Coop. Societies Haryana & Ors. Vs. Israil Khan & Ors.  Insc 1640
(8 October 2009)
IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.3668
OF 2007 Registrar, Co-operative Societies ... Appellant(s) Haryana Israil Khan
& Ors. ... Respondent(s) WITH Civil Appeal Nos.3669, 3670, 3671, 3675, 3676
O R D E R
These appeals raise a 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.
The respondents are employees of Ferozepur Jhirka Co-operative
Credit & Service Society Limited, a primary 2 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 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 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.
Respondents and other employees of the said society 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 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 respondent and
second respondent were paid salary at the rate of Rs.3050/- and Rs.2550/- per
month. As no funds 3 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 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 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 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
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 4
extending the benefit of 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.
connected appeals relate to similar payments to employees of other primary
co-operative societies and involve the same issue.
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 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 benefit, committed an error in refusing to direct refund thereof.
other hand, the respondents contended that having regard to the decisions of
this Court in Sahib Ram v.
Haryana [1995 Supp(1) SCC 18] and Shyam Babu Verma v. Union of India [1994(2)
SCC 521], any excess payment to employees, should not be recovered from them.
There is no `principle' that any excess payment to employees
should not be recovered back by the employer.
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 the following conditions were fulfilled:
The excess payment was not made on account of any misrepresentation or fraud on
the part of the employee.
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."
(Retd.) B.J. Akkara v. Govt of India [2006 (11) SCC 709] this Court explained
the reason for extending such concession thus:
relief, restraining recovery back of excess payment is granted by courts not
because of any right in the employees, but in equity, in exercise of judicial
discretion, 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 family. If he receives an excess payment for a long period, 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 wrongly paid, or where the error 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
relief against recovery."
supplied) 6 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 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 their discretion to
deny the right to recover the excess payment.
In these cases, the Rules specifically provided that the employees
should be paid a consolidated salary.
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
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 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 as well as the employees were aware that the
resolution and 7 consequential payment was contrary of the Rules. There was no
question of any wrong calculation or erroneous 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
respondents would also lead to discrimination.
Therefore, the appeals are allowed, the impugned orders of the
High Court holding that the illegal payments to the respondents need not be
refunded to them are set aside. However, having regard to the hardship put
forth by the employees, the appellants are directed to calculate and recover
the excess payment in twenty four monthly installments.
.........................................................J [R. V.