Pension calculation must be based on emoluments drawn during last ten months of service. Recovery from retired Class-III employees without notice is impermissible.

The applicant, Ved Prakash, was appointed on December 29, 1984, and retired on superannuation from the post of Electric Signal Maintainer-I (Level-5, GP 2800) with a last drawn basic pay of Rs. 46,800/-, as evidenced by his pay slips from June 2020 to November 2022.

However, without a show cause notice or hearing, his basic pay was reduced to Rs. 37,000/-, and his pension was fixed on this reduced amount through impugned orders dated December 23, 2022 (by respondent No. 3) and December 30, 2022 (by respondent No. 4).

Additionally, Rs. 12,54,000/- was recovered from his retiral dues post-retirement without prior notice, despite no prior communication of excess payment during his service.

The respondents contended that the applicant's pay was corrected due to a mistake in fixing it effective December 29, 1984, which was rectified via a letter dated February 12, 2014, leading to the revised pay of Rs. 37,000/- on January 1, 2022, after revision.

They also claimed the recovery of Rs. 12,54,313/- was informed to the applicant through his Supervisor via a letter dated December 29, 2022.

1. Whether the impugned orders dated December 23, 2022, and December 30, 2022, which reduced the applicant's pension and recovered Rs. 12,54,000/- from his retiral benefits, are legally sustainable.

2. Whether recovery of excess payment made to a Class-III employee after retirement, without prior notice or opportunity of hearing, is permissible in law.

3. Whether the applicant is entitled to a refund of the recovered amount with interest.

The court primarily applied Rule 50 of the Indian Railway Service (Pension) Rules, 1993, which mandates the determination of pension based on emoluments drawn during the last ten months of service.

It relied on the principle established in State of Punjab v. Rafiq Masih, 2015 (4) SCC 334, which held that recovery from Class-III and Class-IV employees, especially after retirement or within one year of retirement, is impermissible.

The court also referred to the Railway Board and Government of India circular/O.M. dated March 27, 2016, and June 22, 2016, which stated that no recovery shall be made from Group 'C' and 'D' (Class-III & IV) employees.

Furthermore, it extensively cited Jagdish Prasad Singh v. State of Bihar and others, 2024 SCC Online SC 1909, which reiterated that recovery of excess emoluments is not allowed if the payment was not due to the employee's misrepresentation or fraud and was made by the employer applying a wrong principle or interpretation of rules.

This case also highlighted that reduction in pay scale and recovery from a government employee can be punitive and requires adherence to natural justice, especially if the employee has superannuated.

The court found that the respondents illegally reduced the applicant's basic pay and fixed pension without a show-cause notice or affording an opportunity of hearing, contrary to Rule 50 of the Railway Services (Pension) Rules, 1993, which requires pension determination based on the last ten months' emoluments.

The applicant's last drawn basic pay was Rs. 46,800/-, but his pension was fixed at Rs. 37,000/-.

The recovery of Rs. 12,54,000/- from his retiral dues post-retirement was also made without prior notice.

The court specifically noted that the applicant, being a Class-III employee, was protected by the Supreme Court’s judgment in State of Punjab v. Rafiq Masih, which explicitly bars recovery from Class-III and Class-IV employees, especially retired ones or those due to retire within one year of the recovery order.

The court emphasized that there was no fault on the applicant's part regarding the alleged error committed by the respondents' authority, thus bringing the case squarely within the exceptions against recovery outlined in Rafiq Masih.

The tribunal also relied on Jagdish Prasad Singh, which held that recovery made without misrepresentation or fraud by the employee, or due to the employer's error, is impermissible and amounts to a punitive action without natural justice.

The respondents' belated claim of informing the applicant through his supervisor for recovery on December 29, 2022, was deemed insufficient as it occurred after retirement and without due process.

The impugned orders dated December 23, 2022, and December 30, 2022, pertaining to the recovery of Rs. 12,54,313/- from the applicant's retiral dues, were quashed and set aside.

The respondents were directed to refund the recovered amount to the applicant along with interest at the rate of 6% per annum, within three months from the date of receiving the certified copy of the order.

All pending MAs were deemed disposed of.