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Factual and Procedural Background

The petitioner was initially appointed as Bhumi Bhawan Kar Amin by order dated 25.5.1968 and subsequently held various posts in the Collectorate. He was appointed as Clerk in the pay scale of Rs.354-550 on 25.5.1973 and, after regularisation of service in 1980, was promoted over time to Clerk Grade-II (pay scale Rs.1200-2040) in 1987 and to First Grade (pay scale Rs.1350-2200) by order dated 3.4.1992. He retired on 30.6.2001 upon attaining superannuation.

On 29.6.2001 (one day before retirement) the petitioner was served with a charge sheet alleging irregularity in his initial 1968 appointment and claiming some payments/promotional benefits were wrongly granted. The petitioner replied on 27.7.2001 asserting harassment. On 17.8.2001 respondent no.1 issued an order canceling the 3.4.1992 order granting the 1st Grade pay scale and held the petitioner entitled only to 2nd Grade (Rs.1200-2040); an enquiry officer was also appointed.

The petitioner filed the present writ petition seeking quashing of the charge sheet dated 29.6.2001 and various impugned orders (including 17.8.2001, 16.3.2002 and 24.6.2002) and directions to pay pension, gratuity and other retiral benefits (including salary of June 2001) and to give pension and retiral benefits in the Rs.1350-2200 pay scale. This Court admitted the petition on 15.10.2001 and directed notice, stay listing and provisional payment of pension; it also directed the respondents to proceed with the disciplinary inquiry and complete it expeditiously, preferably within six months.

Despite the interim direction, respondents issued an order dated 16.3.2002 finalising gratuity at Rs.18,900/- after deducting Rs.1,04,375/- from a total of Rs.1,04,375/- that respondents considered excess; pension was fixed at Rs.1,965/- on the basis that certain pre-25.5.1993 service was not regular and hence non-pensionable. The petitioner challenged these deductions and the procedural conduct of the department in this writ petition.

Legal Issues Presented

  1. Whether the charge sheet dated 29.6.2001 and the administrative orders cancelling the earlier promotion/fixation (including order dated 17.8.2001, 16.3.2002 and 24.6.2002) are legally sustainable.
  2. Whether the respondents were entitled to recover Rs.1,04,375/- from the petitioner’s gratuity and reduce pension on the grounds stated, having served the charge sheet on the eve of retirement and without affording opportunity of hearing.
  3. Whether, in the circumstances of this case (including alleged absence of fraud or misrepresentation by the employee and prior fixation by the department), recovery of amounts paid earlier can be ordered.
  4. Whether the petitioner is entitled to pension, gratuity and other retiral benefits in the pay scale of Rs.1350-2200 as claimed.

Arguments of the Parties

Petitioner's Arguments

  • The charge sheet dated 29.6.2001 was served on the petitioner on the date of his retirement (30.6.2001) and appears to have been issued to harass him after about 15 years regarding an alleged adverse entry from 1986.
  • The order dated 17.8.2001 cancelling his 1992 promotion to 1st Grade was passed without giving him any opportunity of hearing; on the same day an enquiry officer was appointed and respondents proceeded inconsistently.
  • Under Clause (7-Kha) of Clause-5 of the Government Order dated 28.7.1989, enquiry cannot be started in respect of incidents occurring within four years of retirement; the respondents’ action was therefore impermissible.
  • Under Government Order dated 28.10.1980, if departmental proceedings are pending the employee is entitled to pension equivalent to the pay last drawn; despite the court’s interim order dated 15.10.2001 directing completion of inquiry and provisional pension, inquiry was not concluded and retiral benefits were unlawfully reduced.
  • The deductions from gratuity (Rs.1,04,375/-) and fixation of pension at Rs.1,965/- were arbitrary, made without providing opportunity of hearing, and violated principles of natural justice.

Respondents' Arguments (as advanced by Learned Standing Counsel)

  • The petitioner’s early appointments were temporary; after abolition of the Bhumi Bhawan Kar Amin post in 1973 he was appointed temporarily to fill a leave vacancy and was regularised only by order dated 16.2.1980.
  • In 1983–84 a committee on staffing pattern noted that the petitioner should draw salary in the pay scale Rs.354-550 till conclusion of departmental enquiry and that he would not get future benefit; subsequent notes and orders in 1986–1987 recorded that he was not found fit for promotion and that departmental enquiry had been concluded on 16.7.1986.
  • There were internal records and committee recommendations suggesting the petitioner was not entitled to certain pay-scale benefits; the grant of higher pay scales at various times did not conform to rule and the excess payments were thus contestable by the department.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Rajendra Prasad Singh v. State of U.P. and others, 2008 (1) UPLBEC 245 The principle that if excess payment was made due to the employer's fault and the employee is not responsible (no fraud/misrepresentation), amounts already received and spent by the employee should not be recovered. The Court relied on this proposition to support the view that recovery should not be ordered where the employee had not been at fault; it formed part of reasoning to quash the departmental deductions in the present case.
Syed Abdul Qadir & others v. State of Bihar & others, (2009) 3 SCC 475 Sets out that relief against recovery of excess payments is available if (a) excess payment was not due to misrepresentation/fraud by the employee, and (b) excess payment resulted from employer applying a wrong principle or erroneous interpretation subsequently found wrong; courts exercise equitable discretion to relieve employees from hardship of recovery. The Court applied this framework to hold that since there was no allegation or proof of fraud/misrepresentation by the petitioner and the department itself had earlier fixed the pay scale, recovery by arbitrary deduction was not warranted.
Registrar, Cooperative Societies, Haryana & others v. Israil Khan & others, (2010) 1 SCC 440 Explains that recovery of excess payments is refused where excess arises from employer's wrong method/principle of calculation or erroneous interpretation; recovery is permissible where excess is due to misrepresentation, fraud or collusion by the employee. The Court relied on this restatement to distinguish cases of employer error from cases of employee fraud, finding no fraud here and thus disallowing arbitrary recovery.
Sahib Ram v. State of Haryana, 1995 Supp. (1) SCC 18 (cited) Cited as part of the line of authorities establishing that relief against recovery may be granted where excess payment not due to employee’s misrepresentation/fraud. Listed among authorities reinforcing the equitable principle invoked; used to buttress the proposition that recovery should be denied where employee is not culpable.
Shyam Babu Verma v. Union of India, [1994] 2 SCC 521 (cited) Cited in support of the general rule that courts may relieve employees from recovery where the excess was not due to employee misconduct. Relied upon as supporting authority for the Court's equitable exercise of discretion in the present case.
Union of India v. M. Bhaskar, [1996] 4 SCC 416 (cited) Cited as authority in the same line affirming the circumstances in which recovery of excess payments can or cannot be ordered. Used as supporting precedent for denying recovery where employer error, not employee fraud, caused excess payment.
V. Ganga Ram v. Regional Jt. Director, [1997] 6 SCC 139 (cited) Cited among cases recognizing equitable relief against recovery when employer has erred. Relied on as part of the consistent judicial approach applied by this Court in the instant matter.
Col. B.J. Akkara (Retd.) v. Government of India & Ors., (2006) 11 SCC 709 (cited) Cited as part of a series of Supreme Court decisions that guide the exercise of discretion in recovery matters. Included among authorities cited to demonstrate established Supreme Court principles supporting the petitioner's case against recovery.
Purshottam Lal Das & Ors. v. State of Bihar, [2006] 11 SCC 492 (cited) Cited as authority in the series referenced in Syed Abdul Qadir for limiting recovery where excess payments are employer errors. Used as corroborative authority; the Court treated it as part of the consistent jurisprudence relevant to the issue.
Punjab National Bank & Ors. v. Manjeet Singh & Anr., [2006] 8 SCC 647 (cited) Cited in the list of cases that inform the principle whether to allow or refuse recovery of wrongly paid amounts. Referred to as supportive authority for the equitable approach adopted by the Court.
Bihar State Electricity Board & Anr. v. Bijay Bahadur & Anr., [2000] 10 SCC 99 (cited) Cited among Supreme Court decisions delineating circumstances in which recovery of excess payments may be refused. Adduced as further precedent consistent with the Court's reliance on an equitable discretion against recovery in absence of employee culpability.
M.D./Chief Engineer, U.P. Jal Nigam & others v. Sri Nath Singh & others (referenced in Rajendra Prasad Singh discussion) Cited in the Division Bench decision referenced for the same proposition that recovery should not be ordered where employer's mistake, not employee's fraud, caused excess payments. Considered as part of the body of authority supporting the Court’s conclusion that the petitioner should not be subjected to recovery in the facts of this case.

Court's Reasoning and Analysis

The Court proceeded by first recounting the factual matrix: the petitioner’s long service history, the regularisation of service in 1980, subsequent promotions including to First Grade in 1992, and retirement on 30.6.2001. The Court noted that the charge sheet was served on 29.6.2001 (one day before retirement) and that, despite the Court’s interim direction of 15.10.2001 to complete the disciplinary inquiry expeditiously and to provisionally pay pension, the respondents did not conclude the inquiry within the preferred period and proceeded to finalise gratuity and pension by order dated 16.3.2002.

The Court examined the respondents’ action of deducting Rs.1,04,375/- from the petitioner’s gratuity and fixing pension at Rs.1,965/-, observing that the department itself had earlier fixed the petitioner’s pay scale and that there was no allegation or proof that the petitioner had engaged in fraud or misrepresentation. The Court emphasised that the deductions were made without affording the petitioner an opportunity of hearing, thereby violating principles of natural justice.

The Court relied on a line of precedents (including Rajendra Prasad Singh, Syed Abdul Qadir and Registrar, Cooperative Societies v. Israil Khan) which establish that recovery of excess payments will normally be refused where the excess arose from the employer's error or a wrong principle of calculation, and not from an employee's fraud or misrepresentation. Applying those principles to the facts before it, the Court concluded that the respondents acted arbitrarily in effecting large deductions from the petitioner’s gratuity and that such recovery was impermissible in equity and in law in the absence of employee culpability.

Concluding its analysis, the Court found the impugned orders unlawful and quashed them; it directed restoration of the amounts deducted along with interest, precisely because the prerequisites for recovery (fraud/misrepresentation or timely correction) were not met and because the departmental process violated natural justice and the interim judicial direction.

Holding and Implications

Core Holding: WRIT PETITION ALLOWED; IMPUGNED ORDERS QUASHED.

Direct consequences implemented by the Court:

  • The impugned orders (including the order(s) resulting in deduction of Rs.1,04,375/- from the petitioner’s gratuity and fixation of gratuity at Rs.18,900/- and pension at Rs.1,965/-) are quashed.
  • All amounts deducted from the petitioner’s gratuity shall be returned to the petitioner along with simple interest at 6% per annum. The refund with interest is to be paid within one month from the date of production of a certified copy of the Court’s order.

Broader implications: The Court applied established Supreme Court and Division Bench authorities delineating the equitable principle that recovery of excess payments is not appropriate where the overpayment was caused by employer error and not by employee fraud or misrepresentation. The opinion did not announce a new legal principle; it applied existing authorities to the particular facts, resulting in relief to the petitioner for the direct effect described above.

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    Shyama Ranjan Dixit v. District Magistrate, Etawah And Ors.

    Mahesh Chandra Tripathi,J.

    1. Heard learned counsel for the petitioner and learned Standing Counsel for the respondents.

    2. By means of present writ petition, the petitioner has prayed for quashing the charge sheet dated 29.6.2001 (Anneuxre No.1 to the writ petition); the order dated 17.8.2001 passed by respondent no.1 (Annexure No, 8 to the writ petition) and to direct the respondents to pay the pension and other retiral benefits including salary of June, 2001 to him.

    3. By the amendment application allowed on 14.5.2002, the petitioner has also prayed for quashing the order dated 16.3.2002 (Annexure-11 to the writ petition) and to direct the respondents to pay pension, gratuity and other retiral benefits in the Pay Scale of Rs.1350-2200 in accordance with law. By another amendment application allowed on 16.2.2005, he has also prayed for quashing the order dated 24.6.2002 (Annexure-12 to the writ petition).

    4. It appears from the records that vide order dated 25.5.1968 passed by the District Magistrate, Etawah, the petitioner was appointed on the post of Bhumi Bhawan Kar Amin in the Collectorate. After some time the post of Bhumi Bhawan Kar Amin was abolished, and the petitioner was posted on various other posts in the Collectorate. Ultimately he was appointed as Clerk in the pay scale of Rs.354-550 on 25.5.1973, and since then he was discharging his duties continuously. In the year 1987 he was promoted as Clerk Grade-II in the pay scale of Rs.1200-2040. By order of the District Magistrate dated 3.4.1992 the petitioner was promoted from pay scale of Rs.1200-2040 to the pay scale of Rs.1350-2200 on the recommendation of Selection Committee. Since the year 1992 he was working as Clerk in First Grade pay scale. He retired on 30.6.2001 after attaining the age of superannuation.

    5. After retirement of the petitioner, he was served with the charge sheet dated 29.6.2001 alleging that his initial appointment as Bhumi Bhawan Kar Amin in the year 1968 was irregular. The petitioner had given his reply on 27.7.2001 to the charge sheet dated 29.6.2001 stating that the charge sheet was given to him after about 15 years only to harass him. The respondent no.4 passed an order on 17.8.2001 stating that the petitioner is entitled for Clerical II Grade in pay scale of Rs.1200-2040 only and he was wrongly given the pay scale of Rs.1350-2200 and cancelled the order of the then District Magistrate dated 30.4.1992, by which the petitioner was given the pay scale of Clerk 1st Grade. On 25.8.2001 he received an office order dated 17.7.2001, by which Shri Udai Bhan Tripathi, Sub Divisional Magistrate was appointed as enquiry officer. On 17.8.2001 the respondent no.1 had taken a decision that the petitioner is not entitled for 1st Grade Pay Scale, giving rise to the writ petition.

    6. On 15.10.2001 this Court passed following orders:-

    "Advocates are agitating on the issue of creation of a Bench of the High Court in Western U.P. Petitioner has appeared in person.

    Heard and perused the record.

    Admit.

    Issue notice.

    Respondents may file counter affidavit within two months. Rejoinder affidavit, if any, may be filed without within one month of the receipt of the counter affidavit.

    Stay application shall be listed immediately thereafter.

    Until further orders, it is directed that respondents may proceed with the disciplinary inquiry and shall complete it expeditiously, preferably within six months.

    It is further directed that petitioner shall be provisionally paid his pension in the meantime without one month of receiving a certified copy of this order."

    7. Inspite of the aforesaid interim order, the respondents did not conclude the enquiry and by the impugned order dated 16.3.2002 the respondents in most illegal and arbitrary manner fixed the final gratuity of the petitioner of Rs.18,900/- after deducting from the total amount of Rs.1,04,375/-. The respondents fixed the pension of the petitioner at Rs.1965/- stating that the service of the petitioner before 25.5.1993 were not regular, hence the same were not pensionable.

    8. Learned counsel for the petitioner submits that the petitioner received the charge sheet dated 29.6.2001 on the date of his retirement on 30.6.2001, alleging that he was wrongly given benefit of selection grade and staffing pattern as an adverse entry was given to him in the year 1986 and therefore, the said excessive payment is liable to be recovered from him. On 17.8.2001 without giving any opportunity of hearing to the petitioner, the respondent no.1 passed another order cancelling the order of the then District Magistrate dated 3.4.1992, by which the petitioner was given promotion in 1st Grade Clerical pay scale of Rs.1350-2000 on the recommendation of the Selection Committee and passed the order that the petitioner is only entitled for 2nd Grade Clerical pay scale of Rs.1200-2040. The respondents are illegally and arbitrarily harassing the petitioner inasmuch as on 17.8.2001 the respondent no.1 directed the authority concerned to proceed further as per order dated 17.8.2005 and on the other hand, they passed another order on the same day on 17.8.2001 appointing the enquiry officer to enquire into the alleged complaint against the petitioner and to submit his report. The petitioner was not given any information about the alleged complaint.

    9. Learned counsel for the petitioner further submits that the respondents are harassing the petitioner for some alleged entry of the year 1986 after expiry of about 15 years and no objection was raised before giving promotion to the petitioner and as per Clause (7-Kha) of Clause-5 of the Government Order dated 28.7.1989, the enquiry against the employee cannot be started on the basis of incident pertains to the four years before the retirement. .

    10. Learned counsel for the petitioner submits that as per Government Order dated 28.10.1980, if any departmental proceedings are pending against the employee, then the employee is entitled for pension only and pension will be equivalent to the pay scale he has lastly drawn. He submits that inspite of the order of this Court dated 15.10.2001 the enquiry has not been completed by the respondents.

    11. Learned Standing Counsel, on the other hand, submits that after abolition of the post of Bhawan Kar Amin in the year 1973, the petitioner was temporarily appointed on the leave vacancy of Shri Vishambhar Dayal, Clerk who proceeded on earned leave from 25.5.1973 to 24.7.1973. Thereafter, he was appointed temporarily from time to time and in the year 1980 by the order of the District Magistrate dated 16.2.1980 the petitioner's services were regularized. Thereafter in the year 1983-84 a Committee was constituted in connection with staffing pattern of the employees of the Collectorate. The Committeed submitted its report on 10.12.1985 making note with regard to the petitioner that the petitioner will continue to work on the post of Assistant Vasil Baki Navis (4th), Tehsil Auraiya, and draw salary in the pay scale of Rs.354-550 till conclusion of the departmental enquiry against him and in future he will not get benefit on the post. In the year 1987 he was not found fit for promotion vide order of the District Magistrate dated 2.9.1987. Thereafter in the year 1987 in the report of Prabhari Adhikari dated 26.11.1987, which was approved by the District Magistrate on 26.11.1987, the departmental enquiry against the petitioner was concluded on 16.7.1986. At present, the post of Assistant Vasil Baki Navis (4th) Tehsil Auraiya was mentioned and against the transferred post, he will get the benefit of Second Grade on the post of Misc. Clerk Revenue Records and the arrangement will be made later on on the post of Assistant Vasil Baki Navis, Auraiya. This note was decreased increased by making cutting by hand. It appears that inspite of giving pay scale of staffing pattern Rs.354-550 with recommendation that he will not get benefit of the said post in future and he was not found fit for promotion in the year 1987, the petitioner was given benefit of pay scale of Rs.430-685, which was not payable to him as per rule.

    12. It is undisputed that in the present matter, the petitioner was initially appointed in the year 1973. Thereafter he was appointed temporarily from time to time and in the year 1980 by the order of District Magistrate dated 16.2.1980 the services of the petitioner were regularized. Surprisingly just one day before his retirement on 30.6.2001 the petitioner was served the charge sheet dated 29.6.2001 alleging that he was wrongly given certain benefits of selection grade and staffing pattern as an adverse entry was given to him in the year 1986. This Court, while entertaining the writ petition, vide an order dated 15.10.2001 had directed the respondents to complete the enquiry expeditiously preferably within six months' times. Finally the respondents vide an order dated 16.3.2002 in most arbitrary manner had finalised the gratuity and other benefits of the petitioner and had given only Rs.18,900/- and illegally deducted total amount of Rs.1,04,375/- from the gratuity amount as has been paid excess to him on the basis of alleged fixation.

    13. It has been averred that the petitioner was in fact entitled for the second grade pay scale of Rs.1200-2040, instead of pay scale of Rs.1350-2200 i.e. clerical 1st grade. It is not disputed in the matter that the services of the petitioner were regularized way back in the year 1980 and admittedly he had worked in the pay scale of Rs.1350-2200 clerical 1st grade and at the verge of his retirement the charge sheet was given and by means of impugned order certain amount had been realised from the retiral benefits of the petitioner.

    14. In Rajendra Prasad Singh Versus State of U.P. and others reported in 2008 (1) UPLBEC 245, the Division Bench of this Court has held as under:-

    "5. We are of the view that the contention of learned Counsel of the petitioner-appellant has substance in view of the law laid down by the Apex Court as well as this Court in the judgements relied upon by learned Counsel for the petitioner-appellant which have been followed by this Bench also in Special Appeal No.1317 of 2003, M.D./Chief Engineer, U.P. Jal Nigam and others Versus Sri Nath Singh and others, connected matters in which this Bench has held as under:-

    "In the matter of recovery, we may remind to the authorities that now it is well settled if certain payment has been made to the employees on account of any fault of the employer, and for which the employee is not responsible, namely, not guilty of fraud or misrepresentation, in such case, the amount which has already been received by the employee and he has spent, should not be recovered."

    15. In Syed Abdul Qadir and others vs. State of Bihar and others (2009) 3 SCC 475 as follows:-

    "57. This Court, in a catena of decisions, has granted relief against recovery of excess payment of emoluments/allowances if (a) the excess amount was not paid on account of any misrepresentation or fraud on the part of the employee, and (b) if such excess payment was made by the employer by applying a wrong principle for calculating the pay/allowance or on the basis of a particular interpretation of rule/order, which is subsequently found to be erroneous.

    58. The relief against recovery is granted by courts not because of any right in the employees, but in equity, exercising judicial discretion to relieve the employees from the hardship that will be caused if recovery is ordered. But, if in a given case, it is proved that the employee had knowledge that the payment received was in excess of what was due or wrongly paid, or in cases where the error is detected or corrected within a short time of wrong payment, the matter being in the realm of judicial discretion, courts may, on the facts and circumstances of any particular case, order for recovery of the amount paid in excess. See Sahib Ram vs. State of Haryana, 1995 Supp. (1) SCC 18, Shyam Babu Verma vs. Union of India, [1994] 2 SCC 521; Union of India vs. M. Bhaskar, [1996] 4 SCC 416; V. Ganga Ram vs. Regional Jt., Director, [1997] 6 SCC 139; Col. B.J. Akkara [Retd.] vs. Government of India & Ors. (2006) 11 SCC 709; Purshottam Lal Das & Ors., vs. State of Bihar, [2006] 11 SCC 492; Punjab National Bank & Ors. Vs. Manjeet Singh & Anr., [2006] 8 SCC 647; and Bihar State Electricity Board & Anr. Vs. Bijay Bahadur & Anr., [2000] 10 SCC 99."

    16. The Supreme Court further explained the principle in paragraph-9 of the judgment in Registrar, Cooperative Societies, Haryana and others vs. Israil Khan and others (2010) 1 SCC 440, which reads as follows:-

    "What is important is, recovery of excess payments from employees is refused only where the excess payment is made by the employer by applying a wrong method or principle for calculating the pay/allowance, or on a particular interpretation of the applicable rules which is subsequently found to be erroneous. But where the excess payment is made as a result of any misrepresentation, fraud or collusion, courts will not use their discretion to deny the right to recover the excess payment."

    17. It is not the case that the department had fixed their salary on account of any misrepresentation or fraud played on the part of the petitioner or the department applied a wrong principle for calculating the pay/ allowances, but in fact in the present matter, the petitioner had not misrepresented. The respondents in most arbitrary manner without affording any opportunity to the petitioner deducted total amount of Rs.1,04,375/- from the gratuity amount as has been paid excess to him on the basis of alleged fixation, which is also in violation of principle of natural justice.

    18. Even though the aforesaid judgments clearly indicates that even in the case of wrong fixation, the department cannot proceed in an arbitrary manner, in the present matter the petitioner's case is on better footing as the department itself initially fixed the scale of the petitioner and further without giving any opportunity of hearing the respondents had deducted Rs.1,04,375/- from the gratuity amount.

    19. In view of the above, the writ petition is allowed and the impugned orders are hereby quashed. Whatever amount deducted from the gratuity of the petitioner will be returned to the petitioner along with simple interest @ 6% per annum within one month from the date of production of a certified copy of this order.

    ________________

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    Shyama Ranjan Dixit v. District Magistrate, Etawah And Ors.
    (Apr 23, 2015)