Service Law: Is Recovery of Excess Payment from Employee Permissible?


June 18, 2018

Case name:  Smt. Chandra Kala Saxena  v. Nagar Palika Parishad Shahjahanpur & Others 


In this recent case, the Allahabad High Court allowed the Petition while noting the circumstances under which recovery of excess payment made to an employee is impermissible in law.

In the case, the Petitioner challenged Respondent’s order imposing recovery of Rs. 76,797 against the Petitioner on the ground that whatever amount was paid to petitioner was paid by respondents on their own and there was no fraud or misrepresentation on her part, and hence after retirement no recovery could be made.

Thus, the intrinsic issue in the case pertained to recovery of amount erroneously, wrongly or mistakenly paid by employer to an employee?

The High Court Allahabad while pronouncing its verdict in the case made reference to the case of State of Punjab and others Vs Rafiq Masih and others[1], whereby the Supreme Court enumerated the circumstances wherein recovery was impermissible in law. Such circumstances are:

  1. Recovery from employees belonging to Class-III and Class-IV service (or Group ‘C’ and Group ‘D’ service)
  2. Recovery from retired employees, or employees who are due to retire within one year, of the order of recovery.
  3. Recovery from employees, when the excess payment has been made for a period in excess of five years, before the order of recovery is issued.
  4. 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.
  5. 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.

In view of the aforesaid circumstances enumerated by the Supreme Court, the High Court held that in the present case, the alleged excess payment made to the Petitioner is not on account
of any fault on his part and that the instant case fell in Clauses (iii) and (iv) and it would not be equitable to recover such amount from petitioner.

The entire case can be accessed here.

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[1] (2014) 8 SCC 883