Himachal Pradesh university ordered to release ₹18.6 lakh in pay arrears after diverting ICAR funds earmarked for staff payments

The petitioner, a retired Principal Scientist who had served in the University’s AICRP on Agroforestry, claimed ₹18,60,374 as her 75% share of pay arrears arising from implementation of the Seventh Central Pay Commission.

The University had calculated that amount and sought the corresponding grant from the funding agency, CAFRI/ICAR, which released ₹45 lakh in March 2023, including the petitioner’s arrears, for disbursement under the pay head during financial year 2022–23.

Instead of paying the employees, the University transferred the amount to its Centralized Fund Scheme account and later issued a utilization certificate to the funding agency.

The petitioner’s requests for payment were unsuccessful; the University maintained that payment awaited State Government instructions.

In the writ proceedings, the State Finance Department stated that it had not barred the University from disbursing the ICAR-funded component and had assumed no liability for that component.

1. Whether the University could withhold the petitioner’s ICAR-funded share of pay arrears after seeking and receiving the grant specifically for that purpose.

2. Whether the petitioner was entitled to payment of the admitted arrears with interest and costs.

The judgment cited no specific statute, service rule, or precedent. It applied the principle that funds received for a specified purpose must be used for that purpose: where an institution has sought and received a grant earmarked for identified employees’ pay arrears, it must disburse the funds accordingly and cannot withhold or divert them to its own account without lawful authority or justification.

The Court also treated the State’s phased-release instructions as inapplicable to the ICAR-funded component, which the State had not undertaken to finance and had not directed the University to withhold.

The University’s own arrears statement identified ₹18,60,374 as due to the petitioner, and the University had sought the grant for payment of arrears to specified project employees.

CAFRI/ICAR released the funds under the pay head, expressly requiring their use for the stated purpose and within the relevant financial year.

The University’s transfer of the funds to its centralized account, non-payment to the employees, and issuance of a utilization certificate despite non-disbursement were inconsistent with those restrictions.

The State Finance Department’s instructions did not justify withholding the ICAR share; they distinguished it from the State-funded 25% component.

It directed the University to pay ₹18,60,374 with interest at 6% per annum from the due date, and to pay ₹50,000 in costs, completing payment by 9 November 2026.