Law Of Limitation Only Bars Judicial Remedy, The Substantive Right Survives: Kerala High Court

A division bench of Justices Alexander Thomas and K. Babu while disposing the petition held as follows:

"We make it clear that the substantive right of the petitioners/Bank to recover the money paid in excess to the original applicant in ways other than judicial remedy is not destroyed by reason of the rules of limitation."

The petition was filed by the Bank challenging the order of the Central Administrative Tribunal which held that the recovery of an amount prior to the span of three years from the date on which the mistake was discovered is barred by limitation.

Background:

The original applicant was the wife of a deceased Railway employee who has been receiving family pension since his death on 2007. The said pension was disbursed by the Railway through the petitioner Bank.

Accordingly, an enhanced rate of family pension was to be paid till the deceased would have attained 67 years of age or till 7 years from the date of his death, whichever was earlier. Although the pensioner would have been 67 years in 2013, the Bank inadvertently continued to pay the enhanced rate till January 2019.

Therefore, from November 2013 to January 2019, the bank erroneously paid a total sum of approximately 1.5 lakh in excess to the applicant. The petitioner realized this mistake in February 2019, and initiated steps to adjust the amount paid in excess from the applicant's account in installments at the rate of Rs.3200/- per month from February 2019 until December 2022.

The applicant challenged this process of recovery of excess amount before the Tribunal on the ground that the amount sought to be recovered is barred by limitation. It was held inter alia, that the bank is only entitled to recover the amount due for the period immediately prior to February 2019, when the mistake was discovered.

The order of the Tribunal, to the extent it held that the amount for the period prior to the span of three years from the date of discovery of the mistake is barred by limitation, was challenged by the petitioner before the High Court.

Arguments

Adv. Bindumol Joseph argued on behalf of the petitioner that they are entitled to the benefit u/s.17 of Limitation Act. It was submitted that for any application for relief from the consequences of a mistake, the limitation period shall not begin until the applicant has discovered the mistake.

Hence in the given case, it was argued that the limitation starts to run only from January 2019, thereby asserting that the petitioner Bank is entitled to recover the amount from the original applicant.

The petitioner also argued that rule of limitation bars only the remedy and not the substantive right. On that note, it was submitted that even if it is found that a portion of their claim is barred by limitation, it will not destroy their substantive right to recover the amount paid in excess by way of mistake.

Adv. C.S. Gopalakrishnan Nair, appeared for the original applicant and contended that, at any rate, she was entitled to the benefit of guidelines issued in White Washer's Case [(2015) 4 SCC 334]. The Apex Court in this decision had summarized the situations wherein recoveries by the employers would be impermissible in law.

To this the petitioner responded that these principles would not apply to them since the Bank was not an employer of the deceased, the Southern Railways was.

Observations:

While modifying the order of the Tribunal, the Division bench held as follows:

• Law Of Limitation Only Bars Judicial Remedy

The High Court held that the bank is entitled to adjust the amount from the account of the original applicant since the Law of Limitation only bars judicial remedy but the substantive right survives and continues to be available in other ways.

The Tribunal's finding that the petitioner is only entitled to recover excess payment made for three years prior to the date of issuance of notice, by reason of the rules of limitation, was found to be unsustainable since Section 3 of the Act only bars the remedy, but does not destroy the right which the remedy relates to.

• Bank Not Entitled To Benefit Of Sec.17 Of Limitation Act

Section 17 is only applicable when it is established that they could not have discovered the mistake sooner with reasonable diligence. Reliance was placed on Halsbury's Laws of England to hold that since a considerable interval of time had elapsed between the alleged mistake and its discovery, the mistake could have been discovered much earlier with reasonable diligence.

If the petitioner had conducted timely audit, they could have discovered the mistake earlier. Consequently, the Division Bench held that the bank is not entitled to the benefit of Sec.17.

• Principle –Agent Relationship Binds The Petitioner

The court held that although there was no employer-employee relationship between the petitioner and the applicant, a principal-agent relationship existed between the Southern Railway and the Bank in the matter of disbursement of pension to the employees of the former.

This implies that any contracts entered into through an agent will have the same legal consequences as if the contracts had been entered into by the principal in person. Therefore, it was held that "since public law remedy based on equity and justice deduced in White Washer is enforceable against the Southern Railway, the bank is bound by the guidelines issued by the Apex Court as well."

• Recovery Of Total Excess Amount Harsh And Iniquitous

The Court also observed that given the particular circumstances of the case, the effect of the recovery of total excess amount from the original applicant would be unfair and improper than the corresponding right of the petitioner to recover the amount.

On that ground, it was held that it is impermissible in law to permit the bank to recover the excess payment made to the applicant prior to 2016.

However, it was held that the petitioners were entitled to recover the excess payment made to the original applicant for the period from 8.2.2016 to 8.2.2019, and granted them the liberty to realize the amount in 30 installments.

Title: The Assistant General Manager, State Bank of India vs. S. Saradamani & Ors