Civil Writ Petition No. 8278 of 2010 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Civil Writ Petition No. 8278 of 2010 Date of decision:-18.07.2011 Sarwan Singh ...Petitioner Versus State of Punjab and others ...Respondents CORAM: HON'BLE MS. JUSTICE RITU BAHRI Present:- Mr. R.K. Shukla, Advocate for Mr. C.L. Premy, Advocate for the petitioner. Mr. Puneet Gupta, Addl.A.G. Punjab. RITU BAHRI J. Challenge in this petition is to the audit report dated 3.1.2008 (Annexure P-1), office order dated 09.4.2008 (Annexure P-2) and letter dated 15.1.2010 (Annexure P-4) vide which the salary of the petitioner has been reduced after withdrawing one increment given on account of proficiency step up and ordered the recovery of Rs.53735/- and further restraining the respondents from recovering the said amount and not to withdraw the increment. The petitioner was appointed as a Clerk on 28.12.1972 on adhoc basis in Panchayat Samiti Nabha and his services were regularized w.e.f. 29.3.1973. Thereafter, the petitioner was confirmed on 12.11.1975 and granted selection grade w.e.f. 1.1.1978 and promoted as Junior Assistant on 1.1.1986. Thereafter, after completion of 24 years of service, one increment was granted to the petitioner as per rule and instructions by the competent authority. The Civil Writ Petition No. 8278 of 2010 -2- petitioner was promoted on 30.3.2001 as Superintendent Grade-II in the pay scale of Rs.6400-200-70000-220-8100-275-10300-340-10640 and posted at Panchayat Samiti, Samana District Patiala. In the year 2008 respondent No.4 conducted the audit of the Panchayat Samiti, Patiala and submitted the recommendation report dated 3.1.2008 (Annexure P-1) on the basis of which respondent No.3 vide order dated 09.4.2008 (Annexure P-2) re-fixed the pay of the petitioner and ordered the recovery as per rules of the excess payment made to the petitioner in the light of the audit. The petitioner is aggrieved of action of the respondents in re- fixation of his salary and consequential recovery either on the basis of the objections raised by the Accountant General, the audit/inspection or under other circumstances. The issue involved is re-fixation of the salary, consequential recovery and even reduction in the pensionary benefits. The question of re-fixation and recovery had been considered by the Hon'ble Apex Court in the case of Sahib Ram versus State of Haryana 1994(5) SLR 753 which was later on followed in the case of Purshotam Lal and others versus State of Bihar and others 2007(1) RSJ 150 wherein it has been held that where any benefit has been granted to an employee without any misrepresentation or fraud attributed to him, the employer has the right to re-fix the salary/emoluments, but without right to recover such benefits already granted to the employee. However, other version of the issue came to be opined in some of the judgments passed in the cases of Union of India versus Smt. Sujata Vedachalam and others JT 2000(6) SC 217, Comptroller and Auditor General of India and others versus Farid Sattar JT 2000(4) SC 374 and Mafatlal Industries Ltd. and others versus Union of India and others 1997(5) SCC 536. Since the judgment passed in the case of Sahib Ram (supra) Civil Writ Petition No. 8278 of 2010 -3- held the field for a number of years, various judgments came to be delivered by this Court following the dictum therein. A Division Bench of this Court, however, noticing both sets of judgments referred the matter to a larger Bench for an authoritative pronouncement and following question of law was referred to the larger Bench : “Whether the Government is entitled to recover from an employee any payment made in excess of what he was otherwise entitled to, on account of any mistake or bonafide but erroneous interpretation or brief regarding any Rule, Regulation or Government instructions whatsoever especially in cases where the employee concerned is not guilty of any fraud or misrepresentation in claiming or receiving such monetary benefits.” The Hon'ble Full Bench of this Court presided over by Hon'ble the Chief Justice heard and answered the reference vide judgment dated 22.5.2009 passed in CWP No.2799/2008 etc. (Budh Ram and others versus State of Haryana and others). On consideration of the controversy, Hon'ble Full Bench formulated following three issues to answer the reference : i) Cases in which the benefits sought to be recovered from the employees were granted to them on the basis of any fraud, misrepresentation or any other act of deception; ii) Cases in which the benefits sought to be recovered were granted on the basis of a bonafide mistake committed by the authority granting the same while applying or interpreting a provision contained in the service rule, regulation or any other memo or circular authorizing such grant regardless whether or not grant of benefits involved the performance of higher or more onerous duties by the employee concerned; iii) Cases that do not fall in either one of the above two categories but where the nature of the benefit and extent is so unconnected with his service conditions Civil Writ Petition No. 8278 of 2010 -4- that the employee must be presumed to have known that the benefit was flowing to him undeservedly because of a mistake by the authority granting the same.” On consideration of various judgments, issue No. i) was answered as follows : “.......It follows that a person, who has committed a fraud, misrepresentation or any other act of deception cannot possibly qualify for any relief in equity. A priori, it must be held, that any benefit received or obtained by an employee by reasons of fraud, misrepresentation or any other act of deception would dis-entitle him to retain the benefit, which he has obtained as a result of such acts or any one of them.” Issue No. ii) has been answered with the following observations : “It is in the light of the above pronouncement, no longer open to the authorities granting the benefits, no matter erroneously, to contend that even when the employee concerned was not at fault and was not in any way responsible for the mistake committed by the authorities, they are entitled to recover the benefit that has been received by the employee on the basis of any such erroneous grant. We say so primarily because if the employee is not responsible for the erroneous grant of benefit to him/her, it would induce in him the belief that the same was indeed due and payable. Acting on that belief the employee would, as any other person placed in his position arrange his affairs accordingly which he may not have done if he had known that the benefit being granted to him is likely to be withdrawn at any subsequent point of time on what may be then said to be the correct interpretation and application of rules. Having induced that belief in the employee and made him change his position and arrange his affairs in a manner that he would not otherwise have done, it would be unfair, Civil Writ Petition No. 8278 of 2010 -5- inequitable and harsh for the Government to direct recovery of the excess amount simply because on a true and correct interpretation of the rules, such a benefit was not due ....... We have, therefore, no hesitation in holding that in case the employees who are recepient of the benefits extended to them on an erroneous interpretation or application of any rule, regulation, circular and instructions have not in any way contributed to such erroneous interpretation nor have they committed any fraud, misrepresentation, deception to obtain the grant of such benefit, the benefit so extended may be stopped for the future, but the amount already paid to the employees cannot be recovered from them........” While considering issue no. iii), Hon'ble Full Bench perceived certain situations and made following observations : “It is a case where by reason of sheer neglect of a functionary of the State Government, a payment that is undeserved and wholly uncalled for is made to the employee.........” We cannot for obvious reasons exhaustively enumerate situations where such payments are received and can be lawfully recovered. All that we propose to point out is that while generalty of the cases would fall in category (i) and (ii), some freak cases like the one in category (iii) that we have been able to conceive, may need to be dealt with independently depending upon whether the employee can be attributed the knowledge that the payment was undeserved and whether the duty to verify the factual position and refund the amount when the same came to his notice could be read into his duty as an employee of the State or its instrumentalities. The reference is answered accordingly. These petitions shall now be placed before the appropriate Bench for disposal in the light of what we have said above.” The claim of the petitioner in the present petition has been Civil Writ Petition No. 8278 of 2010 -6- considered in the light of the aforesaid judgment of the Full Bench and the issues decided therein. Two categories of cases are being disposed of by this order. In the writ petitions shown under Category (I) in the cause title for this judgment, the petitioner has assailed only the recovery part and has not challenged the re- fixation of the salary. After perusing the impugned orders, the recoveries have been ordered on re-fixation either during the service or after retirement. The State has not attributed any misrepresentation or fraud to the employee(s). All these cases thus fall in Category (II) noticed by the Hon'ble Full Bench. In these cases, the benefit was passed on to the employee(s) without misrepresentation/fraud on the basis of either bona fide mistake or misinterpretation of any rule, Circular or order of the employer. In view of the answer to Issue No. ii), no recovery can be effected from the petitioner. Mr. Puneet Gupta, learned counsel appearing on behalf of State has attempted to argue that where the recovery has already been made, the same cannot be ordered to be refunded. I am unable to accept his contention for the simple reason that the benefit was given to the petitioner by either mistake or misinterpretation of the rules/regulations/circulars by the functionaries of the employers and the employees/petitioners were/are not responsible for extraction of any illegal benefits. In most of the cases, the recoveries are being effected from their pensionary benefits after a number of years of the retirement. In some cases pensionary and retiral benefits have been withheld for a number of years forcing the retired employees to approach this Court. It is also noticed that in most of the cases, the employees have not even been put to notice. However, in none of the cases, the fraud or misrepresentation has been attributed to the petitioners and thus, the respondents cannot be permitted to effect recovery or retain the recovered amount. In all such cases where the amounts have been recovered in part or in whole, the same shall be refunded to the petitioners Civil Writ Petition No. 8278 of 2010 -7- within a period of two months from the date a certified copy of this order is served upon the competent authority. In view of the above, this petition is thus allowed. The action of the respondents and the impugned order dated 15.1.2010 (Annexure P-4) passed for recovery are hereby quashed while upholding the re-fixation of his salary. It is, however, directed that the respondents will refund the amount already recovered. July 18, 2011 ( RITU BAHRI ) Vijay Asija JUDGE