Recovery of excess higher-pay-scale payments is impermissible absent employee misrepresentation, fraud, or contributory fault.

The petitioner was appointed as Office Assistant Grade-III on 6 May 1980 and was promoted to Office Assistant Grade-II on 15 May 1998.

Pursuant to the Finance Department’s circular dated 24 January 2008, he was granted the second time-scale with effect from 15 May 2004. Subsequently, the respondents granted him the third time-scale with effect from 1 July 2014.

Upon verification, the authorities found that he had not passed the requisite four papers of the Senior Clerical Examination, allegedly necessary for promotion to the equivalent post of UDC Grade-I/Accountant.

The third time-scale was consequently withdrawn by order dated 21 March 2017, and recovery of the excess amount paid was directed without issuing a prior show-cause notice.

The petitioner challenged the recovery, relying on the decision in Smt. Nisha Singhai v. State of M.P. and Others, W.P. No. 2459 of 2017, which had upheld withdrawal of the benefit but quashed recovery.

Whether the petitioner was entitled to retain the third time-scale despite not possessing the qualifications prescribed for promotion to the equivalent higher post?

Whether recovery of the excess amount paid towards the third time-scale was legally permissible in the absence of misrepresentation or fraud by the petitioner and without prior notice?

The Court applied Article 226 of the Constitution of India in reviewing the impugned recovery orders.

Under paragraph 4 of the Finance Department circular dated 24 January 2008, grant of a higher time-scale required fulfilment of the eligibility conditions prescribed for promotion; the circular dated 30 September 2014 extended those conditions to the third time-scale.

The Court relied on Smt. Nisha Singhai v. State of M.P. and Others, which held that an employee lacking the requisite promotional qualification was not entitled to the third time-scale, but that recovery of amounts paid without the employee’s misrepresentation or fraud was impermissible.

It further relied on Babulal Jain v. State of M.P., (2007) 6 SCC 180, Shyam Babu Verma v. Union of India, (1994) 2 SCC 521, and State of Punjab v. Rafiq Masih, which establish that excess payments made due to an employer’s mistake, without fault or misrepresentation by the employee, should not ordinarily be recovered, particularly where recovery would be harsh, inequitable or arbitrary.

The Court held that the eligibility requirements for the third time-scale were linked to the qualifications prescribed for promotion to the corresponding higher post.

Since the petitioner had not passed the requisite Senior Clerical Examination papers, the withdrawal of the third time-scale was consistent with paragraph 4 of the 24 January 2008 circular, as extended by the 30 September 2014 circular, and with the coordinate Bench’s ruling in Nisha Singhai.

However, the benefit had been granted by the department and there was no allegation that the petitioner had obtained it through fraud, misrepresentation or concealment.

Applying Rafiq Masih, Babulal Jain and Shyam Babu Verma, the Court found that recovery of the amounts already paid would be inequitable.

It also noted that recovery could not be sustained without adherence to natural justice, including issuance of a show-cause notice.

Any amount already recovered was directed to be refunded to the petitioner with interest at 6% per annum within three months from receipt of a certified copy of the order.

In default, the refund would carry interest at 12% per annum from the date of entitlement until actual payment.

The petitioner’s pay fixation was upheld, while the withdrawal of the third time-scale itself was not disturbed.

The petition was accordingly disposed of.