction of loans. The Bank issued a chargesheet in January 2010, detailing allegations of misconduct including:

1. Acting as a conduit for sanctioning loans.

2. Taking illegal gratification from multiple customers.

3. Processing loan documentation at his residence.

4. Unauthorised absence during a crucial period of investigation.

After a full departmental inquiry, the charges were proved, and the Disciplinary Authority imposed the penalty of dismissal from service on 08.01.2011. On statutory appeal, the Appellate Authority took a compassionate view and reduced the penalty to “removal from service with superannuation benefits”.

Unhappy with this outcome, the respondent approached the Patna High Court. A Single Bench allowed his writ petition, setting aside the penalty and ordering reinstatement with back wages, while giving liberty to initiate fresh proceedings. The Bank’s intra-court appeal was dismissed by a Division Bench, compelling SBI to approach the Supreme Court.

Arguments Advanced

Appellants (SBI)

• The High Court failed to consider that a formal chargesheet was issued after the initial show cause notice, with sufficient particulars.

• The Appellate Authority had already shown leniency by reducing dismissal to removal with benefits.

• Judicial review under Article 226 does not extend to re-appreciating evidence like an appellate court.

• The respondent had participated fully in the inquiry, including cross-examination of witnesses.

• Customers’ testimonies directly implicated the respondent, and several loans had become irregular.

• Other officers involved (Branch Manager and Field Officer) were also punished.

• Reliance was placed on SBI v. Ajai Kumar Srivastava and Boloram Bordoloi v. Lakhimi Gaolia Bank.

Respondent (Ramadhar Sao)

• He was a Class IV employee with no authority to sanction loans.

• He was made a scapegoat, while more senior officials should have borne responsibility.

• Evidence from some witnesses, including colleagues, suggested his work was satisfactory.

• He was even promoted after the alleged misconduct, showing good conduct.

• The Single Bench had given liberty for a fresh inquiry, but the Bank did not act for over seven years.

• Relief could be moulded to reduce back wages instead of overturning reinstatement.

Supreme Court’s Observations

The Supreme Court carefully reviewed the factual matrix and the scope of judicial review. Several critical observations were made:

1. On the Scope of Judicial Review The Court reiterated:

   “The power of judicial review in the matters of disciplinary inquiries, exercised by the constitutional courts under Article 226 or Article 32 or Article 136 of the Constitution of India is circumscribed by limits of correcting errors of law or procedural errors leading to manifest injustice or violation of principles of natural justice and it is not akin to adjudication of the case on merits as an appellate authority.”

   This reaffirmed that High Courts cannot re-evaluate evidence or act as appellate forums in disciplinary cases.

2. On Findings of the Inquiry

   The Court noted that five loan customers testified against the respondent, each admitting to having paid bribes for sanctioning their loans. The Inquiry Officer had afforded full opportunity of hearing, and the respondent was represented by a defence counsel.

3. On the Respondent’s Plea for Mercy The Court highlighted his statement before the Disciplinary Authority:

   “I am innocent. Knowingly or unknowingly whatever mistake I have made, please forgive me. One of my son is handicapped and one of my daughter is of marriageable age. I have always served the Bank with utmost satisfaction. I don’t have any other source of income.”

   According to the Bench, this plea indirectly admitted guilt and sought mercy, further weakening his case.

4. On the High Court’s Reasoning The Supreme Court held that the High Court had committed errors:

   • The Single Bench wrongly concluded that there was no application of mind by the Disciplinary or Appellate Authority.

   • The finding that only the respondent was punished was incorrect, since other officers were also removed.

   • The Division Bench failed to appreciate the facts and focused on procedural aspects rather than merits.

5. On the Punishment The Court emphasised that leniency had already been exercised by the Appellate Authority. The reduced penalty of removal from service with superannuation benefits was considered adequate in light of the respondent’s misconduct.

Decision

The Supreme Court allowed the appeal, set aside the judgments of both the Single and Division Benches of the Patna High Court, and restored the order of the Appellate Authority dated 07.12.2012.

Thus, the penalty of removal from service with superannuation benefits stood confirmed.

Supreme Court’s Observations

The Charges and Evidence

The Court carefully noted the evidence relied upon during the inquiry. The allegations were that the respondent had acted as a middleman in loan sanctioning, taking bribes from customers in return for facilitating irregular approvals. The Court recorded:

“PW-1/Fakruddin stated that he was forced to pay ₹5,000/- to the respondent for getting his loan sanctioned without even proper documents. Similar were the statements made by PW-2, PW-3, PW-4 and PW-5, all of whom had stated about giving several thousands to respondent in order to get their loans sanctioned.”

The evidence demonstrated a pattern of misconduct. Even though the respondent was a low-ranking employee, the testimonies established his active participation in irregular practices.

On Due Process and Natural Justice

The Supreme Court rejected the argument that the inquiry was procedurally flawed. It stressed that the respondent had been given full opportunity to defend himself, including representation by a defence counsel and cross-examination of witnesses.

The Court held:

“The aforesaid process of inquiry clearly established the fact that due opportunity of hearing was afforded to the respondent during the course of inquiry.”

This finding was central, because the scope of judicial review hinges heavily on whether natural justice was followed.

The Respondent’s Plea for Leniency

The Bench gave attention to the respondent’s statement before the Disciplinary Authority:

“I am innocent. Knowingly or unknowingly whatever mistake I have made, please forgive me. One of my son is handicapped and one of my daughter is of marriageable age. I have always served the Bank with utmost satisfaction. I don’t have any other source of income.”

The Court interpreted this not merely as a plea for leniency, but as an indirect admission of guilt, showing that the respondent sought mercy rather than a complete exoneration.

High Court’s Reasoning Critiqued

The Court was particularly critical of the approach taken by the Patna High Court. The Single Bench, it observed, erred in concluding that the disciplinary findings were based on conjecture.

“The opinion expressed by the Single Bench that the finding recorded by the Inquiry Officer and the Disciplinary Authority were based on conjuncture and surmises, cannot be legally sustained.”

The Division Bench, meanwhile, had failed to appreciate the facts correctly, focusing on the maintainability of the writ petition rather than engaging with the evidence.

Parity of Punishment and the “Scapegoat” Argument

The High Court had reasoned that the respondent was being unfairly singled out, given his low rank and lack of sanctioning authority. The Supreme Court corrected this misapprehension by pointing out that other officers — including the Branch Manager and the Field Officer — had also been removed from service for similar involvement.

“Another reason assigned by the Single Bench is that the respondent has been made the scapegoat and other senior officers have not been proceeded against, is also wrong as the stand taken by the Bank is that the Branch Manager and the Field Officer against whom allegations were levelled along with the respondent, were removed from service.”

This clarification underscores the principle of proportional accountability in disciplinary proceedings.

Judicial Review: Limits and Principles

The Court leaned heavily on precedent to outline the limits of judicial review. Citing SBI v. Ajai Kumar Srivastava, it reiterated:

“The power of judicial review in the matters of disciplinary inquiries… is circumscribed by limits of correcting errors of law or procedural errors leading to manifest injustice or violation of principles of natural justice and it is not akin to adjudication of the case on merits as an appellate authority.”

It also drew from Boloram Bordoloi, affirming that when a Disciplinary Authority accepts the Inquiry Officer’s report, detailed reasons are not mandatory.

Final Findings

The Court held that the High Court had effectively exceeded its jurisdiction by substituting its own assessment for that of the Disciplinary and Appellate Authorities.

“For the reasons mentioned above, in our opinion, the impugned orders passed by the Single Bench and the Division Bench of the High Court cannot be legally sustained. The same are liable to be set aside.”

Accordingly, it restored the Appellate Authority’s decision: removal from service with superannuation benefits.

Key Takeaways for Legal Professionals

1. Judicial Review is Limited The judgment reiterates that writ courts cannot sit in appeal over disciplinary authority’s decisions. They may interfere only in cases of:

   • Procedural irregularity

   • Violation of natural justice

   • Manifest perversity

2. Indirect Admissions Matter The respondent’s plea for mercy was viewed as an indirect admission of guilt, which weighed against him.

3. Compassionate Leniency The appellate authority’s decision to convert dismissal into removal was acknowledged as a compassionate approach, reflecting judicial reluctance to further dilute punishment in cases involving corruption.

4. Parity in Punishment The High Court’s view that the respondent was singled out was factually incorrect. The Bank’s evidence showed that senior officers involved were also penalised, underscoring that proportional accountability was maintained.

5. Reaffirmation of Precedent By relying on SBI v. Ajai Kumar Srivastava and Boloram Bordoloi, the Court reinforced the principle that detailed reasoning is unnecessary when a Disciplinary Authority accepts the Inquiry Officer’s report.

Conclusion

The judgment in State Bank of India v. Ramadhar Sao is a cautionary note to both employees and reviewing courts. It signals that corruption, regardless of the employee’s position, cannot be condoned, and that High Courts must respect the boundaries of judicial review.

By reaffirming the disciplinary framework, the Supreme Court strengthens institutional accountability within public sector banks, ensuring that principles of fairness, evidence, and proportionate punishment remain at the forefront.