Indemnity Bond Taken At Retirement Won't Let State Recover Wrongly Fixed Pay, Undertaking Must Be At Time Of Pay Fixation: Allahabad High Court

The Allahabad High Court has held that an undertaking or indemnity bond taken from a government servant at the time of his retirement does not entitle the State to recover salary paid in excess due to wrong fixation of his pay scale. The undertaking which permits such recovery is the one furnished at the time of the pay fixation later said to be wrong.

Referring to the decision of the Apex Court in High Court Of Punjab & Haryana v. Jagdev Singh, Justice Anish Kumar Gupta held

“In Jagdev (Supra), the aforesaid position has been clarified that if any undertaking was submitted by such government servant at the time of fixation of the pay scale on the basis of the aforesaid undertaking, the amount paid in excess can be recovered. However, that doesn't mean that any undertaking or indemnity bonds taken by the respondents at the time of retirement would entitle them to recover the amount as in Jagdev (Supra), the undertaking, which is to be relied upon is the undertaking at the time of fixation of the pay scale, which is stated to be wrong.”

Petitioner was appointed as a Constable, promoted as Head Constable and retired on superannuation on 31.07.2021. His retiral dues were withheld until he furnished an undertaking, on 29.09.2021, to refund any amount paid in excess on sanction of pension and gratuity.

By letter dated 27.07.2022, the Finance Controller at the U.P. Police Headquarters told the Commandant, 9th Battalion PAC, Moradabad that the petitioner's pay, correctly fixed at Rs. 39,200/- up to 01.01.2016, ought to have been revised to Rs. 40,400/- from 01.07.2016 but had been fixed at Rs. 41,600/-. The Commandant refixed the pay scale with effect from 24.02.2010, and by order dated 24.02.2023 an excess of Rs. 6,74,404/- was recovered out of the pension computation amount of Rs. 9,36,083/- payable to the petitioner, leaving him Rs. 2,61,679/-.

Aggrieved, the petitioner approached the High Court and was later permitted to amend the petition to challenge the re-fixation orders as well. Relying on Sushil Kumar Singhal v. Pramukh Sachiv, Irrigation Department and others and State of UP and others v. Bhim Sen Sharma, he contended that no excess payment arising from wrong pay fixation can be recovered from a Class-III or Class-IV employee after retirement, that the State cannot refix the pay scale thereafter, and that pension must be computed on the last pay drawn.

Standing Counsel for the State relied on Chandi Prasad Uniyal And Ors v. State Of Uttarakhand And Ors. to submit that money paid in excess is taxpayers' money which the State may recover while correcting its own mistake, and on High Court Of Punjab & Haryana v. Jagdev Singh to submit that the petitioner was bound by his undertaking. The Government Order dated 16.01.2007, it was submitted, stood clarified by that dated 07.05.2007, which permits a wrong payment to be corrected after a hearing.

The Court noted that the Government Order dated 16.01.2007 sets an outer limit of 34 months from the date of retirement for such re-fixation, and that in Sushil Kumar Singhal (supra) the Apex Court had considered an identical Government Order and held that neither could salary paid by mistake be recovered nor pension reduced after retirement.

It also noted the situations of impermissible recovery summarised in State of Punjab & Ors. v. Rafiq Masih (White Washer), among them recovery from Class-III and Class-IV employees and from retired employees. Nothing was on record to show that either decision stood overruled.

“Even otherwise, under the Government Order dated 07.05.2007, it was clarified that if any re-fixation was required, the respondents were obligated to issue a notice, provide a reasonable opportunity of explanation, and only thereafter proceed with the re-fixation or recovery. However, in the instant case, neither was any notice issued nor any opportunity of hearing granted to the petitioner; instead, an order for deduction from the petitioner's pensionary benefits was passed straightaway.”

Holding the re-fixation impermissible, the Court quashed the orders dated 27.07.2022, 22.08.2022 and 24.02.2023 and directed a refund of Rs. 6,74,404/- with interest at 8% per annum within eight weeks of production of a certified copy of the order. The petitioner's pension is to be fixed on the basis of the last pay drawn by him at retirement.

Accordingly, the writ petition was allowed.