Recovery of excess pay cannot be made from retired Class III employees based on a subsequent undertaking.

The petitioner, a Sub-Inspector in the Police Department and therefore a Class III employee, retired on 30 June 2021.

During scrutiny of his service book at the time of retirement, the respondents alleged that his pay had been wrongly fixed and ordered recovery of ₹2,96,319 in respect of alleged excess payments made from 1 January 2006 to 1 July 2020.

The recovery was initiated without issuing a show-cause notice or granting the petitioner an opportunity of hearing.

The State contended that the recovery was permissible because the petitioner had furnished an undertaking at the time of preparation of his pension papers agreeing to refund any excess payment.

The petitioner challenged the recovery and sought refund of the recovered amount with interest, relying principally on State of Punjab v. Rafiq Masih and the Full Bench decision in State of Madhya Pradesh v. Jagdish Prasad Dubey.

1. Whether recovery of alleged excess salary paid pursuant to a pay fixation made between 1 January 2006 and 1 July 2020 could be effected from the petitioner, a retired Class III employee, particularly without prior notice or opportunity of hearing.

2. Whether an undertaking furnished by the petitioner at the time of retirement or preparation of pension papers authorized recovery of excess payments made pursuant to an earlier pay fixation.

3. Whether the petitioner was entitled to refund of ₹2,96,319 with interest.

The Court applied the principle in State of Punjab v. Rafiq Masih (White Washer), (2015) 4 SCC 334, that recovery of mistaken excess payments is ordinarily impermissible from Class III/Class IV employees, retired employees, or where the payments relate to a period exceeding five years before the recovery order, particularly where recovery would be harsh or inequitable.

It relied on the Full Bench ruling in State of Madhya Pradesh v. Jagdish Prasad Dubey, (2024) 2 M.P.L.J. 198, which held that recovery may be made on the basis of an undertaking or indemnity bond given before grant of the financial benefit, subject to considerations of hardship, but an undertaking obtained only at the stage of retirement or payment of retiral dues cannot ordinarily validate recovery relating to an earlier pay refixation; an undertaking given at the time of extending the benefit must also be voluntary to be enforceable.

The Court further relied on Jogeswar Sahoo v. District Judge, Cuttack, 2025 (3) M.P.L.J. (S.C.) 25, concerning the impermissibility of recovery from retired non-gazetted employees without notice where there was no fraud or misrepresentation.

It further relied on Ravindra Kumar Joshi v. State of Madhya Pradesh, W.P. No. 17831 of 2019, order dated 13 May 2024, holding that a retirement-stage undertaking is ineffective unless the State establishes that it was voluntarily furnished.

The principles of natural justice also required notice and an opportunity of hearing before ordering recovery.

The alleged excess payment arose from a pay fixation made in 2006, and the record contained no undertaking furnished by the petitioner when the pay benefit was originally granted.

The only undertaking relied upon by the State was furnished after the petitioner’s retirement, during preparation of pension papers; under Jagdish Prasad Dubey, such a later undertaking could not retrospectively authorize recovery of payments made pursuant to a decades-old pay fixation.

The petitioner had neither committed fraud nor made any misrepresentation, had retired from a Class III post, and the recovery related to a period substantially exceeding five years before the recovery action.

These circumstances fell squarely within the categories identified in Rafiq Masih as making recovery impermissible.

The absence of a show-cause notice or hearing further rendered the recovery procedurally unsustainable.

Accordingly, the Court held that the retirement-stage undertaking did not benefit the respondents and that the recovery was illegal.

The respondents were directed to refund the amount to the petitioner with interest at 6% per annum from the date of his retirement, 30 June 2021, until actual payment.

The directions were to be complied with within 90 days from submission of a certified copy of the order.

The Court clarified that the refund and interest would not be payable if no amount had in fact been recovered from the petitioner’s retiral dues.