CAT Quashes Post-Retirement Leave Recovery Against Retired MES Chief Engineer, Orders Reconsideration of LTC Cash Package Claim
The Principal Bench held that reconstructing a leave account post-retirement without a show-cause notice and denying LTC benefit on a pre-scheme advance payment were both legally unsustainable.
The Central Administrative Tribunal's Principal Bench at New Delhi has partly allowed an original application filed by Naresh Kumar Goel, a retired Chief Engineer of the Military Engineering Service, challenging recovery orders that sought to claw back over Rs. 4.94 lakh from his retiral dues. The Tribunal, presided over by Hon'ble Mr. Rajinder Kashyap, Member (A), quashed the impugned orders relating to alleged excess earned leave and directed the respondents to release admissible leave encashment after proper reconciliation of records within eight weeks. On the separate question of the LTC Cash Package Scheme introduced by the Government of India OM dated 12.10.2020, the Tribunal quashed the rejection order and directed reconsideration, holding that an advance booking payment made before the scheme's cut-off date cannot be treated as the determinative transaction when the actual purchase invoice and substantial payment came after 12.10.2020.
The Dispute Before the Tribunal
Naresh Kumar Goel was appointed as Assistant Executive Engineer in the Military Engineering Service on 01.12.1985 and superannuated from the post of Chief Engineer on 31.05.2021. At the time of retirement, his leave account reflected 34 days of Earned Leave and 237 days of Half Pay Leave, entitling him to leave encashment on both counts.
The trouble began when the Central Record Office, which is the custodian of service books for MES officers, undertook a re-verification of his leave account post-retirement. The CRO's initial certificate, received by the respondents on 22.12.2021, showed a negative balance of 147 days of Earned Leave and a positive balance of 247 days of Half Pay Leave. On that basis, Respondent No. 3 issued an order dated 19.01.2022 proposing recovery of Rs. 12,89,523/-, which after adjustment with HPL was reduced to Rs. 6,18,445/-.
The applicant submitted representations in March and July 2022 seeking reconciliation and release of retiral dues. The Record Office then revised its certificate in August 2022, indicating a net recoverable amount of only Rs. 65,792/-. Despite this revision, the respondents issued a fresh communication on 23.02.2023 directing the applicant to deposit Rs. 4,94,534/-, comprising leave encashment of Rs. 3,94,752/-, LTC advance of Rs. 62,600/-, and leave encashment on LTC of Rs. 37,182/-, after the Principal Controller of Defence Accounts vetted a fresh calculation sheet based on the revised CRO certificate showing minus 130 days EL and 245 days HPL.
A separate strand of the dispute concerned the LTC Cash Package Scheme. The applicant had applied for benefit under the Government of India OM dated 12.10.2020. His claim was rejected by order dated 13.09.2021 on the ground that he had made an initial payment of Rs. 4,47,591/- towards purchase of a Maruti car on 09.10.2020, i.e., three days before the scheme came into force. He was also directed to refund an LTC advance of Rs. 54,000/- along with leave encashment of Rs. 32,074/- and penal interest at 9% per annum.
The applicant's position was that the actual purchase invoice was dated 21.10.2020 and that the full and final payment was made after the OM was issued, making him eligible under the scheme.
The Case Made by Each Side
The applicant argued that all leave availed during service was sanctioned by the competent authority on the basis of leave records maintained at the unit level, and that those records had been audited multiple times without any irregularity being found. He contended that the CRO's post-retirement reconstruction of the leave account from the date of his appointment was contrary to a Government of India decision dated 27.07.2020, which clarified that an accounts officer has no authority to go back beyond a maximum of 24 months preceding the date of retirement. He also submitted that no show-cause notice was issued before the recovery was proposed and that no copy of the old leave record was supplied to him.
On the legal side, the applicant relied on the Supreme Court's judgment in State of Punjab v. Rafiq Masih, AIR 2015 SC 696, which laid down guidelines restricting recovery from government servants, and on Babu Lal Jain v. State of M.P., (2006) 6 SCC, for the proposition that recovery of excess payment is impermissible where the employee has not obtained the benefit by fraud or misrepresentation. He also cited several other Supreme Court decisions to the same effect.
The applicant further pointed to two earlier Tribunal orders, Gokal Chand Koslia v. Union of India (O.A. No. 956/2017) and J.R. Dhiman v. Union of India (O.A. No. 481/2010), in which the respondents' writ petitions before the High Court were dismissed, affirming the Tribunal's findings on similar questions.
The respondents defended the recovery on the ground that the Office of the Joint Secretary and Chief Administrative Officer functions only as a Drawing and Disbursing Officer and processes leave encashment solely on the basis of the audited Leave Encashment Certificate issued by the CRO. They maintained that they had not prepared any fresh leave account themselves and had no authority to do so. The calculation, they said, was duly vetted by the PCDA and was arithmetically correct. On the LTC question, they relied on the bank statement of the applicant showing a payment of Rs. 4,47,591/- on 09.10.2020, and on FAQ No. 13 issued by the Ministry of Finance on 10.11.2020, which clarified that transactions must have occurred on or after 12.10.2020.
The Legal Questions Framed
The Tribunal identified two issues for adjudication. First, whether revising the leave account post-retirement and directing recovery without affording an opportunity of hearing, despite leave having been duly sanctioned during service, was arbitrary and violative of the principles of natural justice. Second, whether rejecting the LTC Cash Package claim solely on the basis of an advance payment made before 12.10.2020, when the invoice and substantial payment came after that date, was legally sustainable.
How the Tribunal Reasoned
On the leave encashment question, the Tribunal accepted that the CRO is the custodian of service books for MES officers and that the respondents, as DDO, processed leave encashment on the basis of the CRO's audited certificate. It observed that when maintenance of the service book is entrusted to the CRO, unit-level leave records do not carry much evidentiary value. The Tribunal also noted that the service book was forwarded to the PCDA for verification before payment. The impugned orders dated 19.01.2022 and 20.02.2023/23.02.2023 were quashed insofar as they related to recovery towards alleged excess earned leave and withholding of leave encashment, with a direction for proper reconciliation of records before finalising the retiral benefits.
On the LTC Cash Package, the Tribunal's reasoning turned on the nature of the transaction. It held that an advance or booking amount paid before 12.10.2020 cannot be construed as the final transaction. The final transaction, in the Tribunal's view, was completed when the applicant made full and final payment and received a receipt, the date of which was 21.10.2020. The Tribunal read the OM dated 12.10.2020 as a beneficial and welfare-oriented measure designed to incentivise consumption during the Covid-19 pandemic, and applied the principle that beneficial schemes must receive a liberal and purposive interpretation.
The Tribunal drew on the Supreme Court's judgment in Urmila Dixit v. Sunil Sharan Dixit, (2025) 2 SCC 787, which restated that provisions of a beneficial legislation must be construed with a purpose-oriented approach and that literal construction is to be avoided. Applying that principle, the Tribunal held that treating a mere advance payment as determinative would defeat the very purpose of the scheme. Substantive compliance, purchase of goods, issuance of a valid GST invoice, and incurring of expenditure within the scheme period, ought to prevail over a procedural or incidental aspect such as advance booking. The Tribunal also noted that an advance booking is a transaction that could have been cancelled, and that a hyper-technical interpretation denying benefit on that basis was not warranted.
The Tribunal accordingly held that the applicant's LTC Cash Package claim required reconsideration in the light of the actual date of invoice and payments made after 12.10.2020, rather than being rejected solely on the basis of the initial booking amount. Issue No. 11(ii) was answered in favour of the applicant.
Order
The Original Application was partly allowed. The Tribunal issued the following directions:
First, the impugned orders/communications dated 19.01.2022 and 20.02.2023/23.02.2023, insofar as they relate to recovery towards alleged excess payment of Earned Leave and withholding of leave encashment, are quashed and set aside. The respondents are directed to finalise the retiral benefits of the applicant and release the admissible leave encashment amount along with all consequential benefits, after proper reconciliation of records, within eight weeks from the date of receipt of a certified copy of the order.
Second, the respondents are directed to examine and release all other admissible dues of the applicant, including TA/DA claims and CGEIS/insurance amount, if otherwise payable under the applicable rules, within the same eight-week period.
Third, the order dated 13.09.2021 relating to the LTC Cash Package Scheme is quashed, and the respondents are directed to reconsider the applicant's claim in the light of the actual date of invoice and payments made after 12.10.2020.
Fourth, if admissible dues are not released within the stipulated period, the applicant shall be entitled to interest at the GPF rate on the delayed payment from the date it became due till actual payment.
Pending miscellaneous applications, if any, stand disposed of. No order as to costs.