Post-retirement recovery is impermissible without notice or undertaking, absent fraud or misrepresentation.

The original petitioner, a government employee, remained absent from duty due to illness from 1 June 2011 and retired on 31 August 2015. The respondents adjusted 204 days of available leave against the period of absence and treated the remaining period as Leave Without Pay (“LWP”). While calculating arrears under the Sixth Pay Commission, they deducted ₹73,283 from the amount payable to him.

The petitioner alleged that the deduction was made without notice or an opportunity of hearing and that the respondents had issued a No-Dues Certificate dated 30 June 2016 recording that no amount was recoverable from him.

During the pendency of the writ petition, the petitioner died on 26 August 2019, and his widow and son were substituted as legal representatives pursuant to the order dated 15 July 2025.

The State contended that the deduction was not recovery of excess pay caused by erroneous pay fixation, but adjustment arising from the petitioner’s LWP, and therefore State of Punjab v. Rafiq Masih (White Washer) was inapplicable.

Whether the respondents could deduct ₹73,283 from the retiral or Sixth Pay Commission arrears payable to the petitioner after his retirement, without issuing notice or granting an opportunity of hearing, on the ground that part of his absence was to be treated as LWP.

Whether the principles restricting recovery from retired employees under State of Punjab v. Rafiq Masih (White Washer), (2015) 4 SCC 334, applied even though the respondents characterised the deduction as an LWP-related adjustment rather than recovery of excess pay.

Whether the respondents were entitled to retain the deducted amount in the absence of fraud, misrepresentation, concealment, or a specific undertaking by the petitioner authorising recovery.

The Court applied the principles of natural justice, requiring notice and a reasonable opportunity of hearing before determining and deducting an alleged liability from an employee’s dues.

Under State of Punjab v. Rafiq Masih (White Washer), recovery from retired employees, or employees due to retire within one year, is ordinarily impermissible, particularly where recovery would be harsh, inequitable, or arbitrary.

High Court of Punjab and Haryana v. Jagdev Singh, (2016) 14 SCC 267, was relied upon for the exception that such protection may not apply where the employee had furnished a specific undertaking, at the time of receiving the benefit, permitting recovery of excess payment.

The Court also relied on the Full Bench decision in State of Madhya Pradesh v. Jagdish Prasad Dubey, W.A. No. 815 of 2017 and connected matters, 2024 SCC OnLine MP 1567, which held that recovery from pensionary benefits requires an undertaking or indemnity bond given before grant of the benefit, and that recovery under Rules 65 and 66 of the 1976 Rules must follow the prescribed procedure.

The Court found that the petitioner had retired before the deduction was made and that the respondents had not alleged fraud, misrepresentation, or concealment, nor produced any undertaking authorising recovery.

Although the State described the deduction as an LWP adjustment rather than recovery arising from erroneous pay fixation, the Court held that the substance of the action remained a post-retirement determination and deduction of liability from the petitioner’s dues.

The respondents had neither issued notice nor afforded the petitioner an opportunity to contest the alleged period of LWP, and their prior No-Dues Certificate further required explanation before any subsequent deduction could be sustained.

Accordingly, the recovery fell within the hardship-based protection recognised in Rafiq Masih, and the exception in Jagdev Singh was unavailable because no specific undertaking had been established.

If the amount had already been recovered, the respondents were directed to refund it to the legal representatives within three months of receiving a certified copy of the order, together with simple interest at 6% per annum from the date of recovery until actual payment.

The Court clarified that the respondents could independently examine the petitioner’s leave account and the alleged LWP period in accordance with the applicable service rules, but only after giving due notice and a reasonable opportunity of hearing to the legal representatives, and without making any recovery contrary to the principles laid down by the Supreme Court.