Excess Salary Paid By Mistake Can Be Recovered From Employees Who Gave Undertaking: Supreme Court Dismisses Teachers' Plea
The Supreme Court has recently upheld the recovery of Academic Grade Pay benefits that were given by mistake to the teachers of the National Institute of Technology (NIT), Calicut, holding that the recovery was valid because the teachers had given written undertakings to refund excess payments.
A bench of Justice Dipankar Datta and Justice Sheel Nagu ruled so while dismissing the appeals against the Kerala High Court Division Bench's judgment.
The case pertains to the grant of Academic Grade Pay to the appellants. The financial benefits were extended to them around October 2009 and withdrawn in January 2010, on the ground that they had not put in the requisite years of service, pursuant to which a writ petition was filed before the Kerala High Court.
A Single Judge of the Kerala High Court allowed the teachers' writ petitions in November 2014, ruling in their favour. In appeal, a Division Bench reversed the decision in November 2015.
Aggrieved by the Division Bench's reversal, the teachers filed a Special Leave Petition (SLP) before the Supreme Court.
The Supreme Court framed the question as follows:
“Whether financial benefits which were extended to a class of teachers voluntarily by the respondents and without any misrepresentation or fraud or fault at the end of such teachers could be withdrawn.”
Before the Supreme Court, the petitioners (teachers) relied on State of Punjab v Rafiq Masih (White Washer) and Thomas Daniel v State of Kerala, arguing that their case fell under clause (v) of paragraph 18 of Rafiq Masih (White Washer), which bars recovery where it “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.”
With regards to the submission, the Court noted that Rafiq Masih (White Washer) “has a prior history and, therefore, cannot be seen in isolation.” It, instead, referred to Chandi Prasad Uniyal v State of Uttarakhand, wherein it was held that the Supreme Court had not laid down any principle that excess payment can be recovered only if the recipient committed misrepresentation or fraud. Chandi Prasad Uniyal had also observed that “any amount paid/received without the authority of law can always be recovered barring few exceptions of extreme hardships but not as a matter of right, in such situations law implies an obligation on the payee to repay the money, otherwise it would amount to unjust enrichment.”
Referring to Sahib Ram v State of Haryana, Shyam Babu Verma v Union of India, and Chandi Prasad Uniyal, the Court explained as follows:
“What logically follows from a bare reading of the above passage is that Chandi Prasad Uniyal (supra) was held to have declared the law in exercise of this Court's jurisdiction under Article 136 of the Constitution, which we understand would be binding on all courts under Article 141; whereas Sahib Ram (supra) and Shyam Babu (supra) were held to be decisions where this Court had invoked powers under Article 142 thereof.”
The Court, thus, observed that decisions following Sahib Ram and Shyam Babu, being rendered under Article 142, do not have the efficacy of a binding precedent. Despite this, the bench in Rafiq Masih (White Washer) “did not apply the law laid down in Chandi Prasad Uniyal (supra) and preferred to abide by the course of action adopted in Sahib Ram (supra), Shyam Babu (supra) and Syed Abdul Qadir (supra).”
The Court also flagged that “not a single precedent has remarked on the applicability of Section 72 of the Contract Act, 1872,” and that the ratio of Chandi Prasad Uniyal draws inspiration from it even without referring to it. For context, Section 72 of the Indian Contract Act, 1872 deals with unjust enrichment and requires a person to whom money has been paid by mistake or under coercion to repay or return it.
Further, the Court referred to High Court of Punjab & Haryana v Jagdev Singh, wherein the Court had held that the protection in the second category of paragraph 18 of Rafiq Masih (White Washer) does not apply where the officer was placed on notice that excess payment would have to be refunded and furnished an undertaking while opting for the revised pay scale.
The bench then perused the facts of the case in the light of aforesaid. The NIT had placed on record an undertaking by the teachers agreeing to recovery if the pay fixation was found erroneous. The Division Bench had accepted that the NIT merely corrected a mistake. It had also found that the teachers were not required to perform any additional duties on account of their placement as Associate Professors and did not fall under any exceptional category.
Noting the above, the bench held that “it is, therefore, clear that a mistake was committed in extending financial benefits to the appellants; and this was immediately withdrawn upon detection of such mistake. Such recovery of the amounts paid by mistake to the appellants, in view of the undertakings given by them, did not warrant interference by the Single Judge in exercise of writ jurisdiction and the Division Bench appears to be right in its interdiction.”
On the contrary, the appellants relied on a letter from the Director, Ministry of Human Resource Development, to the Directors of all NITs, which stated that “the benefits already given would not be recovered from the academic staff of the Institutes.” The Court rejected this contention noting that the recovery had been effected two years before the writ petition was filed.
Finding the appellants' case without merit, the Court dismissed their plea, and upheld the Division Bench's order.
Appearance:
For Appellants: Mr. Devendra Singh, AOR; Mr. Sanchar Anand, Adv.; Mr. Anant Kumar Vatsya, Adv.; Mr. Karan Thakur, Adv.; Ms. Diva Singh, Adv.; Mr. Anukurat Singh Baweja, Adv.; Ms. Ananaya Khare, Adv.; Ms. Rashi Agnihotry, Adv.
For Respondents: Mr. Shyam Padman, Sr. Adv.; Mr. Naresh Kumar, AOR; Mr. Jaimon Andrews, Adv.; Mr. Piyo Harold J, Adv.; Ms. Ashwathy Shyam, Adv.; Mr. Firdouse CP, Adv.; Ms. Nandhitha Dinesh, Adv.