2025 INSC 449

SUPREME COURT OF INDIA

(HON’BLE PAMIDIGHANTAM SRI NARASIMHA, J. AND HON’BLE PRASHANT KUMAR MISHRA, JJ.)

JOGESWAR SAHOO & ORS.

Appellant

VERSUS

DISTRICT JUDGE, CUTTACK & ORS.

Respondent

Civil Appeal No(S). __________ OF 2025(Arising out of SLP(C) No(s). 5918 of 2024-Decided on 04-04-2025

Service Law

(A) Service Law - Recovery of Excess Payment - Opportunity of Hearing - Appeal challenging the High Court's dismissal of a writ petition against recovery orders issued for excess payments made to the appellants, who were Stenographers in the District Judiciary in Cuttack. The appellants, awarded retrospective financial benefits in 2017 based on Shetty Commission recommendations, faced recovery three years post-retirement without a hearing. The Court reiterated established legal precedents prohibiting recovery of amounts not obtained through fraud or misinterpretation by the employee. Emphasizing the lack of misrepresentation and the undue hardship recovery would cause, the Court found the recovery orders unsustainable, thus ruling in favor of the appellants and setting aside the High Court's decision and the subsequent recovery orders.

(Para 12)

(B) Service Law - Due Process - Recovery of Payments - Administrative Actions - Procedural shortcomings in the context of recovery orders against the appellants for excess payments. Held: That administrative actions impacting individuals' rights, particularly regarding financial recoveries post-retirement, require adherence to principles of natural justice, including the right to a fair hearing. The Court highlighted that the appellants were not afforded an opportunity to contest the recovery before it was ordered, thus breaching due process. This lack of procedural fairness contributed to the invalidation of the recovery directives, reinforcing that individuals must be informed and given a chance to be heard in administrative decisions affecting their entitlements.

(Para 11)

(C) Service Law - Equitable Relief - Pensioners’ Hardship - In confirming the long-standing jurisprudence surrounding the recovery of excess payments made to employees, the Supreme Court reiterated that such recovery is impermissible when there is no fraud or misrepresentation by the employee and when payments are made under erroneous interpretations of regulations. The Court surveyed several precedents, affirming that judicial discretion exists to mitigate hardship for employees, particularly lower-paid staff, upon whom recovery actions may impose undue strain, especially post-retirement. Emphasizing equity, the Court's ruling makes clear that the recovery of payments improperly issued without fault of the employee is not just a legal conclusion but a moral obligation that protects vulnerable individuals from financial unpredictability.

(Para 9)

JUDGMENT

Prashant Kumar Mishra, J. :- Leave granted.

2. This appeal is directed against the final judgment and order dated 09.11.2023 passed by the High Court of Orissa at Cuttack in WP (C) No. 33482 of 2023 where under the High Court dismissed the appellants’ writ petition in which a challenge was made to the orders dated 12.09.2023 and 08.09.2023 passed by the Special Judge, Special Court, Cuttack and Registrar, Civil Courts, Cuttack, as the case may be, directing recovery of Rs 26,034/-, Rs.40713/-, Rs. 26539/-, Rs. 24683/- and Rs. 21,485/-.

3. At the relevant time, the appellants were working as Stenographer Grade-I and Personal Assistant in the establishment of District Judiciary, Cuttack, Orissa. They were granted financial benefit for a sum of Rs 26,034/-, Rs.40713/-, Rs. 26539/-, Rs. 24683/- and Rs. 21,485/- by way of credit to their account vide Office Order No. 63 dated 10.05.2017passed by the District Judge, Cuttack granting promotion/appointment retrospectively w.e.f 01.04.2003 consequent upon upgradation of the Stenographers in three grades such as Stenographer Grade-I, Stenographer Grade-II and Stenographer Grade-III by relying upon the recommendations of the respondent no. 1 in compliance towards the implementation of the report of the Shetty Commission.

4. After grant of such financial benefit, in the year 2017, the appellants have superannuated from their respective postssometimes in the year 2020. After three years of their retirement and six years of granting the financial benefit, respondent no. 1 ordered for recovery of the said amount on the ground that extension of benefit of Shetty Commission’s recommendations to the appellants were on an erroneous interpretation of such recommendations, therefore, the financial benefit granted to them is liable to be recovered and under orders dated 12.09.2023 and 08.09.2023, the appellants were directed to deposit the excess drawn arrears. Since the orders were passed without affording any opportunity of hearing to the appellants, they preferred a writ petition before the High Court which came to be dismissed under the impugned judgment and order.

5. Learned counsel appearing for the appellants argued that the appellants were granted financial benefit without there being any fraud or misrepresentation by them, therefore, recovery of the amount after three years of their retirement is illegal and arbitrary. It is argued that the High Court has failed to consider the settled legal position in catena of decisions of this Court wherein such recovery from a low paid employee after retirement have been held bad in law.

6. Per contra, learned counsel appearing for the respondents would support the impugned judgment on submission that the appellants were not entitled to the financial benefit extended to them and the order passed by the District Judge, Cuttack was affirmed by the High Court of Orissa in exercise of an administrative power, therefore, the recovery is justified. It is also argued that such financial benefit upon retrospective promotion was granted with the condition that excess amount, if any, paid shall be refunded by the appellants and the appellants have furnished their respective undertakings to the said effect, therefore, they are estopped from challenging the recovery.

7. The issue falling for our consideration is not about the legality of the retrospective promotion and the financial benefit granted to the appellants on 10.05.2017. The issue for consideration is whether recovery of the amount extended to the appellants while they were in service is justified after their retirement and that too without affording any opportunity of hearing.

8. The law in this regard has been settled by this Court in catena of judgments rendered time and again; Sahib Ram vs. State of Haryana[(1995) Supp (1) SCC 18], Shyam Babu Verma vs. Union of India[(1994) 2 SCC 521], Union of India vs. M. Bhaskar[(1996) 4 SCC 416] and V. Gangaram vs. Regional Jt. Director[(1997) 6 SCC 139] and in a recent decision in the matter of Thomas Daniel vs. State of Kerala & Ors. [(2022) SCC online SC 536].

9. This Court has consistently taken the view that if the excess amount was not paid on account of any misrepresentation or fraud on the part 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 payments of emoluments or allowances are not recoverable. It is held that such relief against the recovery is not because of any right of the employee but in equity, exercising judicial discretion to provide relief to the employee from the hardship that will be caused if the recovery is ordered.

10. In Thomas Daniel (supra), this Court has held thus in paras 10, 11, 12 and 13:

“10. In Sahib Ram v. State of Haryana1 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. It was held thus:

“5. Admittedly the appellant does not possess the required educational qualifications. Under the circumstances the appellant would not be entitled to the relaxation. The Principal erred in granting him the relaxation. Since the date of relaxation, the appellant had been paid his salary on the revised scale. However, it is not on account of any misrepresentation made by the appellant that the benefit of the higher pay scale was given to him but by wrong construction made by the Principal for which the appellant cannot be held to be at fault. Under the circumstances the amount paid till date may not be recovered from the appellant. The principle of equal pay for equal work would not apply to the scales prescribed by the University Grants Commission. The appeal is allowed partly without any order as to costs.”

11. In Col. B.J. Akkara (Retd.) v. Government of India this Court considered an identical question as under:

“27. The last question to be considered is whether relief should be granted against the recovery of the excess payments made on account of the wrong interpretation/understanding of the circular dated 7-6-1999. This Court has consistently granted relief against recovery of excess wrong payment of emoluments/allowances from an employee, if the following conditions are fulfilled (vide Sahib Ram v. State of Haryana [1995 Supp (1) SCC 18 : 1995 SCC (L&S) 248], Shyam Babu Verma v. Union of India [(1994) 2 SCC 521 : 1994 SCC (L&S) 683 : (1994) 27 ATC 121], Union of India v. M. Bhaskar [(1996) 4 SCC 416 : 1996 SCC (L&S) 967] and V. Gangaram v. Regional Jt. Director [(1997) 6 SCC 139 : 1997 SCC (L&S) 1652]):

(a) The excess payment was not made on account of any misrepresentation or fraud on the part of the employee.

(b) 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.

28. Such relief, restraining back recovery of excess payment, is granted by courts not because of any right in the employees, but in equity, in exercise of judicial discretion to relieve the employees from the hardship that will be caused if recovery is implemented. A government servant, particularly one in the lower rungs of service would spend whatever emoluments he receives for the upkeep of his family. If he receives an excess payment for a long period, he would spend it, genuinely believing that he is entitled to it. As any subsequent action to recover the excess payment will cause undue hardship to him, relief is granted in that behalf. But where the employee had knowledge that the payment received was in excess of what was due or wrongly paid, or where the error is detected or corrected within a short time of wrong payment, courts will not grant relief against recovery. The matter being in the realm of judicial discretion, courts may on the facts and circumstances of any particular case refuse to grant such relief against recovery.

29. On the same principle, pensioners can also seek a direction that wrong payments should not be recovered, as pensioners are in a more disadvantageous position when compared to in-service employees. Any attempt to recover excess wrong payment would cause undue hardship to them. The petitioners are not guilty of any misrepresentation or fraud in regard to the excess payment. NPA was added to minimum pay, for purposes of stepping up, due to a wrong understanding by the implementing departments. We are therefore of the view that the respondents shall not recover any excess payments made towards pension in pursuance of the circular dated 7-6-1999 till the issue of the clarificatory circular dated 11-9-2001. Insofar as any excess payment made after the circular dated 11-9-2001, obviously the Union of India will be entitled to recover the excess as the validity of the said circular has been upheld and as pensioners have been put on notice in regard to the wrong calculations earlier made.”

12. In Syed Abdul Qadir v. State of Bihar excess payment was sought to be recovered which was made to the appellants-teachers on account of mistake and wrong interpretation of prevailing Bihar Nationalised Secondary School (Service Conditions) Rules, 1983. The appellants therein contended that even if it were to be held that the appellants were not entitled to the benefit of additional increment on promotion, the excess amount should not be recovered from them, it having been paid without any misrepresentation or fraud on their part. The Court held that the appellants cannot be held responsible in such a situation and recovery of the excess payment should not be ordered, especially when the employee has subsequently retired. The court observed that in general parlance, recovery is prohibited by courts where there exists no misrepresentation or fraud on the part of the employee and when the excess payment has been made by applying a wrong interpretation/understanding of a Rule or Order. It was held thus:

“59. Undoubtedly, the excess amount that has been paid to the appellant teachers was not because of any misrepresentation or fraud on their part and the appellants also had no knowledge that the amount that was being paid to them was more than what they were entitled to. It would not be out of place to mention here that the Finance Department had, in its counter_affidavit, admitted that it was a bona fide mistake on their part. The excess payment made was the result of wrong interpretation of the Rule that was applicable to them, for which the appellants cannot be held responsible. Rather, the whole confusion was because of inaction, negligence and carelessness of the officials concerned of the Government of Bihar. Learned counsel appearing on behalf of the appellant teachers submitted that majority of the beneficiaries have either retired or are on the verge of it. Keeping in view the peculiar facts and circumstances of the case at hand and to avoid any hardship to the appellant teachers, we are of the view that no recovery of the amount that has been paid in excess to the appellant teachers should be made.”

13. In State of Punjab v. Rafiq Masih (White Washer) wherein this court examined the validity of an order passed by the State to recover the monetary gains wrongly extended to the beneficiary employees in excess of their entitlements without any fault or misrepresentation at the behest of the recipient. This Court considered situations of hardship caused to an employee, if recovery is directed to reimburse the employer and disallowed the same, exempting the beneficiary employees from such recovery. It was held thus:

“8. As between two parties, if a determination is rendered in favour of the party, which is the weaker of the two, without any serious detriment to the other (which is truly a welfare State), the issue resolved would be in consonance with the concept of justice, which is assured to the citizens of India, even in the Preamble of the Constitution of India. The right to recover being pursued by the employer, will have to be compared, with the effect of the recovery on the employee concerned. If the effect of the recovery from the employee concerned would be, more unfair, more wrongful, more improper, and more unwarranted, than the corresponding right of the employer to recover the amount, then it would be iniquitous and arbitrary, to effect the recovery. In such a situation, the employee's right would outbalance, and therefore eclipse, the right of the employer to recover.

xxxxxxxxx

18. It is not possible to postulate all situations of hardship which would govern employees on the issue of recovery, where payments have mistakenly been made by the employer, in excess of their entitlement. Be that as it may, based on the decisions referred to hereinabove, we may, as a ready reference, summarise the following few situations, wherein recoveries by the employers, would be impermissible in law:

(i) Recovery from the employees belonging to Class III and Class IV service (or Group C and Group D service).

(ii) Recovery from the retired employees, or the employees who are due to retire within one year, of the order of recovery.

(iii) Recovery from the employees, when the excess payment has been made for a period in excess of five years, before the order of recovery is issued.

(iv) Recovery in cases where an employee has wrongfully been required to discharge duties of a higher post, and has been paid accordingly, even though he should have rightfully been required to work against an inferior post.

(v) In any other case, where the court arrives at the conclusion, that recovery if made from the employee, would be iniquitous or harsh or arbitrary to such an extent, as would far outweigh the equitable balance of the employer's right to recover.”

11. In the case at hand, the appellants were working on the post of Stenographers when the subject illegal payment was made to them. It is not reflected in the record that such payment was made to the appellants on account of any fraud or misrepresentation by them. It seems, when the financial benefit was extended to the appellants by the District Judge, Cuttack, the same was subsequently not approved by the High Court which resulted in the subsequent order of recovery. It is also not in dispute that the payment was made in the year 2017 whereas the recovery was directed in the year 2023. However, in the meanwhile, the appellants have retired in the year 2020. It is also an admitted position that the appellants were not afforded any opportunity of hearing before issuing the order of recovery. The appellants having superannuated on a ministerial post of Stenographer were admittedly not holding any gazetted post as such applying the principle enunciated by this Court in the above quoted judgment, the recovery is found unsustainable.

12. For the aforestated, we are of the considered view that the appeal deserves to be allowed. Accordingly, we allow the appeal and set aside the order of the High Court and in consequence the orders dated 12.09.2023 and 08.09.2023 by which the appellants were directed to deposit the excess drawn arrears are set aside.

------