Parties Should Be Heard Before Initiating Recovery From Pension Even If Statute Does Not Require So: Kerala High Court

The Kerala High Court on Friday ruled that parties should be offered a hearing before a recovery proceeding as per principles of natural justice, even if a statute does not provide for the same since such proceedings can have civil and pecuniary consequences.

A Division Bench of Justice A.K. Jayasankaran Nambiar and Justice C.S. Dias thereby dismissed the argument of Kerala State Road Transport Corporation (KSRTC) that before the Corporation finds that excess payments are made, the employees need not be heard as there is no statutory provision mandating the same.

"We cannot accept the said argument. Since a recovery/ withholding of the amounts due to a person visits him with civil and pecuniary consequences, even in the absence of a statutory provision, requiring a hearing, principles of natural justice demands a hearing to be offered before such decisions are taken."

While agreeing that the Government has the power to rectify its mistakes, the Division Bench highlighted that interference is warranted when such recovery seems iniquitous.

"We are in complete agreement with the principle of law that the Government/ Administrative authority has the power to rectify mistakes at any time. The circumstances in which the recovery of excess amounts paid by mistake is not permitted is when the recovery would result in hardship of such nature which would far outweigh the equitable balance of the employer's right to recover. In other words, interference would be called for only in such cases where it would be iniquitous to recover the payment made."

As per a bilateral agreement between the KSRTC management and its employees, the salary of the employees was revised with effect from March 2011 and options were invited. The respondents herein, who are now retired employees of KSRTC, exercised their option on time to the concerned officer.

This option was accepted and the payments were being made accordingly. However, after their retirement, the surplus amount was recovered from the pensionary benefits and Death Cum Retirement Benefits (DCRG) citing that the unit officers did not sign the option utilised by the respondents On this ground, these payments were treated as excess.

Aggrieved by this recovery, the respondents approached the Singe Judge. 

The Single Judge quashed the orders of recovery alleging excess pay and directed a refund of the said amounts to the respondents within 45 days, failing which the amount was to carry interest at 6% from the officer responsible for the same. Challenging this decision, KSRTC moved the Division Bench. 

Standing Counsel Deepu Thankan appearing for KSRTC argued that Corporation is governed by Note 2 of Rule 3 of Part III of Kerala Service Rules which permits the employer/Government to recover the amounts due from the employee without any departmental/judicial proceedings after giving the employee or pensioner a reasonable opportunity to explain.

It was also contended that the Corporation had issued a notice to the respondents and that as per Note 2, what is contemplated is only a communication of such liabilities to them so as to enable them to submit their explanation.

He further argued that the impugned orders of recovery were made in 2017 and 2018 and that KSRTC had already realised the excess amounts drawn by the employees while the pleas were only filed in 2020. It was therefore submitted that the petitions deserve to be dismissed on the ground of delay.

Advocate K.P.Rajeevan appeared for the respondents and contested the appeal. 

The Court observed that generally, the employer/Government is empowered to recover the excess amount, if any, drawn by the employee and that power of the Government cannot be questioned.

"The said power flows from the settled legal position that administrative mistakes can be corrected by the Government at any point of time when the mistake is detected, for a perpetuation of the mistake without rectifying it would not be in public interest."

However, in this case, the employees did not admit that they had received anything in excess of what they are entitled to and there was no determination of liability with notice to the respondents while they were in service.

Further, the Bench noted that it was clear from Rule 3(b)(ii) that the proceedings if initiated also should be in respect of any event which took place more than four years before such institution. Note 2 which allows the pensionary benefits to be recovered also has to be in a proceeding which is instituted within the four-year period.

"In cases where the employee had knowledge that the payment received was in excess of what was due or wrongly paid, or where the error was detected or corrected, within a short time of the wrong payment, courts will not grant relief against recovery."

The appeal was accordingly dismissed with a clarification that the payments as directed by the single Judge should be paid by KSRTC within four weeks.

Case Title: KSRTC & Ors. v. K. Venu Kumar and connected matters

Citation: 2022 LiveLaw (Ker) 378

Click Here To Read/Download The Order