Minnie Mathew, Member (A):— The first applicant is the Union of the Civilian Employees of the Ordnance Factory, Yeddumailaram, Medak District and the 2nd and 3rd applicants are the members of the said Union. The applicants submit that the Industrial employees of the Ordnance Factory are covered by the provisions of the Factories Act, 1948 with regard to their leave entitlements. On 11.09.1997, as per the agreement with the staff side of the National Council of JCM, the Government of India decided that the Industrial employees in Central Government Departments other than Railways shall be entitled to Earned Leave at the rate of 30 days for each completed year of service irrespective of the number of years of service rendered by them. However, no options were exercised by the Industrial employees in the 2nd respondent factory. At the instance of the employees' Unions, the 2nd respondent vide Annexure. A-V factory orders No. 256 dated 15.10.2005, granted one more opportunity to the Industrial employees to choose either the Civilians in Defence Services (Industrial Employees) Leave Rules, 1954 or Factories Act, 1948 for the purpose of leave. Accordingly, all the Industrial employees in the respondent-factory opted for Civilians in Defence Services (Industrial Employees) Leave Rules, 1954. Based on an objection raised by Internal Audit that the entitlement for piece work profit on Earned Leave would be available only to those who have opted to be governed by the Factories Act 1948, the profit earned on earned leave from 20.07.1998 to 08.02.2006 was recovered from the members of the applicant Union. Subsequently, the first applicant submitted Annexure. A-VIII representation to the 2nd respondent dated 17.10.2013 objecting to the illegal recovery made in violation of the statutory law. The recovery was thereafter stopped and the amount recovered was refunded to the employees. Thereafter, the Internal Audit Officer issued the Annexure. A-XI letter dated 12.05.2014 reiterating his earlier objection and also pointing out that the Government order is silent regarding payment of profit on earned leave to those workers who have opted to come under Civilians in Defence Services (Industrial Employees) Leave Rules, 1954. The Internal Audit Officer also requested for immediate action to recover the paid amount of Rs. 1,04,50,318/-. The first respondent vide Annexure. A-I letter dated 18.11.2014, directed the 2nd respondent to make the recoveries as the industrial employees have been incorrectly allowed profit on earned leave as observed by the Internal Audit vide their letter dated 12.05.2014. Being aggrieved by the said orders, the applicants filed this OA and also obtained stay of the impugned orders by way of interim relief.

2. The applicants contend that even assuming that the Ordnance Factory order dated 15.10.2005 extending the benefit of CDS Leave Rules to the Industrial employees leads to the ineligibility for profit on earned leave, such disentitlement would arise only after 2006. Hence, the respondents cannot recover the profit/incentive on earned leave already paid between 1998 to 2006. Hence, the impugned orders are illegal and arbitrary. It is also submitted that there is no mention with regard to the recovery of profit earned on earned leave either in the orignal orders in 1997 or in the Factory Order dated 15.10.2005.

3. From the reply statement filed by the respondents, it is seen that there is no dispute with regrad to the facts of the case. The main contention of the Respondents is that the entitlement of piece work profit while on earned leave is for those industrial employees who have opted for the Factories Act 1948. As all the Industrial Employees of Ordnance Factory, Medak, opted for CDS (IEs) Rules, 1954, they are not entitled for piece work profit while on earned leave. Hence, the payment made to the applicants is in violation of the Government orders as observed by the Internal Audit Officer. Accordingly, in accordance with the directions of Ordnance Factory Board, the recovery of profit has been done from October 2012 to March 2013. They submit that it is only due to some mis-interpretation of the Annexure. A-IX letter to the Principal Controller of Accounts dated 10.01.2014 that the amount which was already recovered from the industrial employees has been repaid to them during February 2014. It is also submitted that DOPT vide Annexure. R-4 OM dated 14.05.2007 has clarified that the accumulation and enchashment of Earned Leave is raised from 120 days to 300 days in respect of industrial employees with effect from 07.11.2006. Thus, an industrial employee who is already having 120 days of Earned Leave as on 01.01.2006 is eligible to get a credit of the leave earned by him during the year 2006 subject to a ceiling of 30 days as on 01.01.2007. They also point out that vide the Annexure. A-I letter dated 18.11.2014 of the first respondent, it is made clear that once option has been exercised by the Industrial Employees in favour of CDS (IE) Leave Rules, 1954, the entire EL accumulated prior to the date of option would be regulated as per CDS IE Rules, 1954 including profit on Earned Leave. Hence, the payments which have been incorrectly allowed have to be recovered.

4. The applicants have filed a rejoinder reiterating the averments in the OA. They also submit that the Apex Court in Civil Appeal No. 11527/2014 in State of Punjab v. Rafiq Masih (White Washer) etc, has summarized the situations in which recovery of payments mistakenly made by the employer in excess of entitlement, would be impermissible in law and that the applicants are squarely covered by the aforesaid judgment.

5. Heard the learned counsel on both sides and perused the record.

6. The question that falls for consideration in this OA is as to whether there is justification for recovering the payment of piece work profit on earned leave paid to the members of the applicants' Union between 1998 and 2006 on the ground that they exercised their option to come under CDS (IE) Leave Rules, 1954.

7. From the material on record, it is clear that the Civilian Industrial Employees of the Ordnance Factory Board were given an option to come under the CDS (IE) Leave Rules, 1954 or continue under the Factories Act, 1948, vide Annexure. A-V Factory Order No. 256 dated 15.10.2005. The respondents while calling for options have explained the salient features of the leave rules under CDS (IE) Leave Rules, 1954 and the Factories Act 1948 as hereunder:

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Sl. Civilians in Defence Factories Act, 1948

No. Services (IE), 1954

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1. Eligible for 30 days EL per year Eligible for Earned Leave

a) Above 1 year service 17 days

b) Above 10 years service 22 days

c) Above 20 years service 27 days

2. Sundays/Holidays shall be counted Leave admissibility shall be while granting leave excluding Sundays/Holidays

3. Piece work profit on EL is not Piece work profit on EL shall permissifble be paid @ of the profit paid for the preceding month.

4. No restriction of spells Leave to be availed in six spells a year.

8. A plain reading of the above makes it clear that the piece work profit on Earned Leave is not permissible in the case of an Industrial Employee who exercises his option to come under the CDS (IE) Leave Rules, 1954. As there is no mention of any retrospective effect, the order can take effect only from the date of the Annexure. A5 order. The first respondent vide his Annexure. A-I letter addressed to the 2nd respondent on 18.11.2014 has held that once option has been exercised by the Industrial Employees in favour of CDS (IE) Leave Rules, 1954, the entire Earned Leave accumulated prior to the date of option would be regulated as per the CDS (IE) Leave Rules, 1954 including the profit on Earned Leave. However, the Annexure. A-V order dated 15.10.2005 is totally silent on this aspect. A very significant decision of this nature should have been communicated in explicit terms to the Civilian Industrial Employees in the Ordnance Factory Board while permitting them to exercise their options. The respondents have not brought anything on record to show that the members of the applicants' Union have been put on notice that the leave accumulated by them prior to their option would also be covered by CDS (IE) Leave Rules, 1954. This appears to be a unilateral decision taken by the first respondent. Further, it is evident from Annexure. R-4 OM dated 14th May 2007 that the accumulation and encashment limit of Earned Leave has been raised from 120 days to 300 days only with effect from 07.11.2006 and that the industrial employees can get a credit of 30 days leave as on 01.01.2007. When the enhancement in Earned Leave entitlement as per CDS (IE) Rules has become effective only from 07.11.2006/01.01.2007, there can be no justification for giving retrospective application to CDS (IE) Leave Rules and order recovery of the profit on Earned Leave prior to 07.11.2006.

9. Further, the applicants are supported by the judgment of the Hon'ble Apex Court in State of Punjab v. Rafiq Masih (White Washer) etc, which governs the issue as to whether the payments, which have been mistakenly made by the employer in excess of entitlement, can be recovered.

10. The Hon'ble Apex Court has summarized the following situations, wherein recoveries by the employer would be impermissible in law:

“12. It is not possible to postulate all situations of hardship, which would govern employees on the issue of recovery, where payments have mistakenly been made by the employer, in excess of their entitlement. Be that as it may, based on the decisions referred to hereinabove, we may, as a ready reference, summarise the following few situations, wherein recoveries by the employers, would be impermissible in law:

(i) Recovery from employees belonging to Class-III and Class-IV service (or Group ‘C’ and Group ‘D’ service).

(ii) Recovery from retired employees or employees, who are due to retire within one year of the order of recovery.

(iii) Recovery from employees, when the excess payment has been made for a period in excess of five years, before the order of recovery is issued.

(iv) Recovery in cases where an employee has wrongfully been required to discharge duties of a higher post, and has been paid accordingly, even thugh he should have rightfully been required to work against an inferior post.

(v) In any other case, where the Court arrives at the conclusion, that recovery if made from the employee, would be iniquitous or harsh or arbitrary to such an extent, as would far outweigh the equitable balance of the employer's right to recover.”

11. The applicants herein are admittedly factory workers and belong to the lowest echelons in service. The recovery sought to be made by the respondents in 2012/2014 relate to the period between 1998 and 2006, which is in excess of 5 years of the issuance of the orders of recovery. Hence, the members of the applicants' Union stand covered by Para 12(i) and (iii) of the aforesaid orders of the Apex Court.

12. In the result, the applicants are entitled to the relief prayed for in the OA. Accordingly, the impugned orders are quashed and set aside and the interim stay of the recovery of the payment of piece work profit on Earned Leave paid to the members of the applicants' Union between 1998 and 2006 is made absolute.

13. The OA is allowed as above. There shall be no order as to costs.