No Recovery of Erroneous Pay From Class III/IV Employees; Mistake Correctable For Future Entitlements

The respondents, primarily Class IV employees (Assistant Linemen/Work Supervisors) of the Jal Shakti (PHE) Department, were granted retrospective pay scale benefits under SRO 59 of 1990 via administrative orders issued in 2017.

In 2019, the Director Finance determined that these benefits were erroneously extended by an incompetent authority and directed the recovery of the excess payments.

The respondents challenged this before the Central Administrative Tribunal (CAT), Srinagar. The CAT allowed the petition, restraining the petitioners from both withdrawing the benefits and making recoveries.

The Union Territory moved the High Court in writ jurisdiction against the CAT’s judgment.

1. Whether the recovery of excess payments made to Class III and Class IV employees due to an administrative error is permissible in the absence of fraud or misrepresentation by the employees.

2. Whether the employer is legally precluded from correcting a bona fide mistake in pay fixation for future payments once the error is discovered.

The court primarily applied the principles regarding recovery of excess payments established in State of Punjab v. Rafiq Masih (White Washer) (2015), which prohibits recovery from Class III/IV employees or retirees when the payment resulted from employer error without employee fraud.

It further considered Chandi Prasad Uniyal v. State of Uttarakhand (2012), which emphasizes that while public money paid without authority should generally be recovered to prevent unjust enrichment, exceptions exist for cases of extreme hardship.

The court also referenced Thomas Daniel v. State of Kerala (2022) and UT of JK v. Deshbir Singh (2023) to reaffirm that employers retain the right to correct pay fixation prospectively.

The Court observed that the respondents were low-level employees who did not practice fraud or misrepresentation to obtain the higher pay scales.

Applying the Rafiq Masih criteria, the Court found the recovery iniquitous because the employees had already adjusted their lifestyles based on the received wages, and many had since retired.

However, the Court disagreed with the CAT’s direction to continue the erroneous pay scale. It reasoned that a "mistake is not irreversible" and the State has a duty to protect "taxpayers' money" by correcting administrative errors.

The Court balanced the equities by protecting the employees from the hardship of repayment while upholding the State’s right to re-fix salaries and pensions correctly for the future.

The petitioners are "well within their right to correct the mistake and refix the salary or pensionary benefits" prospectively by withdrawing the SRO 59 benefits.

The writ petition was disposed of with the direction that no recoveries be made, but future pay/pension shall be adjusted to the correct legal scale.