Reportable

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.3156 OF 2007

State of Madhya Pradesh & Ors. …….  Appellants Vs. Yogendra Shrivastava         ….…  Respondent  

WITH Civil Appeal Nos.3157, 3158, 3159, 3160, 3161, 3162,  3163, 3164, 3165, 3166, 3167 of 2007

AND Civil Appeal Nos.6043, 6044, 6045, 6046, 6047, 6076 of  2007 Civil Appeal Nos. 6895, 6896 and 6897 of 2009 (arising  from SLP(C) Nos.12549 of 2004), SLP(C) No.2039 of 2005  and SLP(C) No.2040 of 2005).   

O R D E R R.V.RAVEENDRAN, J.

Delay condoned and leave granted in the SLPs.  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

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 l.N o.

Name of the Posts included in the  service

Scale of pay

2. 3. 4. 5.

Dy. Director Superintendent, ESI Hospital Specialist, ESI Hospital Supervisory Insurance Medical Officer

Rs.680-40-800-50-1000- EB-50-1150 + NPA @  25% of pay  

6. Insurance Medical Officer (Class I) Rs.500-30-680-40-800- EB-50-1150 + NPA @  25% of pay

7. Insurance Medical Officer/Assistant  Surgeon

Rs.425-25-500-30-680- EB-40-800-50-900 +  Rs.100 pm as ESI Special  Allowance + NPA @ 25%  of pay

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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  

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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  

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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  

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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%  

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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  

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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  

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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  

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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  

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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]

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____________________J [B. Sudershan Reddy]

New Delhi; October 07, 2009.

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