The Madhya Pradesh High Court (Gwalior Bench), in a decision by Justice Anil Verma, quashed a recovery order against retired Class III employee Hari Shankar Soni. The court held that recoveries of excess payments made to Class III and IV employees after retirement are impermissible unless such payments resulted from misrepresentation or fraud. It further ruled that an undertaking permitting recovery must have been in effect at the time the payments were made and cannot be applied retroactively.
Background
Hari Shankar Soni, a retired Field Officer, served the State of Madhya Pradesh for 41 years from 1979 to 2020. Upon his retirement, his dues, including gratuity and leave encashment, were delayed. While the dues were eventually disbursed, Rs. 2,26,587 was deducted on the grounds of alleged overpayments made between 2006 and 2015. This recovery was based on an indemnity bond Soni signed at retirement. In response, Soni filed a writ petition seeking a refund of the deducted amount.
Arguments
The petitioner contended that the recovery order violated the Supreme Court’s judgment in State of Punjab v. Rafiq Masih (White Washer) (AIR 2015 SC 696), which prohibits recoveries from retired Class III employees unless fraud or misrepresentation is involved. Soni argued that no such misconduct occurred and claimed the indemnity bond he signed at retirement was ineffective, as the recovery pertained to payments made years earlier.
The State defended the recovery, arguing that it arose from overpayments discovered only during post-retirement audits. It pointed out that Soni had voluntarily signed the indemnity bond, which allowed recovery of excess amounts. The State also asserted that Soni’s pension and other benefits were fully settled and cited State of M.P. v. Jagdish Prasad Dubey to justify recoveries in similar cases.
Court’s Reasoning
The court first referred to the Supreme Court’s ruling in Rafiq Masih, which prohibits recoveries from retired or nearing-retirement employees, particularly Class III and IV employees, unless fraud or misrepresentation is evident. It emphasized that such recoveries are inequitable and noted a Madhya Pradesh Finance Department circular dated March 31, 2016, reinforcing this prohibition.
Examining the indemnity bond, the court rejected the State’s reliance on it to justify the recovery. It reasoned that the bond, executed at the time of Soni’s retirement, could not retrospectively validate recoveries for payments made years earlier. The court underscored that such undertakings must align with the time of payment. Furthermore, it observed that the State failed to give Soni an opportunity to contest the alleged overpayment, violating principles of natural justice.
Conclusion
The court declared the recovery of Rs. 2,26,587 illegal and quashed the recovery order. It directed the State to refund the deducted amount along with interest at 6% per annum from the date of recovery until full repayment.
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