Recovery of excess pay from retired Class-III employees without proof of fraud or misrepresentation is impermissible.

The petitioner was appointed as an Auxiliary Nurse Midwife (ANM) on December 31, 1989, and retired upon superannuation on June 30, 2022.

Following her retirement, the respondents issued an order on August 23, 2022, and an impugned recovery order dated September 1, 2017, seeking to recover ₹3,07,830/- from her retiral benefits due to alleged excess payments in pay scales/increments.

The petitioner, a Class-III employee, was forced to provide an undertaking for this recovery.

She challenged the recovery on the grounds that it violated principles of natural justice and established judicial precedents prohibiting recovery from retired Class-III employees.

1. Whether the recovery of excess payments from the retiral benefits of a Class-III employee, long after the payment was made and without any proof of fraud or misrepresentation by the employee, is legally sustainable.

2. Whether the recovery initiated without providing a show-cause notice or an opportunity of hearing violates the principles of natural justice.

State of Punjab & Others v. Rafiq Masih (White Washer) [(2015) 4 SCC 334], which established that recoveries from Class-III/IV employees or retired employees are impermissible if the payment was not a result of fraud or misrepresentation.

Doctrine of equality under Articles 14 to 18 of the Constitution and the principles of natural justice as articulated in Shrawan Kumar Jha v. State of Bihar [AIR 1991 SC 310], which mandates a hearing before passing orders with civil consequences.

MP Power Transmission Co. Ltd. v. Lalita Rathore [W.A. No. 2772/2025], which affirmed that administrative oversights by the state cannot be corrected by penalizing retired employees.

The Court observed that the petitioner was a Class-III employee and that the alleged excess payment was not the result of any fraud or misrepresentation on her part.

Applying the criteria from Rafiq Masih, the Court noted that recovery from retired Class-III employees, particularly when the payment was made more than five years prior, is "iniquitous, harsh, and arbitrary".

The Court highlighted that the respondents failed to issue a show-cause notice, thereby violating the principles of natural justice.

It reasoned that since the error was an administrative oversight by the Department, the economic burden of such a mistake cannot be shifted onto the employee post-retirement, especially when such recovery outweighs the equitable balance of the employer's right to recover.

The High Court quashed the impugned order dated September 1, 2017 (Annexure P/1). The respondents were directed to refund the recovered amount of ₹3,07,830/- to the petitioner within eight weeks of receiving the order, along with interest at the rate of 6% per annum from the date of recovery until the date of actual payment.