Excess Payment Made to Employees Can't Be Recovered After Retirement on Ground of Error, Says Supreme Court

New Delhi, May 2: The Supreme Court on Monday held that excess payment made to an employee cannot be recovered after his retirement on the ground that the said increments were granted on account of an error. A bench of Justices S A Nazeer and Vikram Nath said restraining back recovery of excess payment, is granted by courts, not because of any right in the employees, but in equity, in the exercise of judicial discretion to relieve the employees from the hardship that will be caused to him.

"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 based on 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," said the bench.

Referring to its earlier decisions, the top court said a government servant, particularly one in the lower rungs of service, would spend whatever emoluments he receives for the upkeep of his family. Beant Singh Assassination: Supreme Court Asks Centre to Decide Balwant Singh Rajoana's Plea for Commutation of Death Penalty.

"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 on 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 bench said.

The top court's observations came on a plea filed by Kerala resident Thomas Daniel who was asked by the District Educational Officer, Kollam to return pay and subsequent increments granted to him after his retirement in 1999.

Daniel 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 years 1989 and 1991.

The apex court noted that in this 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 retired on March 31, 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," the bench said while adding that the attempt to recover the said increments after the passage of ten years of his retirement is unjustified.

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