Precedents Barring Recovery Of Excess Payments Have Not Considered Section 72 Contract Act: Supreme Court

A bench of Justice Dipankar Datta and Justice Sheel Nagu made the observation while dismissing appeals by teachers whose Academic Grade Pay benefits were withdrawn after they were found to have been granted by mistake.

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 The financial benefits were extended to them around October 2009 and withdrawn in January 2010, on the ground that they had not put in the requisite years of service, pursuant to which a writ petition was filed before the Kerala High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voluntarily by the respondents and without any misrepresentation or fraud or fault at the end of such teachers could be withdrawn.”

While arriving at a decision in the matter, the Supreme Court also flagged that “not a single precedent has remarked on the applicability of Section 72 of the Contract Act, 1872.” For context, Section 72 of the Indian Contract Act, 1872 deals with the liability of a person to whom money is paid, or something delivered, by mistake or under coercion. It requires a person to whom money has been paid by mistake or under coercion to repay or return it.

The Court noted that State of Punjab v Rafiq Masih (White Washer), on which the appellants relied, “has a prior history and, therefore, cannot be seen in isolation.” It traced precedents from Chandi Prasad Uniyal v State of Uttarakhand, wherein it was held that the Supreme Court had not laid down any principle that excess pay can be recovered only on proof of misrepresentation or fraud by the recipient. It also held that any amount paid or 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.

The bench also noted that in Rakesh Kumar v State of Haryana, an apparent difference of views were observed between Shyam Babu Verma v Union of India and Sahib Ram v State of Haryana, and Chandi Prasad Uniyal on the other. It, thus, referred the question to a 3-Judge Bench, which held there was no conflict between the decisions, and that in Sahib Ram and Shyam Babu Verma, directions were issued in exercise of this Court's powers under Article 142, whereas Chandi Prasad Uniyal laid down the law under Article 136.

Noting this, the bench observed 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).”

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 Court then observed that the line of decisions following Sahib Ram and Shyam Babu Verma, being decisions under Article 142, “do not have the efficacy of a binding precedent.” It also noted that Thomas Daniel v State of Kerala neither considered Chandi Prasad Uniyal nor the 3-Judge Bench decision in Rafiq Masih.

The Court then made the observation the following observation:

“Curiously, not a single precedent has remarked on the applicability of Section 72 of the Contract Act, 1872; however, without referring to it, we find that the ratio of Chandi Prasad Uniyal (supra) draws inspiration from it.”

The Court further clarified that:

“It is farthest from our mind to cast any shadow of doubt on either of the two decisions of the coordinate Benches in Rafiq Masih (White Washer) (supra) and Thomas Daniel (supra). The above discussion is necessitated only for the purpose of highlighting that the law, perhaps, has not developed on correct lines.”

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.