THOMAS DANIEL versus STATE OF KERALA AND ORS.

[2022] 4 S.C.R.

THOMAS DANIEL

STATE OF KERALA AND ORS.

(Civil Appeal No. 7115 of 2010)

BMAY 02, 2022

[S. ABDUL NAZEER AND VIKRAM NATH, JJ.]

Service Law: Retirement – Excess payment made to employeesby error, recovery of – On facts, recovery of increments granted tothe employee while in service almost ten years after his retirementCon the ground that the said increments were granted on account ofan error – Justification of – Held: If the excess amount was notpaid on account of any misrepresentation or fraud of the employeeor paid by applying wrong principle for calculating the pay/allowance or interpretation of rule/order which is subsequentlyDfound to be erroneous, such excess payment made are notrecoverable – Relief against the recovery is granted not because ofany right of the employees but in equity, exercising judicial discretionto provide relief to the employees from the hardship that wouldcaused if the recovery is ordered – However, if the error is detected

or corrected in short time of wrong payment or the employee hadEthe knowledge of excess payment, then the courts can order forrecovery of amount paid in excess – On facts, excess payment madedue to mistake in interpreting the Kerela Service Rules – Thus,attempt to recover the said amount after ten years of retirementunjustified – Equity.FAllowing the appeal, the Court

HELD: 1.1 If the excess amount was not paid on accountof any misrepresentation or fraud of the employee or if suchexcess payment was made by the employer by applying wrongprinciple for calculating the pay/allowance or on the basis of aGparticular interpretation of rule/order which is subsequently foundto be erroneous, such excess payment of emoluments orallowances are not recoverable. This relief against the recoveryis granted not because of any right of the employees but in equity,exercising judicial discretion to provide relief to the employeesHfrom the hardship that will be caused if the recovery is ordered.

If in given case, it is proved that an employee had knowledgethat the payment received was in excess of what was due orwrongly paid, or in cases where error is detected or correctedwithin short time of wrong payment, the matter being in therealm of judicial discretion, the courts may on the facts andcircumstances of any particular case order for recovery of amountpaid in excess. [Para 9][610-A-D]

1.2 It is not contended that on account of themisrepresentation or fraud played by the appellant, the excessamounts have been paid. The appellant has retired on 31.03.1999.In fact, the case of the respondents is that excess payment wasmade due to mistake in interpreting Kerala Service Rules whichwas subsequently pointed out by the Accountant General. In viewthereof, an attempt to recover the said increments after passageof ten years of his retirement is unjustified. [Paras 14 and 15][614-E-F]

Sahib Ram v. State of Haryana and Others (1995) 1Suppl. SCC 18; Col. B.J. Akkara (Retd.) v. Governmentof India and Others (2006) 11 SCC 709 : [2006] 7Suppl. SCR 58; Syed Abdul Qadir and Others v. Stateof Bihar and Others (2009) 3 SCC 475 : [2008] 17SCR 917; State of Punjab and Others v. Rafiq Masih(White Washer) and Others (2015) 4 SCC 334 : [2014]13 SCR 1343 – referred to

Case Law Reference

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7115 of2010.

From the Judgment and Order dated 02.03.2009 of the High Courtof Kerala at Ernakulam in WA No. 404 of 2006.

Raghenth Basant, Senthil Jagadeesan, Iqram Govind Singh, Advs.for the Appellant.

ANishe Rajen Shonker, Mrs. Anu K. Joy, Alim Anvar, Advs. for theRespondents.

The Judgment of the Court was delivered by

S. ABDUL NAZEER, J.

B(1) This appeal raises an issue as to whether increments grantedto the appellant, while he was in service, can be recovered from himalmost 10 years after his retirement on the ground that the said incrementswere 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 HighSchool Assistant/Teacher at Craven High School, Kollam which is anaided school. During his tenure, he availed leave without allowancestarting from 20.10.1972 to 31.03.1973 and again from 02.07.1973 to28.03.1974, for pursuing post-graduation i.e., M.Sc. (Chemistry) Course.DThereafter on 1.06.1989, the appellant was promoted as Headmaster ofthe school and he was granted senior grade promotion and his pay scalewas revised accordingly.

(3) In the year 1997, notice dated 09.10.1997 accompanied withan audit report of the respondent no.5- Account General of Kerala wasserved on the appellant by the respondent no.4- District EducationalEOfficer, Kollam with an objection that the period of leave obtained bythe appellant for undergoing higher education should not be includedwhile determining his total qualifying service. Therefore, the pay andsubsequent increments granted to the appellant should be recovered fromhim. Meanwhile, the appellant had retired from service on 31.03.1999Fand since then he was neither paid pensionary benefits nor death-cum-retirement gratuity (D.C.R.G.). The appellant filed various representationsbut he received no response.

(4) Ultimately on 25.05.2000, the appellant challenged the proposalto initiate recovery proceedings against him by way of filing complaintGbefore the Public Redressal Complaint Cell, Chief Minister of Kerala,for recovering the increments granted to the appellant during the year1989 and 1991. The respondent herein- State of Kerala rejected the saidcomplaint 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 theKerala Service Rules in any manner to the public service, therefore,H

leave without allowance cannot be counted for service benefits. In themeantime, on an application filed by the appellant under Rule 116, PartIII of the Kerala Service Rules, the respondent no.3-Deputy DirectorEducation, Kollam on 6.10.2000 sanctioned the release of 90% of theD.C.R.G. amount after withholding 10% of the said amount andsubsequently on 15.01.2001 the amount was released to the appellant.

(5) Being aggrieved, the appellant filed writ petition before theHigh Court. During the pendency of the writ petition, the remaining amountof D.C.R.G was also released to the appellant. However, the respondent-State of Kerala in their counter affidavit took stand that the periodduring which the appellant was on leave without allowance forundertaking post-graduation cannot be counted for the purpose of grantof increments and, therefore, the demand for recovery made by themwas justified. The learned Single Judge vide order dated 05.01.2006upheld the reasoning given by the State of Kerala and dismissed the writpetition holding that the mistake committed by the department concernedwhile granting the service benefits can be rectified subsequently by wayof proposed recovery to be effected from appellant’s D.C.R.G. amount.Thereagainst, the appellant filed writ appeal before the High Court.The Division Bench of the High Court vide impugned order dated02.03.2009 dismissed the appeal, affirming the order of the learned SingleJudge.(6) Learned counsel for the appellant would contend that the excesspayment made to the appellant was not on account of anymisrepresentation or fraud on his part. The excess payment was madedue to mistake in interpreting the Kerala Service Rules. It is furthersubmitted that the appellant has retired on 31.03.1999. The appellanthad to undergo bypass surgery and he is in huge debts. After repeatedrequest, D.C.R.G. benefit was released in his favour. He prays for settingaside the impugned judgment and also the order dated 26.06.2000 passedby the Public Redressal Complaint Cell, Chief Minister of Kerala.

(7) On the other hand, learned counsel appearing for therespondents-State of Kerala has supported the impugned judgment ofthe High Court.

(8) We have carefully considered the submission made at the Barby learned counsel for the parties and perused the materials placed onthe record.

A(9) This Court in catena of decisions has consistently held that ifthe excess amount was not paid on account of any misrepresentation orfraud of the employee or if such excess payment was made by theemployer by applying wrong principle for calculating the pay/allowanceor on the basis of particular interpretation of rule/order which issubsequently found to be erroneous, such excess payment of emolumentsBor allowances are not recoverable. This relief against the recovery isgranted not because of any right of the employees but in equity, exercisingjudicial discretion to provide relief to the employees from the hardshipthat will be caused if the recovery is ordered. This Court has furtherheld that if in given case, it is proved that an employee had knowledgeCthat the payment received was in excess of what was due or wronglypaid, or in cases where error is detected or corrected within short timeof wrong payment, the matter being in the realm of judicial discretion,the courts may on the facts and circumstances of any particular caseorder for recovery of amount paid in excess.

D(10) In Sahib Ram v. State of Haryana and Others[1]this Courtrestrained recovery of payment which was given under the upgradedpay scale on account of wrong construction of relevant order by theauthority concerned, without any misrepresentation on part of theemployees. It was held thus :

E“5. Admittedly the appellant does not possess the requirededucational qualifications. Under the circumstances the appellantwould not be entitled to the relaxation. The Principal erred ingranting him the relaxation. Since the date of relaxation, theappellant had been paid his salary on the revised scale. However,it is not on account of any misrepresentation made by the appellantFthat the benefit of the higher pay scale was given to him but bywrong construction made by the Principal for which the appellantcannot be held to be at fault. Under the circumstances the amountpaid till date may not be recovered from the appellant. The principleof equal pay for equal work would not apply to the scalesGprescribed by the University Grants Commission. The appeal isallowed partly without any order as to costs.”

(11) In Col. B.J. Akkara (Retd.) v. Government of India andOthers[2]this Court considered an identical question as under:

1 1995 Supp (1) SCC 18H2 (2006) 11 SCC 709

“27. The last question to be considered is whether relief shouldbe granted against the recovery of the excess payments made onaccount of the wrong interpretation/understanding of the circulardated 7-6-1999. This Court has consistently granted relief againstrecovery of excess wrong payment of emoluments/allowancesfrom 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 ofIndia [(1994) 2 SCC 521 : 1994 SCC (L&S) 683 : (1994) 27 ATC121], Union of India v. M. Bhaskar [(1996) 4 SCC 416 : 1996SCC (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 anymisrepresentation or fraud on the part of the employee.

(b) Such excess payment was made by the employer byapplying wrong principle for calculating the pay/allowanceor on the basis of particular interpretation of rule/order, whichis subsequently found to be erroneous.

28. Such relief, restraining back recovery of excess payment, isgranted by courts not because of any right in the employees, butin equity, in exercise of judicial discretion to relieve the employeesfrom the hardship that will be caused if recovery is implemented.A government servant, particularly one in the lower rungs ofservice would spend whatever emoluments he receives for theupkeep of his family. If he receives an excess payment for longperiod, he would spend it, genuinely believing that he is entitled toit. As any subsequent action to recover the excess payment willcause undue hardship to him, relief is granted in that behalf. Butwhere the employee had knowledge that the payment receivedwas in excess of what was due or wrongly paid, or where theerror is detected or corrected within short time of wrong payment,courts will not grant relief against recovery. The matter being inthe realm of judicial discretion, courts may on the facts andcircumstances of any particular case refuse to grant such reliefagainst recovery.

29. On the same principle, pensioners can also seek directionthat wrong payments should not be recovered, as pensioners are

Ain more disadvantageous position when compared to in-serviceemployees. Any attempt to recover excess wrong payment wouldcause undue hardship to them. The petitioners are not guilty ofany misrepresentation or fraud in regard to the excess payment.NPA was added to minimum pay, for purposes of stepping up,due to wrong understanding by the implementing departments.BWe are therefore of the view that the respondents shall not recoverany excess payments made towards pension in pursuance of thecircular dated 7-6-1999 till the issue of the clarificatory circulardated 11-9-2001. Insofar as any excess payment made after thecircular dated 11-9-2001, obviously the Union of India will beCentitled to recover the excess as the validity of the said circularhas been upheld and as pensioners have been put on notice inregard to the wrong calculations earlier made.”

(12) In Syed Abdul Qadir and Others v. State of Bihar andOthers[3] excess payment was sought to be recovered which was madeDto the appellants-teachers on account of mistake and wrong interpretationof prevailing Bihar Nationalised Secondary School (Service Conditions)Rules, 1983. The appellants therein contended that even if it were to beheld that the appellants were not entitled to the benefit of additionalincrement on promotion, the excess amount should not be recoveredfrom them, it having been paid without any misrepresentation or fraudEon their part. The Court held that the appellants cannot be held responsiblein such situation and recovery of the excess payment should not beordered, especially when the employee has subsequently retired. Thecourt observed that in general parlance, recovery is prohibited by courtswhere there exists no misrepresentation or fraud on the part of the

Femployee and when the excess payment has been made by applying awrong interpretation/ understanding of Rule or Order. It was held thus:

“59. Undoubtedly, the excess amount that has been paid to theappellant teachers was not because of any misrepresentation orfraud on their part and the appellants also had no knowledge thatGthe amount that was being paid to them was more than what theywere entitled to. It would not be out of place to mention here thatthe Finance Department had, in its counter-affidavit, admitted thatit was bona fide mistake on their part. The excess paymentmade was the result of wrong interpretation of the Rule that was

applicable to them, for which the appellants cannot be heldresponsible. Rather, the whole confusion was because of inaction,negligence and carelessness of the officials concerned of theGovernment of Bihar. Learned counsel appearing on behalf ofthe appellant teachers submitted that majority of the beneficiarieshave either retired or are on the verge of it. Keeping in view thepeculiar facts and circumstances of the case at hand and to avoidany hardship to the appellant teachers, we are of the view that norecovery of the amount that has been paid in excess to the appellantteachers should be made.”

(13) In State of Punjab and Others v. Rafiq Masih (WhiteWasher) and Others[4] wherein this court examined the validity of anorder passed by the State to recover the monetary gains wrongly extendedto the beneficiary employees in excess of their entitlements without anyfault or misrepresentation at the behest of the recipient. This Courtconsidered situations of hardship caused to an employee, if recovery isdirected to reimburse the employer and disallowed the same, exemptingthe beneficiary employees from such recovery. It was held thus:

“8. As between two parties, if determination is rendered in favourof the party, which is the weaker of the two, without any seriousdetriment to the other (which is truly welfare State), the issueresolved would be in consonance with the concept of justice, whichis assured to the citizens of India, even in the Preamble of theConstitution of India. The right to recover being pursued by theemployer, will have to be compared, with the effect of the recoveryon the employee concerned. If the effect of the recovery fromthe employee concerned would be, more unfair, more wrongful,more improper, and more unwarranted, than the correspondingright of the employer to recover the amount, then it would beiniquitous and arbitrary, to effect the recovery. In such situation,the employee’s right would outbalance, and therefore eclipse, theright of the employer to recover.

xxx

18. It is not possible to postulate all situations of hardship whichwould govern employees on the issue of recovery, where paymentshave mistakenly been made by the employer, in excess of their

4 (2015) 4 SCC 334

Aentitlement. Be that as it may, based on the decisions referred tohereinabove, we may, as ready reference, summarise thefollowing few situations, wherein recoveries by the employers,would be impermissible in law:

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

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

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

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

(v) In any other case, where the court arrives at theconclusion, that recovery if made from the employee, would beiniquitous or harsh or arbitrary to such an extent, as would faroutweigh the equitable balance of the employer’s right to recover.”

(14) Coming to the facts of the present case, it is not contendedbefore us that on account of the misrepresentation or fraud played byEthe appellant, the excess amounts have been paid. The appellant hasretired on 31.03.1999. In fact, the case of the respondents is that excesspayment was made due to mistake in interpreting Kerala Service Ruleswhich was subsequently pointed out by the Accountant General.

(15) Having regard to the above, we are of the view that an attemptFto recover the said increments after passage of ten years of his retirementis unjustified.

(16) In the result, the appeal succeeds and is accordingly allowed.The Judgment and order of the Division Bench dated 02.03.2009 andalso of the learned Single Judge of the High Court dated 05.01.2006Gimpugned herein, and the order dated 26.06.2000 passed by the PublicRedressal Complaint Cell of the Chief Minister of Kerala and therecovery Notice dated 09.10.1997 are hereby set aside. There shall beno order as to costs.

Nidhi JainH(Assisted by : Shashwat Jain, LCRA)

Appeal allowed.