Administrative Error In Pay Fixation Cannot Lead To Post-Retirement Recovery With Interest: MP HC

Madhya Pradesh High Court: A Single Judge Bench of Justice Sushrut Arvind Dharmadhikari quashed a recovery order seeking excess payments with interest from a retired Subedar. The Court held that recovery of excess payments from retired government employees, particularly when there is no misrepresentation or fraud, is impermissible after four years of retirement under Rule 9(4) of M.P. Civil Services Pension Rules, 1976. The Court emphasized that while principal amounts might be recalculated, imposing interest on excess payments made due to administrative errors is harsh and unwarranted, especially for low-income retirees. Background Smt. Parwati Verma was initially appointed to the Home Department of Madhya Pradesh on 19 May 1981. She retired on 31 May 2016 from the position of Subedar (Ministerial Cadre). Upon her retirement, her pension was calculated, and the pay scales were revised under an order that extended similar pay scales to both the Executive and Ministerial Staff due to the similarity in their duties. However, in January 2022, the Commandant of the 8th Battalion, SAF Chhindwada, issued an order to recover ₹29,66,982 from her, consisting of ₹13,01,635 as excess salary paid and ₹16,65,347 as interest. Verma challenged this recovery order under Article 226 of the Constitution, asserting that it violated Rule 9(4) of M.P. Civil Services Pension Rules, 1976. She claimed the state had no jurisdiction to recover amounts after four years of her retirement, and that she had not been given a chance to be heard before the issuance of the recovery order. Furthermore, she argued that the pay scales were revised by the authorities themselves without any misrepresentation or fraud on her part. Arguments Verma contended that the recovery order violated Rule 9(4) of the M.P. Civil Services Pension Rules, 1976. This provision restricts recoveries beyond four years of retirement unless authorized by the Governor, which was not the case here. The counsel emphasized that the recovery was initiated without any notice or opportunity of hearing, thereby violating the principles of natural justice. It was further argued that the pay revision had been extended to both Executive and Ministerial cadres due to the similarity in duties, and treating Verma differently amounted to discrimination. Additionally, the counsel referenced past judgments which held that recovery of excess payments could not be made when there was no fraud or misrepresentation on the part of the employee. The State of Madhya Pradesh, represented by Shri Praveen Namdev, defended the recovery by arguing that Verma's pay had been incorrectly fixed at ₹4,000-₹6,000 instead of ₹3,050-₹4,590. This miscalculation led to the excess payments. The Joint Director, Treasury and Accounts, had reviewed her pay and identified the overpayment, which justified the recovery. The State argued that in financial matters, if a clear error is found, a show cause notice is not necessary, and recoveries can be made. Further, in cases such as High Court of Punjab and Haryana v. Jagdev Singh, where employees gave undertakings at the time of pay fixation, recovery was deemed lawful. Court's Reasoning Firstly, the court found that the case did not involve any misconduct or misrepresentation by Verma, which was a crucial distinction from other cases where recovery had been allowed. The excess payment resulted from administrative errors in pay fixation, not from any fraudulent action by the petitioner. The court noted that the Supreme Court in State of Punjab v. Rafiq Masih, 2015 AIR SCW 401, had clearly set out the circumstances under which recovery could not be made, particularly from low-income retirees or those without misrepresentation. The court determined that the state's action violated these principles. Secondly, the court addressed the interest component. Relying on State of Madhya Pradesh & Ors. v. Rajendra Bhavsar, the court held that while the principal amount might be recoverable, imposing interest on the excess payment was “harsh” and “unwarranted.” The interest component would only add to the petitioner's burden, especially when there was no fault on her part. Thirdly, the court rejected the state's argument that Rule 9(4) did not apply. It ruled that the provision was relevant to the present case and barred such recovery actions after four years of retirement unless specific authority was granted by the Governor. The state had failed to follow this procedure, further invalidating the recovery order. Finally, the court observed that Verma had given an undertaking at the time of her pay fixation, but this did not extend to interest recovery, and no misrepresentation had been proven to justify the state's claims. Thus, the court ruled that only the principal amount could be re-calculated, and no recovery of interest would be permitted. Thus, the court quashed the recovery ...

Administrative Error In Pay Fixation Cannot Lead To Post-Retirement Recovery With Interest: MP HC

Pranav Kumar

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