The High Court of Karnataka at Bengaluru has given its verdict in Writ Petition No 20321 of 2021 filed by one Vimala Ramanath Pawar. As some of the observations made by the court and the judgment will have a far-reaching impact on the functioning of the banks with regard to the administration of pension payment of government employees.

There is a need to analyse the implications of the verdict.

Primarily, the case relates to the effort of the bank to recover some excess payment of pension from the family pensioner. The petitioner’s husband was a government servant and he was drawing pension after retirement. The husband of the petitioner was getting ₹38,604 as pension up to February 2019.

On account of some mistake, the pension amount was credited at the rate of ₹96,988 from March 2019 to February 6, 2021 (nearly two years). The husband of the petitioner died on February 6, 2021.

Recovery proceedings

When the petitioner approached the bank for family pension, the bank found out the mistake of excess payment for over two years and started recovery proceeding out of family pension payable to the petitioner. The petitioner was informed that excess pension has been paid to the husband of the petitioner and later an order of refund of ₹13,40,261 came to be passed against the petitioner.

The petitioner informed the bank that she was not aware of what the problem was but did admit that if there is any excess payment that has come to the account of the husband of the petitioner, she would clear it but not in one go. However, the bank did not accede to her request and on intermittent intervals had debited ₹6,40,000 from family pension amount and it was not even paying any family pension to the petitioner. Hence she filed this writ petition.

The bank submitted that it had acted as per a Master Circular for disbursement of government pension by agency banks which contains the following clause: “13 (d) If the overpayment cannot be recovered from the pensioner due to his death or discontinuance of pension, then action has to be taken as per the letter of undertaking given by the pensioner under the scheme.”

Court’s observation

But the court observed that though recovery of excess amount is permitted in terms of the Master Circular, which depicts uniform recovery of wrong payments made to pensioners drawing pension, that would not mean that the amount that is paid in excess is to be recovered in one stroke that too, from the petitioner who is a widow depending on family pension and is suffering from ailments at the age of 73 years.

Finally, the court directed the bank to re-credit the amount recovered — that is, ₹.6,40,000 or whatever — from the account of the petitioner within two weeks from the date of receipt of a copy of the order and also pay appropriate pension without any deduction on this issue.

Further, the court also informed that the bank is at liberty to recover ₹4,000 every month from the family pension the petitioner till the alleged excess amount deposited in the account of the husband of the petitioner gets cleared.

Implications

It is not uncommon for banks, as they handle millions of entries every day, to make mistakes. Though the banks have the concept of ‘Maker and Checker’ in their standard operating procedures, sometimes errors do creep in. The banks, as part of their process, will conduct an enquiry and fix accountability on the erring official in course of time and the official may get some punishment, including monetary penalty, for any wrongdoing.

When the court has commented that “the State Government has not paid any excess pension to the husband of the petitioner. It is the irresponsibility of the officers of the bank, which has led to such over payment,” the bank will proceed against the officials responsible for the lapse.

But in this case, when the pensioner was receiving more than two-and-a-half times of his monthly pension every month for two years, can anyone say he was not aware of the excess payment? It is also unbelievable that the spouse of the pensioner was not aware of any such excess payment. Is this not unjust enrichment? Can anyone say that the petitioner has come to the court with clean hands?

When there is a specific provision to recover excess payment made, it is beyond comprehension why that cannot be invoked. It is after all the directive of the government of India. Even under Section 72 of the Indian Contract Act 1872, “a person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it.” 

Time value of money

The court does not seem to have considered the time value of money while allowing recovery in instalments, which may run into 13 years. Yesterday’s, today’s and tomorrow’s hundred rupees are not the same. There is a vast difference between recovering ₹6,40,000 now and over a period of 13 years in instalments. This will be a direct loss to the bank.

Assuming an interest rate of 6 per cent per annum, the present value of this future recovery will be equal to ₹4,38,000, and the difference of more than ₹2 lakh is a loss to the bank, just because it is not allowed to adopt the government’s recovery method.

If the family pensioner also dies before complete recover of the amount due, then the bank may have to write off the balance due at that time because of this judgment.

Government banks are also commercial institutions. Though they can fulfil social obligations, they cannot be equated to charitable institutions. Banks have to pay interest for the funds they mobilise and banks earn a small percentage of commission for the pension disbursement, and it cannot be considered a remunerative business. That is why no private bank is willing to touch pension disbursement work.

One expects the bank to approach the appellate court as otherwise this will be taken as a precedence in all other cases that may come up in future.

The writer is a retired banker