Recently, the
Supreme Court was confronted with the issue of whether employees that were in
receipt of monetary benefits beyond their due, should be exempted in law, from
the reimbursement of the same to the employer. An important factual scenario that
is required to be noted is that the
employees were no guilty of furnishing any incorrect information, which had led
the concerned competent authority, to commit the mistake of making the higher payment
to the employees.
The issue has its
own inherent difficulty in the sense that there is a Right to Recovery of the employer as against the effect on the employee who had been in good faith, enjoying the
excess amount received by him/her.
I. Precedents Involved
(i) Shyam Babu
Verma and Ors. vs. Union of India & Ors. (1994) 2 SCC 521;
(ii) Sahib Ram
Verma vs. State of Haryana (1995) Supp. 1 SCC 18;
(iii) Chandi Prasad
Uniyal and Ors. vs. State of Uttarakhand & Ors. (2012) 8 SCC 417;
(iv) Syed Abdul Qadir
v. State of Bihar, (2009) 3 SCC 475;
(v) Col. B.J.
Akkara v. Government of India, (2006) 11 SCC 709.
II. Decision of the Court
The Court in para 8 reasoned that the right to recover being pursued by the
employer, will have to be compared, with the effect of the recovery on the
concerned employee. It held that in case, the effect of the recovery
from the concerned employee would be more unfair/more wrongful/more improper/more
unwarranted, than the corresponding right of the employer to recover the amount,
then it would be iniquitous and arbitrary, to effect the recovery.
The Court invoked
Article 14 and DPSPs u/Arts 38, 39, 39A, 43 and 46 to reason that equity and
good conscience, in the matter of livelihood of the people of this country, has
to be the basis of all governmental actions. Otherwise, the said action is Arbitrary
and consequently violative of Article 14.
III. Instances where Right to Recovery is
Unconstitutional
The Court was
presented with precedents of the Supreme Court itself, where by exercising its
extra- ordinary power under Article 142 to pass equitable orders in the ends of
justice, it had previously ordered non- recoverability of excess amount. The
Court used these judgments to lay down certain instances, where recovery will
not be allowed, since such recovery would be iniquitious or have a harsh and
arbitrary effect on the employee and consequently violative of Article 14:
(i) If the excess payment
had been made for a long duration of time, i.e., more than 5 years, it would be
iniquitous to make any recovery. (because it would be almost impossible for an
employee to bear the financial burden, of a refund of payment received
wrongfully for a long span of time);
(ii) Recovery from
employees in lower rung of service, i.e., Class-III and Class-IV – sometimes denoted
as Group ‘C’ and Group ‘D’. (because employees in lower rung of service would spend
their entire earnings in the upkeep and welfare of their family, and if such
excess payment is allowed to be recovered from them, it would cause them far
more hardship, than the reciprocal gains to the employer);
(iii) Recovery of excess
payments, made from employees who have retired from service, or
are close to their
retirement. (because it would entail extremely harsh consequences outweighing
the monetary gains by the employer as a retired employee or an employee about to
retire, is a class apart from those who have sufficient service to their
credit, before their retirement. Also, at this stage an employee is past his
youth, his needs are far in excess of what they were when he was younger and his
earnings have substantially dwindled on retirement);
(iv) Where employees
were entitled to wages, for the post against which they had discharged their
duties, even if the concerned appellants were ineligible for the same post. But
the mistake of employing on that post must be of someone else and the employee
should not have contributed to that mistake; or
(v) where the Court
arrives at the conclusion, that recovery if made from the employee, would be
iniquitous or harsh or arbitrary to such an extent, as would far outweigh the
equitable balance of the employer’s right to recover.
IV. Conclusion
The Court through its reasoning, in cases where the employer is ‘State’ has termed such recovery to be violative of
Article 14, but still it has allowed the doors open where the employer is a
‘private person’. In latter cases, equity still can be invoked to have the
Court exercise its discretion in employee’s favor.
IVa. Law of Unjust
Enrichment
The
law of recovery in cases of “unjust enrichment” is based on law of restitution
in cases where there is neither any
consent or wrongdoing issue. Such action is based neither on contract nor on tort, hence it falls in
a third category i.e. of restitution. The law is clear on this issue Lipkin Gorman v. Karpnale
Limited[1]
where it was held:
“The claim for money had and received is not…
founded upon any wrong committed by the club against the solicitors. But it does not, in my opinion, follow that the court has carte blanche to reject the solicitors' claim simply because it thinks it unfair or unjust in the circumstances to grant recovery. The recovery of money in restitution is not, as a general rule, a matter of discretion for the court. A claim to recover money at common law is made as a matter of right; and even though the underlying principle of recovery is the principle of unjust enrichment, nevertheless, where recovery is denied, it is denied on the basis of legal principle. [emphasis added] [example
defence of change of position].”
The
position in India seems to be a bit changed, allowing for huge scope for judicial
discretion in interpreting when would the ‘recovery be unjust’, rather than simply analyzing the defences available to such restitution:
“Unjust enrichment”
has been defined by the court as the unjust retention of a benefit to the loss
of another, or the retention of money or property of another against the
fundamental principles of justice or equity and good conscience. A person
is enriched if he has received a benefit, and he is unjustly enriched if
retention of the benefit would be unjust.”[2]
This position may cause a reader to erroneously mix two different aspects, one what is unjust enrichment and second when is recovery unjust. Right to recovery flows from unjust enrichment, but such recovery may be unjust if an employee has been innocently getting such sum for say 20 years. The law is that recovery can be stopped only when one of the defences is applicable, otherwise there is a Right to have recovery. The Indian Courts have in such cases used equity principles to refuse such recovery, though the Right to Recover due to unjust enrichment is still there. In my opinion, what is not allowed is the enforcement of the Right because allowing Right to Recover from a person unjustly enriched, would be more unjust to the employee as compared to how unjust it was to the employer when he gave the excess amount to the employee.
IVb. Present
Decision and its Impact.
The Court here used Article 14 and not resorted to the invocation of jurisdiction
in equity which had earlier been used to do so by the precedents cited in the
present case.
Therefore, the
decision seems to be sound in the sense that it uses the fundamental rights of
State employees against the State employer’s Right to recover, consequently
avoided any scope of using equity jurisdiction, which could have the adverse
effect of twisting the law of Unjust Enrichment by subjecting the private
employers’ Right to the recover given under the common law, to the law of
equity and consequently to vast discretion of the Courts. The decision has given a Constitutional basis to reject the claim of recovery, though under the guise of judicial discretion to check whether the recovery would be unjust.
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