ORDER : The petitioner was appointed as Deputy Manager (Legal) in the respondent – Corporation in the year 1992 and was promoted as Manager (Legal) in the year 2003. The petitioner was served with a showcause notice on 18.09.2000 in the matter of financial assistance extended to M/s. BL Industries (India) Ltd. A reply dated 20.08.2000 was submitted by the petitioner. Charge sheet dated 02.02.2010 was served upon the petitioner containing 3 charges namely: (i) The Urban Land ceiling clearance certificate bearing CC No.E1/ULC/3768/1976 dated 20/11/1993 produced by the surety and accepted by you, clearly states that the property bearing Survey No.77 & 78 (accepted as collateral security) stands in the names of five persons. However the legal documents were executed in favour of KSFC by one Mr. C.R.Mohan Rao. As a legal officer before giving legal clearance you have failed to look into this aspect. (ii) That you have visited Hyderabad on 4th, 5th and 6th March 1998 to get the legal documents executed and you have failed to inspect the said property on your visit and notice the deviations. You have also failed to get photos of surety Mr. C.R.Mohan Rao and others at the time of execution of documents which would have helped the Corporation to initiate appropriate recovery action/pursue other recourses open to it for enforcement. (iii) As per the documents submitted by the party in respect of collateral security, the road is on East side. Further as per the parent deed submitted by the party which is in Urdu, the road is facing towards South side. This aspect was not examined by you at the time of scrutinizing / giving legal clearance. Thus you have failed to exercise due care and caution in identifying the genuineness of the said documents. The petitioner submitted reply on 15.02.2010 and denied all the allegations. As the Disciplinary Authority was not satisfied with the reply, a retired District and Sessions Judge was appointed to conduct Disciplinary Inquiry. After conducting and concluding the inquiry, Inquiry Officer submitted a report dated 09.08.2010, exonerating the petitioner from all the charges. In support of the findings, adequate reasons was assigned. Managing Director of the Corporation served a showcause notice dated 27.01.2011 and the petitioner was notified that the Board of Directors after protracted discussions on the subject disagreed with the findings of the Inquiry Officer. In support of the findings, adequate reasons was assigned. Managing Director of the Corporation served a showcause notice dated 27.01.2011 and the petitioner was notified that the Board of Directors after protracted discussions on the subject disagreed with the findings of the Inquiry Officer. Copy of the Board proceeding dated 23.11.2010 and Inquiry Officer’s report was furnished. Explanation to the said showcause notice was submitted by the petitioner on 05.04.2011. The Board of Management of the respondent having arrived at the decision that there is grave irregularity committed by the petitioner and thus jeopardised the interest of the Corporation, resolved to impose the penalty of reduction of the petitioner’s pay to the lowest stage in the time scale of pay in the rank of Manager and a communication dated 07.12.2011 was served in that regard. On 25.01.2012 a review of the said order was sought by filing a petition under Rule 26 of the Karnataka State Financial Corporation Services (Classification, Control & Appeal) Rules, 2003 (for short, 'the Rules'), . The Board of Directors having rejected the Review Petition and a communication in that regard served on the petitioner on 09.03.2012, this petition was filed to set aside the Order dated 07.12.2011 imposing the penalty and the Order dated 09.03.2012, by which the Review Petition was rejected. 2. Sri Ajoy Kumar Patil, learned advocate vehemently contended that there is breach of sub-Rule (3) of Rule 11A by the respondent. He submitted that the Inquiry Officer who conducted and completed the Inquiry having exonerated the petitioner from all the charges and the report submitted being a well considered report, upon appreciation of the entire material placed on record of the inquiry, no reasons for disagreement was made out and furnished to the petitioner, to make his representation. He further submitted that the format vide Annexure-1, enclosed to the showcause notice dated 27.01.2011 does not meet the mandatory requirement of Subrule (3) of Rule 11A of the Rules. He contended that the petitioner having submitted the explanation on 05.04.2011, without any application of mind, mechanically the penalty was imposed. He further submitted that the Review Petition filed, without examination in the manner contemplated in law was rejected virtually by a non-speaking order dated 09.03.2012. He contended that the petitioner having submitted the explanation on 05.04.2011, without any application of mind, mechanically the penalty was imposed. He further submitted that the Review Petition filed, without examination in the manner contemplated in law was rejected virtually by a non-speaking order dated 09.03.2012. He contended that the respondent having failed to consider the case in the correct perspective, impugned orders suffer from fatal defects and the findings entered unsupported by any evidence being perverse, there is gross miscarriage of justice. He submitted that there is no due and proper application of mind and both the orders are bad in law, as the reply submitted and also the review petition filed has not received consideration in accordance with law. 3. Per contra, Sri Gururaj Joshi, learned advocate defended the impugned orders by contending that there was no requirement for serving the reasons recorded to the petitioner and that the order dated 07.12.2011 and 09.03.2012 being justified, no interference is called for. Alternatively, he submitted that even if there is any infirmity in the order(s) passed against the petitioner, liberty be reserved to the respondent for doing the needful afresh. 4. Perused the record and considered the rival contentions. Point for consideration is, whether there is flaw in the matter of imposition of punishment by the respondent? 5. Rule 11A is with regard to action on the Inquiry Report. It provides for four kinds of orders to be passed by the Disciplinary Authority after receiving the report of the Inquiry i.e., by recording the reasons: (i) Remit the case to the Inquiry Authority; (ii) Record reasons for disagreement and record its own findings on the charges, if the evidence on record is sufficient for the purposes and communicate the reasons for such disagreement; (iii) Impose one or more of the penalties specified in Rule 8; (iv) Exonerate the employee. 6. Rule 11A (3) makes it clear that where the Disciplinary Authority disagrees with the findings of the Inquiring Authority on any article of charge, it must record its reasons for such disagreement and record its own findings on such charge, if the evidence on record is sufficient for the purposes and communicate the reasons for such disagreement to the employee to make his representation if any in the matter and consider the same before taking any decision to impose the penalty. Sub-Rules (3) and (4) of Rule 11A have to be read together. When so read, it is clear that they have been made only with a view to provide an opportunity to the employee to represent against the findings, which can be termed as ‘tentative’ of Disciplinary Authority, to the extent they are adverse to him. If explanation is submitted, it becomes mandatory for the Disciplinary Authority to meaningfully consider the explanation and pass order in exercise of the power conferred under Rule 11A (4). 7. The respondent is an instrumentality of the State and is expected to act in fairness by following the principles of natural justice, meaning thereby, that in case an oral hearing is not allowed, the explanation submitted should receive due consideration of the Disciplinary Authority. 8. Annexure-1 enclosed to the showcause notice dated 27.01.2011 (proceedings of Board Meeting held on 23.11.2010), in the form of a table with headings “Gist of Charges; Findings of I.O.; Observations of the Board and the penultimate portion with a heading ‘General observations of the Board’ as rightly contended by Sri Ajoy Kumar Patil does not comply with subRule (3) of Rule 11A as the Disciplinary Authority has not recorded its reasons for the disagreement with the findings of the I.O. and has not recorded its own findings chargewise. The Table Annexure 1 appears to be parawise comments and not recording of the Disciplinary Authority reasons for such disagreement nor the findings of the Disciplinary Authority chargewise. Thus, Annexure 1 to the showcause notice dated 27.01.2011 is only a farce of compliance. 9. There is no dispute with regard to submission of reply dated 05.04.2011 by the petitioner to the showcause notice dated 27.01.2011 served on him by the Managing Director. The order dated 07.12.2011 makes it clear that the Disciplinary Authority by taking note of the said explanation of the petitioner has concluded as follows: “….The Board after detailed deliberations, felt that the reply given by the CSO cannot be accepted as the CSO obtained the security documents and recorded in the note sheet that the Company and collateral security owner have executed the so and so documents which is not in dispute. Further, the lapses committed by the CSO are serious in nature and because of the negligence of the CSO, the Corporation could not take action for sale of collateral property for recovery of its dues. Further, the lapses committed by the CSO are serious in nature and because of the negligence of the CSO, the Corporation could not take action for sale of collateral property for recovery of its dues. The dues in the financial guarantee loan account is Rs.20.83 crore as on 30.06.2011 and chances of further recovery in this case are remote.” It is apparent that the said explanation of the petitioner has not received meaningful consideration and has been brushed aside without assigning any valid reason. There is neither appreciation of the evidence nor recording of reasons in support of the conclusion. Thus, the Disciplinary Authority has faultered in discharge of its duty in terms of Rule 11A and illegally imposed the punishment on the petitioner. 10. Review Petition filed by the petitioner has been rejected without taking into consideration the facts stated and the grounds raised therein which becomes clear from the order dated 09.03.2012, relevant portion of which reads as follows: “The Board perused the review petition filed by DO and noted that DO has recorded in the loan file note sheet that the legal security documents have been executed by the company along with surety. Being a legal officer he should have taken due care and precaution to verify the authenticity of the collateral security title deeds to protect the interest of the Corporation. The Board noted that, the DO has failed in his duties to exercise due caution at the stage of loan documentation in this case and therefore the Corporation is unable to proceed against the collateral security property to recover the huge outstandings in the loan account. The DO has not brought out any new grounds in his review petition except repeating the contention taken by him in his earlier representation and there is no merit to review the order passed by the Board in its meeting held on 08.09.2011. In view of the observations as above, the Board reiterated its earlier decision of imposing the penalty of reduction to the lowest time scale of pay in the rank of Manager and rejected the review petition of the DO. The Board authorised the Managing Director to communicate the said decision of the Board to the Appellant. In view of the observations as above, the Board reiterated its earlier decision of imposing the penalty of reduction to the lowest time scale of pay in the rank of Manager and rejected the review petition of the DO. The Board authorised the Managing Director to communicate the said decision of the Board to the Appellant. ORDER The Board rejected the review petition dated 25.01.2012 preferred by Sri G.B. Lokesh and confirmed imposing the penalty of reduction to the lowest time scale of pay in the rank of Manager.” Thus, it is clear that the same fault, as was noticed supra, was committed even while passing the order dated 09.03.2012. 11. Despite exoneration of the petitioner by Inquiring Authority by assigning reasons, without recording any reasons for disagreement with the findings recorded by the Inquiring Authority and recording the reasons of the Disciplinary Authority on the charges leveled against the petitioner, the aforesaid orders have been passed and the petitioner imposed with the penalty, which is wholly arbitrary. The action of the respondent after receipt of the Inquiry Report being in breach of sub-Rule (3) of Rule 11A, the impugned orders are illegal. 12. In PUNJAB NATIONAL BANK Vs. KUNJ BEHARI MISRA, (1998) 7 SCC 84 , Apex Court by considering Regulation 7(2) of the Punjab National Bank Officer Employees’ (Discipline and Appeal) Regulations, 1977 which did not provide for giving of any notice before Disciplinary Authority differed with the finding of the Inquiry Officer, has held as follows: “The result of the aforesaid discussion would be that the principles of natural justice have to be read into Regulation 7(2). As a result thereof, whenever the disciplinary authority disagrees with the enquiry authority on any article of charge, then before it records its own findings on such charge, it must record its tentative reasons for such disagreement and give to the delinquent officer an opportunity to represent before it records its findings. The report of the enquiry officer containing its findings will have to be conveyed and the delinquent officer will have an opportunity to persuade the disciplinary authority to accept the favorable conclusion of the enquiry officer. The report of the enquiry officer containing its findings will have to be conveyed and the delinquent officer will have an opportunity to persuade the disciplinary authority to accept the favorable conclusion of the enquiry officer. The principles of natural justice, as we have already observed, require the authority which has to take a final decision and can impose a penalty, to give an opportunity to the officer charged of misconduct to file a representation before the disciplinary authority records its findings on the charges framed against the officer.” (emphasis supplied) 13. In YOGINATH D. BAGDE Vs. STATE OF MAHARASHTRA, (1999) 7 SCC 739 , Apex Court noticing the scope of Rule 9(2) of the Maharashtra Civil Services (Disciplinary and Appeal) Rules, 1979 which did not specifically provide for the Disciplinary Authority to give an opportunity to the petitioner before differing with the finding, has held as follows: “But the requirement of ‘hearing’ in consonance with the principles of natural justice even at that stage has to be read into Rule 9(2) and it has to be held that before the Disciplinary authority finally disagrees with the findings of the enquiring authority, it would give an opportunity of hearing to the delinquent officer so that he may have the opportunity to indicate that the findings recorded by the enquiring authority do not suffer from any error and that there was no occasion to take a different view. The disciplinary authority, at the same time, has to communicate to the delinquent officer the ‘TENTATIVE’ reasons for disagreeing with the findings of the enquiring authority so that the delinquent officer may further indicate that the reasons on the basis of which the disciplinary authority proposes to disagree with the findings recorded by the enquiring authority are not germane and the finding of ‘not guilty’ already recorded by the enquiring authority was not liable to be interfered with.” (emphasis supplied) 14. In the case of RANJIT SINGH Vs. UNION OF INDIA reported in (2006) 4 SCC 153 , in the Departmental Proceedings, the Inquiry Officer submitted report exonerating the appellant from the charges. The Disciplinary Authority however differed with the findings of the Inquiry Officer and issued a memorandum stating the reasons for disagreeing with the Inquiry Officer and called upon the appellant to make a representation in defence to the ground of disagreement before a final decision is taken. The Disciplinary Authority however differed with the findings of the Inquiry Officer and issued a memorandum stating the reasons for disagreeing with the Inquiry Officer and called upon the appellant to make a representation in defence to the ground of disagreement before a final decision is taken. Appellant sought 10 days’ time and the same was allowed. Again he prayed for further time and the same was also allowed. Another application was filed seeking extension of time which was not granted as the Disciplinary Authority already prepared the order. Considering the matter in the aforesaid background, Apex Court has held as follows: “22. In view of the aforementioned decisions of this Court, it is now well settled that the principles of natural justice were required to be complied with by the disciplinary authority. He was also required to apply his mind to the materials on record. The Enquiry Officer arrived at findings which were in favour of the appellant. Such findings were required (sic sought) to be overturned by the disciplinary authority. It is in that view of the matter, the power sought to be exercised by the disciplinary authority, although not as that of an Appellate Authority, but is akin thereto. The inquiry report was in favour of the appellant but the disciplinary authority proposed to differ with such conclusions and, thus, apart from complying with the principles of natural justice it was obligatory on his part, in the absence of any show-cause filed by the appellant, to analyse the materials on record afresh….” (emphasis supplied) 15. In MATHURA PRASAD Vs. UNION OF INDIA, (2007) 1 SCC 437 , it was held, that when an employee by reason of alleged act of misconduct is sought to be deprived of the livelihood, the procedure laid down under the Sub-Rules is required to be strictly followed and it has been further held as follows: “19….. It is now well settled that a judicial review would lie even if there is an error of law apparent on the face of the record. If statutory authority uses its power in a manner not provided for in the statute or passes an order without application of mind, judicial review would be maintainable. Even an error of fact for sufficient reasons may attract the principles of judicial review.” 16. If statutory authority uses its power in a manner not provided for in the statute or passes an order without application of mind, judicial review would be maintainable. Even an error of fact for sufficient reasons may attract the principles of judicial review.” 16. In the present case, Disciplinary Authority has not communicated to the petitioner the ‘tentative reasons’ for disagreeing with the findings of Inquiring Authority nor has ‘recorded its own findings’ on the charges leveled against the petitioner i.e., when the communication dated 27.01.2011 was served on the petitioner. Thus, there is breach of sub-Rules (3) and (4) of Rule 11A, which amounts to violation of principles of natural justice. Consequently, there is flaw in the decision making process by Disciplinary Authority at all the three stages i.e., under Rules 11A (3), 11A (4) and 26. In the result, petition is allowed and the impugned orders as at Annexures – A and B quashed. Liberty is reserved to the respondent to proceed afresh against the petitioner, if found necessary, i.e., from the stage the Inquiry Report was received by keeping in view the observations made supra. No costs.