1. Recovery of increments granted due to erroneous interpretation of service rules — dispute over qualifying service for leave without allowance — recovery sought after retirement. (Para 1 , 2 , 3 , 4 , 5 )
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2022 Supreme(SC) 387
SUPREME COURT OF INDIA
S. Abdul Nazeer, Vikram Nath, JJ.
Thomas Daniel – Appellant
Versus
State Of Kerala & Ors. – Respondent
Civil Appeal No. 7115 of 2010
Decided on : 02-05-2022
Important Points
IMPORTANT POINT
Recovery – If excess amount was not paid on account of any misrepresentation or fraud of employee or if such excess payment was made by employer by applying a wrong principle for calculating 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.
Recovery – If excess amount was not paid on account of any misrepresentation or fraud of employee or if such excess payment was made by employer by applying a wrong principle for calculating 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.
Subject
Employment - Recovery of Excess Payments
Act Referred
KERALA SERVICE RULES: R.91(a)(i), R.116(iii)
Headnote
Service Law – Recovery – If excess amount was not paid on account of any misrepresentation or fraud of employee or if such excess payment was made by employer by applying a wrong principle for calculating 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 recovery is granted not because of any right of employees but in equity, exercising judicial discretion to provide relief to employees from hardship that will be caused if recovery is ordered – If in a given case, it is proved that employee had knowledge that 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, matter being in realm of judicial discretion, courts may on facts and circumstances of any particular case order for recovery of amount paid in excess – In present case, attempt to recover increments after passage of ten years of his retirement is unjustified – Judgment and order of Division Bench and also of Single Judge of High Court and order passed by Public Redressal Complaint Cell of Chief Minister of Kerala and Recovery Notice set aside. (Paras 9, 15 and 16)
Facts of the case:
Instant appeal raises an issue as to 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 said increments were granted on account of an error?
Findings of Court:
It is not contended that on account of the misrepresentation or fraud played by the appellant, excess amounts have been paid. The appellant has retired on 31.03.1999. In fact, the case of respondents is that excess payment was made due to a mistake in interpreting Kerala Service Rules which was subsequently pointed out by Accountant General.
Result : Appeal allowed.
Legal Category Hierarchy
Advocates appeared:
For the Appellant(s) :Raghenth Basant, Senthil Jagadeesan, Advocates
For the Respondent(s):Nishe Rajen Shonker, Anu K.Joy, Alim Anvar, Abraham C.Mathews, Bina Madhavan, Advocates
For the Appellant(s) :Raghenth Basant, Senthil Jagadeesan, Advocates
For the Respondent(s):Nishe Rajen Shonker, Anu K.Joy, Alim Anvar, Abraham C.Mathews, Bina Madhavan, Advocates
Table of Contents
2. Appellant contends excess payment resulted from employer's misinterpretation without fraud or misrepresentation — Respondent argues recovery of erroneously granted benefits is justified. (Para 6 , 7 )
3. Recovery of excess payments is impermissible where no fraud or misrepresentation exists and payments resulted from the employer's wrong interpretation of rules, especially for retired employees. (Para 9 , 10 , 11 , 12 , 13 , 14 )
4. Excess payments made without fraud or misrepresentation due to employer's erroneous rule interpretation are not recoverable in equity to prevent undue hardship to employees, particularly retirees. (Para 9 , 11 , 13 )
5. Appeal allowed — judgments of the High Court and orders of the Public Redressal Complaint Cell and recovery notice set aside. (Para 15 , 16 )
6. When is recovery of excess payment from an employee impermissible?
Recovery is impermissible if the excess payment was not made due to fraud or misrepresentation by the employee, but resulted from the employer applying a wrong principle or erroneous interpretation of a rule or order. (Para 9 , 11 , 12 )
7. How does the court exercise discretion regarding the recovery of wrong payments?
Relief against recovery is granted based on equity and judicial discretion to prevent undue hardship, particularly for employees in lower rungs or pensioners who spend emoluments believing they are entitled to them. (Para 9 , 11 )
8. What specific situations make recovery by employers legally impermissible according to the Rafiq Masih guidelines?
Recovery is impermissible from Class III and IV employees, retired employees (or those retiring within one year), where excess payment occurred over five years prior to the recovery order, or where recovery would be iniquitous or harsh. (Para 13 )
9. Can pensioners seek relief against the recovery of wrong payments?
Yes, pensioners can seek directions against recovery as they are in a more disadvantageous position than in-service employees, and any attempt to recover wrong payments would cause them undue hardship. (Para 11 )
JUDGMENT
S. Abdul Nazeer, J.
This appeal raises an issue as to 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?
2. The brief facts of the case, in nutshell, are as under:
In the year 1966, the appellant herein joined services as a High School Assistant/Teacher at Craven High School, Kollam which is an aided school. During his tenure, he availed leave without allowance starting from 20.10.1972 to 31.03.1973 and again from 02.07.1973 to 28.03.1974, for pursuing post-graduation i.e., M.Sc. (Chemistry) Course. Thereafter on 1.06.1989, the appellant was promoted as Headmaster of the school and he was granted senior grade promotion and his pay scale was revised accordingly.
3. In the year 1997, a notice dated 09.10.1997 accompanied with an audit report of the respondent no. 5- Account General of Kerala was served on the appellant by the respondent no. 4- District Educational Officer, Kollam with an objection that the period of leave obtained by the appellant for undergoing higher education should not be included while determining his total qualifying service. Therefore, the pay and subsequent increments granted to the appellant should be recovered from him. Meanwhile, the appellant had retired from service on 31.03.1999 and since then he was neither paid pensionary benefits nor death-cum-retirement gratuity (D.C.R.G.). The appellant filed various representations but he received no response.
4. Ultimately on 25.05.2000, the appellant challenged the proposal to initiate recovery proceedings against him by way of filing a complaint before the Public Redressal Complaint Cell, Chief Minister of Kerala, for recovering the increments granted to the appellant during the year 1989 and 1991. The respondent herein-State of Kerala rejected the said complaint by order dated 26.06.2000 stating that post-graduation degree-M.Sc. (Chemistry) was not useful as per the Rule 91A Part I of the KERALA SERVICE RULES in any manner to the public service, therefore, leave without allowance cannot be counted for service benefits. In the meantime, on an application filed by the appellant under Rule 116, Part III of the KERALA SERVICE RULES , the respondent no. 3-Deputy Director Education, Kollam on 6.10.2000 sanctioned the release of 90% of the D.C.R.G. amount after withholding 10% of the said amount and subsequently on 15.01.2001 the amount was released to the appellant.
5. Being aggrieved, the appellant filed a writ petition before the High Court. During the pendency of the writ petition, the remaining amount of D.C.R.G was also released to the appellant. However, the respondent- State of Kerala in their counter affidavit took a stand that the period during which the appellant was on leave without allowance for undertaking post-graduation cannot be counted for the purpose of grant of increments and, therefore, the demand for recovery made by them was justified. The learned Single Judge vide order dated 05.01.2006 upheld the reasoning given by the State of Kerala and dismissed the writ petition holding that the mistake committed by the department concerned while granting the service benefits can be rectified subsequently by way of proposed recovery to be effected from appellant's D.C.R.G. amount. There against, the appellant filed a writ appeal before the High Court. The Division Bench of the High Court vide impugned order dated 02.03.2009 dismissed the appeal, affirming the order of the learned Single Judge.
6. Learned counsel for the appellant would contend that the excess payment made to the appellant was not on account of any misrepresentation or fraud on his part. The excess payment was made due to a mistake in interpreting the KERALA SERVICE RULES . It is further submitted that the appellant has retired on 31.03.1999.
The appellant had to undergo a bypass surgery and he is in huge debts. After repeate
