Excess Payment Made To Employee Due To Erroneous Interpretation Of Rule Not Recoverable : Supreme Court

The Supreme Court observed that the excess payment of emoluments or allowances to an employee are not recoverable if it was on the basis of a particular interpretation of rule/order which is subsequently found to be erroneous.

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, the bench comprising Justices S. Abdul Nazeer and Vikram Nath said.

In this case, while dismissing a writ petition filed by a teacher challenging recovery proceedings initiated by the State against him, the High Court of Kerala held that 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 the employee's D.C.R.G. amount.

In appeal before the Apex Court,the appellant contended that the excess payment made to the appellant was not on account of any misrepresentation or fraud on his part, but due to a mistake in interpreting the Kerala Service Rules. The issue therefore considered was 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?

Referring to various judgments on this aspect, the bench observed thus:

This Court in a catena of decisions has consistently held that 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 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 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. This Court has further held that if in a given case, it is proved that an employee had knowledge that the 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, the matter being in the realm of judicial discretion, the courts may on the facts and circumstances of any particular case order for recovery of amount paid in excess.

The court noted that the department has no case that it is on account of the misrepresentation or fraud played by the appellant, the excess amounts have been paid. 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 court noted while setting aside the High Court judgment.

Case details

Thomas Daniel vs State of Kerala | 2022 LiveLaw (SC) 438 | CA 7115 OF 2010 | 2 May 2022

Coram: Justices S. Abdul Nazeer and Vikram Nath

Headnotes

Service Law - 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 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 the recovery is granted not 6 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 - if in a given case, it is proved that an employee had knowledge that the 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, the matter being in the realm of judicial discretion, the courts may on the facts and circumstances of any particular case order for recovery of amount paid in excess. [Referred to Sahib Ram v. State of Haryana and Others 1995 Supp (1) SCC 18 , Syed Abdul Qadir and Others v. State of Bihar and Others (2009) 3 SCC 475, State of Punjab and Others v. Rafiq Masih (White Washer) and Others (2015) 4 SCC 334 and Col. B.J. Akkara (Retd.) v. Government of India and Others (2006) 11 SCC 709 ] (Para 9)

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