Excess Payment Negligently Granted Cannot Be Recovered When Employee Has No Knowledge That Payment Is More Than What Is Entitled: Kerala High Court

The Kerala High Court recently held that excess payment that was carelessly or negligently granted to an employee by an employer cannot be recovered, particularly when the employee had no knowledge that the amount that was paid was more than what (s)he was entitled to.

The Division Bench comprising Justice Alexander Thomas and Justice C. Jayachandran, on considering the case of an applicant teacher who was paid excess increment based on a Government Order, ascertained that the situation was covered within the ambit of clause (v) of the situations summarized in paragraph 18 of State of Punjab & Ors. v. Rafiq Masih (White Washer Case) (2015). The said clause states that recoveries of excess payment by employers, would be impermissible in law where the 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. 

The applicant herein had applied for Leave Without Allowance to join B.Ed. course under Rule 91 of Part I, Kerala Service Rules (hereinafter,KSR) on June 8, 2004. She secured an admission for the said course from June 15, 2004 to March 29, 2005. However, Leave Without Allowance was allowed belatedly, vide an order dated September 17, 2004. Subsequently, the respondent authorities decided that the date of entry into service of the applicant will be taken as March 30, 2005, which is the date she rejoined after the B.Ed. Course, thus forfeiting her earlier service. 

When the same was challenged before the High Court, the Court directed the State to take a decision on the applicant's representation within a period of two months, vide its Order dated March 7, 2007. The State accordingly, passed an order rejecting the said representation on finding her not to have completed the prescribed years of service, due to which she was not eligible for Leave Without Allowance for the 288 days of the Course. During this time, a Government Order (G.O.) dated April 28, 2010 was issued by the State Government as per which, an incumbent who availed Leave Without Allowance prior to May 24, 2005, to undergo B.Ed. course, etc. would be entitled to reckon their leave period for the purpose of increment, and the Applicant was accordingly granted the benefit of the increment. 

However, subsequently, an audit objection arose in 2013 against reckoning the leave period of the applicant for the purpose of increment, and the representation filed by the applicant against the same was rejected by the Deputy Director of Education (DDE). The DDE also issued proceedings for recovering the excess amount paid to the applicant.

The Tribunal found merit in the respondent's stance as regards the applicant's entitlement to the benefit, that the latter was not eligible for Leave Without Allowance for the said period of 288 days for want of completion of the prescribed years of service as per Rule 91/88, Part I, KSR. The respondents took the view that since the the applicant was granted Leave Without Allowance under Appendix XII B Part I, KSR, the GO would not be applicable to her, which the Tribunal found as legally sustainable. However, the Tribunal added that the excess payment could not be recovered from the applicant.

The Tribunal held that this was because the present situation was covered by the situations in Clause (i) and (v) of the White Washer Case (2015), wherein recoveries of excess payment by employers, would be impermissible in law where the recovery is to be made from employees belonging to Class-III and Class-IV service (or Group 'C' and Group 'D' service), or 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, respectively. 

The Court in this case observed that the legal position emanating from the White Washer's case (2015), followed by High Court of Punjab and Haryana & Ors. v. Jagdev Singh (2016) was no longer res integra. It perused that the decisions in State of Kerala & Ors. v. Vinod Kumar C.R. (2020), State of Kerala & Ors v. Sreedevi T.R. (2019), and State of Kerala & Ors. v. P.V.Priya (2021). 

The Court observed that the Apex Court had held in Syed Abdul Qadir & Ors. v. State of Bihar & Ors. (2009) that no recovery of the amount paid in excess to teachers ought to be made, since payment of the same was not due to any misrepresentation or fraud on the part of the teachers, but due to the inaction, negligence and carelessness of the State officials. 

Accordingly, the Court in this case reiterated that the applicant had no knowledge that the amount paid to her was more than what she was entitled to. 

"It was the petitioners/authorities, who erroneously granted increment in terms of Annexure-A6 Government Order, quite carelessly and negligently, for which the respondent/ applicant cannot be faulted at all," it added. 

The Court also noted that the Order directing recovery of excess payment was made more than five years after the date of the first GO, based on which the applicant's salary was refixed counting the increment. 

"At any rate, as found by the Tribunal, the case of the respondent/applicant would fall within the ambit of clause (v) of the situations summarised in paragraph 18 in the White Washer's case. We find no reason to interfere with the Order of the Tribunal," it held.

The Court however, clarified that the authorities would be at liberty to refix the salary of the applicant after doing away with the mistake prospectively, and also to recover the excess amount, if any, paid with effect from the date of the subsequent order directing recovery, inasmuch as the applicant had due notice of the fact that the salary being drawn by her was in excess of what was legitimately due to her. The petition was thus disposed of. 

Senior Government Pleader Saiji Jacob Palatty appeared on behalf of the authorities. Advocates Kaleeswaram Raj, Thulasi K. Raj, Aparna Narayan Menon, and Chinnu Maria Antony appeared on behalf of the applicant. 

Case Title: State of Kerala & Ors. v. Seena M. 

Citation: 2023 LiveLaw (Ker) 286

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