Dues Towards Excess Payment Recoverable From 'Retiring' Employee If There's No Forced Undertaking At Time Of Pay Refixation: MP High Court Full Bench

A full bench of the Madhya Pradesh High Court has recently held that recovery can be ordered to be effected from the pensionary benefits or the salary in view of the undertaking or indemnity bond given by the employee at the stage when the grant of benefit of pay refixation is made. However, while answering the questions posed in the reference, the High Court has clarified that this would mean dues can be realised from a 'retiring' employee, and not a 'retired' employee, as per Rule 65 of MP Civil Service Pension Rules, 1976.

The bench of Chief Justice Ravi Malimath, Justice Vishal Mishra and Justice Pramod Kumar Agarwal further made it clear that if an employee was forced to give an undertaking at the time of refixation of pay, it won't be enforceable for the purpose of recovery of money at a later stage.

“….in case of Central Inland Water Transport Corporation Limited (supra)…It was held that the employer should not be allowed to take advantage of its position. Therefore, the condition of furnishing an undertaking cannot be forced upon a Government servant... Therefore in all those cases where the Government servants have furnished an undertaking willingly at the time when the benefits of revision of pay have been extended to them, in such an event, they are bound by the undertaking and not otherwise”, the bench sitting at Jabalpur clarified.

The court has also discussed in detail various apex court judgments enunciated under Articles 136 and 142 of the Constitution that were allegedly in conflict with each other, their precedential value and concluded with a harmonious interpretation of all.

The court opined that the state, as a party with higher bargaining power, is likely to draw contractual terms favouring the self. Relying on Balmer Lawrie & Company Limited v. Partha Sarathi Sen Roy (2013), the court iterated that public bodies bear public character and the aspect of public interest. Therefore, as held in Balmer, unconscionable and unfair clauses in contracts entered into between parties with unequal bargaining power will be hit by Section 23 [What considerations and objects are lawful, and what not] of the Contract Act and should be struck down. Citing the above reasons, the court underscored that the reliance of the state's counsel on Section 72 [Liability of person to whom money is paid, or thing delivered, by mistake or under coercion] of the Indian Contract Act is misplaced.

Though Clause 11(1) of Madhya Pradesh Pay Revision Rules, 2017 wherein a Circular dated 22.07.2017 was issued by the Finance Department of the state talks about securing an undertaking from the Government servant to the effect that in case excess payment is made, he will refund the same, the High Court concluded that it can't be considered as a voluntary undertaking furnished by the employee.

“…Such kind of undertaking is given by the employee since non-furnishing of undertaking would deny him the benefit of revision of pay. Therefore, it cannot be said that the same would amount to any contract between the employee and the employer”, the three-judge bench observed in the order.

Another question raised before the bench was with regards to the effect of an undertaking given at the stage of payment of retiral dues concerning the refixation of pay or increments done decades ago. The court was of the opinion that the same cannot be enforced. The court emphasised that the time period as fixed in State of Punjab & Ors. v. Rafiq Masih(White Washer) & Ors (2015) 4 SCC 334) must be strictly followed. Recovery from retired employees, or employees who are due to retire within one year of the order of recovery would be impermissible, the apex court had noted in the said order. Supreme Court also mentioned then that no recovery can be made from the employees when the excess payment has been made for a period over five years before the order of recovery is issued. These propositions have not been disturbed by the decisions in later judgments, the court clarified.

“…the argument of the State that the judgment in the case of Chandi Prasad Uniyal (supra) as well as the Madhya Pradesh Civil Services (Pension) Rules, 1976 were not considered in the case of Rafiq Masih (supra) may not be correct. The judgment delivered in the case of Syed Abdul Qadir (supra) was also followed in the case of Chandi Prasad Uniyal (supra) wherein in para 15 of the judgment, the Hon'ble Supreme Court has directed not to effect recovery in exceptional cases as pointed out in Syed Abdul Qadri's case and Col. B.J. Akkara's case.

Further, referring to MP Civil Services Pension Rules, the court emphasised that proceedings have to be initiated at least two years prior to retirement and no recovery can be made from a 'retired' servant. The court added that such mandates have not been followed by the state authorities in the current case.

On another question of whether recovery on account of excess payment to an employee can be made in exercise of the power conferred under Rule 65 of M.P Civil Services Pension Rules, 1976, the court concluded as given below:

“An employer has a right to recover the amount of excess payment made to a retiring Government servant in exercise of the power conferred under Rules 65 and 66 of the Rules of 1976 subject to the fact as to at what stage the recovery is directed to be made. No recovery can be made from a retired Government employee in view of judgment of the Hon'ble Supreme Court in Syed Abdul Qadir's case”

After answering all three questions framed for reference, the High Court has directed the batch of writ matters to be placed before the appropriate bench for consideration.

Amit Seth – Deputy Advocate General assisted by Advocates Sahil Sonkusale and B.D. Singh (DAG) appeared for the state instrumentalities. Advocates Sandeep Singh Baghel, M.R. Verma, Atul Kumar Rai, Vandana Tripathy, Sachin Pandey, Amit Kumar Chaturvedi, Dileep Kumar Pandey placed arguments before the court on behalf of the retired employees in the connected writ matters.

Case Title: The State Of Madhya Pradesh Thr. Principal Secretary, School Education Department & Ors v. Jagdish Prasad Dubey & Connected Matters

Case No: Writ Appeal No. 815 of 2017

Citation: 2024 LiveLaw (MP) 67

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