Sc Sharma And Ors. vs Shivaji College And Anr.

* IN THE HIGH COURT OF DELHI AT NEW DELHI
th
Reserved on: 21 July, 2026.
st
Pronounced on: 31 August, 2026.
st
Uploaded on: 31 August, 2026.

+ W.P.(C) 558/2019 & CM APPL. 4005/2019
SC SHARMA AND ORS. .....Petitioners
Through: Mr. Bharat Bhushan and Mr. C.
Shekher Malhotra, Advocates with
Mr. S.C. Sharma, (Petitioner No. 1-
person.
versus

SHIVAJI COLLEGE AND ANR. .....Respondents
Through: Mr. Sudhir Nandrajog, Senior
Advocate with Mr. Anurag Dayal
Mathur and Mr. Ankit Singh,
Advocate for R-1.
CORAM:
HON'BLE MR. JUSTICE SANJEEV NARULA
JUDGMENT

SANJEEV NARULA, J.:
The Controversy
1. The Petitioners, former teaching and non-teaching employees of
Shivaji College who retired between 2001 and 2011, challenge the recovery
of amounts alleged to have been overpaid to them from the College
Provident Fund. Their grievance is directed, in particular, against the
adjustment of those alleged dues against the additional gratuity that became
payable upon enhancement of the gratuity ceiling.
Factual Background
2. The College maintains its own Provident Fund account. Subscribers’
Signature Not Verified
Digitally Signed
By:ANITA BAITAL
Signing Date:31.08.2026
20:15:34
W.P.(C) 558/2019 Page 1 of 12

contributions are invested by the College in fixed deposits, and the interest
earned thereon is distributed among the subscribers. In 2007, certain
anomalies were noticed in the Provident Fund accounts. The Governing
Body, accordingly, decided to have the accounts examined, leading
eventually to a Special Audit for the period 1990-91 to 2009-10.
th
3. The Special Audit Report was received by the College on 6 June,
2011. It pointed to various errors and anomalies in the Provident Fund
accounts, including incorrect recording of fixed-deposit transactions and
interest, omission of subscribers’ names, totalling and balancing mistakes,
erroneous accounting entries and carry-forward errors. These irregularities
resulted in discrepancies in the individual Provident Fund statements.
4. The Provident Fund Committee thereafter accepted the Special Audit
Report and resolved to rectify the anomalies identified in it. In December
2012, it further decided that corrected Provident Fund statements should be
prepared for each subscriber. A meeting of the Provident Fund subscribers
th
was then held on 20 January, 2014, at which the anomalies and the
proposed course of rectification were explained.
5. On the basis of the recast accounts, the College computed that INR
58,26,165 was payable to certain retired subscribers, while INR 65,68,839
was recoverable from others who had allegedly been overpaid. Some retired
employees thereafter deposited an aggregate amount of INR 17,60,404.41.
Of this, INR 13,91,167.85 was distributed pro rata among subscribers
whose accounts showed amounts due and payable.
6. Recovery notices were issued to the Petitioners in 2014, followed by
reminders in 2017. The amounts demanded were substantial. By way of
illustration, INR 1,39,435.52 was claimed from S.C. Sharma, INR
Signature Not Verified
Digitally Signed
By:ANITA BAITAL
Signing Date:31.08.2026
20:15:34
W.P.(C) 558/2019 Page 2 of 12

4,81,662.73 from U.S. Chauhan, and INR 3,58,136.96 from P.D. Sharma.
The notices described these amounts as excess payments made on account of
interest credited to their Provident Fund accounts.
7. The dispute sharpened when the gratuity ceiling was enhanced and
additional gratuity became payable to the Petitioners. The College adjusted
the alleged Provident Fund dues against those enhanced gratuity amounts.
Thus, in the case of S.C. Sharma, the entire enhanced gratuity of INR 74,169
was adjusted against the alleged Provident Fund liability of INR 1,39,435,
leaving a further demand of INR 65,266. In the case of B.P. Maithani, INR
91,171 was adjusted against gratuity of INR 35,075, leaving a balance
demand of INR 56,096. In the case of G.C. Mittal, INR 92,591 was adjusted
against gratuity of INR 97,825, and the remaining balance of INR 5,234 was
credited to his account.
th
8. On 28 January, 2019, notice was issued in CM APPL. 4005/2019
filed in the present petition. By the same order, further recovery against the
Petitioners was stayed until further orders.
Petitioners’ Contentions
9. The Petitioners dispute the demands. They submit that the Provident
Fund accounts were maintained entirely by the College. Annual statements
of account were furnished to them, and those accounts were audited from
time to time. Their Provident Fund balances were thereafter released upon
retirement. The Petitioners emphasise that they had no role in calculating or
finalising the amounts paid to them. Nor is there any allegation that the
alleged excess payments were obtained by fraud, misrepresentation or
suppression on their part.
10. Reliance is placed on State of Punjab v. Rafiq Masih (White
Signature Not Verified
Digitally Signed
By:ANITA BAITAL
Signing Date:31.08.2026
20:15:34
W.P.(C) 558/2019 Page 3 of 12

1 2
Washer) & Ors. , Thomas Daniel v. State of Kerala & Ors. and Jogeswar
3
Sahoo & Ors. v. District Judge, Cuttack & Ors. The Petitioners contend
that these decisions prohibit recovery of excess payments where the
employee has not practised fraud or misrepresentation, particularly when
recovery is attempted after retirement or after a long lapse of time and would
operate harshly or inequitably.
College’s Contentions
11. The College does not allege that the Petitioners were responsible for
the excess credits by reason of any incorrect information, fraud or
misrepresentation. Its defence rests on the nature of the Provident Fund. The
College submits that it maintains a separate Provident Fund account and
does not subscribe to the General Provident Fund administered by the
Government of India. Amounts deposited in the Fund are invested in fixed
deposits with nationalised banks, and the interest earned is distributed
among subscribers at the rate notified by the Central Government from time
to time. Since the Government does not contribute to the Fund, the College
characterises it as a pooled fund belonging to the subscribers themselves.
12. The College also relies on the statutory and regulatory framework
governing the Fund. It submits that the administration of the Fund, including
the rate of interest payable to subscribers, is subject to applicable statutory
provisions and directions issued by the Central Government. In this regard,
reliance is placed on Section 8(2) of the Provident Fund Act, 1925, as made
th
applicable to the University of Delhi, the communication dated 16
February, 1999 issued by the Department of Education, Government of

1
(2015) 4 SCC 334.
2
2022 SCC OnLine SC 536.
Signature Not Verified
Digitally Signed
By:ANITA BAITAL
Signing Date:31.08.2026
20:15:34
W.P.(C) 558/2019 Page 4 of 12

th
India, and the University Executive Council resolution dated 28 September,
2001 adopting the same.
13. According to the College, the Special Audit and the subsequent
recasting of accounts were undertaken only to correct discrepancies in the
Fund for the period 1990-91 to 2009-10. The audit was not initiated behind
the employees’ back. The Teachers’ Association had requested an audit, and
some of the Petitioners had supported that request. The Special Audit Report
was later accepted by the Provident Fund Committee, which resolved to
rectify the anomalies and recast the individual accounts.
14. The College further refers to the meeting of Provident Fund
th
subscribers held on 20 January, 2014, where the anomalies identified in the
Special Audit and the proposed method of rectification were explained. The
recast accounts showed amounts payable to some subscribers and amounts
recoverable from others. On that basis, the Provident Fund Committee
resolved to recover amounts from subscribers who had been overpaid and to
release amounts to those whose accounts disclosed credit balances.
15. The College seeks to distinguish Rafiq Masih on the ground that the
instant case concerns a pooled Provident Fund. It submits that an excess
credit to one subscriber correspondingly reduces the amount available for
distribution to other subscribers whose recast accounts disclose shortfalls.
Recovery, according to the College, is therefore necessary not merely to
restore money to the College, but to enable payment to subscribers who
were underpaid. It points out that some retired employees deposited an
aggregate amount of INR 17,60,404.41, of which INR 13,91,167.85 was
distributed on a pro rata basis among subscribers to whom amounts were

3
2025 SCC OnLine SC 724.
Signature Not Verified
Digitally Signed
By:ANITA BAITAL
Signing Date:31.08.2026
20:15:34
W.P.(C) 558/2019 Page 5 of 12

found due and payable. The College also submits that several similarly
placed employees accepted the recast accounts and returned the amounts
demanded, whereas the Petitioners have resisted repayment.
16. On delay in adjustments, the College submits that the expiry of time
for instituting recovery proceedings does not extinguish the underlying
liability. It merely bars enforcement through the ordinary process of law.
According to the College, where any amount otherwise payable to an
employee remains in its hands, an outstanding liability may be adjusted
against that amount without filing a separate recovery action. Such
adjustment, it submits, is distinct from coercive recovery and is not barred
merely because a suit or other proceeding for recovery may have become
time-barred.
Analysis
Scope of the Controversy and Issues requiring Determination
17. The decision to undertake the Special Audit and the authority of the
College to correct its books and ascertain the true position of the Provident
Fund are not in issue. Once discrepancies of this kind were noticed,
reconciliation of the accounts was necessary. Nor is the Court called upon to
decide the entitlement of subscribers whose recast accounts disclose credit
balances. The controversy is narrower: whether, after the Petitioners’
Provident Fund accounts had been settled and they had retired, the College
could recover debit balances worked out later, and whether such recovery
could be made by withholding or appropriating gratuity or other retiral dues
otherwise payable to them.
Governing Principles on Recovery of Excess Payments
18. Rafiq Masih does not proceed on the footing that a mistaken payment,
Signature Not Verified
Digitally Signed
By:ANITA BAITAL
Signing Date:31.08.2026
20:15:34
W.P.(C) 558/2019 Page 6 of 12

once made, becomes an entitlement of the employee. It recognises that the
employer may otherwise have a right to recover an amount paid in excess
but restrains the exercise of that right where recovery would operate
inequitably against an employee who was neither responsible for, nor had
induced, the excess payment. The Supreme Court identified, among such
situations, recovery from retired employees and cases where excess payment
had continued for a period exceeding five years before the order of recovery.
It also preserved a broader category where recovery, having regard to the
circumstances, would be so harsh or iniquitous as to outweigh the
employer’s claim. The principle is, therefore, one of equitable restraint: it
protects an employee who is not at fault from a recovery which, by reason of
the lapse of time or other surrounding circumstances, would operate harshly
or inequitably.
19. The same approach was carried forward in Thomas Daniel , where the
excess payment arose from an erroneous interpretation of the applicable
service rules and not from any fraud or misrepresentation by the employee.
The Supreme Court reiterated that relief against recovery in such cases rests
in equity and is intended to prevent the hardship of reclaiming, after a
considerable lapse of time, amounts which the employee had received
without fraud. The employee had retired and the proposed recovery was
sought to be sustained against benefits flowing from increments granted
many years earlier. In those circumstances, the attempt to recover the
amount was held to be unjustified.
20. More recently, in Jogeswar Sahoo , the Supreme Court applied the
same principle where financial benefits had been credited to the employees
in 2017, they had superannuated by 2020, and recovery was directed only in
Signature Not Verified
Digitally Signed
By:ANITA BAITAL
Signing Date:31.08.2026
20:15:34
W.P.(C) 558/2019 Page 7 of 12

2023. The Court also noted that no opportunity of hearing had been afforded
before the recovery was ordered and, applying the settled principles
governing recovery of excess payments, found the recovery unsustainable.
21. The protection recognised in these decisions is not confined to excess
4
payments arising from pay fixation. In Umesh Chand Tyagi v. UOI & Ors. ,
a Division Bench of this Court applied Rafiq Masih to an erroneous credit in
the petitioner’s General Provident Fund account. The Court found that the
credit was the result of a bona fide mistake by the respondents, that no fraud,
misrepresentation or misstatement was attributable to the petitioner, and that
the error had remained undetected until his superannuation. The consequent
deductions from the petitioner’s GPF account or retirement dues were
therefore quashed. Although the factual setting was not identical, the
decision is significant because it shows that the character of the account
does not, by itself, exclude the equitable protection recognised in Rafiq
Masih .
Application of the principles to the Petitioners
22. The present case bears the features that make delayed recovery
inequitable. The Provident Fund accounts were maintained by the College;
the interest was calculated and credited by it; and statements were issued to
the subscribers from year to year. On retirement, the accumulated balances
were released to the Petitioners as amounts then found payable. The record
also contains clearance/no-dues documentation in respect of at least one
Petitioner, which supports the Petitioners’ case that their terminal dues had
been treated as settled. There is no allegation that the Petitioners furnished
incorrect information, influenced the calculations, or otherwise contributed
Signature Not Verified
Digitally Signed
By:ANITA BAITAL
Signing Date:31.08.2026
20:15:34
W.P.(C) 558/2019 Page 8 of 12

to the alleged excess credits. The liabilities now sought to be enforced arose
only after accounts spanning nearly two decades were reopened and
reconstructed.
23. The College is right in pointing out that the Special Audit was
initiated in 2007 and that some employees may have supported the
examination of the accounts. It is also correct that the anomalies and the
proposed method of rectification were later explained to the subscribers. But
these facts do not carry the matter far enough. They do not show that the
Petitioners were aware that their own accounts contained excess credits, or
that they accepted the liabilities later computed against them. A request for
verification, or participation in a general process of reconciliation, cannot be
converted into an admission of individual liability.
th
24. The minutes dated 10 December, 2012 proposed that payments made
at the time of retirement would thereafter be treated as provisional and
subject to rectification. Such a later administrative decision could govern
future settlements but could not convert earlier final settlements into
provisional payments or be applied retrospectively to payments already
made to the Petitioners, all of whom had retired before that decision was
taken.
25. The position of subscribers who were underpaid deserves
consideration, but it cannot be viewed in isolation. The Petitioners too are
retired subscribers. They received amounts reflected as payable in accounts
prepared, audited and settled by the College, and were entitled to arrange
their affairs on that basis. Where both sets of subscribers are without fault,
the consequences of a prolonged accounting failure cannot be shifted

4 th
W.P.(C) 12434/2022, decided on 6 May, 2025 (Delhi High Court).
Signature Not Verified
Digitally Signed
By:ANITA BAITAL
Signing Date:31.08.2026
20:15:34
W.P.(C) 558/2019 Page 9 of 12

entirely to those whose accounts, upon retrospective reconstruction, came to
show debit balances.
The College’s Pooled-Fund Defence
26. The pooled character of the Provident Fund gives the College a
legitimate concern. Subscribers who received less than their entitlement
cannot be ignored. But that does not answer whether the College could, after
the Petitioners’ retirement, reopen settled accounts and recover amounts
subsequently found due.
27. The audit discrepancies were not a simple case of shifting amounts
from one subscriber’s account to another. They included errors in
investments, interest entries, totals, carry-forwards, omitted subscriber
names and treatment of contributory provident fund amounts. These were
systemic accounting and administrative failures. Even if an excess credit in
one account contributed to a shortfall elsewhere, an underpaid subscriber’s
claim would lie against the Fund and its administrator. It would not, for that
reason alone, become a direct claim against another subscriber whose
account had already been settled by the College.
28. Nor does the fact that some employees deposited the amounts
demanded alter the position. Their payments may reflect acceptance of the
recast accounts, prudence, or a desire to avoid dispute. Their conduct cannot
bind the Petitioners or confer on the College a power that must otherwise
exist in law.
Limitation, Recovery and Adjustment against Gratuity
29. The limitation argument does not advance the College’s case. It is
unnecessary to decide whether the claim stood extinguished or was only
barred from enforcement by legal proceedings. Even on the latter
Signature Not Verified
Digitally Signed
By:ANITA BAITAL
Signing Date:31.08.2026
20:15:34
W.P.(C) 558/2019 Page 10 of 12

assumption, a unilateral adjustment must be supported by a legal,
contractual or statutory right.
30. That requirement cannot be avoided by describing the action as an
‘ adjustment ’ rather than a ‘ recovery ’. The College retained enhanced
gratuity otherwise payable to the Petitioners and applied it towards disputed
Provident Fund demands arising from alleged excess payments made years
earlier. In substance, therefore, an amount payable to the Petitioners as a
retirement benefit was withheld to satisfy those demands.
31. Gratuity is an independent statutory retirement benefit governed by
the Payment of Gratuity Act, 1972. The Act permits forfeiture only in the
limited circumstances set out in Section 4(6), namely where employment is
terminated for the specified misconduct. The present demands arise from a
subsequent recasting of Provident Fund accounts, not from termination for
misconduct. Section 7 provides the mechanism for determination and
adjudication of gratuity disputes. Section 14 gives the Act overriding effect,
and Section 13 protects gratuity from attachment in execution of court
orders/decrees. These provisions leave little room for an employer to
appropriate gratuity unilaterally towards a disputed claim of this nature.
32. The Provident Fund framework relied upon by the College may
regulate maintenance of accounts, investment of contributions and crediting
of interest. It does not, by itself, authorise recovery of a later-determined
debit balance by appropriating an independent statutory benefit such as
gratuity. The College has not shown any rule, undertaking or contractual
term permitting such adjustment. The fact that enhanced gratuity was
payable through the College did not make it available for unilateral set-off
against the disputed Provident Fund demand.
Signature Not Verified
Digitally Signed
By:ANITA BAITAL
Signing Date:31.08.2026
20:15:34
W.P.(C) 558/2019 Page 11 of 12

Conclusion and Relief
33. For these reasons, the recovery sought from the Petitioners, whether
by direct demand or by adjustment against gratuity, cannot be sustained. The
writ petition is allowed in the following terms:
a. The recovery notices issued to the Petitioners pursuant to the Special
Audit for the period 1990-91 to 2009-10, along with all consequential
demands and adjustments, are set aside.
b. The College shall not effect any further recovery from the Petitioners
towards amounts found recoverable under the Special Audit, whether from
gratuity or from any other retiral dues.
c. Within four weeks from the date of pronouncement of this judgment,
the College shall prepare and communicate to each Petitioner a statement
specifying the amount, if any, recovered from or adjusted against that
Petitioner under the impugned demands.
d. Any amount so recovered, adjusted, or withheld from enhanced
gratuity, shall be refunded or released to the concerned Petitioner within
eight weeks thereafter, together with interest at 6% per annum from the date
of recovery, adjustment or withholding until payment.
34. The relief granted is confined to the Petitioners before this Court. This
judgment does not re-open payments made by, or transactions concluded
with, subscribers who have not challenged the recovery.
35. The present petition, along with any pending application(s), is
disposed of in the above terms.


SANJEEV NARULA, J
AUGUST 31, 2026/ ab
Signature Not Verified
Digitally Signed
By:ANITA BAITAL
Signing Date:31.08.2026
20:15:34
W.P.(C) 558/2019 Page 12 of 12