Recovery of pecuniary loss cannot be enforced without a concluded disciplinary finding and proper hearing.

The State preferred an appeal under Section 2(1) of the Madhya Pradesh Uchcha Nyayalaya (Khand Nyayapeeth Ko Appeal) Adhiniyam, 2005, against the order dated 11 February 2025 in W.P. No. 137/2020, whereby the Single Judge quashed recovery orders dated 20 September 2019 and 13 December 2019 directing recovery of ₹24,58,173 from Dr. Krishan Murari Dwivedi.

During his tenure as District Project Coordinator, the respondent issued purchase orders allegedly exceeding the sanctioned limit of ₹1,20,000 per hostel, with aggregate orders valued at ₹10,18,525.

The State alleged that an inspection/inquiry report attributed financial irregularity and negligence to him and that an arbitral award in favour of M/s Himalaya House ultimately caused a liability of ₹24,58,173 to the State exchequer.

The respondent contended that the orders were issued after approval of the Collector, that he was transferred before the goods were supplied, and that the successor DPC accepted and utilized the goods after the respondent’s transfer.

He further argued that the departmental inquiry had not culminated in a final finding of guilt and that recovery was ordered without an effective opportunity of hearing.

1. Whether the respondent could be held personally liable for the entire pecuniary liability arising from purchase orders issued during his tenure when the goods were supplied, received, and utilized after his transfer by the successor DPC.

2. Whether recovery of ₹24,58,173 could be effected in the absence of a concluded departmental proceeding and a final finding of guilt against the respondent.

3. Whether the recovery proceedings were invalid for failure to afford the respondent a proper opportunity of hearing, in breach of the principles of natural justice.

Rule 10(iii) of the Madhya Pradesh Civil Services (Classification, Control and Appeal) Rules, 1966 permits recovery from an employee’s pay of the whole or part of pecuniary loss caused to the Government by negligence or breach of orders, but such recovery must be founded on a lawful determination of the employee’s responsibility.

The principles of natural justice require that a person against whom recovery is proposed must receive a proper opportunity of hearing.

A preliminary or incomplete inquiry report, without a concluded disciplinary proceeding and final finding of guilt by the competent authority, does not by itself constitute a sufficient basis for fastening the entire financial liability upon the employee.

The State relied on State of Uttar Pradesh v. Brahm Datt Sharma, (1987) 2 SCC 179, in support of the proposition that the Government may recover loss caused by an employee’s negligence.

Although the purchase orders were issued during the respondent’s tenure, they were issued after approval of the Collector, and the respondent had been transferred before the goods were supplied.

The successor DPC had attempted to cancel the orders, but the supplier subsequently delivered the goods, which were received, physically verified, and utilized by the successor. Consequently, the respondent could not be held solely responsible for the entire liability arising from the subsequent supply and arbitral proceedings.

Further, the departmental inquiry had not culminated in a final order holding him guilty.

Since Rule 10(iii) presupposes a legally established connection between the employee’s negligence or breach and the Government’s loss, the incomplete inquiry report could not independently justify execution of a recovery certificate for the entire amount.

The absence of a proper hearing before initiating the recovery proceedings independently violated natural justice and rendered the recovery unsustainable.

It held that the respondent could not be saddled with the entire liability in the absence of a final disciplinary finding, particularly when the goods were supplied and accepted after his transfer.

No recovery was to be made from him.

The competent authority was directed to release all retiral dues legally payable to the respondent within two months from the date of the judgment, subject to verification in accordance with law.