Recovery of Excess Pay from Retired Employee Based on Post-Retirement Undertaking is Legally Impermissible

The petitioner, Dr. Ramveer Singh Raghuwanshi, retired as an Incharge Chief Medical and Health Officer (Class-I post) on June 30, 2018.

In 2008–2009, he was granted a senior grade pay scale and subsequently promoted, with pay fixation carried out by the Joint Director of Health Services.

Ten years later, following his retirement, respondent no. 2 issued an order dated November 20, 2018, amending the 2008 pay scale order and directing a recovery of Rs. 15,22,740/- from the petitioner’s gratuity and leave encashment.

The recovery was initiated without a show-cause notice or an opportunity for a hearing.

While the state contended that an undertaking (Annexure R-1) was signed by the petitioner allowing for recovery of excess payments, the petitioner argued the recovery was barred by established legal precedents.

1. Whether the recovery of excess payments made due to erroneous pay fixation can be effected from a retired Class-I employee after a lapse of ten years.

2. Whether an undertaking furnished at the time of retirement, rather than at the time of receiving the benefit, justifies the recovery of past excess payments.

3. Whether the principles of natural justice were violated by initiating recovery without notice or hearing.

State of Punjab v. Rafiq Masih (White Washer) (2015) 4 SCC 334, which prohibits recovery from retired employees or when excess payment was made for over five years.

M.P. Medical Officers Association v. State of M.P. (Civil Appeal No. 5527/2022), holding that recovery is unjustified when no misrepresentation is attributable to the employee.

Full Bench decision in State of M.P. v. Jagdish Prasad Dubey (2024) 2 M.P.L.J. 198, which established that "forced" undertakings given at the stage of retirement are unenforceable.

Jogeswar Sahoo v. District Judge, Cuttack regarding the necessity of providing an opportunity of hearing prior to recovery.

The court found that the erroneous pay fixation dated back to July 1, 2008, and the recovery was initiated a decade later, well beyond the five-year limit prescribed in Rafiq Masih.

Although the petitioner was a Class-I officer (ordinarily excluded from some Rafiq Masih protections), the court held that recovery after retirement remains impermissible where no fraud or misrepresentation by the employee is proven.

Regarding the state's reliance on the undertaking (Annexure R-1), the court observed that this was furnished only at the time of retirement and not when the pay benefits were originally granted in 2008.

Following the Jagdish Prasad Dubey precedent, the court characterized such an undertaking as "forced" and legally ineffective for recovering payments made years prior.

The lack of a show-cause notice was held to be a violation of the principles of natural justice.

The court held that the recovery was illegal and directed the respondents to refund the recovered amount of Rs. 15,22,740/- with 6% interest per annum from the date of retirement and further directed the respondents to settle all retiral dues and gratuity within 90 days.