State Of M.P. & Ors vs Yogendra Shrivastava

The question involved in these appeals filed by the

State of Madhya Pradesh, relates to the quantum of Non-

Practicing Allowance (`NPA' for short) payable to 2

certain categories of Medical Officers belonging to the

State Insurance service.

2. The Madhya Pradesh Employees State Insurance

Service (Gazetted) Recruitment Rules, 1981 (in short

`the Rules') framed by the State Government came into

force in the year 1982. Rule (5) of the Rules provides

that classification of the service, the scales of pay

attached thereto and the number of posts included in the

service shall be in accordance with the provisions

contained in Schedule I thereto. The scales of pay and

NPA payable to different categories of Medical Officers,

other than the Director of the Service, are extracted

below from Schedule I to the Rules:

S Name of the Posts included in the Scale of pay l.N service o.

2. Dy. Director Rs.680-40-800-50-1000-

3. Superintendent, ESI Hospital EB-50-1150 + NPA @

4. Specialist, ESI Hospital 25% of pay

5. Supervisory Insurance Medical Officer

6. Insurance Medical Officer (Class I) Rs.500-30-680-40-800-

EB-50-1150 + NPA @ 25% of pay

7. Insurance Medical Officer/Assistant Rs.425-25-500-30-680-

Surgeon EB-40-800-50-900 + Rs.100 pm as ESI Special Allowance + NPA @ 25% of pay 3

Non-Practising Allowance is paid to Medical Officers

when private practice by medical officers was prohibited

and abolished.

3. Even though the rules specified that the aforesaid

categories of Medical Officers were entitled to NPA

linked to their pay (that is 25% of the basic pay), the

letters of appointment issued to them specified that the

NPA payable to them would be a fixed lump sum

approximately equal to 25% of the initial (minimum) pay

in the pay scale applicable to them, (as contrasted from

a variable linked to the quantum of their pay provided

under the Rules). As a result, whenever there were

increases in their pay on account of annual increments,

NPA was not correspondingly increased so as to maintain

it at 25% of basic pay, but continued to be paid at the

fixed lump sum rate. The state Government was however

revising the fixed lump sum NPA, whenever there was

revisions in the pay scales, by issuing executive

orders. The respondents in these appeals as also several

other medical officers brought this anomaly to the 4

notice of the department and requested that the NPA

should be paid to them at 25% of the pay in accordance

with the rules, as was done in the case of Medical

Officers working in the Public Health and Medical

Education departments.

4. As their request was not acceded, the respondents

approached the Madhya Pradesh Administrative Tribunal

seeking a direction for payment of NPA in accordance

with the Rules. They contended that whenever there was

an increase in their basic pay, either on account of

annual increments in the pay scale or on account of

revision of pay scales, there should be corresponding

automatic increase in the NPA in terms of the Rules

which required payment of "NPA @ 25% of the pay". The

Tribunal accepted the contention and allowed their

applications and directed the appellant to calculate and

pay NPA at the rate of 25% of the pay from the

respective dates of their joining service. The State

Government filed writ petitions challenging the orders

of the Tribunal. The High Court dismissed those

petitions, upholding the orders of the Tribunal. The 5

said orders of the High Court are under challenge in

these appeals by special leave.

5. It should be noted here that as there was no stay,

the state government instructed the Director of

Employees State Insurance Services, to give effect to

the orders of the Tribunal affirmed by the High Court

and pay the respondents NPA @ 25% of their salary from

the respective dates of their appointment, subject to

the final decision of this Court, with a condition that

if the matters were decided in favour of the appellants,

recovery of the excess payment would be made.

6. The appellant State also amended the Madhya Pradesh

Employees State Insurance Service (Gazetted) Rules 1981

(by notification dated 20.3.2003) and substituted the

words "NPA at such rate as may be fixed by state

government from time to time by orders issued in this

behalf" in place of the words "NPA at 25% of pay"

wherever they occurred in the Rules, with retrospective

effect from 14.10.1982.

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7. In this background, on the contentions raised by

the parties, the following three questions arise for our

consideration:

(i) Whether the rates of NPA specified in the letters of appointment and the orders of the department, can prevail over the provisions relating to NPA in the Rules ?

(ii) Whether the retrospective amendment of the Rules by notification dated 20.5.2003, can deny the benefit which had accrued under the unamended Rules?

(iii) Even if the respondents are held to be entitled to higher NPA as contended by them and as found by the Tribunal and the High Court, whether the financial benefit could be extended to them beyond three years prior to filing of the original applications before the Tribunal.

Re : Question (i)

8. The appellants contend that the Rules do not

contain any specific provision for payment of non-

practising allowance. They point out that schedule I to

the Rules merely refers to "plus NPA @ 25% of the pay"

in the column relating to the pay scale, without

defining the term `pay'. It is submitted that when the

term `pay' is not defined, it can refer to the minimum

or initial pay in the pay-scale, or to each stage in the 7

pay-scale commencing from the initial pay and ending

with the maximum pay in the pay-scale. It is contended

that the State Government had proceeded on the basis

that "25% of the pay" referred to the `25% of initial

pay' and had fixed the NPA keeping the said figure in

view, by means of executive orders. It is submitted that

fixing of a lump sum as NPA, approximately equal to 25%

of the initial pay in the applicable pay-scale, by

executive orders issued by the Government from time to

time, was therefore in consonance with the Rules.

Alternatively, it was contended that incidental matters

relating to number of posts, pay scales and NPA referred

to the Schedule to the Rules, were subject to periodical

revision/changes and it was common practice to make such

revisions/changes, by executive orders instead of

adopting the process of amending the rules every time,

and that such executive orders were binding on the

employees and were never challenged.

9. The Rules made under Article 309 of the

Constitution clearly provided that the concerned

employees (medical officers) were entitled to NPA @ 25% 8

of pay, in addition to the pay in the pay scale. In

fact, it formed part of the pay scale. Consequently,

whatever was the basic pay, 25% thereof had to be paid

as NPA. Whenever the benefit of increments in the pay-

scale, or revision in pay scale were extended, NPA also

got correspondingly increased so that NPA always

remained as one fourth of the basic pay. This is the

interpretation that has been put forth by the Tribunal

and upheld by the High Court and we find no reason to

interfere with the same.

10. The contention that the executive orders issued

from time to time or the appointment letters issued in

accordance with such executive orders will prevail over

the Rules cannot be accepted. When there is conflict

between the Statutory Rules and executive orders, the

statutory Rules will prevail (See : K. Dayananda Lal

vs. State of Kerala - 1996 (9) SCC 728, T. N. Housing

Board vs. N. Balasubramaniun - 2004 (6) SCC 85, State

of Karnataka vs. K.G.S.D. Canteen Employees Welfare

Association - 2006 (1) SCC 567 and Punjab National Bank

vs. Astamija Dash - 2008 (14) SCC 370). Executive orders 9

cannot be made or given effect in violation of what is

mandated by the Rules. If appointment letters provides

for payment of NPA which is not in consonance with

Rules, they can be corrected or set right by

Tribunals/courts.

Re : Question No.(ii)

11. The Rules were retrospectively amended on 20.5.2003

substituting the words "NPA at such rates as may be

fixed by the state government from time to time by order

issued in this behalf" in place of "NPA @ 25% of pay" in

the Rules. It was contended that as the Rules were

amended in the year 2003 with retrospective effect from

14.10.1982, it should be deemed that the NPA payable was

as notified by the government from time to time and not

`25% of the pay'.

12. It is no doubt true that Rules under Article 309

can be made so as to operate with retrospective effect.

But it is well settled that rights and benefits which 1

have already been earned or acquired under the existing

rules cannot be taken away by amending the rules with

retrospective effect. [See : N.C. Singhal vs. Director

General, Armed Forces Medical Services - 1972 (4) SCC

765; K. C. Arora vs. State of Haryana - 1984 (3) SCC

281; and T.R. Kapoor vs. State of Haryana - 1986 Supp.

SCC 584]. Therefore, it has to be held that while the

amendment, even if it is to be considered as otherwise

valid, cannot affect the rights and benefits which had

accrued to the employees under the unamended rules. The

right to NPA @ 25% of the pay, having accrued to the

respondents under the unamended Rules, it follows that

respondents-employees will be entitled to Non-Practising

Allowance @ 25% of their pay upto 20.5.2003.

Re : Question No.(iii)

13. The Tribunal directed payment of the difference in

NPA to respondents from their respective dates of

appointment. The respondents were appointed from 1982

onwards. The respondents had approached the Tribunal 1

long after their appointment, that is, in 1998 or

thereafter.

14. The appellants contended that the claims were

therefore barred by limitation. It was pointed out that

the respondents were paid NPA at a fixed rate as

stipulated in the appointment orders and NPA was

increased only when it was revised by Government orders

from time to time; that respondents accepted such NPA

without protest; and that therefore, they cannot, after

periods varying from 5 to 15 years, challenge the

fixation of NPA or contend that they are entitled to NPA

at a higher rate, that is 25% of their pay. We cannot

agree. Where the issue relates to payment or fixation of

salary or any allowance, the challenge is not barred by

limitation or the doctrine of laches, as the denial of

benefit occurs every month when the salary is paid,

thereby giving rise to a fresh cause of action, based on

continuing wrong. Though the lesser payment may be a

consequence of the error that was committed at the time

of appointment, the claim for a higher allowance in

accordance with the Rules (prospectively from the date 1

of application) cannot be rejected merely because it

arises from a wrong fixation made several years prior to

the claim for correct payment. But in respect of grant

of consequential relief of recovery of arrears for the

past period, the principle relating to recurring and

successive wrongs would apply. Therefore the

consequential relief of payment of arrears will have to

be restricted to a period of three years prior to the

date of the original application. [See: M.R. Gupta vs.

Union of India - 1995 (5) SCC 628, and Union of India

vs. Tarsem Singh 2008 (8) SCC 648]

Conclusion :

15. The appeals are allowed in part as follows:

(i) We uphold the decision of the Tribunal, affirmed

by the High Court that respondents are entitled to 25%

of their pay, as NPA.

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(ii) The respondents will be entitled to NPA @ `25% of

pay' only upto 20.5.2003. Thereafter, the amended Rules

will apply.

(iii) In so far as arrears, the respondents are entitled

to recover the difference in NPA only in regard to the

salary which accrued due during the three0 years prior

to the date of filing of the original applications by

the respondents before the Tribunal and not from the

date of their appointments.

(iv) As a consequence, if the appellants, in pursuance

of the orders of the Tribunal/High Court, had paid the

difference in NPA, for any period beyond three years

before the date of the respective original applications,

they will be at liberty to recover the same from the

respective respondents in 24 monthly instalments.

__________________J [R. V. Raveendran] 1

____________________J [B. Sudershan Reddy] New Delhi;

October 07, 2009.