Can Govt Employee Consent To Recovery Of Dues From Death-Cum-Retirement-Gratuity?: Kerala High Court Refers To Division Bench

Section 60 of the Code of Civil Procedure deals with property liable to attachment and sale in execution of decree. Section 60(1)(g) provides that stipends and gratuities of pensioners are not liable to attachment and sale in execution of a decree. Sub-section (1A) lays down that an agreement by which a person agrees to waive the benefit of any exemption under the section is void.

Rule 124 of KSR states that pension granted by government is not liable for seizure, attachment by process of any court at the instance of a creditor for any demands against the pensioner in satisfaction of a decree of any court.

Justice K. Babu referred to two Division Bench decisions, which had categorically held that dues from a government employees can be recovered from the DCRG under certain circumstances if their consent, in writing, has been received.

However, the Court opined that the correctness of the law laid down by these decisions was doubtful since the impact of Section 60(1A) CPC and public policy aspects while applying Ruling 1 under Rule 3 Part III KSR was not addressed in those cases:

“the correctness of the law laid down by the Division Bench of this Court in Surendran v. Mavelikara Primary Cooperative Agricultural and R.D. Bank Ltd. [2005 (4) KLT 619] and Adhyapaka Urban Co-operative Bank Ltd. No.794 and another v. State of Kerala and Others [2022 (6) KHC 388] is doubtful since the impact of Section 60(1A) of the CPC and the public policy aspects in applying Ruling No.1 under Rule 3 Part III of the Kerala Service Rules was not addressed before the court in those cases.”

Ruling 1 provides that the amounts due from a government employee or pension to government companies, cooperative societies, etc. may be recovered from the DCRG with written consent.

The Court was considering a writ petition challenging a requisition notice issued under by a Co-operative Society to a Tahsildar for the recovery of dues from a loan by deducting them from his DCRG and pension amounts. The notice was issued under Section 37 of the Kerala Co-operative Societies Act read with Rule 52 of the Co-operative Societies Rules.

The petitioner was a surety for the principal borrower in a loan of Rs. 1.5 lakhs availed from the Co-operative Society. In the loan agreement, the petitioner had agreed that his employer and pension sanctioning authority can deduct the amount from his salary, gratuity and pension benefits.

When the person who availed the loan defaulted, proceedings were initiated before the Assistant Registrar of Co-operative Societies and an award was passed in 2022. Thereafter, the petitioner retired from service in 2024 and on the date of his retirement, the impugned notice was received.

The Society contended that since the petitioner consented in writing for the amount to be recovered from his eligible gratuity, the notice is lawful. The petitioner pointed out that no steps were taken by the Society to recover dues from the principal borrower and therefore, he cannot be proceeded against.

The government placed reliance on Ruling No.1 and submitted that since consent was given, the petitioner cannot go back and say that his DCRG is protected from recovery.

The amicus curiae Advocate K.M. Firoz referred to various laws and decisions to state that Section 60 CPC embody a public policy based on a welfare legislative objective. It was submitted that consent cannot public policy and such agreements are void as per Section 23 of the Contract Act. It was also stated that recovery of DCRG without just procedure violates Article 14, 21 and 300A of the Constitution.

The Court looked in detail into the relevant provisions and the caselaws and was in agreement with the views expressed by the amicus. It observed:

“DCRG is the last financial safety net of a retired Government servant, earned through his entire working life. Exemptions under Section 60 of the CPC are not merely procedural privileges of the judgment debtor. They contemplate a public policy based on a welfare legislative objective. Consent cannot override public policy and such a consent overriding public policy will be void under Section 23 of the Contract Act. If so, a person cannot contract out or consent for the deprivation of property that the law protects from creditors. If exemption of gratuity under Section 60 of the CPC can be nullified by routing recovery through a non-judicial mechanism, the protection will become illusory. Constructing Section 60 of the CPC by applying the rule of purposive construction, protection provided therein is to be extended to all forms of coercive recovery and not just applicable to the proceedings in execution under the CPC. The recovery of DCRG without just procedure violates Articles 14, 21 and 300A of the Constitution of India. Therefore, written consent cannot validly authorise recovery from DCRG in a manner that strips the employee of the statutory and constitutional protection that the law has specifically designed to preserve a terminal benefits from creditor's reach, regardless of the mechanism of recovery.”

The Court also opined that a purposive interpretation will lead to the conclusion that consent to recover DCRG under Ruling No.1 is void.

“This interpretation is also supported by the legislative policy of the Pensions' Act, 1871, by which the pension granted by the Government on account of past services, shall not be liable to seizure, attachment or sequestration at the instance of a creditor, for any demand against the pensioner, or in satisfaction of a decree or order… Section 12 of the Pensions' Act, 1871 declares that all agreements made by a person entitled to any pension mentioned in Section 11 in respect of any money not payable on account of any such pension are null and void. However Sections 11 and 12 of the Pensions' Act are not applicable to the instant case since as per Section 1 of Pensions' Act, the said Act is made applicable to the whole of India only in respect of Union Pensions…It is also relevant to refer to Section 13 of the Payment of Gratuity Act, 1972, which demonstrates a similar policy even though the said provision is not applicable to the subject matter DCRG,” the Court added.

The Court then referred to the proviso to Section 3 of the Kerala High Court Act, which states that a Single Judge has the option of adjourning a matter for it to be heard and determined by a Division Bench.

Reference was also placed on the Full Bench decision in Babu Premarajan v. Superintendent of Police [2000 (3) KT 177] to state that the subject matter in the present case make out an exceptional circumstance warranting hearing by a Division Bench. The Court thus directed the Registry to place the matter before the Chief Justice for appropriate action.

Case No: WP(C) No. 23555 of 2024

Case Title: Rajendran V. v. Tahsildar and Ors.

Counsel for the petitioner: T.K. Ananda Krishnan

Counsel for the respondents: Sreeja Sasidharan, Smruthi Sasidharan, V.P. Brijesh, Aadil Mubarak U.A.

Amicus Curiae: K.M. Firoz

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