Introduction
In Mukhya Vyavasthapak, Banswara Kray Vikray Sahakari Samiti Limited v. Pradeep Singh Rathore & Ors. (D.B. Special Appeal Writ No. 993/2025, together with connected Special Appeals Nos. 995/2025, 1137/2025 and 1762/2025), decided on 10 September 2026, a Division Bench of the Rajasthan High Court at Jodhpur, comprising Chief Justice Sanjay K. Agrawal and Justice Munnuri Laxman, has held that a reduction in pay scale entails civil consequences and cannot be effected without first affording the employee an opportunity of hearing. The Bench dismissed the appeals even though the Society’s case was that the original appointments were irregular and that the reduction merely restored the earlier position. The decision is a useful reminder that an audit finding does not, by itself, dispense with a fair procedure.
Factual Background
The writ-petitioners (the respondents in the appeals) were initially engaged as Lower Division Clerks (“LDCs”) with Banswara Kray Vikray Sahakari Samiti Limited (the “Society”) on a consolidated remuneration of Rs. 12,000 per month. By an order dated 21 May 2013, they were appointed against regular posts and were granted the regular pay scale. During an audit conducted on 2 February 2018, the Auditor found that the appointments of these four employees were irregular.
Pursuant to the audit objection, the Society, by an order dated 5 February 2018, withdrew the regular pay scale granted to the employees and directed them to work on a fixed remuneration of Rs. 12,000 per month. The employees challenged this action by way of writ petitions. By a common order dated 19 December 2024, the learned Single Judge allowed the petitions on the ground that a reduction in pay scale entails civil consequences, that no notice or opportunity of hearing had been given, and that the Society’s action therefore violated the principles of natural justice. The Society filed the present Special Writ Appeals against that order.
Contentions Before the Court
The Society contended that fraud had been committed by the then Manager in making the appointments, and that, once the irregularities were detected in the audit, disciplinary proceedings were initiated against him and he was removed from service. It was further submitted that the resolution dated 15 June 2013 passed by the Society did not contain any approval of the appointments, and that the proceedings of 21 May 2013 related only to sanctioning the cadre strength of one post of LDC. Despite this, three persons were appointed as LDCs and one as an Assistant as regular employees and were granted regular pay scales. On this basis, the Society argued that its action was merely to restore the position existing before the irregular appointments, and that no opportunity of hearing was required in such circumstances.
The employees submitted that a reduction in pay scale entails civil consequences, so that they were entitled to be heard before such action was taken. Since no hearing had been granted, the Single Judge had rightly interfered. They relied on the decision of the Supreme Court in Mukund K. Pai & Ors. v. Punjab National Bank & Ors. (2025 SCC OnLine SC 2345).
Reliance on Mukund K. Pai and the Requirement of Hearing
The Division Bench noted that the order reducing the pay scales was dated 5 February 2018 and that no opportunity of hearing had been afforded to the affected employees before it was passed. The Single Judge had allowed the petitions on this ground alone. The Bench then set out the observations of the Supreme Court in Mukund K. Pai, which in turn drew on Bhagwan Shukla v. Union of India ((1994) 6 SCC 154). In that line of authority, a reduction of pay was treated as visiting the employee with civil consequences, and no such order could be passed without putting the employee on notice and hearing him. In Mukund K. Pai, the Supreme Court described observance of natural justice in cases of re-fixation of pay leading to financial loss as a sine qua non.
From these decisions, the High Court distilled the position that whenever the pay of an employee is reduced, the reduction entails civil consequences, and the affected party must be given an opportunity of hearing before it is effected. The impugned orders had been passed without any such opportunity. The Bench therefore held that the Single Judge was justified in interfering with them, found no merit in the appeals and dismissed them.
Irregularity of the Appointments and the Plea of Restoration
The judgment records the Society’s case on fraud by the former Manager, the absence of approval in the resolution of 15 June 2013 and the limited cadre strength sanctioned. The Bench, however, did not examine whether the appointments were in fact irregular, nor did it separately address the plea that the Society was only restoring the position existing before the appointments. Having recorded these contentions, it applied the rule that a reduction in pay must be preceded by an opportunity of hearing, found that no such opportunity had been given, and dismissed the appeals. LiveLaw reports the ruling as holding that a hearing was required even if the initial appointments were irregular.
AMLEGALS Remarks
The decision indicates that an establishment cannot treat an audit objection as sufficient authority to withdraw a pay scale already extended to an employee. Even where the appointment is genuinely defective, and even where the official who made it has been proceeded against, the affected employee would ordinarily need to be informed of the proposed action and given a reasonable opportunity to respond before the pay scale is revised. Establishments that discover irregularities in past appointments would be well advised to issue a show-cause notice setting out the audit finding, consider the employee’s reply, and pass a reasoned order, rather than directing an immediate reversion to the earlier terms.
From the perspective of employees, the ruling suggests that a reduction in pay or pay scale made without notice is open to challenge on the ground of breach of natural justice alone, irrespective of the merits of the establishment’s objection. It should be noted, however, that the decision turns on the absence of a hearing and does not hold that the appointments were regular. The judgment neither reserves nor refuses liberty to the Society to proceed afresh, and the position on that point would depend on how the Society acts after the dismissal of its appeals. The outcome in any given case would continue to depend on its specific facts and the terms of the order in question.
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