When an employs fails to adhere to the expected standards of loyalty and fidelity, or commits crimes under the Prevention of Corruption Act,1988 or Indian Penal Code he is no longer an asset, but a liability to the organization. He forfeits his good conscience and violates norms of service ethics to the detriment of the interests or the fair name of the organization or to gain an undue benefit for himself. In this case, he is committing vigilance misconduct, as distinguished from administrative misconduct (failure to carry out due orders of superiors) or technical lapse(negligence, errors of judgement or failure to follow the prescribed procedure).

Stray instances of bad judgement taken in otherwise bonafide circumstances can be condoned, but not a single instance of bad faith. Employment is a contract of utmost good faith. Good faith should be deemed as the foundation, on which a service contract can dwell. The employee is trusted upon and entrusted custody of valuable resources and sensitive data belonging to the organization as part of his job responsibilities. Breach of trust by the employee may render the organization to immense damage and jeopardy.

Vigilance lapses are on account of an illegal intent of the mind. Here the amount involved is not a criteria, since a misappropriation of Re.1/- shows an inclination of mind, that will not miss an opportunity, if secured to misappropriate a much larger amount. Punishment here can be two-fold. Initially it may be from the employer resulting in dismissal and termination of the contract of employment, but ultimately it may also be from the law enforcing authority under the Indian Penal Code and in respect of public servants also under the Prevention of Corruption Act.

PNB, which is one of the largest all-India nationalised banks, describes about investigation and prosecution of vigilance lapses committed by employees, as under:

"Vigilance in Banks

Vigilance activity in financial institutions is an integral part of the managerial function. The raison d'être of such activity is not to reduce, but to enhance the level of managerial efficiency and effectiveness in the organisation. In Banks risk-taking forms an integral part of business. Therefore, every loss caused to the organisation, either in pecuniary or non-pecuniary terms, need not necessarily become the subject mater of a vigilance inquiry. It would be quite unfair to use the benefit of hindsight to question the technical merits of managerial decisions from the vigilance point of view. At the same time, it would be unfair to ignore motivated or reckless decisions, which have caused damage to the interests of the organisation. Therefore, a distinction has to be drawn between a business loss which has arisen as a consequence of a bona fide commercial decision, and an extraordinary loss which has occurred due to any malafide, motivated or reckless performance of duties. While the former has to be accepted as a normal part of business and ignored from the vigilance point of view, the latter has to be viewed adversely and dealt with under the extant disciplinary procedures."

The difficulty to distinguish between such cases and segregate vigilance misconduct from genuine losses will not arise, if a bottom-to-top or end-to-beginning sequence is not made in the scrutiny and investigation is conducted on the beginning-to-end approach. The occurrence of loss is a result and not a cause. Investigations will not be based on the manifested symptoms (i.e. terminal loss confronted), but looking to the root causes starting from the very beginning. That is, The investigator will start reviewing from the beginning of the transaction concerned and review step by step chronologically as to the courses of decision/action followed, against what should have been done, as per normal guidelines or prudential management. He will see if deviations made, are duly explained and reported to the next higher authority. Lapses should be noted with reference to their effect on subsequent sequential stages. If the lapses are serious or severe and they logically explain the adverse happening, the misconduct of the employee is established objectively.

Further every happening of a loss is like a business "accident". How and why it has happened and how to seal and prevent the future occurrence of such a loss has definitely to be looked, which needs a thorough objective probe. The existence of a 'vigilance angle' if any, is clearly exhibited in such a scrutiny. it is conceded that "every loss caused to the organisation, either in pecuniary or non-pecuniary terms, need not necessarily become the subject mater of a vigilance inquiry", but it should necessarily become the subject-matter of an objective inquiry, recognizing this as an exceptional as distinguished from a normal situation. It is the duty of the Bank in the first instance to conduct such a investigation and keep the investigation report transparent to the investigating authority. Risks pertain to two categories, foreseen and unforeseen. Risk management is a duty of the management and they have to provide for each and every foreseen risks. Management is accountable for such lapses. An example is the failure to insure a hazardous asset against fire and other risks, and consequent loss to the Bank on account of a subsequent fire accident.

It is also necessary that the norms for distinguishing a "genuine business loss" and "a loss due to vigilance misconduct" or "criminal negligence" are well defined and uniformly applied to all segments of the officers handling risk in taking decisions at their respective levels.

If the top management of nationalised and other governed owned banks accept this ground discipline, these institutions would not have become loaded with huge NPAs, as they do now.

Complaints of illegal gratification and bribery against public servants are covered by Prevention of Corruption Act, 1988. This Act is elaborately discussed in the Legal Supplement, which in case of need you may access and refer. The Act is dealt with in 5 web pages and you may move to be subsequent pages from the first page through links provided. Where the law is violated, the recourse should be through a complaint lodged with law-enforcing authority, either CBI or Crime section of the State Police.

Detailed guidelines for conducting investigations through the CBI are given in the web page titled Investigation2

It should be noted that due assistance and cooperation to be extended to the investigating agency, even if the complaint is not lodged by us, and they have taken up investigation on the basis of 3rd party complaints. All information needed by them should be provided. Records including original records, as demanded by them should be made available. For more detailed guidelines on the subject of obligations of the executive authority to render assistance to the investigations of CBI, please refer to CVC Manual, Chapter -6 titled "Facilities & Co-operation to be Extended by Administrative Authorities to the Central Bureau of Investigation During Investigation of Cases". Please visit the web site of CVC and peruse these guidelines in the Manual of CVC published therein. In case so requested the accused public servant should be placed under suspension, or transferred to a different department or place of posting.

Under Section 19 of the Prevention of Corruption Act, 1988, it is necessary for the prosecuting authority to have the previous sanction of the appropriate administrative authority for launching prosecution against a public servant.

The requirement of previous sanction is intended to afford a reasonable protection to a public servant, who in the course of strict and impartial discharge of his duties may offend persons and create enemies, from frivolous, malicious or vexations prosecution and to save him from unnecessary harassment or undue hardship which may result from an inadequate appreciation by police authorities of the technicalities of the working of a department. The prosecution of a Government servant for an offence challenging his honesty and integrity has also a bearing on the morale of the pubic services. The administrative authority alone is in a position to assess and weigh the accusation against the background of their own intimate knowledge of the work and conduct of the public servant and the overall administrative interest of the State.

The sanctioning authority has an absolute discretion to grant or to withhold sanction after satisfying itself whether the material placed before it discloses a prima facie case against the person sought to be prosecuted. It is the sole judge of the material that is placed before it. If the facts placed before it are not sufficient to enable to exercise its discretion properly, it may ask for more particulars. It may refuse sanction on any ground which commends itself to it, if it considers prosecution as inexpedient.

However, a public servant, who is alleged to have committed an offence should be allowed to be proceeded against in a court of law, unless on the basis of the facts placed before it the sanctioning authority considers that there is no case for launching a prosecution. That a case might lead to an acquittal will not be enough reason for withholding sanction. Whether the evidence available is adequate or not is a matter for the court to consider and decide. For the sanctioning authority to be guided by such considerations will not be proper and may lead to suspicion of partiality and protection of the guilty person. Therefore, normally sanction for prosecution should be accorded even if there is some doubt about its result.