Recovery of excess pay from retired employees is impermissible absent misrepresentation, despite valid pay revision.

The petitioner was appointed as a Junior Bailiff on 06 November 1995 and was granted Selection Grade after completing ten years of service. He retired on superannuation on 31 May 2025.

Following an audit objection, the third respondent concluded that the petitioner’s basic pay had been incorrectly fixed and ordered recovery of alleged excess pay and allowances amounting to ₹5,15,382 for the period from 16 November 2005 to 31 March 2025 from his Death-cum-Retirement Gratuity.

The petitioner challenged the recovery and sought refund of the amount recovered.

1. Whether the respondents could revise the petitioner’s pay fixation pursuant to the audit objection and applicable Pay Rules and Government Orders.

2. Whether recovery of alleged excess salary paid over a prolonged period, without any misrepresentation by the petitioner, was legally permissible, particularly when the petitioner had retired from service.

3. Whether the amount recovered from the petitioner’s Death-cum-Retirement Gratuity was required to be refunded.

The Court applied the principle that unjust enrichment from public funds is impermissible and that competent authorities may correct erroneous pay fixation in accordance with the applicable Pay Rules and Government Orders.

However, it relied on State of Punjab v. Rafiq Masih, (2015) 4 SCC 334, which holds that recovery of excess payments is ordinarily impermissible where the employee belongs to Class III or IV/Group C or D service, has retired or is due to retire within one year, or where the excess payment relates to a period exceeding five years before the recovery order; recovery is also barred where it would be inequitable, harsh, or arbitrary.

The writ jurisdiction under Article 226 was exercised to grant appropriate relief against the unlawful recovery.

The Court distinguished between correction of the petitioner’s pay fixation and recovery of the excess amount.

It held that the respondents were entitled to revise the pay fixation if the earlier fixation was contrary to the applicable Pay Rules and Government Orders.

Nevertheless, the record did not establish any misrepresentation by the petitioner, and the alleged excess payment had continued for nearly two decades before recovery was ordered.

Since the petitioner was a retired Class III employee and recovery after such a substantial lapse would cause extreme hardship, the recovery fell within the impermissible categories identified in State of Punjab v. Rafiq Masih.

Accordingly, the Court upheld the revised pay fixation but invalidated the recovery.

The Court confirmed the revision of the petitioner’s pay pursuant to the audit objection but set aside the recovery of ₹5,15,382 from his Death-cum-Retirement Gratuity.

The respondents were directed to repay the recovered amount to the petitioner within twelve weeks from the date of receipt of a copy of the order.

The impugned orders were set aside only to the extent that they authorised recovery of excess salary; there was no order as to costs.