Recovery From Class III Employee Post-Retirement Illegal Without Misrepresentation Or Fraud: MP HC

Madhya Pradesh High Court (Gwalior Bench): A single judge bench of Justice Anil Verma set aside a recovery order against a retired Class III employee, Hari Shankar Soni. It held that recoveries of excess payments made to Class III and IV employees after retirement are impermissible, unless there is misrepresentation or fraud. It also held that any specific undertaking allowing such recovery must have been in force when the payments prompting recovery were made. It confirmed that such undertakings cannot be applied retrospectively.BackgroundHari Shankar Soni, a retired Field Officer, served the State of Madhya Pradesh for 41 years from 1979 to 2020. At the time of his retirement, dues such as gratuity and leave encashment were delayed. While dues were eventually disbursed, Rs. 2,26,587 was deducted, allegedly due to some excess payment made between 2006 and 2015. This recovery was based on a retirement undertaking signed by Soni. Soni filed a writ seeking a refund of the recovered amount.Arguments The petitioner argued that the recovery order was contrary to the Supreme Court's ruling in State of Punjab v. Rafiq Masih (White Washer) (AIR (2015) SC 696), as the ruling prohibits recoveries from retired Class III employees. He asserted that no misrepresentation or fraud was committed on his part. He further argued that the undertaking executed at retirement was ineffective, as the recovery pertained to payments made years earlier.The State defended the recovery contending that it was necessitated by an overpayment only discovered during the accounting done post-retirement. It mentioned that Soni had voluntarily executed an indemnity bond, and that such bond permitted recovery of all excess amounts. The State also argued that Soni's pension and other benefits had been settled, leaving no further claims. It relied on State of M.P. v. Jagdish Prasad Dubey, (W.A. No. 815/2017), and argued that recoveries under similar facts and circumstances were allowed.Court's ReasoningFirstly, the court referred to the case of Rafiq Masih and noted that recoveries from retired employees or employees nearing retirement are impermissible. This is especially so, it held, when excess payments are not attributable to fraud or misrepresentation. The court used Rafiq Masih to enumerate situations where recovery is inequitable, which specifically included cases involving Class III and IV employees. The court also acknowledged a Finance Department of Madhya Pradesh circular dated 31-03-2016, which again restated that recovery orders against Class III and IV employees are impermissible.The court then analysed the indemnity bond. It rejected the state's contentions and concluded that the bond could not validate any recovery. It noted that the bond was executed by Soni at the time of retirement, while the payments were made years earlier. The court held that the bond must have been undertaken at the same time as the payments in question, and it would not cover recoveries for payments made much earlier. Cursorily, the court also noted that the State had failed to provide Soni an opportunity to contest the alleged overpayment before effecting recovery, thus violating the principles of natural justice. The court declared the recovery of Rs. 2,26,587 from Soni illegal and set aside the recovery order. It directed the State to refund the recovered amount along with interest at 6% per annum from the date of recovery until repayment. Decided on: 28-11-2024Citation: 2024:MPHC-GWL:21023, Hari Shankar Soni v. The State of Madhya Pradesh and OthersCounsel for the Petitioner: Shri Arun KatareCounsel for the Respondent: Shri B.M. Patel, Government AdvocateCitation: 2024 LiveLaw (MP) 318Click Here To Read/Download Order

Recovery From Class III Employee Post-Retirement Illegal Without Misrepresentation Or Fraud: MP HC

Pranav Kumar

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