State Government Cannot Retrospectively Reduce An Employee’s Pay Scale And Recover Excess Amount: Supreme Court
The Supreme Court observed that the State Government cannot retrospectively reduce an employee’s pay scale and recover the excess amount granted.
The Court quashed the “grossly illegal and arbitrary” order passed by the State Government to reduce the pay scale of the employee (appellant) and to direct recovery of the excess amount from the appellant. The Bench explained that any step of reduction in the pay scale and recovery from a Government employee would be “tantamount to a punitive action because the same has drastic civil as well as evil consequences.”
A Bench of Justice Sandeep Mehta and Justice R. Mahadevan observed, “We firmly believe that any decision taken by the State Government to reduce an employee’s pay scale and recover the excess amount cannot be applied retrospectively and that too after a long time gap.”
Sr. Advocate Gaurav Agrawal appeared for the appellant, while ASG Vikramjit Bannerjee and Sr. Advocate Rupesh Kumar represented the respondents.
The appellant was appointed as a Supply Inspector by the Bihar government in 1966. Over the years, he earned promotions, culminating in his appointment as ADSO in 1991, with a revised pay scale as per the 5th Pay Commission. Upon his retirement in 2001, his pension was calculated based on this pay scale as ADSO.
However, in 2009, the State Government issued a letter demanding the recovery of excess payment of emoluments due to a mistake in the pay fixation and claimed that the promotion conferred upon the appellant had become ineffective in 1996, due to a government resolution passed in 1999. The recovery notice was challenged.
The Supreme Court stated that no departmental action could have been initiated by the State against the appellant after eight years following his superannuation because the employer-employee relationship had come to an end after the appellant’s superannuation. “The order directing reduction in pay scale and recovery from the appellant was manifestly not preceded by any show cause notice and was thus, passed in gross violation of the principles of natural justice,” the Bench noted.
The Court referred to its decision in Syed Abdul Qadir v. State of Bihar (2009), wherein it was held that when the excess unauthorised payment is detected within a short period of time, it would be open for the employer to recover the same. Conversely, if the payment had been made for a long duration of time, it would be iniquitous to make any recovery.
The Bench observed that “the impugned action directing reduction of pay scale and recovery of the excess amount is grossly arbitrary and illegal and also suffers from the vice of non-adherence to the principles of natural justice and hence, the same cannot be sustained.”
Consequently, the Court clarified, “In case, if any reduction in pension and consequential recovery was effected on account of the impugned orders, the appellant shall be entitled to the restoration/reimbursement thereof with interest as applicable.”
Accordingly, the Supreme Court allowed the appeal.
Cause Title: Jagdish Prasad Singh v. State Of Bihar & Ors. (Neutral Citation: 2024 INSC 591)
Appearance:
Appellant: Sr. Advocate Gaurav Agrawal; Advocates Manan Daga and Ansh Mittal; AOR C. George Thomas
Respondents: ASG Vikramjit Bannerjee; Sr. Advocate Rupesh Kumar; AOR Manish Kumar and Raj Bahadur Yadav; Advocates Chandan Kumar, Nachiketa Joshi, Rajesh Kr Singh, Sushma Verma and Priya Mishra