MP High Court Rules Against Recovery of Excess Payment with Interest from Retired Employee

A single-judge bench of Justice Sushrut Arvind Dharmadhikari of the Madhya Pradesh High Court recently overturned a recovery order issued against a retired government employee, Smt. Parwati Verma. The court ruled that it was unfair to demand excess payments with interest from retired employees after more than four years of retirement, especially when no fraud or misrepresentation was involved.

Background of the Case

Smt. Parwati Verma was appointed to the Home Department of Madhya Pradesh on May 19, 1981, and retired on May 31, 2016, as a Subedar in the ministerial cadre. Upon her retirement, Verma’s pension was calculated based on a revised pay scale extended to both executive and ministerial staff. However, in January 2022, she was notified that she owed ₹29,66,982, which included ₹13,01,635 as excess salary and ₹16,65,347 in interest.

Verma challenged this recovery under Article 226 of the Indian Constitution, arguing that it went against Rule 9(4) of the M.P. Civil Services Pension Rules, 1976, which prohibits recovery of excess payments after four years of retirement unless explicitly authorized by the Governor.

Petitioner’s Arguments

Verma argued that the recovery order was unfair for several reasons:

• Rule Violation: The recovery order violated Rule 9(4) of the M.P. Civil Services Pension Rules, as it was issued more than four years after her retirement, without the Governor’s approval.
• Lack of Notice: She was not given an opportunity to present her side, which violates the principles of natural justice.
• No Misrepresentation: She emphasized that the pay scales were revised due to administrative decisions, with no misrepresentation or fraud from her side.

Her counsel also highlighted past judgments, where courts have ruled against recovering excess payments from retirees if no fraud or intentional misconduct was involved.

State’s Position

The State of Madhya Pradesh, represented by Shri Praveen Namdev, defended the recovery, stating:

• Incorrect Pay Fixation: Verma’s pay scale was set higher than it should have been due to a clerical error, resulting in the excess payments.
• Financial Prudence: The State argued that no notice was required in financial matters if an error is found, allowing for immediate recovery.
• Legal Precedents: The State referenced past cases where recoveries were allowed from employees who had given undertakings at the time of pay fixation.

Court’s Decision and Reasoning

The court ruled in favor of Smt. Verma, quashing the recovery order and citing several reasons:

1. No Fraud or Misconduct: The court emphasized that Verma had not engaged in any fraud or misrepresentation. The overpayment occurred due to administrative errors in setting her pay scale.
2. Unfair Interest Charges: Citing the Supreme Court’s ruling in State of Madhya Pradesh & Ors. v. Rajendra Bhavsar, the court held that recovering interest on the excess payment was overly harsh and unjustified, as Verma was not responsible for the miscalculation.
3. Violation of Rule 9(4): The court determined that Rule 9(4) was applicable, which prevents recovery of excess payments after four years of retirement without Governor approval. The state had not obtained such approval, making the recovery order invalid.
4. No Grounds for Interest Recovery: Although Verma had signed an undertaking, the court noted that this did not extend to interest recovery, and her case involved no evidence of misconduct.

Final Ruling

The Madhya Pradesh High Court ultimately quashed the recovery order. While the court allowed for a recalculation of the principal amount, it barred any recovery of interest. This decision reinforces protections for retirees against recovery orders stemming from administrative errors, particularly in cases where the retiree has not committed fraud or misrepresented information.