Excess Payment Made To Govt Employee Without His Fault Can't Be Recovered From His Leave Encashment Benefits After Retirement: Orissa High Court

The Orissa High Court has held that excess payment made to a government employee cannot be recovered by the employer from his 'leave encashment benefits' after his retirement, especially when it is apparent that the excess payment was erroneously made by the employer without any fault on the part of the employee.

Granting relief to a former Mail Man in the postal department, the Division Bench of Chief Justice Chakradhari Sharan Singh and Justice Sangam Kumar Sahoo held –

“It is no more res integra that the government cannot be allowed to recover excess payment of emoluments/allowances if the said payment was made by the employer by applying a wrong principle for calculating the pay or on the basis of erroneous interpretation of the rules.”

Background

The Opposite Party was appointed as a Mail Man (MTS) in the postal department on 17.01.1984. As per a notification made in 2009, the opposite party was to become eligible for financial upgradation under the 'Modified Assured Career Progression Scheme' ('MACP scheme') upon completion of 30 years of service, i.e. 17.01.2014.

However, he was erroneously granted 3^rd MACP by an order dated 21.04.2010, which was four years prior to he became eligible to receive the financial benefit. This discrepancy came to the fore by the report of internal audit dated 03.04.2012. Subsequently, the opposite party retired from service on 31.07.2017.

After his retirement, the petitioner-authorities withheld his leave encashment benefit with the purpose that the excess payment that was made to the opposite party can be recovered from such benefit as was due to him after his retirement.

The opposite party approached the Central Administrative Tribunal, Cuttack against such decision of the authorities, where he argued that withholding such post-retirement benefit is against the mandate of law and the same should be invalidated.

The Tribunal held in favour of the Opposite Party and allowed his application by directing the authorities to immediately release the amount. It also directed the authorities to grant him 9% interest per annum on the withheld amount. Being aggrieved by such order of the Tribunal, the petitioners approached the High Court.

Court's Observations

The Court, at the outset, observed that withholding of leave encashment benefit is prescribed under Rule 39(3) of the Central Civil Services (Leave) Rules, 1972 which says that the whole or a part of the leave encashment benefit can be withheld by the employer if the employee, while retiring from service, was under suspension or facing any disciplinary or criminal proceeding.

The Court observed that in the present case, the opposite party was neither under suspension nor was facing any disciplinary or criminal proceeding when he retired from service on 31.07.2017. Therefore, the pre-conditions required to invoke the aforesaid provision were not satisfied.

Further, it was highlighted by the Court that the petitioner-authorities did not produce any order by the virtue of which recovery of excess amount, which was wrongly sanctioned to the opposite party, was recovered.

In this respect, the Court relied upon the ratio laid down by the Supreme Court in State of Jharkhand v. Jitendra Kumar Srivastava, wherein it was held that taking away a part of pension or gratuity or even leave encashment without any statutory provision would amount to violation of the right to property of the employee under Article 300-A of the Constitution.

Furthermore, the Court was of the considered opinion that when the petitioner-authorities erred in granting excess payment to the employee, without having any fault on his part, the petitioners cannot be allowed to recover the same amount from his leave encashment benefits. In this regard, the Bench relied upon the judgments of the Apex Court in Syed Abdul Qadir v. State of Bihar and State of Punjab & Ors. v. Rafiq Masih (White washer) & Ors.

As far as granting interest on the withheld amount was concerned, the Court observed –

“…the petitioners were not authorized to withhold or to deduct any amount from the credit which was outstanding in favour of the opposite party on the date of his retirement, i.e. 31.07.2017 for encashment of his earned leaves. Also, the petitioners are at fault in not passing an order in accordance with law for effectuating the said deduction. As a corollary, this Court finds the action of the petitioners to be perverse and unwarranted. When the payment was delayed due to the fault of the petitioner authorities, the opposite party cannot be made to suffer.”

Accordingly, it upheld the order passed by the Tribunal directing the petitioners to disburse the amount of Rs. 3,88,548/- to the opposite party along with an interest on such amount from 1.8.2017 till the actual date of disbursement at the rate of 9% per annum.

Case Title: Union of India & Ors. v. Md. Ahmed Baig

Case No: W.P.(C) No. 9987 of 2021

Date of Judgment: February 22, 2024

Counsel for the Petitioners: Mr. P.K. Parhi, Deputy Solicitor General of India along with Mr. D. Gochhayat, Central Govt. Counsel

Counsel for the Opposite Party: Mr. T.K. Mishra, Advocate

Citation: 2024 LiveLaw (Ori) 13

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