Liability must be determined under Section 89 of the Panchayat Act before recovery proceedings under Section 92.

The petitioner, working as a Gram Rojgar Sahayak in Gram Panchayat Sojna, challenged a recovery order dated 28.01.2020 issued by the CEO, Zila Panchayat, Gwalior

The respondents alleged that the petitioner was responsible for double payments made to 18 beneficiaries under the Swachh Bharat Mission via the online portal and FTO process

While the petitioner contended that his role was limited to supervision and that sanctioning power rested with the Sarpanch and Secretary, the State maintained that an inquiry by the Project Officer established the petitioner's involvement in manipulating beneficiary IDs

No formal inquiry to adjudicate liability was conducted prior to the recovery order

1. Whether the respondents could directly initiate recovery proceedings under Section 92 of the Adhiniyam without first adjudicating liability and quantifying loss under Section 89

2. Whether the impugned recovery order was passed in violation of the principles of natural justice and established legal precedents

The court primarily applied Sections 89 and 92 of the Madhya Pradesh Panchayat Raj Evam Gram Swaraj Adhiniyam, 1993. Section 89 mandates a proper inquiry to determine responsibility and quantify loss in cases of misappropriation of Panchayat funds, while Section 92 provides the mechanism for recovery once such liability is established

The Court relied on the Division Bench precedent in State of M.P. & Others vs. Ku. Preeti Patidar & Others (W.A. No. 949/2021), which held that recovery under Section 92 is impermissible unless the amount due is first determined and quantified through an inquiry under Section 89

The Court reasoned that Sections 89 and 92 operate in a sequential and connected manner

It observed that a mere show-cause notice and response cannot substitute for the mandatory statutory requirement of a formal inquiry to fix responsibility

In this case, the respondents jumped to recovery under Section 92 based on "assumptions" without an independent finding establishing that the petitioner alone—who held limited supervisory functions—was responsible for the loss

Furthermore, the Court noted that other authorities (Sarpanch, Secretary, and Block level officers) involved in the payment process were ignored, and fastening the entire liability on the petitioner without supplying him with the materials relied upon constituted a breach of natural justice

Because the liability was not "res integra" and remained unquantified under the prescribed legal process, the recovery was held to be without jurisdiction

It held that recovery under Section 92 is unsustainable in law without prior adjudication under Section 89

The matter was remanded to the competent authority to conduct a fresh inquiry under Section 89, providing the petitioner and other concerned parties an adequate opportunity to be heard, to determine specific roles, responsibilities, and the exact quantification of loss before any recovery is initiated