Supreme Court of India
REGISTRAR, CO-OPERATIVE SOCIETIES HARYANAversusISRAIL KHAN & ORS.
- Citation
- 2009 INSC 1176
- Decided
- 8 October 2009
- Disposal
- Appeal(s) allowed
- Bench
- R V RAVEENDRAN
Holding
Illegal payments made under an unauthorized resolution must be recovered from the employees, as the Managing Committee lacks power to alter pay scales and the court’s discretion to refuse recovery does not apply where the employee is complicit.
Summary
The Supreme Court examined a dispute where employees of a primary co‑operative credit society in Haryana were paid salaries on a regular pay‑scale basis, contrary to the Primary Co‑operative Credit & Service Society Staff Service Rules, 1992 which mandated a consolidated salary. The society’s Managing Committee, lacking authority under the Haryana Co‑operative Societies Act, passed a resolution granting retrospective regular pay and diverted loan funds meant for farmers to meet the excess salary. The Registrar, invoking Section 27 of the Act, rescinded the resolution and ordered recovery of the excess payments, a direction the employees contested. The High Court held the resolution illegal but refused to order recovery, relying on earlier cases that sometimes barred recovery to avoid hardship. The Supreme Court rejected that approach, holding that there is no principle barring recovery of unauthorised emoluments and that discretion to refuse recovery applies only where the employee is not at fault. Consequently, the Court set aside the High Court order, allowed the appeals, and directed the society to recover the excess salary in 24 instalments.
Issues considered
- Whether the Managing Committee of a primary co‑operative society has authority to revise pay scales under the Service Rules.
- Whether excess salary paid illegally under an unauthorized resolution can be recovered from employees.
- Whether courts must order recovery of unauthorised emoluments or may refuse on grounds of hardship.
Subjects
co-operative societiessalary revisionconsolidated salaryregular pay scaleexcess payment recoverySection 27judicial discretionhardshipmisrepresentationcollusion
Judgment
[2009} 14 S.C.R. 1162
A REGISTRAR, CO-OPERATIVE SOCIETIES HARYANA "'
v.
ISRAIL KHAN & ORS.
(Civil Appeal No. 3668 of 2007)
OCTOBER 8, 2009
B
[R.V. RAVEENDRAN AND P. SATHASIVAM, JJ.]
)(
.,
Primary Co-operative Credit and Service Society Staff
Service Rules, 1992:
c
r. 9 - Consolidated salary payable to employees -
Managing Committee passing resolution and granting benefit
of regular pay scale to employees with retrospective effect -
D
Further, in order to pay arrears to employees diverting funds
available for loan to farmers to pay arrears to employees -
,
High Court holding the resolutions of Societies illegal but
declined to direct recovery of excess amounts paid to
employees - HELD: Registrar of Co-operative Societies, and
not Managing Committee, was empowered to effect revisions
in pay scales - There is no 'principle' that any excess
E payment to employees should not be recovered back by
employer - The Court, in certain cases has merely used its
judicial discretion to refuse recovery of excess wrong
payments of emoluments/allowances from employees on the
ground of hardship, where certain conditions were fulfilled -
F What is important is recovery of excess payments from
employees is refused only where the excess payment is
made by the employer by applying a wrong method or
principles for calculating pay/allowance, or on a particular
interpretation of applicable rules which is subsequently found
G to be erroneous - But where excess payment is made as a
result of any misrepresentation, fraud or collusion, courts will
not use their discretion to deny the right to recover the excess
H 1162
REGISTRAR, CO-OPERATIVE SOCIETIES HARYANA1163
v. ISRAIL KHAN & ORS.
.. payment - In the instant cases, the Rules specifically A
' provided that employees should be paid a consolidated salary
__,
---( - Therefore, without amendment to the Rules, the Managing
Committees could not have passed a resolution for giving the
benefit of regular pay scales that too with retrospective effect
to the employees - Further, the Societies did not have the B
funds to make such payments and illegally diverted the funds
made available for disbursal of loans to farmers, for the
purpose of making such excess payment to the employees
- When resolution extending such benefit was passed and the
amounts earmarked for loans for farmers was diverted for
making payment to the employees, the Managing Committee
c
as well as the employees were aware that the resolution and
consequential payment was contrary to the Rules - There was
no question of any wrong calculation or erroneous
"\ understanding of legal position - Most of the employees who
received similar relief have refunded or have agreed for refund D
of the excess payment - Making any exception in the case
of respondents would also lead to discrimination - Therefore,
orders of High Court holding that illegal payments to
employees need not be refunded to them are set aside -
Service Law - Recovery of unauthorised emoluments paid to E
employees.
Sahib Ram vs. State of Haryana (1995) Supp. 1 SCC
18; Shyam Babu Verma vs. Union of India (1994) 2 SCC 521
and Co/ (Retd.) B.J. Akkaa vs. Govt. of India (2006) 11 SCC F
709, referred to.
Case Law Reference:
(1995) Supp. 1 sec 18 referred to para 5
(1994) 2 sec 521 referred to para 5
G
(2006) 11 sec 109 referred to para 6
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
3668 of 2007.
H
1164 SUPREME COURT REPORTS [2009) 14 (ADDL.) S.C.R.
A From the Judgment & Order dated 20.1.2004 of the High .
Court of Punjab & Haryana at Chandigarh in Civil Writ Petition
No. 20301 of 2002. ~
WITH
..
~
B C.A. No. 3675, 3670, 3669, 3677, 3676 & 3671 of 2007.
Jasbir Malik, S.K. Sabharwal, Kamakshi S. Mehlwal for the
Appellants.
Harikesh Singh, Jeevan Prakash for the Respondent.
c
The Order of the Court was delivered by
ORDER
R.V. RAVEENDRAN, J. 1. These appeals raise a ~
D
common issue relating to recovery of unauthorised emoluments _
paid to employees of co-operative societies. For convenience, ~
we will refer to the facts in Civil Appeal No.3668/2007.
2. The respondents are employees of Ferozepur Jhirka
E Co-operative Credit & Service Society Limited, a primary co-
operative society in the State of Haryana. The service
conditions of employees of such societies were governed by
the Primary Co-operative Credit & Service Society Staff
Service Rules, 1992 (for short 'the Rules'). The said Rules
F classified the Societies according to their business turnover
and prescribed the corresponding staffing pattern. Rule 9 of the
said Rules provided that all categories of employees were
entitled to a consolidated salary with annual increments as
provided therein. The same post carried different consolidated
G pay depending upon the size/turnover of the Society. The
Registrar of co-operative societies, and not the Managing
Committees of the primary co-operative societies, was
empowered to effect revisions in pay.
.. _,.- '.
3. Respondents and other employees of the said society
H
REGISTRAR, CO-OPERATIVE SOCIETIES HARYANA 1165
v. ISRAIL KHAN & ORS. [R.V. RAVEENDRAN, J.]
..
'
... submitted representations for regular pay scales, instead of
consolidated pay. The Managing Committee of the said society
passed a resolution extending the benefit of regular pay scale
A
to the respondents with retrospective effect from 1.1.1996. As
a consequence, instead of a consolidated salary of Rs.1200/-
and Rs. 800/- respectively to which they were entitled, the first B
respondent and second respondent were paid salary at the
rate of Rs.3050/- and Rs.2550/- per month. As no funds were
. sanctioned or available to pay the arrears on the basis of such
higher pay, the Managing Committee diverted the funds made
available by the State Government (through the controlling c
Bank) for disbursement of loans to farmers, to pay arrears of
Rs.47891/- to first Respondent and Rs.42300/- to second
respondent on 27.2.1999. When this came to the notice of the
office of the Registrar of Co-operative Societies, the Deputy
Registrar of Co-operative Societies, Gurgaon made an order
D
" dated 2 .4.2002 rescinding the resolution dated 1.3.1999 of the
Managing Committee, in exercise of powers conferred under
Section 27 of the Haryana Co-operative Societies Act (for short
'the Act') and directed the employer Society to recover back
the excess payment made to the employees. The Society gave
effect to the said direction by passing a resolution dated E
22.3.2002 directing recovery of the excess payments from the
respondents. Feeling aggrieved, the employees filed the
appeals before the Registrar, Co-operative Societies, Haryana.
The Registrar by a detailed order rejected the said appeals by
order dated 22.8.2002. F
4. The employees challenged the said order before the
High Court. The High Court disposed of the said writ petition
by the impugned order dated 20.1.2004 wherein it held that the
resolution of the Managing Committee extending the benefit of G
regular scale of pay and payment of arrears was illegal.
However, the High Court was not inclined to direct recovery of
the excess amount illegally paid by extending the benefit of
regular pay scales. The said judgment is challenged in this
appeal. The connected appeals relate to similar payments to H
1166 SUPREME COURT REPORTS [2009] 14 (ADDL.) S.C.R.
A employees of other primary co-operative societies and involve ii'
the same issue. ....,
5. The appellants contend that the resolutions of the
Managing Committees directing payment of salary by
extending the benefit of regular pay scales was in violation of
B
the Rules and that such resolutions were a result of the collusion
between the concerned employees and the respective
Managing Committees and therefore the employees are liable
to refund the same. They further contend that the High Court,
having held that the employees were not entitled to the said
c benefit, committed an error in refusing to direct refund thereof.
On the other hand, the respondents contended that having
regard to the decisions of this Court in Sahib Ram v. State of
Haryana [1995 Supp(1) SCC 18) and Shyam Babu Verma v.
Union of India [1994(2) sec 521), any excess payment to
D employees, should not be recovered from them.
6. There is no 'principle' that any excess payment to
employees should not be recovered back by the employer. This ..
., ,
Court, in certain case$ has merely used its judicial discretion
E to refuse recovery of excess wrong payments of emoluments/
allowances from employees on the ground of hardship, where
the following conditions were fulfilled:
"(a)' The excess payment was not made on account of any
misrepresentation or fraud on the part of the employee.
F
(b) Such excess payment was made by the employer by
applying a wrong principle for calculating the pay/allowance
or on the basis of a particular interpretation of rule/order,
which is subsequently found to be erroneous."
G
In Col (Retd.) B.J. Akkara v. Govt of India [2006 (11) SCC 709)
this Court explained the reason for extending such concession
thus:
"Such relief, restraining recovery back of excess paymerit
H is granted by courts not because of a~y right in the
(
=(
REGISTRAR, CO-OPERATIVE SOCIETIES HARYANA1167
v. ISRAIL KHAN & ORS. [R.V. RAVEENDRAN, J.]
employees, but in equity, in exercise of judicial discretion, A
to relieve the employees, from the hardship that will be
caused if recovery is implemented. A Government servant,
particularly one in the lower rungs of service would spend
whatever emoluments he received for the upkeep of his
\.'
I family. If he receives an excess payment for a long period, B
he would spend it genuinely believing that he is entitled to
it. As any subsequent action to recover the excess payment
will cause undue hardship to him, relief is granted in that
behalf. But where the employee had knowledge that the
payment received was in excess of what was due or c
wrongly paid, or where the en-or is detected or corrected
within a short time of wrong payment, Courts will not grant
relief against recovery. The matter being in the realm of
(
judicial discretion, courts may on the facts and
circumstances of any particular case refuse to grant such 0
J A
relief against recovery."
(emphasis supplied)
What is important is recovery of excess payments from
employees is refused only where the excess payment is made E
by the employer by applying a wrong method or principle for
calculating the pay/allowance, or on a particular interpretation
of the applicable rules which is subsequently found to be
erroneous. But where the excess payment is made as a result
of any misrepresentation, fraud or collusion, courts will not use F
their discretion to deny the right to recover the excess payment.
7. In these cases, the Rules specifically provided that the
employees should be paid a consolidated salary. Therefore
without amendment to the Rules, the Managing Committees
could not have passed a resolution for giving the benefit of G
regular pay scales that too with retrospective effect to the
employees. Further, the Societies did not have the funds to
make such payments and illegally diverted the funds made
available for disbursal of loans to farmers, for the purpose of
making such excess payment to the employees. When the H
1168 SUPREME COURT REPORTS [2009} 14 {ADDL.) S.C.R. •
r-
A resolution extending such benefit was passed and the amounts "' I
earmarked for loans for farmers was diverted for making ";
payment to the employees, the Managing Committee as well
as the employees were aware that the resolution and
consequential payment was contrary of the Rules. There was .
B no question of any wrong calculation or erroneo_us "
understanding of the legal position. Most of the employees who
received similar relief have refunded or have agreed for refund
the excess payment. Making any exception in the case of
---
.r,f'.spondents would also lead to discrimination.
c 8. Therefore, the appeals are allowed, the impugned
orders of the High Court holding that the illegal payments to the
respondents need not be refunded fo them are set aside.
However, having regard to the hardship put forth by the
employees, the appellants are directed to calculate and recover
D the excess payment in twenty four monthly installments. A ....
R.P. Appeals allowed.
"
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