Recovery From Salary Without Fixing Responsibility or Enquiry Is Unconstitutional: Orissa High Court Quashes ₹1.24 Lakh Deduction Against Junior Engineer For Theft Losses

“Mere occurrence of thefts during an employee’s tenure does not establish liability — recovery without notice, enquiry or fixing blame violates natural justice”, Orissa High Court, in a significant decision concerning public employment and principles of natural justice, quashed a recovery order issued by the Odisha Lift Irrigation Corporation Ltd. against a Junior Engineer, Mohan Behera, directing recovery of ₹1,24,774.20 towards the value of materials stolen from the Corporation’s Central Store during his tenure.

Justice Sanjay Kumar Mishra held that no recovery can be made from an employee’s salary without notice, enquiry, or fixation of responsibility, even when public funds are involved. The Corporation was ordered to refund the entire amount with 7% interest, failing which a 12% penal interest would apply.

“Recovery Order Without Notice or Hearing Violates Natural Justice and Is Liable To Be Quashed”

The Court emphatically ruled that the common recovery order dated 26.09.2018 passed by the Financial Advisor and Chief Accounts Officer of OLIC Ltd., which included the petitioner’s name at Serial No.24, was illegal and unconstitutional. It was passed without issuing a show-cause notice, conducting any departmental enquiry, or giving the employee an opportunity to contest the liability.

“Law is well settled that fair play in action warrants that no such order, which has the effect of an employee suffering civil consequences, should be passed without putting the concerned to notice and giving him a hearing in the matter,” the Court held [Para 14].

The Court found that the entire deduction was carried out unilaterally, purely based on the fact that the thefts had occurred while the petitioner was in-charge of the store, without any proof of misconduct or negligence on his part.

Employee Reported Thefts, Lodged FIRs, Took All Reasonable Steps — Yet Was Penalised Without Cause

Between 2004 and 2005, several thefts occurred at the Central Store of the L.I. Division, Berhampur, where Mohan Behera served as Junior Engineer (Civil) and was the store in-charge. The record revealed that he had:

• Promptly lodged FIRs for each incident (dated 19.08.2004, 14.12.2004, etc.)

• Cooperated with police investigations

• Submitted detailed compliance reports

• Followed up with the authorities to pursue action

The Executive Engineer, through letters dated 03.10.2007 and 30.01.2018, explicitly recommended that the losses be treated as corporate loss, not individual liability, and the amount be dropped from the outstanding dues against the petitioner.

The communication stated: “Looking to the above circumstances, the above amount, if desired, may be treated as loss to the Corporation... Since Sri Behera has observed all official formalities... the above cost is loss to the Corporation.” [Para 11]

Despite this, the Corporation chose to ignore these findings and acted upon a subsequent contrary recommendation dated 18.09.2018, without informing or consulting the petitioner.

“Selective Acceptance Of Internal Recommendations Without Reason Is Arbitrary”

The High Court highlighted the arbitrariness of the Corporation’s conduct in relying on a single communication while disregarding multiple earlier recommendations by the same or equivalent officers that had found no fault on the part of the petitioner.

“The Opposite Parties have failed to demonstrate... how they could act on the subsequent recommendation made by the succeeding Executive Engineer... without making any communication... thereby giving him an opportunity to have his say in the said regard.” [Para 13]

This conduct, the Court held, violated the basic tenets of administrative fairness and public accountability, especially when civil consequences were being imposed on a government employee.

Public Money Argument Cannot Override Due Process

Rejecting the Corporation’s justification that the loss involved public funds, the High Court made it clear that even when public money is at stake, recovery must follow established procedures.

“The Authority concerned was not justified to recover the alleged outstanding from the Petitioner without fixing any responsibility... such unilateral action... is illegal and unjustified, being hit by the principles of natural justice.” [Para 16]

The Court cautioned that financial discipline must be enforced within the boundaries of constitutional rights and fairness.

Recovery Was Completed During Pendency Of Writ Petition — Court Orders Refund With Interest

Despite the pendency of the writ petition since 2018, the Corporation went ahead and completed the recovery from the petitioner’s salary — a fact admitted by both parties.

In response, the Court directed:“The Opposite Parties are directed to refund the said amount to the Petitioner with 7% simple interest thereon from the date of last deduction... failing which... 12% penal interest shall apply.” [Para 18]

The refund is to be processed within four weeks from submission of the certified copy of the judgment.

This judgment reiterates a fundamental service law principle: no recovery can be ordered against a government employee unless responsibility is clearly fixed through a fair procedure. The Orissa High Court not only protected the rights of the petitioner but also reaffirmed natural justice as a non-negotiable element of public administration.

By quashing the recovery order and directing refund with interest, the Court ensured accountability of the Corporation’s internal decision-making and emphasized that procedural safeguards cannot be sacrificed even in the name of public loss.

Date of Decision: 12 November 2025