2022 (5) TMI 1674 - SC - Indian Laws

Retired employee cannot be forced to repay salary increments granted in error after 10 years without fraud proof

Thomas Daniel Versus State of Kerala & Ors.

The SC held that increments granted in error cannot be recovered from a retired employee after 10 years without proof of misrepresentation or fraud. The ... Recovery of increments granted in error - whether increments granted to the appellant, while he was in service, can be recovered from him almost 10 years after his retirement on the ground that the said increments were granted on account of an error? - HELD THAT:- This Court in a catena of decisions has consistently held that if the excess amount was not paid on account of any misrepresentation or fraud of the employee or if such excess payment was made by the employer by applying a wrong principle for calculating the pay/allowance or on the basis of a particular interpretation of rule/order which is subsequently found to be erroneous, such excess payment of emoluments or allowances are not recoverable. This relief against the recovery is granted not because of any right of the employees but in equity, exercising judicial discretion to provide relief to the employees from the hardship that will be caused if the recovery is ordered. This Court has further held that if in a given case, it is proved that an employee had knowledge that the payment received was in excess of what was due or wrongly paid, or in cases where error is detected or corrected within a short time of wrong payment, the matter being in the realm of judicial discretion, the courts may on the facts and circumstances of any particular case order for recovery of amount paid in excess. In Sahib Ram v. State of Haryana and Others [1994 (9) TMI 373 - SUPREME COURT] this Court restrained recovery of payment which was given under the upgraded pay scale on account of wrong construction of relevant order by the authority concerned, without any misrepresentation on part of the employees. Coming to the facts of the present case, it is not contended that on account of the misrepresentation or fraud played by the appellant, the excess amounts have been paid. The appellant has retired on 31.03.1999. In fact, the case of the respondents is that excess payment was made due to a mistake in interpreting Kerala Service Rules which was subsequently pointed out by the Accountant General. Conclusion - An attempt to recover the said increments after passage of ten years of his retirement is unjustified. Appeal allowed. ISSUES PRESENTED and CONSIDEREDThe core legal question considered in this judgment is whether increments granted to the appellant during his service can be recovered from him almost ten years after his retirement, based on the assertion that these increments were granted due to an error in interpreting the applicable service rules.ISSUE-WISE DETAILED ANALYSISRelevant Legal Framework and PrecedentsThe case primarily hinges on the interpretation of the Kerala Service Rules and the precedents set by the Supreme Court concerning the recovery of excess payments made due to administrative errors. The key legal precedents referenced include decisions in Sahib Ram v. State of Haryana, Col. B.J. Akkara (Retd.) v. Government of India, Syed Abdul Qadir and Others v. State of Bihar, and State of Punjab and Others v. Rafiq Masih. These cases collectively establish that recovery of excess payments is generally not permissible if the payments were made without misrepresentation or fraud by the employee and were due to an erroneous interpretation of rules by the employer.Court's Interpretation and ReasoningThe Court noted that the excess payments to the appellant were not made due to any misrepresentation or fraud on his part. Instead, the payments resulted from a misinterpretation of the Kerala Service Rules by the employer. The Court emphasized that recovery of such payments is generally restrained to prevent undue hardship to the employee, especially when the employee has retired or is close to retirement.Key Evidence and FindingsThe appellant joined service as a High School Assistant/Teacher and took leave without allowance to pursue higher education. He was later promoted and received increments, which were later contested by the state on the grounds that the leave period should not have been included in calculating his qualifying service. The appellant retired in 1999, and recovery proceedings were initiated nearly ten years later.Application of Law to FactsThe Court applied the principles from the cited precedents to the appellant's case, emphasizing that the recovery of payments made due to administrative errors, without any fault of the employee, is inequitable. The Court found that the appellant had no knowledge of the erroneous nature of the payments and had already retired, making recovery particularly harsh.Treatment of Competing ArgumentsThe appellant argued that the excess payments were not due to any fraudulent actions on his part but were the result of an incorrect interpretation of the service rules. The respondents contended that recovery was justified based on the corrected interpretation of the rules. The Court sided with the appellant, highlighting the undue hardship recovery would cause, especially given the appellant's retirement status.ConclusionsThe Court concluded that the recovery of increments granted to the appellant was unjustified and set aside the previous orders allowing such recovery.SIGNIFICANT HOLDINGSThe Court reiterated the principle that recovery of excess payments is not permissible when the payments were made without misrepresentation or fraud by the employee and resulted from the employer's erroneous interpretation of rules. The judgment emphasized equity and the prevention of hardship to retired employees.Core Principles EstablishedThe judgment reinforced the principle that recovery of excess payments should be restrained in cases where the payments were made due to administrative errors and not due to any fault of the employee. This principle is particularly applicable to retired employees or those nearing retirement, as recovery would cause undue hardship.Final Determinations on Each IssueThe Court allowed the appeal, setting aside the orders of the Division Bench and the Single Judge of the High Court, as well as the order from the Public Redressal Complaint Cell and the recovery notice. The Court determined that the recovery of increments from the appellant was unjustified, given the circumstances of the case and the established legal principles.